-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EyqE6DuQwTqtaNKxj3cHOXErRAftH6RH3j5SPJ80pGp/9j4BTsNXuT1/0KEzC2XX ZDy6BRTyQ6UIS4c4UPjGUQ== 0000908996-05-000027.txt : 20050311 0000908996-05-000027.hdr.sgml : 20050311 20050311121720 ACCESSION NUMBER: 0000908996-05-000027 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050311 DATE AS OF CHANGE: 20050311 EFFECTIVENESS DATE: 20050311 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER VARIABLE CONTRACTS TRUST /MA/ CENTRAL INDEX KEY: 0000930709 IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-08786 FILM NUMBER: 05674581 BUSINESS ADDRESS: STREET 1: 60 STATE ST STREET 2: 19TH FLOOR CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6177427825 MAIL ADDRESS: STREET 1: 60 STATE ST STREET 2: 19TH FLOOR CITY: BOSTON STATE: MA ZIP: 021091820 FORMER COMPANY: FORMER CONFORMED NAME: VARIABLE INSURANCE CONTRACTS TRUST DATE OF NAME CHANGE: 19940929 N-CSR 1 ncsr.txt OMB APPROVAL OMB Number: 3235-0570 Expires: December 31, 2005 Estimated average burden hours per response..... 5.0 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-08786 Pioneer Variable Contracts Trust (Exact name of registrant as specified in charter) 60 State Street, Boston, MA 02109 (Address of principal executive offices) (ZIP code) Dorothy E. Bourassa, Pioneer Investment Management, Inc., 60 State Street, Boston, MA 02109 (Name and address of agent for service) Registrant's telephone number, including area code: (617) 742-7825 Date of fiscal year end: December 31 Date of reporting period: January 1, 2004 through December 31, 2004 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. item 1.REPORTS TO SHAREOWNERS. [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Papp Small and Mid Cap Growth VCT Portfolio -- Class II Shares ANNUAL REPORT December 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- T a b l e o f C o n t e n t s - -------------------------------------------------------------------------------- Pioneer Papp Small and Mid Cap Growth VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 6 Financial Statements 8 Notes to Financial Statements 12 Report of Independent Registered Public Accounting Firm 15 Trustees, Officers and Service Providers 16
Please consider a Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about a Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, contact your adviser, call 1-800-225-6292 or visit our website at www.pioneerfunds.com. The Trust files a complete statement of investments with the Securities and Exchange Commission for the first and the third quarters for each fiscal year on Form N-Q. Shareowners may view the filed Form N-Q by visiting the Commission's web site at http://www.sec.gov. The filed form may also be viewed and copied at the Commission's Public Reference Room in Washington, D.C. Information regarding the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330. PIONEER VARIABLE CONTRACTS TRUST Pioneer Papp Small and Mid Cap Growth VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- [THE FOLLOWING DATA WAS REPRESENTED AS A PIECHART IN THE PRINTED MATERIAL] Portfolio Diversification (As a percentage of total investment portfolio) Depository Receipts for International Stocks 2.9% U.S. Common Stocks 97.1% Sector Distribution (As a percentage of equity holdings) Materials 2.1% Consumer Staples 5.5% Financials 11.5% Industrials 12.3% Consumer Discretionary 15.8% Health Care 24.2% Information Technology 28.6% Five Largest Holdings (As a percentage of equity holdings) 1. C.R. Bard, Inc. 3.15% 2. UCBH Holdings, Inc. 3.07 3. Federated Investors, Inc. 3.00 4. Alberto-Culver Co. 2.97 5. Investors Financial Services Corp. 2.56
The Portfolio is actively managed and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Prices and Distributions
12/31/04 3/15/04 Net Asset Value per Share $ 10.87 $ 10.00
Distributions per Share Short-Term Long-Term (3/15/04 - 12/31/04) Dividends Capital Gains Capital Gains $ - $ - $ -
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Papp Small and Mid Cap Growth VCT Portfolio at net asset value, compared to that of the Russell 2500 Growth Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Pioneer Papp Small and Mid Cap Growth VCT Portfolio Russell 2500 Growth Index 4-Mar 10000 10000 4-Dec 10861 10752
The Russell 2500 Growth Index measures the performance of U.S. small- and mid-cap growth stocks. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in any Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
Net Asset Value Life-of-Class 8.70% (3/15/04)
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers fund performance would be lower. Waivers may not be in effect for all funds. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER VARIABLE CONTRACTS TRUST Pioneer Papp Small and Mid Cap Growth VCT Portfolio - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Papp Small and Mid Cap Growth VCT Portfolio Based on actual returns from July 1, 2004 through December 31, 2004
Share Class II - --------------------------------------------------------- Beginning Account Value on 7/1/04 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,000.92 Expenses Paid During Period* $ 7.03 - ---------------------------------------------------------
* Expenses are equal to the Portfolio's annualized expense ratio of 1.40% for Class II shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Papp Small and Mid Cap Growth VCT Portfolio Based on a hypothetical 5% per year return before expenses, reflecting the period from July 1, 2004 through December 31, 2004
Share Class II - --------------------------------------------------------- Beginning Account Value on 7/1/04 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,020.11 Expenses Paid During Period* $ 7.10 - ---------------------------------------------------------
* Expenses are equal to the Portfolio's annualized expense ratio of 1.40% for Class II shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER VARIABLE CONTRACTS TRUST Pioneer Papp Small and Mid Cap Growth VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- Equity markets rose in 2004, led by strong relative performance by small- and mid-cap stocks, especially the securities of companies showing the greatest earnings growth in a cyclical rebound. In the following interview, members of the management team of L. Roy Papp & Associates, which is responsible for the Portfolio's management, discuss the factors that influenced the performance of Pioneer Papp Small and Mid Cap Growth VCT Portfolio from the Portfolio's inception on March 15, 2004, through December 31, 2004. Q: How did the Portfolio perform? A: Pioneer Papp Small and Mid Cap Growth VCT Portfolio produced positive results, although its emphasis on stable growth companies caused it to trail small- and mid-cap averages. For the period from Portfolio inception on March 15, 2004 through December 31, 2004, Class II shares of the Portfolio returned 8.70% at net asset value. In comparison, the Russell 2500 Growth Index returned 12.94% over the same period. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: What factors affected Portfolio performance? A: We emphasize higher quality growth companies with healthy balance sheets, consistent long-term earnings, strong profit growth and relatively little debt. In 2004, the performance of our Portfolio trailed that of our benchmark index. One reason is that we placed a strong emphasis on technology companies, which tended to trail market averages until the final two months of the year. In fact, after a slow start in the period, the Portfolio's performance improved considerably during the final three months of the year. Within technology, we also held the stocks of many semiconductor companies because of our confidence in their long-term earnings prospects. Our semiconductor holdings also were diversified, by their customers, across many different industries. However, when Intel, the largest semiconductor company, reported decelerating earnings growth for a quarter, all semiconductor stocks tended to fall in the market's reaction. We tended to de-emphasize small- and mid-cap software companies because they include relatively few corporations that have the potential to dominate their industries. Our concerns about valuations also caused us to avoid some high-flying Internet stocks, most notably Yahoo and Google. Our focus has been predominately in mid-cap companies that meet our quality criteria. They are companies with long-term operating histories, usually more than 15 to 20 years, and we try to invest in them for long periods of time. Because we focus on companies with consistent earnings, we also de-emphasize cyclical companies whose earnings tend to fluctuate dramatically depending on the business cycle. Q: What were some of the investments that helped performance? A: Among the investments that supported performance, was UCBH Holdings, which was a standout. This West Coast bank specializes in offering services to the fast-growing Asian-American community and recently opened a new branch in Hong Kong. Another financial services company that appreciated substantially was T. Rowe Price, the asset management and mutual fund company. We believe it is in a strong position to benefit from proposals to privatize retirement and health care accounts. A Word About Risk: The Portfolio invests in a limited number of securities and, as a result, the Portfolio's performance may be more volatile than the performance a portfolio holding more securities. Investing in small and mid-sized companies may offer the potential for higher returns, but these companies are also subject to greater short-term price fluctuations than larger, more established companies. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 4 PIONEER VARIABLE CONTRACTS TRUST Pioneer Papp Small and Mid Cap Growth VCT Portfolio - -------------------------------------------------------------------------------- Other investments that helped performance included: Apollo Group, which provides adult vocational educational programs both on campuses and on the Internet; O'Reilly Automotive, a supplier of aftermarket auto parts; Polaris, a manufacturer of all-terrain vehicles and personal watercraft; and Plantronics, a leader in developing telephone headsets. Several health care related stocks also performed well, including: Resmed, which is developing products for patients with sleep disorders; Dentsply International, which provides dental supplies; and Waters, which provides specialized equipment to the biotechnology industry. C.R. Bard, a medical products company, was a recent addition to the portfolio that has supported performance. Q: What were some of the investments that proved disappointing? A: We emphasize companies with records of consistent earnings. As a result, we were underweighted in oil supply companies, whose stock prices registered strong gains as the price of oil soared during the year. Semiconductor industry holdings that detracted from results during the year included Novellus, Semtech and Microchip. Despite their disappointing performance during 2004, we remain confident about their longer-term prospects and continue to hold them. Q: What is your outlook? A: We feel confident about the future earnings prospects of the investments in our portfolio. We have just gone through a period in which many highly speculative companies, including some with inconsistent earnings records, have performed well. We believe that environment will not last forever. We think Pioneer Papp Small and Mid Cap Growth VCT Portfolio is well positioned for an environment that places a higher value on companies that strive to deliver consistent earnings growth over longer periods of time. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. 5 PIONEER VARIABLE CONTRACTS TRUST Pioneer Papp Small and Mid Cap Growth VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 98.3% Materials - 2.1% Specialty Chemicals - 2.1% 900 Sigma-Aldrich Corp. $ 54,414 ---------- Total Materials $ 54,414 ---------- Commercial Services & Supplies - 10.7% Data Processing Services - 1.2% 1,700 Forrester Research, Inc.* $ 30,498 ---------- Diversified Commerce Services - 9.5% 600 Apollo Group, Inc.* $ 48,426 1,550 ChoicePoint, Inc.* 71,285 1,598 Cintas Corp. 70,088 3,200 DeVry, Inc.* 55,552 ---------- $ 245,351 ---------- Total Commercial Services & Supplies $ 275,849 ---------- Transportation - 2.5% Air Freight & Couriers - 2.5% 1,170 Expeditors International of Washington, Inc. $ 65,380 ---------- Total Transportation $ 65,380 ---------- Consumer Durables & Apparel - 2.5% Leisure Products - 2.5% 950 Polaris Industries, Inc. $ 64,619 ---------- Total Consumer Durables & Apparel $ 64,619 ---------- Hotels, Restaurants & Leisure - 2.2% Restaurants - 2.2% 1,600 Brinker International, Inc.* $ 56,112 ---------- Total Hotels, Restaurants & Leisure $ 56,112 ---------- Media - 6.9% Advertising - 5.7% 2,800 Harte-Hanks, Inc. $ 72,744 1,350 WPP Group Plc (A.D.R.) 73,778 ---------- $ 146,522 ---------- Broadcasting & Cable Television - 1.2% 1,800 Saga Communications, Inc.* $ 30,330 ---------- Total Media $ 176,852 ---------- Retailing - 4.0% General Merchandise Stores - 1.4% 1,100 Family Dollar Stores, Inc. $ 34,353 ---------- Specialty Stores - 2.6% 1,500 O'Reilly Automotive, Inc.* $ 67,575 ---------- Total Retailing $ 101,928 ----------
Shares Value Household & Personal Products - 5.4% Household Products - 2.5% 1,100 Clorox Co. $ 64,823 ---------- Personal Products - 2.9% 1,550 Alberto-Culver Co. (Class B) $ 75,284 ---------- Total Household & Personal Products $ 140,107 ---------- Health Care Equipment & Services - 23.8% Health Care Distributors - 2.7% 1,600 Patterson Co.* $ 69,424 ---------- Health Care Equipment - 15.6% 1,250 C. R. Bard, Inc. $ 79,975 1,300 Dentsply International, Inc. 73,060 2,400 Molecular Devices Corp.* 48,240 1,200 ResMed, Inc.* 61,320 1,384 Stryker Corp. 66,778 1,900 Techne Corp.* 73,910 ---------- $ 403,283 ---------- Health Care Services - 5.5% 500 Express Scripts, Inc.* $ 38,220 2,490 IMS Health, Inc. 57,793 1,100 Medco Health Solutions, Inc.* 45,760 ---------- $ 141,773 ---------- Total Health Care Equipment & Services $ 614,480 ---------- Banks - 3.0% Regional Banks - 3.0% 1,700 UCBH Holdings, Inc. $ 77,894 ---------- Total Banks $ 77,894 ---------- Diversified Financials - 8.3% Asset Management & Custody Banks - 8.3% 2,500 Federated Investors, Inc. $ 76,000 1,500 Investors Financial Services Corp. 74,970 1,000 T. Rowe Price Associates, Inc. 62,200 ---------- $ 213,170 ---------- Total Diversified Financials $ 213,170 ---------- Software & Services - 7.9% Data Processing & Outsourced Services - 7.9% 1,300 DST Systems, Inc.* $ 67,756 1,700 Fiserv, Inc.* 68,323 2,400 SunGard Data Systems, Inc.* 67,992 ---------- $ 204,071 ---------- Total Software & Services $ 204,071 ---------- Technology Hardware & Equipment - 7.1% Communications Equipment - 1.6% 1,000 Plantronics, Inc. $ 41,470 ----------
6 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Papp Small and Mid Cap Growth VCT Portfolio - --------------------------------------------------------------------------------
Shares Value Electronic Equipment & Instruments - 1.6% 900 Waters Corp.* $ 42,111 ---------- Electronic Manufacturer Services - 3.9% 2,600 Molex, Inc. $ 69,290 1,100 National Instruments Corp. 29,975 ---------- $ 99,265 ---------- Total Technology Hardware & Equipment $ 182,846 ---------- Semiconductors - 9.4% Semiconductor Equipment - 2.6% 1,100 KLA-Tencor Corp.* $ 51,238 600 Novellus Systems, Inc.* 16,733 ---------- $ 67,971 ---------- Semiconductors - 6.8% 1,600 Linear Technology Corp. $ 62,015 2,600 Microchip Technology 69,316 2,000 Semtech Corp.* 43,740 ---------- $ 175,071 ---------- Total Semiconductors $ 243,042 ----------
Shares Value Capital Goods - 2.5% Manufacturing (Specialized) - 2.5% 1,250 Mettler-Toledo International, Inc.* $ 64,138 ---------- Total Capital Goods $ 64,138 ---------- TOTAL COMMON STOCKS (Cost $2,389,780) $2,534,902 ---------- TOTAL INVESTMENTS IN SECURITIES - 98.3% (Cost $2,389,780) $2,534,902 ---------- OTHER ASSETS AND LIABILITIES - 1.7% $ 43,622 ---------- TOTAL NET ASSETS - 100.0% $2,578,524 ==========
(A.D.R.) American Depositary Receipt * Non-Income producing security The accompanying notes are an integral part of these financial statements. 7 PIONEER VARIABLE CONTRACTS TRUST Pioneer Papp Small and Mid Cap Growth VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
3/15/04 to Class II 12/31/04 Net asset value, beginning of period $ 10.00 ------- Increase from investment operations: Net investment loss $ (0.02) Net realized and unrealized gain on investments 0.89 -------- Net increase from investment operations $ 0.87 -------- Net increase in net asset value $ 0.87 -------- Net asset value, end of period $ 10.87 ======= Total return* 8.70% Ratio of net expenses to average net assets+ 1.00%** Ratio of net investment loss to average net assets+ (0.51)%** Portfolio turnover rate 44% Net assets, end of period (in thousands) $2,579 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 7.50%** Net investment loss (7.01)%** Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.00%** Net investment loss (0.51)%**
* Assumes initial investment at net asset value at the beginning of the period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of the period. Total return rate is not annualized. ** Annualized. + Ratios with no reduction for fees paid indirectly. 8 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Papp Small and Mid Cap Growth VCT Portfolio - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (cost $2,389,780) $2,534,902 Cash 189,652 Receivables - Investment securities sold 71,375 Dividends, interest and foreign taxes withheld 720 Due from Pioneer Investment Management, Inc. 6,245 Other 624 ---------- Total assets $2,803,518 ---------- LIABILITIES: Payables - Investment securities purchased $ 181,195 Fund shares repurchased 1,003 Due to affiliates 2,185 Accrued expenses 40,611 ---------- Total liabilities $ 224,994 ---------- NET ASSETS: Paid-in capital $2,486,138 Accumulated undistributed net realized gain (loss) (52,736) Net unrealized gain (loss) on: Investments 145,122 ---------- Total net assets $2,578,524 ---------- NET ASSET VALUE PER SHARE: Class II: (No par value, unlimited number of shares authorized) Net assets $2,578,524 Shares outstanding 237,257 ---------- Net asset value per share $ 10.87 ----------
The accompanying notes are an integral part of these financial statements. 9 PIONEER VARIABLE CONTRACTS TRUST Pioneer Papp Small and Mid Cap Growth VCT Portfolio - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - --------------------------------------------------------------------------------
For the period from 3/15/04 (Commencement of Operations) to 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $21) $ 4,402 Interest 758 --------- Total investment income $ 5,160 --------- EXPENSES: Management fees $ 7,899 Transfer agent fees 1,260 Distribution fees 2,633 Administrative fees 13,875 Custodian fees 10,806 Professional fees 31,101 Printing 11,535 Fees and expenses of nonaffiliated trustees 99 Miscellaneous 260 --------- Total expenses $ 79,468 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (68,936) --------- Net expenses $ 10,532 --------- Net investment income (loss) $ (5,372) --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from: Investments $ (52,736) --------- $ (52,736) --------- Change in net unrealized gain or loss from: Investments $ 145,122 --------- $ 145,122 --------- Net gain (loss) on investments $ 92,386 ========= Net increase (decrease) in net assets resulting from operations $ 87,014 =========
10 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Papp Small and Mid Cap Growth VCT Portfolio - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
For the period from 3/15/04 (Commencement of Operations) to 12/31/04 FROM OPERATIONS: Net investment income $ (5,372) Net realized gain (loss) on investments (52,736) Change in net unrealized gain or loss on investments, futures contracts and foreign currency transactions 145,122 ---------- Net increase (decrease) in net assets resulting from operations $ 87,014 ---------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $3,211,433 Cost of shares repurchased (719,923) ---------- Net increase in net assets resulting from Fund share transactions $2,491,510 ---------- Net increase in net assets $2,578,524 NET ASSETS: End of period $2,578,524 ==========
The accompanying notes are an integral part of these financial statements. 11 PIONEER VARIABLE CONTRACTS TRUST Pioneer Papp Small and Mid Cap Growth VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Papp Small and Mid Cap Growth VCT Portfolio (the Portfolio) a Portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware statutory trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty-two separate diversified portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: Portfolios: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) The Papp Small and Mid Cap Growth VCT Portfolio commenced operations on March 15, 2004. Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of Papp Small and Mid Cap Growth Portfolio is long term capital growth. The financial statements and financial highlights of all other portfolios are presented in separate books. The Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in the preparation of its financial statements which are consistent with those generally accepted in the investment company industry: A. Security Valuation Security transactions are recorded as of trade date. Net asset values for the portfolio are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 12 PIONEER VARIABLE CONTRACTS TRUST Pioneer Papp Small and Mid Cap Growth VCT Portfolio - -------------------------------------------------------------------------------- Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. B. Taxes It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. The Portfolio has elected to defer $8,778 in capital losses recognized between November 1, 2004 and December 31, 2004 to its fiscal year ending December 31, 2005. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2004, Papp Small and Mid Cap Growth VCT Portfolio had a capital loss carryforward of $25,641, which will expire in 2012 if not utilized. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis. - --------------------------------------------------------------------------------
Undistributed Net Accumulated Investment Realized Paid-In Portfolio Income (Loss) Gain (Loss) Capital - ---------------------------------------------------------------------------------------------------------- Pioneer Papp Small and Mid Cap Growth VCT Portfolio $5,372 $ (0) $(5,372) ====== ===== ========= - ----------------------------------------------------------------------------------------------------------
The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004, on a tax basis. There were no distributions paid during the fiscal year ended December 31, 2004. - --------------------------------------------------------------------------------
2004 - -------------------------------------------------------------------------------- Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ -- Undistributed long-term gain/ (capital loss carryforward) (25,641) Post-October loss deferred (8,778) Unrealized appreciation (depreciation) 126,805 ------- Total $92,356 ======= - --------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized appreciation is primarily attributable to the tax deferral of losses on wash sales. C. Portfolio Shares The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees are calculated based on the average daily net asset values attributable to Class I and Class II shares of the Portfolio, respectively. D. Securities Lending The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. 13 PIONEER VARIABLE CONTRACTS TRUST Pioneer Papp Small and Mid Cap Growth VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) - -------------------------------------------------------------------------------- E. Repurchase Agreements With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. Management Agreement PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the portfolio. Management fees are calculated daily at the following annual rate of 0.75% of the Portfolio's average daily net assets. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $1,542 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. Transfer Agent PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $135 in transfer agent fees payable to PIMSS at December 31, 2004. 4. Distribution Plans The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares. Included in due to affiliates is $508 payable to PFD at December 31, 2004. 5. Aggregate Unrealized Appreciation and Depreciation At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
- ------------------------------------------------------------------------------------------------------------- Net Gross Gross Appreciation/ Tax Cost Appreciation Depreciation (Depreciation) ------------- -------------- -------------- --------------- Papp Small and Mid Cap Growth Portfolio $2,408,097 $160,346 $ (33,541) $126,805 ========== ============= ============= ============= - ---------------------------------------------------------------------------------------------------------------
6. Portfolio Transactions The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the period ended December 31, 2004, were $3,023,924 and $581,408, respectively. 7. Capital Shares At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: - --------------------------------------------------------------------------------
Papp Small & Mid Cap Growth Portfolio '04 Shares '04 Amount - ------------------------------------------------------------------ CLASS II: Shares sold 308,301 $3,211,433 Reinvestment of distributions -- -- Shares repurchased (71,044) (719,923) ------- ---------- Net increase 237,257 $2,491,510 ======= ========== - ------------------------------------------------------------------
14 PIONEER VARIABLE CONTRACTS TRUST Pioneer Papp Small and Mid Cap Growth VCT Portfolio - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Board of Trustees of Pioneer Variable Contracts Trust and the Class II Shareowners of Pioneer Papp Small and Mid Cap Growth VCT Portfolio: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Papp Small and Mid Cap Growth VCT Portfolio, one of the portfolios constituting the Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statements of operations and changes in net assets, and the financial highlights, for the period from March 15, 2004 (commencement of operations) to December 31, 2004. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Papp Small and Mid Cap Growth VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations, changes in its net assets, and the financial highlights, for the period from March 15, 2004 (commencement of operations) to December 31, 2004 in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young Boston, Massachusetts February 11, 2005 15 - -------------------------------------------------------------------------------- Pioneer Papp Small and Mid Cap Growth VCT Portfolio - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- Investment Adviser Trustees and Officers Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the Trust's operations. The Trust's Trustees and officers are listed below, together Custodian with their rincipal occupations during the past five years. Trustees who Brown Brothers Harriman & Co are interested persons of the Portfolio within the meaning of the Investment Company Act of 1940 are referred to as Interested Trustees. Independent Registered Public Accounting Firm Trustees who are not interested persons of the Trust are referred to as Ernst & Young LLP Trustees. Each of the Trustees serves as a trustee of each of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, Principal Underwriter Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address Pioneer Funds Distributor, Inc. for all Interested Trustees and all officers of the Portfolio is 60 State Street, Boston, Massachusetts 02109. Legal Counsel The Trust's statement of additional information provides more detailed Wilmer Cutler Pickering Hale and Dorr LLP information regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-225-6292. Shareowner Services and Transfer Proxy Voting Policies and Procedures of the Trust are available without Pioneer Investment Management Shareholder Services, charge, upon Agent request, by calling our toll free number Inc. (1-800-225-6292). This information is also available online at pioneerfunds.com. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEES - ----------------------------------------------------------------------------------------------------------------------------------- POSITIONS HELD PRINCIPAL OCCUPATION DURING NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS TRUSTEE John F. Cogan, Chairman of the Serves until Trustee and President Serves Director of Harbor Global Company, Ltd. Jr. (78)* Board, Trustee successor trustee until retirement or removal; and President is elected or Deputy Chairman and a earlier retirement Director of Pioneer Global or removal Asset Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------ Osbert M. Hood Trustee and Serves until President and Chief None (52)** Executive Vice successor trustee is Executive Officer, PIM-USA President elected or earlier since May 2003 (Director retirement or removal since January 2001); President and Director of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of th Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 t November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999 **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------
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Pioneer Papp Small and Mid Cap Growth VCT Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) - ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------------ POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS THIS TRUSTEE David R. Trustee since Serves until a Senior Vice President and Director of The Enterprise Social Investment Bock** (61) 2005 successor trustee is Chief Financial Officer, Company (privately-held affordable housing 3050 K. elected or earlier I-trax, Inc. (publicly traded finance company); Director of New York Street NW, retirement or health care services Mortgage Trust (publicly traded mortgage Washington, removal. company) (2001-present); REIT) DC 20007 Managing Partner, Federal City Capital Advisors (boutique merchant bank)(1995-2000; 2002 to 2004); Executive Vice President and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Mary K. Bush Trustee since Serves until President, Bush International Director of Brady Corporation (industrial (56) 3509 2000. successor trustee is (international financial identification and specialty coated material Woodbine elected or earlier advisory firm) products manufacturer), Millennium Street, retirement or removal Chemicals, Inc. (commodity chemicals), Chevy Chase, Mortgage Guaranty Insurance Corporation, MD 20815 and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - ------------------------------------------------------------------------------------------------------------------------------------ Margaret Trustee since Serves until Founding Director, The None B.W. Graham 2000. successor trustee is Winthrop Group, Inc. (57) 1001 elected or earlier (consulting firm); Professor Sherbrooke retirement or of Management, Faculty of Street West, removal Management, McGill Montreal, University Quebec, Canada H3A 1G5 - ------------------------------------------------------------------------------------------------------------------------------------ Marguerite Trustee since Serves until President, and Chief Executive Director of New American High Income Fund, A. Piret 1995. successor Officer, Newbury, Piret & Inc.(closed-end investment company) (56) One trustee is Company, Inc. (investment Boston elected or banking firm) Place, 28th earlier Floor, retirement Boston, MA or removal 02108 - ------------------------------------------------------------------------------------------------------------------------------------ Stephen K. Trustee since Serves until Senior Counsel, Sullivan & Director, The Swiss Helvetia Fund, Inc. West (76) 1995. successor trustee Cromwell (law firm) (closed-end investment company) and AMVESCAP 125 Broad is elected or earlier PLC (investment managers) Street, New retirement or removal York, NY 10004 - ------------------------------------------------------------------------------------------------------------------------------------ John Trustee since Serves until President, John Winthrop & Co., None Winthrop September, successor trustee Inc.(private investment firm) (68) One 2000. is elected or earlier North Adgers retirement or removal Wharf, Charleston, SC 29401 - ------------------------------------------------------------------------------------------------------------------------------------
17
Pioneer Papp Small and Mid Cap Growth VCT Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ TRUST OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS OFFICER Dorothy E. Secretary Serves at the discretion Secretary of PIM-USA; Senior None Bourassa (57) of the Board Vice President - Legal of Pioneer; and Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Christopher J. Assistant Serves at the discretion Assistant Vice President and None Kelley (40) Secretary of the Board Senior Counsel of Pioneer since July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ David C. Assistant Serves at the discretion Partner, Wilmer Cutler None Phelan (47) Secretary of the Board Pickering Hale and Dorr LLP; Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Vincent Treasurer Serves at the discretion Vice President-Fund None Nave (59) of the Board Accounting, Administration and Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ------------------------------------------------------------------------------------------------------------------------------------ Mark E. Assistant Serves at the discretion Deputy Treasurer of Pioneer None Bradley (45) Treasurer of the Board since 2004; Treasurer and Senior Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Luis I. Assistant Serves at the discretion Assistant Vice President - None Presutti (39) Treasurer of the Board Fund Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Gary Sullivan Assistant Serves at the discretion Fund Accounting Manager - None (46) Treasurer of the Board Fund Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - ------------------------------------------------------------------------------------------------------------------------------------
18
- ------------------------------------------------------------------------------------------------------------------------------------ Pioneer Papp Small and Mid Cap Growth VCT Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) - ------------------------------------------------------------------------------------------------------------------------------------ TRUST OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ POSITIONS HELD PRINCIPAL OCCUPATION NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS OFFICER Katharine Kim Assistant Serves at the discretion Fund Administration Manager - None Sullivan (31) Treasurer of the Board Fund Accounting, Administration and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Martin J. Wolin Chief Serves at the discretion Chief Compliance Officer of None (37) Compliance of the Board Pioneer (Director of Officer Compliance and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 19 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 20 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 21 [LOGO] PIONEER Investments(R) [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio -- Class II Shares ANNUAL REPORT December 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- T a b l e o f C o n t e n t s - -------------------------------------------------------------------------------- Pioneer Europe VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 8 Notes to Financial Statements 12 Report of Independent Registered Public Accounting Firm 17 Trustees, Officers and Service Providers 18
Please consider a Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about a Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, contact your adviser, call 1-800-225-6292 or visit our website at www.pioneerfunds.com. The Trust files a complete statement of investments with the Securities and Exchange Commission for the first and the third quarters for each fiscal year on Form N-Q. Shareowners may view the filed Form N-Q by visiting the Commission's web site at http://www.sec.gov. The filed form may also be viewed and copied at the Commission's Public Reference Room in Washington, D.C. Information regarding the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330. PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL] Sector Distribution (As a percentage of total investment portfolio holdings) International Preferred Stocks 0.9% International Common Stocks 99.1% Geographical Distribution (As a percentage of equity holdings) Finland 0.8% Belgium 1.6% Sweden 1.6% Ireland 3.2% Italy 5.1% Netherlands 6.0% Spain 6.7% Germany 9.3% Switzerland 12.6% France 26.5% United Kingdom 26.6% Five Largest Holdings (As a percentage of equity holdings) 1. Vodafone Group Plc 4.70% 2. UBS AG 3.18 3. Total SA 2.92 4. Societe Generale 2.84 5. CS Group 2.78
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Prices and Distributions
12/31/04 12/31/03 Net Asset Value per Share $ 10.44 $ 8.89
Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ 0.0583 $ - $ -
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Europe VCT Portfolio at net asset value, compared to that of the Morgan Stanley Capital International (MSCI) Europe Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Pioneer Europe VCT Portfolio MSCI Europe Index Oct-98 10000 10000 10596 10992 13571 12741 Dec-00 11030 11671 8445 9349 Dec-02 6835 7629 9085 10570 Dec-04 10739 12777
The Morgan Stanley Capital International (MSCI) Europe Index measures the performance of stocks in European developed markets. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
Net Asset Value Life-of-Class 1.16% (10/30/98) 5 Years -4.57 1 Year 18.20
All total returns shown assume reinvestment of distributions at net asset value. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Please refer to the variable product's annual report for performance that reflects the deduction of the variable products fees and charges. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Europe VCT Portfolio Based on actual returns from July 1, 2004 through December 31, 2004.
Share Class I II - -------------------------------------------------------------------------------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,169.25 $ 1,167.75 Expenses Paid During Period* $ 8.12 $ 9.40 - --------------------------------------------------------------------------------
* Expenses are equal to the Portfolio's annualized expense ratio of 1.49% and 1.73% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Europe VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from July 1, 2004 through December 31, 2004.
Share Class I II - -------------------------------------------------------------------------------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,017.60 $ 1,016.34 Expenses Paid During Period* $ 7.55 $ 8.74 - --------------------------------------------------------------------------------
* Expenses are equal to the Portfolio's annualized expense ratio of 1.49% and 1.73% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- The 12 months ended December 31, 2004, was a favorable period for European stocks. In spite of high energy prices, attractive stock price levels, high dividend yields and receding fears of inflation contributed to strong returns for the Europe VCT Portfolio, as portfolio manager Stan Pearson discusses in the following interview. Q: How did the Portfolio perform? A: For the 12 months ended December 31, 2004, Class II shares generated a return of 18.20% at net asset value. The performance lagged the Morgan Stanley Capital International (MSCI) Europe Index's return of 20.88%. We think that two stocks account for the underperformance. AstraZeneca (Switzerland) was impacted by general weakness in the pharmaceutical sector and stock-specific events, including the failure to get FDA approval for one of its drugs. Food service provider Compass Group (United Kingdom) suffered after releasing a surprise profit warning in September. In our view, company cash flows have been impacted by once-off items, and we expect cash flow generation to improve going forward. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: Which stocks contributed to performance? A: While many pharmaceutical stocks suffered as a result of questions surrounding safety concerns about blockbuster Cox-2 inhibitor drugs, not all the news was bad for health care stocks. Celesio (Germany), a wholesale pharmaceutical company, rallied as a result of its business restructuring and continued earnings growth. In the telecommunication services industry, we've focused on operators with a high level of exposure to the European market, which continues to generate attractive growth. We purchased Belgacom (Belgium) during its initial public offering in March because it was well valued and offered an attractive dividend yield. The stock has done well as a result of the company's financial strength and sound management. The Portfolio enjoyed strong performance from its emphasis on energy stocks, which are benefiting from high oil prices. ENI (Italy) represented one of the Portfolio's best performers for the year. In the utility sector, E.on is benefiting from the rise in electricity prices. The company has also made progress in restructuring, selling non-core assets and reducing its workforce. Similarly, strong stock selection and an overweight position in the capital goods sector generated strong returns. CRH (Ireland) is profiting from the cyclical upturn and increased capital expenditures in the building materials arena. The company has a successful strategy of acquiring small companies that are easily integrated into CRH. Underlying fundamentals in the financial sector improved on the back of the strong equity markets, and rising investor demand helped push stock prices higher. Barclays (United Kingdom) led the Portfolio's financial holdings and contributed nicely to the Portfolio's performance. During 2004, the stock benefited from speculation that it was a potential take-over target for U.S. banks. Finally, our decision not to invest in the semiconductor industry helped performance because the industry struggled throughout the fiscal year as growth forecasts proved to be overly optimistic. Q: What is your outlook? A: European companies have the capacity to expand margins and profits, but earnings growth is likely to be modest. In a climate where equity appreciation is driven by modest earnings growth, we consider high dividend yields and strong cash flow to be important sources of stock price support. Therefore, we are placing a premium on stocks with the stability and predictability of robust dividend yields. At present levels, European equities are appropriately discounting an environment characterized by gently accelerating macroeconomic growth, low inflation and low volatility. We believe such a global equity environment is likely to result in moderate expectations for equity returns across Europe for the foreseeable future. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. A Word About Risk: Investing in foreign and/or emerging markets securities involves risks relating to interest rates, currency exchange rates, economic, and political conditions. The Portfolio may invest a substantial amount of its assets in issuers located in a limited number of countries and therefore is susceptible to adverse economic, political or regulatory developments affecting those countries. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 4 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Shares Value PREFERRED STOCKS - 0.9% Automobiles & Components - 0.9% Automobile Manufacturers - 0.9% 250 Porsche AG $ 159,264 ----------- TOTAL PREFERRED STOCKS (Cost $83,104) $ 159,264 ----------- COMMON STOCKS - 97.9% Energy - 9.4% Integrated Oil & Gas - 4.1% 32,474 BP Amoco Plc $ 316,497 16,533 Eni S.p.A. 414,540 ----------- $ 731,037 ----------- Oil & Gas Refining Marketing & Transportation - 5.3% 16,148 Repsol SA $ 419,786 2,339 Total SA 511,991 ----------- $ 931,777 ----------- Total Energy $ 1,662,814 ----------- Materials - 9.3% Commodity Chemicals - 1.4% 3,516 BASF India, Ltd. $ 252,819 ----------- Construction Materials - 6.4% 11,436 CRH Plc $ 306,459 2,196 Holcim, Ltd. 132,566 8,961 Italcementi S.p.A. 144,084 3,729 Lafarge Br 359,324 1,391 VINCI SA 186,499 ----------- $ 1,128,932 ----------- Diversified Metals & Mining - 1.5% 9,326 Rio Tinto Plc $ 274,043 ----------- Total Materials $ 1,655,794 ----------- Capital Goods - 7.1% Construction & Engineering - 4.3% 12,320 ACS, Actividades de Construccion y Servicios, S.A. $ 281,233 5,731 Compagnie de Saint Gobain 344,235 797 Technip 147,072 ----------- $ 772,540 ----------- Electrical Components & Equipment - 1.2% 3,012 Schneider Electric SA $ 209,209 ----------- Industrial Machinery - 1.6% 1,976 Atlas Copco AB $ 89,168 4,221 AB SKF 187,945 ----------- $ 277,113 ----------- Total Capital Goods $ 1,258,862 -----------
Shares Value Commercial Services & Supplies - 1.4% Diversified Commercial Services - 1.4% 9,329 TNT Post Group N.V. $ 253,356 ----------- Total Commercial Services & Supplies $ 253,356 ----------- Automobiles & Components - 0.9% Auto Parts & Equipment - 0.9% 2,394 Compagnie Generale des Etablissements Michelin $ 153,268 ----------- Total Automobiles & Components $ 153,268 ----------- Consumer Durables & Apparel - 1.0% Apparel, Accessories & Luxury Goods - 1.0% 1,131 Adidas-Salomon AG $ 182,109 ----------- Total Consumer Durables & Apparel $ 182,109 ----------- Hotels, Restaurants & Leisure - 2.0% Restaurants - 2.0% 42,574 Compass Group Plc $ 200,909 8,416 GUS plc 151,709 ----------- $ 352,618 ----------- Total Hotels, Restaurants & Leisure $ 352,618 ----------- Media - 2.1% Advertising - 0.5% 2,942 Publicis SA $ 95,154 ----------- Publishing - 1.6% 7,545 Elsevier NV $ 102,854 5,457 Vivendi Universal* 174,811 ----------- $ 277,665 ----------- Total Media $ 372,819 ----------- Retailing - 1.7% Distributors - 0.8% 14,303 Buhrmann NV* $ 139,026 ----------- Specialty Stores - 0.9% 34,285 HMV Group Plc $ 170,270 ----------- Total Retailing $ 309,296 ----------- Food & Drug Retailing - 4.2% Drug Retail - 0.8% 11,116 Boots Co. Plc $ 139,667 ----------- Food Retail - 3.4% 1,429 Nestle SA (Registered Shares) $ 373,904 37,557 Tesco Plc 232,179 ----------- $ 606,083 ----------- Total Food & Drug Retailing $ 745,750 -----------
The accompanying notes are an integral part of these financial statements. 5 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Shares Value Food, Beverage & Tobacco - 1.8% Tobacco - 1.8% 18,370 British American Tobacco Plc $ 316,318 ----------- Total Food, Beverage & Tobacco $ 316,318 ----------- Pharmaceuticals & Biotechnology - 8.2% Pharmaceuticals - 8.2% 512 Actelion, Ltd.* $ 52,454 11,377 AstraZeneca Plc 413,428 12,095 GlaxoSmithKline Plc 284,538 2,452 Roche Holdings AG 280,042 3,535 Sanofi-Aventis 282,546 1,796 Schering AG 133,874 ----------- $ 1,446,882 ----------- Total Pharmaceuticals & Biotechnology $ 1,446,882 ----------- Banks - 15.1% Diversified Banks - 15.1% 8,687 Allied Irish Banks Plc $ 179,311 32,459 Barclays Plc 364,657 13,477 Banco Bilbao Vizcaya Argentaria, SA 238,517 5,468 BNP Paribas SA 395,665 6,739 Credit Agricole SA 202,895 11,564 CS Group* 487,180 4,600 Depfa Bank Plc 77,234 14,386 HSBC Holding Plc 242,491 14,378 Royal Bank of Scotland Group Plc 482,632 ----------- $ 2,670,582 ----------- Total Banks $ 2,670,582 ----------- Diversified Financials - 10.7% Asset Management & Custody Banks - 0.4% 2,630 Man Group Plc $ 73,463 ----------- Diversified Financial Services - 9.1% 6,429 Fortis NV $ 178,055 6,390 ING Groep NV 193,219 2,730 Lagardere S.C.A. 196,640 4,931 Societe Generale 498,393 6,686 UBS AG 557,151 ----------- $ 1,623,458 ----------- Specialized Finance - 1.2% 3,406 Deutsche Boerse AG $ 204,654 ----------- Total Diversified Financials $ 1,901,575 -----------
Shares Value Insurance - 4.6% Life & Health Insurance - 0.5% 2,574 Assicurazioni Generali $ 87,197 ----------- Multi-Line Insurance - 3.4% 11,889 AXA $ 294,430 1,923 Zurich Financial Services* 319,639 ----------- $ 614,069 ----------- Reinsurance - 0.7% 3,097 Hannover Rueckversicheru $ 121,034 ----------- Total Insurance $ 822,300 ----------- Software & Services - 1.0% IT Consulting & Other Services - 1.0% 2,571 Atos Origin* $ 174,397 ----------- Total Software & Services $ 174,397 ----------- Technology Hardware & Equipment - 3.6% Semiconductors - 1.0% 6,783 Philips Electronics NV $ 179,433 ----------- Communications Equipment - 0.9% 10,079 Nokia Oyj $ 158,148 ----------- Computer Hardware - 0.5% 34,273 Dixons Group Plc $ 100,038 ----------- Electronic Equipment & Instruments - 1.2% 2,450 Siemens $ 207,334 ----------- Total Technology Hardware & Equipment $ 644,953 ----------- Telecommunication Services - 11.2% Alternate Carriers - 2.4% 12,630 France Telecom $ 417,197 ----------- Integrated Telecommunication Services - 4.2% 6,351 Belgacom SA* $ 274,098 12,569 Telefonica SA 236,223 59,202 Telecom Italia S.p.A. 241,711 ----------- $ 752,032 ----------- Wireless Telecommunication Services - 4.6% 304,416 Vodafone Group Plc $ 824,041 ----------- Total Telecommunication Services $ 1,993,270 -----------
6 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Utilities - 2.6% Electric Utilities - 2.6% 4,077 E.On AG $ 371,038 8,667 National Grid Transco Plc 82,528 ----------- $ 453,566 ----------- Total Utilities $ 453,566 ----------- TOTAL COMMON STOCKS (Cost $13,033,884) $17,370,529 ----------- TOTAL INVESTMENTS IN SECURITIES - 98.8% (Cost $13,116,988) (a) $17,529,793 ----------- OTHER ASSETS AND LIABILITIES - 1.2% $ 195,845 ----------- TOTAL NET ASSETS - 100.0% $17,725,638 ===========
* Non-income producing security (a) Distributions of investments by country of issue, as a percentage of total equity holdings (excluding temporary cash investments) is as follows: United Kingdom 26.6% France 26.5 Switzerland 12.6 Germany 9.3 Spain 6.7 Netherlands 6.0 Italy 5.1 Ireland 3.2 Sweden 1.6 Belgium 1.6 Finland 0.8 ----- 100.0% =====
The accompanying notes are an integral part of these financial statements. 7 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended 1/2/01 to Class II (a) 12/31/04 12/31/03 12/31/02 12/31/01 Net asset value, beginning of period $ 8.89 $ 6.71 $ 8.29 $ 11.07 ------- ------ -------- -------- Increase from investment operations: Net investment income $ 0.04 $ 0.03 $ 0.01 $ 0.08 Net realized and unrealized gain (loss) on investments and foreign currency transactions 1.57 2.17 ( 1.59) ( 2.71) ------- ------ -------- -------- Net increase (decrease) from investment operations $ 1.61 $ 2.20 $ (1.58) $ (2.63) Distributions to shareowners: Net investment income ( 0.06) (0.02) -- ( 0.15) Net realized gain -- -- -- -- ------- ------- -------- -------- Net increase (decrease) in net asset value $ 1.55 $ 2.18 $ (1.58) $ (2.78) ------- ------- -------- -------- Net asset value, end of period $ 10.44 $ 8.89 $ 6.71 $ 8.29 ======= ======= ======== ======== Total return* 18.20% 32.92% (19.06)% (23.44)% Ratio of net expenses to average net assets+ 1.75% 1.79% 1.86% 3.22% Ratio of net investment income to average net assets+ 0.61% 0.56% 0.25% ( 2.56)% Portfolio turnover rate 55% 52% 95% 73% Net assets, end of period (in thousands) $ 8,252 $ 5,005 $ 1,829 $ 398 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 2.20% 2.75% 2.66% 4.57% Net investment income (loss) 0.17% (0.40)% ( 0.54)% ( 3.90)%
(a) Class II shares were first publicly offered on January 2, 2001. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period.) + Ratios with no reduction for fees paid indirectly. 8 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (Cost $13,116,988) $ 17,529,793 Cash 247,120 Receivables -- Fund shares sold 4,231 Dividends, interest and foreign taxes withheld 32,798 Other 1,489 ------------ Total assets $ 17,815,431 ------------ LIABILITIES: Payables -- Fund shares repurchased $ 17,293 Due to affiliates 21,663 Accrued expenses 50,837 ------------ Total liabilities $ 89,793 ------------ NET ASSETS: Paid-in capital $ 21,052,463 Undistributed net investment income (loss) 103,181 Accumulated undistributed net realized gain (loss) (7,845,397) Net unrealized gain (loss) on: Investments 4,412,805 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies 2,586 ------------ Total net assets $ 17,725,638 ------------ NET ASSET VALUE PER SHARE: Class I: No par value (unlimited number of shares authorized) Net assets $ 9,477,976 Shares outstanding 891,363 ------------ Net asset value per share $ 10.64 Class II: No par value (unlimited number of shares authorized) Net assets $ 8,247,662 Shares outstanding 790,400 ------------ Net asset value per share $ 10.44
The accompanying notes are an integral part of these financial statements. 9 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - --------------------------------------------------------------------------------
Year Ended 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $51,698) $ 355,527 Interest 3,353 ---------- Total investment income $ 358,880 ---------- EXPENSES: Management fees $ 149,784 Transfer agent fees and expenses 3,049 Distribution fees (Class II) 15,403 Administrative reimbursements 18,500 Custodian fees 66,885 Professional fees 33,376 Printing expense 5,807 Miscellaneous 13,769 ---------- Total expenses $ 306,573 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (66,223) ---------- Net expenses $ 240,350 ---------- Net investment income (loss) $ 118,530 ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $1,174,390 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (19,831) ---------- $1,154,559 ---------- Change in net unrealized gain or (loss) from: Investments (the change in reserve for repatriation taxes of $86,981) $1,407,564 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (4,757) ---------- $1,402,807 ---------- Net gain (loss) on investments, futures contracts and foreign currency transactions $2,557,366 ========== Net increase (decrease) in net assets resulting from operations $2,675,896 ==========
10 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Year Ended Year Ended 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 118,530 $ 110,674 Net realized gain (loss) on investments 1,154,559 (108,393) Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions 1,402,807 3,419,238 ------------ ------------ Net increase (decrease) in net assets resulting from operations $ 2,675,896 $ 3,421,519 ------------ ------------ DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (65,951) $ (36,322) Class II (38,910) (9,367) ------------ ------------ Total distributions to shareowners $ (104,861) $ (45,689) ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 3,890,105 $ 6,502,123 Reinvestment of distributions 104,862 45,689 Cost of shares repurchased (3,175,336) (6,113,517) ------------ ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ 819,631 $ 434,295 ------------ ------------ Net increase (decrease) in net assets $ 3,390,666 $ 3,810,125 NET ASSETS: Beginning of year 14,334,972 10,524,848 ------------ ------------ End of year $ 17,725,638 $ 14,334,973 ============ ============ Undistributed net investment income (loss), end of year $ 103,181 $ 109,343 ============ ============
The accompanying notes are an integral part of these financial statements. 11 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Europe Portfolio (the Portfolio) is a Portfolio of the Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate diversified portfolios fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: Portfolios: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value I Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The investment objective of Europe VCT Portfolio is to seek long-term capital growth. The Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting years. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements, which are consistent with those generally accepted in the investment company industry: A. Security Valuation Security transactions are recorded as of trade date. Net asset values for the portfolio is computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Trading in foreign equity securities is substantially completed each day at various times prior to the close of the NYSE. The value of such securities used in computing the net asset value of the Portfolio's shares, based on the last sale price on the principal exchange where they traded. The principal exchanges and markets for such securities have closing times prior to the close of the NYSE. However, the value of these securities may be influenced by changes in global markets occurring after the closing times of the local exchanges and markets up to the time the Portfolio determines its net asset value. Consequently, the Board of Trustees of the Portfolio has determined that the use of daily fair valuations as provided by a pricing service is appropriate for the Portfolio. The Portfolio may also take into consideration other significant events in determining the fair value of these securities. Thus, the Portfolio's securities valuations may differ from prices reported by the various local exchanges and markets. 12 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- At December 31, 2004, there were no fair valued securities except as follows. All securities that trade in foreign markets whose closing prices are as of times prior to the close of the NYSE and that are held by Europe Portfolio are fair valued using vendor-supplied pricing updates for each security to the time of the close of the NYSE. Temporary cash investments and securities held by the Portfolio are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis, net of unrecoverable foreign taxes withheld at the applicable country rates. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. B. Foreign Currency Translation The books and records of the Portfolio are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent, the net realized gains and losses on foreign currency contracts, disposition of foreign currencies, and the difference between the amount of income accrued and the U.S. dollar actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. C. Forward Foreign Currency Contracts The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar (see Note 8). D. Taxes It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amount and characterization of distributions to shareowners for financial reporting purposes is determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2003, Europe VCT Portfolio had a capital loss carryforward of $6,975,894 of which the following amounts will expire between 2009 and 2011 if not utilized: $4,296,563 in 2009, $1,896,288 in 20010 and $783,043 in 2011. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis.
Undistributed Net Investment Income Accumulated Realized Portfolio (Loss) Net Gain (Loss) Paid-In Capital - ------------------------------------------------------------------------------------------ Pioneer Europe VCT Portfolio $ (19,831) $19,831 $ -- ========== ======= ===== - ------------------------------------------------------------------------------------------
13 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) - -------------------------------------------------------------------------------- The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004, and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis. - --------------------------------------------------------------------------------
2004 2003 - ------------------------------------------------------------------------------------------ Distributions paid from: Ordinary Income $ 104,861 $45,689 Long-Term capital gain -- -- ----------- ------- $ 104,861 $45,689 ----------- ------- Return of Capital -- -- Total distributions $ 104,861 $45,689 ============ ======= Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ 103,181 Undistributed long-term gain/(capital loss carryforward) (6,975,894) Unrealized appreciation (depreciation) 3,545,888 ----------- Total $(3,326,825) ============ - ------------------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily attributable to the tax deferral of losses on wash sales. E. Portfolio Shares The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of adjusted net assets at the beginning of the day. Dividends and distributions to shareowners are recorded on the ex-dividend date. Distributions paid by the Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. F. Securities Lending The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. G. Repurchase Agreements With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 14 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2. Management Agreement PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the portfolio. Management fees are calculated daily at the following annual rate of 1.00% of the Portfolio's average daily net assets. In addition, under the management and administration agreement, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $19,630 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. Transfer Agent PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $271 in transfer agent fees payable to PIMSS at December 31, 2004. 4. Distribution Plans The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares. Included in due to affiliates is $1,762 payable to PFD at December 31, 2004. 5. Aggregate Unrealized Appreciation and Depreciation At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows: - --------------------------------------------------------------------------------
Net Gross Gross Appreciation/ Portfolio Tax Cost Appreciation Depreciation (Depreciation) - ------------------------------------------------------------------------------------------ Europe Portfolio $13,986,491 $3,915,690 $ (372,388) $3,543,302 =========== ========== =========== ========== - ------------------------------------------------------------------------------------------
6. Portfolio Transactions The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $8,930,700 and $8,096,127, respectively. 7. Capital Shares At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: - --------------------------------------------------------------------------------
Europe Portfolio '04 Shares '04 Amount '03 Shares '03 Amount - ------------------------------------------------------------------------------------------ CLASS I: Shares sold 43,531 $ 395,370 59,876 $ 462,031 Reinvestment of distributions 7,232 65,952 4,817 36,322 Shares repurchased (190,688) (1,758,638) (308,777) (2,225,749) ------------------------------------------------------- Net increase (decrease) (139,925) $ (1,297,316) (244,084) $ (1,727,396) ======================================================= CLASS II: Shares sold 374,441 $ 3,494,736 836,602 $ 6,040,092 Reinvestment of distributions 4,343 38,910 1,262 9,367 Shares repurchased (151,264) (1,416,699) (547,441) (3,887,768) ------------------------------------------------------- Net increase (decrease) 227,520 $ 2,116,947 290,423 $ 2,161,691 ======================================================= - ------------------------------------------------------------------------------------------
15 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) - -------------------------------------------------------------------------------- 8. Forward Foreign Currency Contracts During the year ended December 31, 2004, certain Portfolios had entered into various contracts that obligate the Portfolios to deliver currencies at specified future dates. At the maturity of a contract, the Portfolios must make delivery of the foreign currency. Alternatively, prior to the settlement date of a portfolio hedge, the Portfolio may close out such contracts by entering into an offsetting hedge contract. As of December 31, 2004, the Portfolio had no outstanding portfolio or settlement hedges. 16 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Board of Trustees of Pioneer Variable Contracts Trust and the Class II Shareowners of Pioneer Europe VCT Portfolio: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Europe VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the period ended December 31, 2001 were audited by other auditors who have ceased operations and whose report, dated February 8, 2002, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Europe VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 17 - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- Pioneer Europe VCT Portfolio - ----------------------------------------------------------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - ----------------------------------------------------------------------------------------------------------------------------------- Investment Adviser Trustees and Officers Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the Trust's operations. The Trust's Trustees and officers are listed below, together Custodian with their rincipal occupations during the past five years. Trustees who Brown Brothers Harriman & Co are interested persons of the Portfolio within the meaning of the Investment Company Act of 1940 are referred to as Interested Trustees. Independent Registered Public Accounting Firm Trustees who are not interested persons of the Trust are referred to as Ernst & Young LLP Trustees. Each of the Trustees serves as a trustee of each of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, Principal Underwriter Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address Pioneer Funds Distributor, Inc. for all Interested Trustees and all officers of the Portfolio is 60 State Street, Boston, Massachusetts 02109. Legal Counsel The Trust's statement of additional information provides more detailed Wilmer Cutler Pickering Hale and Dorr LLP information regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-225-6292. Shareowner Services and Transfer Proxy Voting Policies and Procedures of the Trust are available without Pioneer Investment Management Shareholder Services, charge, upon Agent request, by calling our toll free number Inc. (1-800-225-6292). This information is also available online at pioneerfunds.com. Pioneer Investment Management Shareholder Services, Inc. online at pioneerfunds.com. online at pioneerfunds.com. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEES - ----------------------------------------------------------------------------------------------------------------------------------- POSITIONS HELD PRINCIPAL OCCUPATION DURING NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS TRUSTEE John F. Cogan, Chairman of the Serves until Trustee and President Serves Director of Harbor Global Company, Ltd. Jr. (78)* Board, Trustee successor trustee until retirement or removal; and President is elected or Deputy Chairman and a earlier retirement Director of Pioneer Global or removal Asset Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------ Osbert M. Hood Trustee and Serves until President and Chief Executive None (52)** Executive Vice successor trustee is Officer, PIM-USA since May 2003 President elected or earlier (Director since January 2001); retirement or removal President and Director of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------
18
- ------------------------------------------------------------------------------------------------------------------------------------ Pioneer Europe VCT Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) - ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------------ POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS THIS TRUSTEE David R. Trustee since Serves until a Senior Vice President and Director of The Enterprise Social Investment Bock** (61) 2005 successor trustee is Chief Financial Officer, Company (privately-held affordable housing 3050 K. elected or earlier I-trax, Inc (publicly traded finance company); Director of New York Street NW, retirement or health care services Mortgage Trust (publicly traded mortgage Washington, removal. company) (2001-present); REIT) DC 20007 Managing Partner, Federal City Capital Advisors (boutique merchant bank)(1995-2000; 2002 to 2004); Executive Vice President and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Mary K. Bush Trustee since Serves until President, Bush International Director of Brady Corporation (industrial (56) 3509 2000. successor trustee is (international inancial identification and specialty coated material Woodbine elected or earlier advisory firm) products manufacturer), Millennium Street, retirement or removal Chemicals, Inc. (commodity chemicals), Chevy Chase, Mortgage Guaranty Insurance Corporation, MD 20815 and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - ------------------------------------------------------------------------------------------------------------------------------------ Margaret Trustee since Serves until Founding Director, The None B.W. Graham 2000. successor trustee is Winthrop Group, Inc. (57) 1001 elected or earlier (consulting firm); Professor Sherbrooke retirement or removal of Management, Faculty of Street West, Management, McGill Montreal, University Quebec, Canada H3A 1G5 - ------------------------------------------------------------------------------------------------------------------------------------ Marguerite Trustee since Serves untill President, and Chief Executive Director of New American High Income Fund, A. Piret 1995. successor Officer, Newbury, Piret & Inc.(closed-end investment company) (56) One trustee is Company, Inc. (investment Boston elected or banking firm) Place, 28th earlier Floor, retirement Boston, MA or removal 02108 - ------------------------------------------------------------------------------------------------------------------------------------ Stephen K. Trustee since Serves until Senior Counsel, Sullivan & Director, The Swiss Helvetia Fund, Inc. West (76) 1995. successor trustee Cromwell (law firm) (closed-end investment company) and AMVESCAP 125 Broad is elected or earlier PLC (investment managers) Street, New retirement or removal York, NY 10004 - ------------------------------------------------------------------------------------------------------------------------------------ John Trustee since Serves until President, John Winthrop & CO., None Winthrop September, successor trustee Inc.(private investment firm) (68) One 2000. is elected or earlier North Adgers retirement or removal Wharf, Charleston, SC 29401 - ------------------------------------------------------------------------------------------------------------------------------------
19
- ------------------------------------------------------------------------------------------------------------------------------------ Pioneer Europe VCT Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) - ------------------------------------------------------------------------------------------------------------------------------------ TRUST OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS OFFICER Dorothy E. Secretary Serves at the discretion Secretary of PIM-USA; Senior None Bourassa (57) of the Board Vice President - Legal of Pioneer; and Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Complianc of PIM-USA from April 1998 through October 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Christopher J. Assistant Serves at the discretion Assistant Vice President and None Kelley (40) Secretary of the Board Senior Counsel of Pioneer since July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ David C. Assistant Serves at the discretion Partner, Wilmer Cutler None Phelan (47) Secretary of the Board Pickering Hale and Dorr LLP; Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Vincent Treasurer Serves at the discretion Vice President-Fund None Nave (59) of the Board Accounting, Administration and Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ------------------------------------------------------------------------------------------------------------------------------------ Mark E. Assistant Serves at the discretion Deputy Treasurer of Pioneer None Bradley (45) Treasurer of the Board since 2004; Treasurer and Senior Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Luis I. Assistant Serves at the discretion Assistant Vice President - None Presutti (39) Treasurer of the Board Fund Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Gary Sullivan Assistant Serves at the discretion Fund Accounting Manager - None (46) Treasurer of the Board Fund Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - ------------------------------------------------------------------------------------------------------------------------------------
20
- ------------------------------------------------------------------------------------------------------------------------------------ Pioneer Europe VCT Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) - ------------------------------------------------------------------------------------------------------------------------------------ TRUST OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ POSITIONS HELD PRINCIPAL OCCUPATION NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS OFFICER Katharine Kim Assistant Serves at the discretion Fund Administration Manager - None Sullivan (31) Treasurer of the Board Fund Accounting, Administration and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Martin J. Wolin Chief Serves at the discretion Chief Compliance Officer of None (37) Compliance of the Board Pioneer (Director of Officer Compliance and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 21 [LOGO] PIONEER Investments(R) [GRAPHICS OMITTED] PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust -- Class I Shares Pioneer Emerging Markets VCT Portfolio Pioneer Europe VCT Portfolio Pioneer International Value VCT Portfolio Pioneer Small Cap Value VCT Portfolio Pioneer Small Company VCT Portfolio Pioneer Mid Cap Value VCT Portfolio Pioneer Growth Shares VCT Portfolio Pioneer Real Estate Shares VCT Portfolio Pioneer Fund VCT Portfolio Pioneer Equity Income VCT Portfolio ANNUAL REPORT December 31, 2004 Pioneer Balanced VCT Portfolio Pioneer High Yield VCT Portfolio Pioneer Strategic Income VCT Portfolio Pioneer America Income VCT Portfolio Pioneer Money Market VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Table of Contents Letter to Shareowners 1 Comparing Ongoing Portfolio Expenses 2 Pioneer Emerging Markets VCT Portfolio Portfolio and Performance Update 4 Portfolio Management Discussion 5 Pioneer Europe VCT Portfolio Portfolio and Performance Update 6 Portfolio Management Discussion 7 Pioneer International Value VCT Portfolio Portfolio and Performance Update 8 Portfolio Management Discussion 9 Pioneer Small Cap Value VCT Portfolio Portfolio and Performance Update 10 Portfolio Management Discussion 11 Pioneer Small Company VCT Portfolio Portfolio and Performance Update 12 Portfolio Management Discussion 13 Pioneer Mid Cap Value VCT Portfolio Portfolio and Performance Update 14 Portfolio Management Discussion 15 Pioneer Growth Shares VCT Portfolio Portfolio and Performance Update 16 Portfolio Management Discussion 17 Pioneer Real Estate Shares VCT Portfolio Portfolio and Performance Update 18 Portfolio Management Discussion 19 Pioneer Fund VCT Portfolio Portfolio and Performance Update 20 Portfolio Management Discussion 21 Pioneer Equity Income VCT Portfolio Portfolio and Performance Update 22 Portfolio Management Discussion 23 Pioneer Balanced VCT Portfolio Portfolio and Performance Update 24 Portfolio Management Discussion 25 Pioneer High Yield VCT Portfolio Portfolio and Performance Update 26 Portfolio Management Discussion 27 Pioneer Strategic Income VCT Portfolio Portfolio and Performance Update 28 Portfolio Management Discussion 29 Pioneer America Income VCT Portfolio Portfolio and Performance Update 30 Portfolio Management Discussion 31 Pioneer Money Market VCT Portfolio Portfolio and Performance Update 32 Schedules of Investments Pioneer Emerging Markets VCT Portfolio 33 Pioneer Europe VCT Portfolio 38 Pioneer International Value VCT Portfolio 41 Pioneer Small Cap Value VCT Portfolio 45 Pioneer Small Company VCT Portfolio 49 Pioneer Mid Cap Value VCT Portfolio 53 Pioneer Growth Shares VCT Portfolio 57 Pioneer Real Estate Shares VCT Portfolio 60 Pioneer Fund VCT Portfolio 61 Pioneer Equity Income VCT Portfolio 65 Pioneer Balanced VCT Portfolio 68 Pioneer High Yield VCT Portfolio 75 Pioneer Strategic Income VCT Portfolio 81 Pioneer America Income VCT Portfolio 91 Pioneer Money Market VCT Portfolio 96 Financial Statements 108 Notes to Financial Statements 122
PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- LETTER TO SHAREOWNERS 12/31/04 - -------------------------------------------------------------------------------- Dear Shareowner, After three calendar quarters of listless performance, U.S. equity markets improved strongly late in the year. Anxiety over energy prices, international tensions and the falling American dollar had held the markets back, but uneasiness about the presidential election was the principal source of investor hesitation. The election went smoothly, the result was decisive, and the ensuing rally pushed major indices into the black for the second year running. However, returns trailed 2003's levels. Small-capitalization companies outperformed large-cap issues for the sixth consecutive year. Markets overseas were generally buoyant: commodity-rich nations saw surging demand for copper, iron ore, lumber and other materials, with much of their output destined to feed China's vast economic appetite. Bond investors focused on longer-term issues. Reflecting the risk preference that favored small-cap stocks, high-yield bonds were the strongest performers, while higher quality issues, including U.S. Treasury issues, scored more modest gains. Municipal bond returns were generally favorable as well; economic growth spurred rising tax revenues, putting many issuers into surplus for the first time in years. A measured pace of growth seems in store for the U.S. economy, which generated 2.2 million jobs after years of employment declines. By the end of September, the economy had tallied 12 positive quarters, and the nation's annualized growth rate stood at a respectable four percent. We believe this rate of expansion is enough to sustain growth without provoking the Federal Reserve Board into aggressive interest rate hikes aimed at calming inflation. As always, we encourage you to talk to your investment adviser about market changes and any implications for how your personal investment portfolio is balanced. Thank you for your continued confidence in Pioneer. Respectfully, /s/Osbert M. Hood Osbert M. Hood President Pioneer Investment Management, Inc. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolios' historical or future performance are statements of the opinion of portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. 1 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner of the Portfolio, you incur two types of costs: (1) transactions costs, including sales charges (loads) on purchase payment and redemption fees, and (2) ongoing costs including management fees and other Portfolio Expenses. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2004 - December 31, 2004). This example is intended to help you understand your ongoing costs (in dollars), of investing in the Portfolio and to compare these costs of investing in other mutual funds. Actual Expenses The first line of the table below for each Portfolio provides information about the actual account values and actual expenses. You may use the information in the line, together with amount you invested, to estimate the expenses that you paid over the period. Simply divide you account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiple the result by the number in the first line for a Portfolio under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during the period. Hypothetical Example for Comparison Purposes The second line of the table below for each Portfolio provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other portfolios. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different mutual funds. In addition, if these transaction costs were included, your costs would have been higher.
Class I Shares ---------------------------------------------------- Beginning Ending Account Acount Expenses Paid Value Value During Period 7/1/04 12/31/04 (7/1/04-12/31/04) - ---------------------------------------------------------------------------------------------------- Pioneer Emerging Markets VCT Portfolio Actual $ 1,000.00 $ 1,251.10 $ 9.82 Hypothetical (a) $ 1,000.00 $ 1,016.34 $ 8.79 Pioneer Europe VCT Portfolio Actual $ 1,000.00 $ 1,169.25 $ 8.12 Hypothetical (a) $ 1,000.00 $ 1,017.60 $ 7.55 Pioneer International Value VCT Portfolio Actual $ 1,000.00 $ 1,146.73 $ 9.74 Hypothetical (a) $ 1,000.00 $ 1,016.34 $ 9.14 Pioneer Small Cap Value VCT Portfolio Actual $ 1,000.00 $ 1,112.59 $ 6.60 Hypothetical (a) $ 1,000.00 $ 1,018.85 $ 6.30 Pioneer Small Company VCT Portfolio Actual $ 1,000.00 $ 1,067.51 $ 6.46 Hypothetical (a) $ 1,000.00 $ 1,018.85 $ 6.30 Pioneer Mid Cap Value VCT Portfolio Actual $ 1,000.00 $ 1,121.91 $ 3.88 Hypothetical (a) $ 1,000.00 $ 1,021.52 $ 3.70 Pioneer Growth Shares VCT Portfolio Actual $ 1,000.00 $ 1,077.66 $ 5.30 Hypothetical (a) $ 1,000.00 $ 1,020.31 $ 5.15
2 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Class I Shares ---------------------------------------------------- Beginning Ending Account Acount Expenses Paid Value Value During Period 7/1/04 12/31/04 (7/1/04-12/31/04) - ---------------------------------------------------------------------------------------------------- Pioneer Real Estate Shares VCT Portfolio Actual $ 1,000.00 $ 1,263.87 $ 5.77 Hypothetical (a) $ 1,000.00 $ 1,020.21 $ 5.15 Pioneer Fund VCT Portfolio Actual $ 1,000.00 $ 1,090.36 $ 3.72 Hypothetical (a) $ 1,000.00 $ 1,021.57 $ 3.60 Pioneer Equity Income VCT Portfolio Actual $ 1,000.00 $ 1,119.78 $ 3.82 Hypothetical (a) $ 1,000.00 $ 1,021.52 $ 3.65 Pioneer Balanced VCT Portfolio Actual $ 1,000.00 $ 1,028.06 $ 4.67 Hypothetical (a) $ 1,000.00 $ 1,020.61 $ 4.65 Pioneer High Yield VCT Portfolio Actual $ 1,000.00 $ 1,077.61 $ 4.11 Hypothetical (a) $ 1,000.00 $ 1,021.22 $ 4.00 Pioneer Strategic Income VCT Portfolio Actual $ 1,000.00 $ 1,098.98 $ 5.15 Hypothetical (a) $ 1,000.00 $ 1,019.96 $ 4.95 Pioneer America Income VCT Portfolio Actual $ 1,000.00 $ 1,032.65 $ 4.07 Hypothetical (a) $ 1,000.00 $ 1,021.17 $ 4.05 Pioneer Money Market VCT Portfolio Actual $ 1,000.00 $ 1,003.99 $ 4.01 Hypothetical (a) $ 1,000.00 $ 1,021.42 $ 4.05
(a)5% return per year before expenses Expenses are equal to the annualized expense ratio of a Portfolio's Class I shares (as indicated in the table below), multiplied by 184/366 (to reflect the one half year period.)
Annualized Expense Ratio -------------- Pioneer Emerging Markets VCT Portfolio 1.73% Pioneer Europe VCT Portfolio 1.49% Pioneer International Value VCT Portfolio 1.80% Pioneer Small Cap Value VCT Portfolio 1.24% Pioneer Small Company VCT Portfolio 1.24% Pioneer Mid Cap Value VCT Portfolio 0.73% Pioneer Growth Shares VCT Portfolio 1.01% Pioneer Real Estate Shares VCT Portfolio 1.01% Pioneer Fund VCT Portfolio 0.71% Pioneer Equity Income VCT Portfolio 0.72% Pioneer Balanced VCT Portfolio 0.92% Pioneer High Yield VCT Portfolio 0.79% Pioneer Strategic Income VCT Portfolio 0.98% Pioneer America Income VCT Portfolio 0.80% Pioneer Money Market VCT Portfolio 0.80%
3 PIONEER VARIABLE CONTRACTS TRUST Pioneer Emerging Markets VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS REPRESENTED BY PIE CHART IN THE ORIGINAL DOCUMENT] Portfolio Diversification (As a percentage of total investment portfolio) International Common Stocks 55.8% International Preferred Stocks 1.7% U.S. Common Stocks 5.5% Temporary Cash Investment 7.7% Depositary Receipts for International Stocks 29.3% Geographical Distribution (As a percentage of equity holdings) Other(individually less then 1%) 2.0% Hungary 1.1% Czech Rebublic 1.1% Philippines 1.3% Singapore 1.3% Peru 1.4% People's Republic of China 2.0% Poland 2.2% Thailand 2.3% Chile 2.8% Indonesia 2.8% Malaysia 5.2% India 5.5% Turkey 6.0% Mexico 6.2% Russia 6.8% South Africa 7.1% Taiwan 7.5% Brazil 14.5% South Korea 20.9% Five Largest Holdings (As a percentage of equity holdings) 1. Samsung Electronics Co. 3.67% 2. Petrobras Brasileiro SA (A.D.R.) 3.43% 3. Companhia Vale do Rio Doce (A.D.R.) 2.47% 4. Telefonos de Mexico SA 1.76% 5. Lukoil Holding (A.D.R.) 1.74%
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Prices and Distributions
12/31/04 12/31/03 Net Asset Value per Share $20.48 $17.37
Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ 0.1496 $ - $ -
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Emerging Markets VCT Portfolio at net asset value, compared to that of the Morgan Stanley Capital International (MSCI) Emerging Markets Free Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL]
Pioneer Emerging Markets VCT Portfolio MSCI Emerging Markets Free Index 10/98 10000 10000 10490 10675 18750 17766 12/00 12337 12330 11450 12037 12/02 11312 11315 17903 17682 12/04 21292 22267
The Morgan Stanley Capital International (MSCI) Emerging Markets Free Index measures the performance of emerging market stocks. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
Net Asset Value Life-of-Class 13.03% (10/30/98) 5 Years 2.58% 1 Year 18.93%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 4 PIONEER VARIABLE CONTRACTS TRUST Pioneer Emerging Markets VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- For the 12 months ended December 31, 2004, Pioneer Emerging Markets VCT Portfolio Class I shares delivered a total return of 18.93. Over the same time period, the MSCI Emerging Markets Free Index had a total return of 25.95%. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. In the following discussion, Christopher Smart and Sam Polyak, portfolio managers of the Portfolio, review the last 12 months and look ahead to next year. After an extraordinary performance in 2003, how did Emerging Markets fare this year? With still strong economic growth in the United States and China, supported by an accommodative monetary policy in most countries, Emerging Markets turned in yet another outstanding year. In the 12 months ending December 31, 2004, the MSCI Emerging Markets Index outperformed the MSCI World Index by approximately 11 percentage points and the S&P 500 Index by approximately 14 percentage points. While global rates began to rise, the moderate strength of the recovery made for a more gradual adjustment. Moreover, a weakening U.S. dollar throughout the year had two distinct effects on the Emerging world. On the one hand, it helped reduce the sovereign debt burdens of many developing countries, as a significant portion of their debt is in U.S. dollars, while it helped cool inflationary expectations as their currencies gained in relative value. While the Chinese economy slowed somewhat from the excessive pace of its expansion early in the year, it was still on track to grow near 10%, which provided good support for global commodity prices like coal, iron ore, steel and soybeans. How did the Portfolio fare in this environment? The Portfolio's exposure to these favorable trends generally boosted performance during the period. Our exposure to Turkey and India were especially helpful as these markets benefited from strong acceleration in domestic demand. We also benefited from the inclusion of stocks like Yanzhou Coal Mining, which rose 41.2% as the rapid rise of Chinese coal prices boosted its profits. In Brazil, Companhia Vale do Rio Doce, one of the world's largest producers of iron ore, rose nearly 41.9% as the firm posted record profits on the strength of global commodity prices. Finally, our decision to limit our exposure to technology firms was also helpful, as major stocks in that sector in Taiwan, Israel, and Korea underperformed the benchmark dramatically. Performance was hurt over the last year from our positive view of Russia and our negative view of South Africa. The high oil price, which produced significant inflows of money into the Russian economy and growth near 7% was not enough to overcome investor concerns about political developments that appeared to threaten the course for further economic and political reform. In South Africa, meanwhile, a surge in easy credit and domestic spending provided an unexpected boon to many banks, retailers and industrial companies, even as the strong currency undercut the profits of the mining industry. How do you choose what stocks to buy? Our process moves along two tracks. We look at our markets from the top down, to find countries where the economies are growing, where interest rates are falling and where there is a stable or improving political climate. At the same time, from the bottom up, we screen stocks in our universe for attractive valuations and growth prospects. We examine the economic sector in which a company operates and attempt to assess the management's ability to take advantage of growth opportunities. Together with our investment colleagues in Singapore and Dublin, we model the company's future revenue and profit streams to find stocks where the market may be underestimating its ability to create value. If it meets these criteria within a favorable environment of economic growth, it becomes a good candidate for the Portfolio. We believe the Portfolio contains some of the world's best growth prospects at some of the world's best valuations. Individually, the stocks may be riskier than most, but the Portfolio construction helps to mitigate at least some of that risk. What do you expect in 2005? Emerging Markets have essentially outperformed developed markets significantly in the last few years, which imposes a certain amount of humility on any outlook for the year ahead. Still, we continue to believe that valuations are attractive and growth prospects remain good, especially when compared to the alternatives in developed markets. Performance in 2005 will remain vulnerable to a rapid adjustment in global currencies or a sharp decline in global demand. Still, weak job growth in the United States, Europe and Japan will discourage monetary authorities from moving too quickly on rate increases, which should continue to provide ample liquidity for key Emerging Markets. Barring an unforeseen adjustment, this combination should make for another year of good performance in relative and absolute terms. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. A Word About Risk: Investing in foreign and/or emerging markets securities involves risks relating to interest rates, currency exchange rates, economic, and political conditions. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 5 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- [THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL] Sector Distribution (As a percentage of total investment portfolio) International Common Stock 99.1% International Preferred Stocks 0.9% Geographical Distribution (As a percentage of equity holdings) Finland 0.8% Belgium 1.6% Sweden 1.6% Ireland 3.2% Italy 5.1% Netherlands 6.0% Spain 6.7% Germany 9.3% Switzerland 12.6% France 26.5% United Kingdom 26.6% Five Largest Holdings (As a percentage of equity holdings) 1. Vodafone Group Plc 4.70% 2. UBS AG 3.18% 3. Total SA 2.92% 4. Societe Generale 2.84% 5. CS Group 2.78%
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Prices and Distributions
12/31/04 12/31/03 Net Asset Value per Share $10.64 $9.05
Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ 0.0709 $ - $ -
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Europe VCT Portfolio at net asset value, compared to that of the Morgan Stanley Capital International (MSCI) Europe Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Pioneer Europe VCT Portfolio MSCI Europe Index 10/98 10000 10000 10600 10992 13618 12741 12/00 11104 11671 8587 9349 12/02 6955 7629 9269 10570 12/04 10982 12777
The Morgan Stanley Capital International (MSCI) Europe Index measures the performance of stocks in European developed markets. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
Net Asset Value Life-of-Class 1.53% (10/30/98) 5 Years -4.21% 1 Year 18.48%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 6 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- The 12 months ended December 31, 2004, was a favorable period for European stocks. In spite of high energy prices, attractive stock price levels, high dividend yields and receding fears of inflation contributed to strong returns for the Europe Portfolio, as Portfolio Manager Stan Pearson discusses in the following interview. Q: How did the Portfolio perform? A: For the 12 months ended December 31, 2004, Class I shares rose 18.48% at net asset value. The performance lagged the Morgan Stanley Capital International (MSCI) Europe Index's return of 20.88%. We think that two stocks account for the underperformance. AstraZeneca (Switzerland) was impacted by general weakness in the pharmaceutical sector and stock specific events, including the failure to get FDA approval for one of its drugs. Food service provider Compass Group (United Kingdom) suffered after releasing a surprise profit warning in September. In our view, company cash flows have been impacted by once-off items, and we expect cash flow generation to improve going forward. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: Which stocks contributed to performance? A: While many pharmaceutical stocks suffered as a result of questions surrounding safety concerns about blockbuster cox-2 inhibitor drugs, not all the news was bad for health care stocks. Celesio (Germany), a wholesale pharmaceutical company, rallied as a result of its business restructuring and continued earnings growth. In the telecommunication services industry, we've focused on operators with a high level of exposure to the European market, which continues to generate attractive growth. We purchased Belgacom (Belgium) during its initial public offering in March because it was well valued and offered an attractive dividend yield. The stock has done well as a result of the company's financial strength and sound management. The Portfolio enjoyed strong performance from its emphasis on energy stocks, which are benefiting from high oil prices. ENI (Italy) represented one of the Portfolio's best performers for the year. In the utility sector, E.on is benefiting from the rise in electricity prices. The company has also made progress in restructuring, selling non-core assets and reducing its workforce. Similarly, strong stock selection and an overweight position in the capital goods sector generated strong returns. CRH (Ireland) is profiting from the cyclical upturn and increased capital expenditures in the building materials arena. The company has a successful strategy of acquiring small companies that are easily integrated into CRH. Underlying fundamentals in the financial sector improved on the back of the strong equity markets, and rising investor demand helped push stock prices higher. Barclays (United Kingdom) led the portfolio's financial holdings and contributed nicely to the Portfolio's performance. During 2004, the stock benefited from speculation that it was a potential take-over target for U.S. banks. Finally, our decision not to invest in the semiconductor industry helped performance because the industry struggled throughout the fiscal year as growth forecasts proved to be overly optimistic. Q: What is your outlook? A: European companies have the capacity to expand margins and profits, but earnings growth is likely to be modest. In a climate where equity appreciation is driven by modest earnings growth, we consider high dividend yields and strong cash flow to be important sources of stock price support. Therefore, we are placing a premium on stocks with the stability and predictability of robust dividend yields. At present levels, European equities are appropriately discounting an environment characterized by gently accelerating macroeconomic growth, low inflation and low volatility. We believe such a global equity environment is likely to result in moderate expectations for equity returns across Europe for the foreseeable future. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. A Word About Risk: Investing in foreign and/or emerging markets securities involves risks relating to interest rates, currency exchange rates, economic, and political conditions. The portfolio may invest a substantial amount of its assets in issuers located in a limited number of countries and therefore is susceptible to adverse economic, political or regulatory developments affecting those countries. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 7 PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT] Sector Distribution (As a percentage of total investment portfolio) U.S. Common Stocks 1.5% Temporary Cash Investment 3.4% Depositary Receipts for International Stocks 3.9% International Common Stocks 91.2% Geographical Distribution (As a percentage of equity holdings) Other (individually less then 1%) 3.8% Australia 1.0% Belgium 1.0% Brazil 1.1% Turkey 1.3% Ireland 1.5% South Korea 1.5% Netherlands 3.6% Italy 4.2% Spain 4.9% Germany 5.4% Switzerland 7.9% United Kingdom 15.9% France 16.3% Japan 30.6% Five Largest Holdings (As a percentage of equity holdings) 1. Vodafone Group Plc 2.46% 2. Total SA 2.42% 3. Toyota Motor Co. 2.33% 4. Japan Tobacco, Inc. 2.13% 5. UBS AG 1.97%
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Prices and Distributions
12/31/04 12/31/03 Net Asset Value per Share $11.88 $10.06
Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ 0.0542 $ - $ -
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer International Value VCT Portfolio at net asset value, compared to that of the Morgan Stanley Capital International (MSCI) All Country World Free (ACWF) ex. U.S. Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Pioneer International Value VCT Portfolio MSCI AC WId Fr USA Index 2/95 10000 10000 11053 10960 12/96 11998 11691 12581 11929 12/98 12163 13655 17561 17877 12/00 13609 15177 10378 12218 12/02 8996 10425 11701 14740 12/04 13891 17891
Index comparison begins on 2/28/95. The Morgan Stanley Capital International (MSCI) All Country World Free Index measures the performance of developed and emerging market stock markets. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
Net Asset Value Life-of-Class 3.39% (3/1/95) 5 Years -4.58% 1 Year 18.71%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 8 PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- International stocks appreciated strongly during 2004, despite higher interest rates and rising oil prices. As Portfolio Manager Christopher Smart explains, investments in economically sensitive industries across Japan, Europe and emerging markets were strong contributors to performance. Q: How did the Portfolio perform? A: For the 12 months ended December 31, 2004, Class I shares rose 18.71% at net asset value. However, with the disappointing performance of a few stocks, it lagged the Morgan Stanley Capital International (MSCI) All Country World Free Index, which rose 21.36% for the same period. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. We've been underweighting technology stocks for some time out of concern for their valuations and weak demand in developed countries. Nevertheless, their limited presence in the Portfolio still detracted from performance. Nokia (Finland) and Ericsson (Sweden) suffered from inadequate product lines in an increasingly competitive market for mobile telephones. We saw opportunity in Hitachi Chemical (Japan), which we viewed as a promising, yet undervalued, manufacturer of electronic component materials. Unfortunately, concerns about the semiconductor cycle and weak personal computer sales drove the stock price down during the second half of the fiscal year. Outside the technology sector, two holdings domiciled in Switzerland were disappointing. Nestle S.A., the Swiss food giant, declined as the company's sales growth and profitability came in below expectations. We continue to believe that the stock will recover, as Nestle delivers on its promises to cut operating costs and improve its overall margins. Astra Zeneca's failure to secure approval for its anti-clotting medicine Exanta hurt expectations for future results, but we remain optimistic that its pipeline retains value. Q: What investments contributed to performance? A: Japanese stocks, helped by a recovery in the property market, proved very advantageous despite a retreat in the final months of the fiscal year. Investments in prefabricated housing and construction materials manufacturer Sekisui Chemical Company and Daiwa House rose considerably during the reporting period. Also, quality retail chains like Ryohin Keikaku Co. and clothing chain Fast Retailing enjoyed strong growth in operating profits. Investments in European cyclical stocks, which had lagged the market earlier this year, also posted gains. Electric utility E.on AG (Germany) appreciated sharply, as investors gained confidence in management's ability to sell non-core assets in real estate and the chemicals industry and boost its dividend pay-out ratio. The construction and engineering firm ACS benefited from strong growth in revenues from road, infrastructure and building contracts mainly in Spain, where economic expansion and European Union financing have supported a construction boom. Belgacom, which posted lackluster performance following its initial listing in March, recovered handsomely in the fall. High global oil prices have given management at Total SA (France) and ENI S.p.A (Italy) the opportunity to broaden its ambitions for new exploration and expansion of downstream businesses. Q: What can you tell us about the Portfolio's investments in emerging markets? A: Some limited but key investments in emerging markets helped performance considerably. Last spring, emerging markets were negatively affected by fears of global inflation and the Federal Reserve Board's (the Fed) tighter monetary policy. We thought that the Fed's interest rate increases would be gradual and that the ensuing fall in stock prices in these markets was overblown. Three new holdings exemplify our strategy in emerging markets. For the first time in more than a decade, real wages in Brazil are rising after weathering the effects of currency devaluation and inflation. Brazil's third largest bank, Unibanco, is a new holding that should profit from a continued acceleration of consumer spending and its growth in its credit card business and consumer lending. In Turkey, Koc Holdings rose nearly 30% during the recent quarter, as Turkey's accession into the European union took one small step closer to reality. Mobile operator Turkcell has increased its customer base by more than 22% over the last year, and minutes of usage by subscribers continues to climb. Q: What is your outlook? A: Barring any unforeseen events that could severely hamper the European recovery, the valuations of most stocks remain extremely attractive compared to the United States, and the earnings growth potential is good. We are also optimistic about prospects for a Japanese recovery, as land prices appreciate and consumers begin to spend again. In key emerging markets, like Turkey and Brazil, we think we'll continue to find investment opportunities, where falling inflation and interest rates have released powerful forces of domestic demand. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. A Word About Risk: Investing in foreign and/or emerging markets securities involves risks relating to interest rates, currency exchange rates, economic, and political conditions. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 9 PIONEER VARIABLE CONTRACTS TRUST Pioneer Small Cap Value VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT] Diversification (As a percentage of total investment portfolio) Exchange Traded Fund 0.8% International Common Stocks 1.8% Depositary Receipts for International Stocks 3.4% Temporary Cash Investment 4.1% U.S. Common Stocks 89.9% Sector Distribution Portfolio (As a percentage of equity holdings) Telecommunication Services 0.9% Consumer Staples 4.2% Utilities 4.6% Energy 7.5% Materials 8.0% Information Technology 8.6% Health Care 9.0% Consumer Discretionary 10.2% Industrials 18.6% Financials 28.4% Five Largest Holdings (As a percentage of equity holdings) 1. Insight Enterprises, Inc. 2.26% 2. Southwestern Energy Co. 2.05% 3. PacifiCare Health Systems 1.83% 4. Pediatrix Medical Group, Inc. 1.79% 5. Wabtec Corp. 1.75%
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Prices and Distributions
12/31/04 12/31/03 Net Asset Value per Share $15.02 $12.50
Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ - $ - $ -
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Small Cap Value VCT Portfolio at net asset value, compared to that of the Russell 2000 Value Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Pioneer Small Value VCT Portfolio Russell 2000 Value Index 11/01 10000 10000 12/02 8979 9400 12/04 14611 16781
The Russell 2000 Value Index measures the performance of U.S. small-cap value stocks. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
Net Asset Value Life-of-Class 13.79% (11/8/01) 1 Year 20.16%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 10 PIONEER VARIABLE CONTRACTS TRUST Pioneer Small Cap Value VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- Successful stock selection among energy, transportation and health care companies helped Pioneer Small Cap Value VCT Portfolio perform well over the past 12 months. In the following discussion, portfolio manager David Adams and assistant portfolio manager Jack McPherson review the economic background and detail some of the steps they took to bolster Portfolio performance. Q. How did the Portfolio perform over this period? A. For the twelve-month period ended December 31, 2004, Pioneer Small Cap Value VCT Portfolio returned 20.16% at net asset value. In comparison, the Russell 2000 Value Index, the Fund's benchmark, returned 22.25%. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q. What was the investment background for small-cap value stocks over this period? A. Value issues - those stocks that are selling at a significant discount to our estimation of their intrinsic value - were leaders within the small-cap universe for the full 12-month period, despite periods of outperformance by growth stocks. Strong job creation in the spring raised fears of rising interest rates, driving down financial and other traditional value sectors seen as vulnerable to rising rates. Value issues rebounded sharply over the summer as investors positioned their portfolios more defensively during the runup to the presidential election. With the election decided, growth sectors and a smattering of lower quality issues moved higher in November. But the gains recorded between June and August were enough to position value stocks significantly ahead for the period. Q. Which areas of the Portfolio had the greatest impact on results? A. As energy prices rose, we maintained a heavily overweighted position among energy issues compared to the benchmark. That, plus sharp gains by a number of our selections, made the energy sector the biggest contributor to strong returns. Southwestern Energy, an Arkansas-based exploration and production company, capitalized on high prices by expanding production at existing operating fields and advancing development of more recently discovered reserves. Massey Energy, an Appalachian coal company, saw prices for the metallurgical coal used in steel manufacturing increase sharply for the first time in decades, driven by unprecedented demand from China and elsewhere. Illustrating how our patient, value-focused style is designed to work, we were rewarded this year for our purchase of Swift Energy, a longer-term holding. Swift has stabilized its troubled New Zealand operations and increased oil and gas production from its key Lake Washington reserves. We took some profits in Swift, as continued good news pushed its price higher. Increasing global oil consumption aided results at Stelmar Shipping, which saw strong demand for its fleet of modern, doublehulled tankers. Stelmar has also been approached by potential acquirers. Genesee and Wyoming, which acquires short-line trackage from larger railroads, chiefly in the U.S. and Australia, benefited from expanded shipping volumes of coal and grains. Forward Air, a broker of shipping services for corporations, increased its market share as economic expansion heightened demand for cost-efficient transportation management. Our large exposure to health care services was another positive. Pacificare benefited from federal incentives aimed at steering Medicare patients to managed care plans. Pacificare, the market leader, is also recovering from operational problems, another reason its stock has moved higher. The migration of patients to managed care programs also aided Amerigroup, a large provider of health care programs for beneficiaries of Medicare and other public assistance programs. Shares of Chemed rose when it acquired full ownership of Vitas, a hospice company. Vitas is expected to gain from regulations favoring home care for terminally ill Medicare patients, instead of costly hospital stays. Our underweight position in real estate investment trusts and other interest rate-sensitive financial sectors, also helped returns. Q. What areas held back performance? A. Technology stocks suffered from spotty business conditions. Orders shrank for Remec's telecommunication equipment, but we have retained our commitment because the potential sale of Remec's defense business may enhance the value of the telecom division. Advanced Energy and Applied Films, manufacturers of semiconductor capital equipment, were hurt by uncertain demand for new manufacturers' facilities. Insight Enterprises, a direct distributor of information technology products and services, was an exception. Improving fundamentals and a modest upturn in personal and corporate IT spending boosted Insight's stock. Graftech International slumped following disappointing third quarter earnings. Graftech may not have been aggressive enough in negotiating 2005 contracts for its graphite electrodes, used in steel making. We added to holdings when shares fell, because we think investor reaction has been overblown. Rewards Network, which markets restaurant and other discount programs to consumers, continued to disappoint as skepticism grew over its hotel initiatives and its ability to sign up more restaurants. Q. What is your outlook for the economy and the markets? A. Overall, we think the economic outlook is favorable, with slow, steady growth and rising interest rates a likely scenario. But the stock market may already have taken that outlook into account; the markets enjoyed a strong run over the summer and moved higher once again in November. The rise in small-cap value stocks has been exceptional, implying that returns could be more modest over the next several months. This increases the challenge for investors like us to find good long-term values in the marketplace. However, our value methodology helps us to find reasonably priced stocks throughout the market cycle. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. A Word About Risk: Investing in small companies may offer the potential for higher returns, but these companies are also subject to greater short-term price fluctuations than larger, more established companies. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 11 PIONEER VARIABLE CONTRACTS TRUST Pioneer Small Company VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT] Portfolio Diversification (As a percentage of total investment portfolio) International Common Stocks 0.4% Depositary Receipts for International Stocks 0.7% Temporary Cash Investment 4.1% U.S. Common Stocks 94.8% Sector Distribution (As a percentage of equity holdings) Utilities 1.9% Telecommunication Services 1.9% Consumer Staples 3.4% Energy 3.5% Materials 7.9% Consumer Discretionary 13.7% Health Care 13.9% Information Technology 15.0% Industrials 15.5% Financials 23.3% Five Largest Holdings (As a percentage of equity holdings) 1. Swift Transportation Co., Inc. 1.43% 2. Ruby Tuesday, Inc. 1.11% 3. Provident Senior Living 0.96% 4. Wind River Systems 0.90% 5. People's Energy Corp. 0.88%
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Prices and Distributions
12/31/04 12/31/03 Net Asset Value per Share $ 12.97 $ 11.44
Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ - $ - $ -
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Small Company VCT Portfolio at net asset value, compared to that of the Russell 2000 Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING DATA WAS REPRESENTED AS A MOUTAIN CHART IN THE PRINTED MATERIAL]
Pioneer Small Company VCT Portfolio Russell 2000 Index 1/01 10000 10000 10498 9741 12/02 8739 7747 10951 11407 12/04 12415 13497
Index comparison begins 1/31/01. The Russell 2000 Index measures U.S. small-cap stocks. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
Net Asset Value Life-of-Class 6.81% (1/19/01) 1 Year 13.37%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 12 PIONEER VARIABLE CONTRACTS TRUST Pioneer Small Company VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- In the following discussion, co-managers Diego Franzin and Michael Rega review the performance of Pioneer Small Company VCT Portfolio over the year ended December 31, 2004. Diego and Michael assumed day-to-day investment responsibility for the Portfolio on November 1, 2004. Q. How did Pioneer Small Company VCT Portfolio perform over this period? A. For the twelve months ended December 31, 2004, the Portfolio returned 13.38% at net asset value. The result trailed the Portfolio's benchmark, the Russell 2000 Index, which returned 18.33% over the same period. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q. Please describe the background for small-company stocks over this period. A. Stocks, including small-caps, treaded water for several months in 2004, held back by concern over the economy, election uncertainty and international tensions. With renewed evidence of continued economic growth, and with the election firmly decided, investors returned to equities in the latter months of the year. Driven by profit growth, small-capitalization stocks outperformed large caps for the sixth consecutive year in 2004, marking the longest stretch of small-cap outperformance since the Russell 2000 Index was launched in 1979. Smaller companies increased operating efficiencies and expanded margins, allowing more of each revenue dollar to reach the bottom line. For four of the last five years, value-oriented smaller stocks were dominant, but growth stocks began catching up late in the year. Q. Which stocks or sectors influenced performance favorably? A. One-time coalmine operator Brink's rose as it continued to work down long-standing pension obligations owed to former employees and their families. Canada-based Alliance Atlantis, whose management team is highly regarded in the industry, enjoyed good results from its various Crime Scene Investigation (CSI) television series. Sales targets in China for Nu Skin's health and beauty products fell behind by a few months; after a brief decline, shares rebounded and added to results for the year. We took profits in Chattem, manufacturers of Gold Bond products, in favor of other opportunities. We also took advantage of higher prices to cut real estate investment trust holdings, adding commercial banks, including Irwin Financial and City National, that appear better positioned to profit as a flattening yield curve squeezes profit margins. Corn Products International, a leading producer of corn syrup, benefited from increased operating efficiencies and the probability of greater access to the large Mexican market. Q. Which holdings had a negative impact over the period? A. Unsuccessful stock selection nullified an overweight position in the strong energy sector. Being underweight in technology was beneficial, but choices among industrial, materials and technology issues hurt results. Together, those factors account for much of the Portfolio's underperformance compared with its benchmark. Unifi, a maker of synthetic yarns for apparel and home goods, missed earnings targets due to weak pricing and saw some of its customers move production overseas. Rewards Network, which continues to retool its hotel and restaurant discount programs, fell sharply. Cuts in state and federal educational programs combined with a revamping of the SAT test undercut shares of Princeton Review, a test preparation company. And shares of Plato Learning, which offers computer-based job training, declined after ratcheting back revenue expectations. Q. What is your current outlook, and how are you positioning the Portfolio? A. We believe the economic expansion will carry over into 2005 even if interest rates rise further. In addition, energy prices may moderate in the face of adequate supplies. In late 2004, growth stocks appeared exceptionally cheap by some traditional measures, and we believe that growth prospects will eventually be reflected in stock prices. In addition, the best performing growth issues had no earnings at all, a sign that investors were attracted to the notion of growth, independent of other factors. With that scenario in mind, we are tightening the Portfolio's growth focus, broadening sector diversification and increasing the Portfolio's roster of stocks. Attractive sectors include health care, as well as deepwater drilling, where drilling rig utilization rates have moved higher. In technology, software companies may benefit as companies look for productivity-enhancing ways to invest sizeable cash holdings accumulated over recent years. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. A Word About Risk: Investing in small companies may offer the potential for higher returns, but these companies are also subject to greater short-term price fluctuations than larger, more established companies. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 13 PIONEER VARIABLE CONTRACTS TRUST Pioneer Mid Cap Value VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT] Portfolio Diversification (As a percentage of total investment portfolio) Depositary Receipts for International Stocks 1.0% Temporary Cash Investment 8.2% U.S. Common Stocks 90.8% Sector Distribution Portfolio (As a percentage of total investment portfolio) Telecommunication Services 0.1% Utilities 5.5% Energy 6.0% Consumer Staples 7.7% Health Care 8.5% Materials 8.7% Industrials 11.1% Information Technology 12.6% Consumer Discretionary 19.7% Financials 20.1% Five Largest Holdings (As a percentage of equity holdings) 1. Foot Locker Inc. 2.55% 2. Mattel, Inc. 2.19% 3. Safeway, Inc. 1.81% 4. Triad Hospitals, Inc. 1.76% 5. CIGNA Corp. 1.76%
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Prices and Distributions
12/31/04 12/31/03 Net Asset Value per Share $24.67 $20.47
Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ 0.080 $ - $ 0.2095
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Mid Cap Value VCT Portfolio at net asset value, compared to that of the Russell Midcap Value Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Pioneer Mid Cap Value VCT Portfolio Russell Midcap Value Index 3/95 10000 10000 12263 11819 12/96 14748 13596 19812 16952 12/98 20820 16271 20799 18407 12/00 24789 21721 25369 23130 12/02 22920 20537 31643 28234 12/04 39142 34478
Index comparison begins 3/31/95. The Russell Midcap Value Index measures the performance of U.S. mid-cap value stocks. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in any Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 13.30% (3/1/95) 5 Years 13.37% 1 Year 22.12%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 14 PIONEER VARIABLE CONTRACTS TRUST Pioneer Mid Cap Value VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- Domestic equity markets moved in fits and starts, both up and down, through the first nine months of 2004 before finally staging a strong rally following the November elections. In the final two months of the year, stock indices moved upward, with small- and mid-cap companies outperforming large-cap corporations, and value stocks outpacing growth stocks. In the following interview, Rod Wright discusses the market environment and factors that affected performance during 2004. Mr. Wright is responsible for the day-to-day management of Pioneer Mid Cap Value VCT Portfolio. Q: How did the Portfolio perform? A: The Portfolio delivered strong results, despite trailing its benchmark index. For the 12 months ended December 31, 2004, the Portfolio had a total return of 22.12% at net asset value, while the Russell Midcap Value Index returned 23.71%. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: What were the principal factors that affected performance? A: The Portfolio participated in the final end-of-year rally that raised stock averages. For much of the year, a variety of factors and potential problems affected investors, who worried about the effects of rising interest rates, increasing energy prices, instability in Iraq and the political uncertainty resulting from a fiercely contested Presidential election. During the year, our selections in the health care, telecommunications, energy, financials and utilities sectors helped performance, while investments in materials, technology, industrials and consumer staples sectors detracted from results. Q: What were some of the individual investments that had the greatest impact on Portfolio results? A: Although technology investments tended to be a drag on performance, one technology company - NCR - had the single greatest positive impact on the Portfolio's return. NCR, which already had established itself as a leader in producing ATM and automatic retail scanning and check-out equipment, saw greatly improved results from its technology that helps companies store and manage large quantities of data. NCR's stock had been selling at a deep discount, but the effects of a corporate reorganization and the policies of a new management team helped lead to greatly improved earnings. Reliant Energy, which is involved in both electric power generation and in power distribution, was the Portfolio's second-largest contributor, as its stock appreciated after a reorganization of company debt. Other stocks that helped performance substantially included: Transocean, which operates oil drilling rigs and benefited from rising oil prices; W.W. Grainger, a national distributor of industrial parts and machinery, which enjoyed improved earnings as a result of a restructuring; and Ball, a packaging company which manufactures cans and bottles for beverage companies. Two health care sector investments that helped were: Becton Dickinson, a medical supply company; and Cigna, an HMO. Also adding to results were three companies involved in acquisitions at premiums to their stock valuations: Charter Bank, which was taken over by Citizens Bank, a unit of Royal Bank of Scotland; Apogent Technology, a producer of research equipment for medical laboratories, which was acquired by Fisher Scientific; and Veritas Software, a developer of data management software, which announced it was being acquired by Symantec. Holdings that detracted from results included UTStarcom, a manufacturer of inexpensive hand-held telephones, which was hurt by intense competition in China. While we sold our position in UTStarcom, we retained three other stocks that were a drag on performance: Safeway, toy company Mattel and mortgage insurer PMI, all of which gained, but still lagged the mid-cap value market. Portfolio results were held back by not owning three companies that were performance leaders during 2004: TXU, a Texas utility; Apple Computer, the developer of the popular iPod product; and Monsanto, which produces genetically modified seeds for the agriculture industry. Q: What is your investment outlook? A: We are reasonably optimistic about the economy and investment opportunities in the stock market. After a year in which corporate earnings rose faster than stock prices, stock valuations - as measured by price/earnings ratios - are more reasonable than they were a year ago. At the same time, interest rates remain low by historical standards, even though the Federal Reserve has raised short-term rates several times, while the economy continues to expand and support rising corporate earnings. Although we expect to continue to de-emphasize stocks of companies that may be vulnerable to rapid increases in interest rates, we are moderately bullish about the overall market. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. A Word About Risk: Investing in mid-sized companies may offer the potential for higher returns, but these companies are also subject to greater short-term price fluctuations than larger, more established companies. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 15 PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT] Portfolio Diversification (As a percentage of total investment portfolio) Temporary Cash Investment 1.0% Depositary Receipts for International Stocks 11.1% U.S. Common Stocks 87.9% Sector Distribution Portfolio (As a percentage of equity holdings) Energy 1.5% Telecommunication Services 4.1% Materials 4.5% Consumer Discretionary 10.7% Industrials 10.8% Financials 10.9% Consumer Staples 13.4% Health Care 21.2% Information Technology 22.9% Five Largest Holdings (As a percentage of equity holdings) 1. Microsoft Corp. 4.97% 2. Pfizer, Inc. 4.05% 3. American International Group, Inc. 3.57% 4. Sandisk Corp. 3.47% 5. Amgen, Inc. 2.99%
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Prices and Distributions
12/31/04 12/31/03 Net Asset Value per Share $13.04 $12.22
Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ - $ - $ -
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Growth Shares VCT Portfolio at net asset value, compared to that of the Russell 1000 Growth Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Pioneer Growth Shares VCT Portfolio Russell 1000 Index 10/97 10000 10000 10646 10227 12/98 13522 13561 16351 14637 12/00 15079 13484 13202 10962 12/02 10343 7157 13436 8971 12/04 14966 9573
The Russell 1000 Growth Index measures the performance of large-cap U.S. growth stocks. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class -0.61% (10/31/97) 5 Years -8.14% 1 Year 6.71%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 16 PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- Helped by a late-year rally, equities produced returns consistent with long-term historical averages during 2004, but large-cap growth stocks tended to underperform large-cap value stocks, as well as small- and mid-cap issues. In the following interview, Christopher Galizio discusses the factors that affected the performance of Pioneer Growth Shares VCT Portfolio during 2004. Mr. Galizio is responsible for day-to-day investment management of the Portfolio. Q: How did the Portfolio perform during 2004? A: For the 12-month period ended December 31, 2004, the Portfolio's Class I shares had a total return of 6.71%. During the same 12-month period, the Russell 1000 Growth Index, a common benchmark for large-company growth stocks, returned 6.30%. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: What was the investment environment like during the year? A: While the stock market produced good returns, large-cap growth stocks tended to underperform the market as well as other types of stocks, especially value stocks. The reason was predominately because the best-performing sectors tended to have more value stocks. The low-interest-rate environment, for example, helped the performance of financial service companies, while fast-rising commodity prices helped lift the valuations of companies in the energy and materials sectors. Similarly, the economic expansion aided the industrial sector, which enjoyed increasing sales and improved profitability. All these sectors tend to have greater concentrations of value companies than growth companies. At the same time, we saw underperformance by two sectors with high concentrations of growth companies - health care and information technology. In health care, the large pharmaceutical companies in particular underperformed both because some successful products were losing patent protection and because other products became embroiled in questions about possible harmful side effects. The most notable products affected by these side-effect questions were Pfizer's two Cox-2 pain inhibitors, Celebrex and Bextra, both of which suffered declines in sales, and Merck's Cox-2 inhibitor Vioxx, which was withdrawn from the market. In the case of information technology, slowing demand and a build-up of inventories undermined the earnings growth of several companies, especially in the semiconductor industry. Q: What were your principal strategies and how did they affect performance? A: We had repositioned the Portfolio shortly before the mid-point of the year, reducing holdings in both health care and information technology. The adjusted portfolio performed strongly during the final six months of 2004. We liquidated our position in Pfizer before the questions arose about Celebrex, and our lack of exposure to that controversy was a big help to Portfolio performance. At the same time, we retained a holding in Merck and even added to it after its stock price fell to a very attractive level. We also reduced investments in information technology, substantially lowering our holdings of semiconductor companies, and we de-emphasized consumer staples, which we believed had risen to high valuations. As we did so, we added to our investments in basic materials, financial services and telecommunications services. In basic materials, we increased our investments in copper companies, notably Freeport-McMoRan and Phelps Dodge, both of which faced very favorable demand-supply outlooks for the foreseeable future. In financial services, we added to investments in major companies such as Citigroup, Bank of America, credit-card issuer MBNA, and the government-sponsored mortgage organization, Freddie Mac. We reduced our exposure to the insurance industry, eliminating AIG before its stock plummeted amid questions about financial arrangements with brokers. After AIG's stock price collapsed, we reinvested in the company to take advantage of its attractive valuation. Q: What were some of the investments that most influenced performance? A: The two decisions that most helped performance were the liquidation of the position in Pfizer and the overweighting of Phelps Dodge. Macrovision, a software company that we overweighted in the second half of the year, rose by 30% after we purchased it. Macrovision is a leader in producing an anti-piracy technology designed to protect material on both DVDs and CDs from unauthorized copying. National retailer Target was another excellent performer, as its same-store sales improved faster than rival Wal-Mart. We sold our position in Target after its stock had risen to a high valuation. Altria, the former Philip Morris, also supported performance when it rallied following a favorable court ruling in a tobacco liability case. U.K.-based wireless phone company Vodafone was another stock that appreciated in anticipation of the success of its investments in the next generation of wireless technology. Nextel, which later received an aquisition offer, and France Telecom were two other wireless investments that performed very well In health care, a leading performer was medical equipment company Guidant, which received a favorable takeover proposal from Johnson & Johnson. Other technology holdings that detracted from results included UTStarcomm, which we have sold, and Samsung Electronics, which we have retained because we like the company's long-term prospects. Relative to the market, performance was held back because we did not own any shares of several companies that performed very well, including Johnson & Johnson, GE, United Health Group, eBay and Qualcomm. Q: What is your investment outlook? A: We base our investment decisions on our analysis of the fundamental strengths and prospects of individual companies in relation to their stock prices, rather than on any top-down sector decisions based on macroeconomic analysis. At the start of the new year, we continued to have a favorable opinion about many materials companies and believed the long-term outlook for copper companies was particularly favorable. We also had overweight positions in industrials, financial services and telecommunications services sector. Within those sectors, the companies with the largest weightings were metals, insurance and wireless communications providers. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 17 PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT] Portfolio Diversification (As a percentage of total investment portfolio) U.S. Common Stocks 92.1% Temporary Cash Investment 7.9% Sector Distribution Portfolio (As a percentage of equity holdings) Health Care 0.4% Manufactured Homes 0.4% Self Storage 4.0% Diversified 7.7% Hotel 10.1% Shopping Center 12.0% Industrials 13.1% Regional Mall 13.4% Apartment 18.6% Office 20.3% Five Largest Holdings (As a percentage of equity holdings) 1. Simon DeBartolo Group, Inc. 6.58% 2. Boston Properties, Inc. 5.08% 3. AvalonBay Communities, Inc. 4.82% 4. Equity Residential Property Trust 4.37% 5. Catellus Development Corp. 4.19%
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Prices and Distributions
12/31/04 12/31/03 Net Asset Value per Share $24.30 $18.57
Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ 0.4466 $ 0.2129 $ 0.1166
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Real Estate Shares VCT Portfolio at net asset value, compared to that of the Wilshire Real Estate Securities Index. Portfolio returns are based on net asset value and do not reflect applicable insurance fees and surrender charges. [THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Pioneer Real Estate Shares VCT Portfolio Wilshire Real Estate Securities Index 3/95 10000 10000 11322 11696 12/96 15497 15875 18565 19235 12/98 15330 15629 14841 14977 12/00 19403 19397 21431 20911 12/02 21983 21440 30133 28890 12/04 40622 39215
Index comparison begins on 2/28/95. The Wilshire Real Estate Securities Index is a market-capitalization weighted measure of the performance of real estate investment trusts (equity and hybrid) and real estate operating companies. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
Net Asset Value Life-of-Class 14.90% (3/1/95) 5 Years 21.23% 1 Year 35.74%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 18 PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- For the fifth year in a row, real estate stocks achieved positive returns and outperformed the broader market indices. As Matthew Troxell of AEW Capital Management, L.P. explains in the following interview, it will fall to astute stock selection to identify the real estate investments most likely to continue this momentum into the New Year after such a rewarding multi-year rally. Q: How did the Portfolio perform during fiscal 2004? A: Performance by property type was universally strong. For the 12 months ended December 31, 2004, Class I shares rose 35.74% at net asset value. This performance slightly outperformed the 34.81% return for the Wilshire Real Estate Securities Index for the same period. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: What investments contributed to performance? A: Strong operating fundamentals at the property level and solid consumer spending patterns boosted returns of regional mall real estate investment trusts (REITs). One of the Portfolio's largest holdings, Simon Property Group, performed strongly in the last quarter of the fiscal year. This REIT announced the acquisition of Chelsea Property Group (also held by the Portfolio) during the first half of the fiscal year. Initially, investors reacted negatively. But we viewed the proposed merger very positively, because Chelsea Property Group, which owns factory outlet shopping centers in Japan as well as in the United States, would add international diversity and a new retail avenue of growth to Simon's current portfolio. Each company's board of directors and Chelsea's shareholders unanimously approved the definitive merger agreement, and the company's stock rallied nicely. While the outlook for the office sector is improving as a result of positive job growth, it takes longer for the improvements to manifest themselves at the property owner level. (Tenants must first use their existing empty space before seeking new office space.) Boston Properties, Inc., which holds a portfolio of high-quality buildings in markets with high barriers to entry, exemplifies the kind of resilient, well-managed company that has weathered the office downturn better than many of its counterparts. This office REIT returned 42.5% for 2004. A sector of the real estate market that recovered well in 2004 was apartments. AvalonBay Communities, Inc. was one of the Portfolio's best performing stocks for the reporting period. Like the office sector, multi-family housing is benefiting from positive job growth, which helps increase demand for apartments. In addition, we're seeing tremendous demand for the conversion of apartments to condominiums in a number of markets, including southeast Florida and southern California, where the price of owning a home is prohibitive for many people. This increased demand is improving fundamentals while condo conversion demand provides support for asset prices - a scenario that creates a natural price support. In the lodging sector, our selection of hotels did well, but it was the presence of Starwood Hotels and Resorts that dramatically impacted performance with its 64.7% return for 2004. This hotel, like many in its universe, saw great improvement in occupancy rates - resulting in a greater number of rooms being rented in 2004 than 2003. Much of the improvement was due to the ability of management to increase room rates, which is a more powerful driver of profitability than occupancy rates. Q: Any stocks prove to be disappointing? A: Despite the positive performance of industrial stocks, the sector detracted from performance relatively speaking, since the group underperformed the index. The Portfolio's investments in Liberty Property Trust, an office and industrial REIT, lagged the market due to investor concerns about management's decision to delay construction of a new office building in downtown Philadelphia until an anchor tenant was found. When Comcast signed on as a tenant, the stock recovered. We remain confident that management at Liberty has a good understanding of their business and holds strong assets. Q: What is your outlook? A: With the underlying fundamentals improving, real estate stocks appear poised to continue strengthening. However, after such impressive performance during the past five years, we would not be surprised to see a moderating of performance returns in 2005. As the proverbial tide lifts all boats, we expect to take a more cautious approach, knowing that astute stock picking will be challenging but all the more important in the upcoming months. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. A Word About Risk: The Portfolio invests in REIT securities, the value of which can fall for a variety of reasons, such as declines in rental income, poor property management, environmental liabilities, uninsured damage, increased competition, or changes in real estate tax laws. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 19 PIONEER VARIABLE CONTRACTS TRUST Pioneer Fund VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT] Portfolio Diversification (As a percentage of total investment portfolio) U.S. Common Stocks 94.6% International Common Stocks 1.1% Temporary Cash Investments 1.8% Depositary Receipts for International Stocks 1.0% Sector Distribution (As a percentage of equity holidings) Utilities 1.7% Telecommunication Services 3.1% Materials 6.5% Energy 7.9% Consumer Staples 10.1% Health Care 12.3% Industrials 13.2% Consumer Discretionary 14.0% Information Technology 15.5% Financials 15.7% Five Largest Holdings (As a percentage of equity holdings) 1. Exxon Mobil Corp. 2.58% 2. ChevronTexaco Corp. 2.18% 3. Target Corp. 2.04% 4. United Technologies Corp. 1.98% 5. Microsoft Corp. 1.97%
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Prices and Distributions
12/31/04 12/31/03 Net Asset Value per Share $20.57 $18.70
Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ 0.2186 $ - $ -
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Fund VCT Portfolio at net asset value, compared to that of the Standard & Poor's (S&P) 500 Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Pioneer Fund VCT Portfolio S&P 500 Index 10/97 10000 10000 10643 10543 12/98 13686 13296 16565 15411 12/00 15060 15600 13275 13908 12/02 10342 11261 13306 13936 12/04 14747 15504
The Standard & Poor's 500 Stock Index (the S&P 500) is a commonly used measure of the broad U.S. stock market. Index returns assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. Portfolio returns are based on net asset value and do not reflect any annuity-related costs. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
Net Asset Value Life-of-Class 6.31% (10/31/97) 5 Years 0.12% 1 Year 11.26%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 20 PIONEER VARIABLE CONTRACTS TRUST Pioneer Fund VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- In the following discussion, John Carey, portfolio manager of Pioneer Fund VCT Portfolio, reviews the past year and gives an overview of the Portfolio's performance over that period. Q: How did the Portfolio perform versus its benchmark? To what do you attribute the performance? A: Pioneer Fund VCT Portfolio achieved respectable returns in 2004. The Portfolio rose 11.25% at net asset value for the calendar year. Most of the gain came in the fourth quarter, which saw the Portfolio rise 9.26%. By comparison, the Standard & Poor's 500 Index increased by 11.04% for the year and 9.23% in the fourth quarter. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. For Pioneer Fund VCT Portfolio, the better-than-average performance was derived both from our solid weightings in many of the old-economy stocks, especially in energy, industrials, and materials, and from our good stock selection in the four sectors that underperformed the S&P 500 average, consumer staples, financials, health care, and information technology. Among our best-performing stocks were Norfolk Southern and PACCAR in industrials and T. Rowe Price in financials, but we also benefited from having only modest relative exposure to Pfizer and Cisco Systems (which we sold during the year) and no holdings of Coca-Cola, all stocks that did poorly. We did suffer from having above-market weightings in two of the dismal semi-conductor names, Applied Materials and Texas Instruments, but on the whole we managed to avoid most of the "disaster" stocks. We were particularly pleased that consumer discretionary, the sector we had highlighted in our annual report for 2003 as the "major culprit" in our relative underperformance versus the S&P during that year, was a positive contributor to performance in 2004. Three of our largest gains were from stocks in that sector: McGraw-Hill, Target, and John Wiley & Sons. Q: What changes did you make to the Portfolio during the second half? A: The list of 32 additions to and 10 deletions from the portfolio in the second half of 2004 makes it look as though the period was a singularly busy one for Pioneer Fund VCT Portfolio. Actually it was just a normally busy time, but due to the merger of an acquired fund, the Safeco Core Equity Fund, into Pioneer Fund VCT Portfolio during December, we ended up with some new, transferred positions. Most of the Safeco fund, overlapped with positions already owned, but we inherited the others as well. Rather than "throwing them all out with the wash," we thought that we would take our time to study them in the expectation that some might prove to be worthwhile longer-term holdings. The merger itself marked an exciting increase to the asset base of Pioneer Fund VCT Portfolio, and also to our shareholder family. To our new, formerly Safeco shareholders, a hearty welcome! The total effect of the portfolio activity on sector weights was modest, with no sector weighting going up or down by as much as 2%. Materials, industrials, consumer discretionary, information technology, and telecommunications services all increased as a percentage of the Fund portfolio, and energy, consumer staples, health care, financials, and utilities all decreased. As examples, in materials we added: BHP Billiton, a major Australian-based mining and minerals company; Inco, the Canadian nickel producer; and Newmont Mining, a leading gold miner. Two new materials names came from the Safeco fund, Praxair, supplier of industrial gases, and Ball, a packaging company. Among industrials, Northrup Grumman and Ingersoll-Rand were both Safeco holdings, and in the case of consumer discretionary, five of the eight new stocks came from the Safeco fund. The two largest additions, however, were our own purchases, Nordstrom and Gap, both of them retailing companies showing signs of meaningful operational improvement over the past couple of years. Information technology rose somewhat with: our purchase of Veritas Software, which has received a merger proposal from another portfolio company, Symantec; the receipt of shares of Freescale Semiconductor from our holding Motorola; and the inclusion of EMC, an information storage specialist, from the Safeco fund. Telecommunications saw one purchase by us, Nextel Communications, and two additions attributable to the Safeco fund, CenturyTel and Verizon. Subsequent to our purchase of Nextel, the company entered into merger discussions with Sprint. In regard to the sectors where the weightings decreased, the reasons in some cases had to do with weaker relative share-price performance and in other cases with sales from the portfolio. In energy, we realized a gain on a large position in Smith International and replaced it with a smaller holding of Schlumberger. With consumer staples, despite the addition of two small positions from the Safeco portfolio, Kellogg and Kimberly Clark, the sector declined as a percent of the Portfolio due to underperformance versus the market averages. In the case of health care, it was a combination of selling in excess of purchasing and woeful stock performance from some of the pharmaceuticals, especially Mylan Labs, which announced an acquisition that many investors thought ill conceived. During the six months, we realized significant percentage gains on our sales of Biomet and Wellpoint Health Networks, while adding two names in the health-care equipment and supplies industry, Stryker and Medtronic, and one name in biotechnology, Amgen. Medtronic and Amgen were both from the Safeco fund. Financials saw SouthTrust stock exchanged for shares of Wachovia in a merger and our shares of Charter One Financial acquired for cash by the Royal Bank of Scotland. We sold our position in St. Paul Travelers after discouragement over the company's need to set up additional reserves following the merger creating the company. Finally, in utilities, we sold a position in Vectren and received a smaller position in Exelon from the Safeco fund. Q: What is your outlook for 2005? A: The economic outlook appears favorable over the coming year. Interest rates are expected to continue rising, but not so fast that they should present impediments to further economic growth. Earnings growth will moderate somewhat, which is normal as a business cycle lengthens, but should still be adequate to fuel additional share-price advances. Federal tax law, with the maximum 15% tax rate on qualified dividends and long-term capital gains, is likewise favorable to the stock market. Of course there are concerns, including energy and other commodity prices and the high trade and Federal budget deficits. At some point, too, investors will begin looking ahead to the next downturn in the economy and thinking about ways to position themselves more defensively. A lot rides on the length of the current business cycle. Making the forecasting even more difficult is the unusual circumstance that this is a wartime cycle, with some economic activity not conforming to more predictable business patterns. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 21 PIONEER VARIABLE CONTRACTS TRUST Pioneer Equity Income VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT] Portfolio Diversification (As a percentage of total investment portfolio) Convertible Corporate Bonds 0.1% Convertible Preferred Stocks 1.2% Temporary Cash Investment 4.5% U.S. Common Stocks 94.2% Sector Distribution (As a percentage of equity holdings) Information Technology 3.1% Health Care 6.2% Consumer Staples 6.4% Telecommunication Services 6.5% Materials 7.2% Energy 9.8% Industrials 10.0% Consumer Discretionary 12.1% Utlities 16.8% Financials 21.9% Five Largest Holdings (As a percentage of equity holdings) 1. PACCAR, Inc. 4.48% 2. Exxon Mobil Corp. 3.35% 3. ChevronTexaco Corp. 3.31% 4. Washington Mutual, Inc. 3.07% 5. T. Rowe Price Associates, Inc. 2.61%
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Prices and Distributions
12/31/04 12/31/03 Net Asset Value per Share $20.58 $18.09
Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ 0.4372 $ - $ -
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Equity Income VCT Portfolio at net asset value, compared to that of the Russell 1000 Value Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Pioneer Equity Income VCT Portfolio Russell 1000 Value Index 3/95 10000 10000 12632 12025 12/96 15366 13852 20773 18732 12/98 24021 22816 25787 23092 12/00 27597 26522 26054 24673 12/2 22010 20770 28620 25466 12/04 33339 29638
Index comparison begins 2/28/95. The Russell 1000 Value Index measures the performance of large-cap U.S. value stocks. Index returns assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. Portfolio returns are based on net asset value and do not reflect any annuity-related costs. You cannot invest directly in any Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
Net Asset Value Life-of-Class 11.99% (3/1/95) 5 Years 5.12% 1 Year 16.39%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 22 PIONEER VARIABLE CONTRACTS TRUST Pioneer Equity Income VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- In the following discussion, John Carey, portfolio manager of Pioneer Equity Income VCT Portfolio, reviews the past year and gives an overview of the Portfolio's performance over that period. Q: How did the Portfolio perform versus its benchmark? To what do you attribute the performance? A: Pioneer Equity Income VCT Portfolio showed a good gain in 2004, rising by 16.38% at net asset value. That was in line with the Russell 1000 Value Index, which rose by 16.49%. We are pleased to report such positive results to you. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. As a whole, it was, as the numbers suggest, a good year for stocks, though most of the performance came in the second half and particularly in the fourth quarter. During the earlier part of the year, the market largely backed and filled as investors worried about rising interest rates, the war in Iraq, the weak dollar, rising oil prices, terrorist threats, and the upcoming Presidential election. Around the middle of October, however, the market as measured by most major indexes began to move higher, and it continued the upward move following the election and right through to the end of the year. The sectors in the Russell 1000 Value Index performing above average for the year were energy, utilities, industrials, consumer staples, and materials, and those performing below average were telecommunications services, financials, consumer discretionary, information technology, and health care. Pioneer Equity Income VCT Portfolio was overweight in four of the five top performing sectors, and underweight in three of the five underperforming sectors. Oddly enough, though, the principal contributor to relative positive performance for the portfolio was our stock selection in one of the underperforming sectors, financials, our biggest underweight relative to the index! The performance was attributable to premium take-over offers received by two of our banks, Charter One Financial and SouthTrust, and significant price increases for T. Rowe Price, a money-management company, and Simon Property Group, a real-estate investment trust. We also did not own any shares of Citigroup, an important index name that underperformed. At the same time, while we were appropriately underweight in information technology, we happened to own a very poor performer in the sector, convertible preferred shares of Electronic Data Systems, which we did sell during the year. Industrials and materials were bright spots for both the index and the Portfolio. In addition to being overweight in both sectors, we enjoyed superior performance from our holdings relative to the sector averages. Positive stand-outs for us in those sectors were PACCAR, builder of heavy trucks, and Roanoke Electric Steel, a small steel mill. Offsetting negative-return contributions came from holdings in the troubled health-care sector, where we were overweight and also suffered from below-average results from Eli Lilly and Merck. Q: What changes did you make to the portfolio during the year? A: In total, we added 18 holdings to the Portfolio and eliminated 16. With the favorable fundamentals in energy, materials, and industrials, we looked for additional investments in those sectors. Occidental Petroleum (oil and natural gas), Valspar (coatings and specialty chemicals), Phelps Dodge (copper mining), ServiceMaster (commercial and residential maintenance services), and Vulcan Materials (construction materials) were situations we found attractive. With our "value" orientation, we also looked in some of the underperforming sectors for names we thought unaccountably "cheap." In financials, we added Comerica, U.S. Bancorp, and State Street, and we also received shares of Wachovia in exchange for SouthTrust, which Wachovia acquired. In consumer discretionary, we bought Tupperware and common shares of Ford Motor in addition to our previous position in Ford convertible preferred shares; in information technology, we added Motorola; and in health care, we purchased Bristol-Myers Squibb and a small position in a new issue of convertible securities from Schering-Plough. Rounding out our additions were Clorox in consumer staples and Atmos Energy, Equitable Resources, and Ameren in utilities. Securities liquidated included stocks such as Biomet and Illinois Tool Works on which we had taken significant profits and whose prices we thought adequately reflected values, and stocks such as Pfizer and Coca-Cola about which we became concerned in a longer-term fundamental way. Other names sold during the year were Deere, Norfolk Southern, Tribune, Sears Roebuck, Bank of America, Merrill Lynch, St. Paul Travelers, Equity Office Properties, Electonic Data Systems convertible preferred, and Hewlett-Packard. The most meaningful effects of our trading on sector weights were in materials and utilities, where our weightings increased versus the portfolio weightings in the sectors at yearend 2003, and in health care, where our weighting decreased versus a year ago, though part of the decrease was due just to weak share-price moves for our health-care stocks relative to large price increases in some other sectors. Q: What is your outlook for 2005? A: The economic outlook appears favorable over the coming year. Interest rates are expected to continue rising, but not so fast that they should present impediments to further economic growth. Earnings growth should continue, albeit potentially at a slower pace than in 2003 and 2004. Federal tax law, with the maximum 15% tax rate on qualified dividends and 15% rate on long-term capital gains, is likewise favorable to the stock market. Of course there are concerns, including energy and other commodity prices and the high trade and Federal budget deficits. We aim to mitigate the risk from those factors by investing on the one hand in companies benefiting from rising materials prices and, on the other hand, avoiding companies with poor cost controls. Otherwise we are always interested in companies that not only can do better but that also have a plan in place and a management committed to achieve the better results. A good economy creates more opportunities for companies to execute such turn-arounds. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results.} Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 23 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- Portfolio Diversification (As a percentage of total investment portfolio) U.S. Common Stocks 62.7% Collateralized Mortgage Obligations 0.3% Asset Backed Securites 0.4% U.S Government Agency Obligations 0.4% Depositary Receipts for International Stocks 2.0% U.S. Corporate Bonds 11.7% U.S. Government Securities 22.5% U.S. Common Stocks 62.7% Sector Distribution (As a percentage of long-term holdings) Utilities 0.4% Telecommunication Services 2.4% Materials 3.4% Energy 6.5% Industrials 7.1% Health Care 9.1% Consumer Discretionary 10.3% Information Technology 11.9% Financials 11.9% Consumer Staples 15.1% Government Obligations 22.9% Five Largest Holdings (As a percentage of long-term holdings) 1. Berkshire Hathaway, Inc. (Class B) 3.37% 2. First Data Corp. 3.10% 3. Microsoft Corp. 3.08% 4. Northrop Grumman Corp. 3.03% 5. Wm. Wrigley Jr. Co. 2.82%
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Prices and Distributions
12/31/04 12/31/03 Net Asset Value per Share $14.40 $14.04
Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ 0.3057 $ - $ -
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Balanced VCT Portfolio at net asset value, compared to that of the Standard & Poor's (S&P) 500 Index and the Lehman Brothers Aggregate Bond Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Pioneer Balanced VCT Portfolio S&P 500 Lehman Aggregate Bond Index 3/95 10000 10000 10000 11279 12533 11847 12/96 11686 15406 13536 12817 20543 15920 12/98 13929 26417 16341 13812 31974 16754 12/00 15418 29068 17668 16720 25623 17268 12/02 18435 19961 15496 19192 25684 18085 12/04 20025 28476 18952
Index comparison begins 3/31/95. The Standard & Poor's 500 Stock Index (the S&P 500) is a commonly used measure of the broad U.S. stock market. The Lehman Brothers Aggregate Bond Index is a measure of the U.S. bond market. Index returns assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. Portfolio returns are based on net asset value and do not reflect any annuity-related costs. You cannot invest directly in any Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
Net Asset Value Life-of-Class 6.93% (3/1/95) 5 Years 2.50% 1 Year 4.79%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 24 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- In the following interview, Timothy Mulrenan, who is responsible for the equity portfolio of Pioneer Balanced VCT Portfolio, and Richard Schlanger, who is responsible for the Portfolio's fixed-income portfolio, discuss the markets and the factors that affected performance during 2004. Throughout the year, the Portfolio kept its allocations to equities and bonds relatively stable, with about 64% of assets in stocks and about 36% in fixed income investments. Q: How did the Portfolio perform during 2004? A: Pioneer Balanced VCT Portfolio had a total return of 4.79% at net asset value during the 12 months ended December 31, 2004. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: What was the investment environment like during the period? A: The economy was healthy, growing at a moderate rate throughout 2004. Evidence of a sustained economic recovery was clear enough that, beginning on June 30, the Federal Reserve Board began raising the overnight interbank lending rate, the Fed Funds Rate, in an effort to avoid any increase in inflationary pressures. By the end of the year, the Fed Funds Rate had risen from 1.00% to 2.25%, with the Fed indicating it intended to continue to raise the rate at a "measured" pace. During a year in which the value of the U.S. dollar on international currency exchanges fell dramatically and energy prices rose significantly, longer-term interest rates remained surprisingly stable for much of the year. In fact, the yield of the 10-year Treasury ended 2004 at 4.22%, very close to its level at the start of the year. As the improving economy helped lift corporate profits, corporate bonds significantly outperformed government bonds. Mortgage-backed securities also did better than Treasuries in a year in which securities that paid a higher coupon tended to deliver higher returns. In the equity markets, stock prices did not move greatly during the first 10 months of the year. However, after the November elections and the end of political uncertainty about control of the federal government, stocks staged a strong rally. Small- and mid-cap stocks and value stocks outperformed large-cap stocks and growth stocks. Q: What were your strategies in managing fixed-income assets of the Portfolio during the year? A: We emphasized the "spread sectors" - corporates and mortgages - and kept the portfolio's duration, or sensitivity to interest-rate changes, close to that of the benchmark Lehman Brothers Aggregate Bond Index. For much of the year, we kept our investments in high-yielding, lower-rated corporate bonds at about 8.5% of fixed income assets, close to our limit of 10%. However, we did lower that to about 7.6% of fixed income assets by the end of the year, increasing our investments in mortgage-backed securities to almost half the portfolio. This was because, after strong performance by corporate bonds, we found that mortgage securities offered very attractive relative value, as they provided almost as much income as corporate securities, but with higher credit quality. At the end of 2004, average credit quality was AA-, up from the A+ average rating of a year earlier. Both because we were cautious in taking interest-rate risk and because we increased our investments in mortgages, the Portfolio's duration was 3.93 years, down from 4.26 years at the end of 2003. Both our sector selection and our decision to keep the Portfolio's sensitivity to interest rate changes close to that of the benchmark aided performance during the year. Q: What were the principal factors affecting the performance of the equity investments during 2004? A: During a year in which high-quality, large-company growth stocks were not in favor, the best performance tended to come from our investments in the energy and consumer staples sectors. Several of our holdings in the information technology sector also supported performance, while many of the most notable detractors were in health care and consumer discretionary investments. The price of oil rose substantially in 2004, helping lift the performance of the entire energy sector. Our best-performing energy investments included Encana, a Canadian exploration and production company, and Varco International, which provides oil field equipment and services to energy companies. Varco eventually received an attractive acquisition offer from National Oil Well. Chewing gum leader Wrigleys appreciated on good earnings growth, its improving outlook with the acquisition of the Altoids and Lifesavers brands, and inroads into the markets in China and India. Gillette gained on successful new product introductions and excellent cost management. In information technology, Symantec's stock price appreciated with strong sales of its anti-virus software. Newmont Mining, the world's largest gold mining company, was another holding that did well. In health care, our investments in large pharmaceutical companies detracted from results during a difficult year for the industry. The largest disappointment was Pfizer, a major position in the portfolio. Pfizer's stock price plummeted late in the year amid controversies about possible side effects of its Cox-2 pain inhibitor, Celebrex. The news came after Merck, a smaller holding in the portfolio, withdrew its Cox-2 pain inhibitor from the market entirely. Among consumer discretionary holdings, the most notable drag on performance was our investment in Viacom, which declined 17% during the year, primarily because of disappointing advertising sales in its radio station division. As the year progressed, we sold some of our more successful investments, notably Symantec and Newmont Mining because of concerns about the high valuations that they had attained. As we did so, we invested in Vodaphone, the wireless communications company based in the U.K.; Guidant, a leading medical device company which later received an acquisition offer from Johnson & Johnson; and Avaya, a telecommunications equipment company that is a leader in providing Voice Over Internet Protocol technology to corporations. Q: What is your investment outlook? A: We believe the economy will continue to expand and the Federal Reserve will maintain its policy of raising short-term interest rates. Longer-term rates may rise more slowly. As this happens, the "yield curve" will flatten as the difference between short-term rates and longer-term rates narrows. If this scenario unfolds, we may take a more "bar-belled" approach to the fixed income portfolio, investing in both short-maturity (less than two years) and longer-maturity securities (more than 10 years) but de-emphasizing intermediate-term issues which may be the most vulnerable to the risk of price loss from rising rates. We may also take some profits in mortgage investments if their prices begin to look less appealing and look for more attractive opportunities in corporate securities. In the equity market, we believe corporate profits will continue to improve, but at a decelerating rate. We think stock prices will track earnings growth, which in turn should track nominal Gross Domestic Product growth. We intend to continue to emphasize high quality, stable-growth companies. Historically, these companies have done relatively well as corporate profit growth begins decelerating as the economy enters a new, slower-growth stage in the business cycle. The consumer staples and health care sectors typically perform well in such an environment. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. A Word About Risk: When interest rates rise, the prices of fixed income securities in the Portfolio will generally fall. Conversely, when interest rates fall the prices of fixed income securities in the Portfolio will generally rise. Investments in the Portfolio are subject to possible loss due to the financial failure of underlying securities and their inability to meet their debt obligations. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 25 PIONEER VARIABLE CONTRACTS TRUST Pioneer High Yield VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT] Portfolio Diversification (As a percentage of total investment in securities) Convertible Preferred Stocks 2.4% Temporary Cash Investment 2.7% Convertible Corporate Bonds 30.3% U.S Corprotate Bonds 64.6% Maturity Distribution (As a percentage of total investment in securities) 8+ years 8.5% 6-8 years 11.2% 4-6 years 48.8% 3-4 years 15.0% 1-3 years 16.5% Five Largest Holdings (As a percentage of long-term holdings) 1. Mueller Industries, Inc. 6.0%, 11/1/14 3.97% 2. Corning, Inc., 5.9%, 3/15/14 3.42% 3. CMS Energy Corp. 7.75%, 8/1/10 3.03% 4. Bowater, Inc., 6.5%, 6/15/13 3.02% 5. SCI Systems, Inc., 3.0%, 3/15/07 2.68%
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Prices and Distributions
12/31/04 12/31/03 Net Asset Value per Share $ 11.67 $ 11.45
Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ 0.6177 $ - $ 0.047
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer High Yield VCT Portfolio at net asset value, compared to that of Merrill Lynch (ML) High Yield Master II Index and of the ML Index of Convertible Bonds (Speculative Quality). Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Pioneer High Yield VCT Portfolio ML Convertible Bonds Speculative Quality Index ML High Yield Master II Index 5/00 10000 10000 10000 8424 9770 10623 7882 10207 12387 12/02 7744 10013 12211 10529 12830 16215 12/04 11861 14227 17517
Index comparisons begin on 4/30/00. The ML High Yield Master II Index is a commonly accepted measure of the performance of high yield securities. The ML Index of Convertible Bonds (speculative quality) is a commonly accepted measure of the performance of speculative grade convertible bond securities. Index returns assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in any Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
Net Asset Value Life-of-Class 12.27% (5/1/00) 1 Year 8.03%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 26 PIONEER VARIABLE CONTRACTS TRUST Pioneer High Yield VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- The high-yield market generated solid returns during the 12 months ended December 31, 2004. In the following interview, Portfolio Manager Margaret Patel describes the market backdrop and why the Portfolio underperformed its benchmark index. Q: How did the Portfolio perform? A: During the six months ended December 31, 2004, the Portfolio's Class I shares had a total return based on net asset value of 8.03%. By comparison, the Merrill Lynch High Yield Master II Index returned 10.87%. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: What was the environment like for the high-yield market during 2004? A: All sectors of the high-yield market generally rallied, reflecting a pick-up in the economy. Defaults continued to decline steadily from their peak in 2002. Although short-term interest rates were on the rise - as the Federal Reserve Board began to implement a tightening policy - high-yield bonds continued to offer a substantial yield advantage over comparable-maturity Treasuries and cash equivalents. Furthermore, the supply of newly issued high-yield corporate bonds was not sufficient to meet the demand for higher-yielding securities. As a result, high-yield bond prices continued to rise. Q. Why did the Portfolio's performance lag that of the Merrill Lynch High Yield Master II Index? A. Because of its investments in convertible bonds. Convertibles underperformed conventional high-yield bonds because they tend to be more sensitive to the changes in short-term interest rates that we experienced than high-yield issues. In addition, the period was characterized by underlying equity-market volatility that was lower than historical averages, a factor that also typically leads to the underperformance of convertible securities. Overall, the lower credit tiers of the market performed best, at a time when we were moving the Portfolio's average credit quality higher. The Portfolio had minimal exposure to the distressed and lower-tier credits that led the market during the past 12 months, particularly in such sectors as telecommunications and media. Q: Which investments proved to be some of the top performers during the fiscal year? Which disappointed? A: Tesoro Petroleum, a West Coast refiner, profited from tighter supply/demand conditions. Millennium Chemicals, benefited from its acquisition by Lyondell, as well as from a brighter outlook for basic chemicals. Several biotechnology holdings also fared well, including Cubist Pharmaceuticals, which offers a drug for soft-tissue infections; CV Therapeutics, which sells products to treat angina; and Human Genome, which advanced due to clinical successes and management's focus on reducing research and development expenditures. Disappointments included Intermet, an auto-parts manufacturer that defaulted on its debt due to raw materials pricing pressure. Two technology holdings also lagged, Maxtor, a data storage manufacturer, and Adaptec, which makes computer-networking products. Those securities fell in concert with the technology sector, which struggled through most of the year because of weaker-than-expected corporate technology spending. Q: What is your outlook? A: We remain optimistic that the economy should continue to grow near its long-term historical average during the coming year. While the Fed is likely to continue to raise short-term rates, we expect any increases to be gradual. In addition, we anticipate that defaults should remain below long-term averages, providing solid support for high-yield bonds. Because the high-yield market has experienced such a run-up in the recent past, we believe that returns in 2005 will be driven more by interest income than by capital appreciation. We have been able to find the best value in the higher-quality tiers of the market. They should be better insulated if financial market volatility increases. Although convertible securities detracted from Portfolio performance, we believe that, over time, they offer an opportunity to participate in the future growth of the underlying stocks, making the asset class attractive to long-term-oriented investors. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. A Word About Risk: Investments in high-yield or lower-rated securities are subject to greater-than-average risk. When interest rates rise, the prices of fixed-income securities in the Portfolio will generally fall. Conversely, when interest rates fall the prices of fixed income securities in the Portfolio will generally rise. When concentrating on one issuer, the Portfolio is sensitive to changes in the value of these securities. Investments in the Portfolio are subject to possible loss due to the financial failure of underlying securities and their inability to meet their debt obligations. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 27 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT] Portfolio Diversification (As a percentage of total investment portfolio) Convertible Corporate Bonds 0.7% Collateralized Mortgage Obligations 1.0% Municipal Bonds 1.9% Asset Backed Securities 2.4% Temporary Cash Investment 2.6% Foreign Government Bonds 12.6% U.S. Government Securities 24.5% U.S. Corporate Bonds 54.3% Maturity Distribution (As a percentage of total investment portfolio) 8+ years 7.3% 6-8 years 14.3% 4-6 years 28.5% 3-4 years 11.9% 1-3 years 31.5% 0-1 years 6.5% Five Largest Holdings (As a percentage of long-term holdings) 1. Federal Home Loan Mortgage Corp., 6.0%, 8/1/34 2.22% 2. Government National Mortgage Association, 6.0%, 8/15/16 1.69% 3. Federal National Mortgage Association, 6.375%, 8/15/07 1.44% 4. Norwegian Government, 6.75%, 1/15/07 1.38% 5. Canadian Government, 4.25%, 9/1/09 1.27%
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Prices and Distributions
12/31/04 12/31/03 Net Asset Value per Share $11.26 $11.01
Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ 0.6551 $ - $ 0.1616
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Strategic Income VCT Portfolio at net asset value, compared to that of the Lehman Brothers U.S. Universal Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Pioneer Strategic Income VCT Portfolio Lehman U.S. Universal Index 7/99 10000 10000 10136 10070 12/00 11234 10525 12144 11251 12/02 13338 12458 14117 15104 12/04 14640 16651
Index comparison begins July 31, 1999. The Lehman Brothers U.S. Universal Index is the union of the U.S. Aggregate Index, the U.S. High Yield Corporate Index, the 144A Index, the Eurodollar Index, the Emerging Markets Index, the non-ERISA portion of the CMBS Index and the CMBS High Yield Index. Municipal debt, private placements and non-dollar-denominated issues are excluded from the Index. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 9.84% (7/29/99) 5 Years 10.58% 1 Year 10.25%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 28 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- As economies throughout the world grew steadily during 2004, the values of both corporate bonds and emerging market debt tended to rise. At the same time, many non-U.S. currencies gained in value relative to the dollar. In the following discussion, Kenneth J. Taubes discusses the factors that influenced the performance of Strategic Income VCT Portfolio during 2004. Mr. Taubes, Director of Pioneer's Fixed Income Group, oversees the team responsible for daily management of the Portfolio. Q: How did the Portfolio perform during 2004? A: Strategic Income Portfolio performed very well, outpacing its benchmark by a wide margin. For the 12 months ended December 31, 2004, the Portfolio's Class I shares had a total return of 10.25%, while the Lehman U.S. Universal Bond Index returned 4.97%. On December 31, 2004, the Standardized 30-day SEC Yield for Class I shares was 5.64%. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: What factors affected Portfolio performance? A: With strong economic growth throughout the globe during 2004, corporate cash flows and profits rose, improving overall credit quality in the United States and abroad. The best-performing sectors in the fixed-income markets tended to be those areas that normally carry the highest credit risk - high-yield, corporate bonds and emerging market debt - as strengthening economies improved overall credit quality. The year 2004 also was a period in which the U.S. dollar continued to lose value against major foreign currencies. Taking advantage of the Portfolio's ability to diversify across several different fixed-income sectors, we overweighted the two best-performing sectors - domestic high-yield bonds and emerging market bonds. This strategy substantially contributed to performance, as did our allocations to investment-grade foreign debt that appreciated in value as the dollar fell. Outside the United States, we invested in countries such as Australia and Canada, whose economies benefited from rising commodity prices and tighter monetary policies. In Europe, we invested in Sweden and Norway, both of which also benefited from these factors. Within the emerging markets, we emphasized Brazil and Russia, where economic growth was strong, while adding to commodity-linked bonds in China and India. At the end of the year, U.S. high yield bonds constituted 29.3l% of the Portfolio's assets, while emerging market and international high-yield investments accounted for another 20% of assets. We also emphasized other sectors that offered yield advantages over Treasuries. International investment-grade debt accounted for 17.2% of Portfolio assets, while U.S. mortgage-backed securities constituted 23.5% of Portfolio assets and domestic investment-grade corporate debt accounted for 8.4%. Q: What were some of the individual holdings that most influenced Portfolio performance? A: Within the emerging markets, the bonds of several Brazilian companies were standout performers, including: brewer AMBEV; steel company CSN; and Telemar, a telecommunications service company. Russian investments that supported performance included bonds of Gazprom, the government-controlled energy company, and Mobil Telesystems, a mobile phone service provider. In India, Vedanta, a mining company with operations in zinc and other materials, performed well. Among European high-yield bonds that performed well were cable companies NTL of the United Kingdom and Kabel of Germany. Domestically, top performers included materials companies Celanese, European and ICI Huntsman, as well as chemical companies Lyondell and Methanex. Detracting from results were: insurance company Unum Provident, whose bond prices slipped amid controversy over the New York attorney general's investigation of industry practices; and Toys "R" Us, which announced restructuring plans. Q: What is your investment outlook? A: We anticipate continued global economic growth and expect to maintain an emphasis on corporate securities. However, we believe high-yield corporate bonds do not offer as compelling relative values as they did a year ago. We have reduced our high-yield positions somewhat, while increasing our commitment to mortgage-backed securities. In the United States, we anticipate that the Federal Reserve will continue to raise the Fed funds rate at a measured pace during 2005. We believe the market rates for longer-term securities already are close to being fairly valued. As a result, we anticipate that the yield curve - which measures the relationship between short-term and longer-term interest rates - likely will flatten during the year as short-term rates move up. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. A Word About Risk: Investing in foreign and/or emerging markets securities involves risks relating to interest rates, currency exchange rates, economic, and political conditions. Investments in high-yield or lower-rated securities are subject to greater-than-average risk. When interest rates rise, the prices of fixed-income securities in the Portfolio will generally fall. Conversely, when interest rates fall the prices of fixed-income securities in the Portfolio will generally rise. Investments in the Portfolio are subject to possible loss due to the financial failure of underlying securities and their inability to meet their debt obligations. The securities issued by U.S. Government sponsored entities (i.e., FNMA, Freddie Mac) is neither guaranteed nor issued by the U.S. Government. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 29 PIONEER VARIABLE CONTRACTS TRUST Pioneer America Income VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS REPRESENTED BY A MOUNTAIN CHART IN THE ORIGINAL DOCUMENT] Portfolio Diversification (As a percentage of total investment portfolio) U.S. Corporate Bonds 0.5% Temporary Cash Investment 3.3% U.S. Government Agency Obligatons 3.9% U.S. Govenment Securites 92.3% Maturity Distribution (As a percentage of total investment portfolio) 8+ years 8.4% 6-8 years 0.9% 4-6 years 16.2% 3-4 years 4.9% 1-3 years 66.6% 0-1 years 3.0% Five Largest Holdings (As a percentage of long-term holdings) 1. U.S. Treasury Notes, 6.5%, 2/15/10 11.92% 2. U.S. Treasury Notes, 6.25%, 8/15/23 4.85% 3. Federal Home Loan Mortgage Corp., 6.0%, 3/1/33 2.72% 4. U.S. Treasury Notes, 6.375%, 8/15/27 2.49% 5. Federal Home Loan Mortgage Corp., 6.0%, 5/1/34 2.08%
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Prices and Distributions
12/31/04 12/31/03 Net Asset Value per Share $ 10.11 $ 10.35
Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ 0.58203 $ - $ -
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer America Income VCT Portfolio at net asset value, compared to that of the Lehman Brothers Fixed-Rate Mortgage-Backed Securities Index and of Lehman Brothers Government Bond Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING DATA WAS REPRESENTED AS A MOUTAIN CHART IN THE PRINTED MATERIAL]
Pioneer American Income VCT Portfolio Lehman Government Bond Index Lehman Fixed Rate Mortgage Index 3/95 10000 10000 10000 11098 11302 10574 12/96 11693 11615 10712 12802 12727 11616 12/98 13694 13981 12563 13947 13667 12247 12/00 15505 15477 13687 16779 16598 14574 12/02 18246 18506 16077 18802 18943 16369 12/04 19687 19604 16928
Index comparisons begin 2/28/95. The Lehman Brothers Government Bond Index measures the performance of the U.S. government bond market. The Lehman Brothers Fixed Rate Mortgage Index measures the performance of the government and mortgage securities markets. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in any Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 5.49% (3/1/95) 5 Years 6.69% 1 Year 3.42%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 30 PIONEER VARIABLE CONTRACTS TRUST Pioneer America Income VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- As the U.S. economy expanded, the Federal Reserve began raising interest rates at a slow but steady pace. The yield curve flattened, and short-term interest rates rose more than long-term rates, which remained virtually unchanged for the year. Against this backdrop, investors in U.S. Government and agency securities were rewarded with a relatively attractive level of income during the 12-month period ended December 31, 2004. Richard Schlanger, a member of the Pioneer fixed-income team, discusses the factors that affected the fixed-income market and the Portfolio over the past 12 months. Q: How did the Portfolio perform during the period? A. For the 12-month period ended December 31, 2004, Class I shares of Pioneer America Income VCT Portfolio produced a total return of 3.42%. The Portfolio performed in line with its benchmark, the Lehman Brothers Government Bond Index which returned 3.48% for the same period, but underperformed the 4.70% return of the Lehman Brothers Fixed-Rate Mortgage-Backed Index. At the end of the period, the 30-day SEC yield for Class I shares was 3.59%. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q. What was the investment environment like during the period? A. With the economy on a firmer footing, the Federal Reserve boosted short-term interest rates in June and continued raising them through the end of the year. Initially, the Fed's actions caused Treasury yields to move higher; but when it appeared that inflation was under control, the yield curve flattened. The yield curve shows the relationship between bond yields and maturity lengths. With a flatter yield curve, short-term yields moved higher and prices declined; and longer-term yields fell or remained stable, boosting prices. An enormous amount of Treasury buying by overseas investors was also instrumental in keeping Treasury yields low. Q: How did you manage the Portfolio in this environment? A: The Portfolio's assets were invested in mortgage-backed securities, which accounted for 68.3% of net assets and Treasury securities, 28.8% of net assets. There was also a 2.9% cash position. All of the mortgages were issued by Government Sponsored Enterprises (GSEs), with about 37.5% of the mortgage position invested in securities issued by the Government National Mortgage Association (Ginnie Mae). (Ginnie Mae securities are backed by the full faith and credit of the U.S. government; however, a full faith and credit backing applies to underlying Portfolio securities and not to Portfolio shares.) About 18.8% of the mortgages were from the Federal National Mortgage Association (Fannie Mae,) and 11.6% from the Federal Home Loan Mortgage Corporation (Freddie Mac). In the Treasury portion of the Portfolio, we emphasized securities with short to intermediate durations. We expected yields to move higher and wanted to minimize the price volatility that would naturally occur as yields rose. Therefore, we kept duration shorter than the benchmark. Measured in years, duration measures a bond's price sensitivity to interest-rate changes. A shorter duration can protect a portfolio from price declines as yields rise. We were premature, however, in our expectation of higher yields. As a result, our short-duration strategy worked against the Portfolio. Long-term Treasuries outperformed, because of the huge demand from overseas investors and the flattening of the yield curve. For example, the 30-year Treasury bond returned 8.89%; the five-year Treasury returned 2.39%. Q: What contributed most to performance? A: The significant overweight in mortgage-backed securities made the largest positive impact, as mortgages outperformed other fixed-income assets. Minimizing prepayment risk by selecting specific mortgage pools also helped drive performance. The flatter yield curve, which boosted the prices of longer-term Treasury securities, also benefited results. Q: What detracted from performance? A: The Portfolio's underweight in long-term Treasuries. We continue to believe, however, that yields on such Treasuries are artificially low, given the weak U.S. dollar, the growing trade imbalance and a Fed that is likely to continue raising interest rates. Q: What is your outlook for the next six months? A: In the short-term, we expect the investment environment to remain unchanged and are unlikely to alter the Portfolio significantly during the first quarter of 2005. We plan to remain overweight in mortgage securities. In February, Federal Reserve Chairman Alan Greenspan will make his semi-annual Humphrey-Hawkins testimony before Congressional committees. At that time, we will learn what next several months, we will be closely monitoring data to determine the appropriate action to take should the economic backdrop change. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. A Word About Risk: Government guarantees apply to the underlying securities only and not to the prices and yields of the Portfolio. When interest rates rise, the prices of fixed-income securities in the Portfolio will generally fall. Conversely, when interest rates fall the prices of fixed-income securities in the Portfolio will generally rise. The Portfolio may invest in mortgage-backed securities, which during times of fluctuating interest rates may increase or decrease more than other fixed--income securities. Mortgage-backed securities are also subject to pre-payments. Investments in the Portfolio are subject to possible loss due to the financial failure of underlying securities and their inability to meet their debt obligations. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 31 PIONEER VARIABLE CONTRACTS TRUST Pioneer Money Market VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO AND PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Although the U.S. Federal Reserve started to raise short-term interest rates from the lowest levels reached in more than four decades, 2004 remained a year in which money market investments offered extremely low yields by historical measures. Despite five increases in interest rates between June 30 and December 31, the key Fed Funds Rate ended the year at just 2.25%. Throughout the 12 months ended December 31, 2004, Pioneer Money Market VCT Portfolio maintained a $1 share price and provided modest income consistent with the yields available in the money market. The Portfolio invests exclusively in high-quality money market instruments issued by the U.S. government and domestic corporations and banks. All issues have the highest ratings from the two nationally recognized ratings organizations: A1 by Standard & Poor's Investors Services and P1 by Moody's Investor Services. (Ratings apply to underlying securities, not Portfolio shares.) In the following discussion, Andrew D. Feltus reviews the investment environment and the strategies that affected Pioneer Money Market VCT Portfolio over the 12 months ended December 31, 2004. Mr. Feltus is a member of Pioneer's Fixed Income Group, which is responsible for the daily management of the Portfolio. Q: How did the Portfolio perform during 2004? A: For the 12 months ended December 31, 2004, Pioneer Money Market VCT Portfolio had a total return of 0.65% at net asset value. On December 31, 2004, the Portfolio's seven-day effective yield for Class A shares was 1.38%. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: What was the investment environment like during the year? A: For virtually the entire first half of 2004, the influential Fed Funds Rate remained at a 46-year low of 1.00%. The situation began to change when the Federal Reserve raised the rate on June 30 by one-quarter of one percentage point and signaled that it intended to initiate further increases on a gradual basis. The central bank raised the rate four more times, and the Fed Funds Rate stood at 2.25% at the end of the year. The rate increases occurred against a backdrop of continued economic growth and hints of an increase in inflationary pressure. Economic growth, as measured by growth in Gross Domestic Product (GDP), rose by an average annualized rate of 4.6% during the first nine months of 2004. Affected by the higher costs of energy, the Consumer Price Index rose to about 3.5% by the end of November. While periodic concerns about low new-job creation did arise, in general the Federal Reserve Board believed that the economy was gathering enough strength that monetary policy could be tightened to avert the possibility of increasing inflationary threats. At the end of the year, the Federal Reserve was widely expected to continue to raise short-term rates in 2005. Q: What were your principal strategies in this low-interest rate environment? A: We held to our commitment to high-quality money market instruments. We started gradually to lower the Portfolio's effective duration so that we could take advantage of higher yields available as the Federal Reserve Board proceeded with its rate increases. At the end of the year, the effective duration of the Fund was 45 days, down from 67 days just six months earlier. Q: What is your investment outlook? A: We anticipate that the economy will show sustained growth in 2005 and that the Federal Reserve Board will maintain its policy of raising short-term grates gradually. At the same time, because of budget pressures and concern about the federal deficit, the government is likely to put new brakes on spending. The combination of the tighter monetary policy and restrained fiscal policy may act as a drag on the pace of economic growth and ultimately cause a possible change in monetary policy. If economic growth does begin to slow, the Federal Reserve may revise its current bias toward raising short-term rates. However, until that appears imminent, we intend to continue to keep the Portfolio's effective duration relatively short to enable us to invest in newer, higher-yielding securities that have the potential to raise the level of income to be distributed to shareholders. Prices and Distributions
12/31/04 12/31/03 Net Asset Value per Share $ 1.00 $ 1.00
Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ 0.0065 $ - $ -
A Word About Risk: Investing in foreign and/or emerging markets securities involves risks relating to interest rates, currency exchange rates, economic, and political conditions. Although the Portfolio seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Portfolio. Portfolio shares are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. - --------------------- Average Annual Total Returns (As of December 31, 2004)
Net Asset Value Life-of-Class 3.45% (3/1/95) 5 Years 2.28% 1 Year 0.65%
All total returns shown assume reinvestment of distributions at net asset value. * Portfolio performance does not reflect any variable contract fees, expenses or sales charges. If they had been included, performance would have been lower. Please refer to the variable product's annual report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. 32 PIONEER VARIABLE CONTRACTS TRUST Pioneer Emerging Markets VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Shares Value PREFERRED STOCKS - 2.8% Materials - 0.6% Diversified Metals & Mining - 0.6% 274,000 Caemi Mineracao E Metalurgia SA* $ 235,211 ----------- Total Materials $ 235,211 ----------- Capital Goods - 0.1% Industrial Conglomerates - 0.1% 3,445 LG Corp. $ 37,249 ----------- Total Capital Goods $ 37,249 ----------- Banks - 1.1% Diversified Banks - 1.1% 2,893 Banco Itau Holding Financeira $ 434,604 ----------- Total Banks $ 434,604 ----------- Telecommunication Services - 1.0% Integrated Telecommunication Services - 0.5% 12,301 Tele Norte Leste Participacoes (A.D.R.) $ 207,518 ----------- Wireless Telecommunication Services - 0.5% 6,900 Telemig Celular Participacoes (A.D.R.) $ 194,787 ----------- Total Telecommunication Services $ 402,305 ----------- TOTAL PREFERRED STOCKS (Cost $626,782) $ 1,109,369 ----------- COMMON STOCKS - 93.1% Energy - 9.7% Integrated Oil & Gas - 6.9% 225,000 CNOOC, Ltd. $ 121,671 5,480 Lukoil Holding (A.D.R.) 649,939 35,300 Petrobras Brasileiro (A.D.R.) 1,278,213 13,500 Surgutneftegaz (A.D.R.) (a) 504,900 46,000 Yukos 135,125 ----------- $ 2,689,848 ----------- Oil & Gas Equipment and Services - 0.5% 3,000 Samchully Co., Ltd. $ 188,049 ----------- Oil & Gas Exploration & Production - 1.5% 431,600 China Petroleum & Chemicals $ 177,043 179,000 Panva Gas Holdings, Ltd.* 79,998 2,700 Mol Magyar Olaj 189,702 34,200 PTT Public Co., Ltd. 152,199 ----------- $ 598,942 ----------- Oil & Gas Refining Marketing & Transportation - 0.8% 220,000 China Aviation Oil Singapore $ 0 1,598,800 Petron Corp. 92,507 8,000 Polski Koncern Nafto (G.D.R.) 201,520 ----------- $ 294,027 ----------- Total Energy $ 3,770,866 -----------
Shares Value Materials - 15.3% Commodity Chemicals - 1.9% 3,869 Daelim Industrial Co. $ 200,997 4,900 LG Petrochemical Co., Ltd. 122,997 7,000 Reliance Industries, Ltd. (144A) 179,340 12,010,000 Ultrapar Participacoes SA 230,614 ----------- $ 733,948 ----------- Construction Materials - 1.3% 5,150 Asia Cement Co., Ltd. $ 169,070 35,006,000 Akcansa Cimento AS* 123,565 543,800 Lafarge Malayan Cement Bhd 104,451 14,400 Siam City Cement Co., Ltd. 90,384 ----------- $ 487,470 ----------- Diversified Chemical - 0.4% 270,234 Sinopac Holdings Co. $ 158,850 ----------- Diversified Metals & Mining - 5.1% 5,500 Anglo American Platinum Corp., Ltd.* $ 201,487 37,700 Companhia Vale do Rio Doce (A.D.R.) 919,126 4,900 Freeport-McMoRan Copper & Gold, Inc. (Class B) 187,327 17,200 KGHM Polska Miedz SA 178,622 6,300 Norilsk Nickel 344,138 127,000 Yanzhou Coal Mining 181,077 ----------- $ 2,011,777 ----------- Fertilizers & Agricultural Chemicals - 0.5% 38,600 Makhteshim-Agan Industries, Ltd. $ 207,372 ----------- Gold - 0.7% 30,100 IAMGOLD Corp. $ 198,961 172,000 Zijin Mining Group Co., Ltd. 77,965 ----------- $ 276,926 ----------- Paper Products - 0.5% 5,270 Aracruz Cellulose SA (A.D.R.) $ 198,679 ----------- Precious Metals & Minerals - 3.3% 1,750 Anglogold Ashanti, Ltd. $ 63,338 16,400 Anglogold Ashanti, Ltd. (A.D.R.) (a) 596,140 23,200 Compania de Minas Buenaventura SA 531,280 507,100 PT Aneka Tambang TBK 94,184 ----------- $ 1,284,942 ----------- Specialty Chemicals - 0.4% 85,501 Formosa Plastic Corp. $ 146,510 ----------- Steel - 1.2% 4,400 Pohang Iron & Steel Co., Ltd. (A.D.R.) (a) $ 195,932 16,800 Remgro, Ltd. 280,885 ----------- $ 476,817 ----------- Total Materials $ 5,983,291 -----------
The accompanying notes are an integral part of these financial statements. 33 PIONEER VARIABLE CONTRACTS TRUST Pioneer Emerging Markets VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Shares Value Capital Goods - 5.7% Building Products - 0.8% 12,500 Daewoo Heavy Industries & Machinery, Ltd. $ 185,824 2,530 Hanil Cement Co., Ltd. 146,478 ----------- $ 332,302 ----------- Construction & Engineering - 1.7% 379,435 CTCI Corp. $ 240,994 9,600 LG Construction, Ltd. 264,226 10,740 Kyeryong Construction Industrial Co., Ltd. 166,135 ----------- $ 671,355 ----------- Electrical Components & Equipment - 0.7% 14,900 Bharat Heavy Electricals (Demat Shares) $ 265,190 ----------- Industrial Conglomerates - 1.8% 23,200 Copec-Compania Petroleos $ 185,767 6,825 LG Corp. 111,148 59,798,000 KOC Holding AS* 390,489 ----------- $ 687,404 ----------- Industrial Machinery - 0.7% 19,400 Daewood Heavy Industries & Machinery, Ltd. $ 150,353 187,000 Yungtay Engineering Co., Ltd. 112,884 ----------- $ 263,237 ----------- Total Capital Goods $ 2,219,488 ----------- Commercial Services & Supplies - 0.8% Diversified Commercial Services - 0.8% 20,956 Bidvest Group, Ltd. $ 297,387 ----------- Total Commercial Services & Supplies $ 297,387 ----------- Transportation - 1.7% Air Freight & Couriers - 0.2% 153,400 Singapore Post, Ltd. $ 83,604 ----------- Marine - 1.1% 68,000 Samsung Heavy Industries Co., Ltd. $ 424,004 ----------- Railroads - 0.4% 34,300 Malaysia International Shipping Bhd. $ 138,033 ----------- Total Transportation $ 645,641 ----------- Automobiles & Components - 3.0% Automobile Manufacturers - 3.0% 3,500 Hyundai Motor Co., Ltd. $ 187,440 10,530 Hyundai Heavy Industries 350,212 143,653 PT Astra International 148,538 178,200 Sime Darby Bhd. 281,310 17,499 Tata Motors 204,293 ----------- $ 1,171,793 ----------- Total Automobiles & Components $ 1,171,793 -----------
Shares Value Consumer Durables & Apparel - 1.2% Homebuilding - 0.8% 563,500 Ayala Land, Inc. $ 73,325 110,200 Corporacion GEO, S.A. de CV* 220,538 ----------- $ 293,863 ----------- Leisure Products - 0.4% 6,000 Bajaj Auto, Ltd. (Demat Shares) $ 156,909 ----------- Total Consumer Durables & Apparel $ 450,772 ----------- Hotels, Restaurants & Leisure - 0.4% Hotels, Resorts & Cruise Lines - 0.3% 9,200 Indian Hotels Co., Ltd. $ 116,755 ----------- Restaurants - 0.1% 105,000 Jollibee Foods Corp. $ 53,329 ----------- Total Hotels, Restaurants & Leisure $ 170,084 ----------- Media - 3.0% Advertising - 0.3% 6,200 G2R, Inc. $ 106,368 ----------- Broadcasting & Cable Television - 1.3% 306,200 ABS-CBN Broadcasting Corp. $ 101,221 3,100 Grupo Televisa SA (A.D.R.) 187,550 518,000 Media Prima Bhd* 233,097 ----------- $ 521,868 ----------- Movies & Entertainment - 1.0% 322,800 Grammy Entertainment Plc $ 142,825 57,700 Zee Telefilms, Ltd. 228,241 ----------- $ 371,066 ----------- Publishing - 0.4% 69,716,000 Hurriyet Gazetecilik ve Matbaacilik AS* $ 164,400 ----------- Total Media $ 1,163,702 ----------- Retailing - 0.1% Distributors - 0.1% 6,955 The Spar Group, Ltd.* $ 26,468 ----------- Total Retailing $ 26,468 ----------- Food & Drug Retailing - 2.7% Food Distributors - 0.6% 7,300 Compania Cervecerias Unidas SA (a) $ 184,179 12,000 Kimberly-Clark de Mexico, S.A. de C.V. 41,461 ----------- $ 225,640 ----------- Food Retail - 2.1% 12,000 Brasil Distr Pao Acu (A.D.R.) $ 307,200 3,780 CJ Corp. 258,377 94,000 President Chain Store Corp. 150,760 6,955 Tiger Brands, Ltd. 119,373 ----------- $ 835,710 ----------- Total Food & Drug Retailing $ 1,061,350 -----------
34 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Emerging Markets VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Food, Beverage & Tobacco - 7.2% Brewers - 0.3% 3,950 Efes Breweries International (G.D.R.) (144A)* $ 118,500 ----------- Distillers & Vintners - 1.9% 9,966,000 Andalou efes Biracilik VE $ 201,470 12,500 Companhia de Bebidas PR (A.D.R.) 354,125 68,500 Grupo Modelo SA de CV 188,478 ----------- $ 744,073 ----------- Packaged Foods & Meats - 0.4% 1,390 Pulmuone Co., Ltd. $ 69,770 71,017 Rainbow Chicken, Ltd. 94,261 ----------- $ 164,031 ----------- Soft Drinks - 2.3% 9,100 Coca-Cola FEMSA, S.A. de C.V. (A.D.R.) $ 216,216 14,200 Embotelladora Andina SA (A.D.R.) 186,659 7,900 Fomento Economico Mexicano SA de C.V. 415,619 140,600 Sermsuk Public Co., Ltd. 78,840 ----------- $ 897,334 ----------- Tobacco - 2.3% 17,000 British American Tabacco (Malaysia) Bhd $ 204,631 6,200 Korea Tobacco 185,442 300 Philip Morris CR AS 226,620 97,200 PT Gudang Garam Public Co., Ltd. 141,995 186,500 PT Hanjaya Mandala Sampoerna Tbk 133,739 ----------- $ 892,427 ----------- Total Food, Beverage & Tobacco $ 2,816,365 ----------- Household & Personal Products - 1.4% Household Products - 0.7% 44,940,000 Arcelik AS* $ 275,188 ----------- Personal Products - 0.7% 8,750 Natura Cosmeticos SA $ 255,318 ----------- Total Household & Personal Products $ 530,506 ----------- Pharmaceuticals & Biotechnology - 0.6% Pharmaceuticals - 0.6% 21,500 Aurobindo Pharma, Ltd. $ 160,964 110,200 PT Tempo Scan Pacific 90,209 ----------- $ 251,173 ----------- Total Pharmaceuticals & Biotechnology $ 251,173 -----------
Shares Value Banks - 9.7% Diversified Banks - 9.2% 9,666 Banco Bradesco SA $ 242,230 33,800 Bangkok Bank, Ltd. 99,045 230,950 Chinatrust Financial Holding Co., Ltd. 275,222 149,000 Commerce Asset Holdings Bhd 184,232 10,300 Hana Bank 256,452 131,000 Hong Leong Bank Bhd 189,532 91,000 Kasikornbank (Class F) 131,380 12,000 Kookmin Bank (A.D.R.)* (a) 468,960 1,900 Kookmin Bank* 74,078 58,700 Malayan Banking Bhd 182,208 162,700 Metropolitan Bank & Trust Co. 76,831 407,500 PT Bank Central Asia Tbk 130,758 2,136,076 PT Lippo Bank 161,097 79,800 Siam Commercial Bank Plc (Foreign) 100,073 22,549 Standard Bank Group, LTD. 262,607 13,600 State Bank of India 205,117 35,354,000 Turkiye Is Bankasi (Isbank)* 195,369 11,400 Uniao de Bancos Brasileiros S.A. (Unibanco) (G.D.R.) (144A) 361,608 ----------- $ 3,596,799 ----------- Regional Banks - 0.5% 218,000 First Financial Holdings $ 186,317 ----------- Total Banks $ 3,783,116 ----------- Diversified Financials - 5.1% Diversified Financial Services - 5.1% 732,700 Bank Mandiri $ 151,926 485,344 China Development Financial* 233,397 70,000 Citic Pacific, Ltd. 198,911 143,900 FirstRand, Ltd. 340,126 137,000 Fubon Group 139,979 102,656,000 Haci Omer Sabanci Holding AS* 399,700 109,000 MCL Ladn, Ltd. 100,790 250,900 RHB Capital Berhad 154,431 76,900 Sanlam, Ltd. 176,233 632,700 SM Prime Holdings 86,753 ----------- $ 1,982,246 ----------- Total Diversified Financials $ 1,982,246 ----------- Insurance - 1.6% Life & Health Insurance - 0.4% 7,900 Cathay Financial Holding Co., Ltd. (144A) $ 158,790 ----------- Multi-Line Insurance - 1.2% 47,567,000 Aksigorta AS* $ 190,550 3,600 Samsung Fire & Marine Insurance 284,036 ----------- $ 474,586 ----------- Total Insurance $ 633,376 -----------
The accompanying notes are an integral part of these financial statements. 35 PIONEER VARIABLE CONTRACTS TRUST Pioneer Emerging Markets VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Shares Value Real Estate - 0.4% Real Estate Management & Development - 0.4% 98,200 Wheelock Properties (Singapore), Ltd. $ 147,092 ----------- Total Real Estate $ 147,092 ----------- Software & Services - 0.5% Application Software - 0.5% 4,032 Infosys Technologies, Ltd. $ 194,681 ----------- Total Software & Services $ 194,681 ----------- Technology Hardware & Equipment - 2.3% Semiconductors - 1.2% 44,269 Hon Hai Precision Industry $ 204,496 171,005 Taiwan Semiconductor Manufacturing Co. 271,274 ----------- $ 475,770 ----------- Communications Equipment - 0.5% 8,600 Matav Rt (A.D.R.) $ 209,926 ----------- Electronic Equipment & Instruments - 0.6% 24,000 Elec & Eltek International Co., Ltd. $ 68,147 2,350 LG Electronics, Inc. 145,098 ----------- $ 213,245 ----------- Total Technology Hardware & Equipment $ 898,941 ----------- Semiconductors - 4.1% 3,130 Samsung Electronics $ 1,365,942 390,870 United Microelectronics Corp., Ltd. 251,691 ----------- $ 1,617,633 ----------- Total Semiconductors $ 1,617,633 ----------- Telecommunication Services - 13.0% Integrated Telecommunication Services - 6.8% 4,900 Brasil Telecom Participacoes SA $ 186,935 24,800 Compania de Telephonos de Chile SA (A.D.R.) 278,752 18,900 KT Corp. (a) 412,209 29,587 Mahanagar Telephone Nigam, Ltd. 236, 29,900 Mahanagar Telephone (Demat) 107,028 3,100 Maroc Telecom* 35,394 11,900 SPT Telecom AS 197,306 40,000 Telekom Malaysia 122,064 17,100 Telefonos de Mexico SA (a) 655,272 68,800 Telekomunikacja Polska SA 451,545 ----------- $ 2,682,609 -----------
Shares Value Wireless Telecommunication Services - 6.2% 27,200 Advanced Service Co., Ltd. $ 74,868 7,700 Alumax, Inc. 403,095 9,900 Korea Telecom Freetel Co. 236,755 1,100 Mobile Telesystems (A.D.R.) (a) 152,361 21,637 SK Telecom Co., Ltd. (a) 481,423 142,500 StarHub, Ltd.* 96,026 146,000 Taiwan Cellular Corp. 163,007 16,447 Turkcell Iletism Hizmet (A.D.R.) 297,691 42,700 Venfin, Ltd. 189,718 8,700 Vimpel-Communications (A.D.R.)* 314,418 ----------- $ 2,409,362 ----------- Total Telecommunication Services $ 5,091,971 ----------- Utilities - 3.6% Electric Utilities - 2.3% 1,200 Cemig SA (A.D.R.) $ 29,448 1,206,235 Enersis SA* 205,109 14,600 Korea Electric Power Corp. 378,682 10,060 Unified Energy System (G.D.R.) 276,101 ----------- $ 889,340 ----------- Gas Utilities - 0.9% 5,100 Gazprom (A.D.R.)* (a) $ 180,908 5,900 Korea Gas Corp. 182,884 ----------- $ 363,792 ----------- Multi-Utilities & Unregulated Power - 0.4% 283,600 YTL Power International Bhd $ 134,320 ----------- Total Utilities $ 1,387,452 ----------- TOTAL COMMON STOCKS (Cost $26,091,813) $36,295,394 ----------- RIGHTS/WARRANTS - 0.0% Commercial Services & Supplies - 0.0% Diversified Commercial Services - 0.0% 1,580 Bidvest Group, Ltd., Exp. 12/8/06* $ 6,714 ----------- Total Commercial Services & Supplies $ 6,714 ----------- TOTAL RIGHTS/WARRANTS (Cost $0) $ 6,714 -----------
36 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Emerging Markets VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value TEMPORARY CASH INVESTMENT - 8.3% Security Lending Collateral - 8.3% 3,125,761 Securities Lending Investment Fund, 2.18% $ 3,125,761 ------------ TOTAL TEMPORARY CASH INVESTMENT (Cost $3,125,761) $ 3,125,761 ------------ TOTAL INVESTMENTS IN SECURITIES - 104.2% (Cost $29,844,356) (b) $ 40,537,238 ------------ OTHER ASSETS AND LIABILITIES - (4.2)% $ (1,557,033) ------------ TOTAL NET ASSETS - 100.0% $ 38,980,205 ============
(A.D.R.) American Depositary Receipt (G.D.R.) Global Depositary Receipt * Non-income producing security 144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At December 31, 2004, the value of these securities amounted to $818,238 or 2.1% of net assets. (a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value 15,575 Anglogold Ashanti, Ltd. (A.D.R.) $ 566,151 590 Compania Cervecerias Unidas SA 14,886 155 Gazprom (A.D.R.)* 5,343 11,365 Kookmin Bank* (A.D.R.) 444,144 15,905 KT Corp. 346,888 976 Mobile Telesystems (A.D.R.) 135,186 4,105 Pohang Iron & Steel Co., Ltd. (A.D.R.) 182,796 13,090 SK Telecom Co., Ltd. 291,253 12,620 Surgutneftegaz (A.D.R.) 471,988 15,565 Telefonos de Mexico SA 596,451 ---------- Total $3,055,085 ==========
(b) Distributions of investments by country of issue, as a percentage of total equity holdings (excluding temporary cash investments) is as follows: South Korea 20.9% Brazil 14.5 Taiwan 7.5 South Africa 7.1 Russia 6.8 Mexico 6.2 Turkey 6.0 India 5.5 Malaysia 5.2 Indonesia 2.8 Chile 2.8 Thailand 2.3 Poland 2.2 People's Republic of China 2.0 Peru 1.4 Singapore 1.3 Philippines 1.3 Czech Republic 1.1 Hungary 1.1 Other (individually less than 1%) 2.0 ----- 100.0% =====
The accompanying notes are an integral part of these financial statements. 37 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Shares Value PREFERRED STOCKS - 0.9% Automobiles & Components - 0.9% Automobile Manufacturers - 0.9% 250 Porsche AG $ 159,264 ----------- TOTAL PREFERRED STOCKS (Cost $83,104) $ 159,264 ----------- COMMON STOCKS - 97.9% Energy - 9.4% Integrated Oil & Gas - 4.1% 32,474 BP Amoco Plc $ 316,497 16,533 Eni S.p.A. 414,540 ----------- $ 731,037 ----------- Oil & Gas Refining Marketing & Transportation - 5.3% 16,148 Repsol SA $ 419,786 2,339 Total SA 511,991 ----------- $ 931,777 ----------- Total Energy $ 1,662,814 ----------- Materials - 9.3% Commodity Chemicals - 1.4% 3,516 BASF India, Ltd. $ 252,819 ----------- Construction Materials - 6.4% 11,436 CRH Plc $ 306,459 2,196 Holcim, Ltd. 132,566 8,961 Italcementi S.p.A. 144,084 3,729 Lafarge Br 359,324 1,391 VINCI SA 186,499 ----------- $ 1,128,932 ----------- Diversified Metals & Mining - 1.5% 9,326 Rio Tinto Plc $ 274,043 ----------- Total Materials $ 1,655,794 ----------- Capital Goods - 7.1% Construction & Engineering - 4.3% 12,320 ACS, Actividades de Construccion y Servicios, S.A. $ 281,233 5,731 Compagnie de Saint Gobain 344,235 797 Technip 147,072 ----------- $ 772,540 ----------- Electrical Components & Equipment - 1.2% 3,012 Schneider Electric SA $ 209,209 ----------- Industrial Machinery - 1.6% 1,976 Atlas Copco AB $ 89,168 4,221 AB SKF 187,945 ----------- $ 277,113 ----------- Total Capital Goods $ 1,258,862 -----------
Shares Value Commercial Services & Supplies - 1.4% Diversified Commercial Services - 1.4% 9,329 TNT Post Group N.V. $ 253,356 ----------- Total Commercial Services & Supplies $ 253,356 ----------- Automobiles & Components - 0.9% Auto Parts & Equipment - 0.9% 2,394 Compagnie Generale des Etablissements Michelin $ 153,268 ----------- Total Automobiles & Components $ 153,268 ----------- Consumer Durables & Apparel - 1.0% Apparel, Accessories & Luxury Goods - 1.0% 1,131 Adidas-Salomon AG $ 182,109 ----------- Total Consumer Durables & Apparel $ 182,109 ----------- Hotels, Restaurants & Leisure - 2.0% Restaurants - 2.0% 42,574 Compass Group Plc $ 200,909 8,416 GUS plc 151,709 ----------- $ 352,618 ----------- Total Hotels, Restaurants & Leisure $ 352,618 ----------- Media - 2.1% Advertising - 0.5% 2,942 Publicis SA $ 95,154 ----------- Publishing - 1.6% 7,545 Elsevier NV $ 102,854 5,457 Vivendi Universal* 174,811 ----------- $ 277,665 ----------- Total Media $ 372,819 ----------- Retailing - 1.7% Distributors - 0.8% 14,303 Buhrmann NV* $ 139,026 ----------- Specialty Stores - 0.9% 34,285 HMV Group Plc $ 170,270 ----------- Total Retailing $ 309,296 ----------- Food & Drug Retailing - 4.2% Drug Retail - 0.8% 11,116 Boots Co. Plc $ 139,667 ----------- Food Retail - 3.4% 1,429 Nestle SA (Registered Shares) $ 373,904 37,557 Tesco Plc 232,179 ----------- $ 606,083 ----------- Total Food & Drug Retailing $ 745,750 -----------
38 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Food, Beverage & Tobacco - 1.8% Tobacco - 1.8% 18,370 British American Tobacco Plc $ 316,318 ----------- Total Food, Beverage & Tobacco $ 316,318 ----------- Pharmaceuticals & Biotechnology - 8.2% Pharmaceuticals - 8.2% 512 Actelion, Ltd.* $ 52,454 11,377 AstraZeneca Plc 413,428 12,095 GlaxoSmithKline Plc 284,538 2,452 Roche Holdings AG 280,042 3,535 Sanofi-Aventis 282,546 1,796 Schering AG 133,874 ----------- $ 1,446,882 ----------- Total Pharmaceuticals & Biotechnology $ 1,446,882 ----------- Banks - 15.1% Diversified Banks - 15.1% 8,687 Allied Irish Banks Plc $ 179,311 32,459 Barclays Plc 364,657 13,477 Banco Bilbao Vizcaya Argentaria, SA 238,517 5,468 BNP Paribas SA 395,665 6,739 Credit Agricole SA 202,895 11,564 CS Group* 487,180 4,600 Depfa Bank Plc 77,234 14,386 HSBC Holding Plc 242,491 14,378 Royal Bank of Scotland Group Plc 482,632 ----------- $ 2,670,582 ----------- Total Banks $ 2,670,582 ----------- Diversified Financials - 10.7% Asset Management & Custody Banks - 0.4% 2,630 Man Group Plc $ 73,463 ----------- Diversified Financial Services - 9.1% 6,429 Fortis NV $ 178,055 6,390 ING Groep NV 193,219 2,730 Lagardere S.C.A. 196,640 4,931 Societe Generale 498,393 6,686 UBS AG 557,151 ----------- $ 1,623,458 ----------- Specialized Finance - 1.2% 3,406 Deutsche Boerse AG $ 204,654 ----------- Total Diversified Financials $ 1,901,575 -----------
Shares Value Insurance - 4.6% Life & Health Insurance - 0.5% 2,574 Assicurazioni Generali $ 87,197 ----------- Multi-Line Insurance - 3.4% 11,889 AXA $ 294,430 1,923 Zurich Financial Services* 319,639 ----------- $ 614,069 ----------- Reinsurance - 0.7% 3,097 Hannover Rueckversicheru $ 121,034 ----------- Total Insurance $ 822,300 ----------- Software & Services - 1.0% IT Consulting & Other Services - 1.0% 2,571 Atos Origin* $ 174,397 ----------- Total Software & Services $ 174,397 ----------- Technology Hardware & Equipment - 3.6% Semiconductors - 1.0% 6,783 Philips Electronics NV $ 179,433 ----------- Communications Equipment - 0.9% 10,079 Nokia Oyj $ 158,148 ----------- Computer Hardware - 0.5% 34,273 Dixons Group Plc $ 100,038 ----------- Electronic Equipment & Instruments - 1.2% 2,450 Siemens $ 207,334 ----------- Total Technology Hardware & Equipment $ 644,953 ----------- Telecommunication Services - 11.2% Alternate Carriers - 2.4% 12,630 France Telecom $ 417,197 ----------- Integrated Telecommunication Services - 4.2% 6,351 Belgacom SA* $ 274,098 12,569 Telefonica SA 236,223 59,202 Telecom Italia S.p.A. 241,711 ----------- $ 752,032 ----------- Wireless Telecommunication Services - 4.6% 304,416 Vodafone Group Plc $ 824,041 ----------- Total Telecommunication Services $ 1,993,270 -----------
The accompanying notes are an integral part of these financial statements. 39 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Shares Value Utilities - 2.6% Electric Utilities - 2.6% 4,077 E.On AG $ 371,038 8,667 National Grid Transco Plc 82,528 ----------- $ 453,566 ----------- Total Utilities $ 453,566 ----------- TOTAL COMMON STOCKS (Cost $13,033,884) $17,370,529 ----------- TOTAL INVESTMENTS IN SECURITIES - 98.8% (Cost $13,116,988) (a) $17,529,793 ----------- OTHER ASSETS AND LIABILITIES - 1.2% $ 195,845 ----------- TOTAL NET ASSETS - 100.0% $17,725,638 ===========
* Non-income producing security (a) Distributions of investments by country of issue, as a percentage of total equity holdings (excluding temporary cash investments) is as follows: United Kingdom 26.6% France 26.5 Switzerland 12.6 Germany 9.3 Spain 6.7 Netherlands 6.0 Italy 5.1 Ireland 3.2 Sweden 1.6 Belgium 1.6 Finland 0.8 ----- 100.0% =====
40 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Shares Value PREFERRED STOCK - 0.5% Telecommunication Services - 0.5% Integrated Telecommunication Services - 0.5% 8,400 Tele Norte Leste Participacoes (A.D.R.) $ 141,708 ----------- TOTAL PREFERRED STOCK (Cost $101,323) $ 141,708 ----------- COMMON STOCKS - 98.7% Energy - 6.3% Integrated Oil & Gas - 2.7% 30,110 BP Amoco Plc $ 293,457 17,400 Eni S.p.A. 436,278 ----------- $ 729,735 ----------- Oil & Gas Refining Marketing & Transportation - 3.6% 12,600 Repsol SA $ 327,551 2,960 Total SA 647,924 ----------- $ 975,475 ----------- Total Energy $ 1,705,210 ----------- Materials - 8.1% Commodity Chemicals - 1.3% 4,700 BASF India, Ltd. $ 337,955 ----------- Construction Materials - 2.9% 9,600 CRH Plc $ 256,586 6,200 Italcementi S.p.A. 99,690 1,600 Lafarge Br 154,175 1,980 Vinci SA (a) 265,469 ----------- $ 775,920 ----------- Diversified Metals & Mining - 1.6% 3,850 Freeport-McMoRan Copper & Gold, Inc. (Class B) $ 147,186 2,100 Norilsk Nickel 114,713 5,390 Rio Tinto Plc 158,384 ----------- $ 420,283 ----------- Industrial Gases - 1.3% 62,000 Taiyo Nippon Sanso Corp. $ 364,928 ----------- Steel - 1.0% 23,102 Broken Hill Proprietary Co., Ltd. $ 277,355 ----------- Total Materials $ 2,176,441 ----------- Capital Goods - 9.1% Aerospace & Defense - 0.3% 2,700 European Aeronautic Defence $ 78,322 -----------
Shares Value Construction & Engineering - 4.4% 11,649 ACS, Actividades de Construccion y Servicios, SA $ 265,916 4,000 Compagnie de Saint Gobain 240,262 119,200 Kajima Corp. 514,067 940 Technip 173,459 ----------- $ 1,193,704 ----------- Electrical Components & Equipment - 1.6% 55,800 Mitsubishi Electric Corp. $ 274,245 2,400 Schneider Electric SA 166,700 ----------- $ 440,945 ----------- Industrial Conglomerates - 0.5% 20,892,000 KOC Holding AS* $ 136,428 ----------- Industrial Machinery - 2.3% 3,800 Atlas Copco AB $ 171,478 36,600 OSG Corp. (a) 443,151 ----------- $ 614,629 ----------- Total Capital Goods $ 2,464,028 ----------- Commercial Services & Supplies - 0.8% Diversified Commercial Services - 0.8% 8,100 TNT Post Group NV $ 219,979 ----------- Total Commercial Services & Supplies $ 219,979 ----------- Transportation - 1.8% Railroads - 1.8% 88 East Japan Railway Co. $ 490,631 ----------- Total Transportation $ 490,631 ----------- Automobiles & Components - 3.1% Auto Parts & Equipment - 0.4% 1,500 Compagnie Generale des Etablissements Michelin $ 96,033 ----------- Automobile Manufacturers - 2.7% 2,500 Bayerische Motoren Werke AG $ 112,628 15,300 Toyota Motor Co. 625,414 ----------- $ 738,042 ----------- Total Automobiles & Components $ 834,075 ----------- Consumer Durables & Apparel - 0.6% Apparel, Accessories & Luxury Goods - 0.6% 1,000 Adidas-Salomon AG $ 161,016 ----------- Total Consumer Durables & Apparel $ 161,016 ----------- Hotels, Restaurants & Leisure - 3.1% Casinos & Gaming - 1.7% 8,200 Sega Sammy Holdings, Inc.* $ 450,679 -----------
The accompanying notes are an integral part of these financial statements. 41 PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Shares Value Restaurants - 1.4% 37,200 Compass Group Plc $ 175,549 12,000 GUS plc 216,315 ----------- $ 391,864 ----------- Total Hotels, Restaurants & Leisure $ 842,543 ----------- Media - 1.7% Advertising - 0.3% 3,000 Publicis SA $ 97,030 ----------- Publishing - 1.4% 11,200 Reed Elsevier Plc $ 102,875 8,400 Vivendi Universal* 269,088 ----------- $ 371,963 ----------- Total Media $ 468,993 ----------- Retailing - 4.2% Distributors - 1.6% 34,000 Mitsubishi Corp. $ 439,416 ----------- General Merchandise Stores - 2.6% 6,900 Ito Yokado, Ltd. $ 290,671 7,900 Ryohin Keikaku Co., Ltd. 397,075 ----------- $ 687,746 ----------- Total Retailing $ 1,127,162 ----------- Food & Drug Retailing - 3.8% Drug Retail - 0.6% 13,500 Boots Co., Plc $ 169,621 ----------- Food Retail - 3.2% 7,266 Koninklijke Ahold NV (144A)* $ 56,227 1,700 Nestle SA (Registered Shares) 444,812 55,700 Tesco Plc 344,340 ----------- $ 845,379 ----------- Total Food & Drug Retailing $ 1,015,000 ----------- Food, Beverage & Tobacco - 3.1% Tobacco - 3.1% 16,020 British American Tobacco Plc $ 275,853 50 Japan Tobacco, Inc. 570,938 ----------- $ 846,791 ----------- Total Food, Beverage & Tobacco $ 846,791 ----------- Household & Personal Products - 1.5% Household Products - 1.5% 28,300 Shiseido Co., Ltd. $ 410,008 ----------- Total Household & Personal Products $ 410,008 -----------
Shares Value Health Care Equipment & Services - 0.5% Health Care Supplies - 0.5% 800 Nobel Biocare Holding AG $ 144,687 ----------- Total Health Care Equipment & Services $ 144,687 ----------- Pharmaceuticals & Biotechnology - 5.7% Pharmaceuticals - 5.7% 9,332 AstraZeneca Plc $ 339,115 8,590 GlaxoSmithKline Plc 202,082 3,200 Novartis 160,026 3,138 Roche Holdings AG 358,390 4,280 Sanofi-Aventis 342,093 1,670 Schering AG 124,482 ----------- $ 1,526,188 ----------- Total Pharmaceuticals & Biotechnology $ 1,526,188 ----------- Banks - 11.5% Diversified Banks - 11.5% 7,400 Allied Irish Banks Plc $ 152,745 16,225 Barclays Plc 182,278 18,200 Banco Bilbao Vizcaya Argentaria SA 322,105 50,800 Banca Intesa S.p.A. 243,983 5,000 BNP Paribas SA 361,801 9,645 Credit Agricole SA 290,387 7,930 CS Group* 334,083 18,000 Development Bank of Singapore, Ltd. 177,261 17,200 HSBC Holding Plc 289,924 4,100 Kookmin Bank (A.D.R.)* (a) 160,228 12,520 Royal Bank of Scotland Group Plc 420,264 5,100 Uniao de Bancos Brasileiros S.A. (Unibanco) (G.D.R.) (144A) 161,772 ----------- $ 3,096,831 ----------- Total Banks $ 3,096,831 ----------- Diversified Financials - 9.3% Consumer Finance - 1.8% 13,600 Credit Saison Co., Ltd. $ 497,009 ----------- Diversified Financial Services - 6.7% 12,400 ING Groep NV $ 374,947 2,800 Lagardere S.C.A. 201,682 3,319 Societe Generale 335,463 50,000 Sumitomo Trust Bank 361,633 6,350 UBS AG 529,152 ----------- $ 1,802,877 ----------- Specialized Finance - 0.8% 3,400 Deutsche Boerse AG $ 204,294 ----------- Total Diversified Financials $ 2,504,180 -----------
42 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - --------------------------------------------------------------------------------
Shares Value Insurance - 2.4% Life & Health Insurance - 0.7% 5,300 Assicurazioni Generali $ 179,543 ----------- Multi-Line Insurance - 1.7% 11,600 AXA $ 287,272 1,080 Zurich Financial Services* 179,517 ----------- $ 466,789 ----------- Total Insurance $ 646,332 ----------- Real Estate - 1.5% Real Estate Management & Development - 1.5% 34,000 Mitsui Fudosan Co. $ 414,847 ----------- Total Real Estate $ 414,847 ----------- Software & Services - 0.5% IT Consulting & Other Services - 0.5% 2,100 Atos Origin* $ 142,448 ----------- Total Software & Services $ 142,448 ----------- Technology Hardware & Equipment - 5.5% Semiconductors - 0.9% 9,500 Philips Electronics NV $ 251,307 ----------- Computer Hardware - 0.4% 35,300 Dixons Group Plc $ 103,036 ----------- Electronic Equipment & Instruments - 2.6% 3,900 Nidec Corp. $ 476,798 2,490 Siemens 210,719 ----------- $ 687,517 ----------- Office Electronics - 1.6% 32,500 Konica Minolta Holdings, Inc.* $ 432,715 ----------- Total Technology Hardware & Equipment $ 1,474,575 ----------- Semiconductors - 2.5% Semiconductor Equipment - 1.6% 7,100 Tokyo Electron, Ltd. $ 439,022 ----------- Semiconductors - 0.9% 250 Samsung Electronics $ 109,101 15,900 Taiwan Semiconductor Manufacturing Co. (A.D.R.) 134,991 ----------- $ 244,092 ----------- Total Semiconductors $ 683,114 ----------- Telecommunication Services - 9.8% Alternate Carriers - 1.3% 11,000 France Telecom $ 363,354 -----------
Shares Value Integrated Telecommunication Services - 4.2% 6,500 Belgacom SA* $ 280,528 16,200 British Sky Broadcasting Plc 174,818 17,500 Mahanagar Telephone Nigam, Ltd. 139,650 18,730 Telefonica SA 352,014 46,486 Telecom Italia S.p.A. 189,794 ----------- $ 1,136,804 ----------- Wireless Telecommunciation Services - 4.3% 1,000 Mobile Telesystems (A.D.R.) (a) $ 138,510 6,500 SK Telecom Co., Ltd. (a) 144,625 12,091 Turk ell Iletism Hizmet (A.D.R.) 218,847 243,611 Vodafone Group Plc 659,444 ----------- $ 1,161,426 ----------- Total Telecommunication Services $ 2,661,584 ----------- Utilities - 2.3% Electric Utilities - 2.3% 3,533 E.On AG $ 321,530 2,700 Iberdrola SA* 68,502 23,300 National Grid Transco Plc 221,864 ----------- $ 611,896 ----------- Total Utilities $ 611,896 ----------- TOTAL COMMON STOCKS (Cost $20,557,882) $26,668,559 ----------- TEMPORARY CASH INVESTMENT - 3.5% Security Lending Collateral - 3.5% 946,907 Securities Lending Investment Fund, 2.18% $ 946,907 ----------- TOTAL TEMPORARY CASH INVESTMENT (Cost $946,907) $ 946,907 ----------- TOTAL INVESTMENTS IN SECURITIES - 102.7% (Cost $21,606,112) (b) $27,757,174 ----------- OTHER ASSETS AND LIABILITIES - (2.7)% $ (764,841) ----------- TOTAL NET ASSETS - 100.0% $26,992,333 ===========
The accompanying notes are an integral part of these financial statements. 43 PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - -------------------------------------------------------------------------------- (A.D.R.) American Depositary Receipt (G.D.R.) Global Depository Receipt 144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At December 31, 2004, the value of these securities amounted to $217,999 or 0.8% of net assets. * Non-income producing security (a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value 3,895 Kookmin Bank (A.D.R.) * $ 152,217 950 Mobile Telesystems (A.D.R.) 131,585 30,700 OSG Corp. 371,776 570 SK Telecom Co., Ltd. 12,683 1,800 Vinci SA 241,344 --------- Total $ 909,605 =========
(b) Distributions of investments by country of issue, as a percentage of total equity holdings (excluding temporary cash investments) is as follows: Japan 30.6% France 16.3 United Kingdom 15.9 Switzerland 7.9 Germany 5.4 Spain 4.9 Italy 4.2 Netherlands 3.6 South Korea 1.5 Ireland 1.5 Turkey 1.3 Brazil 1.1 Belgium 1.0 Austrialia 1.0 Other (individually less than 1%) 3.8 ----- 100.0% =====
44 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Small Cap Value VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 90.2% Energy - 6.9% Oil & Gas Drilling - 2.3% 1,525 Atwood Oceanics, Inc.* $ 79,453 26,736 Key Energy Services, Inc.* 315,485 14,500 Todco* 267,090 ----------- $ 662,028 ----------- Oil & Gas Equipment & Services - 2.2% 14,200 Gulfmarkt Offshore, Inc.* $ 316,234 10,240 Maverick Tube Corp.* 310,272 ----------- $ 626,506 ----------- Oil & Gas Exploration & Production - 2.4% 5,900 Penn Virginia Corp. $ 239,363 5,395 Swift Energy Co.* 156,131 7,769 Unit Corp.* 296,853 ----------- $ 692,347 ----------- Total Energy $ 1,980,881 ----------- Materials - 7.2% Diversified Metals & Mining - 1.2% 9,914 Massey Energy Co. $ 346,494 ----------- Gold - 1.0% 7,350 Glamis Gold, Ltd.* $ 126,126 24,300 IAMGOLD Corp. 160,623 ----------- $ 286,749 ----------- Metal & Glass Containers - 0.8% 5,137 Jarden Corp.* $ 223,151 ----------- Paper Products - 1.8% 16,193 Domtar, Inc. $ 195,450 11,400 Flowserve Corp.* 313,956 ----------- $ 509,406 ----------- Precious Metals & Minerals - 0.2% 28,125 Cambior, Inc.* $ 75,094 ----------- Specialty Chemicals - 0.4% 3,875 Great Lakes Chemical Corp. $ 110,399 ----------- Steel - 1.9% 3,575 Carpenter Technology $ 208,995 34,893 Graftech International, Ltd.* 330,088 ----------- $ 539,083 ----------- Total Materials $ 2,090,376 ----------- Capital Goods - 8.1% Aerospace & Defense - 0.2% 4,875 Intrado, Inc.* $ 58,988 -----------
Shares Value Construction, Farm Machinery & Heavy Trucks - 1.6% 21,575 Wabtec Corp. $ 459,979 ----------- Construction & Engineering - 1.1% 5,070 Granite Construction, Inc. $ 134,862 7,825 Insituform Technologies, Inc.* 177,393 ----------- $ 312,255 ----------- Electrical Components & Equipment - 0.7% 23,479 Power-One, Inc.* $ 209,433 ----------- Industrial Conglomerates - 1.5% 20,760 Cornell Co., Inc.* $ 315,137 7,796 NN, Inc. 102,985 ----------- $ 418,122 ----------- Industrial Machinery - 1.9% 5,687 Joy Global, Inc. $ 246,986 3,125 Kaydon Corp. 103,188 1,894 Nacco Industries, Inc. 199,628 ----------- $ 549,802 ----------- Trading Companies & Distributors - 1.1% 11,830 Applied Industrial Technologies, Inc. $ 324,128 ----------- Total Capital Goods $ 2,332,707 ----------- Commercial Services & Supplies - 5.6% Data Processing Services - 0.4% 10,000 Gartner Group, Inc.* $ 124,600 ----------- Diversified Commercial Services - 4.1% 5,878 Chemed Corp. $ 394,473 18,400 Central Parking Corp. 278,760 14,335 Profit Recovery Group International* 72,105 27,255 Rent-Way, Inc.* (a) 218,313 8,100 Watson Wyatt & Co. Holdings 218,295 ----------- $ 1,181,946 ----------- Employment Services - 1.1% 36,400 On Assignment, Inc.* $ 188,916 5,670 Korn/Ferry International* 117,653 ----------- $ 306,569 ----------- Total Commercial Services & Supplies $ 1,613,115 ----------- Transportation - 3.3% Marine - 0.8% 2,400 Arlington Tankers, Ltd.* $ 55,080 3,677 Stelmar Shipping, Ltd. 175,430 ----------- $ 230,510 ----------- Railroads - 1.3% 13,043 Genesee & Wyoming, Inc.* $ 365,334 -----------
The accompanying notes are an integral part of these financial statements. 45 PIONEER VARIABLE CONTRACTS TRUST Pioneer Small Cap Value VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Shares Value Trucking - 1.2% 16,775 Central Freight Lines, Inc.* $ 105,683 3,968 Dollar Thrifty Automotive Group* 119,834 2,800 Forward Air Corp.* 125,160 ----------- $ 350,677 ----------- Total Transportation $ 946,521 ----------- Automobiles & Components - 0.6% Auto Parts & Equipment - 0.6% 10,395 Federal Signal Corp. $ 183,576 ----------- Total Automobiles & Components $ 183,576 ----------- Consumer Durables & Apparel - 1.1% Apparel, Accessories & Luxury Goods - 1.1% 18,968 Charming Shoppes, Inc.* $ 177,730 4,250 Kellwood Co. 146,625 ----------- $ 324,355 ----------- Total Consumer Durables & Apparel $ 324,355 ----------- Hotels, Restaurants & Leisure - 0.7% Hotels, Resorts & Cruise Lines - 0.1% 11,500 Jameson Inns, Inc.* $ 22,655 ----------- Restaurants - 0.6% 9,619 O'Charley's, Inc.* $ 188,051 ----------- Total Hotels, Restaurants & Leisure $ 210,706 ----------- Media - 0.5% Advertising - 0.2% 6,566 EMAK Worldwide, Inc.* $ 65,660 ----------- Publishing - 0.3% 7,340 Advanced Marketing Services, Inc. $ 73,840 ----------- Total Media $ 139,500 ----------- Retailing - 6.4% Apparel Retail - 0.8% 5,295 Stage Stores, Inc.* $ 219,848 ----------- Catalog Retail - 2.1% 28,975 Insight Enterprises, Inc.* $ 594,567 ----------- Computer & Electronics Retail - 0.4% 16,750 Tweeter Home Entertainment Group, Inc.* $ 114,738 ----------- Specialty Stores - 3.1% 7,075 Claire's Stores, Inc. $ 150,344 5,052 Guitar Center, Inc.* 266,190 23,407 Hancock Fabrics, Inc. 242,731 6,348 School Specialty, Inc.* 244,779 ----------- $ 904,044 ----------- Total Retailing $ 1,833,197 -----------
Shares Value Food & Drug Retailing - 1.9% Food Distributors - 0.6% 12,050 B & G Foods, Inc. $ 180,509 ----------- Food Retail - 1.3% 8,808 Fresh Del Monte Produce, Inc. $ 260,805 11,625 Wild Oats Markets, Inc.* 102,416 ----------- $ 363,221 ----------- Total Food & Drug Retailing $ 543,730 ----------- Food, Beverage & Tobacco - 0.2% Packaged Foods & Meats - 0.2% 1,925 American Italian Pasta Co. (a) $ 44,756 ----------- Total Food, Beverage & Tobacco $ 44,756 ----------- Household & Personal Products - 1.7% Household Products - 1.3% 15,279 Nu Skin Enterprises, Inc. $ 387,781 ----------- Personal Products - 0.4% 4,825 NBTY, Inc.* $ 115,848 ----------- Total Household & Personal Products $ 503,629 ----------- Health Care Equipment & Services - 7.6% Health Care Distributors - 2.3% 4,585 Amerigroup Corp. $ 346,901 12,125 Cross Country Healthcare, Inc.* (a) 219,220 3,475 Chattem, Inc.* 115,023 ----------- $ 681,144 ----------- Health Care Equipment - 0.5% 3,000 Analogic Corp. $ 134,370 ----------- Health Care Facilities - 0.9% 3,350 Sunrise Senior Living, Inc.* (a) $ 155,306 2,783 Triad Hospitals, Inc.* 103,555 ----------- $ 258,861 ----------- Health Care Services - 2.2% 7,327 Pediatrix Medical Group, Inc.* $ 469,294 8,275 Providence Service Corp.* 173,527 ----------- $ 642,821 ----------- Managed Health Care - 1.7% 8,530 PacifiCare Health Systems* $ 482,116 ----------- Total Health Care Equipment & Services $ 2,199,312 ----------- Pharmaceuticals & Biotechnology - 0.5% Biotechnology - 0.5% 17,655 Kendle International, Inc.* $ 155,364 ----------- Total Pharmaceuticals & Biotechnology $ 155,364 -----------
46 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Small Cap Value VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Banks - 8.7% Diversified Banks - 3.9% 4,131 Banner Corp. $ 128,846 15,230 BankAtlantic Bancorp, Inc. 303,077 1,100 Community Bancorp* 33,660 11,050 Provident Financial Services, Inc. 214,039 20,325 Texas Capital Bancshares, Inc.* 439,427 ----------- $ 1,119,049 ----------- Regional Banks - 4.0% 7,000 Alliance Bankshares Corp.* $ 108,850 27,425 Cardinal Financial Corp.* 305,789 3,875 City National Corp. 273,769 1,775 Irwin Financial Corp. 50,392 23,150 Sterling Bancshares, Inc. 330,351 1,705 Whitney Holding Corp. 76,708 ----------- $ 1,145,859 ----------- Thrifts & Mortgage Finance - 0.8% 3,475 BankUnited Financial Corp.* $ 111,026 9,475 First Niagara Financial Group, Inc. 132,176 ----------- $ 243,202 ----------- Total Banks $ 2,508,110 ----------- Diversified Financials - 6.7% Consumer Finance - 0.9% 25,856 Medallion Financial Corp. $ 250,803 ----------- Consumer Finance - 1.4% 7,025 Advanta Corp. $ 158,906 7,478 Advanta Corp. (Class B) 181,491 11,000 Rewards Network, Inc.* (a) 77,000 ----------- $ 417,397 ----------- Investment Banking & Brokerage - 2.9% 7,000 A.G. Edwards, Inc. $ 302,470 23,689 Apollo Investment Corp. 357,704 4,050 Piper Jaffray Co.* 194,198 ----------- $ 854,372 ----------- Specialized Finance - 1.5% 10,225 Assured Guaranty, Ltd. $ 201,126 5,843 Financial Federal Corp.* 229,046 ----------- $ 430,172 ----------- Total Diversified Financials $ 1,952,744 ----------- Insurance - 3.7% Insurance Brokers - 0.2% 1,800 Platinum Underwriter Holdings, Ltd. $ 55,980 -----------
Shares Value Property & Casualty Insurance - 2.9% 3,825 American Safety Insurance Group, Ltd.* $ 62,501 6,826 IPC Holdings, Ltd. 296,999 27,525 Quanta Capital Holdings (144A)* 253,781 2,925 RLI Corp. 121,592 2,525 Selective Insurance Group, Inc. (a) 111,706 ----------- $ 846,579 ----------- Reinsurance - 0.6% 6,950 Odyssey Re Holdings, Corp. (a) $ 175,210 ----------- Total Insurance $ 1,077,769 ----------- Real Estate - 5.7% Real Estate Management & Development - 0.8% 3,875 Corrections Corp. of America* $ 156,744 2,626 Levitt Corp. 80,277 ----------- $ 237,021 ----------- Real Estate Investment Trusts - 4.9% 9,913 BioMed Property Trust, Inc. $ 220,168 10,650 Capital Trust, Inc. 327,062 1,928 Entertainment Properties Trust 85,892 18,425 Feldman Mall Properties, Inc.* (a) 239,709 15,915 Provident Senior Living* 254,640 6,350 Saxon Capital, Inc. 152,337 4,271 Universal Health Realty, Inc. 137,227 ----------- $ 1,417,035 ----------- Total Real Estate $ 1,654,056 ----------- Software & Services - 4.2% Application Software - 0.8% 13,779 SPSS, Inc.* $ 215,504 ----------- Data Processing & Outsourced Services - 0.7% 16,142 Pegusus Systems, Inc.* $ 203,389 ----------- Internet Software & Services - 1.2% 7,625 Internet Security Systems, Inc.* $ 177,281 12,275 PEC Solutions, Inc.* 173,937 ----------- $ 351,218 ----------- Systems Software - 1.5% 24,550 Borland Software Corp.* $ 286,744 7,025 Sybase, Inc.* 140,149 ----------- $ 426,893 ----------- Total Software & Services $ 1,197,004 ----------- Technology Hardware & Equipment - 3.1% Communications Equipment - 1.9% 4,575 Black Box Corp. $ 219,692 47,375 Remec, Inc.* 341,574 ----------- $ 561,266 -----------
The accompanying notes are an integral part of these financial statements. 47 PIONEER VARIABLE CONTRACTS TRUST Pioneer Small Cap Value VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Shares Value Computer Storage & Peripherals - 0.3% 4,425 Electronics For Imaging, Inc.* $ 77,039 ----------- Electronic Equipment & Instruments - 0.4% 11,425 Planar Systems, Inc.* $ 128,303 ----------- Technology Distributors - 0.5% 3,075 Tech Data Corp.* $ 139,605 ----------- Total Technology Hardware & Equipment $ 906,213 ----------- Semiconductors - 0.6% Semiconductor Equipment - 0.3% 3,593 Advanced Energy Industries, Inc.* $ 32,804 2,837 Brooks Automations, Inc.* 48,853 ----------- $ 81,657 ----------- Semiconductors - 0.3% 9,370 HI/FN, Inc.* $ 86,391 ----------- Total Semiconductors $ 168,048 ----------- Telecommunication Services - 0.8% Wireless Telecom Services - 0.8% 26,003 Boston Communications Group, Inc.* $ 240,268 ----------- Total Telecommunication Services $ 240,268 ----------- Utilities - 4.2% Gas Utilities - 3.5% 5,600 AGL Resources, Inc. $ 186,144 6,505 People's Energy Corp. 285,895 10,649 Southwestern Energy Co.* 539,787 ----------- $ 1,011,826 ----------- Multi-Utilities & Unregulated Power - 0.5% 2,350 Energen Corp. $ 138,533 ----------- Utilities - 0.2% 1,625 UGI Corp. $ 66,479 ----------- Total Utilities $ 1,216,838 ----------- TOTAL COMMON STOCKS (Cost $20,981,073) $26,022,775 ----------- EXCHANGE TRADED FUND - 0.8% 1,150 iShares Russell 2000 Value ETF (a) $ 221,904 ----------- TOTAL EXCHANGE TRADED FUND (Cost $162,579) $ 221,904 -----------
Shares Value TEMPORARY CASH INVESTMENT - 3.9% Security Lending Collateral - 3.9% 1,134,938 Securities Lending Investment Fund, 2.18% $ 1,134,938 ----------- TOTAL TEMPORARY CASH INVESTMENT (Cost $1,134,938) $ 1,134,938 ----------- TOTAL INVESTMENTS IN SECURITIES - 94.9% (Cost $22,278,590) $27,379,617 ----------- OTHER ASSETS AND LIABILITIES - 5.1% $ 1,458,402 ----------- TOTAL NET ASSETS - 100.0% $28,838,019 ==========
* Non-income producing security (a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value 1,700 American Italian Pasta Co. $ 39,525 3,735 Cross Country Healthcare, Inc.* 67,529 16,500 Feldman Mall Properties, Inc.* 214,500 1,045 iShares Russell 2000 Value (ETF) 201,643 5,320 Odyssey Re Holdings, Corp. 134,117 24,685 Rent-Way, Inc.* 197,727 4,964 Rewards Network, Inc.* 34,748 1,425 Selective Insurance Group, Inc. 63,042 3,110 Sunrise Senior Living, Inc.* 144,180 ---------- Total $1,097,011 ==========
48 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Small Company VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 98.4% Energy - 3.4% Oil & Gas Drilling - 0.7% 2,100 Stone Energy Corp.* $ 94,689 ----------- Oil & Gas Equipment & Services - 0.7% 3,100 Maverick Tube Corp.* $ 93,930 ----------- Oil & Gas Exploration & Production - 2.0% 2,925 Forest Oil Corp.* (a) $ 92,781 1,600 Houston Exploration Co.* 90,096 2,703 Spinnaker Exploration Co.* 94,794 ----------- $ 277,671 ----------- Total Energy $ 466,290 ----------- Materials - 7.7% Aluminum - 0.7% 3,900 Century Aluminum Co.* $ 102,414 ----------- Gold - 0.5% 11,125 IAMGOLD Corp. $ 73,536 ----------- Materials - 0.4% 625 Mega Blocks* $ 9,928 2,950 Mega Blocks, Inc. (144A)* 46,861 ----------- $ 56,789 ----------- Metal & Glass Containers - 0.6% 1,775 Kennametal, Inc. $ 88,342 ----------- Paper Products - 1.4% 3,600 Flowserve Corp.* $ 99,144 5,250 Wausau-Mosinee Paper Corp. 93,765 ----------- $ 192,909 ----------- Precious Metals & Minerals - 0.7% 8,500 Stillwater Mining Co.* $ 95,710 ----------- Specialty Chemicals - 2.7% 3,700 Cambrex Corp. $ 100,270 3,300 H.B. Fuller Co. 94,083 9,700 PolyOne Corp.* 87,882 8,775 Wellman, Inc. 93,805 ----------- $ 376,040 ----------- Steel - 0.7% 3,200 NS Group, Inc.* $ 88,960 ----------- Total Materials $ 1,074,700 ----------- Capital Goods - 6.5% Aerospace & Defense - 1.2% 5,600 Hexcel Corp.* $ 81,200 7,300 Orbital Sciences Corp.* (a) 86,359 ----------- $ 167,559 ----------- Building Products - 0.7% 5,000 Lennox International, Inc. $ 101,750 -----------
Shares Value Construction, Farm Machinery & Heavy Trucks - 0.7% 1,200 The Toro Co. $ 97,620 ----------- Construction & Engineering - 0.7% 5,500 Perini Corp.* $ 91,795 ----------- Electrical Components & Equipment - 1.2% 2,900 Acuity Brands, Inc. $ 92,220 2,500 Thomas & Betts Corp.* 76,875 ----------- $ 169,095 ----------- Industrial Conglomerates - 1.3% 4,900 Brush Engineered Materials, Inc.* $ 90,650 4,700 Tredegar Corp. 94,987 ----------- $ 185,637 ----------- Industrial Machinery - 0.7% 2,600 Albany International Corp. $ 91,416 ----------- Total Capital Goods $ 904,872 ----------- Commercial Services & Supplies - 5.3% Data Processing Services - 0.7% 7,450 Gartner Group, Inc.* $ 92,827 ----------- Commercial Printing - 0.4% 1,675 John H. Harland Co. $ 60,468 ----------- Diversified Commercial Services - 3.1% 2,301 The Brinks Co. $ 90,936 3,650 Central Parking Corp. 55,298 4,394 FTI Consulting, Inc.* 92,582 2,000 Regis Corp. 92,300 5,900 Tetra Tech, Inc* 98,766 ----------- $ 429,882 ----------- Employment Services - 0.6% 14,700 The Princeton Review, Inc.* $ 90,405 ----------- Environmental Services - 0.5% 12,275 Newpark Resources, Inc.* $ 63,216 ----------- Total Commercial Services & Supplies $ 736,798 ----------- Transportation - 3.5% Airlines - 1.4% 2,800 Alaska Air Group, Inc.* $ 93,772 7,600 ExpressJet Holdings, Inc.* 97,888 ----------- $ 191,660 ----------- Trucking - 2.1% 2,600 Overnite Corp. $ 96,824 9,100 Swift Transportation Co., Inc.* 195,468 ----------- $ 292,292 ----------- Total Transportation $ 483,952 -----------
The accompanying notes are an integral part of these financial statements. 49 PIONEER VARIABLE CONTRACTS TRUST Pioneer Small Company VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Shares Value Automobiles & Components - 1.3% Auto Parts & Equipment - 0.6% 5,400 Aftermarket Technology Corp.* $ 86,940 ----------- Automobile Manufacturers - 0.7% 2,300 Winnebago Industries, Inc.* $ 89,838 ----------- Total Automobiles & Components $ 176,778 ----------- Consumer Durables & Apparel - 2.7% Apparel, Accessories & Luxury Goods - 0.7% 10,100 Charming Shoppes, Inc.* $ 94,637 ----------- Footwear - 0.7% 3,100 Wolverine World Wide, Inc. $ 97,402 ----------- Housewares & Specialties - 0.7% 2,775 Yankee Candle Co. $ 92,075 ----------- Leisure Products - 0.6% 3,900 JAKKS Pacific, Inc.* $ 86,229 ----------- Total Consumer Durables & Apparel $ 370,343 ----------- Hotels, Restaurants & Leisure - 2.4% Leisure Facilities - 0.6% 4,000 Vail Resorts, Inc.* $ 89,680 ----------- Restaurants - 1.8% 5,800 Ruby Tuesday, Inc. $ 151,264 4,900 The Steak n Shake Co.* 98,392 ----------- $ 249,656 ----------- Total Hotels, Restaurants & Leisure $ 339,336 ----------- Media - 2.7% Advertising - 0.7% 1,600 R.H. Donnelley Corp.* $ 94,480 ----------- Broadcasting & Cable Television - 0.6% 6,000 Gray Television, Inc. $ 93,000 ----------- Movies & Entertainment - 0.7% 3,550 Alliance Atlantis Communications, Inc.* $ 97,554 ----------- Publishing - 0.7% 4,875 Journal Register Co.* $ 94,234 ----------- Total Media $ 379,268 ----------- Retailing - 5.1% Apparel Retail - 1.9% 3,100 Aeropostale, Inc.* $ 91,233 7,500 Guess?, Inc.* 94,125 6,500 Skechers U.S.A.* 84,240 ----------- $ 269,598 ----------- Distributors - 1.2% 3,200 Beacon Roofing Supply, Inc.* $ 63,552 3,500 Wesco International, Inc.* 103,740 ----------- $ 167,292 -----------
Shares Value General Merchandise Stores - 0.6% 3,000 American Greetings Corp. $ 76,050 ----------- Internet Retail - 0.7% 8,000 Netflix, Inc.* $ 98,640 ----------- Specialty Stores - 0.7% 7,400 Payless ShoeSource, Inc.* $ 91,020 ----------- Total Retailing $ 702,600 ----------- Food & Drug Retailing - 1.4% Food Distributors - 0.7% 1,939 The J.M. Smucker Co. $ 91,269 ----------- Food Retail - 0.7% 2,300 Sanderson Farms, Inc. $ 99,544 ----------- Total Food & Drug Retailing $ 190,813 ----------- Food, Beverage & Tobacco - 0.6% Agricultural Products - 0.6% 1,670 Corn Products International, Inc. $ 89,445 ----------- Total Food, Beverage & Tobacco $ 89,445 ----------- Household & Personal Products - 0.7% Household Products - 0.7% 3,850 Nu Skin Enterprises, Inc. $ 97,713 ----------- Total Household & Personal Products $ 97,713 ----------- Health Care Equipment & Services - 9.3% Health Care Distributors - 0.8% 2,300 United Therapeutics Corp.* $ 103,845 ----------- Health Care Equipment - 2.0% 2,475 Haemonetics Corp.* $ 89,620 2,575 PolyMedica Corp. 96,022 3,900 Steris Corp.* 92,508 ----------- $ 278,150 ----------- Health Care Facilities - 1.9% 2,600 Lifepoint Hospitals, Inc.* $ 90,532 2,002 Sunrise Senior Living, Inc.* (a) 92,813 1,900 Universal Health Services, Inc. (Class B) 84,550 ----------- $ 267,895 ----------- Health Care Services - 3.3% 1,700 Cerner Corp.* (a) $ 90,389 3,300 Lifeline Systems, Inc.* 85,008 1,425 Pediatrix Medical Group, Inc.* 91,271 5,025 Providence Service Corp.* 105,374 4,496 Parexel International Corp.* 91,269 ----------- $ 463,311 ----------- Health Care Supplies - 0.6% 5,800 Merit Medical Systems, Inc.* $ 88,624 -----------
50 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Small Company VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Managed Health Care - 0.7% 5,050 First Health Group Corp.* $ 94,486 ----------- Total Health Care Equipment & Services $ 1,296,311 ----------- Pharmaceuticals & Biotechnology - 4.4% Biotechnology - 3.0% 4,925 Cubist Pharmaceuticals, Inc.* $ 58,263 4,200 Connetics Corp.* 102,018 12,500 Indevus Pharmaceuticals, Inc.* (a) 74,500 7,300 InterMune, Inc.* 96,798 8,600 Regeneron Pharmaceuticals, Inc.* 79,206 ----------- $ 410,785 ----------- Pharmaceuticals - 1.4% 4,100 Able Laboratories, Inc.* $ 93,275 3,600 Bone Care International, Inc.* 100,260 ----------- $ 193,535 ----------- Total Pharmaceuticals & Biotechnology $ 604,320 ----------- Banks - 10.6% Diversified Banks - 1.4% 4,800 Provident Financial Services, Inc. $ 92,976 3,100 Trustmark Corp. 96,317 ----------- $ 189,293 ----------- Regional Banks - 7.3% 3,700 BancorpSouth, Inc. $ 90,169 3,300 Community Bank System, Inc. 93,225 2,200 Chemical Financial Corp. 94,424 2,600 Central Pacific Financial Corp.* 94,042 1,325 City National Corp. 93,611 2,200 First Community Bancorp 93,940 5,300 First Financial Bancorp 92,750 2,900 Greater Bay Bancorp 80,852 3,500 Irwin Financial Corp. 99,365 3,300 Oriental Financial Group, Inc. 93,423 3,600 Susquehanna Bancshares, Inc. 89,820 ----------- $ 1,015,621 ----------- Thrifts & Mortgage Finance - 1.9% 2,300 BankUnited Financial Corp.* $ 73,485 3,025 Commercial Federal Corp. 89,873 2,125 Webster Financial Corp. 107,610 ----------- $ 270,968 ----------- Total Banks $ 1,475,882 ----------- Diversified Financials - 2.8% Consumer Finance - 0.7% 3,800 Charter Municipal Mortgage Acceptance Co. $ 92,872 -----------
Shares Value Consumer Finance - 1.4% 4,078 Advanta Corp. (Class B) $ 98,973 13,997 Rewards Network, Inc.* (a) 97,979 ----------- $ 196,952 ----------- Investment Banking & Brokerage - 0.7% 6,078 Apollo Investment Corp. $ 91,778 ----------- Total Diversified Financials $ 381,602 ----------- Insurance - 2.6% Life & Health Insurance - 0.7% 2,100 AmerUs Group Co. $ 95,130 ----------- Property & Casualty Insurance - 1.9% 4,600 Bristol West Holdings, Inc. $ 92,000 2,500 Infinity Property & Casualty Corp. 88,000 2,020 Selective Insurance Group, Inc. 89,365 ----------- $ 269,365 ----------- Total Insurance $ 364,495 ----------- Real Estate - 6.9% Real Estate Investment Trusts - 6.9% 8,500 Anworth Mortgage Asset Corp. $ 91,035 3,100 Brandywine Realty Trust 91,109 4,577 BioMed Property Trust, Inc. 101,655 2,850 Capital Trust, Inc. 87,524 2,900 Cousins Properties, Inc. 87,783 2,800 Heritage Property Investment Trust 89,852 10,000 MFA Mortgage Investments, Inc. 88,200 2,800 Newcastle Investment Corp. 88,984 8,195 Provident Senior Living* 131,120 1,600 Redwood Trust, Inc. 99,344 ----------- $ 956,606 ----------- Total Real Estate $ 956,606 ----------- Software & Services - 6.1% Application Software - 3.4% 3,700 Advent Software, Inc.* $ 75,776 3,500 Macrovision Corp.* 90,020 14,500 Parametric Technology Co.* 85,405 7,100 Valueclick, Inc.* 94,643 9,100 Wind River Systems* 345,844 ----------- $ 691,688 ----------- Data Processing & Outsourced Services - 0.7% 5,700 The BISYS Group, Inc.* $ 93,765 ----------- Home Entertainment Software - 0.7% 12,375 Plato Learning, Inc.* $ 92,194 ----------- Internet Software & Services - 0.6% 7,000 Earthlink, Inc.* $ 80,640 -----------
The accompanying notes are an integral part of these financial statements. 51 PIONEER VARIABLE CONTRACTS TRUST Pioneer Small Company VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Shares Value Systems Software - 0.7% 8,875 Borland Software Corp.* $ 103,660 ----------- Total Software & Services $ 1,061,947 ----------- Technology, Hardware & Equipment - 5.9% Networking Equipment - 0.6% 13,900 Extreme Networks, Inc.* $ 91,045 ----------- Communications Equipment - 2.7% 15,100 Arris Group, Inc.* $ 106,304 4,800 CommScope, Inc.* 90,720 5,200 SeaChange International, Inc.* (a) 90,688 8,500 Symmetricom, Inc.* 82,535 ----------- $ 370,247 ----------- Computer Storage & Peripherals - 1.2% 3,500 Intergraph Corp.* $ 94,255 4,000 Novatel Wireless, Inc.* (a) 77,520 ----------- $ 171,775 ----------- Electronic Equipment & Instruments - 0.7% 12,400 Identix, Inc.* $ 91,512 ----------- Electronic Manufacturing Services - 0.7% 7,800 TTM Technologies, Inc.* $ 92,040 ----------- Total Technology, Hardware & Equipment $ 816,619 ----------- Semiconductors - 2.8% Semiconductor Equipment - 1.4% 11,900 Axcelis Technologies, Inc.* $ 96,747 5,246 Photronics, Inc.* 86,559 500 PortalPlayer, Inc.* 12,340 ----------- $ 195,646 ----------- Semiconductors - 1.4% 10,100 MIPS Technologies, Inc.* $ 99,485 20,800 SGC Holding Corp.* 94,432 ----------- $ 193,917 ----------- Total Semiconductors $ 389,563 ----------- Telecommunication Services - 1.9% Integrated Telecommunication Services - 1.3% 7,575 Aeroflex, Inc.* $ 91,809 6,959 CT Communications, Inc. 85,596 ----------- $ 177,405 ----------- Wireless Telecom Services - 0.6% 9,375 Boston Communications Group, Inc.* $ 86,625 ----------- Total Telecommunication Services $ 264,030 -----------
Shares Value Utilities - 1.8% Electric Utilities - 0.5% 1,400 CH Energy Group, Inc. $ 67,270 ----------- Gas Utilities - 1.3% 2,500 Atmos Energy Corp. $ 68,375 2,750 People's Energy Corp. 120,857 ----------- $ 189,232 ----------- Total Utilities $ 256,502 ----------- TOTAL COMMON STOCKS (Cost $12,760,997) $13,658,246 =========== WARRANTS - 0.0% Energy - 0.0% Oil & Gas Exploration & Production - 0.0% 1,850 Arena Resources Warrants EXP 8/9/08* $ 5,411 ----------- TOTAL WARRANTS (Cost $1,885) $ 5,411 ----------- TEMPORARY CASH INVESTMENT - 4.2% Security Lending Collateral - 4.2% 579,352 Securities Lending Investment Fund, 2.18% $ 579,352 ----------- TOTAL TEMPORARY CASH INVESTMENT (Cost $579,352) $ 579,352 ----------- TOTAL INVESTMENTS IN SECURITIES - 102.6% (Cost $13,342,234) $14,243,009 ----------- OTHER ASSETS AND LIABILITIES - (2.6)% $ (372,893) ----------- TOTAL NET ASSETS - 100.0% $13,870,116 ===========
* Non-income producing security 144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At December 31, 2004, the value of these securities amounted to $46,861 or 0.3% of net assets. (a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value 1,615 Cerner Corp.* $ 85,870 2,779 Forest Oil Corp.* 88,150 11,875 Indevus Pharmaceuticals, Inc.* 70,775 3,800 Novatel Wireless, Inc.* 73,644 6,935 Orbital Sciences Corp.* 82,041 791 Rewards Network, Inc.* 5,537 3,990 SeaChange International, Inc.* 69,586 1,759 Sunrise Senior Living, Inc.* 81,546 -------- Total $557,149 ========
52 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Mid Cap Value VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 99.8% Energy - 5.9% Integrated Oil & Gas - 0.9% 7,700 BP Amoco Plc (A.D.R.) $ 449,680 129,540 Occidental Petroleum Corp. 7,559,954 ------------ $ 8,009,634 ------------ Oil & Gas Drilling - 2.8% 175,915 ENSCO International, Inc. $ 5,583,542 111,530 Nabors Industries, Inc.* 5,720,374 30,000 Pride International, Inc* 616,200 141,630 Transocean Offshore, Inc.* 6,003,696 102,035 Weatherford International, Inc.* 5,234,396 ------------ $ 23,158,208 ------------ Oil & Gas Exploration & Production - 2.0% 14,200 Apache Corp. $ 718,094 11,700 Anadarko Petroleum Corp. 758,277 185,022 Devon Energy Corp. 7,201,056 203,585 Pioneer Natural Resources Co. 7,145,834 19,300 XTO Energy, Inc. 682,834 ------------ $ 16,506,095 ------------ Oil & Gas Refining Marketing & Transportation - 0.3% 27,385 Sun Co., Inc. $ 2,237,628 ------------ Total Energy $ 49,911,565 ------------ Materials - 8.6% Commodity Chemicals - 1.2% 171,545 Air Products & Chemicals, Inc. $ 9,944,464 ------------ Diversified Chemical - 1.6% 7,200 Olin Corp. $ 158,544 197,420 PPG Industries, Inc. 13,456,147 ------------ $ 13,614,691 ------------ Diversified Metals & Mining - 1.8% 141,700 Freeport-McMoRan Copper & Gold, Inc. (Class B) $ 5,417,191 100,785 Phelps Dodge Corp. 9,969,652 ------------ $ 15,386,843 ------------ Metal & Glass Containers - 1.6% 305,720 Ball Corp. $ 13,445,566 ------------ Paper Products - 2.3% 278,467 Flowserve Corp.* $ 7,668,981 351,900 Meadwestvaco Corp. 11,925,891 ------------ $ 19,594,872 ------------ Specialty Chemicals - 0.1% 16,500 Ecolab, Inc. $ 579,645 ------------ Total Materials $ 72,566,081 ------------
Shares Value Capital Goods - 5.2% Aerospace & Defense - 1.0% 11,800 Northrop Grumman Corp. $ 641,448 166,500 United Defense Industries, Inc.* 7,867,125 ------------ $ 8,508,573 ------------ Construction, Farm Machinery & Heavy Trucks - 0.1% 13,100 Terex Corp.* $ 624,215 ------------ Electrical Component & Equipment - 1.3% 627,890 Symbol Technologies, Inc. $ 10,862,497 ------------ Industrial Conglomerates - 2.8% 259,780 American Standard Co., Inc.* $ 10,734,110 148,520 ITT Industries, Inc. 12,542,514 ------------ $ 23,276,624 ------------ Total Capital Goods $ 43,271,909 ------------ Commercial Services & Supplies - 4.3% Commercial Printing - 1.4% 344,740 R.R. Donnelly & Sons Co. $ 12,165,875 ------------ Diversified Commercial Services - 1.3% 26,700 FTI Consulting, Inc.* $ 562,569 209,010 H & R Block, Inc. 10,241,490 ------------ $ 10,804,059 ------------ Environmental Services - 1.6% 396,435 Republic Services, Inc. $ 13,296,430 ------------ Total Commercial Services & Supplies $ 36,266,364 ------------ Transportation - 1.7% Air Freight & Couriers - 0.1% 9,600 Expeditors International of Washington, Inc. $ 536,448 ------------ Airlines - 0.6% 294,810 Southwest Airlines Co. $ 4,799,507 ------------ Railroads - 1.0% 139,920 Canadian National Railway Co. $ 8,570,100 ------------ Total Transportation $ 13,906,055 ------------ Automobiles & Components - 0.1% Automobile Manufacturers - 0.1% 19,300 Monaco Coach Corp. $ 397,001 8,800 PACCAR, Inc. 708,224 ------------ $ 1,105,225 ------------ Total Automobiles & Components $ 1,105,225 ------------
The accompanying notes are an integral part of these financial statements. 53 PIONEER VARIABLE CONTRACTS TRUST Pioneer Mid Cap Value VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Shares Value Consumer Durables & Apparel - 4.5% Apparel, Accessories & Luxury Goods - 0.3% 99,391 The Limited Brands, Inc. $ 2,287,981 ------------ Housewares & Specialties - 0.8% 31,700 Leggett & Platt, Inc. $ 901,231 174,600 Yankee Candle Co.* 5,793,228 ------------ $ 6,694,459 ------------ Leisure Products - 2.2% 940,930 Mattel, Inc. $ 18,338,726 ------------ Photographic Products - 1.2% 316,300 Eastman Kodak Co. (a) $ 10,200,675 ------------ Total Consumer Durables & Apparel $ 37,521,841 ------------ Hotels, Restaurants & Leisure - 1.7% Hotels, Resorts & Cruise Lines - 0.1% 27,600 Ambassadors Group, Inc. $ 982,836 ------------ Restaurants - 1.6% 333,400 Ruby Tuesday, Inc. $ 8,695,072 91,905 Tricon Global Restaurants, Inc. 4,336,078 ------------ $ 13,031,150 ------------ Total Hotels, Restaurants & Leisure $ 14,013,986 ------------ Media - 3.7% Advertising - 1.7% 1,066,400 The Interpublic Group of Co., Inc.* $ 14,289,760 ------------ Broadcasting & Cable TV - 1.2% 275,200 Entercom Communications Corp.* $ 9,876,928 ------------ Movies & Entertainment - 0.8% 315,360 Regal Entertainment Group (a) $ 6,543,720 16,900 Viacom, Inc. (Class B) 614,991 ------------ $ 7,158,711 ------------ Total Media $ 31,325,399 ------------ Retailing - 9.6% Apparel Retail - 1.1% 221,900 Liz Claiborne, Inc. $ 9,366,399 ------------ Department Stores - 0.7% 150,300 J.C. Penney Co., Inc. $ 6,222,420 ------------ General Merchandise Stores - 0.8% 265,100 American Greetings Corp. (a) $ 6,720,285 ------------ Internet Retail - 1.4% 418,500 InterActive Corp.* $ 11,558,970 ------------
Shares Value Specialty Stores - 5.6% 984,000 Blockbuster, Inc. (a) $ 9,387,360 793,230 Foot Locker, Inc. 21,361,684 210,700 Tiffany & Co. 6,736,079 471,700 Toys "R" Us, Inc.* 9,655,699 ------------ $ 47,140,822 ------------ Total Retailing $ 81,008,896 ------------ Food & Drug Retailing - 7.6% Drug Retail - 1.3% 233,170 CVS Corp. $ 10,508,972 ------------ Food Distributors - 1.3% 9,800 Amerisourcebergen Corp. $ 575,064 322,700 McKesson HBOC, Inc. 10,152,142 21,900 Performance Food Group Co.* 589,329 ------------ $ 11,316,535 ------------ Food Retail - 3.4% 284,790 ConAgra, Inc. $ 8,387,066 111,818 Dean Foods Co.* 3,684,403 62,000 Kroger Co.* 1,087,480 770,100 Safeway, Inc. 15,201,774 ------------ $ 28,360,723 ------------ Hypermarkets & Supercenters - 1.6% 447,870 BJ'S Wholesale Club, Inc.* (a) $ 13,046,453 13,000 Costco Wholesale Corp. 629,330 ------------ $ 13,675,783 ------------ Total Food & Drug Retailing $ 63,862,013 ------------ Food, Beverage & Tobacco - 0.1% Soft Drinks - 0.1% 13,600 PepsiCo, Inc. $ 709,920 ------------ Total Food, Beverage & Tobacco $ 709,920 ------------ Health Care Equipment & Services - 6.5% Health Care Distributors - 0.8% 147,700 Par Pharmaceutical Co., Inc.* $ 6,111,826 21,200 Wyeth 902,908 ------------ $ 7,014,734 ------------ Health Care Facilities - 3.0% 971,100 Tenet Healthcare Corp.* $ 10,662,678 397,360 Triad Hospitals, Inc.* 14,785,766 ------------ $ 25,448,444 ------------ Health Care Services - 0.8% 17,200 Accredo Health, Inc.* $ 476,784 111,330 Laboratory Corp. of America Holdings* 5,546,461 23,200 Ims Health, Inc. 538,472 ------------ $ 6,561,717 ------------
54 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Mid Cap Value VCT Portfolio - --------------------------------------------------------------------------------
Shares Value Health Care Supplies - 0.1% 11,200 Cooper Co., Inc. $ 790,608 ------------ Managed Health Care - 1.8% 180,400 CIGNA Corp. $ 14,715,228 ------------ Total Health Care Equipment & Services $ 54,530,731 ------------ Pharmaceuticals & Biotechnology - 2.0% Pharmaceuticals - 2.0% 648,200 IVAX Corp.* (a) $ 10,254,524 356,100 Mylan Laboratories, Inc. (a) 6,295,848 23,900 Pfizer, Inc. 642,671 ------------ $ 17,193,043 ------------ Total Pharmaceuticals & Biotechnology $ 17,193,043 ------------ Banks - 7.1% Diversified Banks - 0.0% 10,200 U.S. Bancorp $ 319,464 ------------ Regional Banks - 4.7% 120,600 City National Corp. $ 8,520,390 175,830 KeyCorp 5,960,637 184,865 Marshall & Ilsley Corp. 8,171,033 264,456 North Fork Bancorporation, Inc. 7,629,556 28,852 Washington Banking Co. 523,664 36,000 West Coast Bancorp Oregon 914,760 120,200 Zions Bancorporation 8,177,206 ------------ $ 39,897,246 ------------ Thrifts & Mortgage Finance - 2.4% 145,098 Countrywide Financial Corp. $ 5,370,077 323,160 The PMI Group, Inc. 13,491,930 21,500 Washington Mutual, Inc. 909,020 ------------ $ 19,771,027 ------------ Total Banks $ 59,987,737 ------------ Diversified Financials - 6.6% Consumer Finance - 1.4% 18,414 White Mountains Insurance Group, Ltd. $ 11,895,444 ------------ Asset Management & Custody Banks - 1.2% 314,990 Federated Investors, Inc. $ 9,575,696 23,600 Waddell & Reed Financial, Inc. 563,804 ------------ $ 10,139,500 ------------ Consumer Finance - 1.7% 29,000 MBNA Corp. $ 817,510 832,100 Providian Financial Corp.* 13,704,687 ------------ $ 14,522,197 ------------
Shares Value Investment Banking & Brokerage - 2.3% 322,000 A.G. Edwards, Inc. $ 13,913,620 248,150 Investment Technology Group, Inc.* 4,963,000 ------------ $ 18,876,620 ------------ Total Diversified Financials $ 55,433,761 ------------ Insurance - 6.4% Insurance Brokers - 2.3% 278,410 Platinum Underwriter Holdings, Ltd. $ 8,658,551 259,540 Willis Group Holdings, Ltd. (a) 10,685,262 ------------ $ 19,343,813 ------------ Life & Health Insurance - 2.0% 111,030 Jefferson - Pilot Corp. $ 5,769,119 6,900 Stancorp Financial Group, Inc. 569,250 554,700 UNUM Corp. (a) 9,951,318 ------------ $ 16,289,687 ------------ Property & Casualty Insurance - 2.1% 64,905 Ambac Financial Group, Inc. $ 5,330,648 238,000 Safeco Corp. 12,433,120 ------------ $ 17,763,768 ------------ Total Insurance $ 53,397,268 ------------ Software & Services - 4.4% Application Software - 1.6% 71,100 Captaris, Inc.* $ 366,876 14,600 Intuit, Inc.* 642,546 18,200 Microsoft Corp. 486,122 407,100 Veritas Software Corp.* 11,622,705 ------------ $ 13,118,249 ------------ Data Processing & Outsourced Services - 2.7% 584,730 The BISYS Group, Inc.* $ 9,618,809 14,800 Fiserv, Inc.* 594,812 437,829 SunGard Data Systems, Inc.* 12,403,696 ------------ $ 22,617,317 ------------ Systems Software - 0.1% 19,020 Netiq Corp.* $ 232,234 36,000 WatchGuard Technologies, Inc.* 159,480 ------------ $ 391,714 ------------ Total Software & Services $ 36,127,280 ------------ Technology, Hardware & Equipment - 8.0% Communications Equipment - 2.0% 356,600 Century Telephone Enterprises, Inc. $ 12,648,602 480,221 Tellabs, Inc.* 4,125,098 ------------ $ 16,773,700 ------------
The accompanying notes are an integral part of these financial statements. 55 PIONEER VARIABLE CONTRACTS TRUST Pioneer Mid Cap Value VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Shares Value Computer Hardware - 0.6% 76,360 NCR Corp.* $ 5,286,403 ------------ Computer Storage & Peripherals - 3.1% 275,600 Imation Corp. $ 8,772,348 277,500 Sandisk Corp.* 6,929,174 333,900 Storage Technology Corp.* 10,554,579 ------------ $ 26,256,101 ------------ Electronic Equipment & Instruments - 1.1% 123,980 W.W. Grainger, Inc. $ 8,259,548 28,000 Ingram Micro, Inc.* 582,400 ------------ $ 8,841,948 ------------ Technology Distributors - 1.2% 150,320 Fisher Scientific International, Inc.* $ 9,376,962 19,600 Tektronix, Inc. 592,115 ------------ $ 9,969,077 ------------ Total Technology, Hardware & Equipment $ 67,127,229 ------------ Semiconductors - 0.2% Semiconductor Equipment - 0.0% 24,500 FEI Co.* $ 514,500 ------------ Semiconductors - 0.2% 36,300 Intel Corp. $ 849,057 36,700 Micron Technology, Inc.* 453,245 50,400 Triquint Semiconductor, Inc.* 224,280 ------------ $ 1,526,582 ------------ Total Semiconductors $ 2,041,082 ------------ Telecommunication Services - 0.1% Integrated Telecommunication Services - 0.1% 20,600 SBC Communications, Inc. $ 530,862 14,700 Verizon Communications, Inc. 595,498 ------------ $ 1,126,360 ------------ Total Telecommunication Services $ 1,126,360 ------------ Utilities - 5.5% Electric Utilities - 4.1% 45,800 Avista Corp. $ 809,286 168,475 Constellation Energy Group 7,364,041 131,915 Entergy Corp. 8,916,137 122,500 NSTAR 6,649,300 322,500 PG&E Corp.* 10,732,800 ------------ $ 34,471,564 ------------ Multi-Utilities & Unregulated Power - 1.4% 836,100 Reliant Energy* (a) $ 11,412,762 ------------ Total Utilities $ 45,884,323 ------------ TOTAL COMMON STOCKS (Cost $694,162,506) $838,318,071 ------------
Principal Amount Value TEMPORARY CASH INVESTMENTS - 8.9% Repurchase Agreement - 0.9% $7,500,000 UBS Warburg, Inc., 1.00%, dated 12/31/04, repurchase price of $7,500,000 plus accrued interest on 1/3/05 collateralized by $7,133,000 U.S. Treasury Bill, 6.5%, 10/15/2006 $ 7,500,000 ------------ Shares Security Lending Collateral - 8.0% 67,222,325 Securities Lending Investment Fund, 2.18% $ 67,222,325 ------------ TOTAL TEMPORARY CASH INVESTMENTS (Cost $74,722,325) $ 74,722,325 ------------ TOTAL INVESTMENTS IN SECURITIES - 108.7% (Cost $768,884,831) $913,040,396 ------------ OTHER ASSETS AND LIABILITIES - (8.7%) $(73,064,457) ------------ TOTAL NET ASSETS - 100.0% $839,975,936 =============
(A.D.R.) American Depositary Receipt * Non-income producing security (a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value 261,495 American Greetings Corp. $ 6,628,898 386,336 BJ'S Wholesale Club, Inc.* 11,253,968 775,700 Blockbuster, Inc. 7,400,178 100,000 Eastman Kodak Co. 3,225,000 122,760 IVAX Corp.* 1,942,063 338,295 Mylan Laboratories, Inc. 5,981,056 294,557 Regal Entertainment Group 6,112,058 214,400 Reliant Energy* 2,926,560 521,740 UNUM Corp. 9,360,016 245,613 Willis Group Holdings, Ltd. 10,111,886 ----------- Total $64,941,683 ===========
56 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 99.5% Energy - 1.5% Integrated Oil & Gas - 0.9% 6,100 Occidental Petroleum Corp. $ 355,996 ----------- Oil & Gas Refining Marketing & Transportation - 0.6% 9,700 Repsol SA (A.D.R.) $ 253,170 ----------- Total Energy $ 609,166 ----------- Materials - 4.4% Diversified Metals & Mining - 4.4% 27,100 Freeport-McMoRan Copper & Gold, Inc. (Class B) $ 1,036,033 7,300 Phelps Dodge Corp. 722,116 ----------- $ 1,758,149 ----------- Total Materials $ 1,758,149 ----------- Capital Goods - 9.0% Industrial Conglomerates - 6.6% 12,200 American Standard Co., Inc.* $ 504,104 5,700 Illinois Tool Works, Inc. 528,276 6,400 Johnson Controls, Inc. 406,016 20,200 Tyco International, Ltd. 721,948 4,700 United Technologies Corp. 485,745 ----------- $ 2,646,089 ----------- Industrial Machinery - 2.4% 12,800 Deere & Co. $ 952,320 ----------- Total Capital Goods $ 3,598,409 ----------- Commercial Services & Supplies - 1.8% Diversified Commercial Services - 0.8% 1,300 Apollo Group, Inc.* $ 104,923 3,300 The Dun & Bradstreet Corp.* 196,845 ----------- $ 301,768 ----------- Office Services & Supplies - 1.0% 7,700 Canon, Inc. (A.D.R.) $ 417,802 ----------- Total Commercial Services & Supplies $ 719,570 ----------- Consumer Durables & Apparel - 1.4% Apparel, Accessories & Luxury Goods - 1.4% 22,500 TJX Companies, Inc. $ 565,425 ----------- Total Consumer Durables & Apparel $ 565,425 -----------
Shares Value Hotels, Restaurants & Leisure - 1.9% Restaurants - 1.9% 9,400 Ruby Tuesday, Inc. $ 245,152 10,600 Tricon Global Restaurants, Inc. 500,108 ----------- $ 745,260 ----------- Total Hotels, Restaurants & Leisure $ 745,260 ----------- Media - 3.7% Broadcasting & Cable Television - 1.8% 65,800 Liberty Media Corp.* $ 722,484 ----------- Movies & Entertainment - 1.9% 27,000 The Walt Disney Co. $ 750,600 ----------- Total Media $ 1,473,084 ----------- Retailing - 3.8% Apparel Retail - 0.7% 6,800 Liz Claiborne, Inc. $ 287,028 ----------- Computer & Electronics Retail - 1.1% 7,500 Best Buy Co., Inc. $ 445,650 ----------- Home Improvement Retail - 2.0% 13,500 Lowe's Co., Inc. $ 777,465 ----------- Total Retailing $ 1,510,143 ----------- Food & Drug Retailing - 2.4% Food Distributors - 2.4% 16,300 Cardinal Health, Inc. $ 947,845 ----------- Total Food & Drug Retailing $ 947,845 ----------- Food, Beverage & Tobacco - 6.7% Soft Drinks - 4.2% 9,500 Fomento Economico Mexicano SA de C.V. $ 499,795 22,800 PepsiCo, Inc. 1,190,160 ----------- $ 1,689,955 ----------- Tobacco - 2.5% 16,200 Altria Group, Inc. $ 989,820 ----------- Total Food, Beverage & Tobacco $ 2,679,775 ----------- Household & Personal Products - 4.3% Household Products - 2.5% 18,300 Procter & Gamble Co. $ 1,007,964 ----------- Personal Products - 1.8% 18,000 Avon Products, Inc. $ 696,600 ----------- Total Household & Personal Products $ 1,704,564 -----------
The accompanying notes are an integral part of these financial statements. 57 PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Shares Value Health Care Equipment & Services - 6.8% Health Care Distributors - 1.9% 29,800 Bristol-Myers Squibb Co. $ 763,476 ----------- Health Care Equipment - 3.1% 11,800 AstraZeneca Plc (A.D.R.) $ 429,402 11,600 Guidant Corp. 836,360 ----------- $ 1,265,762 ----------- Health Care Facilities - 0.8% 7,900 HCA, Inc. $ 315,684 ----------- Health Care Supplies - 1.0% 7,500 Smith & Nephew Plc (A.D.R.) $ 388,200 ----------- Total Health Care Equipment & Services $ 2,733,122 ----------- Pharmaceuticals & Biotechnology - 14.1% Biotechnology - 5.0% 18,558 Amgen, Inc.* $ 1,190,496 14,000 Gilead Sciences, Inc.* 489,860 6,800 ImClone Systems, Inc.* 313,344 ----------- $ 1,993,700 ----------- Pharmaceuticals - 9.1% 17,900 IVAX Corp.* $ 283,178 32,200 Merck & Co., Inc. 1,034,908 59,900 Pfizer, Inc. 1,610,711 35,100 Schering-Plough Corp. 732,888 ----------- $ 3,661,685 ----------- Total Pharmaceuticals & Biotechnology $ 5,655,385 ----------- Banks - 1.3% Diversified Banks - 1.3% 5,100 Bank of America Corp. $ 239,649 5,100 Wachovia Corp. 268,260 ----------- $ 507,909 ----------- Total Banks $ 507,909 ----------- Diversified Financials - 3.7% Consumer Finance - 1.2% 16,700 MBNA Corp. $ 470,773 ----------- Other Diversified Finance Services - 2.5% 21,100 Citigroup, Inc. $ 1,016,598 ----------- Total Diversified Financials $ 1,487,371 ----------- Insurance - 5.9% Life & Health Insurance - 1.5% 14,800 Aflac, Inc. $ 589,632 -----------
Shares Value Multi-Line Insurance - 3.5% 21,600 American International Group, Inc. $ 1,418,472 ----------- Property & Casualty Insurance - 0.9% 7,900 ACE, Ltd. $ 337,725 ----------- Total Insurance $ 2,345,829 ----------- Software & Services - 9.1% Application Software - 5.9% 74,000 Microsoft Corp. $ 1,976,540 15,500 Macrovision Corp.* 398,660 ----------- $ 2,375,200 ----------- Home Entertainment Software - 1.2% 13,400 Take-Two Interactive Software, Inc.* (a) $ 466,186 ----------- IT Consulting & Other Services - 2.0% 29,900 Accenture, Ltd.* $ 807,300 ----------- Total Software & Services $ 3,648,686 ----------- Technology Hardware & Equipment - 12.1% Communications Equipment - 1.6% 37,400 Avaya, Inc.* $ 643,280 ----------- Computer Hardware - 4.1% 5,700 Diebold, Inc. $ 317,661 9,300 Dell, Inc.* 391,902 45,200 Hewlett-Packard Co. 947,844 ----------- $ 1,657,407 ----------- Computer Storage & Peripherals - 3.5% 55,300 Sandisk Corp.* $ 1,380,841 ----------- Electronic Equipment & Instruments - 2.9% 5,300 Samsung Electronics $ 1,160,700 ----------- Total Technology Hardware & Equipment $ 4,842,228 ----------- Semiconductors - 3.1% 42,900 Taiwan Semiconductor Manufacturing Co. (A.D.R.) $ 364,221 36,000 Texas Instruments, Inc. 886,320 ----------- $ 1,250,541 ----------- Total Semiconductors $ 1,250,541 ----------- Telecommunication Services - 2.5% Wireless Telecommunication Services - 2.5% 36,400 Vodafone Group Plc (A.D.R.) $ 996,632 ----------- Total Telecommunication Services $ 996,632 ----------- TOTAL COMMON STOCKS (Cost $36,802,330) $39,779,093 -----------
58 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value TEMPORARY CASH INVESTMENT - 1.0% Security Lending Collateral - 1.0% 413,820 Securities Lending Investment Fund, 2.18% $ 413,820 ----------- TOTAL TEMPORARY CASH INVESTMENT (Cost $413,820) $ 413,820 ----------- TOTAL INVESTMENTS IN SECURITIES - 100.4% (Cost $37,216,150) $40,192,913 ----------- OTHER ASSETS AND LIABILITIES - (0.4)% $ (143,560) ----------- TOTAL NET ASSETS - 100.0% $40,049,353 ===========
(A.D.R.) American Depositary Receipt * Non-income producing security (a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value 11,495 Take-Two Interactive Software, Inc.* $ 399,911 --------- Total $ 399,911 =========
The accompanying notes are an integral part of these financial statements. 59 PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 97.7% Hotels, Restaurants & Leisure - 5.4% Hotels, Resorts & Cruise Lines - 5.4% 93,500 Hilton Hotels Corp. $ 2,126,190 54,000 Starwood Hotels & Resorts 3,153,600 ------------ $ 5,279,790 ------------ Total Hotels, Restaurants & Leisure $ 5,279,790 ------------ Diversified Financials - 3.3% Diversified Financial Services - 3.3% 86,000 Brookfield Properties Corp. (a) $ 3,216,400 ------------ Total Diversified Financials $ 3,216,400 ------------ Real Estate - 89.1% Real Estate Management & Development - 4.5% 131,500 Catellus Development Corp. $ 4,023,900 27,500 Kite Realty Group Trust 420,200 ------------ $ 4,444,100 ------------ Real Estate Investment Trusts - 84.6% 38,000 Apartment Investment & Management Co. $ 1,464,520 46,200 AMB Property Corp. 1,866,018 40,000 Arden Realty Group, Inc. 1,508,800 102,000 Archstone Communities Trust 3,906,600 61,500 AvalonBay Communities, Inc. 4,630,950 20,500 BioMed Property Trust, Inc. 455,305 75,500 Boston Properties, Inc. 4,882,585 6,200 Capital Automotive 220,255 44,600 Camden Property Trust 2,274,600 21,000 Corporate Office Properties 616,350 19,000 Carramerica Realty Corp. 627,000 74,000 Developers Diversifies Realty Corp. 3,283,380 53,000 Duke Realty Investments, Inc. 1,809,420 11,300 Equity Lifestyle Properties, Inc. 403,975 86,000 Equity Office Properties Trust 2,504,320 116,000 Equity Residential Property Trust (a) 4,196,880 12,100 First Potomac Realty Trust 275,880 38,000 Federal Realty Investment Trust 1,962,700 74,500 General Growth Properties, Inc. 2,693,920 51,000 Highwoods Properties, Inc. 1,412,700 196,800 Host Marriott Corp. 3,404,640 14,500 Hospitality Properties Trust 667,000 9,000 Healthcare Realty Trust, Inc. 366,300 24,500 iStar Financial, Inc. 1,108,870 16,500 Kimco Realty Corp. 956,835
Shares Value 12,000 Kilroy Realty Corp. $ 513,000 82,000 Liberty Property Trust 3,542,400 30,900 The Macerich Co. 1,940,520 90,900 ProLogis Trust 3,938,697 30,800 Pan Pacific Retail Properties, Inc. 1,931,160 41,000 Prentiss Properties Trust 1,566,200 44,000 Public Storage, Inc. 2,453,000 25,000 PS Business Parks, Inc. 1,127,500 53,600 Regency Centers Corp. 2,969,440 10,800 Spirit Finance Corp.* (a) 136,620 30,500 Shurgard Storage Centers, Inc. 1,342,305 24,700 Strategic Hotel Capital, Inc. 407,550 97,800 Simon DeBartolo Group, Inc. 6,324,726 63,400 Taubman Centers, Inc. 1,898,830 70,400 Trizec Properties Inc. 1,331,968 57,000 United Dominion Realty Trust 1,413,600 36,500 Vornado Realty Trust (a) 2,778,745 ------------ $83,116,064 ------------ Total Real Estate $87,560,164 ------------ TOTAL COMMON STOCKS (Cost $63,722,198) $96,056,354 ------------ TEMPORARY CASH INVESTMENT - 8.4% Security Lending Collateral - 8.4% 8,225,580 Securities Lending Investment Fund, 2.18% $ 8,225,580 ------------ TOTAL TEMPORARY CASH INVESTMENT (Cost $8,225,580) $ 8,225,580 ------------ TOTAL INVESTMENTS IN SECURITIES - 106.1% (Cost $71,947,778) $104,281,934 ------------ OTHER ASSETS AND LIABILITIES - (6.1)% $(6,035,766) ------------ TOTAL NET ASSETS - 100.0% $98,246,168 ===========
* Non-income producing security (a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value 81,700 Brookfield Properties Corp. $3,055,580 58,700 Equity Residential Property Trust 2,123,766 10,260 Spirit Finance Corp.* 129,789 34,675 Vornado Realty Trust 2,639,808 ---------- Total $7,948,943 ==========
60 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Fund VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 98.9% Energy - 7.8% Integrated Oil & Gas - 5.8% 20,126 BP Amoco Plc (A.D.R.) $ 1,175,358 31,052 ConocoPhillips 2,696,245 241,264 ChevronTexaco Corp. 12,668,773 292,714 Exxon Mobil Corp. 15,004,520 44,680 Occidental Petroleum Corp. 2,607,525 ------------ $ 34,152,421 ------------ Oil & Gas Drilling - 0.7% 60,277 Schlumberger, Ltd. $ 4,035,545 ------------ Oil & Gas Exploration & Production - 1.3% 99,995 Apache Corp. $ 5,056,747 70,551 Pioneer Natural Resources Co. 2,476,340 ------------ $ 7,533,087 ------------ Total Energy $ 45,721,053 ------------ Materials - 6.5% Aluminum - 0.6% 117,716 Alcoa, Inc. $ 3,698,637 ------------ Commodity Chemicals - 1.3% 27,138 Air Products & Chemicals, Inc. $ 1,573,190 46,466 E.I. du Pont de Nemours and Co. 2,279,157 88,000 Praxair, Inc. 3,885,200 ------------ $ 7,737,547 ------------ Diversified Chemical - 0.3% 21,688 PPG Industries, Inc. $ 1,478,254 ------------ Diversified Metals & Mining - 2.7% 112,522 BHP Billiton, Ltd. (A.D.R) $ 2,702,778 81,386 Inco, Ltd.* 2,993,377 39,803 Phelps Dodge Corp. 3,937,313 200,118 Rio Tinto Plc 5,886,829 ------------ $ 15,520,297 ------------ Metal & Glass Containers - 0.8% 104,000 Ball Corp. $ 4,573,920 ------------ Paper Products - 0.3% 53,073 Meadwestvaco Corp. $ 1,798,644 ------------ Precious Metals & Minerals - 0.3% 40,047 Newmont Mining Corp. $ 1,778,487 ------------ Specialty Chemicals - 0.2% 39,222 Ecolab, Inc. $ 1,377,869 ------------ Total Materials $ 37,963,655 ------------
Shares Value Capital Goods - 10.3% Aerospace & Defense - 1.4% 48,104 General Dynamics Corp. $ 5,031,678 54,000 Northrop Grumman Corp. 2,935,440 ------------ $ 7,967,118 ------------ Electrical Components & Equipment - 2.1% 65,964 Emerson Electric Co. $ 4,624,076 206,300 General Electric Co. 7,529,950 ------------ $ 12,154,026 ------------ Industrial Conglomerates - 4.5% 79,790 Illinois Tool Works, Inc. $ 7,394,937 120,984 Johnson Controls, Inc. 7,675,225 111,551 United Technologies Corp. 11,528,796 ------------ $ 26,598,958 ------------ Industrial Machinery - 2.3% 40,569 Caterpillar, Inc. $ 3,955,883 86,222 Deere & Co. 6,414,917 40,000 Ingersoll-Rand Co. 3,212,000 ------------ $ 13,582,800 ------------ Total Capital Goods $ 60,302,902 ------------ Commercial Services & Supplies - 0.5% Office Services & Supplies - 0.5% 58,698 Canon, Inc. (A.D.R.) $ 3,184,953 ------------ Total Commercial Services & Supplies $ 3,184,953 ------------ Transportation - 2.3% Airlines - 0.5% 170,807 Southwest Airlines Co. $ 2,780,738 ------------ Railroads - 1.5% 50,040 Burlington Northern, Inc. $ 2,367,392 180,893 Norfolk Southern Corp. 6,546,518 ------------ $ 8,913,910 ------------ Trucking - 0.3% 21,253 United Parcel Service (a) $ 1,816,281 ------------ Total Transportation $ 13,510,929 ------------ Automobiles & Components - 2.1% Automobile Manufacturers - 2.1% 253,315 Ford Motor Corp. $ 3,708,532 108,616 PACCAR, Inc. 8,741,416 ------------ $ 12,449,948 ------------ Total Automobiles & Components $ 12,449,948 ------------
The accompanying notes are an integral part of these financial statements. 61 PIONEER VARIABLE CONTRACTS TRUST Pioneer Fund VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Shares Value Consumer Durables & Apparel - 0.6% Apparel, Accessories & Luxury Goods - 0.2% 65,267 Gap, Inc. $ 1,378,439 ------------ Housewares & Specialties - 0.4% 84,000 Leggett & Platt, Inc. $ 2,388,120 ------------ Total Consumer Durables & Apparel $ 3,766,559 ------------ Media - 4.5% Advertising - 0.6% 43,791 Omnicom Group $ 3,692,457 ------------ Movies & Entertainment - 0.2% 51,957 The Walt Disney Co. $ 1,444,405 ------------ Publishing - 3.7% 48,893 Elsevier NV $ 665,764 90,111 Gannett Co. 7,362,069 149,146 John Wiley & Sons, Inc. 5,196,247 78,179 McGraw-Hill Co., Inc. 7,156,506 28,800 Tribune Co. 1,213,632 ------------ $ 21,594,218 ------------ Total Media $ 26,731,080 ------------ Retailing - 6.5% Apparel Retail - 0.2% 24,633 Liz Claiborne, Inc. $ 1,039,759 ------------ Computer & Electronics Retail - 0.6% 60,000 Best Buy Co., Inc. $ 3,565,200 11,064 Game Stop Corp. (Class B)* 247,944 ------------ $ 3,813,144 ------------ Department Stores - 2.0% 80,000 Kohl's Corp.* $ 3,933,600 88,332 May Department Stores Co. 2,596,961 118,523 Nordstrom, Inc. 5,538,580 ------------ $ 12,069,141 ------------ General Merchandise Stores - 2.2% 34,432 Family Dollar Stores, Inc. $ 1,075,311 228,656 Target Corp. 11,874,106 ------------ $ 12,949,417 ------------ Home Improvement Retail - 1.3% 110,000 Home Depot, Inc. $ 4,701,400 48,716 Lowe's Co., Inc. 2,805,554 ------------ $ 7,506,954 ------------ Specialty Stores - 0.2% 30,603 Barnes & Noble, Inc.* $ 987,559 ------------ Total Retailing $ 38,365,974 ------------
Shares Value Food & Drug Retailing - 2.5% Drug Retail - 0.9% 139,003 Walgreen Co. $ 5,333,545 ------------ Food Distributors - 1.4% 83,493 Cardinal Health, Inc. $ 4,855,118 84,201 Sysco Corp. 3,213,952 ------------ $ 8,069,070 ------------ Food Retail - 0.2% 28,200 Kellogg Co. $ 1,259,412 ------------ Total Food & Drug Retailing $ 14,662,027 ------------ Food, Beverage & Tobacco - 3.7% Packaged Foods & Meats - 2.1% 86,457 Campbell Soup Co. $ 2,584,200 44,844 General Mills, Inc. 2,229,195 73,219 H.J. Heinz Co., Inc. 2,854,809 54,767 Hershey Foods Corp. 3,041,759 76,005 Sara Lee Corp. 1,834,761 ------------ $ 12,544,724 ------------ Soft Drinks - 1.6% 178,941 PepsiCo, Inc. $ 9,340,720 ------------ Total Food, Beverage & Tobacco $ 21,885,444 ------------ Household & Personal Products - 3.8% Household Products - 3.2% 90,211 Colgate-Palmolive Co. $ 4,615,195 15,015 Clorox Co. 884,834 80,030 Estee Lauder Co. 3,662,973 171,470 Procter & Gamble Co. 9,444,568 ------------ $ 18,607,570 ------------ Personal Products - 0.6% 58,000 Kimberly-Clark Corp. $ 3,816,980 ------------ Total Household & Personal Products $ 22,424,550 ------------ Health Care Equipment & Services - 6.6% Health Care Distributors - 3.4% 204,554 Abbott Laboratories $ 9,542,444 163,188 Johnson & Johnson 10,349,383 ------------ $ 19,891,827 ------------ Health Care Equipment - 2.8% 73,222 Becton, Dickinson & Co. $ 4,159,010 32,057 Guidant Corp. 2,311,310 85,000 Medtronic, Inc. 4,221,950 123,159 Stryker Corp. 5,942,422 ------------ $ 16,634,692 ------------
62 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Fund VCT Portfolio - --------------------------------------------------------------------------------
Shares Value Managed Health Care - 0.4% 23,937 United Healthcare Group, Inc. $ 2,107,174 ------------ Total Health Care Equipment & Services $ 38,633,693 ------------ Pharmaceuticals & Biotechnology - 5.6% Biotechnology - 0.8% 68,200 Amgen, Inc.* $ 4,375,030 ------------ Pharmaceuticals - 4.8% 55,362 Barr Laboratorie, Inc. $ 2,521,185 95,302 Eli Lilly & Co. 5,408,389 236,082 Merck & Co., Inc. 7,587,675 104,212 Mylan Laboratories, Inc. (a) 1,842,468 56,907 Novartis AG 2,876,080 78,800 Pfizer, Inc. 2,118,932 18,810 Roche Holdings AG (A.D.R) 2,184,311 180,617 Schering-Plough Corp. 3,771,283 ------------ $ 28,310,323 ------------ Total Pharmaceuticals & Biotechnology $ 32,685,353 ------------ Banks - 8.1% Diversified Banks - 3.7% 288,277 U.S. Bancorp $ 9,028,836 41,456 Wachovia Corp. 2,180,586 174,435 Wells Fargo & Co. 10,841,135 ------------ $ 22,050,557 ------------ Regional Banks - 3.1% 98,868 First Horizon National Corp. $ 4,262,199 59,000 Fifth Third Bancorp 2,789,520 140,351 National City Corp. 5,270,180 57,444 SunTrust Banks, Inc. 4,243,963 23,185 Zions Bancorporation 1,577,276 ------------ $ 18,143,138 ------------ Thrifts & Mortgage Finance - 1.3% 177,481 Washington Mutual, Inc. $ 7,503,897 ------------ Total Banks $ 47,697,592 ------------ Diversified Financials - 5.4% Asset Management & Custody Banks - 2.6% 114,875 The Bank of New York Co., Inc. $ 3,839,123 45,290 Federated Investors, Inc. 1,376,816 77,103 State Street Corp. 3,787,299 101,277 T. Rowe Price Associates, Inc. 6,299,429 ------------ $ 15,302,667 ------------ Consumer Finance - 2.2% 138,272 American Express Co. $ 7,794,393 172,000 MBNA Corp. 4,848,680 ------------ $ 12,643,073 ------------
Shares Value Investment Banking & Brokerage - 0.6% 60,698 Merrill Lynch & Co., Inc. $ 3,627,919 ------------ Diversified Financial Services - 0.0% 1 Citigroup, Inc. $ 48 ------------ Total Diversified Financials $ 31,573,707 ------------ Insurance - 1.9% Multi-Line Insurance - 0.9% 78,394 American International Group, Inc. $ 5,148,134 ------------ Property & Casualty Insurance - 1.0% 56,844 Chubb Corp. $ 4,371,304 33,919 Safeco Corp. 1,771,929 ------------ $ 6,143,233 ------------ Total Insurance $ 11,291,367 ------------ Software & Services - 5.5% Application Software - 3.1% 44,591 Adobe Systems, Inc. $ 2,797,639 429,081 Microsoft Corp. 11,460,754 62,259 Symantec Corp.* 1,603,792 82,800 Veritas Software Corp.* 2,363,940 ------------ $ 18,226,125 ------------ Data Processing & Outsourced Services - 2.4% 107,497 Automatic Data Processing, Inc. $ 4,767,492 38,501 Computer Sciences Corp.* 2,170,301 26,882 DST Systems, Inc.* 1,401,090 29,998 Fiserv, Inc.* 1,205,620 158,920 SunGard Data Systems, Inc.* 4,502,204 ------------ $ 14,046,707 ------------ Total Software & Services $ 32,272,832 ------------ Technology Hardware & Equipment - 6.2% Communications Equipment - 2.1% 95,000 Century Telephone Enterprises, Inc. $ 3,369,650 221,762 Motorola, Inc. 3,814,306 326,377 Nokia Corp. (A.D.R) 5,114,328 ------------ $ 12,298,284 ------------ Computer Hardware - 3.7% 27,643 Diebold, Inc. $ 1,540,544 203,265 Dell, Inc.* 8,565,587 76,270 Hewlett-Packard Co. 1,599,382 81,063 IBM Corp. 7,991,191 403,137 Sun Microsystems, Inc.* 2,168,877 ------------ $ 21,865,581 ------------ Computer Storage & Peripherals - 0.4% 160,000 EMC Corp.* $ 2,379,200 ------------ Total Technology Hardware & Equipment $ 36,543,065 ------------
The accompanying notes are an integral part of these financial statements. 63 PIONEER VARIABLE CONTRACTS TRUST Pioneer Fund VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Shares Value Semiconductors - 3.6% Semiconductor Equipment - 0.9% 308,306 Applied Materials, Inc.* $ 5,272,033 ------------ Semiconductors - 2.7% 24,815 Freescale Semiconductors, Inc.* $ 455,602 349,426 Intel Corp. 8,173,074 294,793 Texas Instruments, Inc. 7,257,804 ------------ $ 15,886,480 ------------ Total Semiconductors $ 21,158,513 ------------ Telecommunication Services - 3.1% Integrated Telecommunication Services - 3.0% 23,765 Alltel Corp. $ 1,396,431 146,005 BellSouth Corp. 4,057,479 218,671 SBC Communications, Inc. 5,635,151 164,000 Verizon Communications, Inc. 6,643,640 ------------ $ 17,732,701 ------------ Wireless Telecommunication Services - 0.1% 17,897 Nextel Communications, Inc.* $ 536,910 ------------ Total Telecommunication Services $ 18,269,611 ------------ Utilities - 1.7% Electric Utilities - 1.4% 32,838 American Electric Power Co., Inc. $ 1,127,655 36,216 Consolidated Edison, Inc. 1,584,450 90,000 Exelon Corp. 3,966,300 57,799 Southern Co. 1,937,422 ------------ $ 8,615,827 ------------ Gas Utilities - 0.2% 27,431 KeySpan Energy Corp. $ 1,082,153 ------------ Water Utilities - 0.1% 18,826 Aqua America, Inc. $ 462,931 ------------ Total Utilities $ 10,160,911 ------------ TOTAL COMMON STOCKS (Cost $459,723,725) $581,255,718 ============
Principal Amount Value TEMPORARY CASH INVESTMENTS - 1.8% Repurchase Agreement - 1.2% $ 7,300,000 UBS Warburg, Inc., 1.00%, dated 12/31/04, repurchase price of $7,300,000 plus accrued interest on 1/3/05 collateralized by $6,902,000 U.S. Treasury Bill, 5.625%, 5/15/08 $ 7,300,000 ------------ Shares Security Lending Collateral - 0.6% 3,264,285 Securities Lending Investment Fund, 2.18% $ 3,264,286 ------------ TOTAL TEMPORARY CASH INVESTMENTS (Cost $10,564,285) $ 10,564,286 ------------ TOTAL INVESTMENTS IN SECURITIES - 100.7% (Cost $470,288,010) $591,820,004 ------------ OTHER ASSETS AND LIABILITIES - (0.7)% $ (4,056,175) ------------ TOTAL NET ASSETS - 100.0% $587,763,829 ============
(A.D.R.) American Depositary Receipt * Non-income producing security (a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value 99,001 Mylan Laboratories, Inc. $ 1,750,338 16,979 United Parcel Service 1,451,025 ----------- Total $ 3,201,363 ===========
64 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Equity Income VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Shares Value CONVERTIBLE PREFERRED STOCKS - 1.2% Automobiles & Components - 1.1% Automobile Manufacturers - 1.1% 2,600 General Motors, 5.25%, 3/6/32 $ 59,800 57,414 Ford Cap Trust, 6.50%, 1/15/32 3,025,718 ------------ $ 3,085,518 ------------ Total Automobiles & Components $ 3,085,518 ------------ Pharmaceuticals & Biotechnology - 0.1% Pharmaceuticals - 0.0% 4,255 Schering-Plough Corp., 6.0%, 9/14/07 $ 247,322 ------------ Total Pharmaceuticals & Biotechnology $ 247,322 ------------ TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $3,000,714) $ 3,332,840 ------------ Principal Amount USD ($) CONVERTIBLE CORPORATE BOND - 0.1% Retailing - 0.1% Apparel Retail - 0.1% 200,000 GAP Inc., 5.75%, 3/15/09 $ 265,250 ------------ Total Retailing $ 265,250 ------------ TOTAL CONVERTIBLE CORPORATE BOND (Cost $200,000) $ 265,250 ------------ Shares COMMON STOCKS - 94.2% Energy - 9.3% Integrated Oil & Gas - 9.3% 71,813 ConocoPhillips $ 6,235,523 169,714 ChevronTexaco Corp. 8,911,682 176,110 Exxon Mobil Corp. 9,027,399 36,142 Occidental Petroleum Corp. 2,109,247 ------------ $ 26,283,851 ------------ Total Energy $ 26,283,851 ------------ Materials - 6.9% Commodity Chemicals - 1.6% 51,941 Air Products & Chemicals, Inc. $ 3,011,020 28,233 E.I. du Pont de Nemours and Co. 1,384,829 ------------ $ 4,395,849 ------------ Construction Materials - 0.7% 36,142 Vulcan Materials Co. $ 1,973,715 ------------ Diversified Chemical - 0.9% 37,925 PPG Industries, Inc. $ 2,584,968 ------------ Diversified Metals & Mining - 1.0% 29,700 Phelps Dodge Corp. $ 2,937,924 ------------ Paper Products - 0.8% 64,436 Meadwestvaco Corp. $ 2,183,736 ------------
Shares Value Specialty Chemicals - 0.8% 42,784 Valspar Corp. $ 2,139,628 ------------ Steel - 1.1% 51,012 Nucor Corp. $ 2,669,968 20,704 Roanoke Electric Steel Corp. 427,972 ------------ $ 3,097,940 ------------ Total Materials $ 19,313,760 ------------ Capital Goods - 8.1% Aerospace & Defense - 2.7% 53,284 Boeing Co. $ 2,758,513 46,899 General Dynamics Corp. 4,905,635 ------------ $ 7,664,148 ------------ Electrical Components & Equipment - 1.5% 60,925 Emerson Electric Co. $ 4,270,843 ------------ Industrial Conglomerates - 2.8% 66,280 Johnson Controls, Inc. $ 4,204,803 33,767 United Technologies Corp. 3,489,819 ------------ $ 7,694,622 ------------ Industrial Machinery - 1.1% 28,397 Gorman-Rupp Co. $ 653,131 95,208 The Timken Co. 2,477,312 ------------ $ 3,130,443 ------------ Total Capital Goods $ 22,760,056 ------------ Commercial Services & Supplies - 0.6% Employment Services - 0.6% 128,355 Servicemaster Co. $ 1,770,015 ------------ Total Commercial Services & Supplies $ 1,770,015 ------------ Transportation - 0.9% Railroads - 0.9% 52,265 Burlington Northern, Inc. $ 2,472,657 ------------ Total Transportation $ 2,472,657 ------------ Automobiles & Components - 5.7% Automobile Manufacturers - 5.7% 154,894 Ford Motor Corp. $ 2,267,648 46,700 General Motors Corp. 1,870,802 149,912 PACCAR, Inc. 12,064,918 ------------ $ 16,203,368 ------------ Total Automobiles & Components $ 16,203,368 ------------ Consumer Durables & Apparel - 0.4% Housewares & Specialties - 0.4% 47,700 Tupperware Corp. $ 988,344 ------------ Total Consumer Durables & Apparel $ 988,344 ------------
The accompanying notes are an integral part of these financial statements. 65 PIONEER VARIABLE CONTRACTS TRUST Pioneer Equity Income VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Shares Value Media - 3.1% Movies & Entertainment - 1.7% 149,253 Cedar Fair, L.P. $ 4,910,424 ------------ Publishing - 1.4% 41,821 McGraw-Hill Co., Inc. $ 3,828,294 ------------ Total Media $ 8,738,718 ------------ Retailing - 1.2% Department Stores - 1.2% 111,354 May Department Stores Co. $ 3,273,808 ------------ Total Retailing $ 3,273,808 ------------ Food, Beverage & Tobacco - 4.7% Packaged Foods & Meats - 4.2% 152,313 Campbell Soup Co. $ 4,552,636 62,343 General Mills, Inc. 3,099,071 76,105 H.J. Heinz Co., Inc. 2,967,334 48,430 Sara Lee Corp. 1,169,100 ------------ $ 11,788,141 ------------ Soft Drinks - 0.5% 29,533 PepsiCo, Inc. $ 1,541,623 ------------ Total Food, Beverage & Tobacco $ 13,329,764 ------------ Household & Personal Products - 1.4% Household Products - 1.4% 40,479 Colgate-Palmolive Co. $ 2,070,906 30,353 Clorox Co. 1,788,702 ------------ $ 3,859,608 ------------ Total Household & Personal Products $ 3,859,608 ------------ Health Care Equipment & Services - 4.0% Health Care Distributors - 3.2% 99,784 Abbott Laboratories $ 4,654,924 28,800 Bristol-Myers Squibb Co. 737,856 59,163 Johnson & Johnson 3,752,117 ------------ $ 9,144,897 ------------ Health Care Equipment - 0.8% 39,446 Becton, Dickinson & Co. $ 2,240,533 ------------ Total Health Care Equipment & Services $ 11,385,430 ------------ Pharmaceuticals & Biotechnology - 1.8% Pharmaceuticals - 1.8% 59,789 Eli Lilly & Co. $ 3,393,026 53,124 Merck & Co., Inc. 1,707,405 ------------ $ 5,100,431 ------------ Total Pharmaceuticals & Biotechnology $ 5,100,431 ------------
Shares Value Banks - 11.7% Diversified Banks - 4.4% 25,400 Comerica, Inc. $ 1,549,908 88,909 U.S. Bancorp 2,784,630 83,196 Wachovia Corp. 4,376,110 60,514 Wells Fargo & Co. 3,760,945 ------------ $ 12,471,593 ------------ Regional Banks - 4.3% 64,229 First Horizon National Corp. $ 2,768,912 100,062 National City Corp. 3,757,328 76,456 SunTrust Banks, Inc. 5,648,569 ------------ $ 12,174,809 ------------ Thrifts & Mortgage Finance - 3.0% 195,686 Washington Mutual, Inc. $ 8,273,604 ------------ Total Banks $ 32,920,006 ------------ Diversified Financials - 4.8% Asset Management & Custody Banks - 4.1% 61,735 Eaton Vance Corp. $ 3,219,480 27,800 State Street Corp. 1,365,536 113,009 T. Rowe Price Associates, Inc. 7,029,160 ------------ $ 11,614,176 ------------ Investment Banking & Brokerage - 0.7% 44,506 A.G. Edwards, Inc. $ 1,923,104 ------------ Total Diversified Financials $ 13,537,280 ------------ Insurance - 3.2% Property & Casualty Insurance - 3.2% 57,533 Chubb Corp. $ 4,424,288 89,632 Safeco Corp. 4,682,376 ------------ $ 9,106,664 ------------ Total Insurance $ 9,106,664 ------------ Real Estate - 1.2% Real Estate Investment Trusts - 1.2% 53,284 Simon DeBartolo Group, Inc. $ 3,445,876 ------------ Total Real Estate $ 3,445,876 ------------ Software & Services - 0.9% Application Software - 0.3% 32,011 Microsoft Corp. $ 855,014 ------------ Data Processing & Outsourced Services - 0.6% 40,616 Automatic Data Processing, Inc. $ 1,801,320 ------------ Total Software & Services $ 2,656,334 ------------ Technology Hardware & Equipment - 2.0% Communications Equipment - 0.6% 91,600 Motorola, Inc. $ 1,575,520 ------------
66 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Equity Income VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Computer Hardware - 1.4% 62,145 Diebold, Inc. $ 3,463,341 6,402 IBM Corp. 631,109 ------------ $ 4,094,450 ------------ Total Technology Hardware & Equipment $ 5,669,970 ------------ Telecommunication Services - 6.2% Integrated Telecommunication Services - 6.2% 53,541 Alltel Corp. $ 3,146,069 140,143 BellSouth Corp. 3,894,574 175,340 SBC Communications, Inc. 4,518,512 64,047 AT&T Corp. 1,220,736 113,589 Verizon Communications, Inc. 4,601,490 ------------ $ 17,381,381 ------------ Total Telecommunication Services $ 17,381,381 ------------ Utilities - 16.1% Electric Utilities - 10.2% 79,358 Ameren Corp. $ 3,979,010 66,696 American Electric Power Co., Inc. 2,290,341 121,608 Constellation Energy Group 5,315,486 76,537 Consolidated Edison, Inc. 3,348,494 34,077 FPL Group, Inc. 2,547,256 108,460 Great Plains Energy, Inc. 3,284,169 66,088 NSTAR 3,587,257 127,476 Southern Co. 4,272,996 ------------ $ 28,625,009 ------------ Gas Utilities - 4.2% 15,400 Atmos Energy Corp. $ 421,190 128,160 KeySpan Energy Corp. 5,055,912 124,991 Questar Corp. 6,369,541 ------------ $ 11,846,643 ------------ Multi-Utilities & Unregulated Power - 1.1% 50,083 Equitable Resources, Inc. $ 3,038,035 ------------ Water Utilities - 0.6% 73,317 Aqua America, Inc. $ 1,802,861 ------------ Total Utilities $ 45,312,548 ------------ TOTAL COMMON STOCKS (Cost $200,659,301) $265,509,869 ------------
Principal Amount Value TEMPORARY CASH INVESTMENT - 4.5% Repurchase Agreement - 4.5% $12,700,000 UBS Warburg, Inc., 1.00%, dated 12/31/04, repurchase price of $12,700,000 plus accrued interest on 1/3/05 collateralized by $12,654,000 U.S. Treasury Bill, 6.75%, 5/15/05 $ 12,700,000 ------------ TOTAL TEMPORARY CASH INVESTMENT (Cost $12,700,000) $ 12,700,000 ------------ TOTAL INVESTMENTS IN SECURITIES - 100.0% (Cost $216,560,015) $281,807,959 ------------ OTHER ASSETS AND LIABILITIES - 0.0% $ 117,819 ------------ TOTAL NET ASSETS - 100.0% $281,925,778 ============
The accompanying notes are an integral part of these financial statements. 67 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 63.5% Energy - 5.5% Integrated Oil & Gas - 0.4% 3,900 Exxon Mobil Corp. $ 199,914 ----------- Oil & Gas Drilling - 4.8% 8,700 Encana Corp. $ 496,422 33,400 ENSCO International, Inc. 1,060,116 22,000 Varco International, Inc.* 641,300 ----------- $ 2,197,838 ----------- Oil & Gas Exploration & Production - 0.3% 3,900 Pioneer Natural Resources Co. $ 136,890 ----------- Total Energy $ 2,534,642 ----------- Materials - 2.0% Precious Metals & Minerals - 2.0% 21,800 Newmont Mining Corp. $ 968,138 ----------- Total Materials $ 968,138 ----------- Capital Goods - 2.9% Aerospace & Defense - 3.0% 25,000 Northrop Grumman Corp. $ 1,359,000 ----------- Total Capital Goods $ 1,359,000 ----------- Commercial Services & Supplies - 0.7% Diversified Commercial Services - 0.7% 7,400 Cintas Corp. $ 324,564 ----------- Total Commercial Services & Supplies $ 324,564 ----------- Transportation - 2.5% Trucking - 2.5% 13,400 United Parcel Service $ 1,145,164 ----------- Total Transportation $ 1,145,164 ----------- Media - 3.7% Broadcasting & Cable Television - 1.4% 8,800 Clear Channel Communications, Inc. $ 294,712 10,200 Comcast Corp.* 334,968 ----------- $ 629,680 ----------- Movies & Entertainment - 2.3% 29,319 Viacom, Inc. (Class B) $ 1,066,918 ----------- Total Media $ 1,696,598 ----------- Retailing - 3.9% Apparel Retail - 1.5% 16,400 Liz Claiborne, Inc. $ 692,244 ----------- General Merchandise Stores - 2.2% 32,000 Family Dollar Stores, Inc. $ 999,360 -----------
Shares Value Specialty Stores - 0.2% 6,491 Blockbuster, Inc. $ 61,924 6,491 Blockbuster, Inc. (Class B) 57,186 ----------- $ 119,110 ----------- Total Retailing $ 1,810,714 ----------- Food & Drug Retailing - 5.5% Drug Retail - 1.0% 9,900 CVS Corp. $ 446,193 ----------- Food Distributors - 0.8% 6,400 Cardinal Health, Inc. $ 372,160 ----------- Food Retail - 2.8% 18,300 Wm. Wrigley Jr. Co. $ 1,266,177 ----------- Hypermarkets & Supercenters - 0.9% 7,800 Wal-Mart Stores, Inc. $ 411,996 ----------- Total Food & Drug Retailing $ 2,496,526 ----------- Food, Beverage & Tobacco - 5.3% Distillers & Vintners - 2.1% 19,200 Anheuser-Busch Co., Inc. $ 974,016 ----------- Soft Drinks - 3.2% 7,900 The Coca-Cola Co. $ 328,877 21,800 PepsiCo, Inc. 1,137,960 ----------- $ 1,466,837 ----------- Total Food, Beverage & Tobacco $ 2,440,853 ----------- Household & Personal Products - 3.7% Household Products - 0.9% 9,300 Estee Lauder Co. $ 425,661 ----------- Personal Products - 2.8% 28,100 Gillette Co. $ 1,258,318 ----------- Total Household & Personal Products $ 1,683,979 ----------- Health Care Equipment & Services - 4.5% Health Care Distributors - 1.7% 17,800 Wyeth $ 758,102 ----------- Health Care Equipment - 2.8% 17,300 Biomet, Inc. $ 750,647 7,700 Guidant Corp. 555,170 ----------- $ 1,305,817 ----------- Total Health Care Equipment & Services $ 2,063,919 ----------- Pharmaceuticals & Biotechnology - 3.7% Biotechnology - 0.9% 6,516 Amgen, Inc.* $ 418,001 -----------
68 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Pharmaceuticals - 2.8% 4,000 Eli Lilly & Co. $ 227,000 39,288 Pfizer, Inc. 1,056,454 ----------- $ 1,283,454 ----------- Total Pharmaceuticals & Biotechnology $ 1,701,455 ----------- Diversified Financials - 3.0% Asset Management & Custody Banks - 1.1% 15,700 The Bank of New York Co., Inc. $ 524,694 ----------- Consumer Finance - 1.5% 12,300 American Express Co. $ 693,351 ----------- Investment Banking & Brokerage - 0.4% 2,900 Merrill Lynch & Co., Inc. $ 173,333 ----------- Total Diversified Financials $ 1,391,378 ----------- Insurance - 4.6% Property & Casualty Insurance - 4.6% 515 Berkshire Hathaway, Inc. (Class B)* $ 1,512,040 6,900 Progressive Corp. 585,396 ----------- $ 2,097,436 ----------- Total Insurance $ 2,097,436 ----------- Software & Services - 6.9% Application Software - 3.9% 51,800 Microsoft Corp. $ 1,383,578 15,400 Symantec Corp.* 396,704 ----------- $ 1,780,282 -----------
Shares Value Data Processing & Outsourced Services - 3.0% 32,700 First Data Corp. $ 1,391,058 ----------- Total Software & Services $ 3,171,340 ----------- Technology Hardware & Equipment - 2.4% Communications Equipment - 0.3% 9,500 Avaya Inc.* $ 163,400 ----------- Computer Hardware - 1.6% 34,222 Hewlett-Packard Co. $ 717,635 ----------- Electronic Manufacture Services - 0.5% 8,500 Molex, Inc. $ 226,526 ----------- Total Technology Hardware & Equipment $ 1,107,561 ----------- Semiconductors - 0.4% 7,800 Intel Corp. $ 182,442 ----------- Total Semiconductors $ 182,442 ----------- Telecommunication Services - 1.9% Wireless Telecommunication Services - 1.9% 32,300 Vodafone Group Plc. (A.D.R.) $ 884,374 ----------- Total Telecommunication Services $ 884,374 ----------- TOTAL COMMON STOCKS (Cost $24,770,144) $29,060,083 -----------
The accompanying notes are an integral part of these financial statements. 69 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value ASSET BACKED SECURITIES - 0.3% Diversified Financials - 0.2% Diversified Financial Services - 0.1% 84,728 BBB-/Baa2 PF Export Receivable Master Trust, 6.436%, 6/1/15 (144A) $ 84,212 ----------- Total Diversified Financials $ 84,212 ----------- Utilities - 0.1% Electric Utilities - 0.1% 70,950 BB-/Ba2 FPL Energy Wind Funding, 6.876%, 6/27/17 (144A) $ 73,167 ----------- Total Utilities $ 73,167 ----------- TOTAL ASSET BACKED SECURITIES (Cost $158,096) $ 157,379 ----------- COLLATERALIZED MORTGAGE OBLIGATIONS - 0.3% Diversified Financials - 0.3% Diversified Financial Services - 0.3% 100,000 BBB-/Baa3 Tower 2004-1A E, 5.395%, 1/15/34 $ 99,814 50,000 BB/NR Tower 2004-2A F, 6.376%, 12/15/14 49,750 ----------- Total Diversified Financials $ 149,564 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $150,000) $ 149,564 ----------- CORPORATE BONDS - 11.5% Energy - 0.8% Integrated Oil & Gas - 0.2% 30,000 BBB+/Baa1 Occidental Petroleum, 7.65%, 2/15/06 $ 31,406 40,000 BBB+/Baa1 Occidental Petroleum, 6.75%, 1/15/12 45,407 ----------- $ 76,813 ----------- Oil & Gas Exploration & Production - 0.2% 100,000 BBB-/NR Gazprom International SA, 7.201%, 2/1/20 (144A) $ 105,750 ----------- Oil & Gas Refining Marketing & Transportation - 0.4% 205,000 BBB/Ba1 Magellan Midstream Partners, L.P., 6.45%, 6/1/14 $ 221,688 ----------- Total Energy $ 404,251 ----------- Materials - 1.2% Commodity Chemicals - 0.2% 100,000 BB+/Ba2 Nova Chemicals, Ltd., 6.5%, 1/15/12 $ 106,000 ----------- Diversified Metals & Mining - 0.3% 125,000 BBB-/Baa3 Inco, Ltd., 7.2%, 9/15/32 $ 145,687 ----------- Metal & Glass Containers - 0.1% 40,000 BBB/Baa2 Tenneco Packaging, 8.125%, 6/15/17 $ 49,943 ----------- Paper Packaging - 0.4% 150,000 A/A2 Bemis Co., Inc., 6.7%, 7/1/05 $ 152,563 ----------- Paper Products - 0.2% 100,000 BB-/Ba3 Abitibi-Consolidated, Inc., 6.95%, 4/1/08 $ 103,000 ----------- Total Materials $ 557,193 -----------
70 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Capital Goods - 0.7% Construction & Engineering - 0.1% 50,000 B+/Ba3 Shaw Group Inc., 10.75%, 3/15/10 $ 55,125 ----------- Electrical Components & Equipment - 0.2% 75,000 BBB-/Ba1 Thomas & Betts Corp., 7.25%, 6/1/13 $ 82,269 ----------- Industrial Conglomerates - 0.2% 55,000 AAA/Aaa General Electric Capital Corp., 6.125%, 2/22/11 $ 60,246 30,000 AAA/Aaa General Electric Capital Corp., 6.75%, 3/15/32 35,114 ----------- $ 95,360 ----------- Industrial Machinery - 0.2% 100,000 B+/Ba2 Sun Sage BV, 8.25%, 3/26/09 (144A) $ 105,000 ----------- Total Capital Goods $ 337,754 ----------- Commercial Services & Supplies - 0.0% Diversified Commercial Services - 0.0% 25,000 BBB+/Baa1 Deluxe Corp., 3.5%, 10/1/07 (144A) $ 24,678 ----------- Total Commercial Services & Supplies $ 24,678 ----------- Automobiles & Components - 0.4% Automobile Manufacturers - 0.4% 200,000 BBB-/Baa2 General Motors, 7.2%, 1/15/11 $ 205,128 ----------- Total Automobiles & Components $ 205,128 ----------- Hotels, Restaurants & Leisure - 0.5% Hotels, Resorts & Cruise Lines - 0.5% 200,000 BBB-/Baa3 Hilton Hotels, 7.625%, 12/1/12 $ 233,885 ----------- Total Hotels, Restaurants & Leisure $ 233,885 ----------- Media - 1.2% Broadcasting & Cable Television - 0.8% 250,000 BBB/Baa3 Comcast Cable Corp., 7.125%, 6/15/13 $ 289,636 100,000 BBB-/Baa3 Cox Communications, 7.125%, 10/1/12 112,086 ----------- $ 401,722 ----------- Publishing - 0.4% 170,000 BBB-/Baa3 News America, Inc., 7.3%, 4/30/28 $ 194,794 ----------- Total Media $ 596,516 ----------- Retailing - 0.2% Specialty Stores - 0.2% 100,000 BB/Ba2 Toys "R" Us, 7.875%, 4/15/13 $ 99,250 ----------- Total Retailing $ 99,250 ----------- Food, Beverage & Tobacco - 0.4% Tobacco - 0.4% 150,000 BBB/Baa2 Altria Group, Inc., 7.0%, 11/4/13 $ 162,532 ----------- Total Food, Beverage & Tobacco $ 162,532 ----------- Health Care Equipment & Services - 0.7% Health Care Facilities - 0.5% 200,000 BB+/Ba2 HCA, Inc., 6.3%, 10/1/12 $ 202,841 ----------- Health Care Supplies - 0.2% 100,000 BBB-/Ba1 Bausch & Lomb, 7.125%, 8/1/28 $ 106,550 ----------- Total Health Care Equipment & Services $ 309,391 -----------
The accompanying notes are an integral part of these financial statements. 71 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Banks - 0.3% Diversified Banks - 0.3% 50,000 NR/Aaa KFW - Kredit Wiederaufbau, 2.75%, 5/8/07 $ 49,209 75,000 AA-/Aa2 National Westminster, 7.375%, 10/1/09 85,383 ----------- $ 134,592 ----------- Total Banks $ 134,592 ----------- Diversified Financials - 1.3% Consumer Finance - 0.2% 100,000 A/A2 SLM Corp., Floating Rate Note, 7/25/14 $ 99,642 ----------- Investment Banking & Brokerage - 0.2% 75,000 B+/B1 E*Trade Financial Corp., 8.0%, 6/15/11 (144A) $ 80,625 ----------- Diversified Financial Services - 0.4% 100,000 A-/Baa3 Brascan Corp., 5.75%, 3/1/10 $ 105,806 100,000 BBB-/Baa3 Glencore Funding LLC, 6.0%, 4/15/14 (144A) 96,748 ----------- $ 202,554 ----------- Specialized Finance - 0.5% 100,000 NR/Baa3 Tengizchevroil LLP, 6.124%, 11/15/14 (144A) $ 100,250 100,000 B/B2 MDP Acquistions, 9.625%, 10/1/12 111,500 ----------- $ 211,750 ----------- Total Diversified Financials $ 594,571 ----------- Insurance - 1.2% Life & Health Insurance - 0.2% 100,000 BB+/Ba1 Provident Co., Inc., 7.0%, 7/15/18 $ 96,625 ----------- Multi-Line Insurance - 0.1% 50,000 A/Baa1 Loew Corp., 5.25%, 3/15/16 $ 48,353 ----------- Property & Casualty Insurance - 0.7% 85,000 BBB-/NR Kingsway America, Inc., 7.5%, 2/1/14 $ 88,126 100,000 BBB-/Baa3 Arch Capital Group, Ltd., 7.35%, 5/1/34 106,616 150,000 BB/Baa3 Ohio Casualty Corp., 7.3%, 6/15/14 161,429 ----------- $ 356,171 ----------- Reinsurance - 0.2% 100,000 BBB-/Baa3 Odyssey Re Holdings, 7.65%, 11/1/13 $ 110,296 ----------- Total Insurance $ 611,445 ----------- Real Estate - 0.6% Real Estate Investment Trusts - 0.6% 150,000 BBB-/Baa3 Hospitality Properties Trust, 6.75%, 2/15/13 $ 165,629 100,000 BBB-/Baa3 Colonial Reality LP, 6.15%, 4/15/13 103,869 ----------- $ 269,498 ----------- Total Real Estate $ 269,498 ----------- Technology Hardware & Equipment - 0.9% Communications Equipment - 0.1% 50,000 BB/Ba3 Rogers Wireless Inc., Floating Rate Note, 12/15/10 (144A) $ 52,376 ----------- Computer Hardware - 0.8% 250,000 BBB-/Baa3 NCR Corp., 7.125%, 6/15/09 $ 276,039 100,000 BB+/Ba1 Unisys Corp., 6.875%, 3/15/10 107,000 ----------- $ 383,039 ----------- Total Technology Hardware & Equipment $ 435,415 -----------
72 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Telecommunication Services - 0.4% Integrated Telecommunication Services - 0.4% 100,000 BBB+/Ba3 Intelsat, Ltd. 6.5%, 11/1/13 $ 91,000 100,000 BBB+/Baa2 Telecom Italia Capital, 5.25%, 11/15/13 101,074 ----------- $ 192,074 ----------- Total Telecommunication Services $ 192,074 ----------- Utilities - 0.2% Electric Utilities - 0.2% 95,000 BBB-/Baa3 FLP Energy American Wind LLC, 6.639%, 6/20/23 (144A) $ 101,306 ----------- Total Utilities $ 101,306 ----------- TOTAL CORPORATE BONDS (Cost $4,957,864) $ 5,269,479 ----------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 22.5% Government - 22.5% 449,572 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 1/1/34 $ 457,005 186,807 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 9/1/17 193,183 159,028 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 10/1/16 164,515 1,156,543 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/33 1,196,375 105,004 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/32 108,620 35,818 AAA/Aaa Federal Home Loan Mortgage Corp., 6.5%, 5/1/09 37,582 56,705 AAA/Aaa Federal Home Loan Mortgage Corp., 6.5%, 7/1/33 59,741 17,789 AAA/Aaa Federal Home Loan Mortgage Corp., 6.5%, 11/1/33 18,671 145,347 AAA/Aaa Federal National Mortgage Association, 5.0%, 6/1/34 144,284 203,751 AAA/Aaa Federal National Mortgage Association, 5.5%, 2/1/17 210,912 127,905 AAA/Aaa Federal National Mortgage Association, 5.5%, 3/1/34 129,926 222,719 AAA/Aaa Federal National Mortgage Association, 5.5%, 4/1/34 226,239 263,593 AAA/Aaa Federal National Mortgage Association, 5.5%, 9/1/34 267,760 299,126 AAA/Aaa Federal National Mortgage Association, 5.5%, 10/1/34 303,854 223,574 AAA/Aaa Federal National Mortgage Association, 5.5%, 11/1/33 227,169 136,532 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/33 141,241 110,000 AAA/Aaa Federal National Mortgage Association, 6.125%, 3/15/12 122,216 67,610 AAA/Aaa Federal National Mortgage Association, 6.5%, 4/1/29 71,353 143,018 AAA/Aaa Federal National Mortgage Association, 6.5%, 7/1/32 150,115 94,578 AAA/Aaa Federal National Mortgage Association, 6.5%, 7/1/32 99,286 21,208 AAA/Aaa Federal National Mortgage Association, 6.5%, 8/1/13 22,509 20,623 AAA/Aaa Federal National Mortgage Association, 6.5%, 8/1/14 21,886 62,139 AAA/Aaa Federal National Mortgage Association, 6.5%, 9/1/32 65,442 50,412 AAA/Aaa Federal National Mortgage Association, 6.5%, 10/1/32 52,914 17,685 AAA/Aaa Federal National Mortgage Association, 6.5%, 10/1/32 18,562 67,948 AAA/Aaa Federal National Mortgage Association, 6.5%, 12/1/21 71,713 10,000 AAA/Aaa Federal National Mortgage Association, 7.125%, 6/15/10 11,494 36,108 AAA/Aaa Federal National Mortgage Association, 9.0%, 4/1/33 39,090 389,233 AAA/Aaa Freddie Mac, 5.0%, 4/1/34 386,788 241,158 AAA/Aaa Freddie Mac, 5.0%, 5/1/34 239,643 150,000 AAA/Aaa Freddie Mac, 5.75%, 1/15/12 163,413 45,389 AAA/Aaa Freddie Mac, 6.0%, 6/1/34 46,910 260,832 AAA/Aaa Freddie Mac, 6.0%, 11/1/33 269,561 115,459 AAA/Aaa Government National Mortgage Association, 5.0%, 4/15/34 115,601 96,149 AAA/Aaa Government National Mortgage Association, 5.5%, 4/15/33 98,294
The accompanying notes are an integral part of these financial statements. 73 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value (U.S. Government and Agency Obligations Cont.) 239,253 AAA/Aaa Government National Mortgage Association, 5.5%, 8/15/19 $ 249,518 166,589 AAA/Aaa Government National Mortgage Association, 5.5%, 8/15/33 170,305 51,297 AAA/Aaa Government National Mortgage Association, 5.5%, 9/15/33 52,490 353,413 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/32 367,116 133,507 AAA/Aaa Government National Mortgage Association, 6.5%, 5/15/33 140,575 53,615 AAA/Aaa Government National Mortgage Association, 6.5%, 10/15/28 56,547 262,925 AAA/Aaa Government National Mortgage Association I, 5.5%, 6/15/33 268,789 183,588 AAA/Aaa Government National Mortgage Association I, 5.5%, 7/15/33 187,683 148,787 AAA/Aaa Government National Mortgage Association I, 6.0%, 9/15/32 154,387 467,764 AAA/Aaa Government National Mortgage Association I, 6.0%, 9/15/33 485,108 297,330 AAA/Aaa Government National Mortgage Association II, 6.0%, 10/20/33 308,997 181,240 AAA/Aaa Government National Mortgage Association II, 5.5%, 2/20/34 185,030 25,322 AAA/Aaa Government National Mortgage Association II, 7.5%, 9/20/29 27,092 470,000 AAA/Aaa U.S. Treasury Notes, 4.0%, 11/15/12 469,210 300,000 AAA/Aaa U.S. Treasury Notes, 4.75%, 11/15/08 314,214 200,000 AAA/Aaa U.S. Treasury Notes, 4.75%, 5/15/14 208,422 130,000 AAA/Aaa U.S. Treasury Notes, 5.375%, 2/15/31 140,573 500,000 AAA/Aaa U.S. Treasury Notes, 5.625%, 5/15/08 536,289 ----------- Total Government $10,276,212 ----------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $10,185,772) $10,276,212 ----------- TOTAL INVESTMENTS IN SECURITIES - 98.1% (Cost $40,221,876) $44,912,717 ----------- OTHER ASSETS AND LIABILITIES - 1.9% $ 851,493 ----------- TOTAL NET ASSETS - 100.0% $45,764,210 ===========
(A.D.R.) American Depositary Receipt * Non-income producing security 144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At December 31, 2004,th evalue of these securities amounted to $824,112 or 1.8% of net assets. NR Not rated by either S&P or Moody's 74 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer High Yield VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
S&P/Moody's Ratings Shares (unaudited) Value CONVERTIBLE PREFERRED STOCKS - 2.5% Materials - 2.5% Construction Materials - 0.1% 1,750 B-/B1 TXI Capital Trust I, 5.5%, 6/30/28 $ 88,638 ------------ Diversified Metals & Mining - 2.4% 3,000 B-/NR Freeport-McCorp., 5.5%, 12/31/49 (144A) $ 2,932,500 ------------ Total Materials $ 3,021,138 ------------ TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $3,077,338) $ 3,021,138 ------------ Principal S&P/Moody's Amount Ratings USD ($) (unaudited) CONVERTIBLE CORPORATE BONDS - 32.0% Materials - 5.4% Commodity Chemicals - 0.4% 200,000 B+/B1 Millenium Chemicals Inc., 4.0%, 11/15/23 (144A) $ 458,750 ------------ Diversified Metals & Mining - 1.4% 500,000 B+/B1 Freeport McMoran Copper & Gold, Inc., 7.0%, 2/11/11 $ 750,000 500,000 B+/B1 Massey Energy Co., 4.75% 5/15/23 994,375 ------------ $ 1,744,375 ------------ Gold - 0.9% 1,000,000 NR/NR Coeur D'Alene Mines Corp., 1.25%, 1/15/24 $ 865,000 250,000 BBB+/NR Placer Dome Inc., 2.75%, 10/15/23 306,563 ------------ $ 1,171,563 ------------ Specialty Chemicals - 0.4% 800,000 BBB/Baa3 RPM International Inc., 1.389%, 5/13/33 $ 462,000 ------------ Steel - 2.3% 3,000,000 B-/NR Graftech International, 1.625%, 1/15/24 (144A) $ 2,778,750 ------------ Total Materials $ 6,615,438 ------------ Capital Goods - 4.2% Aerospace & Defense - 1.8% 1,725,000 B/B2 Alliant Technology Systems, 2.75%, 2/15/24 (144A) $ 1,826,344 400,000 NR/NR EDO Corp., 5.25%, 4/15/07 436,000 ------------ $ 2,262,344 ------------ Construction & Engineering - 1.1% 875,000 NR/NR Quanta Services, Inc., 4.0%, 7/1/07 $ 831,250 500,000 B/NR Quanta Services, 4.5%, 10/1/23 545,000 ------------ $ 1,376,250 ------------ Electrical Component & Equipment - 1.0% 2,595,000 NR/B1 Roper Industries Inc., 1.4813%, 1/15/34 $ 1,229,381 ------------ Industrial Machinery - 0.3% 300,000 BB-/NR Kaydon Corp., 4.0%, 5/23/23 $ 380,625 ------------ Total Capital Goods $ 5,248,600 ------------ Media - 1.9% Advertising - 1.9% 1,800,000 BB+/Baa3 Interpublic Group Co., 4.5%, 3/15/23 $ 2,358,000 ------------ Total Media $ 2,358,000 ------------
The accompanying notes are an integral part of these financial statements. 75 PIONEER VARIABLE CONTRACTS TRUST Pioneer High Yield VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Retailing - 1.2% Specialty Stores - 1.2% 1,500,000 B+/B3 Sonic Automotive, Inc., 5.25%, 5/7/09 $ 1,492,500 ------------ Total Retailing $ 1,492,500 ------------ Health Care Equipment & Services - 0.7% Health Care Equipment - 0.7% 375,000 NR/NR Epix Medical, 3.0%, 6/15/24 (144A) $ 338,438 600,000 NR/NR Wilson Greatbatch Technology, 2.25%, 6/15/13 541,500 ------------ Total Health Care Equipment & Services $ 879,938 ------------ Pharmaceuticals & Biotechnology - 5.7% Biotechnology - 0.9% 300,000 NR/NR Cubist Pharmaceuticals, 5.5%, 11/1/08 $ 283,875 850,000 NR/NR CV Therapeutics, 4.75%, 3/7/07 875,500 ------------ $ 1,159,375 ------------ Pharmaceuticals - 4.8% 2,615,000 NR/NR Ivax Corp., Conv, 1.875%, 12/15/24 (144A) $ 2,696,719 2,500,000 B/NR Valeant Pharmaceuticals 3.0%, 8/16/10 2,753,125 400,000 NR/NR Vertex Pharmaceuticals Inc., 5.75%, 2/15/11 (144A) 403,500 ------------ $ 5,853,344 ------------ Total Pharmaceuticals & Biotechnology $ 7,012,719 ------------ Real Estate - 0.6% Real Estate Management & Development - 0.6% 500,000 CCC+/Caa1 LNR Property Corp., 5.5%, 3/1/23 $ 695,625 ------------ Total Real Estate $ 695,625 ------------ Software & Services - 0.9% Application Software - 0.7% 200,000 NR/NR Mentor Graphics, 6.875%, 6/15/07 $ 210,250 500,000 NR/NR Serena Software, 1.5%, 12/15/23 586,250 ------------ $ 796,500 ------------ IT Consulting & Other Services - 0.2% 400,000 NR/NR Safeguard Scientifics, 2.625%, 3/15/24 $ 294,500 ------------ Total Software & Services $ 1,091,000 ------------ Technology Hardware & Equipment - 6.1% Communications Equipment - 1.2% 1,500,000 B-/NR Adaptec Inc., 0.75%, 12/22/23 $ 1,428,750 ------------ Computer Storage & Peripherals - 0.6% 700,000 NR/B2 Maxtor Corp., 6.8%, 4/30/10 $ 713,125 ------------ Electronic Equipment & Instruments - 1.2% 300,000 B+/NR Flir Systems, Inc., 3.0%, 6/1/23 $ 487,500 1,000,000 NR/NR Veeco Instruments, 4.125%, 12/21/08 987,500 ------------ $ 1,475,000 ------------ Electronic Manufacturing Services - 2.7% 3,500,000 B+/Ba3 SCI Systems, Inc., 3.0%, 3/15/07 $ 3,377,500 ------------ Technology Distributors - 0.4% 400,000 NR/R Bell Microproducts, Inc., 3.75%, 3/5/24 $ 456,500 ------------ Total Technology Hardware & Equipment $ 7,450,875 ------------
76 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer High Yield VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Semiconductors - 5.2% Semiconductor Equipment - 3.9% 700,000 B-/NR Advanced Energy Industries, Inc., 5.25%, 11/15/06 $ 675,500 200,000 NR/NR Axcelis Technologies, 4.25%, 1/15/07 198,500 700,000 NR/NR Brooks Automation, Inc., 4.75%, 6/1/08 681,624 500,000 B-/NR Cymer, Inc., 3.5%, 2/15/09 497,500 2,700,000 B-/NR FEI Co., 5.5%, 8/15/08 2,727,000 ------------ $ 4,780,124 ------------ Semiconductors - 1.3% 1,300,000 CCC/NR Conexant Systems, Inc., 4.0%, 2/1/07 (a) $ 1,176,500 500,000 B/NR LSI Logic Corp., 4.0%, 5/15/10 469,375 ------------ $ 1,645,875 ------------ Total Semiconductors $ 6,425,999 ------------ TOTAL CONVERTIBLE CORPORATE BONDS (Cost $38,069,020) $ 39,270,694 ------------ CORPORATE BONDS - 68.1% Energy - 3.6% Oil & Gas Equipment and Services - 0.2% 200,000 BB-/Ba3 Grant Prideco Escrow, 9.0%, 12/15/09 $ 221,500 ------------ Oil & Gas Refining Marketing & Transportation - 3.4% 300,000 B+/B1 Frontier Oil Corp., 6.625%, 10/1/11 (144A) $ 306,000 1,555,000 BB-/B2 Tesoro Petroleum Corp., 9.625%, 11/1/08 1,694,950 1,900,000 BB-/B2 Tesoro Petroleum Corp., 9.625%, 4/1/12 2,185,000 ------------ $ 4,185,950 ------------ Total Energy $ 4,407,450 ------------ Materials - 16.4% Commodity Chemicals - 4.7% 1,800,000 B+/B1 Arco Chemical Co., 9.8%, 2/1/20 $ 2,052,000 2,500,000 BB+/Ba2 Nova Chemicals Corp., 7.875%, 9/15/25 2,587,500 1,000,000 BB+/Ba2 Nova Chemicals Corp., 7.4%, 4/1/09 1,092,500 ------------ $ 5,732,000 ------------ Diversified Metals & Mining - 1.1% 1,375,000 B+/B1 Freeport-McMoran Copper & Gold, 6.875%, 2/1/09 $ 1,366,406 ------------ Metal & Glass Containers - 2.1% 1,500,000 B/B3 Crown Cork & Seal Co., Inc., 7.375%, 12/15/26 $ 1,410,000 1,000,000 B+/B1 Crown Holdings, 9.5%, 3/1/11 1,140,000 ------------ $ 2,550,000 ------------ Paper Products - 5.8% 2,250,000 BB-/Ba3 Abitibi-Consolidated, Inc., 8.55%, 8/1/10 $ 2,438,438 885,000 BB/Ba3 Bowater Canada Finance, 7.95%, 11/15/11 953,652 3,800,000 BB/Ba3 Bowater, Inc., 6.5%, 6/15/13 3,800,540 ------------ $ 7,192,630 ------------ Specialty Chemicals - 2.7% 2,200,000 B+/B1 Millenium America, Inc., 7.625%, 11/15/26 $ 2,167,000 1,000,000 B+/B1 Millenium America, Inc., 9.25%, 6/15/08 1,137,500 ------------ $ 3,304,500 ------------ Total Materials $ 20,145,536 ------------
The accompanying notes are an integral part of these financial statements. 77 PIONEER VARIABLE CONTRACTS TRUST Pioneer High Yield VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Capital Goods - 11.3% Aerospace & Defense - 5.6% 2,500,000 B/B2 DRS Technologies, Inc., 6.875%, 11/1/13 $ 2,612,500 700,000 B/B2 DRS Technologies, Inc., 6.875%, 11/1/13 (144A) 731,500 1,525,000 B+/B1 Esterline Technology, 7.75%, 6/15/13 1,666,063 850,000 BB-/Ba3 L-3 Communications Corp., 5.875%, 1/15/15 (144A) 847,875 1,000,000 BB-/Ba3 L-3 Communications Corp., 6.125%, 1/15/14 1,030,000 ------------ $ 6,887,938 ------------ Industrial Machinery - 5.7% 800,000 B/B3 JLG Industries, Inc., 8.375%, 6/15/12 $ 856,000 800,000 B+/B1 Manitowoc Co., Inc., 7.125%, 11/1/13 866,000 5,100,000 NR/NR Mueller Industries, Inc. 6.0%, 11/1/14 4,998,000 300,000 BB+/Ba3 SPX Corp., 7.5%, 1/1/13 325,500 ------------ $ 7,045,500 ------------ Total Capital Goods $ 13,933,438 ------------ Transportation - 0.4% Air Freight & Couriers - 0.4% 500,000 BB-/B1 Petroleum Helicopters, 9.375%, 5/1/09 $ 547,500 ------------ Total Transportation $ 547,500 ------------ Automobiles & Components - 0.2% Tires & Rubber - 0.2% 300,000 B-/B3 Goodyear Tire & Rubber, 7.857%, 8/15/11 (a) $ 304,500 ------------ Total Automobiles & Components $ 304,500 ------------ Media - 1.8% Advertising - 1.8% 2,000,000 BB+/Baa3 Interpublic Group, Inc., 7.25%, 8/15/11 $ 2,171,242 ------------ Total Media $ 2,171,242 ------------ Retailing - 2.3% Department Stores - 0.8% 1,000,000 BB+/Ba2 J.C. Penney Co., Inc., 7.625%, 3/1/97 $ 1,065,000 ------------ Specialty Stores - 1.5% 1,790,000 B/B3 Pep Boys-Manny Moe Jack, 7.5%, 12/15/14 $ 1,814,613 ------------ Total Retailing $ 2,879,613 ------------ Health Care Equipment & Services - 1.9% Health Care Facilities - 0.4% 500,000 BB+/Ba2 HCA, Inc., 6.25%, 2/15/13 $ 504,384 ------------ Health Care Supplies - 1.5% 1,700,000 B-/Caa1 Inverness Medical Innovation, 8.75%, 2/15/12 $ 1,776,500 ------------ Total Health Care Equipment & Services $ 2,280,884 ------------ Pharmaceuticals & Biotechnology - 2.3% Pharmaceuticals - 2.3% 2,700,000 BB-/B1 Valeant Pharmaceuticals, 7.0%, 12/15/11 $ 2,808,000 ------------ Total Pharmaceuticals & Biotechnology $ 2,808,000 ------------
78 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer High Yield VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Real Estate - 9.6% Real Estate Management & Development - 5.4% 2,635,000 BB-/Ba3 Forest City Enterprises, 7.625%, 6/1/15 $ 2,793,100 2,300,000 CCC+/Caa1 LNR Property Co., 7.25%, 10/15/13 2,590,375 1,100,000 CCC+/Caa1 LNR Property Co., 7.625%, 7/15/13 1,248,500 ------------ $ 6,631,975 ------------ Real Estate Investment Trusts - 4.2% 500,000 B+/B3 BF Saul Real Estate Investment Trust, 7.5%, 3/1/14 $ 515,000 2,300,000 B/B1 Crescent Real Estate, 9.25%, 4/15/09 2,518,500 2,000,000 CCC+/B2 Meristar Hospitality Corp., 9.125%, 1/15/11 2,160,000 ------------ $ 5,193,500 ------------ Total Real Estate $ 11,825,475 ------------ Technology Hardware & Equipment - 9.1% Communications Equipment - 4.1% 4,300,000 BB+/Ba2 Corning, Inc., 5.9%, 3/15/14 $ 4,309,536 700,000 BB+/Ba2 Corning, Inc., 6.2%, 3/15/16 701,770 ------------ $ 5,011,306 ------------ Electronic Equipment & Instruments - 1.7% 1,835,000 B/B2 General Cable Corp., 9.5%, 11/15/10 $ 2,073,550 ------------ Technology Distributors - 3.3% 2,550,000 BBB-/Baa3 Arrow Electronic, Inc., 6.875%, 6/1/18 $ 2,724,145 1,200,000 BBB-/Baa3 Arrow Electronic, Inc., 6.875%, 7/1/13 1,317,504 ------------ $ 4,041,649 ------------ Total Technology Hardware & Equipment $ 11,126,505 ------------ Utilities - 9.2% Electric Utilities - 6.1% 3,000,000 B-/B3 Allegheny Energy Supply, 7.8%, 3/15/11 (a) $ 3,270,000 1,750,000 B-/B3 Allegheny Energy Supply, 8.25%, 4/15/12 (144A) 1,955,624 1,000,000 B+/B1 CMS Energy Corp., 7.5%, 1/15/09 1,065,000 1,000,000 B+/B1 CMS Energy Corp., 8.5%, 4/15/11 1,136,250 ------------ $ 7,426,874 ------------ Multi-Utilities & Unregulated Power - 3.1% 3,490,000 B+/B1 CMS Energy Corp., 7.75%, 8/1/10 $ 3,817,187 ------------ Total Utilities $ 11,244,061 ------------ TOTAL CORPORATE BONDS (Cost $79,489,329) $ 83,674,204 ------------
The accompanying notes are an integral part of these financial statements. 79 PIONEER VARIABLE CONTRACTS TRUST Pioneer High Yield VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
S&P/Moody's Ratings Shares (unaudited) Value TEMPORARY CASH INVESTMENT - 2.9% Security Lending Collateral - 2.9% 3,541,345 Securities Lending Investment Fund, 2.18% $ 3,541,345 ------------ TOTAL TEMPORARY CASH INVESTMENT (Cost $3,541,345) $ 3,541,345 ------------ TOTAL INVESTMENTS IN SECURITIES - 105.5% (Cost $124,177,032) $129,507,381 ------------ OTHER ASSETS AND LIABILITIES - (5.5)% $ (6,705,919) ------------ TOTAL NET ASSETS - 100.0% $122,801,462 ============
NR Not rated by either S&P or Moody's * Non-income producing security 144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At December 31, 2004, the value of these securities amounted to $15,276,000 or 12.4% of net assets. (a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value 1,899,750 Allegheny Energy Supply, 7.8%, 03/15/11 $ 2,070,728 1,136,000 Conexant Systems Inc., 4.0%, 2/1/07 1,028,080 285,000 Goodyear Tire & Rubber, 7.857%, 8/15/11 289,275 ----------- Total $ 3,388,083 ===========
80 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value CONVERTIBLE CORPORATE BONDS - 0.7% Technology Hardware & Equipment - 0.3% Electronic Manufacturing Services - 0.3% 150,000 B+/Ba3 SCI Systems, Inc., 3.0%, 3/15/07 $ 144,750 ----------- Total Technology Hardware & Equipment $ 144,750 ----------- Semiconductors - 0.4% Semiconductor Equipment - 0.4% 170,000 NR/NR Brooks Automation, Inc., 4.75%, 6/1/08 $ 165,538 ----------- Total Semiconductors $ 165,538 ----------- TOTAL CONVERTIBLE CORPORATE BONDS (Cost $277,820) $ 310,288 ----------- ASSET BACKED SECURITIES - 2.4% Diversified Financials - 0.9% Consumer Finance - 0.0% DKK 69,512 AA+/Aa1 Realkredit Danmark, 7.0%, 10/1/32 $ 13,387 ----------- Diversified Financial Services - 0.8% 216,055 BBB-/Baa2 PF Export Receivable Master Trust, 6.436%, 6/1/15 (144A) $ 214,739 167,399 BBB/Baa2 Power Receivables Finance, 6.29%, 1/1/12 (144A) 176,179 ----------- $ 390,918 ----------- Total Diversified Financials $ 404,305 ----------- Utilities - 1.5% Electric Utilities - 1.5% 233,750 BBB-/Baa3 Empresa Electric Guacolda, 8.625%, 4/30/13 (144A) $ 266,943 425,700 BB-/Ba2 FPL Energy Wind Funding, 6.876%, 6/27/17 (144A) 439,003 ----------- Total Utilities $ 705,946 ----------- TOTAL ASSET BACKED SECURITIES (Cost $1,085,047) $ 1,110,251 ----------- COLLATERALIZED MORTGAGE OBLIGATIONS - 0.9% Diversified Financials - 0.9% Diversified Financial Services - 0.9% 160,000 BBB-/Baa3 Tower 2004-1A E, 5.395%, 1/15/34 $ 159,703 265,000 BB/NR Tower 2004-2A F, 6.376%, 12/15/14 263,675 ----------- Total Diversified Financials $ 423,378 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $425,000) $ 423,378 ----------- CORPORATE BONDS - 53.8% Energy - 5.2% Oil & Gas Drilling - 0.9% ITL 275,000,000 BBB-/Baa2 Petroleos Mexicanos, 7.375%, 8/13/07 $ 211,697 215,000 BB-/Ba3 Stena AB, 7.0%, 12/1/16 (144A) 212,850 ----------- $ 424,547 ----------- Oil & Gas Equipment & Services - 0.7% 240,000 BB-/Ba3 Hornbeck Offshore Service , 6.125%, 12/1/14 (144A) $ 241,200 76,000 B+/B3 Transmontaigne, Inc., 9.125%, 6/1/10 82,460 ----------- $ 323,660 -----------
The accompanying notes are an integral part of these financial statements. 81 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Oil & Gas Exploration & Production - 2.7% 300,000 B-/B3 Baytex Energy, Ltd., 9.625%, 7/15/10 $ 321,000 60,000 BB-/Ba3 Chesapeake Energy Corp., 6.375%, 6/15/15 (144A) 61,650 55,000 B/B2 Comstock Resources, Inc., 6.875%, 3/1/12 56,788 300,000 BB-/Ba2 Gaz Capital SA, 8.625%, 4/28/34 (144A) 351,000 250,000 BBB-/NR Gazprom International SA., 7.201%, 2/1/20 (144A) 264,375 160,000 B+/B2 Stone Energy Corp., 6.75%, 12/15/14 (144A) 159,600 ----------- $ 1,214,413 ----------- Oil & Gas Refining Marketing & Transportation - 0.9% 50,000 BB/Ba2 Citgo Petroleum Corp., 6.0%, 10/15/11 (144A) $ 49,750 350,000 BBB/Ba1 Magellan Midstream Partners, L.P., 6.45%, 6/1/14 378,492 ----------- $ 428,242 ----------- Total Energy $ 2,390,862 ----------- Materials - 12.2% Aluminum - 0.3% 135,000 B-/B3 Imco Recycling Escrow, 9.0%, 11/15/14 144A $ 140,400 ----------- Commodity Chemicals - 1.1% 110,000 B+/B1 Arco Chemical Co., 9.8%, 2/1/20 $ 125,400 13,000 B+/B1 Lyondell Petrochemical Co., 9.875%, 5/1/07 13,618 300,000 BBB-/Ba1 Methanex Corp., 8.75%, 8/15/12 350,250 ----------- $ 489,268 ----------- Construction Materials - 1.0% NOK 3,200,000 NR/NR Kvaerner A.S., 0.0%, 10/30/11 $ 423,158 60,000 NR/NR Kvaerner A.S., 0.0%, 10/30/11 48,150 ----------- $ 471,308 ----------- Diversified Chemical - 0.3% EUR 79,000 CCC+/Caa1 Huntsman ICI Chemicals LLC, 10.125%, 7/1/09 $ 112,881 ----------- Diversified Metals & Mining - 2.8% 140,000 B+/B1 Freeport-McMoran Copper & Gold, 10.125%, 2/1/10 $ 159,950 250,000 B+/B1 Freeport-McMoran Copper & Gold, 6.875%, 2/1/09 248,438 100,000 BBB/Ba1 Kennametal, Inc., 7.2%, 6/15/12 111,124 400,000 NR/Ba2 Vale Overseas, Ltd., 8.25%, 1/17/34 421,000 340,000 BB/Ba2 Vedenta Resources Plc, 6.625%, 2/22/10 (144A) 344,050 ----------- $ 1,284,562 ----------- Forest Products - 1.2% 225,000 B+/B1 Ainsworth Lumber, 6.75%, 3/15/14 $ 220,219 300,000 BB-/Ba2 Sino Forest Corp., 9.125%, 8/17/11 (144A) 327,750 ----------- $ 547,969 ----------- Metal & Glass Containers - 0.9% EUR 100,000 B+/NR Crown Holdings, 10.25%, 3/1/11 $ 157,482 130,000 B+/B1 Greif Brothers Corp., 8.875%, 8/1/12 144,625 100,000 B+/B2 Vitro Envases Norteamerica, 10.75%, 7/23/11 (144A) 103,750 ----------- $ 405,857 ----------- Paper Products - 0.2% 100,000 BB-/Ba3 Abitibi-Consolidated, Inc., 6.0%, 6/20/13 $ 95,375 -----------
82 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Specialty Chemicals - 2.9% 43,000 B+/B1 Arco Chemical Co., 9.375%, 12/15/05 $ 44,935 340,000 BBB-/Baa3 Basell Finance Co., 8.1%, 3/15/27 (144A) 312,800 300,000 BB+/Baa3 Ferro Corp., 7.125%, 4/1/28 297,432 25,000 BB+/Baa3 Ferro Corp., 7.625%, 5/1/13 25,858 170,000 B-/Caa1 OM Group, Inc., 9.25%, 12/15/11 181,050 EUR 140,000 CCC+/B3 Rhodia SA, 8.0%, 6/1/10 196,717 EUR 45,000 CCC+/Caa1 Rhodia SA, 9.25%, 6/1/11 62,161 50,000 B-/B3 Rockwood Specialties Group, 7.625%, 11/15/14 (144A) 69,832 135,000 B-/B3 United Industries Co., 9.875%, 4/1/09 141,244 ----------- $ 1,332,029 ----------- Steel - 1.5% 100,000 BB-/B1 CSN Islands IX Corp., 10.0%, 1/15/15 (144A) $ 107,375 225,000 BB-/B1 CSN Islands VIII Corp., 9.75%, 12/16/13 (144A) 240,750 325,000 BBB/B3 Ispat Inland ULC, Floating Rate, 4/1/10 (b) 353,438 ----------- $ 701,563 ----------- Total Materials $ 5,581,212 ----------- Capital Goods - 4.5% Building Products - 1.0% 215,000 BB/Ba3 Asia Aluminum Holdings, 8.0%, 12/23/11 (144A) $ 217,150 195,000 B/B2 Resolution Performance Products, 8.0%, 12/15/09 209,625 50,000 B-/B3 US Concrete, Inc., 8.375%, 4/1/14 53,875 ----------- $ 480,650 ----------- Construction & Farm Machinery & Heavy Trucks - 0.3% 140,000 B-/B3 American Rock Salt Co., LLC, 9.5%, 3/15/14 $ 146,300 ----------- Construction & Engineering - 1.3% 225,000 CCC+/Caa1 J Ray McDermott SA, 11.0%, 12/15/13 (144A) $ 250,875 315,000 B+/Ba3 Shaw Group, Inc., 10.75%, 3/15/10 (a) 347,288 ----------- $ 598,163 ----------- Heavy Electrical Equipment - 0.9% 398,923 NR/NR Ormat Funding Corp., 8.25%, 12/30/20 $ 398,923 ----------- Industrial Machinery - 1.0% 175,000 B/B3 JLG Industries, Inc., 8.375%, 6/15/12 (a) $ 187,250 250,000 B+/Ba2 Sun Sage BV, 8.25%, 3/26/09 (144A) 262,500 ----------- $ 449,750 ----------- Total Capital Goods $ 2,073,786 ----------- Commercial Services & Supplies - 1.9% Diversified Commercial Services - 1.2% 115,000 B-/B3 Cornell Co's., Inc., 10.75%, 7/1/12 $ 122,906 215,000 CCC+/Caa1 Park-Ohio Industries, Inc., 8.375%, 11/15/14 (144A) 215,000 215,000 B+/B2 United Rentals NA, Inc., 7.75%, 11/15/13 (a) 210,700 ----------- $ 548,606 ----------- Environmental Services - 0.7% 200,000 B/B3 Clean Harbors, Inc., 11.25%, 7/15/12 (144A) $ 224,000 75,000 B+/B3 IESI Corp., 10.25%, 6/15/12 87,750 ----------- $ 311,750 ----------- Total Commercial Services & Supplies $ 860,356 -----------
The accompanying notes are an integral part of these financial statements. 83 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Transportation - 3.3% Air Freight & Couriers - 0.3% 130,000 BB-/B1 Petroleum Helicopters, 9.375%, 5/1/09 $ 142,350 ----------- Airlines - 0.9% 35,000 CCC/Caa2 AMR Corp., 9.0%, 8/1/12 (a) $ 28,175 50,000 CCC/Caa2 AMR Corp., 9.0%, 9/15/16 39,000 85,000 CCC/Caa2 AMR Corp., 9.8%, 10/1/21 61,625 150,000 B/B3 Continental Air, Inc., 7.568%, 12/1/06 123,100 25,000 CCC+/Caa1 Northwest Airlines, Inc., 8.7%, 3/15/07 22,125 150,000 CCC+/Caa1 Northwest Airlines, Inc., 9.875%, 3/15/07 (a) 135,375 ----------- $ 409,400 ----------- Marine - 1.0% 100,000 CCC+/B3 Horizon Lines LLC., 9.0%, 11/1/12 (144A) $ 107,500 325,000 B/B2 Ship Finance International, Ltd., 8.5%, 12/15/13 334,750 ----------- $ 442,250 ----------- Railroads - 0.5% 210,000 CCC+/B3 Atlantic Express Transport, 12.0%, 4/15/08 $ 205,013 ----------- Transportation - 0.3% 150,000 B/B2 TFM SA De CV, 11.75%, 6/15/09 $ 152,813 ----------- Trucking - 0.3% 145,000 B-/B3 Trailer Bridge, Inc. 9.25%, 11/15/11 (144A) $ 148,988 ----------- Total Transportation $ 1,500,814 ----------- Automobiles & Components - 0.4% Auto Parts & Equipment - 0.3% 135,000 B-/B3 Tenneco Automotive, Inc., 8.625%, 11/15/14 (144A) $ 140,400 ----------- Automobile Manufacturers - 0.1% 35,000 BBB-/A3 Ford Motor Credit Co., 5.8%, 1/12/09 $ 35,775 ----------- Total Automobiles & Components $ 176,175 ----------- Consumer Durables & Apparel - 0.6% Textiles - 0.6% 240,000 B+/B1 Invista, 9.25%, 5/1/12 (144A) $ 267,600 ----------- Total Consumer Durables & Apparel $ 267,600 ----------- Media - 0.7% Broadcasting & Cable Television - 0.7% 150,000 B-/B2 Kabel Deutschland GMBH, 10.625%, 7/1/14 $ 172,500 100,000 B-/B2 Kabel Deutschland, 10.75%, 7/1/14 (144A) 159,518 ----------- $ 332,018 ----------- Total Media $ 332,018 ----------- Retailing - 0.6% Specialty Stores - 0.6% 145,000 B/B3 Asbury Automotive Group, 8.0%, 3/15/14 $ 143,550 35,000 B/B3 Pep Boys-Manny Moe Jack, 7.5%, 12/15/14 35,481 100,000 BB/Ba2 Toys "R" Us, 7.375%, 10/15/18 92,500 ----------- $ 271,531 ----------- Total Retailing $ 271,531 -----------
84 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Food & Drug Retailing - 0.5% Drug Retail - 0.5% 170,000 CCC/Caa1 Duane Reade, Inc., 9.75%, 8/1/11 (144A) $ 154,700 60,000 B-/B2 Duane Reade, Inc., Floating Rate, 12/15/10 (144A) (b) 60,900 ----------- $ 215,600 ----------- Total Food & Drug Retailing $ 215,600 ----------- Food, Beverage & Tobacco - 0.8% Brewers - 0.6% 220,000 BBB/Baa3 Cia Brasileira de Bebida, 8.75%, 9/15/13 $ 256,300 ----------- Soft Drinks - 0.2% 80,000 BBB/Baa3 Cia Brasileira de Bebida, 10.5%, 12/15/11 $ 100,400 ----------- Total Food, Beverage & Tobacco $ 356,700 ----------- Health Care Equipment & Services - 1.7% Health Care Distributors - 0.1% 60,000 BB+/Ba2 Omnicare, Inc., 6.125%, 6/1/13 $ 60,300 ----------- Health Care Facilities - 1.3% 350,000 BB+/Ba2 HCA, Inc., 6.3%, 10/1/12 $ 354,972 210,000 BB/Ba1 Mayne Group, Ltd., 5.875%, 12/1/11 (144A) 213,938 ----------- $ 568,910 ----------- Health Care Supplies - 0.3% 125,000 B-/Caa1 Inverness Medical Innovation, 8.75%, 2/15/12 $ 130,625 ----------- Total Health Care Equipment & Services $ 759,835 ----------- Banks - 0.5% Diversified Banks - 0.5% 200,000 B+/Baa2 Halyk Savings Bank Kazaktn, 8.125%, 10/7/09 (144A) $ 207,500 15,000 BBB+/A1 Skandinaviska Enskilda Bank, 8.125%, 9/6/49 (144A) 16,086 ----------- $ 223,586 ----------- Total Banks $ 223,586 ----------- Diversified Financials - 7.1% Consumer Finance - 0.6% 265,000 A/A2 SLM Corp., Floating Rate, 7/25/14 (b) $ 264,051 ----------- Investment Banking & Brokerage - 2.1% EUR 200,000 B-/B3 BCP Caylux Holdings Lux SCA, 10.375%, 6/15/14 (144A) $ 316,321 EUR 50,000 B-/B3 BCP Caylux Holdings Lux SCA, 9.625%, 6/15/14 (144A) 56,375 325,000 B+/B1 E*Trade Financial Corp., 8.0%, 6/15/11 (144A) 349,375 250,000 B/B3 Refco Finance Holdings, 9.0%, 8/1/12 (144A) 273,750 ----------- $ 995,821 ----------- Diversified Financial Services - 2.9% 157,000 CCC/Caa1 Alamosa Delaware, Inc., 0.0%, 7/31/09 $ 170,345 250,000 BB+/Ba2 Aries Vermogensverwaltng, 9.6%, 10/25/14 (144A) 307,500 210,000 B/B3 Dollar Financial Group, 9.75%, 11/15/11 227,850 425,000 BBB-/Baa3 Glencore Funding LLC, 6.0%, 4/15/14 (144A) 411,178 200,000 B/B1 Sheridan Acquisition Corp., 10.25%, 8/15/11 218,750 ----------- $ 1,335,623 -----------
The accompanying notes are an integral part of these financial statements. 85 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Specialized Finance - 1.4% 95,000 CCC+/B3 Aventine Renewable Energy, Floating Rate, 12/15/11 (144A) (b) $ 95,950 55,000 B-/Caa1 K&F Acquisition, Inc., 7.75%, 11/15/14 (144A) 56,788 145,000 B+/Ba3 Magnachip Semiconductor, Floating Rate, 12/15/11 (b) 148,988 225,000 NR/Baa3 Tengizchevroil LLP, 6.124%, 11/15/14 (144A) 225,563 100,000 B-/B3 UGS Corp., 10.0%, 6/1/12 (144A) 113,750 ----------- $ 641,039 ----------- Total Diversified Financials $ 3,236,534 ----------- Insurance - 3.8% Life & Health Insurance - 1.4% 365,000 B+/B2 Presidential Life Corp., 7.875%, 2/15/09 $ 365,000 300,000 BB+/Ba1 Provident Companies, Inc., 7.0%, 7/15/18 (a) 289,875 ----------- $ 654,875 ----------- Multi-Line Insurance - 0.5% 210,000 BB/Ba1 Allmerica Financial Corp., 7.625%, 10/15/25 $ 213,929 ----------- Property & Casualty Insurance - 1.4% 285,000 BBB-/NR Kingsway America, Inc., 7.5%, 2/1/14 $ 295,480 350,000 BB/Baa3 Ohio Casualty Corp., 7.3%, 6/15/14 376,669 ----------- $ 672,149 ----------- Reinsurance - 0.5% 200,000 BBB-/Baa3 Odyssey Re Holdings, 7.65%, 11/1/13 $ 220,592 ----------- Total Insurance $ 1,761,545 ----------- Real Estate - 1.3% Real Estate Management & Development - 0.7% 185,000 BB-/Ba3 Forest City Enterprises, 7.625%, 6/1/15 $ 196,100 100,000 CCC+/Caa1 LNR Property Co., 7.25%, 10/15/13 112,624 ----------- $ 308,724 ----------- Real Estate Investment Trusts - 0.6% 120,000 B+/B3 BF Saul Real Estate Investment Trust, 7.5%, 3/1/14 $ 123,600 155,000 B/B1 Crescent Real Estate, 9.25%, 4/15/09 169,723 ----------- $ 293,323 ----------- Total Real Estate $ 602,047 ----------- Software & Services - 0.3% Application Software - 0.3% 100,000 B-/B3 Riverdeep Group, Ltd., 9.25%, 4/15/11 $ 145,263 ----------- Total Software & Services $ 145,263 ----------- Technology Hardware & Equipment - 0.8% Communications Equipment - 0.8% 50,000 BB+/Ba2 Corning, Inc., 5.9%, 3/15/14 $ 50,111 150,000 BB+/Ba2 Corning, Inc., 6.3%, 3/1/09 157,320 200,000 BB/Ba3 Rogers Wireless, Inc., 7.625%, 12/15/11 (144A) 173,358 ----------- $ 380,789 ----------- Total Technology Hardware & Equipment $ 380,789 -----------
86 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Telecommunication Services - 5.4% Integrated Telecommunication Services - 2.5% 325,000 B+/B2 GCI Inc., 7.25%, 2/15/14 $ 325,000 145,000 B+/B2 Innova S De R.L., 9.375%, 9/19/13 164,938 180,000 B-/B3 NTL Cable Plc., 8.75%, 4/15/14 (144A) 272,470 375,000 NR/Baa3 Tele Norte Leste Participacoes, 8.0%, 12/18/13 386,250 ----------- $ 1,148,658 ----------- Wireless Telecommunication Services - 2.9% 200,000 B-/B2 Inmarsat Finance Plc., 7.625%, 6/3/12 $ 208,000 130,000 CCC+/B3 Iwo Escrow Co., Floating Rate, 1/15/12 (144A) (b) 130,975 170,000 CCC+/B3 MetroPCS, Inc., 10.75%, 10/1/11 (144A) 181,900 150,000 B-/B3 Mobifon Holdings, 12.5%, 7/31/10 (144A) 177,937 115,000 BB-/Ba3 Mobile Telesystems Finance, 8.375%, 10/14/10 (144A) 117,300 CAD 240,000 BB/Ba3 Rogers Cantel, Inc., 10.5%, 6/1/06 214,886 275,000 CCC/Caa1 Ubiquitel Operating Co., 9.875%, 3/1/11 308,688 ----------- $ 1,339,686 ----------- Total Telecommunication Services $ 2,488,344 ----------- Utilities - 2.2% Electric Utilities - 2.2% 150,000 CCC/Caa1 Alamosa Delaware, 8.5%, 1/31/12 $ 163,875 350,000 NR/NR Juniper Generation, 6.79%, 12/31/14 (144A) 349,992 250,000 BBB-/Baa3 Kiowa Power Partners LLC, 5.737%, 3/30/21 (144A) 251,000 250,000 BB-/Ba2 MSW Energy Holdings, 7.375%, 9/1/10 262,500 ----------- $ 1,027,367 ----------- Total Utilities $ 1,027,367 ----------- TOTAL CORPORATE BONDS (Cost $22,963,833) $24,651,964 ----------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 24.3% 49,633 AAA/Aaa Federal Home Loan Mortgage Corp., 5.0%, 5/1/34 $ 49,321 79,514 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 10/1/16 82,257 199,797 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 11/1/34 203,100 358,609 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 6/1/17 375,630 20,671 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/33 21,383 86,944 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 11/1/33 89,854 450,000 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/34 465,083 15,278 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 2/1/33 15,804 951,792 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 8/1/34 983,694 298,548 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0% 11/1/33 308,540 118,338 AAA/Aaa Federal National Mortgage Association, 5.5%, 12/1/18 122,403 67,990 AAA/Aaa Federal National Mortgage Association, 5.5%, 3/1/18 70,325 128,343 AAA/Aaa Federal National Mortgage Association, 5.5%, 4/1/19 132,783 198,134 AAA/Aaa Federal National Mortgage Association, 5.5%, 5/1/34 201,266 166,061 AAA/Aaa Federal National Mortgage Association, 6.0%, 1/1/34 171,799 13,994 AAA/Aaa Federal National Mortgage Association, 6.0%, 2/1/32 14,490 134,097 AAA/Aaa Federal National Mortgage Association, 6.0%, 7/1/17 140,597 14,754 AAA/Aaa Federal National Mortgage Association, 6.0% 11/1/32 15,276 449,455 AAA/Aaa Federal National Mortgage Association, 6.0%, 11/1/33 464,956 9,894 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/31 10,245 145,157 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/33 150,163
The accompanying notes are an integral part of these financial statements. 87 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value U.S. Government and Agency Obligations - (Cont.) 177,250 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/33 $ 183,363 AUD 800,000 AAA/Aaa Federal National Mortgage Association, 6.375%, 8/15/07 638,810 11,958 AAA/Aaa Federal National Mortgage Association, 6.5%, 2/1/32 12,554 2,108 AAA/Aaa Federal National Mortgage Association, 6.5%, 7/1/31 2,214 7,397 AAA/Aaa Federal National Mortgage Association, 6.5%, 10/1/31 7,765 1,736 AAA/Aaa Federal National Mortgage Association, 7.0%, 9/1/29 1,842 460 AAA/Aaa Federal National Mortgage Association, 7.5%, 6/1/30 492 188,900 AAA/Aaa Government National Mortgage Association, 4.5%, 5/15/34 184,437 187,405 AAA/Aaa Government National Mortgage Association, 5.5%, 4/20/34 191,324 71,532 AAA/Aaa Government National Mortgage Association, 5.5%, 7/15/34 73,096 496,112 AAA/Aaa Government National Mortgage Association, 5.5%, 10/15/19 517,398 497,067 AAA/Aaa Government National Mortgage Association, 5.5%, 10/15/34 507,930 361,022 AAA/Aaa Government National Mortgage Association, 6.0%, 2/15/18 380,447 51,042 AAA/Aaa Government National Mortgage Association, 6.0%, 2/15/33 52,935 37,103 AAA/Aaa Government National Mortgage Association, 6.0%, 3/15/33 38,478 110,588 AAA/Aaa Government National Mortgage Association, 6.0%, 3/15/33 114,688 72,794 AAA/Aaa Government National Mortgage Association, 6.0%, 3/15/33 75,546 37,990 AAA/Aaa Government National Mortgage Association, 6.0%, 5/15/17 40,031 35,885 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/17 37,813 277,895 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/17 292,826 93,191 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/33 96,646 74,872 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/33 77,648 62,068 AAA/Aaa Government National Mortgage Association, 6.0%, 7/15/33 64,370 132,790 AAA/Aaa Government National Mortgage Association, 6.0%, 7/15/33 137,713 707,891 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/16 745,964 225,479 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/19 237,603 150,775 AAA/Aaa Government National Mortgage Association, 6.0%, 9/15/33 156,365 59,656 AAA/Aaa Government National Mortgage Association, 6.0%, 9/15/33 61,867 101,283 AAA/Aaa Government National Mortgage Association, 6.0%, 10/15/33 105,039 499,075 AAA/Aaa Government National Mortgage Association, 6.0%, 10/15/34 517,609 13,740 AAA/Aaa Government National Mortgage Association, 6.5%, 1/15/30 14,477 43,755 AAA/Aaa Government National Mortgage Association, 6.5%, 1/15/33 46,072 192,578 AAA/Aaa Government National Mortgage Association, 6.5%, 1/15/34 202,766 35,569 AAA/Aaa Government National Mortgage Association, 6.5%, 2/15/32 37,476 52,338 AAA/Aaa Government National Mortgage Association, 6.5%, 3/15/29 55,163 39,310 AAA/Aaa Government National Mortgage Association, 6.5%, 3/15/32 41,418 81,978 AAA/Aaa Government National Mortgage Association, 6.5%, 5/15/33 86,318 4,190 AAA/Aaa Government National Mortgage Association, 6.5%, 6/15/31 4,415 50,371 AAA/Aaa Government National Mortgage Association, 6.5%, 11/15/32 53,071 2,005 AAA/Aaa Government National Mortgage Association, 7.0%, 3/15/31 2,131 4,892 AAA/Aaa Government National Mortgage Association, 7.0%, 3/15/31 5,200 25,219 AAA/Aaa Government National Mortgage Association, 7.5%, 5/15/23 26,943 182,274 AAA/Aaa Government National Mortgage Association II, 5.5%, 3/20/34 186,087 387,393 AAA/Aaa Government National Mortgage Association II, 6.0%, 11/20/33 401,272 175,000 AAA/Aaa U.S. Treasury Notes, 5.25%, 2/15/29 183,572 120,000 AAA/Aaa U.S. Treasury Notes, 5.375%, 2/15/31 129,759 ----------- $11,119,922 ----------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $10,991,307) $11,119,922 -----------
88 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value FOREIGN GOVERNMENT BONDS - 11.9% ITL 530,000,000 B+/B1 Banco Nac De Desen Econo, 8.0%, 4/28/10 $ 397,631 CAD 27,000 AAA/Aaa Government of Canada, 4.25%, 9/1/08 23,139 CAD 659,000 AAA/Aaa Government of Canada, 4.25%, 9/1/09 562,973 CAD 315,000 AAA/Aaa Government of Canada, 5.25%, 6/1/12 281,542 EUR 343,000 AAA/Aaa Government of France, 3.0%, 7/25/09 556,888 SEK 1,665,000 TSY/Aaa Government of Sweden, 5.25%, 3/15/11 274,070 SEK 2,955,000 TSY/Aaa Government of Sweden, 5.5%, 10/8/12 496,200 SEK 2,150,000 TSY/Aaa Government of Sweden, 8.0%, 8/15/07 365,979 JPY 10,000,000 TSY/Tsy Government of Japan, 1.5%, 1/20/05 97,729 NOK 1,320,000 TSY/Aaa Norwegian Government, 6.0%, 5/16/11 246,852 NOK 3,410,000 TSY/Aaa Norwegian Government, 6.75%, 1/15/07 609,083 AUD 532,000 AA/Aa2 Ontario Province, 5.5%, 4/23/13 409,458 AUD 207,000 NR/Aaa Queensland Treasury, 6.0%, 8/14/13 167,600 315,605 BB+/Ba2 Republic of Columbia, 9.75%, 4/9/11 362,946 250,000 BB/Ba1 Republic of Panama, 7.25%, 3/15/15 260,000 185,000 BB-/Ba3 Republic of Peru, 8.375%, 5/3/16 207,200 DEM 180,000 BBB-/Baa3 United Mexican States, 8.25%, 2/24/09 146,377 ----------- $ 5,465,667 ----------- TOTAL FOREIGN GOVERNMENT BONDS (Cost $4,501,809) $ 5,465,667 ----------- SOVEREIGN ISSUES - 0.6% 75,000 CC/B3 Domincan Republic, 9.04%, 1/23/13 (144A) $ 62,063 100,000 BB-/Ba3 Republic of Peru, 9.875%, 2/06/15 122,500 75,000 BB-/Ba3 Republic of Peru, 9.125%, 2/21/12 87,375 ----------- TOTAL SOVEREIGN ISSUES (Cost $266,679) $ 271,938 ----------- MUNICIPAL BONDS - 1.9% Government - 1.0% 90,000 BBB/Baa3 Golden State Tobacco Securitization, 6.75%, 6/1/39 $ 90,050 175,000 B/Caa2 New Jersey Economic Development Authority Special Facility Revenue, 7.0%, 11/15/30 154,257 105,000 BBB/Baa3 Tobacco Settlement Authority Washington, 6.625%, 6/1/32 103,106 60,000 BBB/Baa3 Tobacco Settlement Financing Corp., 7.0%, 6/1/41 60,602 100,000 NR/NR Wayne Charter County SPL, 6.75%, 12/1/15 87,404 ----------- $ 495,419 ----------- Muni Airport - 0.1% 50,000 B/Caa2 New Jersey Economic Development Authority, 6.25%, 9/15/29 $ 40,630 ----------- Muni Tobacco - 0.7% 300,000 BBB/Baa3 Tobacco Settlement Financing Corp., NJ, 6.25%, 6/1/43 $ 279,105 50,000 BBB/Baa3 Tobacco Settlement Financing Corp., NJ, 6.25%, 6/1/42 46,411 ----------- $ 325,516 ----------- Total Government $ 861,565 ----------- TOTAL MUNICIPAL BONDS (Cost $773,830) $ 861,565 -----------
The accompanying notes are an integral part of these financial statements. 89 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
S&P/Moody's Shares Ratings Value TEMPORARY CASH INVESTMENT - 2.6% Security Lending Collateral - 2.6% 1,191,203 Securities Lending Investment Fund, 2.18% $ 1,191,203 ----------- TOTAL TEMPORARY CASH INVESTMENT (Cost $1,191,203) $ 1,191,203 ----------- TOTAL INVESTMENTS IN SECURITIES - 99.1% (Cost $42,476,528) (b) $45,406,176 ----------- OTHER ASSETS AND LIABILITIES - 0.9% $ 434,717 ----------- TOTAL NET ASSETS - 100.0% $45,840,892 ============
144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At December 31, 2004, the value of these securities amounted to $10,546,821 or 24.1% of net assets. NR Not rated by either S&P or Moody's TSY Treasury Security (a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value 33,250 AMR Corp., 9.0%, 8/1/12 $ 26,766 166,250 JLG Industries, Inc., 8.375%, 6/15/12 177,888 142,250 Northwest Airlines, Inc., 9.875%, 3/15/07 128,381 285,000 Provident Companies, Inc., 7.0%, 7/15/18 276,450 299,250 Shaw Group, Inc., 10.75%, 3/15/10 329,174 204,250 United Rentals NA, Inc., 7.75%, 11/15/13 200,165 ----------- Total $ 1,138,824 ===========
(b) Debt obligation initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. NOTE: Principal amounts are denominated in U.S. dollars unless otherwise noted. DEM Deutsche Marks. EURO Euro SEK Swedish Krona. NOK Norwegian Kroner. ITL Italian Lira. CAD Canadian Dollar. AUD Australian Dollar. JPY Japanese Yen. DKK Danish Kroner 90 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer America Income VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Principal Amount Value COLLATERALIZED MORTGAGE OBLIGATIONS - 0.4% Government - 0.4% $ 176,290 Freddie Mac, 5.0%, 1/15/16 $ 179,566 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $182,044) $ 179,566 ----------- CORPORATE BONDS - 0.5% Miscellaneous - 0.5% 250,000 Private Export Funding, 3.375%, 2/15/09 $ 246,378 ----------- TOTAL CORPORATE BONDS (Cost $250,000) $ 246,378 ----------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 95.8% 275,973 Fannie Mae, 5.5%, 6/1/23 $ 282,311 250,000 Fannie Mae, Floating Rate Note, 3/1/19 247,845 250,000 Federal Farm Credit Bank, 3.25%, 6/15/07 249,358 400,000 Federal Farm Credit Bank, 4.9%, 3/17/14 390,855 100,000 Federal Farm Credit Bank, 5.88%, 9/8/08 107,537 200,000 Federal Farm Credit Bank, Medium Term Note, 6.38%, 11/27/06 211,468 400,000 Federal Home Loan Bank, 4.53%, 10/30/06 409,193 850,000 Federal Home Loan Bank, 5.875%, 11/15/07 905,489 300,000 Federal Home Loan Bank, 5.89%, 6/30/08 322,649 290,891 Federal Home Loan Mortgage Corp., 5.5%, 9/1/34 295,700 251,395 Federal Home Loan Mortgage Corp., 6.0%, 2/1/33 260,053 1,175,562 Federal Home Loan Mortgage Corp., 6.0%, 3/1/33 1,214,904 899,518 Federal Home Loan Mortgage Corp., 6.0%, 5/1/34 929,668 105,850 Federal Home Loan Mortgage Corp., 6.0%, 10/1/32 109,496 218,792 Federal Home Loan Mortgage Corp., 6.0%, 11/1/32 226,328 488,433 Federal Home Loan Mortgage Corp., 6.0%, 11/1/32 505,255 57,634 Federal Home Loan Mortgage Corp., 6.0%, 12/1/32 59,619 187,579 Federal Home Loan Mortgage Corp., 6.0%, 12/1/32 194,040 76,135 Federal Home Loan Mortgage Corp., 6.5%, 1/1/29 80,041 62,203 Federal Home Loan Mortgage Corp., 6.5%, 2/1/32 65,331 38,797 Federal Home Loan Mortgage Corp., 6.5%, 3/1/29 40,770 104,969 Federal Home Loan Mortgage Corp., 6.5%, 3/1/11 111,272 51,493 Federal Home Loan Mortgage Corp., 6.5%, 4/1/31 54,083 295,687 Federal Home Loan Mortgage Corp., 6.5%, 4/1/32 310,484 102,288 Federal Home Loan Mortgage Corp., 6.5%, 7/1/32 107,407 313,916 Federal Home Loan Mortgage Corp., 6.5%, 7/1/16 332,419 101,667 Federal Home Loan Mortgage Corp., 6.5%, 10/1/31 106,780 140,000 Federal Home Loan Mortgage Corp., 6.7%, 1/5/07 149,258 28,003 Federal Home Loan Mortgage Corp., 7.0%, 2/1/31 29,688 31,723 Federal Home Loan Mortgage Corp., 7.0%, 3/1/32 33,769 3,927 Federal Home Loan Mortgage Corp., 7.0%, 4/1/30 4,163 54,342 Federal Home Loan Mortgage Corp., 7.0%, 4/1/32 57,612 9,139 Federal Home Loan Mortgage Corp., 7.0%, 6/1/31 9,688 4,628 Federal Home Loan Mortgage Corp., 7.0%, 7/1/31 4,906 12,064 Federal Home Loan Mortgage Corp., 7.0%, 9/1/31 12,786 51,676 Federal Home Loan Mortgage Corp., 7.5%, 8/1/31 55,390 279,272 Federal National Mortgage Association, 4.5%, 4/1/19 278,559 111,964 Federal National Mortgage Association, 5.0%, 3/1/09 113,931
The accompanying notes are an integral part of these financial statements. 91 PIONEER VARIABLE CONTRACTS TRUST Pioneer America Income VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Principal Amount Value U.S. Government and Agency Obligations - (Cont.) $ 251,032 Federal National Mortgage Association, 5.0%, 7/1/19 $ 255,213 268,174 Federal National Mortgage Association, 5.5%, 2/1/33 272,313 377,212 Federal National Mortgage Association, 5.5%, 3/1/18 390,263 290,566 Federal National Mortgage Association, 5.5%, 3/1/34 295,159 397,281 Federal National Mortgage Association, 5.5%, 4/1/18 412,484 458,366 Federal National Mortgage Association, 5.5%, 4/1/19 474,224 406,282 Federal National Mortgage Association, 5.5%, 9/1/33 412,816 425,363 Federal National Mortgage Association, 5.5%, 11/1/33 432,203 597,379 Federal National Mortgage Association, 6.0%, 3/1/33 618,531 157,145 Federal National Mortgage Association, 6.0%, 4/1/33 162,709 219,343 Federal National Mortgage Association, 6.0%, 5/1/33 226,908 187,628 Federal National Mortgage Association, 6.0%, 6/1/33 194,099 198,880 Federal National Mortgage Association, 6.0%, 7/1/34 205,753 227,731 Federal National Mortgage Association, 6.0%, 9/1/34 235,601 60,951 Federal National Mortgage Association, 6.0%, 10/1/32 63,109 96,547 Federal National Mortgage Association, 6.0%, 11/1/32 99,965 137,611 Federal National Mortgage Association, 6.0%, 11/1/32 142,484 314,302 Federal National Mortgage Association, 6.0%, 11/1/32 325,431 267,902 Federal National Mortgage Association, 6.0%, 12/1/11 281,400 65,962 Federal National Mortgage Association, 6.0%, 12/1/31 68,299 57,772 Federal National Mortgage Association, 6.5%, 1/1/29 60,686 46,300 Federal National Mortgage Association, 6.5%, 1/1/32 48,605 116,621 Federal National Mortgage Association, 6.5%, 1/1/32 122,426 29,107 Federal National Mortgage Association, 6.5%, 3/1/32 30,564 45,679 Federal National Mortgage Association, 6.5%, 3/1/32 47,953 48,840 Federal National Mortgage Association, 6.5%, 3/1/32 51,296 100,354 Federal National Mortgage Association, 6.5%, 3/1/32 105,334 121,433 Federal National Mortgage Association, 6.5%, 4/1/32 127,459 59,308 Federal National Mortgage Association, 6.5%, 7/1/21 62,594 106,676 Federal National Mortgage Association, 6.5%, 7/1/32 111,970 486,710 Federal National Mortgage Association, 6.5%, 7/1/34 510,579 63,447 Federal National Mortgage Association, 6.5%, 8/1/32 66,595 205,197 Federal National Mortgage Association, 6.5%, 8/1/32 215,379 101,389 Federal National Mortgage Association, 6.5%, 8/1/32 106,435 57,390 Federal National Mortgage Association, 6.5%, 9/1/32 60,238 12,729 Federal National Mortgage Association, 6.5%, 10/1/31 13,363 95,957 Federal National Mortgage Association, 6.5%, 10/1/31 100,733 93,880 Federal National Mortgage Association, 6.5%, 11/1/28 98,652 13,239 Federal National Mortgage Association, 7.0%, 1/1/29 14,046 38,406 Federal National Mortgage Association, 7.0%, 1/1/32 40,714 8,740 Federal National Mortgage Association, 7.0%, 5/1/31 9,268 26,507 Federal National Mortgage Association, 7.0%, 7/1/31 28,100 40,400 Federal National Mortgage Association, 7.0%, 8/1/19 43,079 64,486 Federal National Mortgage Association, 7.0%, 9/1/18 68,802 170,257 Federal National Mortgage Association, 7.0%, 9/1/30 180,633 26,521 Federal National Mortgage Association, 7.5%, 2/1/31 28,417 73,023 Federal National Mortgage Association, 9.0%, 4/1/33 79,055 300,000 Freddie Mac, 5.25%, 11/15/12 305,040 247,909 Government National Mortgage Association, 4.5%, 6/15/34 242,051 488,855 Government National Mortgage Association, 4.5%, 6/15/34 477,304
92 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer America Income VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal Amount Value U.S. Government and Agency Obligations - (Cont.) $ 438,519 Government National Mortgage Association, 4.5%, 8/15/33 $ 428,316 329,901 Government National Mortgage Association, 5.0%, 7/15/17 339,859 196,084 Government National Mortgage Association, 5.0%, 7/15/19 201,156 248,621 Government National Mortgage Association, 5.0%, 11/20/19 254,089 201,597 Government National Mortgage Association, 5.5%, 2/15/19 210,260 246,379 Government National Mortgage Association, 5.5%, 3/15/33 251,875 191,210 Government National Mortgage Association, 5.5%, 4/15/31 195,673 270,409 Government National Mortgage Association, 5.5%, 4/15/33 276,441 425,040 Government National Mortgage Association, 5.5%, 6/15/17 443,325 244,603 Government National Mortgage Association, 5.5%, 7/15/19 255,097 337,566 Government National Mortgage Association, 5.5%, 7/15/33 345,096 249,372 Government National Mortgage Association, 5.5%, 10/15/34 254,822 199,585 Government National Mortgage Association, 5.5%, 11/20/34 203,759 135,810 Government National Mortgage Association, 6.0%, 1/15/33 140,939 289,888 Government National Mortgage Association, 6.0%, 1/15/33 300,636 266,577 Government National Mortgage Association, 6.0%, 2/15/18 280,921 502,825 Government National Mortgage Association, 6.0%, 2/15/33 521,469 281,601 Government National Mortgage Association, 6.0%, 3/15/34 292,058 481,495 Government National Mortgage Association, 6.0%, 3/15/34 499,377 118,398 Government National Mortgage Association, 6.0%, 5/15/17 124,759 169,002 Government National Mortgage Association, 6.0%, 6/20/16 177,564 430,701 Government National Mortgage Association, 6.0%, 7/15/23 449,745 186,862 Government National Mortgage Association, 6.0%, 7/20/19 196,282 198,278 Government National Mortgage Association, 6.0%, 8/15/19 208,939 193,812 Government National Mortgage Association, 6.0%, 8/15/34 201,187 199,269 Government National Mortgage Association, 6.0%, 8/15/34 206,669 159,562 Government National Mortgage Association, 6.0%, 9/15/32 165,568 376,937 Government National Mortgage Association, 6.0%, 9/15/33 390,912 149,538 Government National Mortgage Association, 6.0%, 9/15/34 155,091 54,936 Government National Mortgage Association, 6.0%, 10/15/32 57,003 100,101 Government National Mortgage Association, 6.0%, 10/15/32 103,869 158,187 Government National Mortgage Association, 6.0%, 10/15/32 164,141 186,854 Government National Mortgage Association, 6.0%, 10/15/32 193,887 349,345 Government National Mortgage Association, 6.0%, 10/15/34 362,319 499,075 Government National Mortgage Association, 6.0%, 10/15/34 517,609 209,478 Government National Mortgage Association, 6.0%, 11/15/32 217,362 272,746 Government National Mortgage Association, 6.0%, 11/15/32 283,860 306,538 Government National Mortgage Association, 6.0%, 12/15/32 319,918 288,866 Government National Mortgage Association, 6.5%, 1/15/34 304,148 37,525 Government National Mortgage Association, 6.5%, 2/15/29 39,551 38,193 Government National Mortgage Association, 6.5%, 2/15/32 40,591 24,629 Government National Mortgage Association, 6.5%, 3/15/26 26,010 52,950 Government National Mortgage Association, 6.5%, 4/15/17 56,480 120,823 Government National Mortgage Association, 6.5%, 4/15/17 128,879 43,252 Government National Mortgage Association, 6.5%, 4/15/32 45,571 47,217 Government National Mortgage Association, 6.5%, 4/15/32 49,748 83,717 Government National Mortgage Association, 6.5%, 5/15/29 88,284 174,227 Government National Mortgage Association, 6.5%, 5/15/29 183,633 220,009 Government National Mortgage Association, 6.5%, 5/15/29 231,986 71,073 Government National Mortgage Association, 6.5%, 5/15/31 74,882
The accompanying notes are an integral part of these financial statements. 93 PIONEER VARIABLE CONTRACTS TRUST Pioneer America Income VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Principal Amount Value U.S. Government and Agency Obligations - (Cont.) $ 35,969 Government National Mortgage Association, 6.5%, 6/15/17 $ 38,367 60,894 Government National Mortgage Association, 6.5%, 6/15/28 64,223 69,534 Government National Mortgage Association, 6.5%, 6/15/28 73,356 9,091 Government National Mortgage Association, 6.5%, 6/15/29 9,581 72,881 Government National Mortgage Association, 6.5%, 6/15/31 76,787 354,205 Government National Mortgage Association, 6.5%, 6/15/31 373,187 34,467 Government National Mortgage Association, 6.5%, 6/15/32 36,314 46,460 Government National Mortgage Association, 6.5%, 6/15/32 48,951 50,698 Government National Mortgage Association, 6.5%, 6/15/32 53,415 117,221 Government National Mortgage Association, 6.5%, 7/15/31 123,503 109,376 Government National Mortgage Association, 6.5%, 7/15/32 115,239 104,642 Government National Mortgage Association, 6.5%, 9/15/31 110,250 134,252 Government National Mortgage Association, 6.5%, 10/15/31 141,447 40,151 Government National Mortgage Association, 6.5%, 12/15/31 42,303 81,034 Government National Mortgage Association, 6.5%, 12/15/31 85,377 16,161 Government National Mortgage Association, 7.0%, 1/15/26 17,231 40,750 Government National Mortgage Association, 7.0%, 1/15/29 43,347 60,301 Government National Mortgage Association, 7.0%, 2/15/28 64,192 44,369 Government National Mortgage Association, 7.0%, 2/15/31 47,159 117,595 Government National Mortgage Association, 7.0%, 2/20/29 124,683 52,848 Government National Mortgage Association, 7.0%, 3/15/28 56,258 26,131 Government National Mortgage Association, 7.0%, 4/15/28 27,817 30,698 Government National Mortgage Association, 7.0%, 5/15/31 32,629 141,847 Government National Mortgage Association, 7.0%, 5/15/32 150,755 37,838 Government National Mortgage Association, 7.0%, 6/15/29 40,249 45,696 Government National Mortgage Association, 7.0%, 7/15/26 48,723 20,983 Government National Mortgage Association, 7.0%, 7/15/29 22,320 45,098 Government National Mortgage Association, 7.0%, 7/15/29 47,972 38,315 Government National Mortgage Association, 7.0%, 8/15/31 40,725 23,557 Government National Mortgage Association, 7.0%, 9/15/27 25,088 63,087 Government National Mortgage Association, 7.0%, 11/15/28 67,158 6,305 Government National Mortgage Association, 7.0%, 12/15/30 6,702 22,876 Government National Mortgage Association, 7.5%, 1/15/31 24,569 33,466 Government National Mortgage Association, 7.5%, 1/15/32 35,941 1,856 Government National Mortgage Association, 7.5%, 6/15/23 2,007 2,186 Government National Mortgage Association, 7.5%, 8/15/23 2,364 8 Government National Mortgage Association, 7.5%, 8/15/29 8 7,983 Government National Mortgage Association, 7.5%, 8/15/29 8,575 9,870 Government National Mortgage Association, 7.5%, 10/15/22 10,677 33,802 Government National Mortgage Association, 7.5%, 10/15/29 36,312 44,869 Government National Mortgage Association, 7.5%, 11/15/29 48,201 125,390 Government National Mortgage Association I, 6.0%, 2/15/29 130,320 75,232 Government National Mortgage Association I, 7.0%, 11/15/30 79,969 39,724 Government National Mortgage Association I, 7.0%, 12/15/30 42,226 386,916 Government National Mortgage Association II, 5.0%, 12/20/18 395,665 453,100 Government National Mortgage Association II, 5.5%, 2/20/34 462,576 477,815 Government National Mortgage Association II, 5.5%, 7/20/19 496,824 373,784 Government National Mortgage Association II, 6.0%, 6/20/34 387,198 279,628 Government National Mortgage Association II, 6.0%, 11/20/33 289,646 83,628 Government National Mortgage Association II, 6.0%, 12/20/18 87,866
94 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer America Income VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal Amount Value U.S. Government and Agency Obligations - (Cont.) $ 48,500 $ 46,129 Government National Mortgage Association II, 6.5%, 9/20/31 47,030 44,673 Government National Mortgage Association II, 6.5%, 8/20/28 63,525 60,358 Government National Mortgage Association II, 6.5%, 12/20/28 24,358 22,993 Government National Mortgage Association II, 7.0%, 1/20/31 61,139 57,526 Government National Mortgage Association II, 7.0%, 5/20/26 10,451 9,749 Government National Mortgage Association II, 7.5%, 8/20/27 3,815 3,516 Government National Mortgage Association II, 8.0%, 8/20/25 299,880 12,000 Tennessee Valley Authority, Variable Rate Note, 6/1/28 2,165,873 1,850,000 U.S. Treasury Bonds, 6.25%, 8/15/23 500,687 400,000 U.S. Treasury Bonds, 7.25%, 5/15/16 390,791 375,000 U.S. Treasury Notes, 4.75%, 5/15/14 1,110,722 925,000 U.S. Treasury Notes, 6.375%, 8/15/27 5,321,095 4,700,000 U.S. Treasury Notes, 6.5%, 2/15/10 ----------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS $44,212,173 (Cost $43,313,182) ----------- TEMPORARY CASH INVESTMENT - 3.3% Repurchase Agreement - 3.3% 1,500,000 UBS Warburg, Inc., 1.00%, dated 12/31/04, repurchase price of $1,500,000 plus accrued interest on 1/3/05 $ 1,500,000 collateralized by $1,495,000 U.S. Treasury Bill, 6.75%, 5/15/05 ----------- TOTAL TEMPORARY CASH INVESTMENT $ 1,500,000 (Cost $1,500,000) ----------- TOTAL INVESTMENTS IN SECURITIES - 100.0% $46,138,116 (Cost $45,245,226) ----------- OTHER ASSETS AND LIABILITIES - (0.0)% $ (5,019) TOTAL NET ASSETS - 100.0% ----------- $46,133,097 ===========
The accompanying notes are an integral part of these financial statements. 95 PIONEER VARIABLE CONTRACTS TRUST Pioneer Money Market VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Principal Amount Value COLLATERALIZED MORTGAGE OBLIGATIONS - 2.3% Banks - 2.3% Thrifts & Mortgage Finance - 2.3% $ 994,371 Federal Home Loan Mortgage Corp. Multifamily VRD Certificate, 1.12%, 1/15/42 $ 994,371 ----------- Total Banks $ 994,371 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $994,371) $ 994,371 ----------- CORPORATE BONDS - 43.8% Capital Goods - 5.3% Industrial Conglomerates - 3.0% 500,000 General Electric Capital Corp., Floating Rate, 12/16/05 $ 500,000 800,000 General Electric Capital Corp., Floating Rate, 1/9/06 800,760 ----------- $ 1,300,760 ----------- Industrial Machinery - 2.3% 1,000,000 Caterpillar Financial Service Corp., Floating Rate, 4/25/05 $ 1,000,956 ----------- Total Capital Goods $ 1,000,956 ----------- Food & Drug Retailing - 4.7% Hypermarkets & Supercenters - 4.7% 2,000,000 Wal-Mart Stores, Inc., Floating Rate, 2/22/05 $ 1,999,932 ----------- Total Food & Drug Retailing $ 1,999,932 ----------- Banks - 7.8% Diversified Banks - 7.8% 750,000 Bank of America Corp., Floating Rate, 1/31/05 $ 750,226 750,000 Bank of America Corp., Floating Rate, 4/28/05 750,535 1,000,000 Wells Fargo Financial, 6.75%, 6/1/05 1,018,429 800,000 Wells Fargo Financial, 7.6%, 5/3/05 813,625 ----------- $ 3,332,815 ----------- Total Banks $ 3,332,815 ----------- Diversified Financials - 23.7% Asset Management & Custody Banks - 2.2% 910,000 Mellon Funding Corp., 7.5%, 6/15/05 $ 930,828 -----------
Principal Amount Value Consumer Finance - 8.6% $ 450,000 American Express Credit, Floating Rate, 10/14/05 $ 450,377 1,200,000 American Express, Floating Rate, 4/18/05 1,200,531 1,000,000 National Rural Utilities, 6.125%, 5/15/05 1,014,686 1,000,000 National Rural Utilities, 1.76%, 3/10/05 1,000,682 ----------- $ 3,666,276 ----------- Investment Banking & Brokerage - 3.0% 200,000 Lehman Brothers Holdings, 8.75%, 3/15/05 $ 202,621 600,000 Merrill Lynch, 4.54%, 3/08/05 602,393 500,000 Merrill Lynch, Floating Rate, 12/9/05 500,000 ----------- $ 1,305,014 ----------- Diversified Financial Services - 9.9% 125,000 Associates Corp., 6.10%, 1/15/05 $ 125,217 1,000,000 Associates Corp., Floating Rate, 6/27/05 1,000,000 1,200,000 Bank One Corp., Floating Rate, 8/23/05 1,201,226 175,000 Citigroup Global Markets, 6.25%, 6/15/05 178,036 750,000 Citigroup Inc., Floating Rate, 9/1/05 750,404 1,000,000 First Union Corp., Floating Rate, 3/31/05 1,001,598 ----------- $ 4,256,481 ----------- Total Diversified Financials $10,158,599 ----------- Real Estate - 2.3% Real Estate Management & Development - 2.3% 1,000,000 Security Capital Group, 7.8%, 1/19/05 $ 1,002,987 ----------- Total Real Estate $ 1,002,987 ----------- TOTAL CORPORATE BONDS (Cost $18,796,049) $18,796,049 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 17.5% Banks - 9.3% Thrifts & Mortgage Finance - 9.3% 1,000,000 Federal National Mortgage Association, 1.56%, 5/16/05 $ 1,000,000 1,000,000 Federal National Mortgage Association, Floating Rate, 4/28/05 999,967 2,000,000 Freddie Mac, Floating Rate, 2/4/05 1,999,949 ----------- $ 3,999,916 ----------- Total Banks $ 3,999,916 -----------
96 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Money Market VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal Amount Value Government - 8.2% $ 1,000,000 Federal Home Loan Mortgage Corp., 1.28%, 4/22/05 $ 1,000,000 1,000,000 Federal Home Loan Mortgage Corp., 1.38%, 3/28/05 1,000,000 500,000 Federal Home Loan Mortgage Corp., 1.47%, 3/1/05 500,000 1,000,000 Federal Home Loan Mortgage Corp., 1.7%, 5/24/05 1,000,000 ----------- Total Government $ 3,500,000 ----------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $7,499,916) $ 7,499,916 ----------- TEMPORARY CASH INVESTMENTS - 36.6% Commercial Paper - 21.2% 1,000,000 AIG Funding, Inc., 2.23%, 1/18/05 $ 999,053 1,000,000 Caterpillar, 2.25%, 1/20/05 998,813 1,000,000 Coca Cola Co., 2.17%, 1/24/05 998,613 1,000,000 Coca Cola Co., 2.21%, 1/12/05 999,325 1,000,000 Federal National Mortgage Association, 2.27%, 2/2/05 997,981 2,000,000 IBM Corp., 2.20%, 1/25/05 1,997,067 1,000,000 Minnesota Mining, 2.20%, 1/5/05 999,756 1,106,000 Paccar Financial, 2.28%, 1/12/05 1,105,230 ----------- $ 9,095,838 ===========
Principal Amount Value Repurchase Agreement - 15.4% $ 6,600,000 UBS Warburg, Inc., 1.00% dated 12/31/04, repurchase price of $6,600,000 plus accrued interest on 1/3/05 collateralized by $6,277,000 U.S. Treasury Bill, 6.5%, 10/15/06 $ 6,600,000 ----------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $15,695,838) $15,695,838 ----------- TOTAL INVESTMENTS IN SECURITIES - 100.2% (Cost $42,986,174) $42,986,174 ----------- OTHER ASSETS AND LIABILITIES - (0.2)% $ (89,982) ----------- TOTAL NET ASSETS - 100.0% $42,896,192 ===========
The accompanying notes are an integral part of these financial statements. 97 PIONEER VARIABLE CONTRACTS TRUST Pioneer Emerging Markets VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Class I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 17.37 $ 11.03 $ 11.23 $ 12.10 $ 18.75 ------- ------- ------- ------- -------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.22 $ 0.20 $ 0.06 $ 0.15 $ (0.12) Net realized and unrealized gain (loss) on investments and foreign currency transactions 3.04 6.20 ( 0.19) ( 1.02) ( 6.20) ------- ------- ------- ------- -------- Net increase (decrease) from investment operations $ 3.26 $ 6.40 $ (0.13) $ (0.87) $ (6.32) Distributions to shareowners: Net investment income (0.15) ( 0.06) ( 0.07) -- -- Net realized gain -- -- -- -- ( 0.33) ------- ------- ------- ------- -------- Net increase (decrease) in net asset value $ 3.11 $ 6.34 $ (0.20) $ (0.87) $ (6.65) ------- ------- ------- ------- -------- Net asset value, end of period $ 20.48 $ 17.37 $ 11.03 $ 11.23 $ 12.10 ======= ======= ======== ======== ========= Total return* 18.93% 58.17% ( 1.20)% ( 7.19)% (34.20)% Ratio of net expenses to average net assets+ 1.75% 1.75% 1.75% 1.66% 1.79% Ratio of net investment income (loss) to average net assets+ 1.12% 1.43% 0.63% 1.30% ( 0.59)% Portfolio turnover rate 66% 79% 124% 175% 156% Net assets, end of period (in thousands) $ 8,633 $ 8,399 $ 5,886 $ 6,896 $ 9,446 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.87% 2.51% 2.88% 3.83% 2.45% Net investment income (loss) 1.00% 0.67% ( 0.50)% ( 0.87)% ( 1.25)% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.75% 1.75% 1.75% 1.66% 1.75% Net investment income (loss) 1.12% 1.43% 0.63% 1.30% ( 0.55)%
* Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. + Ratios with no reduction for fees paid indirectly. 98 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Class I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 9.05 $ 6.82 $ 8.42 $ 11.07 $ 13.61 ------- ------ -------- -------- -------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.11 $ 0.09 $ 0.05 $ 0.01 $ (0.06) Net realized and unrealized gain (loss) on investments and foreign currency transactions 1.55 2.17 ( 1.65) ( 2.51) ( 2.45) ------- ------ -------- -------- -------- Net increase (decrease) from investment operations $ 1.66 $ 2.26 $ (1.60) $ (2.50) $ (2.51) Distributions to shareowners: Net investment income ( 0.07) (0.03) -- ( 0.15) ( 0.02) Net realized gain -- -- -- -- ( 0.01) ------- ------- -------- -------- -------- Net increase (decrease) in net asset value $ 1.59 $ 2.23 $ (1.60) $ (2.65) $ (2.54) ------- ------- -------- -------- -------- Net asset value, end of period $ 10.64 $ 9.05 $ 6.82 $ 8.42 $ 11.07 ======= ======= ======== ======== ======== Total return* 18.48% 33.26% (19.00)% (22.66)% (18.46)% Ratio of net expenses to average net assets+ 1.50% 1.50% 1.50% 1.50% 1.48% Ratio of net investment income (loss) to average net assets+ 0.92% 1.14% 0.68% 0.25% ( 0.28)% Portfolio turnover rate 55% 52% 94% 73% 92% Net assets, end of period (in thousands) $ 9,478 $9,330 $ 8,696 $ 12,417 $ 18,474 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.94% 2.52% 2.21% 1.99% 1.55% Net investment income (loss) 0.48% 0.12% 0.03% (0.24)% (0.35)% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.50% 1.50% 1.50% 1.50% 1.48% Net investment income (loss) 0.92% 1.14% 0.68% 0.25% ( 0.28)%
PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Class I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 10.06 $ 7.79 $ 9.00 $ 11.83 $ 15.38 ------- ------- -------- -------- -------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.05 $ 0.07 $ 0.03 $ 0.02 $ 0.01 Net realized and unrealized gain (loss) on investments and foreign currency transactions 1.82 2.26 (1.23) ( 2.83) ( 3.45) ------- ------- -------- -------- -------- Net increase (decrease) from investment operations $ 1.87 $ 2.33 $ (1.20) $ (2.81) $ (3.44) Distributions to shareowners: Net investment income ( 0.05) ( 0.06) ( 0.01) ( 0.02) ( 0.11) ------- ------- -------- -------- -------- Net increase (decrease) in net asset value $ 1.82 $ 2.27 $ (1.21) $ (2.83) $ (3.55) ------- ------- -------- -------- -------- Net asset value, end of period $ 11.88 $ 10.06 $ 7.79 $ 9.00 $ 11.83 ======= ======= ======== ======== ========= Total return* 18.71% 30.06% (13.31)% (23.74)% (22.50)% Ratio of net expenses to average net assets+ 1.75% 1.69% 1.46% 1.38% 1.25% Ratio of net investment income (loss) to average net assets+ 0.45% 0.68% 0.62% 0.21% 0.10% Portfolio turnover rate 129% 99% 31% 39% 55% Net assets, end of period (in thousands) $22,859 $22,506 $ 21,271 $ 32,083 $ 48,380 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.75% 1.69% 1.46% 1.38% 1.25% Net investment income 0.45% 0.68% 0.62% 0.21% 0.10% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.75% 1.69% 1.46% 1.38% 1.25% Net investment income 0.45% 0.68% 0.62% 0.21% 0.10%
* Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 99 PIONEER VARIABLE CONTRACTS TRUST Pioneer Small Cap Value VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
11/08/01 Year Ended Year Ended Year Ended to Class I 12/31/04 12/31/03 12/31/02 12/31/01(a) Net asset value, beginning of period $ 12.50 $ 9.23 $ 10.87 $ 10.00 ------- ------- -------- ------- Increase (decrease) from investment operations: Net investment income (loss) $ (0.03) $ -- $ (0.01) $ 0.01 Net realized and unrealized gain (loss) on investments and foreign currency transactions 2.55 3.27 ( 1.63) 0.86 ------- ------- -------- ------- Net increase (decrease) from investment operations $ 2.52 $ 3.27 $ (1.64) $ 0.87 Distributions to shareowners Net investment income -- -- ( 0.00)(b) 0.00 Net realized gain -- -- ( 0.00)(b) -- ------- ------- -------- --------- Net increase (decrease) in net asset value $ 2.52 $ 3.27 $ (1.65) $ 0.87 ------- ------- -------- --------- Net asset value, end of period $ 15.02 $ 12.50 $ 9.23 $ 10.87 ======= ======= ======== ========= Total return* 20.16% 35.43% (15.08)% 8.70% Ratio of net expenses to average net assets+ 1.25% 1.25% 1.25% 1.21%** Ratio of net investment income (loss) to average net assets+ ( 0.21)% 0.03% ( 0.05)% 0.86%** Portfolio turnover rate 36% 74% 50% 0% Net assets, end of period (in thousands) $17,993 $12,049 $ 6,603 $ 504 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.30% 2.40% 2.76% 77.48%** Net investment income (loss) ( 0.26)% ( 1.12)% ( 1.56)% (75.41)%** Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.25% 1.25% 1.25% 1.21% Net investment income (loss) ( 0.21)% 0.03% ( 0.05)% 0.86%
(a) Shares of Pioneer Small Cap Value VCT Portfolio were first publicly offered on November 8, 2001. (b) Amount rounds to less than one cent per share * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. + Ratios with no reduction for fees paid indirectly. ** Annualized 100 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Small Company VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended Year Ended Class I 12/31/04 12/31/03 Net asset value, beginning of period $ 11.44 $ 9.13 ------- ------- Increase (decrease) from investment operations: Net investment income (loss) $ (0.03) $ 0.00(b) Net realized and unrealized gain (loss) on investments and foreign currency transactions 1.56 2.31 ------- --------- Net increase (decrease) from investment operations $ 1.53 $ 2.31 Distributions to shareowners: Net investment income -- -- ------- --------- Net increase (decrease) in net asset value $ 1.53 $ 2.31 ------- --------- Net asset value, end of period $ 12.97 $ 11.44 ======= ========= Total return* 13.38% 25.30% Ratio of net expenses to average net assets+ 1.25% 1.25% Ratio of net investment income (loss) to average net assets+ ( 0.25)% 0.02% Portfolio turnover rate 114% 38% Net assets, end of period (in thousands) $ 3,784 $ 3,875 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.53% 2.42% Net investment income (loss) ( 0.53)% ( 1.15)% Ratio with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.25% 1.25% Net investment income (loss) ( 0.25)% 0.02% 01/19/01 Year Ended to Class I 12/31/02 12/31/01(a) Net asset value, beginning of period $ 10.97 $ 10.00 -------- ------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.00(b) $ 0.02 Net realized and unrealized gain (loss) on investments and foreign currency transactions ( 1.84) 0.95 -------- ------- Net increase (decrease) from investment operations $ (1.84) $ 0.97 Distributions to shareowners: Net investment income ( 0.00)(b) -- -------- ------- Net increase (decrease) in net asset value $ (1.84) $ 0.97 -------- ------- Net asset value, end of period $ 9.13 $ 10.97 ======== ======= Total return* (16.75)% 9.70% Ratio of net expenses to average net assets+ 1.25% 1.24%** Ratio of net investment income (loss) to average net assets+ 0.07% 0.30%** Portfolio turnover rate 53% 72% Net assets, end of period (in thousands) $ 3,441 $ 2,375 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 2.68% 7.49%** Net investment income (loss) ( 1.36)% (5.95)%** Ratio with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 2.68% 1.24%* * Net investment income (loss) 1.36% 0.30%* *
PIONEER VARIABLE CONTRACTS TRUST Pioneer Mid Cap Value VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Class I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 20.47 $ 14.94 $ 17.35 $ 17.79 $ 16.26 ------- ------- -------- ------- -------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.08 $ 0.14 $ 0.07 $ 0.07 $ 0.13 Net realized and unrealized gain (loss) on investments 4.41 5.45 ( 1.97) 1.06 2.62 ------- ------- -------- ------- -------- Net increase (decrease) from investment operations $ 4.49 $ 5.59 $ (1.90) $ 1.13 $ 2.75 Distributions to shareowners: Net investment income (0.08) ( 0.06) ( 0.05) ( 0.10) ( 0.13) Net realized gain (0.21) -- ( 0.46) ( 1.47) ( 1.09) -------- -------- -------- -------- -------- Net increase (decrease) in net asset value $ 4.20 $ 5.53 $ (2.49) $ (0.44) $ 1.53 -------- -------- -------- -------- -------- Net asset value, end of period $ 24.67 $ 20.47 $ 14.94 $ 17.35 $ 17.79 ======== ======== ========= ======== ======== Total return* 22.12% 37.48% (11.21)% 6.49% 18.00% Ratio of net expenses to average net assets+ 0.72% 0.76% 0.80% 0.79% 0.77% Ratio of net investment income (loss) to average net assets+ 0.53% 0.86% 0.46% 0.45% 0.63% Portfolio turnover rate 55% 52% 68% 95% 85% Net assets, end of period (in thousands) $303,138 $ 170,237 $120,687 $128,340 $111,466 Ratio with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.72% 0.76% 0.80% 0.79% 0.77% Net investment income (loss) 0.53% 0.86% 0.46% 0.45% 0.63% Ratio with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.72% 0.76% 0.80% 0.79% 0.77% Net investment income (loss) 0.53% 0.86% 0.46% 0.45% 0.63%
(a) Shares of Pioneer Small Company VCT Portfolio were first publicly offered on January 19, 2001. (b) Amount rounds to less than one cent per share. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. + Ratios with no reduction for fees paid indirectly. ** Annualized The accompanying notes are an integral part of these financial statements. 101 PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended Year Ended Class I 12/31/04 12/31/03 Net asset value, beginning of period $ 12.22 $ 9.75 ------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.09 $ (0.01) Net realized and unrealized gain (loss) on investments 0.73 2.48 ------- --------- Net increase (decrease) from investment operations $ 0.82 $ 2.47 Distributions to shareowners: Net investment income -- ( 0.00)(a) Net realized gain -- -- ------- --------- Net increase (decrease) in net asset value $ 0.82 $ 2.47 ------- --------- Net asset value, end of period $ 13.04 $ 12.22 ======= ========= Total return* 6.71% 25.35% Ratio of net expenses to average net assets+ 0.96% 1.08% Ratio of net investment income (loss) to average net assets+ 0.71% ( 0.05%) Portfolio turnover rate 206% 58% Net assets, end of period (in thousands) $32,300 $ 35,750 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.97% 1.08% Net investment income (loss) 0.71% ( 0.05%) Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.96% 1.08% Net investment income (loss) 0.71% ( 0.05%)
Year Ended Year Ended Year Ended Class I 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 14.95 $ 18.39 $ 21.92 -------- --------- ------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.00(a) $ 0.01 $ (0.03) Net realized and unrealized gain (loss) on investments ( 5.19) ( 3.45) ( 1.91) --------- --------- ------- Net increase (decrease) from investment operations $ (5.19) $ (3.44) $ (1.94) Distributions to shareowners: Net investment income ( 0.01) -- ( 0.00) Net realized gain -- -- ( 1.59) --------- --------- ------- Net increase (decrease) in net asset value $ (5.20) $ (3.44) $ (3.53) --------- --------- ------- Net asset value, end of period $ 9.75 $ 14.95 $ 18.39 ========= ========= ======= Total return* (34.71)% (18.71)% ( 7.88)% Ratio of net expenses to average net assets+ 0.97% 0.85% 0.73% Ratio of net investment income (loss) to average net assets+ 0.01% 0.07% ( 0.11%) Portfolio turnover rate 86% 111% 95% Net assets, end of period (in thousands) $ 34,746 $ 72,456 $105,855 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.97% 0.85% 0.73% Net investment income (loss) 0.01% 0.07% ( 0.11%) Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.97% 0.85% 0.73% Net investment income (loss) 0.01% 0.07% ( 0.11%)
PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Class I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 18.57 $ 14.47 $ 14.77 $ 14.42 $ 11.73 ------- ------- ------- ------- ------- Increase (decrease) from investment operations: Net investment income $ 0.52 $ 0.74 $ 0.62 $ 0.68 $ 0.71 Net realized and unrealized gain (loss) on investments 5.99 4.16 ( 0.23) 0.40 2.67 ------- ------- ------- ------- ------- Net increase (decrease) from investment operations $ 6.51 $ 4.90 $ 0.39 $ 1.08 $ 3.38 Distributions to shareowners: Net investment income ( 0.45) ( 0.64) ( 0.69) ( 0.56) ( 0.59) Net realized gain ( 0.33) -- -- -- -- Tax return of capital -- ( 0.16) -- ( 0.17) ( 0.10) ------- ------- ------- ------- ------- Net increase (decrease) in net asset value $ 5.73 $ 4.10 $ (0.30) $ 0.35 $ 2.69 ------- ------- ------- ------- ------- Net asset value, end of period $ 24.30 $ 18.57 $ 14.47 $ 14.77 $ 14.42 ======= ======= ======= ======= ======== Total return* 35.74% 34.75% ( 2.53)% 7.80% 29.51% Ratio of net expenses to average net assets+ 0.98% 1.03% 1.07% 1.16% 1.10% Ratio of net investment income to average net assets+ 2.41% 4.49% 4.76% 4.71% 5.02% Portfolio turnover rate 35% 20% 29% 34% 31% Net assets, end of period (in thousands) $36,447 $31,891 $29,873 $33,026 $32,982 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.98% 1.03% 1.07% 1.16% 1.10% Net investment income 2.41% 4.49% 4.76% 4.71% 5.02% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.98% 1.03% 1.07% 1.16% 1.10% Net investment income 2.41% 4.49% 4.76% 4.71% 5.02%
(a) Amount rounds to less than one cent per share. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. + Ratios with no reduction for fees paid indirectly. 102 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Fund VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Class I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 18.70 $ 15.28 $ 19.08 $ 22.67 $ 22.70 ------- ------- ------- -------- -------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.24 $ 0.20 $ 0.19 $ 0.17 $ 0.18 Net realized and unrealized gain (loss) on investments 1.85 3.41 ( 3.81) ( 2.57) 0.10 ------- ------- -------- -------- --------- Net increase (decrease) from investment operations $ 2.09 $ 3.61 $ (3.62) $ (2.40) $ 0.28 Distributions to shareowners: Net investment income ( 0.22) ( 0.19) ( 0.18) ( 0.17) ( 0.18) Net realized gain -- -- -- ( 1.02) ( 0.13) -------- -------- -------- -------- --------- Net increase (decrease) in net asset value $ 1.87 $ 3.42 $ (3.80) $ (3.59) $ (0.03) -------- -------- -------- -------- --------- Net asset value, end of period $ 20.57 $ 18.70 $ 15.28 $ 19.08 $ 22.67 ======== ======== ======== ======== ========= Total return* 11.26% 23.76% 19.03% (10.85)% 1.22% Ratio of net expenses to average net assets+ 0.71% 0.76% 0.80% 0.74% 0.69% Ratio of net investment income (loss) to average net assets+ 1.26% 1.16% 1.09% 0.83% 0.78% Portfolio turnover rate 17% 11% 11% 7.0% 37% Net assets, end of period (in thousands) $454,136 $154,839 $141,892 $199,160 $222,107 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.71% 0.76% 0.80% 0.74% 0.69% Net investment income (loss) 1.26% 1.16% 1.09% 0.83% 0.78% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.71% 0.76% 0.80% 0.74% 0.69% Net investment income (loss) 1.26% 1.16% 1.09% 0.83% 0.78%
PIONEER VARIABLE CONTRACTS TRUST Pioneer Equity Income VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Class I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 18.09 $ 15.11 $ 18.40 $ 21.28 $ 20.72 -------- ------- -------- ------- -------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.44 $ 0.41 $ 0.42 $ 0.40 $ 0.51 Net realized and unrealized gain (loss) on investments 2.49 2.96 ( 3.30) (1.86) 2.28 -------- ------- -------- ------- -------- Net increase (decrease) from investment operations $ 2.93 $ 3.37 $ (2.88) $ (1.46) $ 2.79 Distributions to shareowners: Net investment income ( 0.44) ( 0.39) ( 0.41) (0.36) (0.49) Net realized gain -- -- -- (1.06) (1.74) -------- -------- -------- ------- -------- Net increase (decrease) in net asset value $ 2.49 $ 2.98 $ (3.29) $ (2.88) $ 0.56 -------- -------- -------- ------- -------- Net asset value, end of period $ 20.58 $ 18.09 $ 15.11 $ 18.40 $ 21.28 ======== ======== ======== ======== ======== Total return* 16.39% 0.86% (15.82)% (6.97)% 14.85% Ratio of net expenses to average net assets+ 0.72% 0.78% 0.80% 0.75% 0.71% Ratio of net investment income (loss) to average net assets+ 2.40% 2.55% 2.48% 2.07% 2.40% Portfolio turnover rate 19% 12% 12% 13% 13% Net assets, end of period (in thousands) $188,234 $155,634 $133,258 $164,019 $181,920 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.72% 0.78% 0.80% 0.75% 0.71% Net investment income (loss) 2.40% 2.55% 2.48% 2.07% 2.40% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.72% 0.78% 0.80% 0.75% 0.71% Net investment income (loss) 2.40% 2.55% 2.48% 2.07% 2.40%
* Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 103 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Class I 12/31/04 12/31/03 12/31/02 12/31/01(a) 12/31/00 Net asset value, beginning of period $ 14.04 $ 12.27 $ 13.91 $ 14.60 $ 14.31 ------- ------- -------- ------- ------- Increase (decrease) from investment operations: Net investment income $ 0.28 $ 0.23 $ 0.21 $ 0.34 $ 0.48 Net realized and unrealized gain (loss) on investments 0.39 1.80 (1.63) (0.67) 0.29 ------- ------- -------- ------- ------- Net increase (decrease) from investment operations $ 0.67 $ 2.03 $ (1.42) $ (0.33) $ 0.77 Distributions to shareowners: Net investment income ( 0.31) ( 0.26) (0.22) (0.36) (0.48) Net realized gain -- -- -- -- -- ------- ------- -------- ------- ------- Net increase (decrease) in net asset value $ 0.36 $ 1.77 $ (1.64) $ (0.69) $ 0.29 ------- ------- -------- ------- ------- Net asset value, end of period $ 14.40 $ 14.04 $ 12.27 $ 13.91 $ 14.60 ======= ======= ======== ======= ======= Total return* 4.79% 16.71% (10.27)% (2.26)% 5.45% Ratio of net expenses to average net assets+ 0.90% 0.91% 0.95% 0.84% 0.82% Ratio of net investment income to average net assets+ 1.96% 1.75% 1.62% 2.42% 3.21% Portfolio turnover rate 30% 37% 179% 136% 15% Net assets, end of period (in thousands) $35,312 $40,773 $ 42,849 $56,890 $59,545 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.90% 0.91% 0.95% 0.84% 0.82% Net investment income 1.96% 1.75% 1.62% 2.42% 3.21% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.90% 0.91% 0.95% 0.84% 0.82% Net investment income 1.96% 1.75% 1.62% 2.42% 3.21%
PIONEER VARIABLE CONTRACTS TRUST Pioneer High Yield VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
5/1/00 Year Ended Year Ended Year Ended Year Ended to Class I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00(b) Net asset value, beginning of period $ 11.45 $ 9.27 $ 10.33 $ 9.82 $ 10.00 ------- ------- ------- ------- ------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.62 $ 0.76 $ 0.92 $ 0.95 $ 0.61 Net realized and unrealized gain (loss) on investments 0.27 2.18 (1.06) 0.62 (0.18) ------- ------- ------- ------- -------- Net increase (decrease) from investment operations $ 0.89 $ 2.94 $ (0.14) $ 1.57 $ 0.43 Distributions to shareowners: Net investment income ( 0.62) ( 0.76) (0.92) ( 0.95) (0.61) Net realized gain ( 0.05) -- -- ( 0.11) -- ------- ------- ------- ------- -------- Net increase (decrease) in net asset value $ 0.22 $ 2.18 $ (1.06) $ 0.51 $ (0.18) ------- ------- ------- ------- -------- Net asset value, end of period $ 11.67 $ 11.45 $ 9.27 $ 10.33 $ 9.82 ======= ======= ======== ======= ======== Total return* 8.03% 32.78% ( 1.42)% 16.60% 4.12% Ratio of net expenses to average net assets+ 0.78% 0.89% 1.02% 1.15% 1.25%** Ratio of net investment income (loss) to average net assets+ 5.40% 7.22% 9.39% 9.15% 9.18%** Portfolio turnover rate 42% 48% 42% 36% 33% Net assets, end of period (in thousands) $70,890 $66,587 $41,111 $32,331 $6,849 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.78% 0.89% 1.02% 1.28% 2.35%** Net investment income (loss) 5.40% 7.22% 9.39% 9.02% 8.08%**
(a) The Portfolio began accreting discounts and amortizing premiums on debt securities. The effect of this change for the year ended December 31, 2001, was to decrease net investment income by $0.00, increase net realized and unrealized gain (loss) by $0.00 (both amounts round to less than one cent per share) and to decrease the ratio of net investment income to average net assets with waiver of management fees by PIM and reduction for fees paid indirectly. Per share ratios and supplemental data for periods prior to January 1, 2001, have not been restated to reflect this change in presentation. (b) Shares of Pioneer High Yield VCT Portfolio were first publicly offered on May 1, 2000 * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. ** Annualized. + Ratios with no reduction for fees paid indirectly. 104 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Class I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 11.01 $ 9.67 $ 9.33 $ 9.43 $ 9.75 ------- ------- ------ ------ ------ Increase (decrease) from investment operations: Net investment income $ 0.60 $ 0.62 $ 0.65 $ 0.67 $ 0.73 Net realized and unrealized gain (loss) on investments and foreign currency transactions 0.47 1.38 0.32 (0.04) (0.32) ------- ------- ------ ------- ------- Net increase (decrease) from investment operations $ 1.07 $ 2.00 $ 0.97 $ 0.63 $ 0.41 Distributions to shareowners: Net investment income ( 0.66) ( 0.66) (0.63) (0.67) (0.73) Net realized gain ( 0.16) -- -- (0.06) -- ------- ------- ------- ------- ------- Net increase (decrease) in net asset value $ 0.25 $ 1.34 $ 0.34 $(0.10) $ (0.32) ------- ------- ------- ------- ------- Net asset value, end of period $ 11.26 $ 11.01 $ 9.67 $ 9.33 $ 9.43 ======= ======= ======= ======= ======= Total return* 10.25% 21.24% 10.72% 6.90% 4.51% Ratio of net expenses to average net assets+ 1.03% 1.25% 1.25% 1.25% 1.30% Ratio of net investment income to average net assets+ 5.52% 5.95% 6.75% 7.16% 7.53% Portfolio turnover rate 53% 68% 50% 55% 54% Net assets, end of period (in thousands) $20,814 $19,312 $14,692 $ 7,479 $ 3,265 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.03% 1.25% 1.62% 2.44% 2.97% Net investment income 5.52% 5.95% 6.38% 5.97% 5.86% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.03% 1.25% 1.25% 1.25% 1.25% Net investment income 5.52% 5.95% 6.75% 7.16% 7.58%
* Assumes initial investment at net asset value at the beginning of the period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of the period. + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 105 PIONEER VARIABLE CONTRACTS TRUST Pioneer America Income VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Class I 12/31/04 12/31/03 12/31/02 12/31/01(a) 12/31/00 Net asset value, beginning of period $ 10.35 $ 10.59 $ 10.06 $ 9.97 $ 9.47 ------- ------- ------- ------- ------ Increase (decrease) from investment operations: Net investment income (loss) $ 0.37 $ 0.35 $ 0.46 $ 0.52 $ 0.58 Net realized and unrealized gain (loss) on investments ( 0.03) ( 0.16) 0.56 0.12 0.50 ------- ------- ------- ------- ------ Net increase (decrease) from investment operations $ 0.34 $ 0.19 $ 1.02 $ 0.64 $ 1.08 Distributions to shareowners: Net investment income ( 0.58) ( 0.43) ( 0.49) ( 0.55) (0.58) Net realized gain -- -- -- -- -- ------- ------- ------- ------- ------- Net increase (decrease) in net asset value $ (0.24) $ (0.24) $ 0.53 $ 0.09 $ 0.50 -------- --------- ------- ------- ------- Net asset value, end of period $ 10.11 $ 10.35 $ 10.59 $ 10.06 $ 9.97 ======== ========= ======== ======== ======== Total return* 3.42% 1.81% 10.32% 6.48% 11.76% Ratio of net expenses to average net assets+ 0.79% 0.78% 0.81% 0.83% 0.84% Ratio of net investment income (loss) to average net assets+ 3.74% 3.45% 4.39% 5.19% 6.00% Portfolio turnover rate 37% 34% 54% 71% 55% Net assets, end of period (in thousands) $ 32,342 $ 44,526 $69,551 $37,381 $25,791 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.79% 0.78% 0.81% 0.85% 0.84% Net investment income (loss) 3.74% 3.45% 4.39% 5.17% 6.00% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.79% 0.78% 0.81% 0.82% 0.81% Net investment income (loss) 3.74% 3.45% 4.39% 5.20% 6.03%
PIONEER VARIABLE CONTRACTS TRUST Pioneer Money Market VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Class I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.00 $ 1.00 $ 1.00 -------- -------- ------ ------ ------ Increase (decrease) from investment operations: Net investment income $ 0.007 $ 0.006 $ 0.01 $ 0.03 $ 0.06 -------- -------- ------ ------ ------ Distributions to shareowners: Net investment income (0.007) (0.006) (0.01) (0.03) (0.06) -------- -------- ------- ------- ------- Net asset value, end of period $ 1.000 $ 1.000 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======= ======= ======== Total return* 0.65% 0.56% 1.19% 3.39% 5.71% Ratio of net expenses to average net assets+ 0.74% 0.72% 0.78% 0.78% 0.76% Ratio of net investment income to average net assets+ 0.66% 0.58% 1.11% 3.16% 5.58% Net assets, end of period (in thousands) $ 42,896 $ 34,736 $59,521 $49,545 $36,979 Ratios with no waiver of fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.74% 0.72% 0.78% 0.78% 0.76% Net investment income 0.66% 0.58% 1.11% 3.16% 5.58% Ratios with waiver of fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.74% 0.72% 0.78% 0.78% 0.75% Net investment income 0.66% 0.58% 1.11% 3.16% 5.59%
(a) The Portfolio began accreting discounts and amortizing premiums on debt securities. The effect of this change for the year ended December 31, 2001, was to decrease net investment income by $0.00, increase net realized and unrealized gain (loss) by $0.00 (both amounts round to less than one cent per share) and to decrease the ratio of net investment income to average net assets with waiver of management fees by PIM and reduction for fees paid indirectly from 5.38% to 5.17%. Per share ratios and supplemental data for periods prior to January 1, 2001, have not been restated to reflect this change in presentation. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. + Ratios with no reduction for fees paid indirectly. 106 The accompanying notes are an integral part of these financial statements. (This page has been left blank intentionally.) PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES 12/31/04 - --------------------------------------------------------------------------------
Pioneer Emerging Pioneer Markets Europe VCT Portfolio VCT Portfolio ASSETS: Investment in securities, at value (including securities loaned of $3,055,085, $0, $909,605,$1,097,011, $557,149, $64,941,683 and $399,911, respectively) (Cost $29,844,356, $13,116,988, $21,606,112, $22,278,590, $13,342,234, $768,884,831, and $37,216,150, respectively) $ 40,537,238 $ 17,529,793 Cash 1,524,906 247,120 Cash held as collateral for futures contracts -- -- Futures collateral -- -- Foreign currencies, at value (Cost $97,982, $0, $0, $0, $0, $0, and $0, respectively) 116,115 -- Receivables -- Investment securities sold 34,194 -- Fund shares sold -- 4,231 Variation margin -- -- Dividends, interest and foreign taxes withheld 161,539 32,798 Forward foreign currency settlement contracts, net -- -- Forward foreign currency portfolio hedge contracts, open -- net -- -- Due from Pioneer Investment Management, Inc. -- -- Other 5,163 1,489 ------------ ------------ Total assets $ 42,379,155 $ 17,815,431 ------------ ------------ LIABILITIES: Payables -- Investment securities purchased $ 15,338 $ -- Fund shares repurchased 86,231 17,293 Dividends -- -- Upon return of securities loaned 3,125,761 -- Variation margin -- -- Forward foreign currency settlement contracts, net -- -- Forward foreign currency portfolio hedge contracts, net -- -- Reserve for repatriation taxes 35,490 -- Due to bank -- -- Due to affiliates 45,670 21,663 Accrued expenses 90,460 50,837 Other -- -- ------------ ------------ Total liabilities $ 3,398,950 $ 89,793 ------------ ------------ NET ASSETS: Paid-in capital $ 30,602,099 $ 21,052,463 Undistributed net investment income (loss) 44,879 103,181 Accumulated undistributed net realized gain (loss) (2,331,912) (7,845,397) Net unrealized gain (loss) on: Investments 10,657,392 4,412,805 Futures contracts -- -- Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies 7,747 2,586 ------------ ------------ Total net assets $ 38,980,205 $ 17,725,638 ------------ ------------ NET ASSET VALUE PER SHARE: Class I: No par value (unlimited number of shares authorized) Net assets $ 8,632,913 $ 9,477,976 Shares outstanding 421,530 891,363 ------------ ------------ Net asset value per share $ 20.48 $ 10.64 Class II: No par value (unlimited number of shares authorized) Net assets $ 30,347,292 $ 8,247,662 Shares outstanding 1,493,013 790,400 ------------ ------------ Net asset value per share $ 20.33 $ 10.44
108 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - --------------------------------------------------------------------------------
Pioneer Pioneer Pioneer Pioneer Pioneer International Small Cap Small Mid Cap Growth Value Value Company Value Shares VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio $ 27,757,174 $ 27,379,617 $ 14,243,009 $ 913,040,396 $ 40,192,913 678,505 2,653,135 182,717 -- 400,152 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 432,458 -- 101,557 1,342,101 106,827 -- 70,286 57,675 206,665 368 -- 1,125 -- -- -- 43,107 37,933 25,451 591,214 72,271 4,089 -- -- -- -- -- -- -- -- -- -- -- -- -- -- 1,841 2,057 1,556 14,869 3,207 ------------- ------------ ------------ ------------- ------------- $ 28,917,174 $ 30,144,153 $ 14,611,965 $ 915,195,245 $ 40,775,738 ------------- ------------ ------------ ------------- ------------- $ 867,838 $ -- $ 100,703 $ 2,861,531 $ 204,180 11,283 94,176 788 4,004,450 20,701 -- -- -- -- -- 946,907 1,134,938 579,352 67,222,328 413,820 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 434,663 -- 25,455 19,919 10,103 582,759 27,526 73,358 57,101 50,903 113,578 60,198 -- -- -- ------------- ------------ ------------ ------------- ------------- $ 1,924,841 $ 1,306,134 $ 741,849 $ 75,219,309 $ 726,425 ------------- ------------ ------------ ------------- ------------- $ 34,920,512 $ 22,990,010 $ 11,654,699 $ 647,879,874 $ 76,637,190 30,080 260 -- 2,164,900 271,723 (14,107,986) 713,557 1,314,643 45,775,597 (39,836,323) 6,151,062 5,101,027 900,774 144,155,565 2,976,763 -- 33,165 -- -- -- (1,335) -- -- -- -- ------------- ------------ ------------ ------------- ------------- $ 26,992,333 $ 28,838,019 $ 13,870,116 $ 839,975,936 $ 40,049,353 ------------- ------------ ------------ ------------- ------------- $ 22,859,452 $ 17,992,938 $ 3,784,302 $ 303,138,450 $ 32,299,874 1,923,744 1,197,698 291,770 12,289,796 2,477,134 ------------- ------------ ------------ ------------- ------------- $ 11.88 $ 15.02 $ 12.97 $ 24.67 $ 13.04 $ 4,132,881 $ 10,845,081 $ 10,085,814 $ 536,837,486 $ 7,749,479 349,111 725,478 784,728 21,966,264 601,971 ------------- ------------ ------------ ------------- ------------- $ 11.84 $ 14.95 $ 12.85 $ 24.44 $ 12.87
The accompanying notes are an integral part of these financial statements. 109 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES 12/31/04 (continued) - --------------------------------------------------------------------------------
Pioneer Real Estate Pioneer Shares Fund VCT Portfolio VCT Portfolio ASSETS: Investment in securities, at value (including securities loaned of $7,948,943, $3,201,363, $0, $0, $3,388,083, $1,138,824, $0, and $0, respectively) (Cost $71,947,778, $470,288,010, $216,560,015, $40,221,876, $124,177,032, $42,476,528, $45,245,226, and $36,386,174, respectively) $ 104,281,934 $ 591,820,004 Temporary cash investments (cost $6,600,000) -- -- ------------- ------------- Total Investments In Securities $ 104,281,934 $ 591,820,004 Cash 2,220,578 -- Cash held as collateral for futures contracts -- -- Futures collateral -- -- Foreign currencies, at value (Cost $0, $0, $0, $0, $0, $452,063, $0, and $0 respectively) -- -- Receivables -- Investment securities sold -- -- Fund shares sold 15,950 408,198 Variation margin -- -- Dividends, interest and foreign taxes withheld 561,625 1,035,978 Forward foreign currency settlement contracts, net -- -- Forward foreign currency portfolio hedge contracts, open -- net -- -- Due from Pioneer Investment Management, Inc. -- -- Other 3,635 40,546 ------------- ------------- Total assets $ 107,083,722 $ 593,304,726 ------------- ------------- LIABILITIES: Payables -- Investment securities purchased $ 404,407 $ 1,000,388 Fund shares repurchased 60,248 -- Dividends -- -- Upon return for securities loaned 8,225,580 3,264,284 Variation margin -- -- Forward foreign currency settlement contracts, net -- -- Forward foreign currency portfolio hedge contracts, open -- net -- -- Due to bank -- 848,222 Due to affiliates 82,031 307,212 Accrued expenses 65,288 120,791 Other -- -- ------------- ------------- Total liabilities $ 8,837,554 $ 5,540,897 ------------- ------------- NET ASSETS: Paid-in capital $ 62,351,060 $ 535,852,814 Undistributed net investment income (loss) 286,854 433,753 Accumulated net realized gain (loss) 3,274,098 (70,054,732) Net unrealized gain (loss) on: Investments 32,334,156 121,531,994 Futures contracts -- -- Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies -- -- ------------- ------------- Total net assets $ 98,246,168 $ 587,763,829 ------------- ------------- NET ASSET VALUE PER SHARE: Class I: No par value (unlimited number of shares authorized) Net assets $ 36,447,028 $ 454,136,359 Shares outstanding 1,499,747 22,081,959 ------------- ------------- Net asset value per share $ 24.30 $ 20.57 Class II: No par value (unlimited number of shares authorized) Net assets $ 61,799,140 $ 133,627,470 Shares outstanding 2,547,790 6,513,968 ------------- ------------- Net asset value per share $ 24.26 $ 20.51
110 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Pioneer Pioneer Pioneer Pioneer Pioneer Equity Pioneer High Strategic America Money Income Balanced Yield Income Income Market VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio $ 281,807,959 $ 44,912,717 $ 129,507,381 $45,406,176 $ 46,138,116 $36,386,174 -- -- -- -- -- 6,600,000 ------------- ------------ ------------- ----------- ------------ ----------- $ 281,807,959 $ 44,912,717 $ 129,507,381 $45,406,176 $ 46,138,116 $42,986,174 154,992 770,401 392,872 529,987 20,754 44,755 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 590,712 -- -- -- -- -- 79,688 -- 65,132 257,005 615 100,052 132,751 -- 567 -- -- -- -- -- -- 725,532 169,693 1,768,626 676,848 368,514 122,921 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 7,531 3,050 4,893 2,899 2,900 2,807 ------------- ------------ ------------- ----------- ------------ ----------- $ 282,953,019 $ 45,856,476 $ 131,773,824 $47,419,061 $ 46,530,284 $43,222,356 ------------- ------------ ------------- ----------- ------------ ----------- $ -- $ -- $ 333,848 $ 181,909 $ 201,361 $ -- 758,304 7,826 4,952,077 3,445 113,148 259,932 -- -- -- 2,797 -- 1,474 -- -- 3,541,345 1,191,203 -- -- -- -- -- -- -- -- -- -- -- 115,451 -- -- -- -- -- -- -- -- -- -- -- -- -- -- 181,072 30,009 83,826 32,524 26,826 17,912 87,865 54,431 61,266 50,840 55,852 37,855 -- -- -- -- -- 8,991 ------------- ------------ ------------- ----------- ------------ ----------- $ 1,027,241 $ 92,266 $ 8,972,362 $ 1,578,169 $ 397,187 $ 326,164 ------------- ------------ ------------- ----------- ------------ ----------- $ 228,847,694 $ 46,401,274 $ 113,693,485 $41,872,240 $ 46,546,165 $42,897,250 1,228,049 14,409 42,906 311,542 (264,827) 2,001 (13,397,909) (5,342,314) 3,734,722 794,850 (1,041,130) (3,059) 65,247,944 4,690,841 5,330,349 2,929,648 892,889 -- -- -- -- -- -- -- -- -- -- (67,388) -- -- ------------- ------------ ------------- ----------- ------------ ----------- $ 281,925,778 $ 45,764,210 $ 122,801,462 $45,840,892 $ 46,133,097 $42,896,192 ------------- ------------ ------------- ----------- ------------ ----------- $ 188,234,469 $ 35,312,051 $ 70,889,843 $20,813,544 $ 32,341,802 $42,896,192 9,147,953 2,451,399 6,073,809 1,848,427 3,199,958 42,901,207 ------------- ------------ ------------- ----------- ------------ ----------- $ 20.58 $ 14.40 $ 11.67 $ 11.26 $ 10.11 $ 1.00 $ 93,691,309 $ 10,452,159 $ 51,911,619 $25,027,348 $ 13,791,295 $ -- 4,529,535 726,928 4,447,914 2,222,576 1,362,373 -- ------------- ------------ ------------- ----------- ------------ ----------- $ 20.68 $ 14.38 $ 11.67 $ 11.26 $ 10.12 $ --
The accompanying notes are an integral part of these financial statements. 111 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS 12/31/04 - --------------------------------------------------------------------------------
Pioneer Pioneer Emerging Markets Europe VCT Portfolio VCT Portfolio Year Year Ended Ended 12/31/04 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $146,637, $51,698, $53,248, $349, $149, $12,629, and $4,478, respectively) $ 972,424 $ 355,527 Interest 6,531 3,353 Income on securities loaned, net 8,227 -- Other -- -- ---------- ---------- Total investment income $ 987,182 $ 358,880 ---------- ---------- EXPENSES: Management fees $ 395,468 $ 149,784 Transfer agent fees and expenses 3,020 3,049 Distribution fees (Class II) 66,163 15,403 Administrative reimbursements 18,500 18,500 Custodian fees 137,409 66,885 Professional fees 55,020 33,376 Printing expense 15,712 5,807 Fees and expenses of nonaffiliated trustees -- -- Miscellaneous 15,036 13,769 ---------- ---------- Total expenses $ 706,328 $ 306,573 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (41,545) (66,223) Less fees paid indirectly (90) -- ---------- ---------- Net expenses $ 664,693 $ 240,350 ---------- ---------- Net investment income (loss) $ 322,489 $ 118,530 ---------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments (net of foreign capital gains taxes of $179,851) $5,608,134 $1,174,390 Futures Contracts -- -- Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (34,951) (19,831) ---------- ---------- $5,573,183 $1,154,559 ---------- ---------- Change in net unrealized gain or (loss) from: Investments (net of decrease in reserve for repatriation taxes of $348,151) $ 17,838 $1,407,564 Futures Contracts -- -- Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies 4,855 (4,757) ---------- ---------- $ 22,693 $1,402,807 ---------- ---------- Net gain (loss) on investments, futures contracts and foreign currency transactions $5,595,876 $2,557,366 ========== =========== Net increase (decrease) in net assets resulting from operations $5,918,365 $2,675,896 ========== ===========
112 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Pioneer Pioneer Pioneer Pioneer Pioneer International Value Small Cap Value Small Company Mid Cap Value Growth Shares VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio Year Year Year Year Year Ended Ended Ended Ended Ended 12/31/04 12/31/04 12/31/04 12/31/04 12/31/04 $ 499,250 $ 193,923 $ 116,978 $ 7,019,067 $ 644,743 4,330 20,839 5,203 207,829 6,132 14,304 2,778 2,321 24,175 1,712 -- -- -- -- -- ---------- ---------- ---------- ------------ ---------- $ 517,884 $ 217,540 $ 124,502 $ 7,251,071 $ 652,587 ---------- ---------- ---------- ------------ ---------- $ 237,439 $ 153,423 $ 90,872 $ 3,753,733 $ 265,832 2,971 -- 2,009 3,195 3,020 5,526 15,087 21,149 936,681 13,265 18,500 18,500 18,500 117,136 18,500 70,086 38,476 26,887 100,959 30,320 62,141 45,386 32,556 67,108 34,166 13,358 11,214 11,676 107,301 14,534 -- -- -- 3,413 -- 14,409 1,717 1,442 7,185 2,307 ---------- ---------- ---------- ------------ ---------- $ 424,430 $ 283,803 $ 205,091 $ 5,096,711 $ 381,944 -- (9,953) (33,905) -- -- -- (815) -- (10,627) (1,080) ---------- ---------- ---------- ------------ ---------- $ 424,430 $ 273,035 $ 171,186 $ 5,086,084 $ 380,864 ---------- ---------- ---------- ------------ ---------- $ 93,454 $ (55,495) $ (46,684) $ 2,164,987 $ 271,723 ---------- ---------- ---------- ------------ ---------- $2,873,604 $1,576,824 $2,004,714 $ 53,898,712 $1,562,700 -- 167,366 13,667 -- -- (63,278) -- (3,021) -- -- ---------- ---------- ---------- ------------ ---------- $2,810,326 $1,744,190 $2,015,360 $ 53,898,712 $1,562,700 ---------- ---------- ---------- ------------ ---------- $1,321,708 $2,521,390 $ (373,588) $ 70,310,429 $ 618,844 -- 10,731 (11,218) -- -- (11,522) -- -- -- -- ---------- ---------- ---------- ------------ ---------- $1,310,186 $2,532,121 $ (384,806) $ 70,310,429 $ 618,844 ---------- ---------- ---------- ------------ ---------- $4,120,512 $4,276,311 $1,628,554 $124,209,141 $2,181,544 =========== =========== ========== ============ ========== $4,213,966 $4,220,816 $1,583,870 $126,374,128 $2,453,267 =========== ========== ========== ============ ==========
The accompanying notes are an integral part of these financial statements. 113 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS 12/31/04 (continued) - --------------------------------------------------------------------------------
Pioneer Pioneer Real Estate Shares Fund VCT Portfolio VCT Portfolio Year Year Ended Ended 12/31/04 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $3,560, $27,542, $0, $1,615, $0, $0, $0 and $0, respectively) $ 2,668,265 $ 5,255,783 Interest (net of foreign taxes withheld of $0, $0, $0, $94, $0, $3,344, $0 and $0, respectively) 28,012 158,731 Income on securities loaned, net 1,856 9,868 Other -- -- ----------- ----------- Total investment income $ 2,698,133 $ 5,424,382 ----------- ----------- EXPENSES: Management fees $ 632,167 $ 1,790,664 Transfer agent fees and expenses 3,007 2,736 Distribution fees (Class II) 117,814 273,949 Administrative reimbursements 18,500 24,868 Custodian fees 34,727 47,602 Professional fees 46,225 59,072 Printing expense 37,031 30,024 Fees and expenses of nonaffiliated trustees -- -- Miscellaneous 2,572 -- ----------- ----------- Total expenses $ 892,043 $ 2,228,915 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. -- -- Less fees paid indirectly -- (4,581) ----------- ----------- Net expenses $ 892,043 $ 2,224,334 ----------- ----------- Net investment income (loss) $ 1,806,090 $ 3,200,048 ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 7,508,438 $ 1,095,419 Futures Contracts -- -- Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies -- (11,040) ----------- ----------- $ 7,508,438 $ 1,084,379 ----------- ----------- Change in net unrealized gain or (loss) from: Investments $15,633,552 $30,978,376 Futures Contracts -- -- Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies -- -- ----------- ----------- $15,633,552 $30,978,376 ----------- ----------- Net gain (loss) on investments, futures contracts and foreign currency transactions $23,141,990 $32,062,755 =========== =========== Net increase (decrease) in net assets resulting from operations $24,948,080 $35,262,803 =========== ===========
114 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Pioneer Pioneer Pioneer Pioneer Pioneer Pioneer America Money Equity Income Balanced High Yield Strategic Income Income Market VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio Year Year Year Year Year Year Ended Ended Ended Ended Ended Ended 12/31/04 12/31/04 12/31/04 12/31/04 12/31/04 12/31/04 $ 7,227,744 $ 452,044 $ 28,052 $ -- $ -- $ -- 128,972 825,144 6,314,255 2,185,006 1,995,831 430,188 7,190 -- 15,124 -- -- -- -- -- -- 3,989 -- -- ----------- ---------- ----------- ---------- ---------- -------- $ 7,363,906 $1,277,188 $ 6,357,431 $2,188,995 $1,995,831 $430,188 ----------- ---------- ----------- ---------- ---------- -------- $ 1,531,353 $ 288,949 $ 669,359 $ 214,069 $ 243,809 $153,638 3,000 2,987 1,806 2,896 2,896 1,510 181,888 16,887 85,911 31,944 19,905 -- 30,408 18,500 19,997 18,500 18,500 18,500 43,740 18,175 21,500 21,476 18,454 24,343 52,063 53,197 56,459 59,577 52,915 25,656 41,880 17,844 30,056 21,159 11,737 -- 1,681 -- -- -- -- -- 8,282 3,205 4,539 2,272 2,020 1,228 ----------- ---------- ----------- ---------- ---------- -------- $ 1,894,295 $ 419,744 $ 889,627 $ 371,893 $ 370,236 $224,875 -- -- (6) -- -- -- (4,731) -- -- -- -- -- ----------- ---------- ------------- ---------- ---------- -------- $ 1,889,564 $ 419,744 $ 889,621 $ 371,893 $ 370,236 $224,875 ----------- ---------- ------------- ---------- ---------- -------- $ 5,474,342 $ 857,444 $ 5,467,810 $1,817,102 $1,625,595 $205,313 ----------- ---------- ------------- ---------- ---------- -------- $ 2,001,864 $1,099,149 $ 3,746,873 $1,126,982 $ 206,989 $ -- -- -- -- -- -- -- -- -- (45,775) -- -- ----------- ---------- ------------- ---------- ---------- -------- $ 2,001,864 $1,099,149 $ 3,746,873 $1,081,207 $ 206,989 $ -- ----------- ---------- ------------- ---------- ---------- -------- $29,937,321 $ 127,896 $(1,480,061) $ 817,291 $ (352,583) $ -- -- -- -- -- -- -- -- -- -- (49,594) -- -- ----------- ---------- ------------- ---------- ---------- -------- $29,937,321 $ 127,896 $(1,480,061) $ 767,697 $ (352,583) $ -- ----------- ---------- ------------- ---------- ---------- -------- $31,939,185 $1,227,045 $ 2,266,812 $1,848,904 $ (145,594) $ -- =========== ========== ============= ========== ========== ========== $37,413,527 $2,084,489 $ 7,734,622 $3,666,006 $1,480,001 $205,313 ========== ========== ============== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 115 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS 12/31/04 - --------------------------------------------------------------------------------
Pioneer Emerging Pioneer Markets VCT Portfolio Europe VCT Portfolio Year Year Year Year Ended Ended Ended Ended 12/31/04 12/31/03 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 322,489 $ 262,378 $ 118,530 $ 110,674 Net realized gain (loss) on investments 5,573,183 1,187,664 1,154,559 (108,393) Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions 22,693 10,449,480 1,402,807 3,419,238 ------------- ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations $ 5,918,365 $ 11,899,522 $ 2,675,896 $ 3,421,519 ------------- ------------ ------------ ------------ DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (65,091) $ (25,889) $ (65,951) $ (36,322) Class II (196,317) (60,429) (38,910) (9,367) Net realized gain Class I -- -- -- -- Class II -- -- -- -- Tax return of capital Class I -- -- -- -- Class II -- -- -- -- ------------- ------------ ------------ ------------ Total distributions to shareowners $ (261,408) $ (86,319) $ (104,861) $ (45,689) ------------- ------------ ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 9,587,268 $ 16,360,576 $ 3,890,105 $ 6,502,123 Reinvestment of distributions 259,912 85,767 104,862 45,689 Cost of shares repurchased (11,459,650) (8,062,148) (3,175,336) (6,113,517) ------------- ------------ ------------ ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ (1,612,470) $ 8,384,195 $ 819,631 $ 434,295 ------------- ------------ ------------ ------------ Net increase (decrease) in net assets $ 4,044,487 $ 20,197,398 $ 3,390,666 $ 3,810,125 ------------- ------------ ------------ ------------ NET ASSETS: Beginning of year $ 34,935,718 $ 14,738,320 $ 14,334,972 $ 10,524,848 ------------- ------------ ------------ ------------ End of year $ 38,980,205 $ 34,935,718 $ 17,725,638 $ 14,334,973 ============= ============ ============ ============== Undistributed net investment income (loss), end of year $ 44,879 $ 198,789 $ 103,181 $ 109,343 ============= ============ ============ ==============
116 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - --------------------------------------------------------------------------------
Pioneer International Pioneer Small Cap Value Pioneer Small Company Value VCT Portfolio VCT Portfolio VCT Portfolio Year Year Year Year Year Year Ended Ended Ended Ended Ended Ended 12/31/04 12/31/03 12/31/04 12/31/03 12/31/04 12/31/03 $ 93,454 $ 136,624 $ (55,495) $ 2,125 $ (46,684) $ (9,162) 2,810,326 (857,791) 1,744,190 (334,168) 2,015,360 (296,269) 1,310,186 6,236,488 2,532,121 3,353,942 (384,806) 2,171,849 ------------ ----------- ------------ ------------- ------------ ------------ $ 4,213,966 $ 5,515,321 $ 4,220,816 $ 3,021,899 $ 1,583,870 $ 1,866,418 ------------ ----------- ------------ ------------- ------------ ------------ $ (113,573) $ (146,246) $ -- $ -- $ -- $ -- (8,890) (4) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ------------ ------------- ------------ ------------- ------------ ------------ $ (122,463) $ (146,250) $ -- $ -- $ -- $ -- ------------ ------------- ------------ ------------- ------------ ------------ $ 4,380,480 $ 2,253,340 $ 14,302,057 $ 15,752,093 $ 4,450,765 $ 6,156,243 122,460 146,246 -- -- -- (5,189,620) (5,452,468) (4,493,153) (10,568,904) (3,135,048) (3,911,566) ------------ ------------- ------------ ------------- ------------ ------------ $ (686,680) $(3,052,882) $ 9,808,904 $ 5,183,189 $ 1,315,717 $ 2,244,677 ------------ ------------- ------------ ------------- ------------ ------------ $ 3,404,823 $ 2,316,189 $ 14,029,720 $ 8,205,088 $ 2,899,587 $ 4,111,095 ------------ ------------- ------------ ------------- ------------ ------------ $ 23,587,510 $21,271,321 $ 14,808,299 $ 6,603,211 $ 10,970,529 $ 6,859,434 ------------ ------------- ------------ ------------- ------------ ------------ $ 26,992,333 $23,587,510 $ 28,838,019 $ 14,808,299 $ 13,870,116 $ 10,970,529 ============ ============= ============ ============= ============ ============ $ 30,080 $ 122,367 $ 260 $ 3,664 $ -- $ 1,986 ============ ============= ============ ============= ============ ============
The accompanying notes are an integral part of these financial statements. 117 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS 12/31/04 (continued) - --------------------------------------------------------------------------------
Pioneer Mid Cap Pioneer Growth Value VCT Portfolio Shares VCT Portfolio Year Year Year Year Ended Ended Ended Ended 12/31/04 12/31/03 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 2,164,987 $ 1,803,484 $ 271,723 $ (20,270) Net realized gain (loss) on investments 53,898,712 6,004,760 1,562,700 (3,697,565) Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions 70,310,429 75,230,670 618,844 11,680,101 ------------- ------------- ------------ ------------ Net increase (decrease) in net assets resulting from operations $ 126,374,128 $ 83,038,914 $ 2,453,267 $ 7,962,266 ------------- ------------- ------------ ------------ DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (711,725) $ (438,494) $ -- $ (4,477) Class II (1,067,643) (236,135) -- -- Net realized gain Class I (1,863,831) -- -- -- Class II (3,740,321) -- -- -- Tax return of capital Class I -- -- -- -- Class II -- -- -- -- ------------- ------------- ------------ ------------ Total distributions to shareowners $ (7,383,520) $ (674,629) $ -- $ (4,477) ------------- ------------- ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 331,791,818 $ 161,143,658 $ 5,638,676 $ 4,104,812 Class I shares issued in reorganization 49,670,328 -- -- -- Reinvestment of distributions 7,383,520 674,611 -- 4,477 Cost of shares repurchased (49,217,509) (44,550,616) (6,840,932) (8,277,302) ------------- ------------- ------------ ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ 339,628,157 $ 117,267,653 $ (1,202,256) $ (4,168,013) ------------- ------------- ------------ ------------ Net increase (decrease) in net assets $ 458,618,765 $ 199,631,938 $ 1,251,011 $ 3,789,776 ------------- ------------- ------------ ------------ NET ASSETS: Beginning of year $ 381,357,171 $ 181,725,233 $ 38,798,342 $ 35,008,566 ------------- ------------- ------------ ------------ End of year $ 839,975,936 $ 381,357,171 $ 40,049,353 $ 38,798,342 ============= ============= ============ ============= Undistributed net investment income (loss), end of year $ 2,164,900 $ 1,779,281 $ 271,723 $ -- ============= ============= ============ =============
118 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - --------------------------------------------------------------------------------
Pioneer Real Estate Pioneer Fund Pioneer Equity Shares VCT Portfolio VCT Portfolio Income VCT Portfolio Year Year Year Year Year Year Ended Ended Ended Ended Ended Ended 12/31/04 12/31/03 12/31/04 12/31/03 12/31/04 12/31/03 $ 1,806,090 $ 2,666,503 $ 3,200,048 $ 2,086,873 $ 5,474,342 $ 4,413,641 7,508,438 (441,521) 1,084,379 (8,525,302) 2,001,864 (634,370) 15,633,552 15,916,594 30,978,376 49,662,141 29,937,321 34,115,732 ------------- ------------- ------------- ------------- ------------- ------------- $ 24,948,080 $ 18,141,576 $ 35,262,803 $ 43,223,712 $ 37,413,527 $ 37,895,003 ------------- ------------- ------------- ------------- ------------- ------------- $ (707,216) $ (1,049,939) $ (1,685,576) $ (1,580,150) $ (3,809,792) $ (3,313,897) (916,414) (1,121,546) (1,069,680) (520,900) (1,595,526) (860,942) (493,376) -- -- -- -- -- (803,210) -- -- -- -- -- -- (372,973) -- -- -- -- -- (398,048) -- -- -- -- ------------- ------------- ------------- ------------- ------------- ------------- $ (2,920,216) $ (2,942,506) $ (2,755,256) $ (2,101,050) $ (5,405,318) $ (4,174,839) ------------- ------------- ------------- ------------- ------------- ------------- $ 20,027,996 $ 9,753,610 $ 60,072,885 $ 58,651,489 $ 63,295,941 $ 52,433,019 -- -- 298,220,832 -- -- -- 2,920,216 2,942,506 2,755,256 2,101,050 5,405,317 4,174,840 (18,513,875) (17,969,003) (48,119,744) (37,658,369) (34,772,572) (34,680,633) ------------- ------------- ------------- ------------- ------------- ------------- $ 4,434,337 $ (5,272,887) $ 312,929,229 $ 23,094,170 $ 33,928,686 $ 21,927,226 ------------- ------------- ------------- ------------- ------------- ------------- $ 26,462,201 $ 9,926,183 $ 345,436,776 $ 64,216,832 $ 65,936,895 $ 55,647,390 ------------- ------------- ------------- ------------- ------------- ------------- $ 71,783,967 $ 61,857,784 $ 242,327,053 $ 178,110,221 $ 215,988,883 $ 160,341,493 ------------- ------------- ------------- ------------- ------------- ------------- $ 98,246,168 $ 71,783,967 $ 587,763,829 $ 242,327,053 $ 281,925,778 $ 215,988,883 ============= ============= ============ ============= ============= ============= $ 286,854 $ 153,315 $ 433,753 $ -- $ 1,228,049 $ 1,156,984 ============= ============= ============ ============= ============= =============
The accompanying notes are an integral part of these financial statements. 119 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS 12/31/04 (continued) - --------------------------------------------------------------------------------
Pioneer Pioneer High Yield Balanced VCT Portfolio VCT Portfolio Year Year Year Year Ended Ended Ended Ended 12/31/04 12/31/03 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 857,444 $ 718,572 $ 5,467,810 $ 4,106,902 Net realized gain (loss) on investments 1,099,149 336,352 3,746,873 1,124,588 Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions 127,896 5,309,842 (1,480,061) 10,301,474 ------------ ------------ ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 2,084,489 $ 6,364,766 $ 7,734,622 $ 15,532,964 ------------ ------------ ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (789,468) $ (800,491) $ (3,715,003) $ (3,817,405) Class II (155,092) (20,067) (1,764,209) (279,944) Net realized gain Class I -- -- (265,040) -- Class II -- -- (135,300) -- Tax return of capital Class I -- -- -- -- Class II -- -- -- -- ------------ ------------ ------------- ------------- Total distributions to shareowners $ (944,560) $ (820,558) $ (5,879,552) $ (4,097,349) ------------ ------------ ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 8,978,890 $ 4,068,440 $ 75,619,514 $ 45,609,360 Class I shares issued in reorganization -- -- -- -- Reinvestment of distributions 944,549 820,551 5,846,576 4,059,022 Cost of shares repurchased (9,461,531) (9,119,455) (44,707,455) (18,254,761) ------------ ------------ ------------- ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ 461,908 $ (4,230,464) $ 36,758,635 $ 31,413,621 ------------ ------------ ------------- ------------- Net increase (decrease) in net assets $ 1,601,837 $ 1,313,744 $ 38,613,705 $ 42,849,236 ------------ ------------ ------------- ------------- NET ASSETS: Beginning of year $ 44,162,373 $ 42,848,629 $ 84,187,757 $ 41,338,521 ------------ ------------ ------------- ------------- End of year $ 45,764,210 $ 44,162,373 $ 122,801,462 $ 84,187,757 ============ ============ ============= ============= Undistributed net investment income (loss), end of year $ 14,409 $ 12,808 $ 42,906 $ 42,283 ============ ============ ============= =============
120 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - --------------------------------------------------------------------------------
Pioneer Strategic Pioneer America Pioneer Money Income VCT Portfolio Income VCT Portfolio Market VCT Portfolio Year Year Year Year Year Year Ended Ended Ended Ended Ended Ended 12/31/04 12/31/03 12/31/04 12/31/03 12/31/04 12/31/03 $ 1,817,102 $ 1,068,721 $ 1,625,595 $ 2,011,935 $ 205,313 $ 277,950 1,081,207 713,901 206,989 193,917 -- 2,354 767,697 1,695,515 (352,583) (1,192,887) -- -- ------------ ------------ ------------- ------------- ------------- ------------- $ 3,666,006 $ 3,478,137 $ 1,480,001 $ 1,012,965 $ 205,313 $ 280,304 ------------ ------------ ------------- ------------- ------------- ------------- $ (1,210,066) $ (1,087,224) $ (2,102,796) $ (2,321,232) $ (203,312) $ (277,950) (733,628) (52,386) (401,489) (26,127) -- -- (294,736) -- -- -- -- -- (171,204) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ------------ ------------ ------------- ------------- ------------- ------------- $ (2,409,634) $ (1,139,610) $ (2,504,285) $ (2,347,359) $ (203,312) $ (277,950) ------------ ------------ ------------- ------------- ------------- ------------- $ 25,764,732 $ 11,160,025 $ 15,160,465 $ 10,875,454 $ 18,483,087 $ 27,291,288 -- -- -- -- 21,976,837 -- 2,367,418 1,105,582 2,504,258 2,347,346 203,307 277,946 (6,523,479) (6,320,659) (17,669,980) (34,276,542) (32,505,228) (52,356,043) ------------ ------------ ------------- ------------- ------------- ------------- $ 21,608,671 $ 5,944,948 $ (5,257) $ (21,053,742) $ 8,157,953 $ (24,786,809) ------------ ------------ ------------- ------------- ------------- ------------- $ 22,865,043 $ 8,283,475 $ (1,029,541) $ (22,388,141) $ 8,159,954 $ (24,784,455) ------------ ------------ ------------- ------------- ------------- ------------- $ 22,975,849 $ 14,692,374 $ 47,162,638 $ 69,550,779 $ 34,736,238 $ 59,520,693 ------------ ------------ ------------- ------------- ------------- ------------- $ 45,840,892 $ 22,975,849 $ 46,133,097 $ 47,162,638 $ 42,896,192 $ 34,736,238 ============ ============ ============= ============= ============= ============= $ 311,542 $ 152,569 $ (264,827) $ 231,501 $ 2,001 $ -- ============ ============ ============= ============= ============= =============
The accompanying notes are an integral part of these financial statements. 121 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Variable Contracts Trust (the Trust) is a Delaware statutory trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate diversified portfolios, fourteen of which issue both Class I and Class II shares (collectively, the "Portfolios", individually the "Portfolio") as follows: Portfolios: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) Portfolio shares may be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The financial statements of Value Portfolio, Papp America- Pacific Rim Portfolio, Papp Small and Mid Cap Growth Portfolio, Oak Ridge Large Cap Growth Portfolio, Growth Opportunities Portfolio, Small Cap Value II Portfolio and Bond Portfolio and the Class II financial highlights of all the Portfolios are presented in separate books. The investment objective of Emerging Markets Portfolio, Europe Portfolio and International Value Portfolio is to seek long-term capital growth. Small Company Portfolio, Small Cap Value Portfolio, Mid-Cap Value Portfolio and Growth Shares Portfolio seek capital appreciation. Real Estate Shares Portfolio pursues long-term capital growth, with current income as a secondary objective. Fund Portfolio seeks reasonable income and growth of capital. Equity Income Portfolio seeks current income and long-term capital growth. Balanced Portfolio's investment objectives are capital growth and current income. High Yield Portfolio seeks to maximize total return through a combination of income and capital appreciation. Strategic Income Portfolio seeks to produce a high level of current income. America Income Portfolio seeks a high level of current income as consistent with preservation of capital. Money Market Portfolio invests for current income consistent with preserving capital and providing liquidity. The Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses and gains and losses on investments during the reporting year. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements, which are consistent with those generally accepted in the investment company industry: A. Security Valuation Security transactions are recorded as of trade date. Net asset values for the Portfolios are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or 122 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Trading in foreign equity securities is substantially completed each day at various times prior to the close of the NYSE. The value of such securities used in computing the net asset value of the Portfolio's shares is based on the last sale price on the principal exchange where they traded. Fixed income securities are valued at prices supplied by independent pricing services, which consider such factors as Treasury spreads, yields, maturities and ratings. Valuations may be supplemented by dealers and other sources, as required. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. The Portfolios also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities except as follows. All securities that trade in foreign markets whose closing prices are as of times prior to the close of the NYSE and that are held by Emerging Markets Portfolio, Europe Portfolio and International Value Portfolio are fair valued using vendor-supplied pricing updates for each security to the time of the close of the NYSE. The principal exchanges and markets for such securities have closing times prior to the close of the NYSE. However, the value of these securities may be influenced by changes in global markets occurring after the closing times of the local exchanges and markets up to the time the Portfolios determine their net asset values. Consequently, the Board of Trustees of the Trust has determined that the use of daily fair valuations as provided by a pricing service is appropriate for these Portfolios. The Portfolios may also take into consideration other significant events in determining the fair value of these securities. At December 31, 2004, the valuation of China Aviation Oil Singapore was determined by the Board of Trustees of the Trust. Thus, a Portfolio's securities valuations may differ from prices reported by the various local exchanges and markets. Temporary cash investments and securities held by any Portfolio are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. Discounts and premiums on fixed income securities are accreted and amortized, respectively, on a yield-to-maturity basis and are included in interest income. Dividend and interest income from foreign securities are reported net of unrecoverable foreign taxes withheld at the applicable country rates. Gains and losses from sales of investments are calculated on the identified cost method for both financial reporting and federal income tax purposes and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. Because Real Estate Shares Portfolio invests a substantial portion of its assets in real estate investment trusts (REITs), the Portfolio may be subject to certain risks associated with direct investments in REITs. REITs may be affected by changes in the value of their underlying properties and by defaults by borrowers or tenants. REITs depend generally on their ability to generate cash flow to make distributions to shareowners, and certain REITs have self-liquidation provisions by which mortgages held may be paid in full and return of capital distributions may be made at any time. In addition, the performance of a REIT may be affected by its failure to qualify for tax-free pass-through of income under the Internal Revenue Code or its failure to maintain exemption from registration under the Investment Company Act of 1940. Emerging Markets, International Value and Europe Portfolios' investments in emerging markets or countries with limited or developing markets may subject these Portfolios to a greater degree of risk than in a developed market. Risks associated with these developing markets include political, social or economic factors and may affect the price of the Portfolios' investments and income generated by these investments, as well as the Portfolios' ability to repatriate such amounts. High Yield and Strategic Income Portfolios invest in below investment grade (high yield) debt securities and preferred stocks. Some of these high yield securities may be convertible into equity securities of the issuer. Debt securities rated below investment grade are commonly referred to as "junk bonds" and are considered speculative. These securities involve greater risk of loss, are subject to greater price volatility, and are less liquid, especially during periods of economic uncertainty or change, than higher rated debt securities. 123 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) - -------------------------------------------------------------------------------- Small capitalization stocks, while offering the potential for higher returns, such as those in the Small Company and Small Cap Value Portfolios may be subject to greater short-term price fluctuations than securities of larger companies. B. Futures Contracts The Portfolios may enter into futures transactions to hedge against changes in interest rates, securities prices, and currency rates or to seek to increase total return. Upon entering into a futures contract, the Portfolios are required to deposit with a broker an amount of cash or securities equal to the minimum "initial margin" requirements of the associated futures exchange. Subsequent payments for futures contracts ("variation margin") are paid or received by the Portfolios, depending on the daily fluctuation in the value of the contracts, and are recorded by the Portfolios as unrealized gains or losses. When the contract is closed, the Portfolios realize a gain or loss equal to the difference between the opening and closing value of the contract. The use of futures contracts involves, to varying degrees, elements of market risk such as the changes in the value of the contracts may not directly correlate to the changes in the value of the underlying securities. These risks may decrease the effectiveness of the Portfolios' hedging and trading strategies and potentially result in a loss. As of December 31, 2004, open contracts are shown at the bottom of this page: C. Foreign Currency Translation The books and records of the Portfolios are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent the net realized gains and losses on foreign currency contracts, disposition of foreign currencies, and the difference between the amount of income accrued and the U.S. dollars actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments.
- ------------------------------------------------------------------------------------------------------------ Number of Contracts Settlement Unrealized Portfolio Type Long/(Short) Month Market Value Gain/(Loss) - ------------------------------------------------------------------------------------------------------------ Small Cap Value Portfolio Russell 2000 5 March 2005 $1,634,875 $33,165 - ------------------------------------------------------------------------------------------------------------
D. Forward Foreign Currency Contracts Certain Portfolios are authorized to enter into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolios' financial statements. The Portfolios record realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar (see Note 8). E. Taxes It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. In addition to the requirements of the Internal Revenue Code, the Portfolios may also be required to pay local taxes on the recognition of capital gains and/or the repatriation of foreign currencies in certain countries. During the year ended December 31, 2004, no such taxes were paid. In determining the daily net asset value, the Portfolios estimate the reserve for such taxes, if any, associated with investments in certain countries. Any estimated reserve for taxes on capital gains is based on the net unrealized appreciation on certain portfolio securities, the holding period of such securities and the related tax rates, tax loss carryforward (if applicable) and other such factors. Any estimated reserve for taxes on repatriation of foreign currencies is based on principal balances and/or unrealized appreciation of applicable securities, the holding period of such investments and the related tax rates and other such factors. As of December 31, 2004, the Portfolios had no reserves related to taxes on capital gains, except that Emerging Markets 124 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- Portfolio, which had a reserve of $35,490 for the taxes on the repatriation of foreign currencies. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from or in excess of net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. A portion of the dividend income recorded by Real Estate Shares Portfolio is from distributions by publicly traded REITs, and such distributions for tax purposes may also consist of capital gains and return of capital. The actual return of capital and capital gains portions of such distributions will be determined by formal notifications from the REITs subsequent to the calendar year-end. Distributions received from the REITs that are determined to be a return of capital are recorded by the Trust as a reduction of the cost basis of the securities held, and those determined to be capital gains are reflected as such in the Statement of Operations. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2004, certain Portfolios had capital loss carryforwards as follows:
- ----------------------------------------------------------------------------------------------------- Fiscal Emerging International Mid Cap Growth Year Markets Europe Value Value Shares Ending Portfolio Portfolio Portfolio Portfolio Portfolio - ----------------------------------------------------------------------------------------------------- 2004 $ -- $ -- $ -- $ -- $ -- 2005 $ -- $ -- $ -- $ -- $ -- 2006 $ -- $ -- $ -- $ -- $ -- 2007 $ -- $ -- $ -- $ -- $ -- 2008 $ -- $ -- $ -- $ -- $ 2,404,543 2009 $ 864,104 $ 4,296,563 $ 6,653,888 $3,451,474 $ 9,820,202 2010 $ 1,176,783 $ 1,896,288 $ 5,309,516 $2,529,788 $ 19,245,183 2011 $ -- $ 783,043 $ 2,130,998 $ -- $ 7,319,241 2012 $ -- $ -- $ -- $ -- $ -- ------------ ----------- ------------ ---------- ------------ Total $ 2,040,887 $ 6,975,894 $ 14,094,402 $5,981,262 $ 38,789,169 ============ ============ ============= ============= ============= Fiscal Equity America Money Year Fund Income Balanced Income Market Ending Portfolio Portfolio Portfolio Portfolio Portfolio - ----------------------------------------------------------------------------------------------------- 2004 $ -- $ -- $ -- $ -- $ -- 2005 $ -- $ -- $ -- $ -- $ -- 2006 $ -- $ -- $ -- $ -- $ -- 2007 $ -- $ -- $ -- $ -- $ -- 2008 $ -- $ -- $ -- $ 382,424 $ -- 2009 $ 20,833,698 $ 3,961,413 -- $ -- $ -- 2010 $ 35,500,430 $ 6,407,206 $ 2,571,211 $ -- $ 2,813 2011 $ 13,017,527 $ 2,677,654 $ 2,590,145 $ 435,523 $ -- 2012 $ -- $ -- $ -- $ 171,643 $ 246 ---------------------------------------------------------------------------------------- Total $ 69,351,655 $13,046,273 $ 5,161,356 $ 989,590 $ 3,059 ---------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------
The following Portfolios elected to defer capital and/or currency losses recognized between November 1, 2004 and December 31, 2004 to their fiscal year ending December 31, 2005.
- ---------------------------------------------------------------------- Portfolio Capital Losses Currency Losses - ---------------------------------------------------------------------- Growth Shares Portfolio $389,332 $ -- Fund Portfolio $ 23,515 $ -- Equity Income Portfolio $229,369 $ -- Balanced Portfolio $ 90,101 $ -- America Income Portfolio $ 47,565 $ -- - ----------------------------------------------------------------------
125 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) - -------------------------------------------------------------------------------- At December 31, 2004, certain Portfolios made reclassifications as described below. These reclassifications have no impact on the net asset values of the respective Portfolios and are designed to present the Portfolios' capital accounts on a tax basis. - --------------------------------------------------------------------------------
Undistributed Accumulated Net Investment Realized Gain/Net Paid-in Portfolio Income (Loss) (Loss) Capital - -------------------------------------------------------------------------------- Emerging Markets Portfolio $ (214,991) $ 214,991 $ -- Europe Portfolio (19,831) 19,831 -- International Value Portfolio (63,278) 63,278 -- Small Cap Value Portfolio 52,091 6,157 (58,248) Small Company Portfolio 44,698 15,753 (60,451) Mid Cap Value Portfolio -- -- -- Growth Shares Portfolio -- -- -- Real Estate Shares Portfolio (48,921) 19,456 29,465 Fund Portfolio (11,039) 11,039 -- Equity Income Portfolio 2,041 (44,116) 42,075 Balanced Portfolio 88,717 (88,717) -- High Yield Portfolio 12,025 (12,025) -- Strategic Income Portfolio 285,565 (285,565) -- America Income Portfolio 382,362 (368,055) (14,307) Money Market Portfolio -- -- -- - --------------------------------------------------------------------------------
The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004, and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis. - --------------------------------------------------------------------------------
Pioneer Pioneer Emerging Emerging Pioneer Pioneer Markets Markets Europe Europe VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio 2004 2003 2004 2003 - --------------------------------------------------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 261,408 $86,319 $ 104,861 $ 45,689 Long-Term capital gain -- -- -- -- --------------------------------------------------------------------------- $ 261,408 $86,319 $ 104,861 $ 45,689 Return of Capital -- -- -- -- --------------------------------------------------------------------------- Total distributions $ 261,408 $86,319 $ 104,861 $ 45,689 --------------------------------------------------------------------------- Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ 211,876 $ 103,181 Undistributed long-term gain/(Capital loss carryforward) (2,040,887) (6,975,894) Unrealized appreciation (depreciation) 10,207,117 3,545,888 ----------------------------------------------------------------------------- Total $ 8,378,106 $ (3,326,825) ----------------------------------------------------------------------------- ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------------------------------------------------
126 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Pioneer Pioneer International International Value Value VCT Portfolio VCT Portfolio 2004 2003 - --------------------------------------------------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 122,463 $146,250 Long-Term capital gain -- -- ----------------------------- $ 122,463 $146,250 Return of Capital -- -- ----------------------------- Total distributions $ 122,463 $146,250 ----------------------------- Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ 34,169 Undistributed long-term gain/(Capital loss carryforward) (14,094,402) Unrealized appreciation (depreciation) 6,132,054 ------------------------------ Total $ (7,928,179) ============================== - --------------------------------------------------------------------------------------------------------------------------- Pioneer Pioneer Small Small Company Company VCT Portfolio VCT Portfolio 2004 2003 - --------------------------------------------------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ -- $ -- Long-Term capital gain -- -- ----------------------------- $ -- $ -- Return of Capital -- -- ----------------------------- Total distributions $ -- $ -- ----------------------------- Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ -- Capital loss carryforward from merger -- Undistributed long-term gain/(Capital loss carryforward) 1,364,989 Unrealized appreciation (depreciation) 850,428 ------------------------------ Total $ 2,215,417 ============================== - --------------------------------------------------------------------------------------------------------------------------- Pioneer Pioneer Growth Growth Shares Shares VCT Portfolio VCT Portfolio 2004 2003 - --------------------------------------------------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ -- $ 4,477 Long-Term capital gain -- -- ----------------------------- $ -- $ 4,477 Return of Capital -- -- ------------------------------ Total distributions $ -- $ 4,477 ----------------------------- Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ 271,723 Undistributed long-term gain/(Capital loss carryforward) (38,789,169) Post-October loss deferred/REIT Dividend Payable (389,332) Unrealized appreciation (depreciation) 2,318,941 ----------------------------- Total $(36,587,837) ----------------------------- - ---------------------------------------------------------------------------------------------------------------------------
Pioneer Pioneer Small Cap Small Cap Value Value VCT Portfolio VCT Portfolio 2004 2003 ------------------ ----------------- Distributions paid from: Ordinary Income $ -- $ -- Long-Term capital gain -- -- -------------------------------- $ -- $ -- Return of Capital -- -- -------------------------------- Total distributions $ -- $ -- -------------------------------- Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ -- Undistributed long-term gain/(Capital loss carryforward) 1,086,729 Unrealized appreciation (depreciation) 4,761,280 --------------------------------- Total $ 5,848,009 --------------------------------- --------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Pioneer Pioneer Mid Cap Mid Cap Value Value VCT Portfolio VCT Portfolio 2004 2003 - --------------------------------------------------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 3,095,474 $ 674,629 Long-Term capital gain 4,288,046 -- ------------- -- -- ----------- $ 7,383,520 $ 674,629 Return of Capital -- -- ------------- -- -- ----------- Total distributions $ 7,383,520 $ 674,629 ------------- -- -- ----------- Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ 6,505,614 Capital loss carryforward from merger 48,549,164 Undistributed long-term gain/(Capital loss carryforward) (5,981,262) Unrealized appreciation (depreciation) 143,022,546 ------------- -- -- ----------- Total $192,096,062 ------------- -- -- ----------- Pioneer Pioneer Real Estate Real Estate Shares Shares VCT Portfolio VCT Portfolio 2004 2003* - --------------------------------------------------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 2,449,917 $2,171,485 Long-Term capital gain 470,299 -- ------------- ----------- $ 2,920,216 $2,171,485 Return of Capital -- 771,021 ------------- ----------- Total distributions $ 2,920,216 $2,942,506 ------------- ----------- Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ -- Undistributed long-term gain/(Capital loss carryforward) 3,564,562 Post-October loss deferred/REIT Dividend Payable 286,854 Unrealized appreciation (depreciation) 32,043,692 ------------- ----------- Total $ 35,895,108 - ---------------------------------------------------------------------------------------------------------------------------
127 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Pioneer Pioneer Pioneer Pioneer Equity Equity Fund Fund Income Income VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio 2004 2003 2004 2003 - ------------------------------------------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 2,755,256 $2,101,050 $ 5,405,318 $4,174,839 Long-Term capital gain -- -- -- $ -- -------------------------------------------------------------------- $ 2,755,256 $2,101,050 $ 5,405,318 $4,174,839 Return of Capital -- -- -- $ -- -------------------------------------------------------------------- Total distributions $ 2,755,256 $2,101,050 $ 5,405,318 $4,174,839 -------------------------------------------------------------------- Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ 433,753 $ -- Undistributed long-term gain/(Capital loss carryforward) (69,351,655) (13,046,273) Post-October loss deferred (23,515) (229,369) Unrealized appreciation (depreciation) 120,852,432 66,353,726 ------------------------------------------------------------ Total $51,911,015 $ 53,078,084 ------------------------------------------------------------ ------------------------------------------------------------ - --------------------------------------------------------------------------------------------------------------------------- Pioneer Pioneer Pioneer Pioneer Balanced Balanced High Yield High Yield VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio 2004 2003 2004 2003 - --------------------------------------------------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 944,560 $ 820,558 $ 5,479,212 $4,097,349 Long-Term capital gain -- -- 400,340 -- --------------------------------------------------------------------------------- $ 944,560 $ 820,558 $ 5,879,552 $4,097,349 Return of Capital -- -- -- -- --------------------------------------------------------------------------------- Total distributions $ 944,560 $ 820,558 $ 5,879,552 $4,097,349 --------------------------------------------------------------------------------- Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ 13,132 $ 613,388 Undistributed long-term gain/(Capital loss carryforward) (5,161,356) 3,164,280 Post-October loss deferred (90,901) -- Unrealized appreciation (depreciation) 4,602,061 5,330,309 --------------------------------------------------------------------------------- Total $ (637,064) $ $9,107,977 --------------------------------------------------------------------------------- ---------------------------------------------------------------------------------
128 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- Pioneer Strategic Income VCT Portfolio 2004 ------------------------ Distributions paid from: Ordinary Income $ 2,196,847 Long-Term capital gain/(Capital loss carryforward) 212,787 ------------ $ 2,409,634 Return of Capital -- ------------ Total distributions $ 2,409,634 ------------ Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ 218,814 Undistributed long-term gain/(Capital loss carryforward) 773,272 Post-October loss deferred -- Unrealized appreciation (depreciation) 2,976,566 ------------ Total $ 3,968,652 ------------ Pioneer Money Market VCT Portfolio 2004 - -------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 203,312 Long-Term capital gain/Capital loss carryforward -- ------------ $ 203,312 Return of Capital -- ------------ Total distributions $ 203,312 ------------ Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ 2,001 Undistributed long-term gain/(Capital loss carryforward) (3,059) Unrealized appreciation (depreciation) -- ------------ Total $ (1,058) ------------ - --------------------------------------------------------------------------------
Pioneer Pioneer Pioneer America America Strategic Income Income Income VCT Portfolio VCT Portfolio VCT Portfolio 2003 2004 2003 - ------------------------------------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $1,139,610 $2,504,285 $2,347,359 Long-Term capital gain/(Capital loss carryforward) -- -- -- ----------------------------------------------- $1,139,610 $2,504,285 $2,347,359 Return of Capital -- -- -- ----------------------------------------------- Total distributions $1,139,610 $2,504,285 $2,347,359 ------------------------------------------------ Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ -- Undistributed long-term gain/(Capital loss carryforward) (989,590) Post-October loss deferred (47,565) Unrealized appreciation (depreciation) 624,087 ------------------------------------------------ Total $(413,068) Pioneer Money Market VCT Portfolio 2003 - ------------------------------------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 277,950 Long-Term capital gain/Capital loss carryforward -- ---------- $ 277,950 Return of Capital -- ---------- Total distributions $ 277,950 ---------- Distributable Earnings (Accumulated Losses): Undistributed ordinary income Undistributed long-term gain/(Capital loss carryforward) Unrealized appreciation (depreciation) ---------- Total ========== - -------------------------------------------------------------------------------------------------------------
* Included in the Portfolio's distributions from 2003 ordinary income is $192,564 in excess of investment company taxable income, which, in accordance with U.S. tax law, is taxable to shareowners as ordinary income distributions. For the fiscal year ending December 31, 2004, Emerging Markets Portfolio has elected to pass through foreign tax credits of $325,677. The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily attributable to the tax deferral of losses on wash sales, returns of capital on REITs, the recognition of unrealized gains or losses on certain futures contracts and the tax treatment of premium amortization. F. Portfolio Shares The Portfolios record sales and repurchases of their shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. 129 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) - -------------------------------------------------------------------------------- Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of share based on their respective percentage of the adjusted net assets at the beginning of the day. High Yield, Strategic Income, America Income and Money Market Portfolios declare as daily dividends substantially all of their respective net investment income. All dividends are paid on a monthly basis. Short-term capital gain distributions, if any, may be declared with the daily dividends. Dividends and distributions to shareowners are recorded on the ex-dividend date. Distributions paid by a Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. G. Securities Lending The Portfolios lend securities in their portfolios to certain broker-dealers or other institutional investors, with the Portfolios' custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolios also continue to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss on the fair value of the loaned securities that may occur during the term of the loan will be for account of the Portfolios. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The amount of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Portfolios have the right under the lending agreements to recover the securities on loan from the borrower on demand. The Portfolios invest cash collateral in the Securities Lending Investment Fund, which is managed by Brown Brothers Harriman & Co., the Portfolios' custodian. H. Repurchase Agreements With respect to repurchase agreements entered into by the Portfolios, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreements at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Trust's custodian, or subcustodians. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. Management Agreement PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the Portfolios. Management fees are calculated daily at the following annual rates: - ------------------------------------------------------------------------------
Management Fee as a Percentage of each Portfolio's Average Portfolio Daily Net Assets - -------------------------------------------------------------------------------- Emerging Markets Portfolio 1.15% Europe Portfolio 1.00% International Value Portfolio 1.00% Small Cap Value Portfolio 0.75% Small Company Portfolio 0.75% Mid Cap Value Portfolio 0.65% Growth Shares Portfolio 0.70% Real Estate Shares Portfolio 0.80% Fund Portfolio 0.65% Equity Income Portfolio 0.65% Balanced Portfolio 0.65% High Yield Portfolio 0.65% Strategic Income Portfolio 0.65% America Income Portfolio 0.55% Money Market Portfolio 0.50%
- -------------------------------------------------------------------------------- 130 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- PIM has agreed not to impose a portion of its management fees and to assume other operating expenses for certain Portfolios through December 31, 2004 to the extent necessary to limit expenses of Class I shares (Class II shares in the case of High Yield and Value Portfolios) to the following percentages of the Portfolios' average daily net assets attributable to Class I shares: - --------------------------------------------------------------------------------
Expense Limitation as a Percentage of each Portfolio's Average Portfolio Daily Net Assets - -------------------------------------------------------------------------------- Emerging Markets Portfolio 1.75% Europe Portfolio 1.50% Small Cap Value Portfolio 1.25% Small Company Portfolio 1.25% High Yield Portfolio 1.30% Strategic Income Portfolio 1.25% - --------------------------------------------------------------------------------
The portion of the Portfolios' expenses attributable to Class II (or Class I for shares in the case of High Yield Portfolio) will be reduced only to the extent such expenses are reduced for Class I shares (or Class II shares). In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolios. At December 31, 2004, the following amounts were payable to PIM related to management fees, administrative fees and certain other services and are included in due to affiliates: - --------------------------------------------------------------------------------
Portfolio Amount - -------------------------------------------------------------------------------- Emerging Markets Portfolio $39,145 Europe Portfolio 19,630 International Value Portfolio 24,357 Small Cap Value Portfolio 17,466 Small Company Portfolio 7,619 Mid Cap Value Portfolio 467,669 Growth Shares Portfolio 25,622 Real Estate Shares Portfolio 68,694 Fund Portfolio 278,054 Equity Income Portfolio 160,961 Balanced Portfolio 27,524 High Yield Portfolio 72,671 Strategic Income Portfolio 27,040 America Income Portfolio 23,654 Money Market Portfolio 17,777 - --------------------------------------------------------------------------------
131 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) - -------------------------------------------------------------------------------- 3. Transfer Agent PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. The following amounts of transfer agent fees payable to PIMSS are included in due to affiliates at December 31, 2004: - --------------------------------------------------------------------------------
Portfolio Amount - -------------------------------------------------------------------------------- Emerging Markets Portfolio $271 Europe Portfolio 271 International Value Portfolio 270 Small Cap Value Portfolio 268 Small Company Portfolio 268 Mid Cap Value Portfolio 520 Growth Shares Portfolio 271 Real Estate Shares Portfolio 270 Fund Portfolio 269 Equity Income Portfolio 271 Balanced Portfolio 272 High Yield Portfolio 267 Strategic Income Portfolio 271 America Income Portfolio 271 Money Market Portfolio 135 - --------------------------------------------------------------------------------
4. Distribution Plans The Portfolios have adopted plans of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plans, each Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares to compensate PFD for (1) distribution services and (2) personal and account maintenance services performed and expenses incurred by PFD in connection with each Portfolio's Class II shares. The following amounts of distribution fees payable to PFD are included in due to affiliates at December 31, 2004: - --------------------------------------------------------------------------------
Portfolio Amount - -------------------------------------------------------------------------------- Emerging Markets Portfolio $ 6,254 Europe Portfolio 1,762 International Value Portolio 828 Small Cap Value Portfolio 2,185 Small Company Portfolio 2,216 Mid Cap Value Portfolio 114,570 Growth Shares Portfolio 1,633 Real Estate Shares Portfolio 13,097 Fund Portfolio 28,889 Equity Income Portfolio 19,840 Balanced Portfolio 2,213 High Yield Portfolio 10,888 Strategic Income Portfolio 5,213 America Income Portfolio 2,901 - --------------------------------------------------------------------------------
132 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- 5. Aggregate Unrealized Appreciation and Depreciation At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows: - --------------------------------------------------------------------------------
Gross Gross Net Appreciation/ Portfolio Tax Cost Appreciation Depreciation (Depreciation) - ------------------------------------------------------------------------------------------------------------ Emerging Markets Portfolio $ 30,302,378 $ 11,097,178 $ (862,318) $ 10,234,860 Europe Portfolio $ 13,986,491 $ 3,915,690 $ (372,388) $ 3,543,302 International Value Portfolio $ 21,619,696 $ 6,175,716 $ (38,238) $ 6,137,478 Small Cap Value Portfolio $ 22,618,337 $ 5,335,071 $ (573,791) $ 4,761,280 Small Company Portfolio $ 13,392,581 $ 1,098,063 $ (247,635) $ 850,428 Mid Cap Value Portfolio $770,017,850 $149,310,096 $ (6,287,550) $143,022,546 Growth Shares Portfolio $ 37,873,972 $ 3,044,465 $ (725,524) $ 2,318,941 Real Estate Shares Portfolio $ 72,577,658 $ 31,782,239 $ (77,963) $ 31,704,276 Fund Portfolio $470,964,572 $139,688,987 $ (18,836,555) $120,852,432 Equity Income Portfolio $215,454,233 $ 69,454,959 $ (3,101,223) $ 66,353,726 Balanced Portfolio $ 40,310,656 $ 5,154,366 $ (552,305) $ 4,602,061 High Yield Portfolio $124,177,071 $ 6,347,617 $ (1,017,307) $ 5,330,310 Strategic Income Portfolio $ 42,477,674 $ 3,004,383 $ (75,881) $ 2,928,502 America Income Portfolio $ 45,514,028 $ 677,456 $ (53,369) $ 624,088 Money Market Portfolio $ 42,986,174 $ -- $ -- $ -- - ------------------------------------------------------------------------------------------------------------
6. Portfolio Transactions The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were as follows: - --------------------------------------------------------------------------------
Portfolio Purchases Sales - -------------------------------------------------------------------------------- Emerging Markets Portfolio $ 22,233,472 $ 24,663,852 Europe Portfolio 8,930,700 8,096,127 International Value Portfolio 30,362,933 30,703,827 Small Cap Value Portfolio 16,213,181 6,667,416 Small Company Portfolio 15,556,752 13,097,177 Mid Cap Value Portfolio 609,010,425 312,401,269 Growth Shares Portfolio 77,027,440 77,443,920 Real Estate Shares Portfolio 33,759,977 26,732,885 Fund Portfolio 102,950,656 46,364,816 Equity Income Portfolio 72,185,977 44,337,103 Balanced Portfolio 6,958,907 6,637,518 High Yield Portfolio 83,647,941 42,692,245 Strategic Income Portfolio 25,999,621 12,441,146 America Income Portfolio -- -- Money Market Portfolio -- -- - --------------------------------------------------------------------------------
The cost of purchases and the proceeds from sales of U.S. Government obligations for the year ended December 31, 2004, were as follows: - --------------------------------------------------------------------------------
Portfolio Purchases Sales - -------------------------------------------------------------------------------- Balanced Portfolio $ 7,113,072 $ 6,465,950 Strategic Income Portfolio 10,658,816 4,517,261 America Income Portfolio 15,946,349 17,221,316 Money Market Portfolio 102,657,000 90,158,000 - --------------------------------------------------------------------------------
133 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) - -------------------------------------------------------------------------------- 7. Capital Shares At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows for the fiscal years ended December 31, 2004 and 2003: - --------------------------------------------------------------------------------
'04 Shares '04 Amount '03 Shares '03 Amount - --------------------------------------------------------------------------------------------- Emerging Markets Portfolio CLASS I: Shares sold 72,945 $ 1,305,983 143,611 $ 1,837,255 Reinvestment of distributions 3,952 $ 63,595 2,017 25,338 Shares repurchased (138,809) (2,377,707) (195,769) (2,390,909) -------- ------------ -------- ------------- Net increase (decrease) (61,912) $ (1,008,129) (50,141) (528,316) ========= ============= ========= ============= CLASS II: Shares sold 468,119 $ 8,281,285 1,162,017 $ 14,523,321 Reinvestment of distributions 12,278 $ 196,317 4,838 60,429 Shares repurchased (524,708) (9,081,943) (435,883) (5,671,239) -------- ------------ --------- ------------- Net increase (decrease) (44,311) $ (604,341) 730,972 $ 8,912,511 ========= ============= ========= ============= Europe Portfolio CLASS I: Shares sold 43,531 $ 395,370 59,876 $ 462,031 Reinvestment of distributions 7,232 65,952 4,817 36,322 Shares repurchased (190,688) (1,758,638) (308,777) (2,225,749) -------- ------------ --------- ------------- Net increase (decrease) (139,925) $ (1,297,316) (244,084) $ (1,727,396) ========= ============= ========= ============= CLASS II: Shares sold 374,441 $ 3,494,736 836,602 $ 6,040,092 Reinvestment of distributions 4,343 38,910 1,262 9,637 Shares repurchased (151,264) (1,416,699) (547,441) (3,887,768) -------- ------------ --------- ------------- Net increase (decrease) 227,520 $ 2,116,947 290,423 $ 2,161,691 ========= ============= ========= ============= International Value Portfolio: CLASS I: Shares sold 125,954 $ 1,319,269 148,266 $ 1,260,116 Reinvestment of distributions 10,994 113,572 17,452 146,246 Shares repurchased (449,994) (4,643,483) (658,580) (5,442,461) -------- ------------ --------- ------------- Net increase (decrease) (313,046) $ (3,210,642) (492,862) $ (4,036,099) ========= ============= ========= ============= CLASS II: Shares sold 294,244 $ 3,061,211 108,723 $ 993,224 Reinvestment of distributions 862 8,888 -- -- Shares repurchased (53,626) (546,137) (1,092) (10,007) -------- ------------ --------- ------------- Net increase (decrease) 241,480 $ 2,523,962 107,631 $ 983,217 ========= ============= ========= ============= Small Cap Value Portfolio CLASS I: Shares sold 510,952 $ 6,774,823 1,276,588 $ 13,058,675 Reinvestment of distributions -- -- -- -- Shares repurchased (277,189) (3,672,701) (1,028,432) (10,409,382) -------- ------------ ---------- ------------- Net increase (decrease) 233,763 $ 3,102,122 248,156 $ 2,649,293 ========= ============= ========= ============= CLASS II: Shares sold 566,136 $ 7,527,234 235,328 $ 2,693,418 Reinvestment of distributions -- -- -- -- Shares repurchased (61,897) (820,452) (14,089) (159,522) -------- ------------ ---------- ------------- Net increase (decrease) 504,239 $ 6,706,782 221,239 $ 2,533,896 ========= ============= ========= ============= - ---------------------------------------------------------------------------------------------
134 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
'04 Shares '04 Amount '03 Shares '03 Amount - ------------------------------------------------------------------------------------------------------------ Small Company Portfolio CLASS I: Shares sold 56,890 $ 670,369 286,397 $ 2,774,242 Reinvestment of distributions -- -- -- -- Shares repurchased (103,931) (1,215,329) (324,514) (3,132,628) ------------------------------------------------------------ Net increase (decrease) (47,041) $ (544,960) (38,117) $ (358,386) ============================================================ CLASS II: Shares sold 320,212 $ 3,780,396 328,726 $ 3,382,001 Reinvestment of distributions -- -- -- -- Shares repurchased (160,864) (1,919,719) (80,215) (778,938) ------------------------------------------------------------ Net increase (decrease) 159,348 $ 1,860,677 248,511 $ 2,603,063 ============================================================ Mid Cap Value Portfolio CLASS I: Shares sold 3,133,632 $ 68,612,090 2,677,744 $ 46,157,551 Class I shares issued in reorganization 2,087,866 49,670,328 -- -- Reinvestment of distributions 117,982 2,575,556 26,084 438,476 Shares repurchased (1,365,569) (29,591,496) (2,465,836) (40,592,863) -------------------------------------------------------------- Net increase (decrease) 3,973,911 $ 91,266,478 237,992 $ 6,003,164 ============================================================ CLASS II: Shares sold 12,236,512 $ 263,179,728 6,515,291 $ 114,986,107 Reinvestment of distributions 221,974 4,807,964 93,450 236,135 Shares repurchased (881,455) (19,626,013) (249,002) (3,957,753) -------------------------------------------------------------- Net increase (decrease) 11,577,031 $ 248,361,679 6,280,420 $ 111,264,489 ============================================================ Growth Shares Portfolio CLASS I: Shares sold 66,360 $ 806,587 91,892 $ 1,012,931 Reinvestment of distributions -- -- 403 4,477 Shares repurchased (515,053) (6,176,527) (731,375) (7,757,809) -------------------------------------------------------------- Net increase (decrease) (448,693) $ (5,369,940) (639,080) $ (6,740,401) ============================================================ CLASS II: Shares sold 406,516 $ 4,832,089 271,796 $ 3,091,881 Reinvestment of distributions -- -- -- -- Shares repurchased (56,565) (664,405) (46,885) (519,493) -------------------------------------------------------------- Net increase (decrease) 349,951 $ 4,167,684 224,911 $ 2,572,388 ============================================================ Real Estate Shares Portfolio CLASS I: Shares sold 151,466 $ 3,192,487 153,884 $ 2,545,266 Reinvestment of distributions 56,986 1,200,592 87,137 1,422,912 Shares repurchased (425,846) (8,497,885) (588,199) (9,201,017) -------------------------------------------------------------- Net increase (decrease) (217,394) $ (4,104,806) (347,178) $ (5,232,839) ============================================================ CLASS II: Shares sold 820,863 $ 16,857,146 424,038 $ 7,208,344 Reinvestment of distributions 81,377 1,719,624 92,474 1,519,594 Shares repurchased (505,041) (10,015,990) (578,790) (8,767,986) -------------------------------------------------------------- Net increase (decrease) 397,199 $ 8,560,780 (62,278) $ (40,048) ============================================================ - ------------------------------------------------------------------------------------------------------------
135 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
'04 Shares '04 Amount '03 Shares '03 Amount - ------------------------------------------------------------------------------------------------------------ Fund Portfolio CLASS I: Shares sold 451,723 $ 8,690,214 519,126 $ 8,479,870 Class I shares issued in reorganization 14,822,109 298,220,832 -- -- Reinvestment of distributions 87,609 1,685,576 94,945 1,580,150 Shares repurchased (1,561,121) (29,970,569) (1,616,113) (25,564,887) --------------------------------------------------------------- Net increase (decrease) 13,800,320 $ 278,626,053 (1,002,042) $ (15,504,867) =============================================================== CLASS II: Shares sold 2,721,468 $ 51,382,671 3,031,681 $ 50,171,619 Reinvestment of distributions 55,486 1,069,680 30,685 520,900 Shares repurchased (952,397) (18,149,175) (747,392) (12,093,482) -------------------------------------------------------------- Net increase (decrease) 1,824,557 $ 34,303,176 2,314,974 $ 38,599,037 ============================================================== Equity Income Portfolio CLASS I: Shares sold 1,757,096 $ 33,474,454 1,544,529 $ 24,668,979 Reinvestment of distributions 198,654 3,809,791 204,954 3,313,898 Shares repurchased (1,411,407) (26,451,072) (1,964,325) (30,892,038) -------------------------------------------------------------- Net increase (decrease) 544,343 $ 10,833,173 (214,842) $ (2,909,161) =============================================================== CLASS II: Shares sold 1,571,139 $ 29,821,487 1,723,515 $ 27,764,040 Reinvestment of distributions 82,473 1,595,526 52,432 860,942 Shares repurchased (442,520) (8,231,500) (242,114) (3,788,595) -------------------------------------------------------------- Net increase (decrease) 1,211,092 $ 23,095,513 1,533,833 $ 24,836,387 =============================================================== Balanced Portfolio CLASS I: Shares sold 78,321 $ 1,113,192 58,603 $ 777,329 Reinvestment of distributions 55,609 789,468 60,877 800,492 Shares repurchased (586,843) (8,291,593) (705,902) (9,066,098) -------------------------------------------------------------- Net increase (decrease) (452,913) (6,388,933) (586,422) $ (7,488,277) =============================================================== CLASS II: Shares sold 557,386 $ 7,865,698 244,252 $ 3,291,111 Reinvestment of distributions 10,920 155,081 1,455 20,059 Shares repurchased (83,119) (1,169,938) (3,966) (53,357) ------------------------------------------------------------- Net increase (decrease) 485,187 $ 6,850,841 241,741 $ 3,257,813 =============================================================== High Yield Portfolio CLASS I: Shares sold 2,699,382 $ 30,852,667 2,515,726 $ 26,817,319 Reinvestment of distributions 346,267 3,947,046 357,809 3,779,086 Shares repurchased (2,787,689) (31,727,505) (1,491,103) (15,895,254) ------------------------------------------------------------- Net increase (decrease) 257,960 $ 3,072,208 1,382,432 $ 14,701,151 =============================================================== CLASS II: Shares sold 3,916,481 $ 44,766,847 1,708,526 $ 18,792,041 Reinvestment of distributions 166,648 1,899,530 25,089 279,936 Shares repurchased (1,171,662) (12,979,950) (221,726) (2,359,507) ------------------------------------------------------------- Net increase (decrease) 2,911,467 $ 33,686,427 1,511,889 $ 16,712,470 ============================================================== - -----------------------------------------------------------------------------------------------------------
136 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
'04 Shares '04 Amount '03 Shares '03 Amount - -------------------------------------------------------------------------------------------------------------- Strategic Income Portfolio CLASS I: Shares sold 453,590 $ 4,955,590 712,653 $ 7,385,764 Reinvestment of distributions 134,927 1,462,624 100,561 1,053,192 Shares repurchased (494,192) (5,414,640) (579,108) (6,045,569) -------------------------------------------------------------- Net increase (decrease) 94,325 $ 1,002,986 234,106 $ 2,393,387 =============================================================== CLASS II: Shares sold 1,907,997 $ 20,809,730 353,538 $ 3,774,292 Reinvestment of distributions 83,281 904,794 4,862 52,365 Shares repurchased (101,494) (1,108,839) (25,608) (275,096) -------------------------------------------------------------- Net increase (decrease) 1,889,784 $ 20,605,685 332,792 $ 3,551,561 =============================================================== America Income Portfolio CLASS I: Shares sold 245,204 $ 2,472,061 711,258 $ 8,118,733 Reinvestment of distributions 206,467 2,102,795 221,712 2,321,232 Shares repurchased (1,551,998) (15,847,044) (3,202,256) (34,132,706) -------------------------------------------------------------- Net increase (decrease) (1,100,327) $ (11,272,188) 2,269,286 (23,692,741) =============================================================== CLASS II: Shares sold 1,247,751 $ 12,688,404 265,643 $ 2,756,721 Reinvestment of distributions 39,513 401,463 2,521 26,114 Shares repurchased (179,116) (1,822,936) (13,939) (143,836) -------------------------------------------------------------- Net increase (decrease) 1,108,148 $ 11,266,931 254,225 $ 2,638,999 =============================================================== Money Market Portfolio CLASS I: Shares sold 18,483,037 $ 18,483,037 27,291,288 $ 27,291,288 Class I shares issued in reorganization 21,976,837 21,976,837 -- -- Reinvestment of distributions 203,307 203,307 277,946 277,946 Shares repurchased (32,505,228) (32,505,228) (52,356,043) (52,356,043) ----------------------------------------------------------------- Net increase (decrease) 8,157,953 $ 8,157,953 (24,786,809) $ (24,786,809) =============================================================== - --------------------------------------------------------------------------------------------------------------
8. Forward Foreign Currency Contracts During the year ended December 31, 2004, certain Portfolios had entered into various contracts that obligate the Portfolios to deliver currencies at specified future dates. At the maturity of a contract, the Portfolios must make delivery of the foreign currency. Alternatively, prior to the settlement date of a portfolio hedge, the Portfolio may close out such contracts by entering into an offsetting hedge contract. As of December 31, 2004, the Portfolios' open portfolio hedges were as follows: - ------------------------------------------------------------------------------
Contracts to In Exchange Settlement Net Portfolio Deliver For Date Value Unrealized Gain (Loss) - ------------------------------------------------------------------------------------------------------------------------------ Strategic Income Portfolio AUD (200,000) $ 151,140 2/8/05 $ (156,097) $ (4,957) Strategic Income Portfolio EURO (1,551,000) $1,995,676 1/26/05 $ (2,106,170) $ (110,494) - ------------------------------------------------------------------------------------------------------------------------------
Outstanding forward currency settlement contracts as of December 31, 2004 were as follows:
- ---------------------------------------------------------------------------------------------------- Net Gross Settlement Gross Receivable/ Portfolio Receivable Date Payable (Payable) - ---------------------------------------------------------------------------------------------------- International Value Portfolio $ (432,458) 1/3/05 $ (429,646) $ (2,812) International Value Portfolio $ 867,839 1/3/05 $ 860,938 $ 6,901 - ----------------------------------------------------------------------------------------------------
137 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) - -------------------------------------------------------------------------------- 9. Merger Information On December 8, 2004, beneficial owners of Safeco RST Core Equity Portfolio ("Core Equity"), Safeco RST Money Market Portfolio ("Money Market") and Safeco RST Multi-Cap Core Portfolio ("Multi-Cap"), three of the six portfolios that comprised Safeco Resource Series Trust, approved a proposed Agreement and Plan of Reorganization that provided for the mergers listed below. These tax-free reorganizations were accomplished on December 10, 2004 ("Closing Date"), by exchanging all of the Safeco's net assets for Class I shares as indicated below, based on Class I shares' ending net asset value on the Closing Date. The following charts show the details of the reorganizations as of that closing date Closing Date: Pioneer Fund VCT Portfolio - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------- Pioneer Fund Safeco RST Core Pioneer Fund VCT Portfolio Equity Portfolio VCT Portfolio (Pre-Reorganization) (Pre-Reorganization) (Post-Reorganization) - ---------------------------------------------------------------------------------------------------- Net Assets $281,591,969 $298,220,832 $879,147,352 Shares Outstanding 13,990,134 12,804,673 28,812,243 Class I Shares Issued 14,822,109 - ----------------------------------------------------------------------------------------------------
Pioneer Money Market VCT Portfolio - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------- Pioneer Money Pioneer Money Market VCT Safeco RST Money Market VCT Portfolio Market Portfolio Portfolio (Pre-Reorganization) (Pre-Reorganization) (Post-Reorganization) - ---------------------------------------------------------------------------------------------------- Net Assets $23,493,640 $21,976,837 $67,613,266 Shares Outstanding 23,500,655 21,976,837 45,477,492 Class I Shares Issued 21,976,837 - ----------------------------------------------------------------------------------------------------
Pioneer Mid Cap Value VCT Portfolio - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------- Pioneer Mid Cap Pioneer Mid Cap Value VCT Safeco RST Multi- Value VCT Portfolio Cap Core Portfolio Portfolio (Pre-Reorganization) (Pre-Reorganization) (Post-Reorganization) - ---------------------------------------------------------------------------------------------------- Net Assets $757,206,652 $49,670,328 $858,922,877 Shares Outstanding 32,072,498 2,399,533 34,160,364 Class I Shares Issued 2,087,866 - ----------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------- Unrealized Realized Appreciation on Gain/(Loss) Closing Date on Closing Date - ---------------------------------------------------------------------------------------------------- Safeco RST Core Equity Portfolio $68,714,366 $20,662,968 Safeco RST Money Market Portfolio -- -- Safeco RST Multi-Cap Core Portfolio $ 5,550,191 $ 7,992,587 - ----------------------------------------------------------------------------------------------------
138 PIONEER VARIABLE CONTRACTS TRUST Pioneer Variable Contracts Trust - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Board of Trustees and Class I Shareowners of Pioneer Variable Contracts Trust: We have audited the accompanying statements of assets and liabilities, including the schedules of investments of Emerging Markets VCT Portfolio, Europe VCT Portfolio, International Value VCT Portfolio, Small Cap Value VCT Portfolio, Small Company VCT Portfolio, Mid Cap Value VCT Portfolio, Growth Shares VCT Portfolio, Real Estate Shares VCT Portfolio, Pioneer Fund VCT Portfolio, Equity Income VCT Portfolio, Balanced VCT Portfolio, High Yield VCT Portfolio, Strategic Income VCT Portfolio, America Income VCT Portfolio and Money Market VCT Portfolio (fifteen of the portfolios constituting the Pioneer Variable Contracts Trust (the "Trust"), the "Portfolios"), as of December 31, 2004, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the two years in the period ended December 31, 2001 were audited by other auditors who have ceased operations and whose report, dated February 8, 2002, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the fifteen Portfolios of the Pioneer Variable Contracts Trust referred to above at December 31, 2004, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young Boston, Massachusetts February 11, 2005 139 Pioneer Variable Contracts Trust - --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS - ----------------------------------------------------------------------------------------------------------------------------------- Investment Adviser Trustees and Officers Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the Trust's operations. The Trust's Trustees and officers are listed below, together Custodian with their rincipal occupations during the past five years. Trustees who Brown Brothers Harriman & Co are interested persons of the Portfolio within the meaning of the Investment Company Act of 1940 are referred to as Interested Trustees. Independent Registered Public Accounting Firm Trustees who are not interested persons of the Trust are referred to as Ernst & Young LLP Trustees. Each of the Trustees serves as a trustee of each of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, Principal Underwriter Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address Pioneer Funds Distributor, Inc. for all Interested Trustees and all officers of the Portfolio is 60 State Street, Boston, Massachusetts 02109. Legal Counsel The Trust's statement of additional information provides more detailed Wilmer Cutler Pickering Hale and Dorr LLP information regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-225-6292. Shareowner Services and Transfer Proxy Voting Policies and Procedures of the Trust are available without Pioneer Investment Management Shareholder Services, charge, upon Agent request, by calling our toll free number Inc. (1-800-225-6292). This information is also available online at pioneerfunds.com. Pioneer Investment Management Shareholder Services, Inc. online at pioneerfunds.com. online at pioneerfunds.com. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEES - ----------------------------------------------------------------------------------------------------------------------------------- POSITIONS HELD PRINCIPAL OCCUPATION DURING NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS TRUSTEE John F. Cogan, Chairman of the Serves until Trustee and President Serves Director of Harbor Global Company, Ltd. Jr. (78)* Board, Trustee successor trustee until retirement or removal President and is elected or or earlier retirement Deputy removal Chairman and a Director of Pioneer Global Asset Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Manage ("PIM-USA"); Chairman and a Director of Pio of Pioneer Alternative Investment Managemen (Dublin); President and a Director of Pione Investment Management (Bermuda) Limited and funds; President and Director of Pioneer Fu Inc. ("PFD"); President of all of the Pione Of Counsel (since 2000, partner prior to 20 Pickering Hale and Dorr LLP (counsel to PIM Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------ Osbert M. Hood Trustee and Serves until President and Chief Executive None (52)** Executive Vice successor trustee is Officer, PIM-USA since May 2003 President elected or earlier (Director since January 2001); retirement or removal President and Director of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------
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Pioneer Variable Contracts Trust - ------------------------------------------------------------------------------------------------------------------------------------ TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------------ POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS THIS TRUSTEE David R. Trustee since Serves until a Senior Vice President and Director of The Enterprise Social Investment Bock** (61) 2005 successor trustee is Chief Financial Officer, Company (privately-held affordable housing 3050 K. elected or earlier I-trax, Inc (publicly traded finance company); Director of New York Street NW, retirement or removal.health care services Mortgage Trust (publicly traded mortgage Washington, company) (2001-present); REIT) DC 20007 Managing Partner, Federal City Capital Advisors (boutique merchant bank)(1995-2000; 2002 to 2004); Executive Vice President and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Mary K. Bush Trustee since Serves until President, Bush International Director of Brady Corporation (industrial (56) 3509 2000. successor trustee is (international inancial identification and specialty coated material Woodbine elected or earlier advisory firm) products manufacturer), Millennium Street, retirement or removal Chemicals, Inc. (commodity chemicals), Chevy Chase, Mortgage Guaranty Insurance Corporation, MD 20815 and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - ------------------------------------------------------------------------------------------------------------------------------------ Margaret Trustee since Serves until Founding Director, The None B.W. Graham 2000. successor trustee is Winthrop Group, Inc. (57) 1001 elected or earlier (consulting firm); Professor Sherbrooke retirement or removal of Management, Faculty of Street West, Management, McGill Montreal, University Quebec, Canada H3A 1G5 - ------------------------------------------------------------------------------------------------------------------------------------ Marguerite Trustee since Serves untill President, and Chief Executive Director of New American High Income Fund, A. Piret 1995. successor Officer, Newbury, Piret & Inc.(closed-end investment company) (56) One trustee is Company, Inc. (investment Boston elected or banking firm) Place, 28th earlier Floor, retirement Boston, MA or removal 02108 - ------------------------------------------------------------------------------------------------------------------------------------ Stephen K. Trustee since Serves until Senior Counsel, Sullivan & Director, The Swiss Helvetic Fund, Inc. West (76) 1995. successor trustee Cromwell (law firm) (closed-end investment company) and AMVESCAP 125 Broad is elected or earlier PLC (investment managers) Street, New retirement or removal York, NY 10004 - ------------------------------------------------------------------------------------------------------------------------------------ John Trustee since Serves until President, John Winthrop & CO., None Winthrop September, successor trustee Inc.(private investment firm) (68) One 2000. is elected or earlier North Adgers retirement or removal Wharf, Charleston, SC 29401 - ------------------------------------------------------------------------------------------------------------------------------------
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Pioneer Variable Contracts Trust - ------------------------------------------------------------------------------------------------------------------------------------ TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TRUST OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS OFFICER Dorothy E. Secretary Serves at the discretion Secretary of PIM-USA; Senior None Bourassa (57) of the Board Vice President - Legal of Pioneer; and Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Complianc of PIM-USA from April 1998 through October 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Christopher J. Assistant Serves at the discretion Assistant Vice President and None Kelley (40) Secretary of the Board Senior Counsel of Pioneer since July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ David C. Assistant Serves at the discretion Partner, Wilmer Cutler None Phelan (47) Secretary of the Board Pickering Hale and Dorr LLP; Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Vincent Treasurer Serves at the discretion Vice President-Fund None Nave (59) of the Board Accounting, Administration and Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ------------------------------------------------------------------------------------------------------------------------------------ Mark E. Assistant Serves at the discretion Deputy Treasurer of Pioneer None Bradley (45) Treasurer of the Board since 2004; Treasurer and Senior Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Luis I. Assistant Serves at the discretion Assistant Vice President - None Presutti (39) Treasurer of the Board Fund Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Gary Sullivan Assistant Serves at the discretion Fund Accounting Manager - None (46) Treasurer of the Board Fund Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - ------------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------------ Pioneer Variable Contracts Trust - ------------------------------------------------------------------------------------------------------------------------------------ TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TRUST OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ POSITIONS HELD PRINCIPAL OCCUPATION NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS OFFICER Katharine Kim Assistant Serves at the discretion Fund Administration Manager - None Sullivan (31) Treasurer of the Board Fund Accounting, Administration and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Martin J. Wolin Chief Serves at the discretion Chief Compliance Officer of None (37) Compliance of the Board Pioneer (Director of Officer Compliance and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 143 [LOGO] PIONEER Investments(R) Pioneer Variable Contracts Trust Issuer Allmerica Financial Life Insurance and Annuity Company, Contract Form A3025-96 In New York and Hawaii, issued by First Allmerica Financial Life Insurance Company, Contract Form A3025-96 GRC General Distributor Veravest Investments, Inc. 400 Lincoln Street Worcester, MA 01653 Please consider a Portfolio's investment objective, risks, charges and expenses carefully before investing. The prospectus contains this and other information about a Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, contact our adviser, call 1-800-225-6292 or visit our web site at www.pioneerfunds.com. [LOGO] PIONEER INVESTMENT(R) PIONEER VARIABLE CONTRACTS TRUST PIONEER BOND VCT PORTFOLIO -- CLASS I SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Pioneer Bond VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 10 Notes to Financial Statements 14 Report of Independent Registered Public Accounting Firm 18 Trustees, Officers and Service Providers 19 PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT www.pioneerfunds.com. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT http://www.sec.gov. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- PORTFOLIO DIVERSIFICATION (As a percentage of total investment in securities) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] U.S. Government Securities 67.4% U.S. Corporate Bonds 28.6% Asset Backed Securities 1.8% Municipal Bonds 1.1% Collateralized Mortgage Obligations 1.1% QUALITY DISTRIBUTION (As a percentage of total investment in securities) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Cash 1.26% Treasury/Agency 69.70% AA 1.39% A 8.94% BBB 15.56% BB 3.15% FIVE LARGEST HOLDINGS (As a percentage of long-term holdings) 1. Government National Mortgage Association, 6.0%, 9/15/34 6.66% 2. US Treasury Notes, 3.5%, 1/15/11 4.96 3. Government National Mortgage Association, 5.5%, 10/15/33 4.54 4. Federal National Mortgage Association, 4.816%, 12/1/12 3.97 5. Federal National Mortgage Association, 5.0%, 12/1/17 3.58 The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- PRICES AND DISTRIBUTIONS 12/31/04 12/31/03 Net Asset Value per Share $ 11.61 $ 11.24 DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ 0.02545 $ -- $ -- - -------------------------------------------------------------------------------- PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in PIONEER BOND VCT PORTFOLIO at net asset value, compared to that of the Lehman Brothers Aggregate Bond Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Lehman Bros Pioneer Bond Aggregate Bond Index VCT Portfolio 7/87 10,000 10,000 10,301 10,179 12/88 11,113 10,894 12,728 12,125 12/90 13,868 12,921 16,087 14,728 12/92 17,278 15,733 18,962 17,393 12/94 18,409 16,883 21,810 19,900 12/96 22,602 20,007 24,784 21,690 12/98 26,937 23,621 26,716 22,679 12/00 29,822 25,353 32,340 27,198 12/02 35,657 29,317 37,120 30,279 12/04 38,730 31,371 The Lehman Brothers Aggregate Bond Index is a measure of the U.S. bond market. A market value-weighted measure of treasure and agency issues, corporate bond issues and mortgage-backed securities. Index returns assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in any Index. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - -------------------------------------------------------------------------------- NET ASSET VALUE - -------------------------------------------------------------------------------- 10 Years 6.39% 5 Years 6.70% 1 Year 3.61% All total returns shown assume reinvestment of distributions at net asset value. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Please refer to variable product's annual report for performance that reflects the deduction of the variable products fees and charges. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers, performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER BOND VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004 SHARE CLASS I --------------------------------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,036.10 Expenses Paid During Period* $ 4.54 * Expenses are equal to the Portfolio's annualized expense ratio of 0.89% for Class I shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER BOND VCT PORTFOLIO Based on a hypothetical 5% per year return before expenses, reflecting the period from July 1, 2004 through December 31, 2004 SHARE CLASS I --------------------------------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,020.66 Expenses Paid During Period* $ 4.50 * Expenses are equal to the Portfolio's annualized expense ratio of 0.89% for Class I shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- A WORD ABOUT RISK: INVESTMENTS IN HIGH-YIELD OR LOWER-RATED SECURITIES ARE SUBJECT TO GREATER-THAN-AVERAGE RISK. WHEN INTEREST RATES RISE, THE PRICES OF FIXED-INCOME SECURITIES IN THE PORTFOLIO WILL GENERALLY FALL. CONVERSELY, WHEN INTEREST RATES FALL THE PRICES OF FIXED-INCOME SECURITIES IN THE PORTFOLIO WILL GENERALLY RISE. THE PORTFOLIO MAY INVEST IN MORTGAGE-BACKED SECURITIES, WHICH DURING TIMES OF FLUCTUATING INTEREST RATES MAY INCREASE OR DECREASE MORE THAN OTHER FIXED-INCOME SECURITIES. MORTGAGE-BACKED SECURITIES ARE ALSO SUBJECT TO PRE-PAYMENTS. INVESTMENTS IN THE PORTFOLIO ARE SUBJECT TO POSSIBLE LOSS DUE TO THE FINANCIAL FAILURE OF UNDERLYING SECURITIES AND THEIR INABILITY TO MEET THEIR DEBT OBLIGATIONS. THE SECURITIES ISSUED BY U.S. GOVERNMENT SPONSORED ENTITIES (I.E., FNMA, FREDDIE MAC) IS NEITHER GUARANTEED NOR ISSUED BY THE U.S. GOVERNMENT. CALL 800-688-9915 OR VISIT www.pioneerfunds.com FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE RETURNS FOR THE PORTFOLIO DO NOT REFLECT THE DEDUCTION OF EXPENSES ASSOCIATED WITH VARIABLE PRODUCTS, SUCH AS MORTALITY AND EXPENSE RISK CHARGES, SEPARATE ACCOUNT CHARGES, AND SALES CHARGES. THESE EXPENSES WOULD REDUCE THE OVERALL RETURNS SHOWN. PERFORMANCE RESULTS REFLECT ANY APPLICABLE EXPENSE WAIVERS IN EFFECT DURING THE PERIODS SHOWN. WITHOUT SUCH WAIVERS, PERFORMANCE WOULD BE LOWER. WAIVERS MAY NOT BE IN EFFECT FOR ALL PORTFOLIOS. CERTAIN FEE WAIVERS ARE CONTRACTUAL THROUGH A SPECIFIED PERIOD. OTHERWISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION. The domestic economy grew at a healthy pace throughout 2004, encouraging the U.S. Federal Reserve finally to begin raising short-term rates from the unusually low levels to which they had fallen. The fixed income market reacted favorably to the Fed's series of measured increases in the Fed funds rate, with the yields of longer-term Treasuries actually declining modestly. Meanwhile corporate bonds and mortgages continued to outperform Treasuries as investors sought out higher-yielding investments in an environment of continued low, by historical standards, interest rates. In the following discussion, Kenneth J. Taubes discusses the factors that influenced Pioneer Bond VCT Portfolio's performance during the 12 months. Mr. Taubes, Director of Pioneer's Fixed Income Group, oversees the team responsible for daily management of the Portfolio. This team took portfolio management responsibility for Pioneer Bond VCT Portfolio during the final month of the 12-month period. Q: HOW DID THE PORTFOLIO PERFORM 2004? A: The Portfolio's Class I had a total return of 3.61% for the 12 months ended December 31, 2004. During the same 12 months, the Lehman Aggregate Bond Index returned 4.34%. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE 12 MONTHS? A: With increasing evidence that the domestic economic recovery was continuing and sustainable, the Federal Reserve Board began signaling in the spring of 2004 that it was likely to begin tightening monetary policy by raising the Fed funds rate and dampen the potential for increasing inflationary pressures. On June 30, the Fed began a series of modest tightening steps, which resulted in the rate rising from 1.00% to 2.25% by the end of the year. Despite rising short-term rates, market rates for longer-maturity securities actually tended to decline during the year, as investors reacted in a show of confidence about the economy and the Fed's policy to head off inflationary pressures. While longer-term Treasuries performed consistent with a stable environment of flat-to-declining interest rates, the backdrop of a strengthening economy and improving corporate cash flow encouraged investors to seek out greater yields through corporate bonds and mortgage-backed securities. Both corporate bonds and mortgage securities outperformed Treasuries, with high-yield corporate debt turning in the best performance among the sectors in the domestic bond market. As the Pioneer Fixed Income Group took responsibility for the Portfolio during the final month of 2004, we repositioned it to emphasize high-yield and investment-grade corporate bonds as well as mortgage securities. At the end of the 12-month period, about 55% of assets were invested in mortgages and about 40% were invested in corporate debt, including almost 15% high-yield bonds. We reduced our high-yield positions slightly in the final quarter of the year. As we did so, we increased our investments in mortgage securities, which offered yields competitive with corporates but with higher quality. Overall average credit quality of the Portfolio was A+. We also kept the Portfolio's sensitivity to interest-rate changes - as measured by duration - close to that of the benchmark Lehman Aggregate Bond Index. Q: WHAT IS YOUR INVESTMENT OUTLOOK? A: We anticipate that the Federal Reserve will continue to raise the Fed funds rate at a measured pace during 2005. The fixed income market already has anticipated in current bond prices a series of further increases that would bring the Fed funds rate from 2.25% to near 3.5% by the end of the year. We believe the market rates of longer-term and intermediate-term securities already are close to being fairly valued. As a result, we anticipate that the yield curve - which measures the relationship between short-term and longer-term interest rates - likely will flatten during the year as short-term rates move up. In general, valuations of corporate securities appear relatively high by historical standards, but they probably are justified given the strong economic fundamentals both in the United States and throughout the globe. Strengthening economies are now helping companies across all sectors, resulting in improved cash flows and corporate profits. In this environment, we think corporate bonds should perform well, consistent with their yield advantage over Treasuries. As a result, we will continue to look for opportunities in the corporate sector. However, we expect to also put greater emphasis on mortgage securities, which offer virtually the same yields as corporate debt but have the advantage of higher credit ratings. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. 4 PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
S&P/MOODY'S PRINCIPAL RATINGS AMOUNT (UNAUDITED) VALUE ASSET BACKED SECURITIES - 1.8% DIVERSIFIED FINANCIALS - 1.3% CONSUMER FINANCE - 0.3% $ 156,028 AAA/Aaa Americredit Automobile Receivables Trust, Floating Rate Note, 12/12/07 $ 156,126 ------------ SPECIALIZED FINANCE - 0.9% 420,000 AAA/Aaa MBNA Credit Card Master Note, Floating Rate Note, 12/15/08 $ 420,574 ------------ TOTAL DIVERSIFIED FINANCIALS $ 576,700 ------------ UTILITIES - 0.5% ELECTRICAL UTILITIES - 0.5% 222,310 BB+/Ba2 FPL Energy Wind Funding, 6.876%, 6/27/17 (144A) $ 229,257 ------------ TOTAL UTILITIES $ 229,257 ------------ TOTAL ASSET BACKED SECURITIES (Cost $806,100) $ 805,957 ------------ COLLATERALIZED MORTGAGE OBLIGATIONS - 1.0% DIVERSIFIED FINANCIALS - 1.0% CONSUMER FINANCE - 0.1% 37,157 Asset Securitization Corp., Floating Rate Note, 1/13/30 $ 37,270 ------------ OTHER DIVERSIFIED FINANCIAL SERVICES - 0.9% 450,000 BB/NR Tower 2004-2A F, 6.376%, 12/15/14 $ 447,750 ------------ TOTAL DIVERSIFIED FINANCIALS $ 485,020 ------------ TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $488,522) $ 485,020 ------------ CORPORATE BONDS - 25.6% ENERGY - 2.5% INTEGRATED OIL & Gas - 0.8% 215,000 BBB/Baa2 Petro-Canada, 4.0%, 7/15/13 $ 201,398 140,000 BBB+/Baa1 USX Corp., 6.85%, 3/1/08 152,322 ------------ $ 353,720 ------------ OIL & GAS EXPLORATION & PRODUCTION - 1.0% 370,000 BBB-/Baa1 Pemex Project Funding Master, 9.125%, 10/13/10 $ 443,630 ------------ OIL & GAS REFINING MARKETING & TRANSPORTATION - 0.7% 295,000 BBB+/Baa1 Kinder Morgan Energy Partners, 6.75%, 3/15/11 $ 329,347 ------------ TOTAL ENERGY $ 1,126,697 ------------ MATERIALS - 0.7% FERTILIZERS & AGRICULTURAL CHEMICALS - 0.5% 220,000 BBB+/Baa2 Potash Corp. Saskatchewan, 4.875%, 3/1/13 $ 221,133 ------------ FOREST PRODUCTS - 0.2% 81,000 BBB/Baa2 Weyerhaeuser Co., 5.5%, 3/15/05 $ 81,373 ------------ TOTAL MATERIALS $ 302,506 ------------ CAPITAL GOODS - 2.0% AEROSPACE & DEFENSE - 1.9% 190,000 A/A3 Boeing Co., 5.125%, 2/15/13 $ 196,548 585,000 A/A2 Honeywell International, 7.5%, 3/1/10 675,874 ------------ $ 872,422 ------------ CONSTRUCTION & ENGINEERING - 0.1% 40,000 B+/Ba3 Shaw Group Inc., 10.75%, 3/15/10 $ 44,100 ------------ TOTAL CAPITAL GOODS $ 916,522 ------------
The accompanying notes are an integral part of these financial statements. 5 PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - --------------------------------------------------------------------------------
S&P/MOODY'S PRINCIPAL RATINGS AMOUNT (UNAUDITED) VALUE AUTOMOBILES & COMPONENTS - 3.1% AUTOMOBILE MANUFACTURERS - 3.1% $ 635,000 BBB-/Baa1 Ford Motor Co., 7.25%, 10/1/08 $ 681,165 725,000 BBB-/Baa1 GMAC, 6.125%, 9/15/06 743,258 ------------ $ 1,424,423 ------------ TOTAL AUTOMOBILES & COMPONENTS $ 1,424,423 ------------ CONSUMER DURABLES & APPAREL - 0.6% HOUSEWARES & Specialties - 0.6% 275,000 BBB+/Baa2 Newell Rubbermaid, Inc., 4.625%, 12/15/09 $ 277,593 ------------ TOTAL CONSUMER DURABLES & APPAREL $ 277,593 ------------ MEDIA - 1.3% BROADCASTING & CABLE TELEVISION - 0.8% 335,000 BBB/Baa3 Comcast Corp., 5.3%, 1/15/14 $ 345,490 ------------ MOVIES & ENTERTAINMENT - 0.5% 215,000 BBB+/Baa1 Time Warner, Inc., 6.75%, 4/15/11 $ 241,845 ------------ TOTAL MEDIA $ 587,335 ------------ RETAILING - 0.3% DEPARTMENT STORES - 0.3% 140,000 A-/Baa1 Nordstrom, Inc., 5.625%, 1/15/09 $ 148,166 ------------ TOTAL RETAILING $ 148,166 ------------ FOOD, BEVERAGE & TOBACCO - 2.0% BREWERS - 0.7% 280,000 BBB+/Baa1 Miller Brewing Co., 5.5%, 8/15/13 (144A) $ 292,669 ------------ PACKAGED FOODS & MEATS - 0.7% 280,000 A+/A1 Unilever Capital Corp., 7.125%, 11/1/10 $ 322,062 ------------ SOFT DRINKS - 0.6% 280,000 A/A3 Bottling Group LLC., 5.0%, 11/15/13 $ 288,674 ------------ TOTAL FOOD, BEVERAGE & TOBACCO $ 903,405 ------------ HEALTH CARE EQUIPMENT & SERVICES - 1.6% HEALTH CARE DISTRIBUTORS - 0.8% 360,000 BBB/Baa3 Cardinal Health, Inc., 6.0%, 1/15/06 $ 367,609 ------------ HEALTH CARE FACILITIES - 0.8% 350,000 BB+/Ba2 HCA, Inc., 6.3%, 10/1/12 $ 354,972 ------------ TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 722,581 ------------ BANKS - 1.1% DIVERSIFIED BANKS - 0.5% 225,000 A+/Aa3 US Bancorp, 3.125%, 3/15/08 $ 221,056 ------------ REGIONAL BANKS - 0.6% 280,000 A-/A2 Keycorp, 2.75%, 2/27/07 $ 274,850 ------------ TOTAL BANKS $ 495,096 ------------ DIVERSIFIED FINANCIALS - 3.2% CONSUMER FINANCE - 2.1% 460,000 A/A2 National Rural Utilities, 7.25%, 3/1/12 $ 530,934 415,000 A/A2 SLM Corp., Floating Rate Note, 7/25/14 413,514 ------------ $ 944,448 ------------
6 The accompanying notes are an integral part of these financial statements. PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - --------------------------------------------------------------------------------
S&P/MOODY'S PRINCIPAL RATINGS AMOUNT (UNAUDITED) VALUE DIVERSIFIED FINANCIAL SERVICES - 1.1% $ 497,300 BBB-/Baa3 Bombardier Capital, Inc., 7.09%, 3/30/07 $ 505,000 ------------ TOTAL DIVERSIFIED FINANCIALS $ 1,499,448 ------------ INSURANCE - 2.5% LIFE & HEALTH INSURANCE - 1.9% 415,000 AA/A1 Jackson National Life Fund, Floating Rate Note, 3/11/05 (144A) $ 415,091 450,000 A-/A3 Lincoln National Corp., 5.25%, 6/15/07 466,088 ------------ $ 881,179 ------------ PROPERTY & CASUALTY INSURANCE - 0.6% 250,000 BB/Baa3 Ohio Casualty Corp., 7.3%, 6/15/14 $ 269,049 ------------ TOTAL INSURANCE $ 1,150,228 ------------ REAL ESTATE - 0.8% REAL ESTATE INVESTMENT TRUSTS - 0.8% 350,000 BBB-/Baa3 Health Care REIT, 6.0%, 11/15/13 $ 362,239 ------------ TOTAL REAL ESTATE $ 362,239 ------------ TECHNOLOGY HARDWARE & EQUIPMENT - 0.8% COMMUNICATIONS EQUIPMENT - 0.8% 350,000 BB+/Ba2 Corning, Inc., 5.9%, 3/15/14 $ 350,776 ------------ TOTAL TECHNOLOGY HARDWARE & Equipment $ 350,776 ------------ TELECOMMUNICATION SERVICES - 0.5% INTEGRATED TELECOMMUNICATION SERVICES - 0.5% 190,000 A+/A2 Verizon Global Funding Corp., 7.375%, 9/1/12 $ 223,589 ------------ TOTAL TELECOMMUNICATION SERVICES $ 223,589 ------------ UTILITIES - 2.8% ELECTRIC UTILITIES - 1.3% 260,000 BBB-/Baa3 Kiowa Power Partners LLC, 5.737%, 3/30/21 (144A) $ 261,040 305,000 BBB/Baa1 PSE&G Power, 6.95%, 6/1/12 343,687 ------------ $ 604,727 ------------ MULTI-UTILITIES & UNREGULATED POWER - 1.4% 470,000 BBB-/Baa3 Avista Corp., 7.75%, 1/1/07 $ 504,360 140,000 BBB+/Baa1 Dominion Resources, 6.25%, 6/30/12 152,850 ------------ $ 657,210 ------------ TOTAL UTILITIES $ 1,261,937 ------------ TOTAL CORPORATE BONDS (Cost $11,258,585) $ 11,703,351 ------------ SUPERNATIONAL BONDS - 1.9% DIVERSIFIED BANKS - 1.9% 855,000 AAA/Aaa International Bank for Reconstruction & Development, 4.375%, 9/28/06 $ 873,254 ------------ TOTAL SUPERNATIONAL BONDS (Cost $889,548) $ 873,254 ------------
The accompanying notes are an integral part of these financial statements. 7 Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
S&P/MOODY'S PRINCIPAL RATINGS AMOUNT (UNAUDITED) VALUE U.S. GOVERNMENT AGENCY OBLIGATIONS - 66.3% GOVERNMENT - 66.3% $ 730,000 AAA/Aaa Fannie Mae, 5.24%, 8/7/18 $ 728,042 951,792 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 8/1/34 983,694 165,092 AAA/Aaa Federal National Mortgage Association, 3.5%, 9/15/10 165,132 1,746,771 AAA/Aaa Federal National Mortgage Association, 4.816%, 12/1/12 1,785,123 1,468,297 AAA/Aaa Federal National Mortgage Association, 5.0%, 3/1/33 1,459,684 769,739 AAA/Aaa Federal National Mortgage Association, 5.0%, 5/1/34 764,105 1,583,460 AAA/Aaa Federal National Mortgage Association, 5.0%, 12/1/17 1,610,781 1,322,740 AAA/Aaa Federal National Mortgage Association, 5.5%, 2/1/18 1,373,362 627,725 AAA/Aaa Federal National Mortgage Association, 5.5%, 7/1/23 642,141 1,053,879 AAA/Aaa Federal National Mortgage Association, 5.5%, 9/1/17 1,090,341 44,053 AAA/Aaa Federal National Mortgage Association, 6.0%, 1/1/29 45,708 361,965 AAA/Aaa Federal National Mortgage Association, 6.0%, 3/1/31 374,788 955,000 AAA/Aaa Federal National Mortgage Association, 6.0%, 4/15/32 998,376 101,504 AAA/Aaa Federal National Mortgage Association, 6.0%, 6/1/15 106,587 443,634 AAA/Aaa Federal National Mortgage Association, 6.0%, 8/1/32 459,341 155,494 AAA/Aaa Federal National Mortgage Association, 6.0%, 9/1/29 161,142 64,887 AAA/Aaa Federal National Mortgage Association, 6.5%, 1/1/15 68,860 228,628 AAA/Aaa Federal National Mortgage Association, 6.5%, 7/1/29 240,250 95,096 AAA/Aaa Federal National Mortgage Association, 7.0%, 3/1/12 100,828 33,575 AAA/Aaa Federal National Mortgage Association, 8.0%, 1/1/31 36,405 77,981 AAA/Aaa Federal National Mortgage Association, 8.0%, 2/1/29 84,861 31,684 AAA/Aaa Federal National Mortgage Association, 8.0%, 2/1/30 34,441 6,095 AAA/Aaa Federal National Mortgage Association, 8.0%, 2/1/30 6,625 408,015 AAA/Aaa Federal National Mortgage Association, 8.0%, 3/1/31 443,531 47,605 AAA/Aaa Federal National Mortgage Association, 8.0%, 4/1/8 49,835 12,280 AAA/Aaa Federal National Mortgage Association, 8.0%, 4/1/30 13,317 19,527 AAA/Aaa Federal National Mortgage Association, 8.0%, 5/1/31 21,173 35,298 AAA/Aaa Federal National Mortgage Association, 8.0%, 7/1/30 38,275 77,207 AAA/Aaa Federal National Mortgage Association, 8.0%, 10/1/30 83,716 27,595 AAA/Aaa Federal National Mortgage Association, 9.5%, 2/1/21 31,239 200,000 AAA/Aaa Freddie Mac, 6.0% 30 Yr., TBA 12/04 206,650 249,976 AAA/Aaa Government National Mortgage Association, 5.0%, 7/15/19 256,607 1,078,900 AAA/Aaa Government National Mortgage Association, 5.5%, 8/15/33 1,102,966 1,999,801 AAA/Aaa Government National Mortgage Association, 5.5%, 10/15/33 2,044,408 1,097,718 AAA/Aaa Government National Mortgage Association, 5.5%, 11/20/34 1,120,678 435,000 AAA/Aaa Government National Mortgage Association, 5.5%, 12/15/34 444,507 12,341 AAA/Aaa Government National Mortgage Association, 6.0%, 4/15/14 13,021 84,772 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/13 89,430 482,061 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/34 499,963 1,452,445 AAA/Aaa Government National Mortgage Association, 6.0%, 9/15/34 1,506,384 2,891,061 AAA/Aaa Government National Mortgage Association, 6.0%, 9/15/34 2,998,426 75,752 AAA/Aaa Government National Mortgage Association, 7.0%, 4/15/28 80,640 27,543 AAA/Aaa Government National Mortgage Association, 7.75%, 11/15/29 29,746 685,000 AAA/Aaa U.S. Treasury Bonds, 3.125%, 10/15/08 677,696 160,000 AAA/Aaa U.S. Treasury Bonds, 4.25%, 8/15/13 161,264 685,000 AAA/Aaa U.S. Treasury Bonds, 7.125%, 2/15/23 874,098 405,000 AAA/Aaa U.S. Treasury Notes, 1.5%, 7/31/05 402,517 1,820,000 AAA/Aaa U.S. Treasury Notes, 3.5%, 1/15/11 2,232,462 900,000 AAA/Aaa U.S. Treasury Notes, 5.375%, 2/15/31 973,195
8 The accompanying notes are an integral part of these financial statements. PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - --------------------------------------------------------------------------------
S&P/MOODY'S PRINCIPAL RATINGS AMOUNT (UNAUDITED) VALUE U.S. GOVERNMENT AGENCY OBLIGATIONS (CONT'D.) $ 575,000 AAA/Aaa U.S. Treasury Notes, 5.5%, 8/15/28 $ 622,348 ------------ TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $30,078,552) $ 30,338,709 ------------ MUNICIPAL BONDS - 1.1% GOVERNMENT - 1.1% 515,000 BBB+/A3 California State Department of Water Resources & Power Supply, 4.33%, 5/1/06 $ 520,232 ------------ TOTAL MUNICIPAL BONDS (Cost $514,721) $ 520,232 ------------ TOTAL INVESTMENTS IN SECURITIES - 97.7% (Cost $44,036,028) $ 44,726,523 ------------ OTHER ASSETS AND LIABILITIES - 2.3% $ 1,066,849 ------------ TOTAL NET ASSETS - 100.0% $ 45,793,372 ============
144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At December 31, 2004, the value of these securities amounted to $1,198,057 or 2.6% of net assets. TBA (To Be Assigned) Securities are purchased on a forward commitment basis with and approximate (generally plus or minus 2.5%) principal amount and no definite maturity date period. The actual principal amount and maturity date will be determined upon settlement when the specific mortgage pools are assigned. The accompanying notes are an integral part of these financial statements. 9 PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED CLASS I 12/31/04 (a) 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 11.24 $ 11.39 $ 11.12 $ 10.92 $ 10.33 -------- -------- -------- -------- -------- Net increase (decrease) from investment operations: Net investment income $ 0.44 $ 0.46 $ 0.52 $ 0.59 $ 0.63 Net realized and unrealized gain (loss) on investments (0.04) (0.09) 0.35 0.20 0.59 -------- -------- -------- -------- -------- Net increase (decrease) from investment operations $ 0.40 $ 0.37 $ 0.87 $ 0.79 $ 1.22 Distributions to shareowners: Net Investment Income (0.03) (0.52) (0.60) (0.59) (0.63) -------- -------- -------- -------- -------- Net increase (decrease) in net asset value $ 0.37 $ (0.15) $ 0.27 $ 0.20 $ 0.59 -------- -------- -------- -------- -------- Net asset value, end of period $ 11.61 $ 11.24 $ 11.39 $ 11.12 $ 10.92 ======== ======== ======== ======== ======== Total return* 3.56% 3.28% 7.79% 7.28% 11.79% Ratio of net expenses to average net assets 0.89% 0.86% 0.84% 0.82% 0.90% Ratio of net investment income to average net assets 3.61% 3.79% 4.87% 5.56% 6.03% Portfolio turnover rate 57% 56% 87% 133% 104% Net assets, end of period (in thousands) $ 45,793 $ 51,565 $ 51,201 $ 44,847 $ 36,743
(a) Effective August 2, 2004, PIM became the sub-advisor of the Fund and subsequently became the advisor on December 10, 2004. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. 10 The accompanying notes are an integral part of these financial statements. PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investments in securities (Cost $44,036,028) $ 44,726,523 Cash 1,384,720 Receivables -- Dividends, interest and foreign taxes withheld 421,742 ------------ Total assets $ 46,532,985 ------------ LIABILITIES: Payables -- Investment securities purchased $ 529,421 Fund shares repurchased 156,110 Dividends 25 Due to affiliates 11,441 Accrued expenses 42,616 ------------ Total liabilities $ 739,613 ------------ NET ASSETS: Paid-in capital $ 44,077,337 Undistributed net investment income 1,759,777 Accumulated net realized loss (734,237) Net unrealized gain on: Investments 690,495 ------------ Total net assets $ 45,793,372 ------------ NET ASSET VALUE PER SHARE: CLASS I: (No par value, unlimited number of shares authorized) Net assets $ 45,793,372 Shares outstanding 3,944,447 ------------ Net asset value per share $ 11.61 The accompanying notes are an integral part of these financial statements. 11 PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - --------------------------------------------------------------------------------
YEAR ENDED 12/31/04 INVESTMENT INCOME: Interest $ 2,179,041 Income on securities loaned, net 2,734 ------------ Total investment income $ 2,181,775 ------------ EXPENSES: Management fees $ 352,288 Transfer agent fees and expenses 125 Custodian fees 10,947 Professional fees 31,402 Printing expense 12,456 Fees and expenses of nonaffiliated trustees 9,645 Miscellaneous 15,128 ------------ Total expenses $ 431,991 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (1,927) ------------ Net expenses $ 430,064 ------------ Net investment income (loss) $ 1,751,711 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain from: Investments $ 270,731 ------------ $ 270,731 ------------ Change in net unrealized gain or loss from: Investments $ (328,382) ------------ $ (328,382) ------------ Net loss on investments, futures contracts and foreign currency transactions $ (57,651) ============ Net increase in net assets resulting from operations $ 1,694,060 ============
12 The accompanying notes are an integral part of these financial statements. PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income $ 1,751,711 $ 2,020,449 Net realized gain on investments 270,731 683,216 Change in net unrealized gain or loss on investments, futures contracts and foreign currency transactions (328,382) (975,258) ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 1,694,060 $ 1,728,407 ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS Net investment income: Class I $ (118,093) $ (2,292,765) ------------- ------------- Total distributions to shareowners $ (118,093) $ (2,292,765) ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 8,055,931 $ 14,395,843 Reinvestment of distributions 118,093 2,292,765 Cost of shares repurchased (15,521,812) (15,759,792) ------------- ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ (7,347,788) $ 928,816 ------------- ------------- Net increase (decrease) in net assets $ (5,771,821) $ 364,458 NET ASSETS: Beginning of year 51,565,193 51,200,735 ------------- ------------- End of year $ 45,793,372 $ 51,565,193 ============= ============= Undistributed (distributions in excess of) net investment income, end of year $ 1,759,777 $ (134,448) ============= =============
The accompanying notes are an integral part of these financial statements. 13 PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Bond VCT Portfolio (The Portfolio) (formerly Safeco RST Bond Portfolio) is a portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate diversified portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of Bond Portfolio is to seek current income as consistent with preservation of capital. As of December 31, 2004, no Class II shares were outstanding for the Portfolio. The Portfolio, organized on December 10, 2004, is the successor to the Safeco RST Bond Portfolio. Safeco RST Bond Portfolio, one of six series of portfolios that comprised Safeco Resource Series Trust, transferred all of the net assets of Trust shares in exchange for the Portfolio's Class I shares in a one- to-one exchange ratio, on December 10, 2004, pursuant to an agreement and plan of reorganization (the "reorganization" which was approved by the shareholders of Safeco RST Bond Portfolio on December 8, 2004). The Portfolio had no assets or liabilities prior to the reorganization. Accordingly, the reorganization, which was a tax-free exchange, had no effect on the Portfolio's operations. The Trust's financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting years. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements, which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolios are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values. Fixed income securities are valued at prices supplied by independent pricing services, which consider such factors as Treasury spreads, yields, maturities and ratings. Valuations may be supplemented by dealers and other sources, as required. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. Interest income, 14 PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- including interest on income bearing cash accounts, is recorded on the accrual basis, net of unrecoverable foreign taxes withheld at the applicable country rates. All discounts/premiums are accreted/amortized for financial reporting purposes. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. B. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from or in excess of net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2004, Bond VCT Portfolio had a capital loss carryforward of $726,843, of which the following amounts will expire between 2008 and 2010 not utilized: $145,998 in 2008 and $680,855 in 2010. The portfolio elected to defer $7,394 in capital losses recognized between November 1, 2004 and December 31, 2004 to its fiscal year ending December 31, 2005. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis. UNDISTRIBUTED NET ACCUMULATED INVESTMENT REALIZED INCOME GAIN PAID-IN PORTFOLIO (LOSS) (LOSS) CAPITAL - -------------------------- ------------- ----------- --------- Pioneer Bond VCT Portfolio $ 260,607 $ (286,066) $ (25,459) ========= ========== ========= The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004, and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis. 15 PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - --------------------------------------------------------------------------------
2004 2003 ----------- ----------- DISTRIBUTIONS PAID FROM: Ordinary Income $ 118,093 $ 2,292,765 Long-Term capital gain -- -- ----------- ----------- $ 118,093 $ 2,292,765 Return of Capital -- -- ----------- ----------- Total distributions $ 118,093 $ 2,292,765 =========== =========== DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ 1,846,884 Undistributed long-term gain/capital loss carryforward (726,843) Post-October loss deferred (7,394) Unrealized appreciation (depreciation) 603,338 ----------- Total $ 1,716,035 ===========
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily attributable to the tax deferral of losses on wash sales, returns of capital on REITs, and the tax treatment of premium amortization. C. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. D. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. E. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the portfolio. Management fees are calculated at the following annual rate of 0.50% of the Portfolio's average daily net assets. Prior to the reorganization, the Portfolio was advised by Safeco Asset Management, which received an annual fee equal to 0.74% of its average daily net assets. Through December 10, 2006, PIM has agreed not to impose all or a portion of its management fee and to assume other operating expenses of the Portfolio to the extent necessary to limit Class I expenses to 0.62% of the average daily net assets attributable to Class I shares. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $11,316 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT Since the reorganization PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at 16 PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- negotiated rates. Included in due to affiliates is $125 in transfer agent fees payable to PIMSS at December 31, 2004. Prior to the reorganization Safeco services corporation was the transfer and shareholder servicing agent. 4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows: NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------ ------------- ------------ -------------- Bond Portfolio $ 44,395,836 $ 711,539 $ (108,152) $ 603,387 ============ ========= ========== ========= 5. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $5,270,734 and $11,053,420, respectively. The cost of purchases and the proceeds from sales of investments in U.S. Government obligations for the year ended December 31, 2004, were $21,377,799 and $21,148,464, respectively. 6. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
BOND PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - ------------------------------------ ---------- ------------- ---------- ------------- Shares sold 698,811 $ 7,985,736 1,244,220 $ 14,395,843 Reinvestment of distributions -- -- 203,983 2,292,765 Shares repurchased (1,359,793) (15,521,812) (1,357,594) (15,759,792) Shares transferred in reorganization (3,993,012) (46,518,595) CLASS I: Shares sold 8,248 95,681 Reinvestment of distributions 10,191 118,316 Shares issued in reorganization 3,993,012 46,518,595 ---------- ------------- ---------- ------------- Net increase (decrease) (642,543) $ (7,322,079) 90,609 $ 928,816 ========== ============= ========== =============
17 PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS I SHAREOWNERS OF PIONEER BOND VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Bond VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust, (the "Trust"), (formerly Bond Portfolio, one of the portfolios that comprised the Safeco Resource Series Trust) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Bond VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 18 PIONEER BOND VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are CUSTODIAN responsible for the Trust's operations. The Trust's Trustees Brown Brothers Harriman & Co. and officers are listed below, together with their principal occupations during the past five years. Trustees who are INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM interested persons of the Portfolio within the meaning of the Ernst & Young LLP Investment Company Act of 1940 are referred to as Interested Trustees. Trustees who are not interested persons of the Trust PRINCIPAL UNDERWRITER are referred to as Independent Trustees. Each of the Trustees Pioneer Funds Distributor, Inc. serves as a trustee of each of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, LEGAL COUNSEL Inc. ("Pioneer") serves as investment adviser (the "Pioneer Wilmer Cutler Pickering Hale and Dorr LLP Funds"). The address for all Interested Trustees and all officers of the Portfolio is 60 State Street, Boston, SHAREOWNER SERVICES AND TRANSFER Massachusetts 02109. Shareholder Services, Inc. The Trust's statement of additional information provides more detailed information regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-225-6292. Proxy Voting Policies and Procedures of the Trust are available without charge, upon Agent request, by calling our toll free number (1-800-225-6292). This information is also available online at pioneerfunds.com.
- -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE John F. Cogan, Jr. (78)* Chairman of the Serves until Trustee and President Serves until Director of Harbor Board, Trustee successor retirement or removal; Deputy Chairman Global Company, Ltd. and President trustee and a Director of Pioneer Global Asset is elected or Management S.p.A. ("PGAM"); earlier Non-Executive Chairman and a Director retirement of Pioneer Investment Management USA or removal Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------ Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive Officer, None Executive successor PIM-USA since May 2003 (Director since Vice President trustee January 2001); President and Director is elected or of Pioneer since May 2003; Chairman earlier and Director of Pioneer Investment retirement or Management Shareholder Services, Inc. removal ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------
19 PIONEER BOND VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE David R. Bock **(61) Trustee since Serves until a Senior Vice President and Chief Director of The Enterprise 3050 K. Street NW, 2005. successor Financial Officer, I-trax, Inc. Social Investment Company Washington, DC 20007 trustee is (publicly traded health care services (privately-held affordable elected or company) (2001-present); Managing housing finance company); earlier Partner, Federal City Capital Advisors Director of New York retirement or (boutique merchant bank)(1995-2000; Mortgage Trust (publicly removal 2002 to 2004); Executive Vice traded mortgage REIT) President and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Mary K. Bush (56) Trustee since Serves until President, Bush International Director of Brady Corporation 3509 Woodbine Street, 2000. successor (international financial advisory (industrial identification Chevy Chase, MD 20815 trustee is firm) and specialty coated material elected or products manufacturer), earlier Millennium Chemicals, Inc. retirement or (commodity chemicals), removal Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - ------------------------------------------------------------------------------------------------------------------------------------ Margaret B.W. Graham (57) Trustee since Serves until Founding Director, The Winthrop Group, None 1001 Sherbrooke Street 2000. successor Inc. (consulting firm); Professor of West, Montreal, Quebec, trustee is Management, Faculty of Management, Canada H3A 1G5 elected or McGill University earlier retirement or removal - ------------------------------------------------------------------------------------------------------------------------------------ Marguerite A. Piret (56) Trustee since Serves until President and Chief Executive Officer, Director of New America High One Boston Place, 1995. successor Newbury, Piret & Company, Inc. Income Fund, Inc. (closed-end 28th Floor, trustee is (investment banking firm) investment company) Boston, MA 02108 elected or earlier retirement or removal - ------------------------------------------------------------------------------------------------------------------------------------ Stephen K. West (76) Trustee since Serves until Senior Counsel, Sullivan & Cromwell Director, The Swiss Helvetia 125 Broad Street, 1995. successor (law firm) Fund, Inc. (closed-end New York, NY 10004 trustee is investment company) and elected or AMVESCAP PLC (investment earlier managers) retirement or removal - ------------------------------------------------------------------------------------------------------------------------------------ John Winthrop (68) Trustee since Serves until President, John Winthrop & Co., Inc. None One North Adgers Wharf, September, successor (private investment firm) Charleston, SC 29401 2000. trustee is elected or earlier retirement or removal - ------------------------------------------------------------------------------------------------------------------------------------
20 PIONEER BOND VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior Vice None discretion President - Legal of Pioneer; and of the Board Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Christopher J. Kelley Assistant Serves at the Assistant Vice President and Senior None (40) Secretary discretion Counsel of Pioneer since July 2002; of the Board Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering Hale None Secretary discretion and Dorr LLP; Assistant Secretary of of the Board all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Vincent Nave (59) Treasurer Serves at the Vice President - Fund Accounting, None discretion Administration and Custody Services of of the Board Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ------------------------------------------------------------------------------------------------------------------------------------ Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer since None Treasurer discretion 2004; Treasurer and Senior Vice of the Board President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None Treasurer discretion Accounting, Administration and Custody of the Board Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None Treasurer discretion Accounting, Administration and Custody of the Board Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - ------------------------------------------------------------------------------------------------------------------------------------
21 PIONEER BOND VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE Katharine Kim Sullivan Assistant Serves at the Fund Administration Manager - Fund None (31) Treasurer discretion Accounting, Administration and Custody of the Board Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of Pioneer None Officer discretion (Director of Compliance and Senior of the Board Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 22 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. 23 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. 24 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. 25 [LOGO] PIONEER INVESTMENTS(R) [PIONEER INVESTMENTS(R) LOGO] PIONEER VARIABLE CONTRACTS TRUST PIONEER MID CAP VALUE VCT PORTFOLIO -- CLASS I SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST TABLE OF CONTENTS Pioneer Mid Cap Value VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 9 Notes to Financial Statements 13 Report of Independent Registered Public Accounting Firm 18 Trustees, Officers and Service Providers 19
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT WWW.PIONEERFUNDS.COM. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT HTTP://WWW.SEC.GOV. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST PORTFOLIO UPDATE 12/31/04 PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [PIE CHART] U.S. Common Stocks 90.8% Depositary Receipts for International Stocks 1.0% Temporary Cash Investment 8.2%
SECTOR DISTRIBUTION (As a percentage of equity holdings) [PIE CHART] Financials 20.1% Consumer Discretionary 19.7% Information Technology 12.6% Industrials 11.1% Materials 8.7% Health Care 8.5% Consumer Staples 7.7% Energy 6.0% Utilities 5.5% Telecommunication Services 0.1%
FIVE LARGEST HOLDINGS (As a percentage of equity holdings) 1. Foot Locker Inc. 2.55% 2. Mattel, Inc. 2.19% 3. Safeway, Inc. 1.81% 4. Triad Hospitals, Inc. 1.76% 5. CIGNA Corp. 1.76%
The Portfolio is actively managed, and current holdings may be different. PERFORMANCE UPDATE 12/31/04 PRICES AND DISTRIBUTIONS
12/31/04 12/31/03 Net Asset Value per Share $ 24.67 $ 20.47
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ 0.080 $ - $ 0.2095
PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in Pioneer Mid Cap Value VCT Portfolio at net asset value, compared to that of the Russell Midcap Value Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [LINE GRAPH]
Russell Midcap Pioneer Mid Cap Value Value Index VCT Portfolio "3/95" 10,000 10,000 12,263 11,819 "12/96" 14,748 13,596 19,812 16,952 "12/98" 20,820 16,271 20,799 18,407 "12/00" 24,789 21,721 25,369 23,130 "12/02" 22,920 20,537 31,643 28,234 "12/04" 39,142 34,478
Index comparison begins 3/31/95. The Russell Midcap Value Index measures the performance of U.S. mid-cap value stocks. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in any Index. AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004)
NET ASSET VALUE Life-of-Class 13.30% (3/1/95) 5 Years 13.37% 1 Year 22.12%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST COMPARING ONGOING PORTFOLIO EXPENSES As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value [divided by] $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER MID CAP VALUE VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004
SHARE CLASS I II - -------------------------------------------------------------------------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,121.91 $ 1,120.03 Expenses Paid During Period* $ 3.88 $ 5.20
* Expenses are equal to the Portfolio's annualized expense ratio of 0.73% and 0.98% for Class I and Class II C shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER MID CAP VALUE VCT PORTFOLIO Based on a hypothetical 5% per year return before expenses, reflecting the period from July 1, 2004 through December 31, 2004
SHARE CLASS I II - -------------------------------------------------------------------------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,021.52 $ 1,020.26 Expenses Paid During Period* $ 3.70 $ 4.95
* Expenses are equal to the Portfolio's annualized expense ratio of 0.73%, and 0.98% for Class I and Class II, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 Domestic equity markets moved in fits and starts, both up and down, through the first nine months of 2004 before finally staging a strong rally following the November elections. In the final two months of the year, stock indices moved upward, with small- and mid-cap companies outperforming large-cap corporations, and value stocks outpacing growth stocks. In the following interview, Rod Wright discusses the market environment and factors that affected performance during 2004. Mr. Wright is responsible for day-to-day portfolio management of Pioneer Mid Cap Value VCT Portfolio. Q: HOW DID THE PORTFOLIO PERFORM? A: The Portfolio delivered strong results, despite trailing its benchmark index. For the 12 months ended December 31, 2004, the Portfolio had a total return of 22.12% at net asset value, while the Russell Midcap Value Index returned 23.71%. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: WHAT WERE THE PRINCIPAL FACTORS THAT AFFECTED PERFORMANCE? A: The Portfolio participated in the final end-of-year rally that raised stock averages. For much of the year, a variety of factors and potential problems affected investors, who worried about the effects of rising interest rates, increasing energy prices, instability in Iraq and the political uncertainty resulting from a fiercely contested Presidential election. During the year, our selections in the health care, telecommunications, energy, financials and utilities sectors helped performance, while investments in materials, technology, industrials and consumer staples sectors detracted from results. Q: WHAT WERE SOME OF THE INDIVIDUAL INVESTMENTS THAT HAD THE GREATEST IMPACT ON PORTFOLIO RESULTS? A: Although technology investments tended to be a drag on performance, one technology company - NCR - had the single greatest positive impact on the Portfolio's return. NCR, which already had established itself as a leader in producing ATM and automatic retail scanning and check-out equipment, saw greatly improved results from its technology that helps companies store and manage large quantities of data. NCR's stock had been selling at a deep discount, but the effects of a corporate reorganization and the policies of a new management team helped lead to greatly improved earnings. Reliant Energy, which is involved in both electric power generation and in power distribution, was the Portfolio's second-largest contributor, as its stock appreciated after a reorganization of company debt. Other stocks that helped performance substantially included: Transocean, which operates oil drilling rigs and benefited from rising oil prices; W.W. Grainger, a national distributor of industrial parts and machinery, which enjoyed improved earnings as a result of a restructuring; and Ball, a packaging company which manufactures cans and bottles for beverage companies. Two health care sector investments that helped were: Becton Dickinson, a medical supply company; and Cigna, an HMO. Also adding to results were three companies involved in acquisitions at premiums to their stock valuations: Charter Bank, which was taken over by Citizens Bank, a unit of Royal Bank of Scotland; Apogent Technology, a producer of research equipment for medical laboratories, which was acquired by Fisher Scientific; and Veritas Software, a developer of data management software, which announced it was being acquired by Symantec. Holdings that detracted from results included UTStarcom, a manufacturer of inexpensive hand-held telephones, which was hurt by intense competition in China. While we sold our position in UTStarcom, we retained three other stocks that were a drag on performance: Safeway, toy company Mattel and mortgage insurer PMI, all of which gained, but still lagged the mid-cap value market. Portfolio results were held back by not owning three companies that were performance leaders during 2004: TXU, a Texas utility; Apple Computer, the developer of the popular iPod product; and Monsanto, which produces genetically modified seeds for the agriculture industry. Q: WHAT IS YOUR INVESTMENT OUTLOOK? A: We are reasonably optimistic about the economy and investment opportunities in the stock market. After a year in which corporate earnings rose faster than stock prices, stock valuations - as measured by price/earnings ratios - are more reasonable than they were a year ago. At the same time, interest rates remain low by historical standards, even though the Federal Reserve has raised short-term rates several times, while the economy continues to expand and support rising corporate earnings. Although we expect to continue to de-emphasize stocks of companies that may be vulnerable to rapid increases in interest rates, we are moderately bullish about the overall market. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. A WORD ABOUT RISK: Investing in mid-sized companies may offer the potential for higher returns, but these companies are also subject to greater short-term price fluctuations than larger, more established companies. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all porfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 4 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST SCHEDULE OF INVESTMENTS 12/31/04
SHARES VALUE COMMON STOCKS - 99.8% ENERGY - 5.9% INTEGRATED OIL & Gas - 0.9% 7,700 BP Amoco Plc (A.D.R.) $ 449,680 129,540 Occidental Petroleum Corp. 7,559,954 ------------ $ 8,009,634 ------------ OIL & GAS DRILLING - 2.8% 175,915 ENSCO International, Inc. $ 5,583,542 111,530 Nabors Industries, Inc.* 5,720,374 30,000 Pride International, Inc* 616,200 141,630 Transocean Offshore, Inc.* 6,003,696 102,035 Weatherford International, Inc.* 5,234,396 ------------ $ 23,158,208 ------------ OIL & GAS EXPLORATION & PRODUCTION - 2.0% 14,200 Apache Corp. $ 718,094 11,700 Anadarko Petroleum Corp. 758,277 185,022 Devon Energy Corp. 7,201,056 203,585 Pioneer Natural Resources Co. 7,145,834 19,300 XTO Energy, Inc. 682,834 ------------ $ 16,506,095 ------------ OIL & GAS REFINING MARKETING & TRANSPORTATION - 0.3% 27,385 Sun Co., Inc. $ 2,237,628 ------------ TOTAL ENERGY $ 49,911,565 ------------ MATERIALS - 8.6% COMMODITY CHEMICALS - 1.2% 171,545 Air Products & Chemicals, Inc. $ 9,944,464 ------------ DIVERSIFIED CHEMICAL - 1.6% 7,200 Olin Corp. $ 158,544 197,420 PPG Industries, Inc. 13,456,147 ------------ $ 13,614,691 ------------ DIVERSIFIED METALS & MINING - 1.8% 141,700 Freeport-McMoRan Copper & Gold, Inc. (Class B) $ 5,417,191 100,785 Phelps Dodge Corp. 9,969,652 ------------ $ 15,386,843 ------------ METAL & GLASS CONTAINERS - 1.6% 305,720 Ball Corp. $ 13,445,566 ------------ PAPER PRODUCTS - 2.3% 278,467 Flowserve Corp.* $ 7,668,981 351,900 Meadwestvaco Corp. 11,925,891 ------------ $ 19,594,872 ------------ SPECIALTY CHEMICALS - 0.1% 16,500 Ecolab, Inc. $ 579,645 ------------ TOTAL MATERIALS $ 72,566,081 ------------ CAPITAL GOODS - 5.2% AEROSPACE & DEFENSE - 1.0% 11,800 Northrop Grumman Corp. $ 641,448 166,500 United Defense Industries, Inc.* 7,867,125 ------------ $ 8,508,573 ------------ CONSTRUCTION, FARM MACHINERY & HEAVY TRUCKS - 0.1% 13,100 Terex Corp.* $ 624,215 ------------ ELECTRICAL COMPONENT & EQUIPMENT - 1.3% 627,890 Symbol Technologies, Inc. $ 10,862,497 ------------ INDUSTRIAL CONGLOMERATES - 2.8% 259,780 American Standard Co., Inc.* $ 10,734,110 148,520 ITT Industries, Inc. 12,542,514 ------------ $ 23,276,624 ------------ TOTAL CAPITAL GOODS $ 43,271,909 ------------ COMMERCIAL SERVICES & SUPPLIES - 4.3% COMMERCIAL PRINTING - 1.4% 344,740 R.R. Donnelly & Sons Co. $ 12,165,875 ------------ DIVERSIFIED COMMERCIAL SERVICES - 1.3% 26,700 FTI Consulting, Inc.* $ 562,569 209,010 H & R Block, Inc. 10,241,490 ------------ $ 10,804,059 ------------ ENVIRONMENTAL SERVICES - 1.6% 396,435 Republic Services, Inc. $ 13,296,430 ------------ TOTAL COMMERCIAL SERVICES & SUPPLIES $ 36,266,364 ------------ TRANSPORTATION - 1.7% AIR FREIGHT & COURIERS - 0.1% 9,600 Expeditors International of Washington, Inc. $ 536,448 ------------ AIRLINES - 0.6% 294,810 Southwest Airlines Co. $ 4,799,507 ------------ RAILROADS - 1.0% 139,920 Canadian National Railway Co. $ 8,570,100 ------------ TOTAL TRANSPORTATION $ 13,906,055 ------------ AUTOMOBILES & COMPONENTS - 0.1% AUTOMOBILE MANUFACTURERS - 0.1% 19,300 Monaco Coach Corp. $ 397,001 8,800 PACCAR, Inc. 708,224 ------------ $ 1,105,225 ------------ TOTAL AUTOMOBILES & COMPONENTS $ 1,105,225 ------------
The accompanying notes are an integral part of these financial statements. 5 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SHARES VALUE CONSUMER DURABLES & APPAREL - 4.5% APPAREL, ACCESSORIES & LUXURY GOODS - 0.3% 99,391 The Limited Brands, Inc. $ 2,287,981 ------------ HOUSEWARES & SPECIALTIES - 0.8% 31,700 Leggett & Platt, Inc. $ 901,231 174,600 Yankee Candle Co.* 5,793,228 ------------ $ 6,694,459 ------------ LEISURE PRODUCTS - 2.2% 940,930 Mattel, Inc. $ 18,338,726 ------------ PHOTOGRAPHIC PRODUCTS - 1.2% 316,300 Eastman Kodak Co. (a) $ 10,200,675 ------------ TOTAL CONSUMER DURABLES & APPAREL $ 37,521,841 ------------ HOTELS, RESTAURANTS & LEISURE - 1.7% HOTELS, RESORTS & CRUISE LINES - 0.1% 27,600 Ambassadors Group, Inc. $ 982,836 ------------ RESTAURANTS - 1.6% 333,400 Ruby Tuesday, Inc. $ 8,695,072 91,905 Tricon Global Restaurants, Inc. 4,336,078 ------------ $ 13,031,150 ------------ TOTAL HOTELS, RESTAURANTS & LEISURE $ 14,013,986 ------------ MEDIA - 3.7% ADVERTISING - 1.7% 1,066,400 The Interpublic Group of Co., Inc.* $ 14,289,760 ------------ BROADCASTING & CABLE TV - 1.2% 275,200 Entercom Communications Corp.* $ 9,876,928 ------------ MOVIES & ENTERTAINMENT - 0.8% 315,360 Regal Entertainment Group (a) $ 6,543,720 16,900 Viacom, Inc. (Class B) 614,991 ------------ $ 7,158,711 ------------ TOTAL MEDIA $ 31,325,399 ------------ RETAILING - 9.6% APPAREL RETAIL - 1.1% 221,900 Liz Claiborne, Inc. $ 9,366,399 ------------ DEPARTMENT STORES - 0.7% 150,300 J.C. Penney Co., Inc. $ 6,222,420 ------------ GENERAL MERCHANDISE STORES - 0.8% 265,100 American Greetings Corp. (a) $ 6,720,285 ------------ INTERNET RETAIL - 1.4% 418,500 InterActive Corp.* $ 11,558,970 ------------ SPECIALTY STORES - 5.6% 984,000 Blockbuster, Inc. (a) $ 9,387,360 793,230 Foot Locker, Inc. 21,361,684 210,700 Tiffany & Co. 6,736,079 471,700 Toys "R" Us, Inc.* 9,655,699 ------------ $ 47,140,822 ------------ TOTAL RETAILING $ 81,008,896 ------------ FOOD & DRUG RETAILING - 7.6% DRUG RETAIL - 1.3% 233,170 CVS Corp. $ 10,508,972 ------------ FOOD DISTRIBUTORS - 1.3% 9,800 Amerisourcebergen Corp. $ 575,064 322,700 McKesson HBOC, Inc. 10,152,142 21,900 Performance Food Group Co.* 589,329 ------------ $ 11,316,535 ------------ FOOD RETAIL - 3.4% 284,790 ConAgra, Inc. $ 8,387,066 111,818 Dean Foods Co.* 3,684,403 62,000 Kroger Co.* 1,087,480 770,100 Safeway, Inc. 15,201,774 ------------ $ 28,360,723 ------------ HYPERMARKETS & SUPERCENTERS - 1.6% 447,870 BJ'S Wholesale Club, Inc.* (a) $ 13,046,453 13,000 Costco Wholesale Corp. 629,330 ------------ $ 13,675,783 ------------ TOTAL FOOD & DRUG RETAILING $ 63,862,013 ------------ FOOD, BEVERAGE & TOBACCO - 0.1% SOFT DRINKS - 0.1% 13,600 PepsiCo, Inc. $ 709,920 ------------ TOTAL FOOD, BEVERAGE & TOBACCO $ 709,920 ------------ HEALTH CARE EQUIPMENT & SERVICES - 6.5% HEALTH CARE DISTRIBUTORS - 0.8% 147,700 Par Pharmaceutical Co., Inc.* $ 6,111,826 21,200 Wyeth 902,908 ------------ $ 7,014,734 ------------ HEALTH CARE FACILITIES - 3.0% 971,100 Tenet Healthcare Corp.* $ 10,662,678 397,360 Triad Hospitals, Inc.* 14,785,766 ------------ $ 25,448,444 ------------ HEALTH CARE SERVICES - 0.8% 17,200 Accredo Health, Inc.* $ 476,784 111,330 Laboratory Corp. of America Holdings* 5,546,461 23,200 Ims Health, Inc. 538,472 ------------ $ 6,561,717 ------------
The accompanying notes are an integral part of these financial statements. 6 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST SCHEDULE OF INVESTMENTS 12/31/04 (continued)
SHARES VALUE HEALTH CARE SUPPLIES - 0.1% 11,200 Cooper Co., Inc. $ 790,608 ------------ MANAGED HEALTH CARE - 1.8% 180,400 CIGNA Corp. $ 14,715,228 ------------ TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 54,530,731 ------------ PHARMACEUTICALS & BIOTECHNOLOGY - 2.0% PHARMACEUTICALS - 2.0% 648,200 IVAX Corp.* (a) $ 10,254,524 356,100 Mylan Laboratories, Inc. (a) 6,295,848 23,900 Pfizer, Inc. 642,671 ------------ $ 17,193,043 ------------ TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 17,193,043 ------------ BANKS - 7.1% DIVERSIFIED BANKS - 0.0% 10,200 U.S. Bancorp $ 319,464 ------------ REGIONAL BANKS - 4.7% 120,600 City National Corp. $ 8,520,390 175,830 KeyCorp 5,960,637 184,865 Marshall & IIsley Corp. 8,171,033 264,456 North Fork Bancorporation, Inc. 7,629,556 28,852 Washington Banking Co. 523,664 36,000 West Coast Bancorp Oregon 914,760 120,200 Zions Bancorporation 8,177,206 ------------ $ 39,897,246 ------------ THRIFTS & MORTGAGE FINANCE - 2.4% 145,098 Countrywide Financial Corp. $ 5,370,077 323,160 The PMI Group, Inc. 13,491,930 21,500 Washington Mutual, Inc. 909,020 ------------ $ 19,771,027 ------------ TOTAL BANKS $ 59,987,737 ------------ DIVERSIFIED FINANCIALS - 6.6% CONSUMER FINANCE - 1.4% 18,414 White Mountains Insurance Group, Ltd. $ 11,895,444 ------------ ASSET MANAGEMENT & CUSTODY BANKS - 1.2% 314,990 Federated Investors, Inc. $ 9,575,696 23,600 Waddell & Reed Financial, Inc. 563,804 ------------ $ 10,139,500 ------------ CONSUMER FINANCE - 1.7% 29,000 MBNA Corp. $ 817,510 832,100 Providian Financial Corp.* 13,704,687 ------------ $ 14,522,197 ------------ INVESTMENT BANKING & BROKERAGE - 2.3% 322,000 A.G. Edwards, Inc. $ 13,913,620 248,150 Investment Technology Group, Inc.* 4,963,000 ------------ $ 18,876,620 ------------ TOTAL DIVERSIFIED FINANCIALS $ 55,433,761 ------------ INSURANCE - 6.4% INSURANCE BROKERS - 2.3% 278,410 Platinum Underwriter Holdings, Ltd. $ 8,658,551 259,540 Willis Group Holdings, Ltd. (a) 10,685,262 ------------ $ 19,343,813 ------------ LIFE & HEALTH INSURANCE - 2.0% 111,030 Jefferson - Pilot Corp. $ 5,769,119 6,900 Stancorp Financial Group, Inc. 569,250 554,700 UNUM Corp. (a) 9,951,318 ------------ $ 16,289,687 ------------ PROPERTY & CASUALTY INSURANCE - 2.1% 64,905 Ambac Financial Group, Inc. $ 5,330,648 238,000 Safeco Corp. 12,433,120 ------------ $ 17,763,768 ------------ TOTAL INSURANCE $ 53,397,268 ------------ SOFTWARE & SERVICES - 4.4% APPLICATION SOFTWARE - 1.6% 71,100 Captaris, Inc.* $ 366,876 14,600 Intuit, Inc.* 642,546 18,200 Microsoft Corp. 486,122 407,100 Veritas Software Corp.* 11,622,705 ------------ $ 13,118,249 ------------ DATA PROCESSING & OUTSOURCED SERVICES - 2.7% 584,730 The BISYS Group, Inc.* $ 9,618,809 14,800 Fiserv, Inc.* 594,812 437,829 SunGard Data Systems, Inc.* 12,403,696 ------------ $ 22,617,317 ------------ SYSTEMS SOFTWARE - 0.1% 19,020 Netiq Corp.* $ 232,234 36,000 WatchGuard Technologies, Inc.* 159,480 ------------ $ 391,714 ------------ TOTAL SOFTWARE & SERVICES $ 36,127,280 ------------ TECHNOLOGY, HARDWARE & EQUIPMENT - 8.0% COMMUNICATIONS EQUIPMENT - 2.0% 356,600 Century Telephone Enterprises, Inc. $ 12,648,602 480,221 Tellabs, Inc.* 4,125,098 ------------ $ 16,773,700 ------------
The accompanying notes are an integral part of these financial statements. 7 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
VALUE SHARES COMPUTER HARDWARE - 0.6% 76,360 NCR Corp.* $ 5,286,403 ------------ COMPUTER STORAGE & PERIPHERALS - 3.1% 275,600 Imation Corp. $ 8,772,348 277,500 Sandisk Corp.* 6,929,174 333,900 Storage Technology Corp.* 10,554,579 ------------ $ 26,256,101 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.1% 123,980 W.W. Grainger, Inc. $ 8,259,548 28,000 Ingram Micro, Inc.* 582,400 ------------ $ 8,841,948 ------------ TECHNOLOGY DISTRIBUTORS - 1.2% 150,320 Fisher Scientific International, Inc.* $ 9,376,962 19,600 Tektronix, Inc. 592,115 ------------ $ 9,969,077 ------------ TOTAL TECHNOLOGY, HARDWARE & EQUIPMENT $ 67,127,229 ------------ SEMICONDUCTORS - 0.2% SEMICONDUCTOR EQUIPMENT - 0.0% 24,500 FEI Co.* $ 514,500 ------------ SEMICONDUCTORS - 0.2% 36,300 Intel Corp. $ 849,057 36,700 Micron Technology, Inc.* 453,245 50,400 Triquint Semiconductor, Inc.* 224,280 ------------ $ 1,526,582 ------------ TOTAL SEMICONDUCTORS $ 2,041,082 ------------ TELECOMMUNICATION SERVICES - 0.1% INTEGRATED TELECOMMUNICATION SERVICES - 0.1% 20,600 SBC Communications, Inc. $ 530,862 14,700 Verizon Communications, Inc. 595,498 ------------ $ 1,126,360 ------------ TOTAL TELECOMMUNICATION SERVICES $ 1,126,360 ------------ UTILITIES - 5.5% ELECTRIC UTILITIES - 4.1% 45,800 Avista Corp. $ 809,286 168,475 Constellation Energy Group 7,364,041 131,915 Entergy Corp. 8,916,137 122,500 NSTAR 6,649,300 322,500 PG&E Corp.* 10,732,800 ------------ $ 34,471,564 ------------ MULTI-UTILITIES & UNREGULATED POWER - 1.4% 836,100 Reliant Energy* (a) $ 11,412,762 ------------ TOTAL UTILITIES $ 45,884,323 ------------ TOTAL COMMON STOCKS (Cost $694,162,506) $838,318,071 ------------ PRINCIPAL AMOUNT TEMPORARY CASH INVESTMENTS - 8.9% REPURCHASE AGREEMENT - 0.9% $7,500,000 UBS Warburg, Inc., 1.00%, dated 12/31/04, repurchase price of $7,500,000 plus accrued interest on 1/3/05 collateralized by $7,133,000 U.S. Treasury Bill, 6.5%, 10/15/2006 $ 7,500,000 ------------ SHARES SECURITY LENDING COLLATERAL - 8.0% 67,222,325 Securities Lending Investment Fund, 2.18% $ 67,222,325 ------------ TOTAL TEMPORARY CASH INVESTMENTS (Cost $74,722,325) $ 74,722,325 ------------ TOTAL INVESTMENTS IN SECURITIES - 108.7% (Cost $768,884,831) $913,040,396 ------------ OTHER ASSETS AND LIABILITIES - (8.7%) $(73,064,457) ------------ TOTAL NET ASSETS - 100.0% $839,975,936 ============
(A.D.R.) American Depositary Receipt * Non-income producing security (a) At December 31, 2004, the following securities were out on loan:
SHARES SECURITY MARKET VALUE 261,495 American Greetings Corp. $ 6,628,898 386,336 BJ'S Wholesale Club, Inc.* 11,253,968 775,700 Blockbuster, Inc. 7,400,178 100,000 Eastman Kodak Co. 3,225,000 122,760 IVAX Corp.* 1,942,063 338,295 Mylan Laboratories, Inc. 5,981,056 294,557 Regal Entertainment Group 6,112,058 214,400 Reliant Energy* 2,926,560 521,740 UNUM Corp. 9,360,016 245,613 Willis Group Holdings, Ltd. 10,111,886 ----------- TOTAL $64,941,683 ===========
The accompanying notes are an integral part of these financial statements. 8 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED CLASS I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 20.47 $ 14.94 $ 17.35 $ 17.79 $ 16.26 -------- -------- -------- -------- -------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.08 $ 0.14 $ 0.07 $ 0.07 $ 0.13 Net realized and unrealized gain (loss) on investments 4.41 5.45 (1.97) 1.06 2.62 -------- -------- -------- -------- -------- Net increase (decrease) from investment operations $ 4.49 $ 5.59 $ (1.90) $ 1.13 $ 2.75 Distributions to shareowners: Net investment income (0.08) (0.06) (0.05) (0.10) (0.13) Net realized gain (0.21) -- (0.46) (1.47) (1.09) -------- -------- -------- -------- -------- Net increase (decrease) in net asset value $ 4.20 $ 5.53 $ (2.49) $ (0.44) $ 1.53 -------- -------- -------- -------- -------- Net asset value, end of period $ 24.67 $ 20.47 $ 14.94 $ 17.35 $ 17.79 ======== ======== ======== ======== ======== Total return* 22.12% 37.48% (11.21)% 6.49% 18.00% Ratio of net expenses to average net assets+ 0.72% 0.76% 0.80% 0.79% 0.77% Ratio of net investment income (loss) to average net assets+ 0.53% 0.86% 0.46% 0.45% 0.63% Portfolio turnover rate 55% 52% 68% 95% 85% Net assets, end of period (in thousands) $303,138 $170,237 $120,687 $128,340 $111,466 Ratio with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.72% 0.76% 0.80% 0.79% 0.77% Net investment income (loss) 0.53% 0.86% 0.46% 0.45% 0.63% Ratio with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.72% 0.76% 0.80% 0.79% 0.77% Net investment income (loss) 0.53% 0.86% 0.46% 0.45% 0.63%
* Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 9 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST STATEMENT OF ASSETS AND LIABILITIES 12/31/04 ASSETS: Investment in securities, at value (including securities loaned of $64,941,683) $913,040,396 (cost $768,884,831) Receivables -- Investment securities sold 1,342,101 Fund shares sold 206,665 Dividends, interest and foreign taxes withheld 591,214 Other 14,869 ------------ Total assets $915,195,245 ------------ LIABILITIES: Payables -- Investment securities purchased $ 2,861,531 Fund shares repurchased 4,004,450 Dividends Upon return of securities loaned 67,222,328 Due to bank 434,663 Due to affiliates 582,759 Accrued expenses 113,578 ------------ Total liabilities $ 75,219,309 ------------ NET ASSETS: Paid-in capital $647,879,874 Undistributed net investment income (loss) 2,164,900 Accumulated undistributed net realized gain (loss) 45,775,597 Net unrealized gain (loss) on: Investments 144,155,565 ------------ Total net assets $839,975,936 ------------ NET ASSET VALUE PER SHARE: CLASS I: No par value (unlimited number of shares authorized) Net assets $303,138,450 Shares outstanding 12,289,796 ------------ Net asset value per share $ 24.67 CLASS II: No par value (unlimited number of shares authorized) Net assets $536,837,486 Shares outstanding 21,966,264 ------------ Net asset value per share $ 24.44
The accompanying notes are an integral part of these financial statements. 10 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST STATEMENT OF OPERATIONS
YEAR ENDED 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $12,629) $ 7,019,067 Interest 207,829 Income on securities loaned, net 24,175 ------------ Total investment income $ 7,251,071 ------------ EXPENSES: Management fees $ 3,753,733 Transfer agent fees and expenses 3,195 Distribution fees (Class II) 936,681 Administrative reimbursements 117,136 Custodian fees 100,959 Professional fees 67,108 Printing expense 107,301 Fees and expenses of nonaffiliated trustees 3,413 Miscellaneous 7,185 ------------ Total expenses $ 5,096,711 Less fees paid indirectly (10,627) ------------ Net expenses $ 5,086,084 ------------ Net investment income (loss) $ 2,164,987 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 53,898,712 ------------ $ 53,898,712 ------------ Change in net unrealized gain or (loss) from: Investments $ 70,310,429 ------------ $ 70,310,429 ------------ Net gain (loss) on investments, futures contracts and foreign currency transactions $124,209,141 ============ Net increase (decrease) in net assets resulting from operations $126,374,128 ============
The accompanying notes are an integral part of these financial statements. 11 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 2,164,987 $ 1,803,484 Net realized gain (loss) on investments 53,898,712 6,004,760 Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions 70,310,429 75,230,670 ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 126,374,128 $ 83,038,914 ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (711,725) $ (438,494) Class II (1,067,643) (236,135) Net realized gain Class I (1,863,831) -- Class II (3,740,321) -- ------------- ------------- Total distributions to shareowners $ (7,383,520) $ (674,629) ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 331,791,818 $ 161,143,658 Class I shares issued in reorganization 49,670,328 -- Reinvestment of distributions 7,383,520 674,611 Cost of shares repurchased (49,217,509) (44,550,616) ------------- ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ 339,628,157 $ 117,267,653 ------------- ------------- Net increase (decrease) in net assets $ 458,618,765 $ 199,631,938 ------------- ------------- NET ASSETS: Beginning of year $ 381,357,171 $ 181,725,233 ------------- ------------- End of year $ 839,975,936 $ 381,357,171 ============= ============= Undistributed net investment income (loss), end of year $ 2,164,900 $ 1,779,281 ============= =============
The accompanying notes are an integral part of these financial statements. 12 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST NOTES TO FINANCIAL STATEMENTS 12/31/04 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Mid Cap Value VCT Portfolio (the Portfolio) a Portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of Mid Cap Value Portfolio is to seek capital appreciation. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in the preparation of its financial statements which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolio are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. 13 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. B. FUTURES CONTRACTS The Portfolio may enter into futures transactions to hedge against changes in interest rates, securities prices, and currency rates or to seek to increase total return. Upon entering into a futures contract, the Portfolio is required to deposit with a broker an amount of cash or securities equal to the minimum "initial margin" requirements of the associated futures exchange. Subsequent payments for futures contracts ("variation margin") are paid or received by the Portfolio, depending on the daily fluctuation in the value of the contracts, and are recorded by the Portfolio as unrealized gains or losses. When the contract is closed, the Portfolio realize a gain or loss equal to the difference between the opening and closing value of the contract. The use of futures contracts involves, to varying degrees, elements of market risk which may exceed the amounts recognized by the Portfolio. Changes in the value of the contracts may not directly correlate to the changes in the value of the underlying securities. These risks may decrease the effectiveness of the Portfolio's hedging and trading strategies and potentially result in a loss. As of December 31, 2004, Mid Cap Value Portfolio had no open contracts. C. FOREIGN CURRENCY TRANSLATION The books and records of the Portfolio are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent, the net realized gains and losses on foreign currency contracts, disposition of foreign currencies, and the difference between the amount of income accrued and the U.S. dollar actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. D. FORWARD FOREIGN CURRENCY CONTRACTS The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. E. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2004, Mid Cap Value VCT Portfolio had a capital loss carryforward of $5,981,262, of which the following amounts will expire between 2009 and 2010 if not utilized: $3,451,474 in 2009 and $2,529,788 in 2010. 14 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004 and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003 ------------ --------- DISTRIBUTIONS PAID FROM: Ordinary Income $ 3,095,474 $674,629 Long-Term capital gain 4,288,046 -- ------------ -------- $ 7,383,520 $674,629 Return of Capital -- -- ------------ -------- Total distributions $ 7,383,520 $674,629 ------------ -------- DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ 6,505,614 Capital loss carryforward from merger 48,549,164 Undistributed long-term gain/(capital loss carryforward) (5,981,262) Unrealized appreciation (depreciation) 143,022,546 ------------ Total $192,096,062 ============
The difference between book-basis and tax-basis unrealized appreciation is primarily attributable to the tax deferral of losses on wash sales. F. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of the adjusted net assets at the beginning of the day. Distributions paid by a Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. Dividends and distributions to shareowners are recorded on the ex-dividend date. G. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payment in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. H. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 15 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the Portfolio. Management fees are calculated daily at the following annual rate of 0.65% of the Portfolio's average daily net assets. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $467,669 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $520 in transfer agent fees payable to PIMSS at December 31, 2004. 4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) Mid Cap Value Portfolio $770,017,850 $149,310,096 $ (6,287,550) $ 143,022,546 ------------ ------------ ------------ -------------
5. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $609,010,425 and $312,401,269, respectively. 6. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
MID CAP VALUE PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - ------------------------------------------ ------------ ------------- ----------- ------------- CLASS I: Shares sold 3,133,632 $ 68,612,090 2,677,744 $ 46,157,551 Class I Shares issued in reorganization 2,087,866 49,670,328 -- -- Reinvestment of distributions 117,982 2,575,556 26,084 438,476 Shares repurchased (1,365,569) (29,591,496) (2,465,836) (40,592,863) ---------- ------------- ---------- ------------- Net increase 3,973,911 $ 91,266,478 237,992 $ 6,003,164 ========== ============= ========== ============= CLASS II: Shares sold 12,236,512 $ 263,179,728 6,515,291 $ 114,986,107 Reinvestment of distributions 221,974 4,807,964 93,450 236,135 Shares repurchased (881,455) (19,626,013) (1,080,224) (3,957,753) ---------- ------------- ---------- ------------- Net increase 11,577,031 $ 248,361,679 6,280,420 $ 111,264,489 ========== ============= ========== =============
16 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) 7. MERGER INFORMATION On December 8, 2004, beneficial owners of Safeco RST Core Equity Portfolio ("Core Equity"), Safeco RST Money Market Portfolio ("Money Market") and Safeco RST Multi-Cap Core Portfolio ("Multi-Cap"), three of the six portfolios that comprised Safeco Resource Series Trust, approved a proposed Agreement and Plan of Reorganization that provided for the mergers listed below. These tax-free reorganizations were accomplished on December 10, 2004 ("Closing Date"), by exchanging all of the Safeco's net assets for Class I shares as indicated below, based on Class I shares' ending net asset value on the Closing Date. The following charts show the details of the reorganizations as of that closing date Closing Date: PIONEER MID CAP VALUE VCT PORTFOLIO
PIONEER MID CAP VALUE SAFECO RST MULTI- PIONEER MID CAP VCT PORTFOLIO CAP CORE PORTFOLIO VALUE VCT PORTFOLIO (PRE-REORGANIZATION) (PRE-REORGANIZATION) (POST-REORGANIZATION) ---------------------- ---------------------- ---------------------- Net Assets $757,206,652 $49,670,328 $858,922,877 Shares Outstanding 32,072,498 2,399,533 34,160,364 Class I Shares Issued 2,087,866
ACCUMULATED UNREALIZED APPRECIATION REALIZED GAIN ON CLOSING DATE ON CLOSING DATE ------------------------- ---------------- Safeco RST Multi-Cap Core Portfolio $5,550,191 $7,992,587
17 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS I SHAREOWNERS OF PIONEER MID CAP VALUE VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Mid Cap Value VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the two years in the period ended December 31, 2001 were audited by other auditors who have ceased operations and whose report, dated February 8, 2002, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Mid Cap Value VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 18 PIONEER MID CAP VALUE VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS INVESTMENT ADVISER Pioneer Investment Management, Inc. CUSTODIAN Brown Brothers Harriman & Co. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP PRINCIPAL UNDERWRITER Pioneer Funds Distributor, Inc. LEGAL COUNSEL Wilmer Cutler Pickering Hale and Dorr LLP SHAREOWNER SERVICES AND TRANSFER Pioneer Investment Management Shareholder Services, Inc. TRUSTEES AND OFICERS The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the Trust's operations. The Trust's Trustees and officers are listed below, together with their principal occupations during the past five years. Trustees who are interested persons of the Portfolio within the meaning of the Investment Company Act of 1940 are referred to as Interested Trustees. Trustees who are not interested persons of the Fund are referred to as Independent Trustees. Each of the Trustees serves as a trustee of each of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address for all Interested Trustees and all officers of the Portfolio is 60 State Street, Boston, Massachusetts 02109. The Trust's statement of additional information provides more detailed information regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-225-6292. Proxy Voting Policies and Procedures of the Trust are available without charge, upon Agent request, by calling our toll free number (1-800-225-6292). This information is also available online at pioneerfunds.com. INTERESTED TRUSTEES
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE John F. Cogan, Jr. (78)* Chairman of the Serves until successor Trustee and President Serves Director of Harbor Board, Trustee and trustee is elected or until retirement or removal; Global Company, Ltd. President earlier retirement or Deputy Chairman and a Director removal of Pioneer Global Asset Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. Osbert M. Hood (52)** Trustee and Serves until successor President and Chief Executive None Executive Vice trustee is elected or Officer, PIM-USA since May 2003 President earlier retirement or (Director since January 2001); removal President and Director of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
19 PIONEER MID CAP VALUE VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) INDEPENDENT TRUSTEES
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE David R. Bock** (61) Trustee since 2005. Serves until a successor Senior Vice President and Chief Director of The 3050 K. Street NW, trustee is elected or Financial Officer, I-trax, Inc. Enterprise Social Washington, DC 20007 earlier retirement or (publicly traded health care Investment Company removal services company) (privately-held (2001-present); Managing affordable housing Partner, Federal City Capital finance company); Advisors (boutique merchant Director of New York bank) (1995-2000; 2002 to 2004); Mortgage Trust (publicly Executive Vice President and traded mortgage REIT) Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. Mary K. Bush (56) Trustee since 2000. Serves until successor President, Bush International Director of Brady 3509 Woodbine Street, trustee is elected or (international financial Corporation (industrial Chevy Chase, MD 20815 earlier retirement or advisory firm) identification and removal specialty coated material products manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) Margaret B.W. Graham (57) Trustee since 2000. Serves until successor Founding Director, The Winthrop None 1001 Sherbrooke Street trustee is elected or Group, Inc. (consulting firm); West, Montreal, Quebec, earlier retirement or Professor of Management, Faculty Canada H3A 1G5 removal of Management, McGill University Marguerite A. Piret (56) Trustee since 1995. Serves until successor President and Chief Executive Director of New America One Boston Place, trustee is elected or Officer, Newbury, Piret & High Income Fund, Inc. 28th Floor, Boston, earlier retirement or Company, Inc. (investment (closed-end investment MA 02108 removal banking firm) company) Stephen K. West (76) Trustee since 1995. Serves until successor Senior Counsel, Sullivan & Director, The Swiss 125 Broad Street, trustee is elected or Cromwell (law firm) Helvetia Fund, Inc. New York, NY 10004 earlier retirement or (closed-end investment removal company) and AMVESCAP PLC (investment managers) John Winthrop (68) Trustee since Serves until successor President, John Winthrop & Co., None One North Adgers Wharf, September, 2000. trustee is elected or Inc. (private investment firm) Charleston, SC 29401 earlier retirement or removal
20 PIONEER MID CAP VALUE VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) TRUST OFFICERS
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE Dorothy E. Bourassa (57) Secretary Serves at the discretion Secretary of PIM-USA; Senior None of the Board Vice President - Legal of Pioneer; and Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 Christopher J. Kelley Assistant Secretary Serves at the discretion Assistant Vice President and None (40) of the Board Senior Counsel of Pioneer since July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 David C. Phelan (47) Assistant Secretary Serves at the discretion Partner, Wilmer Cutler Pickering None of the Board Hale and Dorr LLP; Assistant Secretary of all Pioneer Funds since September 2003 Vincent Nave (59) Treasurer Serves at the discretion Vice President - Fund None of the Board Accounting, Administration and Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) Mark E. Bradley (45) Assistant Treasurer Serves at the discretion Deputy Treasurer of Pioneer None of the Board since 2004; Treasurer and Senior Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 Luis I. Presutti (39) Assistant Treasurer Serves at the discretion Assistant Vice President - Fund None of the Board Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 Gary Sullivan (46) Assistant Treasurer Serves at the discretion Fund Accounting Manager - Fund None of the Board Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002
21 PIONEER MID CAP VALUE VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) TRUST OFFICERS
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE Katharine Kim Sullivan Assistant Treasurer Serves at the discretion Fund Administration Manager - None (31) of the Board Fund Accounting, Administration and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 Martin J. Wolin (37) Chief Compliance Serves at the discretion Chief Compliance Officer of None Officer of the Board Pioneer (Director of Compliance and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds.
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the larg est banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 22 [PIONEER INVESTMENTS(R) LOGO] [PIONEER INVESTMENTS(R) LOGO] PIONEER VARIABLE CONTRACTS TRUST PIONEER EQUITY INCOME VCT PORTFOLIO -- CLASS I SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST TABLE OF CONTENTS Pioneer Equity Income VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 8 Notes to Financial Statements 12 Report of Independent Registered Public Accounting Firm 16 Trustees, Officers and Service Providers 17
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT WWW.PIONEERFUNDS.COM. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT HTTP://WWW.SEC.GOV. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST PORTFOLIO UPDATE 12/31/04 PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [PIE CHART] U.S. Common Stocks 94.2% Convertible Corporate Bonds 0.1% Convertible Preferred Stocks 1.2% Temporary Cash Investment 4.5%
SECTOR DISTRIBUTION (As a percentage of equity holdings) [PIE CHART] Financials 21.9% Consumer Staples 6.4% Telecommunication Services 6.5% Materials 7.2% Health Care 6.2% Information Technology 3.1% Energy 9.8% Industrials 10.0% Consumer Discretionary 12.1% Utilities 16.8%
FIVE LARGEST HOLDINGS (As a percentage of equity holdings) 1. PACCAR, Inc. 4.48% 2. Exxon Mobil Corp. 3.35% 3. ChevronTexaco Corp. 3.31% 4. Washington Mutual, Inc. 3.07% 5. T. Rowe Price Associates, Inc. 2.61%
The Portfolio is actively managed, and current holdings may be different. PERFORMANCE UPDATE 12/31/04 PRICES AND DISTRIBUTIONS
12/31/04 12/31/03 Net Asset Value per Share $ 20.58 $ 18.09
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ 0.4372 $ - $ -
PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in PIONEER EQUITY INCOME VCT PORTFOLIO at net asset value, compared to that of the Russell 1000 Value Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [LINE GRAPH]
Russell 1000 Pioneer Equity Income Value Index VCT Portfolio "3/95" 10,000 10,000 12,632 12,025 "12/96" 15,366 13,852 20,773 18,732 "12/98" 24,021 22,816 25,787 23,092 "12/00" 27,597 26,522 26,054 24,673 "12/2" 22,010 20,770 28,620 25,466 "12/04" 33,339 29,638
Index comparison begins 2/28/95. The Russell 1000 Value Index measures the performance of large-cap U.S. value stocks. Index returns assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. Portfolio returns are based on net asset value and do not reflect any annuity-related costs. You cannot invest directly in any Index. AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004) NET ASSET VALUE Life-of-Class 11.99% (3/1/95) 5 Years 5.12% 1 Year 16.39%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST COMPARING ONGOING PORTFOLIO EXPENSES As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER EQUITY INCOME VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004
SHARE CLASS I II - ---------------------------------------------------------------------------- Beginning Account Value On (7/1/04) $ 1,000.00 $ 1,000.00 Ending Account Value On (12/31/04) $ 1,119.78 $ 1,117.81 Expenses Paid During Period* $ 3.82 $ 5.19
* Expenses are equal to the Portfolio's annualized expense ratio of 0.72% and 0.98% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER EQUITY INCOME VCT PORTFOLIO Based on a hypothetical 5% per year return before expenses, reflecting the period from July 1, 2004 through December 31, 2004
SHARE CLASS I II - -------------------------------------------------------------------------- Beginning Account Value On 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value On 12/31/04 $ 1,021.52 $ 1,020.21 Expenses Paid During Period* $ 3.65 $ 4.95
* Expenses are equal to the Portfolio's annualized expense ratio of 0.72% and 0.98% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 In the following discussion, John Carey, portfolio manager of Pioneer Equity Income VCT Portfolio, reviews the past year and gives an overview of the Portfolio's performance over that period. Q: HOW DID THE PORTFOLIO PERFORM VERSUS ITS BENCHMARK? TO WHAT DO YOU ATTRIBUTE THE PERFORMANCE? A: Pioneer Equity Income VCT Portfolio showed a good gain in 2004, rising by 16.38% at net asset value. That was in line with the Russell 1000 Value Index, which rose by 16.49%. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. As a whole, it was, as the numbers suggest, a good year for stocks, though most of the performance came in the second half and particularly in the fourth quarter. During the earlier part of the year, the market largely backed and filled as investors worried about rising interest rates, the war in Iraq, the weak dollar, rising oil prices, terrorist threats, and the upcoming Presidential election. Around the middle of October, however, the market as measured by most major indexes began to move higher, and it continued the upward move following the election and right through to the end of the year. The sectors in the Russell 1000 Value Index performing above average for the year were energy, utilities, industrials, consumer staples, and materials, and those performing below average were telecommunications services, financials, consumer discretionary, information technology, and health care. Pioneer Equity Income VCT Portfolio was overweight in four of the five top performing sectors, and underweight in three of the five underperforming sectors. Oddly enough, though, the principal contributor to relative positive performance for the Portfolio was our stock selection in one of the underperforming sectors, financials, our biggest underweight relative to the index! The performance was attributable to premium take-over offers received by two of our banks, Charter One Financial and SouthTrust, and significant price increases for T. Rowe Price, a money-management company, and Simon Property Group, a real-estate investment trust. We also did not own any shares of Citigroup, an important index name that underperformed. At the same time, while we were appropriately underweight in information technology, we happened to own a very poor performer in the sector, convertible preferred shares of Electronic Data Systems, which we did sell during the year. Industrials and materials were bright spots for both the index and the Portfolio. In addition to being overweight in both sectors, we enjoyed superior performance from our holdings relative to the sector averages. Positive stand-outs for us in those sectors were PACCAR, builder of heavy trucks, and Roanoke Electric Steel, a small steel mill. Offsetting negative-return contributions came from holdings in the troubled health-care sector, where we were overweight and also suffered from below-average results from Eli Lilly and Merck. Q: WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE YEAR? A: In total, we added 18 holdings to the Portfolio and eliminated 16. With the favorable fundamentals in energy, materials, and industrials, we looked for additional investments in those sectors. Occidental Petroleum (oil and natural gas), Valspar (coatings and specialty chemicals), Phelps Dodge (copper mining), ServiceMaster (commercial and residential maintenance services), and Vulcan Materials (construction materials) were situations we found attractive. With our "value" orientation, we also looked in some of the underperforming sectors for names we thought unaccountably "cheap." In financials, we added Comerica, U.S. Bancorp, and State Street, and we also received shares of Wachovia in exchange for SouthTrust, which Wachovia acquired. In consumer discretionary, we bought Tupperware and common shares of Ford Motor in addition to our previous position in Ford convertible preferred shares; in information technology, we added Motorola; and in health care, we purchased Bristol-Myers Squibb and a small position in a new issue of convertible securities from Schering-Plough. Rounding out our additions were Clorox in consumer staples and Atmos Energy, Equitable Resources, and Ameren in utilities. Securities liquidated included stocks such as Biomet and Illinois Tool Works on which we had taken significant profits and whose prices we thought adequately reflected values, and stocks such as Pfizer and Coca-Cola about which we became concerned in a longer-term fundamental way. Other names sold during the year were Deere, Norfolk Southern, Tribune, Sears Roebuck, Bank of America, Merrill Lynch, St. Paul Travelers, Equity Office Properties, Electonic Data Systems convertible preferred, and Hewlett-Packard. The most meaningful effects of our trading on sector weights were in materials and utilities, where our weightings increased versus the portfolio weightings in the sectors at year end 2003, and in health care, where our weighting decreased versus a year ago, though part of the decrease was due just to weak share-price moves for our health-care stocks relative to large price increases in some other sectors. Q: WHAT IS YOUR OUTLOOK FOR 2005? A: The economic outlook appears favorable over the coming year. Interest rates are expected to continue rising, but not so fast that they should present impediments to further economic growth. We think earnings growth should continue, albeit potentially at a slower pace than in 2003 and 2004. Federal tax law, with the maximum 15% tax rate on qualified dividends and 15% rate on long-term capital gains, is likewise favorable to the stock market. Of course there are concerns, including energy and other commodity prices and the high trade and Federal budget deficits. We aim to mitigate the risk from those factors by investing on the one hand in companies benefiting from rising materials prices and, on the other hand, avoiding companies with poor cost controls. Otherwise we are always interested in companies that not only can do better but that also have a plan in place and a management committed to achieve the better results. A good economy creates more opportunities for companies to execute such turn-arounds. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 4 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST SCHEDULE OF INVESTMENTS 12/31/04
VALUE SHARES CONVERTIBLE PREFERRED STOCKS - 1.2% AUTOMOBILES & COMPONENTS - 1.1% AUTOMOBILE MANUFACTURERS - 1.1% 2,600 General Motors, 5.25%, 3/6/32 $ 59,800 57,414 Ford Cap Trust, 6.50%, 1/15/32 3,025,718 ------------ $ 3,085,518 ------------ TOTAL AUTOMOBILES & COMPONENTS $ 3,085,518 ------------ PHARMACEUTICALS & BIOTECHNOLOGY - 0.1% PHARMACEUTICALS - 0.0% 4,255 Schering-Plough Corp., 6.0%, 9/14/07 $ 247,322 ------------ TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 247,322 ------------ TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $3,000,714) $ 3,332,840 ------------ PRINCIPAL AMOUNT USD ($) CONVERTIBLE CORPORATE BOND - 0.1% RETAILING - 0.1% APPAREL RETAIL - 0.1% 200,000 GAP Inc., 5.75%, 3/15/09 $ 265,250 ------------ TOTAL RETAILING $ 265,250 ------------ TOTAL CONVERTIBLE CORPORATE BOND (Cost $200,000) $ 265,250 ------------ SHARES COMMON STOCKS - 94.2% ENERGY - 9.3% INTEGRATED OIL & GAS - 9.3% 71,813 ConocoPhillips $ 6,235,523 169,714 ChevronTexaco Corp. 8,911,682 176,110 Exxon Mobil Corp. 9,027,399 36,142 Occidental Petroleum Corp. 2,109,247 ------------ $ 26,283,851 ------------ TOTAL ENERGY $ 26,283,851 ------------ MATERIALS - 6.9% COMMODITY CHEMICALS - 1.6% 51,941 Air Products & Chemicals, Inc. $ 3,011,020 28,233 E.I. du Pont de Nemours and Co. 1,384,829 ------------ $ 4,395,849 ------------ CONSTRUCTION MATERIALS - 0.7% 36,142 Vulcan Materials Co. $ 1,973,715 ------------ DIVERSIFIED CHEMICAL - 0.9% 37,925 PPG Industries, Inc. $ 2,584,968 ------------ DIVERSIFIED METALS & MINING - 1.0% 29,700 Phelps Dodge Corp. $ 2,937,924 ------------ PAPER PRODUCTS - 0.8% 64,436 Meadwestvaco Corp. $ 2,183,736 ------------ SPECIALTY CHEMICALS - 0.8% 42,784 Valspar Corp. $ 2,139,628 ------------ STEEL - 1.1% 51,012 Nucor Corp. $ 2,669,968 20,704 Roanoke Electric Steel Corp. 427,972 ------------ $ 3,097,940 ------------ TOTAL MATERIALS $ 19,313,760 ------------ CAPITAL GOODS - 8.1% AEROSPACE & DEFENSE - 2.7% 53,284 Boeing Co. $ 2,758,513 46,899 General Dynamics Corp. 4,905,635 ------------ $ 7,664,148 ------------ ELECTRICAL COMPONENTS & EQUIPMENT - 1.5% 60,925 Emerson Electric Co. $ 4,270,843 ------------ INDUSTRIAL CONGLOMERATES - 2.8% 66,280 Johnson Controls, Inc. $ 4,204,803 33,767 United Technologies Corp. 3,489,819 ------------ $ 7,694,622 ------------ INDUSTRIAL MACHINERY - 1.1% 28,397 Gorman-Rupp Co. $ 653,131 95,208 The Timken Co. 2,477,312 ------------ $ 3,130,443 ------------ TOTAL CAPITAL GOODS $ 22,760,056 ------------ COMMERCIAL SERVICES & SUPPLIES - 0.6% EMPLOYMENT SERVICES - 0.6% 128,355 Servicemaster Co. $ 1,770,015 ------------ TOTAL COMMERCIAL SERVICES & SUPPLIES $ 1,770,015 ------------ TRANSPORTATION - 0.9% RAILROADS - 0.9% 52,265 Burlington Northern, Inc. $ 2,472,657 ------------ TOTAL TRANSPORTATION $ 2,472,657 ------------ AUTOMOBILES & COMPONENTS - 5.7% AUTOMOBILE MANUFACTURERS - 5.7% 154,894 Ford Motor Corp. $ 2,267,648 46,700 General Motors Corp. 1,870,802 149,912 PACCAR, Inc. 12,064,918 ------------ $ 16,203,368 ------------ TOTAL AUTOMOBILES & COMPONENTS $ 16,203,368 ------------ CONSUMER DURABLES & APPAREL - 0.4% HOUSEWARES & SPECIALTIES - 0.4% 47,700 Tupperware Corp. $ 988,344 ------------ TOTAL CONSUMER DURABLES & APPAREL $ 988,344 ------------
The accompanying notes are an integral part of these financial statements. 5 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST SCHEDULE OF INVESTMENTS 12/31/04 (continued)
VALUE SHARE MEDIA - 3.1% MOVIES & ENTERTAINMENT - 1.7% 149,253 Cedar Fair, L.P. $ 4,910,424 ------------ PUBLISHING - 1.4% 41,821 McGraw-Hill Co., Inc. $ 3,828,294 ------------ TOTAL MEDIA $ 8,738,718 ------------ RETAILING - 1.2% DEPARTMENT STORES - 1.2% 111,354 May Department Stores Co. $ 3,273,808 ------------ TOTAL RETAILING $ 3,273,808 ------------ FOOD, BEVERAGE & TOBACCO - 4.7% PACKAGED FOODS & MEATS - 4.2% 152,313 Campbell Soup Co. $ 4,552,636 62,343 General Mills, Inc. 3,099,071 76,105 H.J. Heinz Co., Inc. 2,967,334 48,430 Sara Lee Corp. 1,169,100 ------------ $ 11,788,141 ------------ SOFT DRINKS - 0.5% 29,533 PepsiCo, Inc. $ 1,541,623 ------------ TOTAL FOOD, BEVERAGE & TOBACCO $ 13,329,764 ------------ HOUSEHOLD & PERSONAL PRODUCTS - 1.4% HOUSEHOLD PRODUCTS - 1.4% 40,479 Colgate-Palmolive Co. $ 2,070,906 30,353 Clorox Co. 1,788,702 ------------ $ 3,859,608 ------------ TOTAL HOUSEHOLD & PERSONAL PRODUCTS $ 3,859,608 ------------ HEALTH CARE EQUIPMENT & SERVICES - 4.0% HEALTH CARE DISTRIBUTORS - 3.2% 99,784 Abbott Laboratories $ 4,654,924 28,800 Bristol-Myers Squibb Co. 737,856 59,163 Johnson & Johnson 3,752,117 ------------ $ 9,144,897 ------------ HEALTH CARE EQUIPMENT - 0.8% 39,446 Becton, Dickinson & Co. $ 2,240,533 ------------ TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 11,385,430 ------------ PHARMACEUTICALS & BIOTECHNOLOGY - 1.8% PHARMACEUTICALS - 1.8% 59,789 Eli Lilly & Co. $ 3,393,026 53,124 Merck & Co., Inc. 1,707,405 ------------ $ 5,100,431 ------------ TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 5,100,431 ------------ BANKS - 11.7% DIVERSIFIED BANKS - 4.4% 25,400 Comerica, Inc. $ 1,549,908 88,909 U.S. Bancorp 2,784,630 83,196 Wachovia Corp. 4,376,110 60,514 Wells Fargo & Co. 3,760,945 ------------ $ 12,471,593 ------------ REGIONAL BANKS - 4.3% 64,229 First Horizon National Corp. $ 2,768,912 100,062 National City Corp. 3,757,328 76,456 SunTrust Banks, Inc. 5,648,569 ------------ $ 12,174,809 ------------ THRIFTS & MORTGAGE FINANCE - 3.0% 195,686 Washington Mutual, Inc. $ 8,273,604 ------------ TOTAL BANKS $ 32,920,006 ------------ DIVERSIFIED FINANCIALS - 4.8% ASSET MANAGEMENT & CUSTODY BANKS - 4.1% 61,735 Eaton Vance Corp. $ 3,219,480 27,800 State Street Corp. 1,365,536 113,009 T. Rowe Price Associates, Inc. 7,029,160 ------------ $ 11,614,176 ------------ INVESTMENT BANKING & BROKERAGE - 0.7% 44,506 A.G. Edwards, Inc. $ 1,923,104 ------------ TOTAL DIVERSIFIED FINANCIALS $ 13,537,280 ------------ INSURANCE - 3.2% PROPERTY & CASUALTY INSURANCE - 3.2% 57,533 Chubb Corp. $ 4,424,288 89,632 Safeco Corp. 4,682,376 ------------ $ 9,106,664 ------------ TOTAL INSURANCE $ 9,106,664 ------------ REAL ESTATE - 1.2% REAL ESTATE INVESTMENT TRUSTS - 1.2% 53,284 Simon DeBartolo Group, Inc. $ 3,445,876 ------------ TOTAL REAL ESTATE $ 3,445,876 ------------ SOFTWARE & SERVICES - 0.9% APPLICATION SOFTWARE - 0.3% 32,011 Microsoft Corp. $ 855,014 ------------ DATA PROCESSING & OUTSOURCED SERVICES - 0.6% 40,616 Automatic Data Processing, Inc. $ 1,801,320 ------------ TOTAL SOFTWARE & SERVICES $ 2,656,334 ------------ TECHNOLOGY HARDWARE & EQUIPMENT - 2.0% COMMUNICATIONS EQUIPMENT - 0.6% 91,600 Motorola, Inc. $ 1,575,520 ------------
The accompanying notes are an integral part of these financial statements. 6 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
VALUE SHARES COMPUTER HARDWARE - 1.4% 62,145 Diebold, Inc. $ 3,463,341 6,402 IBM Corp. 631,109 ------------ $ 4,094,450 ------------ TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 5,669,970 ------------ TELECOMMUNICATION SERVICES - 6.2% INTEGRATED TELECOMMUNICATION SERVICES - 6.2% 53,541 Alltel Corp. $ 3,146,069 140,143 BellSouth Corp. 3,894,574 175,340 SBC Communications, Inc. 4,518,512 64,047 AT&T Corp. 1,220,736 113,589 Verizon Communications, Inc. 4,601,490 ------------ $ 17,381,381 ------------ TOTAL TELECOMMUNICATION SERVICES $ 17,381,381 ------------ UTILITIES - 16.1% ELECTRIC UTILITIES - 10.2% 79,358 Ameren Corp. $ 3,979,010 66,696 American Electric Power Co., Inc. 2,290,341 121,608 Constellation Energy Group 5,315,486 76,537 Consolidated Edison, Inc. 3,348,494 34,077 FPL Group, Inc. 2,547,256 108,460 Great Plains Energy, Inc. 3,284,169 66,088 NSTAR 3,587,257 127,476 Southern Co. 4,272,996 ------------ $ 28,625,009 ------------ GAS UTILITIES - 4.2% 15,400 Atmos Energy Corp. $ 421,190 128,160 KeySpan Energy Corp. 5,055,912 124,991 Questar Corp. 6,369,541 ------------ $ 11,846,643 ------------ MULTI-UTILITIES & UNREGULATED POWER - 1.1% 50,083 Equitable Resources, Inc. $ 3,038,035 ------------ WATER UTILITIES - 0.6% 73,317 Aqua America, Inc. $ 1,802,861 ------------ TOTAL UTILITIES $ 45,312,548 ------------ TOTAL COMMON STOCKS (Cost $200,659,301) $265,509,869 ------------ PRINCIPAL AMOUNT TEMPORARY CASH INVESTMENT - 4.5% Repurchase Agreement - 4.5% $12,700,000 UBS Warburg, Inc., 1.00%, dated 12/31/04, repurchase price of $12,700,000 plus accrued interest on 1/3/05 collateralized by $12,654,000 U.S. Treasury Bill, 6.75%, 5/15/05 $ 12,700,000 ------------ TOTAL TEMPORARY CASH INVESTMENT (Cost $12,700,000) $ 12,700,000 ------------ TOTAL INVESTMENTS IN SECURITIES - 100.0% (Cost $216,560,015) $281,807,959 ------------ OTHER ASSETS AND LIABILITIES - 0.0% $ 117,819 ------------ TOTAL NET ASSETS - 100.0% $281,925,778 ------------
The accompanying notes are an integral part of these financial statements. 7 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED CLASS I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 18.09 $ 15.11 $ 18.40 $ 21.28 $ 20.72 ---------- ---------- ---------- ---------- ---------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.44 $ 0.41 $ 0.42 $ 0.40 $ 0.51 Net realized and unrealized gain (loss) on investments 2.49 2.96 (3.30) (1.86) 2.28 ---------- ---------- ---------- ---------- ---------- Net increase (decrease) from investment operations $ 2.93 $ 3.37 $ (2.88) $ (1.46) $ 2.79 Distributions to shareowners: Net investment income (0.44) (0.39) (0.41) (0.36) (0.49) Net realized gain -- -- -- (1.06) (1.74) ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net asset value $ 2.49 $ 2.98 $ (3.29) $ (2.88) $ 0.56 ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 20.58 $ 18.09 $ 15.11 $ 18.40 $ 21.28 ========== ========== ========== ========== ========== Total return* 16.39% 0.86% (15.82)% (6.97)% 14.85% Ratio of net expenses to average net assets+ 0.72% 0.78% 0.80% 0.75% 0.71% Ratio of net investment income (loss) to average net assets+ 2.40% 2.55% 2.48% 2.07% 2.40% Portfolio turnover rate 19% 12% 12% 13% 13% Net assets, end of period (in thousands) $ 188,234 $ 155,634 $ 133,258 $ 164,019 $ 181,920 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.72% 0.78% 0.80% 0.75% 0.71% Net investment income (loss) 2.40% 2.55% 2.48% 2.07% 2.40% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.72% 0.78% 0.80% 0.75% 0.71% Net investment income (loss) 2.40% 2.55% 2.48% 2.07% 2.40%
* Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 8 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST STATEMENT OF ASSETS AND LIABILITIES 12/31/04 ASSETS: Investment in securities, at value (Cost $216,560,015) $ 281,807,959 Cash 154,992 Receivables -- Fund shares sold 257,005 Dividends, interest and foreign taxes withheld 725,532 Other 7,531 ------------- Total assets $ 282,953,019 ------------- LIABILITIES: Payables -- Fund shares repurchased 758,304 Due to affiliates 181,072 Accrued expenses 87,865 ------------- Total liabilities $ 1,027,241 ------------- NET ASSETS: Paid-in capital $ 228,847,694 Undistributed net investment income (loss) 1,228,049 Accumulated undistributed net realized gain (loss) (13,397,909) Net unrealized gain (loss) on: Investments 65,247,944 ------------- Total net assets $ 281,925,778 ------------- NET ASSET VALUE PER SHARE: CLASS I: No par value (unlimited number of shares authorized) Net assets $ 188,234,469 Shares outstanding 9,147,953 ------------- Net asset value per share $ 20.58 CLASS II: No par value (unlimited number of shares authorized) Net assets $ 93,691,309 Shares outstanding 4,529,535 ------------- Net asset value per share $ 20.68
The accompanying notes are an integral part of these financial statements. 9 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST STATEMENT OF OPERATIONS
YEAR ENDED 12/31/04 INVESTMENT INCOME: Dividends $ 7,227,744 Interest 128,972 Income on securities loaned, net 7,190 ----------- Total investment income $ 7,363,906 ----------- EXPENSES: Management fees $ 1,531,353 Transfer agent fees and expenses 3,000 Distribution fees (Class II) 181,8884 Administrative reimbursements 30,408 Custodian fees 43,740 Professional fees 52,063 Printing expense 41,880 Fees and expenses of nonaffiliated trustees 1,681 Miscellaneous 8,282 ----------- Total expenses $ 1,894,295 Less fees paid indirectly (4,731) ----------- Net expenses $ 1,889,564 ----------- Net investment income (loss) $ 5,474,342 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 2,001,864 ----------- $ 2,001,864 ----------- Change in net unrealized gain or (loss) from: Investments $29,937,321 ----------- $ 2,937,321 ----------- Net gain (loss) on investments, futures contracts and foreign currency transactions $31,939,185 =========== Net increase (decrease) in net assets resulting from operations $37,413,527 ===========
The accompanying notes are an integral part of these financial statements. 10 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 5,474,342 $ 4,413,641 Net realized gain (loss) on investments 2,001,864 (634,370) Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions 29,937,321 34,115,732 ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 37,413,527 $ 37,895,003 ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (3,809,792) $ (3,313,897) Class II (1,595,526) (860,942) ------------- ------------- Total distributions to shareowners $ (5,405,318) $ (4,174,839) ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 63,295,941 $ 52,433,019 Reinvestment of distributions 5,405,317 4,174,840 Cost of shares repurchased (34,772,572) (34,680,633) ------------- ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ 33,928,686 $ 21,927,226 ------------- ------------- Net increase (decrease) in net assets $ 65,936,895 $ 55,647,390 ------------- ------------- NET ASSETS: Beginning of year $ 215,988,883 $ 160,341,493 ------------- ------------- End of year $ 281,925,778 $ 215,988,883 ============= ============= Undistributed net investment income (loss), end of year $ 1,228,049 $ 1,156,984 ============= =============
The accompanying notes are an integral part of these financial statements. 11 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST NOTES TO FINANCIAL STATEMENTS 12/31/04 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Equity Income VCT Portfolio is a portfolio of the Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate diversified portfolios fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The investment objective of Equity Income Portfolio is to seek capital appreciation. Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting years. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in its preparation of its financial statements which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset value for the portfolio is computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Trading in foreign equity securities is substantially completed each day at various times prior to the close of the NYSE. The value of such securities used in computing the net asset value of the Portfolio's shares, based on the last sale price on the principal exchange where they traded. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Fixed income securities are valued at prices supplied by independent pricing services, which consider such factors as Treasury spreads, yields, maturities and ratings. Valuations may be supplemented by dealers and other sources, as required. Securities for which 12 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis, net of unrecoverable foreign taxes withheld at the applicable country rates. All discounts/premiums are accreted/ amortized for financial reporting purposes. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. B. FUTURES CONTRACTS The Portfolio may enter into futures transactions to hedge against changes in interest rates, securities prices, and currency rates or to seek to increase total return. Upon entering into a futures contract, the Portfolio is required to deposit with a broker an amount of cash or securities equal to the minimum "initial margin" requirements of the associated futures exchange. Subsequent payments for futures contracts ("variation margin") are paid or received by the Portfolio, depending on the daily fluctuation in the value of the contracts, and are recorded by the Portfolio as unrealized gains or losses. When the contract is closed, the Portfolio realizes a gain or loss equal to the difference between the opening and closing value of the contract. The use of futures contracts involves, to varying degrees, elements of market risk which may exceed the amounts recognized by the Portfolio. Changes in the value of the contracts may not directly correlate to the changes in the value of the underlying securities. These risks may decrease the effectiveness of the Portfolio's hedging and trading strategies and potentially result in a loss. As of December 31, 2004, the portfolio had no open futures contracts. C. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from or in excess of net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. The portfolio elected to defer $229,369 in capital losses recognized between November 1, 2004 and December 31, 2004, to its fiscal year ending December 31, 2005. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2004, Equity Income VCT Portfolio had a capital loss carryforward of $13,046,223, of which will the following amounts expire between 2009 and 2011 if not utilized: $3,961,413 in 2009, $6,407,206 in 2010, and $2,677,654, in 2011. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis.
UNDISTRIBUTED NET ACCUMULATED INVESTMENT NET REALIZED INCOME GAIN PAID-IN PORTFOLIO (LOSS) (LOSS) CAPITAL - -------------- -------------- ------------ -------- Pioneer Equity Income VCT Portfolio $2,041 $(44,116) $(42,075) ====== ======== ========
The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004 and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003 ------------- ---------- DISTRIBUTIONS PAID FROM: Ordinary Income $ 5,405,318 $4,174,839 Long-Term capital gain -- -- ------------- ---------- $ 5,405,318 $4,174,839 Return of Capital -- -- ------------- ---------- Total distributions $ 5,405,318 $4,174,839 ============= ========== DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ -- Undistributed long-term gain/ (capital loss carryforward) (13,046,273) Unrealized appreciation (depreciation) 66,353,726 Post-October loss deferred (229,369) ------------- Total $ 53,078,084 =============
13 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily attributable to the tax deferral of losses on wash sales, returns of capital on REITs, and the recognition of unrealized gains or losses on certain futures contracts. D. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of the adjusted net assets at the beginning of the day. Dividends and distributions to shareowners are recorded on the ex-dividend date. Distributions paid by a Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. E. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. F. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the Portfolio. Management fees are calculated daily at the following annual rate of 0.65% of the Portfolio's average daily net assets. In addition, under the management and administration agreement, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $160,961 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $271 in transfer agent fees payable to PIMSS at December 31, 2004. 4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolio's aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ PORTFOLIO TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) - -------------------------------------------------------------------------------------------------- Equity Income Portfolio $215,454,233 $69,458,677 $ (3,101,223) $66,353,736 ============ =========== ============ ===========
14 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST 5. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $72,185,977 and $44,337,103, respectively. 6. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
EQUITY INCOME PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - ------------------------------------------------------------------------------------------------- CLASS I: Shares sold 1,757,096 $ 33,474,454 1,544,529 $ 24,668,979 Reinvestment of distributions 198,654 3,809,791 204,954 3,313,898 Shares repurchased (1,411,407) (26,451,072) (1,964,325) (30,892,038) ---------- ------------- ---------- ------------- Net increase (decrease) 544,343 $ 10,833,173 (214,842) $ (2,909,161) ========== ============= ========== ============= CLASS II: Shares sold 1,571,139 $ 29,821,487 1,723,515 $ 27,764,040 Reinvestment of distributions 82,473 1,595,526 54,432 860,942 Shares repurchased (442,520) (8,231,500) (242,114) (3,788,595) ---------- ------------- ---------- ------------- Net increase 1,211,092 $ 23,095,513 1,533,833 $ 24,836,387 ========== ============= ========== =============
15 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS I SHAREOWNERS OF PIONEER EQUITY INCOME VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Equity Income VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the two years in the period ended December 31, 2001 were audited by other auditors who have ceased operations and whose report, dated February 8, 2002, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Equity Income VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /S/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 16 PIONEER EQUITY INCOME VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS INVESTMENT ADVISER Pioneer Investment Management, Inc. CUSTODIAN Brown Brothers Harriman & Co. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP PRINCIPAL UNDERWRITER Pioneer Funds Distributor, Inc. LEGAL COUNSEL Wilmer Cutler Pickering Hale and Dorr LLP SHAREOWNER SERVICES AND TRANSFER Pioneer Investment Management Shareholder Services, Inc. TRUSTEES AND OFFICERS The Trust's Board of Trustees provides officers of the Trust are responsible for the Trust's are listed below, together with their principal occupations during the past five years. Trustees who are interested persons of the Portfolio within the meaning of the Investment Company Act of 1940 are referred to as Interested Trustees. Trustees who are not interested persons of the Trust are referred to as Independent Trustees. Each of the Trustees serves as a trustee of each of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address for all Interested Trustees and all officers of the Portfolio is 60 State Street, Boston, Massachusetts 02109. The Trust's statement of additional information provides more detailed information regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-225-6292. Proxy Voting Policies and Procedures of the Trust are available without charge, upon Agent request, by calling our toll free number (1-800-225-6292). This information is also available online at pioneerfunds.com. INTERESTED TRUSTEES
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE John F. Cogan, Jr. (78)* Chairman of the Board, Serves until successor Trustee and President Serves Director of Harbor Trustee and President trustee is elected or until retirement or removal; Global Company, Ltd. earlier retirement or Deputy Chairman and a Director removal of Pioneer Global Asset Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. Osbert M. Hood (52)** Trustee and Executive Serves until successor President and Chief Executive None Vice President trustee is elected or Officer, PIM-USA since May 2003 earlier retirement or (Director since January 2001); removal President and Director of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
17 PIONEER EQUITY INCOME VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) INDEPENDENT TRUSTEES
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE David R. Bock** (61) Trustee since 2005. Serves until a Senior Vice President and Chief Director of The 3050 K. Street NW, successor trustee is Financial Officer, I-trax, Inc. Enterprise Social Washington, DC 20007 elected or earlier (publicly traded health care Investment Company retirement or removal. services company) (privately-held (2001-present); Managing affordable housing Partner, Federal City Capital finance company); Advisors (boutique merchant Director of New York bank)(1995-2000; 2002 to 2004); Mortgage Trust Executive Vice President and (publicly traded Chief Financial Officer, mortgage REIT) Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. Mary K. Bush (56) Trustee since 2000. Serves until successor President, Bush International Director of Brady 3509 Woodbine Street, trustee is elected or (international financial Corporation Chevy Chase, MD 20815 earlier retirement or advisory firm) (industrial removal identification and specialty coated material products manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) Margaret B.W. Graham (57) Trustee since 2000. Serves until successor Founding Director, The Winthrop None 1001 Sherbrooke Street trustee is elected or Group, Inc. (consulting firm); West, Montreal, Quebec, earlier retirement or Professor of Management, Faculty Canada H3A 1G5 removal of Management, McGill University Marguerite A. Piret (56) Trustee since 1995. Serves until successor President and Chief Executive Director of New One Boston Place, trustee is elected or Officer, Newbury, Piret & America High Income 28th Floor, earlier retirement or Company, Inc. (investment Fund, Inc. Boston, MA 02108 removal banking firm) (closed-end investment company) Stephen K. West (76) Trustee since 1995. Serves until successor Senior Counsel, Sullivan & Director, The Swiss 125 Broad Street, trustee is elected or Cromwell (law firm) Helvetia Fund, Inc. New York, NY 10004 earlier retirement or (closed-end removal investment company) and AMVESCAP PLC (investment managers) John Winthrop (68) Trustee since Serves until successor President, John Winthrop & Co., None One North Adgers Wharf, September, 2000. trustee is elected or Inc. (private investment firm) Charleston, SC 29401 earlier retirement or removal
18 PIONEER EQUITY INCOME VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) TRUST OFFICERS
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS OFFICER Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior None discretion of the Board Vice President - Legal of Pioneer; and Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 Christopher J. Kelley Assistant Secretary Serves at the Assistant Vice President and None (40) discretion of the Board Senior Counsel of Pioneer since July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 David C. Phelan (47) Assistant Secretary Serves at the Partner, Wilmer Cutler Pickering None discretion of the Board Hale and Dorr LLP; Assistant Secretary of all Pioneer Funds since September 2003 Vincent Nave (59) Treasurer Serves at the Vice President - Fund None discretion of the Board Accounting, Administration and Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) Mark E. Bradley (45) Assistant Treasurer Serves at the Deputy Treasurer of Pioneer None discretion of the Board since 2004; Treasurer and Senior Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 Luis I. Presutti (39) Assistant Treasurer Serves at the Assistant Vice President - Fund None discretion of the Board Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 Gary Sullivan (46) Assistant Treasurer Serves at the Fund Accounting Manager - Fund None discretion of the Board Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002
19 PIONEER EQUITY INCOME VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) TRUST OFFICERS
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS OFFICER Katharine Kim Sullivan Assistant Treasurer Serves at the Fund Administration Manager - None (31) discretion of the Board Fund Accounting, Administration and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of None Officer discretion of the Board Pioneer (Director of Compliance and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds.
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 20 THIS PAGE FOR YOUR NOTES. 21 [PIONEER INVESTMENTS(R) LOGO] [PIONEER INVESTMENTS(R) LOGO] PIONEER VARIABLE CONTRACTS TRUST PIONEER FUND VCT PORTFOLIO -- CLASS I SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST TABLE OF CONTENTS Pioneer Fund VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 6 Financial Statements 10 Notes to Financial Statements 14 Report of Independent Registered Public Accounting Firm 19 Trustees, Officers and Service Providers 20
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT WWW.PIONEERFUNDS.COM. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT HTTP://WWW.SEC.GOV. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST PORTFOLIO UPDATE 12/31/04 PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [PIE CHART] U.S. Common Stocks 94.6% International Common Stocks 1.1% Depositary Receipts for International Stocks 2.5% Temporary Cash Investments 1.8%
SECTOR DISTRIBUTION (As a percentage of equity holdings) [PIE CHART] Utilities 1.7% Telecommunication Services 3.1% Materials 6.5% Energy 7.9% Consumer Staples 10.1% Health Care 12.3% Industrials 13.2% Consumer Discretionary 14.0% Information Technology 15.5% Financials 15.7%
FIVE LARGEST HOLDINGS (As a percentage of equity holdings) 1. Exxon Mobil Corp. 2.58% 2. ChevronTexaco Corp. 2.18 3. Target Corp. 2.04 4. United Technologies Corp. 1.98 5. Microsoft Corp. 1.97
The Portfolio is actively managed, and current holdings may be different. PERFORMANCE UPDATE 12/31/04 PRICES AND DISTRIBUTIONS
12/31/04 12/31/03 Net Asset Value per Share $ 20.57 $ 18.70
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ 0.2186 $ - $ -
PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in PIONEER FUND VCT PORTFOLIO at net asset value, compared to that of the Standard & Poor's (S&P) 500 Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [LINE GRAPH]
S&P 500 Pioneer Index Fund VCT Portfolio "10/97" 10,000 10,000 10,643 10,543 "12/98" 13,686 13,296 16,565 15,411 "12/00" 15,060 15,600 13,275 13,908 "12/02" 10,342 11,261 13,306 13,936 "12/04" 14,747 15,504
The Standard & Poor's 500 Stock Index (the S&P 500) is a commonly used measure of the broad U.S. stock market. Index returns assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. Portfolio returns are based on net asset value and do not reflect any annuity-related costs. You cannot invest directly in the Index. AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004)
NET ASSET VALUE Life-of-Class 6.31% (10/31/97) 5 Years 0.12 1 Year 11.26
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST COMPARING ONGOING PORTFOLIO EXPENSES As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER FUND VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004
SHARE CLASS I II - ---------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,090.36 $ 1,088.30 Expenses Paid During Period* $ 3.72 $ 5.02
* Expenses are equal to the Portfolio's annualized expense ratio of 0.71% and 0.96% for Class I and Class II C shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER FUND VCT PORTFOLIO Based on a hypothetical 5% per year return before expenses, reflecting the period from July 1, 2004 through December 31, 2004
SHARE CLASS I II - ------------------------------------------ ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,021.57 $ 1,020.31 Expenses Paid During Period* $ 3.60 $ 4.85
* Expenses are equal to the Portfolio's annualized expense ratio of 0.71%, and 0.96% for Class I and Class II, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 In the following discussion, John Carey, portfolio manager of Pioneer Fund VCT Portfolio, reviews the past year and gives an overview of the Portfolio's performance over that period. Q: HOW DID THE PORTFOLIO PERFORM VERSUS ITS BENCHMARK? TO WHAT DO YOU ATTRIBUTE THE PERFORMANCE? A: Pioneer Fund VCT Portfolio achieved respectable returns in 2004. The Portfolio rose 11.25% at net asset value for the calendar year. Most of the gain came in the fourth quarter, which saw the Portfolio rise 9.26%. By comparison, the Standard & Poor's 500 Index increased by 11.04% for the year and 9.23% in the fourth quarter. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their origianl cost. For Pioneer Fund VCT Portfolio, the better-than-average performance was derived both from our solid weightings in many of the old-economy stocks, especially in energy, industrials, and materials, and from our good stock selection in the four sectors that underperformed the S&P 500 average, consumer staples, financials, health care, and information technology. Among our best-performing stocks were Norfolk Southern and PACCAR in industrials and T. Rowe Price in financials, but we also benefited from having only modest relative exposure to Pfizer and Cisco Systems (which we sold during the year) and no holdings of Coca-Cola, all stocks that did poorly. We did suffer from having above-market weightings in two of the dismal semi-conductor names, Applied Materials and Texas Instruments, but on the whole we managed to avoid most of the "disaster" stocks. We were particularly pleased that consumer discretionary, the sector we had highlighted in our annual report for 2003 as the "major culprit" in our relative underperformance versus the S&P during that year, was a positive contributor to performance in 2004. Three of our largest gains were from stocks in that sector: McGraw-Hill, Target, and John Wiley & Sons. Q: WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE SECOND HALF? A: The list of 32 additions to and 10 deletions from the portfolio in the second half of 2004 makes it look as though the period was a singularly busy one for Pioneer Fund VCT Portfolio. Actually it was just a normally busy time, but due to the merger of an acquired fund, the Safeco Core Equity Fund, into Pioneer Fund VCT Portfolio during December, we ended up with some new, transferred positions. Most of the Safeco fund, overlapped with positions already owned in the Portfolio, but we inherited the others as well. Rather than "throwing them all out with the wash," we thought that we would take our time to study them in the expectation that some might prove to be worthwhile longer-term holdings for Pioneer Fund VCT Portfolio. The merger itself marked an exciting increase to the asset base of Pioneer Fund VCT Portfolio, and also to our shareholder family. To our new, formerly Safeco shareholders, a hearty welcome! The total effect of the portfolio activity on sector weights was modest, with no sector weighting going up or down by as much as 2%. Materials, industrials, consumer discretionary, information technology, and telecommunications services all increased as a percentage of the Portfolio, and energy, consumer staples, health care, financials, and utilities all decreased. As examples, in materials we added: BHP Billiton, a major Australian-based mining and minerals company; Inco, the Canadian nickel producer; and Newmont Mining, a leading gold miner. Two new materials names came from the Safeco fund, Praxair, supplier of industrial gases, and Ball, a packaging company. Among industrials, Northrup Grumman and Ingersoll-Rand were both Safeco holdings, and in the case of consumer discretionary, five of the eight new stocks came from the Safeco fund. The two largest additions, however, were our own purchases, Nordstrom and Gap, both of them retailing companies showing signs of meaningful operational improvement over the past couple of years. Information technology rose somewhat with: our purchase of Veritas Software, which has received a merger proposal from another portfolio company, Symantec; the receipt of shares of Freescale Semiconductor from our holding Motorola; and the inclusion of EMC, an information storage specialist, from the Safeco fund. Telecommunications saw one purchase by us, Nextel Communications, and two additions attributable to the Safeco fund, CenturyTel and Verizon. Subsequent to our purchase of Nextel, the company entered into merger discussions with Sprint. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 4 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 In regard to the sectors where the weightings decreased, the reasons in some cases had to do with weaker relative share-price performance and in other cases with sales from the portfolio. In energy, we realized a gain on a large position in Smith International and replaced it with a smaller holding of Schlumberger. With consumer staples, despite the addition of two small positions from the Safeco portfolio, Kellogg and Kimberly Clark, the sector declined as a percent of the Portfolio due to underperformance versus the market averages. In the case of health care, it was a combination of selling in excess of purchasing and woeful stock performance from some of the pharmaceuticals, especially Mylan Labs, which announced an acquisition that many investors thought ill conceived. During the six months, we realized significant percentage gains on our sales of Biomet and Wellpoint Health Networks, while adding two names in the health-care equipment and supplies industry, Stryker and Medtronic, and one name in biotechnology, Amgen. Medtronic and Amgen were both from the Safeco fund. Financials saw SouthTrust stock exchanged for shares of Wachovia in a merger and our shares of Charter One Financial acquired for cash by the Royal Bank of Scotland. We sold our position in St. Paul Travelers after discouragement over the company's need to set up additional reserves following the merger creating the company. Finally, in utilities, we sold a position in Vectren and received a smaller position in Exelon from the Safeco fund. Q: WHAT IS YOUR OUTLOOK FOR 2005? A: The economic outlook appears favorable over the coming year. Interest rates are expected to continue rising, but not so fast that they should present impediments to further economic growth. Earnings growth will moderate somewhat, which is normal as a business cycle lengthens, but should still be adequate to fuel additional share-price advances. Federal tax law, with the maximum 15% tax rate on qualified dividends and long-term capital gains, is likewise favorable to the stock market. Of course there are concerns, including energy and other commodity prices and the high trade and Federal budget deficits. At some point, too, investors will begin looking ahead to the next downturn in the economy and thinking about ways to position themselves more defensively. A lot rides on the length of the current business cycle. That is, will this be a "normal" cycle of four years or thereabouts, or could it become another extended cycle like the one of the 1990s, which continued for more than six years? Making the forecasting even more difficult is the unusual circumstance that this is a wartime cycle, with some economic activity not conforming to more predictable business patterns. As always, though, we are mainly interested in companies that have the financial and management strengths to survive and do well regardless of the economic climate, and especially companies with the potential, as well as a plan and the management commitment, to do better than they have in the past. A good economy creates more opportunities for such companies to achieve improved results. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. 5 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST SCHEDULE OF INVESTMENTS 12/31/04
SHARES VALUE COMMON STOCKS - 98.9% ENERGY - 7.8% INTEGRATED OIL & GAS - 5.8% 20,126 BP Amoco Plc (A.D.R.) $ 1,175,358 31,052 ConocoPhillips 2,696,245 241,264 ChevronTexaco Corp. 12,668,773 292,714 Exxon Mobil Corp. 15,004,520 44,680 Occidental Petroleum Corp. 2,607,525 ------------ $ 34,152,421 ------------ OIL & GAS DRILLING - 0.7% 60,277 Schlumberger, Ltd. $ 4,035,545 ------------ OIL & GAS EXPLORATION & PRODUCTION - 1.3% 99,995 Apache Corp. $ 5,056,747 70,551 Pioneer Natural Resources Co. 2,476,340 ------------ $ 7,533,087 ------------ TOTAL ENERGY $ 45,721,053 ------------ MATERIALS - 6.5% ALUMINUM - 0.6% 117,716 Alcoa, Inc. $ 3,698,637 ------------ COMMODITY CHEMICALS - 1.3% 27,138 Air Products & Chemicals, Inc. $ 1,573,190 46,466 E.I. du Pont de Nemours and Co. 2,279,157 88,000 Praxair, Inc. 3,885,200 ------------ $ 7,737,547 ------------ DIVERSIFIED CHEMICAL - 0.3% 21,688 PPG Industries, Inc. $ 1,478,254 ------------ DIVERSIFIED METALS & MINING - 2.7% 112,522 BHP Billiton, Ltd. (A.D.R) $ 2,702,778 81,386 Inco, Ltd.* 2,993,377 39,803 Phelps Dodge Corp. 3,937,313 200,118 Rio Tinto Plc 5,886,829 ------------ $ 15,520,297 ------------ METAL & GLASS CONTAINERS - 0.8% 104,000 Ball Corp. $ 4,573,920 ------------ PAPER PRODUCTS - 0.3% 53,073 Meadwestvaco Corp. $ 1,798,644 ------------ PRECIOUS METALS & MINERALS - 0.3% 40,047 Newmont Mining Corp. $ 1,778,487 ------------ SPECIALTY CHEMICALS - 0.2% 39,222 Ecolab, Inc. $ 1,377,869 ------------ TOTAL MATERIALS $ 37,963,655 ------------ CAPITAL GOODS - 10.3% AEROSPACE & DEFENSE - 1.4% 48,104 General Dynamics Corp. $ 5,031,678 54,000 Northrop Grumman Corp. 2,935,440 ------------ $ 7,967,118 ------------ ELECTRICAL COMPONENTS & EQUIPMENT - 2.1% 65,964 Emerson Electric Co. $ 4,624,076 206,300 General Electric Co. 7,529,950 ------------ $ 12,154,026 ------------ INDUSTRIAL CONGLOMERATES - 4.5% 79,790 Illinois Tool Works, Inc. $ 7,394,937 120,984 Johnson Controls, Inc. 7,675,225 111,551 United Technologies Corp. 11,528,796 ------------ $ 26,598,958 ------------ INDUSTRIAL MACHINERY - 2.3% 40,569 Caterpillar, Inc. $ 3,955,883 86,222 Deere & Co. 6,414,917 40,000 Ingersoll-Rand Co. 3,212,000 ------------ $ 13,582,800 ------------ TOTAL CAPITAL GOODS $ 60,302,902 ------------ COMMERCIAL SERVICES & SUPPLIES - 0.5% OFFICE SERVICES & SUPPLIES - 0.5% 58,698 Canon, Inc. (A.D.R.) $ 3,184,953 ------------ TOTAL COMMERCIAL SERVICES & SUPPLIES $ 3,184,953 ------------ TRANSPORTATION - 2.3% AIRLINES - 0.5% 170,807 Southwest Airlines Co. $ 2,780,738 ------------ RAILROADS - 1.5% 50,040 Burlington Northern, Inc. $ 2,367,392 180,893 Norfolk Southern Corp. 6,546,518 ------------ $ 8,913,910 ------------ TRUCKING - 0.3% 21,253 United Parcel Service (a) $ 1,816,281 ------------ TOTAL TRANSPORTATION $ 13,510,929 ------------ AUTOMOBILES & COMPONENTS - 2.1% AUTOMOBILE MANUFACTURERS - 2.1% 253,315 Ford Motor Corp. $ 3,708,532 108,616 PACCAR, Inc. 8,741,416 ------------ $ 12,449,948 ------------ TOTAL AUTOMOBILES & COMPONENTS $ 12,449,948 ------------
The accompanying notes are an integral part of these financial statements. 6 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST SCHEDULE OF INVESTMENTS 12/31/04 (continued)
SHARES VALUE CONSUMER DURABLES & APPAREL - 0.6% APPAREL, ACCESSORIES & LUXURY GOODS - 0.2% 65,267 Gap, Inc. $ 1,378,439 ------------ HOUSEWARES & SPECIALTIES - 0.4% 84,000 Leggett & Platt, Inc. $ 2,388,120 ------------ TOTAL CONSUMER DURABLES & APPAREL $ 3,766,559 ------------ MEDIA - 4.5% ADVERTISING - 0.6% 43,791 Omnicom Group $ 3,692,457 ------------ MOVIES & ENTERTAINMENT - 0.2% 51,957 The Walt Disney Co. $ 1,444,405 ------------ PUBLISHING - 3.7% 48,893 Elsevier NV $ 665,764 90,111 Gannett Co. 7,362,069 149,146 John Wiley & Sons, Inc. 5,196,247 78,179 McGraw-Hill Co., Inc. 7,156,506 28,800 Tribune Co. 1,213,632 ------------ $ 21,594,218 ------------ TOTAL MEDIA $ 26,731,080 ------------ RETAILING - 6.5% APPAREL RETAIL - 0.2% 24,633 Liz Claiborne, Inc. $ 1,039,759 ------------ COMPUTER & ELECTRONICS RETAIL - 0.6% 60,000 Best Buy Co., Inc. $ 3,565,200 11,064 Game Stop Corp. (Class B)* 247,944 ------------ $ 3,813,144 ------------ DEPARTMENT STORES - 2.0% 80,000 Kohl's Corp.* $ 3,933,600 88,332 May Department Stores Co. 2,596,961 118,523 Nordstrom, Inc. 5,538,580 ------------ $ 12,069,141 ------------ GENERAL MERCHANDISE STORES - 2.2% 34,432 Family Dollar Stores, Inc. $ 1,075,311 228,656 Target Corp. 11,874,106 ------------ $ 12,949,417 ------------ HOME IMPROVEMENT RETAIL - 1.3% 110,000 Home Depot, Inc. $ 4,701,400 48,716 Lowe's Co., Inc. 2,805,554 ------------ $ 7,506,954 ------------ SPECIALTY STORES - 0.2% 30,603 Barnes & Noble, Inc.* $ 987,559 ------------ TOTAL RETAILING $ 38,365,974 ------------ FOOD & DRUG RETAILING - 2.5% DRUG RETAIL - 0.9% 139,003 Walgreen Co. $ 5,333,545 ------------ FOOD DISTRIBUTORS - 1.4% 83,493 Cardinal Health, Inc. $ 4,855,118 84,201 Sysco Corp. 3,213,952 ------------ $ 8,069,070 ------------ FOOD RETAIL - 0.2% 28,200 Kellogg Co. $ 1,259,412 ------------ TOTAL FOOD & DRUG RETAILING $ 14,662,027 ------------ FOOD, BEVERAGE & TOBACCO - 3.7% PACKAGED FOODS & MEATS - 2.1% 86,457 Campbell Soup Co. $ 2,584,200 44,844 General Mills, Inc. 2,229,195 73,219 H.J. Heinz Co., Inc. 2,854,809 54,767 Hershey Foods Corp. 3,041,759 76,005 Sara Lee Corp. 1,834,761 ------------ $ 12,544,724 ------------ SOFT DRINKS - 1.6% 178,941 PepsiCo, Inc. $ 9,340,720 ------------ TOTAL FOOD, BEVERAGE & TOBACCO $ 21,885,444 ------------ HOUSEHOLD & PERSONAL PRODUCTS - 3.8% HOUSEHOLD PRODUCTS - 3.2% 90,211 Colgate-Palmolive Co. $ 4,615,195 15,015 Clorox Co. 884,834 80,030 Estee Lauder Co. 3,662,973 171,470 Procter & Gamble Co. 9,444,568 ------------ $ 18,607,570 ------------ PERSONAL PRODUCTS - 0.6% 58,000 Kimberly-Clark Corp. $ 3,816,980 ------------ TOTAL HOUSEHOLD & PERSONAL PRODUCTS $ 22,424,550 ------------ HEALTH CARE EQUIPMENT & SERVICES - 6.6% HEALTH CARE DISTRIBUTORS - 3.4% 204,554 Abbott Laboratories $ 9,542,444 163,188 Johnson & Johnson 10,349,383 ------------ $ 19,891,827 ------------ HEALTH CARE EQUIPMENT - 2.8% 73,222 Becton, Dickinson & Co. $ 4,159,010 32,057 Guidant Corp. 2,311,310 85,000 Medtronic, Inc. 4,221,950 123,159 Stryker Corp. 5,942,422 ------------ $ 16,634,692 ------------
The accompanying notes are an integral part of these financial statements. 7 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SHARES VALUE MANAGED HEALTH CARE - 0.4% 23,937 United Healthcare Group, Inc. $ 2,107,174 ------------ TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 38,633,693 ------------ PHARMACEUTICALS & BIOTECHNOLOGY - 5.6% BIOTECHNOLOGY - 0.8% 68,200 Amgen, Inc.* $ 4,375,030 ------------ PHARMACEUTICALS - 4.8% 55,362 Barr Laboratorie, Inc. $ 2,521,185 95,302 Eli Lilly & Co. 5,408,389 236,082 Merck & Co., Inc. 7,587,675 104,212 Mylan Laboratories, Inc. (a) 1,842,468 56,907 Novartis AG 2,876,080 78,800 Pfizer, Inc. 2,118,932 18,810 Roche Holdings AG (A.D.R) 2,184,311 180,617 Schering-Plough Corp. 3,771,283 ------------ $ 28,310,323 ------------ TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 32,685,353 ------------ BANKS - 8.1% DIVERSIFIED BANKS - 3.7% 288,277 U.S. Bancorp $ 9,028,836 41,456 Wachovia Corp. 2,180,586 174,435 Wells Fargo & Co. 10,841,135 ------------ $ 22,050,557 ------------ REGIONAL BANKS - 3.1% 98,868 First Horizon National Corp. $ 4,262,199 59,000 Fifth Third Bancorp 2,789,520 140,351 National City Corp. 5,270,180 57,444 SunTrust Banks, Inc. 4,243,963 23,185 Zions Bancorporation 1,577,276 ------------ $ 18,143,138 ------------ THRIFTS & MORTGAGE FINANCE - 1.3% 177,481 Washington Mutual, Inc. $ 7,503,897 ------------ TOTAL BANKS $ 47,697,592 ------------ DIVERSIFIED FINANCIALS - 5.4% ASSET MANAGEMENT & CUSTODY BANKS - 2.6% 114,875 The Bank of New York Co., Inc. $ 3,839,123 45,290 Federated Investors, Inc. 1,376,816 77,103 State Street Corp. 3,787,299 101,277 T. Rowe Price Associates, Inc. 6,299,429 ------------ $ 15,302,667 ------------ CONSUMER FINANCE - 2.2% 138,272 American Express Co. $ 7,794,393 172,000 MBNA Corp. 4,848,680 ------------ $ 12,643,073 ------------ INVESTMENT BANKING & BROKERAGE - 0.6% 60,698 Merrill Lynch & Co., Inc. $ 3,627,919 ------------ DIVERSIFIED FINANCIAL SERVICES - 0.0% 1 Citigroup, Inc. $ 48 ------------ TOTAL DIVERSIFIED FINANCIALS $ 31,573,707 ------------ INSURANCE - 1.9% MULTI-LINE INSURANCE - 0.9% 78,394 American International Group, Inc. $ 5,148,134 ------------ PROPERTY & CASUALTY INSURANCE - 1.0% 56,844 Chubb Corp. $ 4,371,304 33,919 Safeco Corp. 1,771,929 ------------ $ 6,143,233 ------------ TOTAL INSURANCE $ 11,291,367 ------------ SOFTWARE & SERVICES - 5.5% APPLICATION SOFTWARE - 3.1% 44,591 Adobe Systems, Inc. $ 2,797,639 429,081 Microsoft Corp. 11,460,754 62,259 Symantec Corp.* 1,603,792 82,800 Veritas Software Corp.* 2,363,940 ------------ $ 18,226,125 ------------ DATA PROCESSING & OUTSOURCED SERVICES - 2.4% 107,497 Automatic Data Processing, Inc. $ 4,767,492 38,501 Computer Sciences Corp.* 2,170,301 26,882 DST Systems, Inc.* 1,401,090 29,998 Fiserv, Inc.* 1,205,620 158,920 SunGard Data Systems, Inc.* 4,502,204 ------------ $ 14,046,707 ------------ TOTAL SOFTWARE & SERVICES $ 32,272,832 ------------ TECHNOLOGY HARDWARE & EQUIPMENT - 6.2% COMMUNICATIONS EQUIPMENT - 2.1% 95,000 Century Telephone Enterprises, Inc. $ 3,369,650 221,762 Motorola, Inc. 3,814,306 326,377 Nokia Corp. (A.D.R) 5,114,328 ------------ $ 12,298,284 ------------ COMPUTER HARDWARE - 3.7% 27,643 Diebold, Inc. $ 1,540,544 203,265 Dell, Inc.* 8,565,587 76,270 Hewlett-Packard Co. 1,599,382 81,063 IBM Corp. 7,991,191 403,137 Sun Microsystems, Inc.* 2,168,877 ------------ $ 21,865,581 ------------ COMPUTER STORAGE & PERIPHERALS - 0.4% 160,000 EMC Corp.* $ 2,379,200 ------------ TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 36,543,065 ------------
The accompanying notes are an integral part of these financial statements. 8 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST SCHEDULE OF INVESTMENTS 12/31/04 (continued)
SHARES VALUE SEMICONDUCTORS - 3.6% SEMICONDUCTOR EQUIPMENT - 0.9% 308,306 Applied Materials, Inc.* $ 5,272,033 ------------ SEMICONDUCTORS - 2.7% 24,815 Freescale Semiconductors, Inc.* $ 455,602 349,426 Intel Corp. 8,173,074 294,793 Texas Instruments, Inc. 7,257,804 ------------ $ 15,886,480 ------------ TOTAL SEMICONDUCTORS $ 21,158,513 ------------ TELECOMMUNICATION SERVICES - 3.1% INTEGRATED TELECOMMUNICATION SERVICES - 3.0% 23,765 Alltel Corp. $ 1,396,431 146,005 BellSouth Corp. 4,057,479 218,671 SBC Communications, Inc. 5,635,151 164,000 Verizon Communications, Inc. 6,643,640 ------------ $ 17,732,701 ------------ WIRELESS TELECOMMUNICATION SERVICES - 0.1% 17,897 Nextel Communications, Inc.* $ 536,910 ------------ TOTAL TELECOMMUNICATION SERVICES $ 18,269,611 ------------ UTILITIES - 1.7% ELECTRIC UTILITIES - 1.4% 32,838 American Electric Power Co., Inc. $ 1,127,655 36,216 Consolidated Edison, Inc. 1,584,450 90,000 Exelon Corp. 3,966,300 57,799 Southern Co. 1,937,422 ------------ $ 8,615,827 ------------ GAS UTILITIES - 0.2% 27,431 KeySpan Energy Corp. $ 1,082,153 ------------ WATER UTILITIES - 0.1% 18,826 Aqua America, Inc. $ 462,931 ------------ TOTAL UTILITIES $ 10,160,911 ------------ TOTAL COMMON STOCKS (Cost $459,723,725) $581,255,718 ------------
PRINCIPAL AMOUNT VALUE TEMPORARY CASH INVESTMENTS - 1.8% REPURCHASE AGREEMENT - 1.2% $ 7,300,000 UBS Warburg, Inc., 1.00%, dated 12/31/04, repurchase price of $7,300,000 plus accrued interest on 1/3/05 collateralized by $6,902,000 U.S. Treasury Bill, 5.625%, 5/15/08 $ 7,300,000 ------------ SHARES SECURITY LENDING COLLATERAL - 0.6% 3,264,285 Securities Lending Investment Fund, 2.18% $ 3,264,286 ------------ TOTAL TEMPORARY CASH INVESTMENTS (Cost $10,564,285) $ 10,564,286 ------------ TOTAL INVESTMENTS IN SECURITIES - 100.7% (Cost $470,288,010) $591,820,004 ------------ OTHER ASSETS AND LIABILITIES - (0.7)% $ (4,056,175) ------------ TOTAL NET ASSETS - 100.0% $587,763,829 ============
(A.D.R.) American Depositary Receipt * Non-income producing security (a) At December 31, 2004, the following securities were out on loan:
SHARES SECURITY MARKET VALUE 99,001 Mylan Laboratories, Inc. $ 1,750,338 16,979 United Parcel Service 1,451,025 ----------- TOTAL $ 3,201,363 ===========
The accompanying notes are an integral part of these financial statements. 9 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED CLASS I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 18.70 $ 15.28 $ 19.08 $ 22.67 $ 22.70 ----------- ----------- ----------- ----------- ----------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.24 $ 0.20 $ 0.19 $ 0.17 $ 0.18 Net realized and unrealized gain (loss) on investments 1.85 3.41 (3.81) (2.57) 0.10 ----------- ----------- ----------- ----------- ----------- Net increase (decrease) from investment operations $ 2.09 $ 3.61 $ (3.62) $ (2.40) $ 0.28 Distributions to shareowners: Net investment income (0.22) (0.19) (0.18) (0.17) (0.18) Net realized gain -- -- -- (1.02) (0.13) ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net asset value $ 1.87 $ 3.42 $ (3.80) $ (3.59) $ (0.03) ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 20.57 $ 18.70 $ 15.28 $ 19.08 $ 22.67 =========== =========== =========== =========== =========== Total return* 11.26% 23.76% 19.03% (10.85)% 1.22% Ratio of net expenses to average net assets+ 0.71% 0.76% 0.80% 0.74% 0.69% Ratio of net investment income (loss) to average net assets+ 1.26% 1.16% 1.09% 0.83% 0.78% Portfolio turnover rate 17% 11% 11% 7.0% 37% Net assets, end of period (in thousands) $ 454,136 $ 154,839 $ 141,892 $ 199,160 $ 222,107 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.71% 0.76% 0.80% 0.74% 0.69% Net investment income (loss) 1.26% 1.16% 1.09% 0.83% 0.78% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.71% 0.76% 0.80% 0.74% 0.69% Net investment income (loss) 1.26% 1.16% 1.09% 0.83% 0.78%
* Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 10 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST STATEMENT OF ASSETS AND LIABILITIES 12/31/04 ASSETS: Investment in securities, at value (including securities loaned of $3,201,363) (Cost $470,288,010) $ 591,820,004 Receivables -- Fund shares sold 408,198 Dividends, interest and foreign taxes withheld 1,035,978 Other 40,546 ------------- Total assets $ 593,304,726 ------------- LIABILITIES: Payables -- Investment securities purchased $ 1,000,388 Upon return for securities loaned 3,264,284 Due to bank 848,222 Due to affiliates 307,212 Accrued expenses 120,791 ------------- Total liabilities $ 5,540,897 ------------- NET ASSETS: Paid-in capital $ 535,852,814 Undistributed net investment income (loss) 433,753 Accumulated undistributed net realized gain (loss) (70,054,732) Net unrealized gain (loss) on: Investments 121,531,994 ------------- Total net assets $ 587,763,829 ------------- NET ASSET VALUE PER SHARE: CLASS I: No par value (unlimited number of shares authorized) Net assets $ 454,136,359 Shares outstanding 22,081,959 ------------- Net asset value per share $ 20.57 CLASS II: No par value (unlimited number of shares authorized) Net assets $ 133,627,470 Shares outstanding 6,513,968 ------------- Net asset value per share $ 20.51
The accompanying notes are an integral part of these financial statements. 11 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST STATEMENT OF OPERATIONS
YEAR ENDED 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $27,542) $ 5,255,783 Interest 158,731 Income on securities loaned, net 9,868 ----------- Total investment income $ 5,424,382 ----------- EXPENSES: Management fees $ 1,790,664 Transfer agent fees and expenses 2,736 Distribution fees (Class II) 273,949 Administrative reimbursements 24,868 Custodian fees 47,602 Professional fees 59,072 Printing expense 30,024 ----------- Total expenses $ 2,228,915 Less fees paid indirectly (4,581) ----------- Net expenses $ 2,224,334 ----------- Net investment income (loss) $ 3,200,048 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 1,095,419 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (11,040) ----------- $ 1,084,379 ----------- Change in net unrealized gain or (loss) from: Investments $30,978,376 ----------- $30,978,376 ----------- Net gain (loss) on investments, futures contracts and foreign currency transactions $32,062,755 =========== Net increase (decrease) in net assets resulting from operations $35,262,803 ===========
The accompanying notes are an integral part of these financial statements. 12 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 3,200,048 $ 2,086,873 Net realized gain (loss) on investments 1,084,379 (8,525,302) Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions 30,978,376 49,662,141 ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 35,262,803 $ 43,223,712 ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (1,685,576) $ (1,580,150) Class II (1,069,680) (520,900) ------------- ------------- Total distributions to shareowners $ (2,755,256) $ (2,101,050) ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 60,072,885 $ 58,651,489 Class I shares issued in reorganization 298,220,832 -- Reinvestment of distributions 2,755,256 2,101,050 Cost of shares repurchased (48,119,744) (37,658,369) ------------- ------------- Net increase (decrease) in net assets resulting from fund share transactions $ 312,929,229 $ 23,940,170 ------------- ------------- Net increase (decrease) in net assets $ 345,436,776 $ 64,216,832 ------------- ------------- NET ASSETS: Beginning of period $ 242,327,053 $ 178,110,221 ------------- ------------- End of period $ 587,763,829 $ 242,327,053 ============= ============= Undistributed net investment income (loss), end of year $ 433,753 $ -- ============= =============
The accompanying notes are an integral part of these financial statements. 13 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST NOTES TO FINANCIAL STATEMENTS 12/31/04 1. Organization and Significant Accounting Policies The Pioneer Fund VCT Portfolio (the Portfolio) a Portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two seperarate portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value I Portfolio) (Class II shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of Fund Portfolio is to seek capital appreciation. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The Trust's financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in the preparation of its financial statements which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolio are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the NYSE. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of 14 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. B. FUTURES CONTRACTS The Portfolio may enter into futures transactions to hedge against changes in interest rates, securities prices, and currency rates or to seek to increase total return. Upon entering into a futures contract, the Portfolio is required to deposit with a broker an amount of cash or securities equal to the minimum "initial margin" requirements of the associated futures exchange. Subsequent payments for futures contracts ("variation margin") are paid or received by the Portfolio, depending on the daily fluctuation in the value of the contracts, and are recorded by the Portfolio as unrealized gains or losses. When the contract is closed, the Portfolio realize a gain or loss equal to the difference between the opening and closing value of the contract. The use of futures contracts involves, to varying degrees, elements of market risk which may exceed the amounts recognized by the Portfolio. Changes in the value of the contracts may not directly correlate to the changes in the value of the underlying securities. These risks may decrease the effectiveness of the Portfolio's hedging and trading strategies and potentially result in a loss. As of December 31, 2004, Fund Portfolio had no open contracts. C. FOREIGN CURRENCY TRANSLATION The books and records of the Portfolio are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent, the net realized gains and losses on foreign currency contracts, disposition of foreign currencies, and the difference between the amount of income accrued and the U.S. dollar actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. D. FORWARD FOREIGN CURRENCY CONTRACTS The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. E. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2004, Fund VCT Portfolio had a capital loss carryforward of $69,351,655, of which the following amounts will expire between 2009 and 2011 if not utilized: $20,833,698 in 2009, $35,500,430 in 2010 and $13,017,527 in 2011. The Portfolio has elected to defer $23,515 in capital losses recognized between November 1, 2004 and December 31, 2004 to its fiscal year ended December 31, 2005. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis. 15 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
UNDISTRIBUTED NET ACCUMULATED NET INVESTMENT INCOME REALIZED GAIN PAID-IN PORTFOLIO (LOSS) (LOSS) CAPITAL - ----------------------------- ------------------- ----------------- -------- Pioneer Fund VCT Portfolio $ (11,039) $11,039 $ (0) ========= ======= ====
The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004 and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003 ------------- ---------- DISTRIBUTIONS PAID FROM: Ordinary Income $ 2,755,256 $2,101,050 Long-Term capital gain -- -- ------------- ---------- $ 2,755,256 $2,101,050 Return of Capital -- -- ------------- ---------- Total distributions $ 2,755,256 $2,101,050 ============= ========== DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ 433,753 Undistributed long-term gain/(capital loss carryforward) (69,351,655) Unrealized appreciation (depreciation) 120,852,432 Post-October loss deferred (23,515) ------------- Total $ 51,911,015 =============
The difference between book-basis and tax-basis unrealized appreciation is primarily attributable to the tax deferral of losses on wash sales. F. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of adjusted net assets at the beginning of the day. Distributions paid by a Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. Dividends and distributions to shareowners are recorded on the ex-dividend date. G. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. 16 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) H. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM a wholly owned indirect subsidiary of UniCredito Italiano manages the portfolio. Management fees are calculated daily at the following annual rate of 0.65% of the Portfolio's average daily net assets. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $278,054 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $269 in transfer agent fees payable to PIMSS at December 31, 2004. 4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------ ------------ ------------ -------------- Fund Portfolio $470,964,572 $139,688,987 $(18,836,555) $120,852,432 ------------ ------------ ------------ ------------
5. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $102,950,656 and $46,364,816, respectively. 6. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
FUND PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - ---------------------------------------- ---------- ------------ ---------- ------------- CLASS I: Shares sold 451,723 $ 8,690,214 519,126 $ 8,479,870 Class I Shares issued in reorgainzation 14,822,109 298,220,832 - - Reinvestment of distributions 87,609 1,685,576 94,945 1,580,150 Shares repurchased (1,561,121) (29,970,569) (1,616,113) (25,664,887) ---------- ------------ ---------- ------------ Net increase 13,800,320 $278,626,053 (1,156,042) $(15,504,867) ========== ============ ========== ============ CLASS II: Shares sold 2,721,468 $ 51,382,671 3,031,681 $ 50,171,619 Reinvestment of distribution 55,486 1,069,680 30,685 520,900 Shares repurchased (952,397) (18,149,175) (747,392) (12,093,482) ---------- ------------ ---------- ------------ Net increase 1,824,557 $ 34,303,176 2,314,974 $ 38,599,037 ========== ============ ========== ============
7. MERGER INFORMATION On December 8, 2004, beneficial owners of Safeco RST Core Equity Portfolio ("Core Equity"), Safeco RST Money Market Portfolio ("Money Market") and Safeco RST Multi-Cap Core Portfolio ("Multi-Cap"), three of the six portfolios that comprised Safeco Resource Series Trust, approved a proposed Agreement and Plan of Reorganization that provided for the mergers listed below. These tax-free reorganizations were accomplished on December 10, 2004 ("Closing Date"), by exchanging all of the Safeco's net 17 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST assets for Class I shares as indicated below, based on Class I shares' ending net asset value on the Closing Date. The following charts show the details of the reorganizations as of that closing date Closing Date:
PIONEER SAFECO RST PIONEER FUND CORE EQUITY FUND PIONEER FUND VCT PORTFOLIO PORTFOLIO VCT PORTFOLIO VCT PORTFOLIO (PRE-REORGANIZATION) (PRE-REORGANIZATION) (POST-REORGANIZATION) - ------------- -------------------- -------------------- --------------------- Net Assets $281,591,969 $298,220,832 $879,147,352 Shares Outstanding 13,990,134 12,804,673 28,812,243 ------------ ------------ ------------ Class I Shares Issued 14,822,109 ============
UNREALIZED REALIZED APPRECIATION ON GAIN/(LOSS) CLOSING DATE ON CLOSING DATE ----------------- ---------------- Safeco RST Core Equity Portfolio $68,714,366 $20,662,968
18 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS I SHAREOWNERS OF PIONEER FUND VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Fund VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the two years in the period ended December 31, 2001 were audited by other auditors who have ceased operations and whose report, dated February 8, 2002, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Fund VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 19 PIONEER FUND VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS INVESTMENT ADVISER Pioneer Investment Management, Inc. CUSTODIAN Brown Brothers Harriman & Co. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP PRINCIPAL UNDERWRITER Pioneer Funds Distributor, Inc. LEGAL COUNSEL Wilmer Cutler Pickering Hale and Dorr LLP SHAREOWNER SERVICES AND TRANSFER Pioneer Investment Management Shareholder Services, Inc. TRUSTEES AND OFFICERS The Trust's Board of Trustees provides officers of the Trust are responsible for the Trust's are listed below, together with their principal occupations during the past five years. Trustees who are interested persons of the Portfolio within the meaning of the Investment Company Act of 1940 are referred to as Interested Trustees. Trustees who are not interested persons of the Trust are referred to as Independent Trustees. Each of the Trustees serves as a trustee of each of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address for all Interested Trustees and all officers of the Portfolio is 60 State Street, Boston, Massachusetts 02109. The Trust's statement of additional information provides more detailed information regarding the Trust's Trustees and is available upon resquest, without charge, by calling 1-800-225-6292. Proxy Voting Policies and Procedures of the Trust are available without charge, upon Agent request, by calling our toll free number (1-800-225-6292). This information is also available online at pioneer funds.com. INTERESTED TRUSTEES
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE John F. Cogan, Jr. (78)* Chairman of the Serves until successor Trustee and President Serves until Director of Board, Trustee trustee is elected or retirement or removal; Deputy Harbor Global and President earlier retirement or Chairman and a Director of Pioneer Company, Ltd. removal Global Asset Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. Osbert M. Hood (52)** Trustee and Serves until successor President and Chief Executive None Executive Vice trustee is elected or Officer, PIM-USA since May 2003 President earlier retirement or (Director since January 2001); removal President and Director of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
20 PIONEER FUND VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS INDEPENDENT TRUSTEES
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE David R. Bock **(61) Trustee since 2005. Serves until a successor Senior Vice President and Director of The Enterprise 3050 K. Street NW, trustee is elected or Chief Financial Officer, Social Investment Company Washington, DC 20007 earlier retirement or I-trax, Inc. (publicly traded (privately-held affordable removal. health care services company) housing finance company); (2001 - present); Managing Director of New York Partner, Federal City Capital Mortgage Trust (publicly Advisors (boutique merchant traded mortgage REIT) bank) (1995 - 2000; 2002 to 2004); Executive Vice President and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000 - 2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. Mary K. Bush (56) Trustee since 2000. Serves until successor President, Bush Director of Brady 3509 Woodbine Street, trustee is elected or International (international Corporation (industrial Chevy Chase, MD 20815 earlier retirement or financial advisory firm) identification and removal specialty coated material products manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reyn Tobacco Holdings, Inc. (tobacco) Margaret B.W. Trustee since 2000. Serves until successor Founding Director, The None Graham (57) trustee is elected or Winthrop Group, Inc. 1001 Sherbrooke earlier retirement (consulting firm); Street West, or removal Professor of Management, Montreal, Quebec, Faculty of Management, Canada H3A 1G5 McGill University Marguerite A. Trustee since 1995. Serves until successor President and Chief Executive Director of New America Piret (56) trustee is elected or Officer, Newbury, Piret & High Income Fund, Inc. One Boston Place, earlier retirement or Company, Inc. (investment (closed-end investment 28th Floor, Boston, removal banking firm) company) MA 02108 Stephen K. West (76) Trustee since 1995. Serves until successor Senior Counsel, Sullivan & Director, The Swiss 125 Broad Street, trustee is elected or Cromwell (law firm) Helvetia Fund, Inc. New York, NY 10004 earlier retirement or (closed-end investment removal company) and AMVESCAP PLC (investment managers) John Winthrop (68) Trustee since Serves until successor President, John Winthrop & None One North Adgers September, 2000. trustee is elected or Co., Inc. (private investment Wharf, Charleston, earlier retirement or firm) SC 29401 removal
21 PIONEER FUND VCT PORTFOLIO TRUSTEE, OFFICERS AND SERVICE PROVIDERS (continued) TRUST OFFICERS
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE Dorothy E. Secretary Serves at the discretion Secretary of PIM-USA; Senior None Bourassa (57) of the Board Vice President - Legal of Pioneer; and Secretary/Clerk of most of PIM-subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 Christopher J. Assistant Secretary Serves at the discretion Assistant Vice President and None Kelley (40) of the Board Senior Counsel of Pioneer since July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 David C. Phelan (47) Assistant Secretary Serves at the discretion Partner, Wilmer Cutler None of the Board Pickering Hale and Dorr LLP; Assistant Secretary of all Pioneer Funds since September 2003 Vincent Nave (59) Treasurer Serves at the discretion Vice President - Fund None of the Board Accounting, Administration and Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) Mark E. Bradley (45) Assistant Treasurer Serves at the discretion Deputy Treasurer of Pioneer None of the Board since 2004; Treasurer and Senior Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 Luis I. Presutti (39) Assistant Treasurer Serves at the discretion Assistant Vice President - None of the Board Fund Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 Gary Sullivan (46) Assistant Treasurer Serves at the discretion Fund Accounting Manager - Fund None of the Board Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002
22 PIONEER FUND VCT PORTFOLIO TRUSTEE, OFFICERS AND SERVICE PROVIDERS (continued) TRUST OFFICERS
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE Katharine Kim Assistant Treasurer Serves at the discretion Fund Administration Manager - None Sullivan (31) of the Board Fund Accounting, Administration and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 Martin J. Wolin (37) Chief Compliance Serves at the discretion Chief Compliance Officer of None Officer of the Board Pioneer (Director of Compliance and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the larg est banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients.
23 THIS PAGE FOR YOUR NOTES. 24 THIS PAGE FOR YOUR NOTES. 25 THIS PAGE FOR YOUR NOTES. 26 [PIONEER INVESTMENTS(R) LOGO] [LOGO] PIONEER INVESTMENT (R) PIONEER VARIABLE CONTRACTS TRUST PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO - CLASS I SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Pioneer Growth Opportunities VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 8 Notes to Financial Statements 12 Report of Independent Registered Public Accounting Firm 16 Trustees, Officers and Service Providers 17 PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT www.pioneerfunds.com. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT http://www.sec.gov. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] U.S. Common Stocks 82.1% Temporary Cash Investment 10.7% Exchange Traded Funds 5.4% Depositary Receipts for International Stocks 1.6% Warrants 0.2% SECTOR DISTRIBUTION (As a percentage of equity holdings) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Financials 27.3% Information Technology 16.7% Consumer Discretionary 16.4% Industrials 12.9% Health Care 12.4% Consumer Staples 6.2% Energy 5.0% Materials 3.1% FIVE LARGEST HOLDINGS (As a percentage of equity holdings) 1. Micros Systems, Inc. 3.39% 2. W Holding Co., Inc. 3.08 3. PolyMedical Corp. 2.92 4. Doral Financial Corp. 2.88 5. American Healthways, Inc. 2.84 The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- PRICES AND DISTRIBUTIONS 12/31/04 12/31/03 Net Asset Value per Share $ 23.78 $ 19.44 DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ -- $ -- $ -- - -------------------------------------------------------------------------------- PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO at net asset value, compared to that of the Russell 2000 Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Pioneer Growth Opportunities Russell 2000 VCT Portfolio Value Index 1/93 10,000 10,000 13,473 11,499 12/94 15,079 11,289 21,261 14,501 12/96 28,077 16,893 40,587 20,670 12/98 41,329 20,144 43,658 24,426 12/00 40,966 23,688 48,808 24,277 12/02 30,422 19,304 43,486 28,426 12/04 52,829 33,637 The Russell 2000 Index is an unmanaged measure of the 2,000 smallest stocks, based on capitalization, in the Russell 3000 Index. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004) - -------------------------------------------------------------------------------- NET ASSET VALUE - -------------------------------------------------------------------------------- 10 Year 13.36% 5 Year 3.89% 1 Year 21.48% All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004 SHARE CLASS I --------------------------------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,114.50 Expenses Paid During Period* $ 4.39 * Expenses are equal to the Portfolio's annualized expense ratio of 0.83% for Class I shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO Based on a hypothetical 5% per year return before expenses, reflecting the period from July 1, 2004 through December 31, 2004 SHARE CLASS I --------------------------------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,021.06 Expenses Paid During Period* $ 4.20 * Expenses are equal to the Portfolio's annualized expense ratio of 0.83% for Class I shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- A WORD ABOUT RISK: BY CONCENTRATING ON ONE INDUSTRY OR ON A GROUP OF RELATED INDUSTRIES, THE PORTFOLIO IS MORE SUSCEPTIBLE TO ADVERSE ECONOMIC, POLITICAL OR REGULATORY DEVELOPMENTS AFFECTING THOSE INDUSTRIES THAN IS A PORTFOLIO THAT INVESTS MORE BROADLY. INVESTING IN FOREIGN AND/OR EMERGING MARKETS SECURITIES INVOLVES RISKS RELATING TO INTEREST RATES, CURRENCY EXCHANGE RATES, ECONOMIC, AND POLITICAL CONDITIONS. INVESTING IN SMALL COMPANIES MAY OFFER THE POTENTIAL FOR HIGHER RETURNS, BUT THESE COMPANIES ARE ALSO SUBJECT TO GREATER SHORT-TERM PRICE FLUCTUATIONS THAN LARGER, MORE ESTABLISHED COMPANIES. CALL 800-688-9915 OR VISIT www.pioneerfunds.com FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE RETURNS FOR THE PORTFOLIO DO NOT REFLECT THE DEDUCTION OF EXPENSES ASSOCIATED WITH VARIABLE PRODUCTS, SUCH AS MORTALITY AND EXPENSE RISK CHARGES, SEPARATE ACCOUNT CHARGES, AND SALES CHARGES. THESE EXPENSES WOULD REDUCE THE OVERALL RETURNS SHOWN. PERFORMANCE RESULTS REFLECT ANY APPLICABLE EXPENSE WAIVERS IN EFFECT DURING THE PERIODS SHOWN. WITHOUT SUCH WAIVERS PERFORMANCE WOULD BE LOWER. WAIVERS MAY NOT BE IN EFFECT FOR ALL PORTFOLIOS. CERTAIN FEE WAIVERS ARE CONTRACTUAL THROUGH A SPECIFIED PERIOD. OTHERWISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION. In the following interview, Michael Rega and Diego Franzin, members of Pioneer Growth Opportunities VCT Portfolio management team, discuss the factors that influenced performance for the twelve months ended December 31, 2004. The current portfolio team assumed the Fund's management duties on December 10, 2004. Q: WHAT FACTORS AFFECTED THE PERFORMANCE OF U.S. EQUITIES DURING THE PAST YEAR? A: The stock market performed very well in 2004 despite a potentially challenging environment. Investors had to contend with a host of obstacles throughout the year, including a sharp increase in oil prices, rising short-term interest rates, the uncertainty associated with the U.S. presidential election and the ongoing insurgency in Iraq. Nevertheless, the market remained well supported by its strong underlying fundamentals. The economy continued to grow at a steady pace, but not so fast that the Federal Reserve felt compelled to accelerate its measured pace of rate increases. Corporate earnings also remained robust, finishing the year at a much higher level than most analysts had anticipated. Strong earnings, in turn, translated into increased dividends and a continued improvement in corporate balance sheets. Taken together, those factors helped the stock market climb the "wall of worry" and post a double-digit gain for the year. Amid this generally positive environment, small-cap stocks outperformed their large-cap counterparts by a wide margin, reflecting the superior earnings growth of companies in the asset class. Within small-caps, value outperformed growth: for the year, the Russell 2000 Value Index returned 22.25% versus 14.31% for the Russell 2000 Growth Index. Given the Portfolio's focus on reasonably valued small- and medium-sized companies, the strong returns within those market segments provided a favorable tailwind to performance. Q: HOW DID THE PORTFOLIO PERFORM IN RELATION TO ITS BENCHMARK? A: The Portfolio produced a total return of 21.48% at net asset value during the twelve-month period ended December 31, 2004, compared to a return of 18.33% for its benchmark, the Russell 2000 Index. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: AS NEW MANAGERS OF THE PORTFOLIO, WHAT CHANGES DO YOU ANTICIPATE MAKING TO THE PORTFOLIO AND ITS OVERALL INVESTMENT STYLE? A: We do not plan to do a major rebalancing of the Portfolio, but we expect to make a series of gradual changes throughout the year as market conditions warrant. First, we intend to bring greater diversification to the portfolio by owning more stocks and taking smaller positions in individual names. Second, we plan to keep the Portfolio "sector neutral," meaning that its industry weightings will usually be very closely in line with those of the benchmark index. In this way, the majority of the Portfolio's performance will be the result of individual stock selection. We believe we can add more value through company research than by attempting to predict the direction of the overall market or the relative performance of specific industries. Q: HOW DO YOU INTEND TO SELECT STOCKS FOR THE PORTFOLIO? A: We start by dividing the Russell 2000 Index into a number of distinct sectors and subsectors, then we use a disciplined stock selection model to identify the most attractive stocks in each sector based on four factors: growth, quality, valuation and momentum. That enables us to analyze the entire universe of 2,000 companies and select what our criteria show to be the top 20% in each sector. Next, we focus our research capabilities to conduct a fundamental analysis of each stock that has been selected. We believe that the approach provides both breadth and depth to our stock picking. We expect that this investment style will provide more stability to the portfolio and reduce the extent of the variation in its return with respect to the benchmark index. Our goal is not to hit home runs, but to hit singles and doubles and, in the process, try to deliver market-beating returns on a long-term basis. Q: WHAT IS YOUR OVERALL VIEW OF THE MARKET AT THIS JUNCTURE? A: We believe a focus on individual stock selection will be critical in the year ahead. Small-caps have outperformed large-caps for six years in a row, which suggests that it may be time for large stocks to come back into favor. What's more, our analysis shows that on an historical basis, growth stocks have been this inexpensive in relation to value less than 5% of the time. This has two implications: first, it means that gains in the small-cap value area are not likely to come as easily as they did in 2004. As a result, fundamental research should play a very important role in generating outperformance. Second, it means that in assessing the outlook for individual stocks, we will place a higher than normal emphasis on companies with the most attractive growth characteristics. We believe these steps will help the Portfolio effectively navigate the year ahead even in the event that the stellar relative performance of the small-cap value asset class begins to cool off. Q: IN WHAT AREAS ARE YOU FINDING THE BEST INVESTMENT OPPORTUNITIES? A: In 2004, every major sector in the Russell 2000 Index provided double-digit returns with the exception of technology. We expect a greater dispersion of returns in 2005, which again would work to our advantage as individual stock pickers. We will be looking for opportunities in technology and health care, two areas that underperformed the broad-based index during 2004. One of the Fund's top holding, Micros Systems, is a tech stock that in our view is among those that have additional upside. Micros develops and markets software applications to the hospitality industry, mostly table-service restaurants. Their software allows restaurants to improve coordination between servers and kitchen staff and reduce costs by improving inventory management and product reordering. A key driver of future growth is expansion into the hotel industry, as the industry embarks on a 5- to 7-year technology infrastructure upgrade cycle. Within health care, we will be closely looking for opportunities in the biotechnology sector. We believe biotechs are less risky than in the past, since there are more companies that have been public for four or five years and, therefore, have a longer earnings history and more experienced management teams. We will look to capitalize on companies we identify as quality-managed and staffed, along with a proven record of execution. On the other side of the coin, we find the consumer staples and real estate areas to be less compelling. And within financials, we intend to focus on companies that have an asset/liability mix that favors a flattening yield curve environment and exposure to expanding markets such as Florida and Texas. Q: DO YOU HAVE ANY FINAL THOUGHTS FOR INVESTORS? A: We believe that the most important aspect of asset management is individual stock selection, and we will remain committed to our research-driven approach. Regardless of the direction of the overall market, we believe Portfolio shareholders have the potential to benefit from our efforts to identify the highest quality small-cap stocks in the market. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. 4 PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - -------------------------------------------------------------------------------- SHARES VALUE COMMON STOCKS - 82.7% ENERGY - 4.4% OIL & GAS DRILLING - 1.1% 145,000 Pride International, Inc.* $ 2,978,300 42,000 Tidewater, Inc. 1,495,620 ------------- $ 4,473,920 ------------- OIL & GAS EQUIPMENT & SERVICES - 0.9% 103,600 FMC Technologies, Inc.* $ 3,335,920 ------------- OIL & GAS EXPLORATION & PRODUCTION - 2.4% 109,700 Forest Oil Corp.* $ 3,479,684 97,000 Newfield Exploration Co.* 5,727,850 ------------- $ 9,207,534 ------------- TOTAL ENERGY $ 17,017,374 ------------- MATERIALS - 2.7% CONSTRUCTION MATERIALS - 2.3% 147,700 Florida Rock Industries, Inc. $ 8,792,581 ------------- SPECIALTY CHEMICALS - 0.4% 273,200 Omnova Solutions, Inc.* $ 1,535,384 ------------- TOTAL MATERIALS $ 10,327,965 ------------- CAPITAL GOODS - 4.2% AEROSPACE & DEFENSE - 1.3% 75,800 Alliant Techsystems, Inc.* $ 4,955,804 ------------- INDUSTRIAL CONGLOMERATES - 1.8% 157,200 Pentair, Inc. $ 6,847,632 ------------- INDUSTRIAL MACHINERY - 1.1% 190,500 AGCO Corp.* $ 4,170,045 ------------- TOTAL CAPITAL GOODS $ 15,973,481 ------------- COMMERCIAL SERVICES & SUPPLIES - 4.5% COMMERCIAL PRINTING - 0.5% 56,637 R.R. Donnelly & Sons Co. $ 1,998,720 ------------- DIVERSIFIED COMMERCIAL SERVICES - 2.4% 92,600 Concorde Career Colleges, Inc.* $ 1,879,780 266,361 NCO Group, Inc.* 6,885,432 41,400 Rent-Way, Inc.* 331,614 ------------- $ 9,096,826 ------------- EMPLOYMENT SERVICES - 1.6% 185,200 Monster Worldwide, Inc.* $ 6,230,128 ------------- TOTAL COMMERCIAL SERVICES & SUPPLIES $ 17,325,674 ------------- TRANSPORTATION - 2.7% TRUCKING - 2.7% 295,500 Old Dominion Freight Line, Inc* $ 10,283,400 ------------- TOTAL TRANSPORTATION $ 10,283,400 ------------- CONSUMER DURABLES & APPAREL - 6.9% APPAREL, ACCESSORIES & LUXURY GOODS - 0.1% 239,071 Harold's Stores, Inc.* $ 344,262 ------------- FOOTWEAR - 1.4% 88,300 The Timberland Co.* $ 5,533,761 ------------- HOMEBUILDING - 5.4% 540,500 Champion Enterprises, Inc.* $ 6,388,710 68,800 Meritage Corp.* 7,753,760 103,100 Standard-Pacific Corp. 6,612,834 ------------- $ 20,755,304 ------------- TOTAL CONSUMER DURABLES & Apparel $ 26,633,327 ------------- HOTELS, RESTAURANTS & LEISURE - 4.7% CASINOS & GAMING - 4.7% 339,400 Scientific Games Corp.* $ 8,091,296 184,900 Station Casinos, Inc. 10,110,332 $ 18,201,628 ------------- TOTAL HOTELS, RESTAURANTS & LEISURE $ 18,201,628 ------------- RETAILING - 2.8% APPAREL RETAIL - 0.6% 123,500 Steven Madden, Ltd.* $ 2,329,210 ------------- HOME IMPROVEMENT RETAIL - 1.2% 61,800 Scottes Co.* $ 4,543,536 ------------- SPECIALTY STORES - 1.0% 150,200 West Marine, Inc.* $ 3,717,450 ------------- TOTAL RETAILING $ 10,590,196 ------------- FOOD & DRUG RETAILING - 2.2% FOOD RETAIL - 2.2% 183,000 Casey's General Stores, Inc. $ 3,321,450 178,300 Fresh Del Monte Produce Inc. 5,279,463 ------------- $ 8,600,913 ------------- TOTAL FOOD & DRUG RETAILING $ 8,600,913 ------------- FOOD, BEVERAGE & TOBACCO - 0.8% SOFT DRINKS - 0.8% 51,100 Coca-Cola Bottling Co. $ 2,915,766 ------------- TOTAL FOOD, BEVERAGE & TOBACCO $ 2,915,766 ------------- HOUSEHOLD & PERSONAL PRODUCTS - 2.5% HOUSEHOLD PRODUCTS - 1.6% 235,900 Nu Skin Enterprises, Inc. $ 5,987,142 ------------- PERSONAL PRODUCTS - 0.9% 145,300 NBTY, Inc.* $ 3,488,653 ------------- TOTAL HOUSEHOLD & PERSONAL PRODUCTS $ 9,475,795 ------------- HEALTH CARE EQUIPMENT & SERVICES - 7.8% HEALTH CARE DISTRIBUTORS - 0.0% 8,200 American Medical Alert Corp.* $ 42,066 ------------- HEALTH CARE EQUIPMENT - 3.5% 280,000 Conceptus, Inc.* $ 2,272,200 296,700 PolyMedica Corp. 11,063,943 ------------- $ 13,336,143 ------------- The accompanying notes are an integral part of these financial statements. 5 PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SHARES VALUE HEALTH CARE SERVICES - 4.3% 325,400 American Healthways, Inc.* $ 10,751,216 149,550 Matria Healthcare, Inc.* 5,842,919 ------------- $ 16,594,135 ------------- TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 29,972,344 ------------- PHARMACEUTICALS & BIOTECHNOLOGY - 3.1% BIOTECHNOLOGY - 3.1% 169,200 Connetics Corp.* $ 4,109,868 352,200 Serologicals Corp.* 7,790,664 ------------- $ 11,900,532 ------------- TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 11,900,532 ------------- BANKS - 9.9% DIVERSIFIED BANKS - 4.2% 221,750 Doral Financial Corp. $ 10,921,188 221,833 Fulton Financial Corp. 5,170,927 ------------- $ 16,092,115 ------------- REGIONAL BANKS - 2.7% 104,800 United Bankshares, Inc. $ 3,998,120 109,200 Westamerica Bancorporation 6,367,452 ------------- $ 10,365,572 ------------- THRIFTS & MORTGAGE FINANCE - 3.0% 508,368 W Holding Co., Inc. $ 11,661,962 ------------- TOTAL BANKS $ 38,119,649 ------------- DIVERSIFIED FINANCIALS - 1.6% DIVERSIFIED FINANCIAL SERVICES - 1.6% 87,900 Affiliated Managers Group, Inc.* $ 5,954,346 ------------- TOTAL DIVERSIFIED FINANCIALS $ 5,954,346 ------------- INSURANCE - 4.1% LIFE & HEALTH INSURANCE - 2.3% 108,000 Stancorp Financial Group, Inc. $ 8,910,000 ------------- REINSURANCE - 1.8% 261,100 Scottish RE Group, Ltd. $ 6,762,490 ------------- TOTAL INSURANCE $ 15,672,490 ------------- REAL ESTATE - 3.1% REAL ESTATE INVESTMENT TRUSTS - 3.1% 89,700 Alexandria Real Estate Equities, Inc. $ 6,675,474 80,400 New Century Financial Corp. 5,138,364 ------------- $ 11,813,838 ------------- TOTAL REAL ESTATE $ 11,813,838 ------------- SOFTWARE & SERVICES - 7.4% DATA PROCESSING & OUTSOURCED SERVICES - 2.2% 279,420 Iron Mountain, Inc.* $ 8,519,516 ------------- HOME ENTERTAINMENT SOFTWARE - 1.6% 256,700 THQ, Inc.* $ 5,888,698 ------------- INTERNET SOFTWARE & SERVICES - 2.2% 166,900 Websense, Inc.* $ 8,465,168 ------------- SYSTEMS SOFTWARE - 1.4% 560,900 Ciber, Inc.* $ 5,407,076 ------------- TOTAL SOFTWARE & SERVICES $ 28,280,458 ------------- TECHNOLOGY HARDWARE & EQUIPMENT - 6.8% COMPUTER STORAGE & PERIPHERALS - 3.4% 164,500 Micros Systems, Inc.* $ 12,840,870 ------------- TECHNOLOGY DISTRIBUTORS - 3.4% 145,100 DRS Technologies, Inc.* $ 6,197,221 228,700 Tektronix, Inc. 6,909,027 ------------- $ 13,106,248 ------------- TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 25,947,118 ------------- SEMICONDUCTORS - 0.6% 96,300 DSP Group, Inc.* $ 2,150,379 ------------- TOTAL SEMICONDUCTORS $ 2,150,379 ------------- TOTAL COMMON STOCKS (Cost $204,543,831) $ 317,156,673 ------------- RIGHTS/WARRANTS - 0.3% HEALTH CARE EQUIPMENT - 0.1% 49,880 Endocare, Inc., Exp. 11/23/05* $ -- 140,000 Lifepoint, Inc., Exp. 4/1/07* -- 84,000 Lifepoint, Inc., Exp. 7/21/07* -- 37,165 NCO Group, Exp. 9/28/06* -- 250,000 Photomedex, Inc., Exp. 6/13/07* 200,000 92,800 SpectRx, Inc., Exp. 6/4/06* -- ------------- TOTAL HEALTH CARE EQUIPMENT $ 200,000 ------------- PHARMACEUTICALS - 0.2 105,000 Nastech Warrants Expiration 3/22/06* $ 604,013 ------------- TOTAL PHARMACEUTICALS $ 604,013 ------------- TOTAL RIGHTS/WARRANTS (Cost $21,608) $ 804,013 ------------- EXCHANGE TRADED FUNDS - 5.3% 30,700 iShares Russell 2000 (ETF) $ 3,975,650 20,300 iShares Russell 2000 Value (ETF) 3,917,088 91,200 iShares Russell 2000 Growth (ETF) 6,136,847 59,400 S&P Small Cap 600/BARRA Growth Index (ETF) 6,361,740 ------------- $ 20,391,325 ------------- TOTAL EXCHANGE TRADED FUNDS (Cost $16,626,620) $ 20,391,325 ------------- 6 The accoccompanying notes are an integral part of these financial statements. PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE TEMPORARY CASH INVESTMENT - 10.6% REPURCHASE AGREEMENT - 10.6% $ 40,700,000 UBS Warburg, Inc., 1.00%, dated 12/31/04, repurchase price of 40,700,000 plus accrued interest on 1/3/05 collateralized by $40,767,000 U.S. Treasury Bill, 1.625%, 9/30/05 and $880,000 U.S. Treasury Bill, 6.75%, 5/15/05 $ 40,700,000 ------------- TOTAL TEMPORARY CASH INVESTMENT (Cost $40,700,000) $ 40,700,000 ------------- TOTAL INVESTMENTS IN SECURITIES - 98.9% (Cost $261,892,059) $ 379,052,011 ------------- OTHER ASSETS AND LIABILITIES - (1.1)% $ 4,416,384 ------------- TOTAL NET ASSETS - 100.0% $ 383,468,395 ============= * Non-Income producing security The accompanying notes are an integral part of these financial statements. 7 PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED CLASS I 12/31/04 (b) 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 19.44 $ 13.60 $ 21.89 $ 18.81 $ 22.50 --------- --------- --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ (0.01) $ (0.02) $ (0.10) $ (0.10) $ (0.12) Net realized and unrealized gain (loss) on investments 4.35 5.86 (8.12)(a) 3.67 (1.27) --------- --------- --------- --------- --------- Net increase (decrease) from investment operations $ 4.34 $ 5.84 $ (8.22) $ 3.57 $ (1.39) --------- --------- --------- --------- --------- Distributions to shareowners: Net realized gain $ -- $ -- $ (0.07) $ (0.49) $ (2.30) --------- --------- --------- --------- --------- Net increase (decrease) in net asset value $ 4.34 $ 5.84 $ (8.29) $ 3.08 $ (3.69) --------- --------- --------- --------- --------- Net asset value, end of period $ 23.78 $ 19.44 $ 13.60 $ 21.89 $ 18.81 ========= ========= ========= ========= ========= Total return* 22.33% 42.94% (37.67)% 19.14% (6.16)% Ratio of net expenses to average net assets 0.81% 0.80% 0.79% 0.78% 0.77% Ratio of net investment loss to average net assets (0.06)% (0.16)% (0.58)% (0.53)% (0.57)% Portfolio turnover rate 19% 54% 38% 47% 66% Net assets, end of period (in thousands) 383,468 337,573 245,954 428,013 354,932
* Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions, the complete redemption of the investment at net asset value at the end of each period, and no sales charges. Total return would be reduced if sales charges were taken into account. (a) Includes $0.01 related to investment reimbursement by advisor. (Safeco Asset Management) (b) Effective August 2, 2004, PIM became the sub-advisor of the Fund and subsequently became the advisor on December 10, 2004. 8 The accompanying notes are an integral part of these financial statements. PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (cost $221,192,059) $ 338,352,011 Temporary Cash Investment (cost $40,700,000) 40,700,000 ------------- Total investment in securities (cost $261,892,059) $ 379,052,011 Cash 3,330,893 Receivables - Investment securities sold 1,873,614 Fund shares sold 61,598 Dividends, interest and foreign taxes withheld 171,448 Other 45,861 ------------- Total assets $ 384,535,425 ------------- LIABILITIES: Payables - Fund shares repurchased $ 787,443 Due to affiliates 161,709 Accrued expenses 117,878 ------------- Total liabilities $ 1,067,030 ------------- NET ASSETS: Paid-in capital $ 355,755,408 Accumulated undistributed net realized gain (loss) (89,446,965) Net unrealized gain (loss) on: Investments 117,159,952 Total net assets $ 383,468,395 ------------- NET ASSET VALUE PER SHARE: CLASS I: (No par value, unlimited number of shares authorized) Net assets $ 383,468,395 Shares outstanding 16,126,459 ------------- Net asset value per share $ 23.78 ------------- The accompanying notes are an integral part of these financial statements. 9 PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS 12/31/04 - -------------------------------------------------------------------------------- Year Ended 12/31/04 INVESTMENT INCOME: Dividends $ 2,277,558 Interest 155,899 Income on securities loaned, net 178,120 ------------ Total investment income $ 2,611,577 ------------ EXPENSES: Management fees $ 2,595,439 Transfer agent fees 125 Custodian fees 34,184 Professional fees 49,469 Printing 97,912 Fees and expenses of nonaffiliated trustees 5,146 Miscellaneous 20,596 ------------ Total expenses $ 2,802,871 ------------ Net expenses $ 2,802,871 ------------ Net investment income (loss) $ (191,294) ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 579,315 ------------ $ 579,315 ------------ Change in net unrealized gain or loss from: Investments $ 71,554,233 ------------ $ 71,554,233 ------------ Net gain (loss) on investments, futures contracts and foreign currency transactions $ 72,133,548 ============ Net increase (decrease) in net assets resulting from operations $ 71,942,254 ============ 10 The accompanying notes are an integral part of these financial statements. PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS 12/31/04 - -------------------------------------------------------------------------------- YEAR YEAR ENDED ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ (191,294) $ (431,306) Net realized gain (loss) on investments 579,315 (15,020,094) Change in net unrealized gain or loss on investments, futures contracts and foreign currency transactions 71,554,233 114,949,555 ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 71,942,254 $ 99,498,155 ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 48,727,340 $ 58,543,445 Cost of shares repurchased (74,774,095) (66,422,513) ------------- ------------- Net increase in net assets resulting from Fund share transactions $ (26,046,755) $ (7,879,068) ------------- ------------- Net increase in net assets $ 45,895,499 $ 91,619,087 NET ASSETS: Beginning of year 337,572,896 245,954,000 ------------- ------------- End of year $ 383,468,395 $ 337,572,896 ============= ============= The accompanying notes are an integral part of these financial statements. 11 PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Growth Opportunities VCT Portfolio (the Portfolio) (formerly SAFECO RST Growth Opportunities Portfolio) a Portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) As of December 31, 2004, no Class II Shares were outstanding for the Portfolio. The Portfolio, organized on December 10, 2004, is the successor to the Safeco RST Growth Opportunities Portfolio. Safeco RST Growth Opportunities Portfolio, one of six series of portfolios that that comprised Safeco Resource Series Trust, transferred all of the net assets of Trust shares in exchange for the Portfolio's Class I shares in a one-to-one exchange ratio, on December 10, 2004, pursuant to an agreement and plan of reorganization (the "reorganization" which was approved by the shareholders of Safeco RST Growth Opportunities Portfolio on December 8, 2004). The Portfolio had no assets or liabilities prior to the reorganization. Accordingly, the reorganization, which was a tax-free exchange, had no effect on the Portfolio's operations. Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of The Pioneer Growth Opportunities VCT Portfolio is to seek capital appreciation. The Trust's financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in the preparation of its financial statements which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolio are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last 12 PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- bid and asked prices. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. B. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2004, Growth Opportunities VCT Portfolio had a capital loss carryforward of $89,435,215, of which the following amounts will expire between 2010 and 2012 if not utilized: $54,386,902 in 2010, $34,799,107 in 2011 and $249,206 in 2012. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis.
UNDISTRIBUTED ACCUMULATED NET INVESTMENT REALIZED PORTFOLIO INCOME (LOSS) GAIN (LOSS) PAID-IN CAPITAL - ------------------------------------------ -------------- ------------ --------------- PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO $ 191,294 $ (0) $ (191,294) ========= ==== ==========
The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004. There were no distributions paid during the fiscal years ended December 31, 2004, and 2003.
PIONEER GROWTH PIONEER GROWTH OPPORTUNITIES OPPORTUNITIES VCT PORTFOLIO VCT PORTFOLIO 2004 2003 -------------- -------------- DISTRIBUTIONS PAID FROM: Ordinary Income $ -- $ -- Long-Term capital gain -- -- ------------- ------------ $ -- $ -- ------------- ------------ Return of Capital -- -- Total distributions $ -- $ -- ============= ============ DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ -- Undistributed long-term gain/(capital loss carryforward) (89,435,215) Unrealized appreciation (depreciation) 117,148,202 ------------- Total $ 27,712,987 =============
13 PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales. C. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. D. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive interest or dividends on the securities loaned, and gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Portfolio. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Portfolio has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Portfolio invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. E. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the portfolio. Management fees are calculated at the following annual rate of 0.74% of the Portfolio's average daily net assets. Prior to the reorganization, the Portfolio was advised by Safeco Asset Management, which received an annual fee equal to 0.74% of its average daily net assets. Through December 10, 2006, PIM has agreed not to impose all or a portion of its management fee and to assume other operating expenses of the Portfolio to the extent necessary to limit Class I expenses to 0.79% of the average daily net assets attributable to Class I shares. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $161,584 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT Since the reorganization, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $125 in transfer agent fees payable to PIMSS at December 31, 2004. Prior to the reorganization Safeco Services Corporation was the Transfer and Shareholder Servicing agent. 4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------- ------------- ------------- -------------- Growth Opportunities Portfolio $ 261,903,809 $ 127,577,497 $ (10,429,295) $ 117,148,202 ============= ============= ============= =============
14 PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- 5. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $63,687,337 and $118,988,491, respectively. 6. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
GROWTH OPPORTUNITIES PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - ----------------------------------- ----------- -------------- ---------- ------------- SAFECO TRUST SHARES: Shares sold -- Safeco 2,250,905 $ 46,344,245 3,713,393 $ 58,543,445 Shares repurchased-Safeco (3,399,953) (70,300,296) (4,429,693) (66,422,513) Shares transferred in reorganiztion (16,214,763) (374,885,314) CLASS I: Shares Sold 101,479 2,383,096 Shares repurchased (189,783) (4,473,799) Shares issued in reorganiztion 16,214,763 374,885,312 ----------- -------------- ---------- ------------- Net increase (decrease) (1,237,351) $ (26,046,755) (716,300) $ (7,879,068) =========== ============== ========== =============
15 PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS I SHAREOWNERS OF PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Growth Opportunities VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust, (the "Trust"), (formerly Growth Opportunities Portfolio, one of the portfolios that comprised the Safeco Resource Series Trust) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Growth Opportunities VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 16 PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - -------------------------------------------------------------------------------- INVESTMENT ADVISER TRUSTEES AND OFFICERS Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Fund are responsible for the Trust's CUSTODIAN operations. The Trust's Trustees and officers are listed below, together Brown Brothers Harriman & Co. with their principal occupations during the past five years. Trustees who are interested persons of the Portfolio within the meaning of the INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Investment Company Act of 1940 are referred to as Interested Trustees. Ernst & Young LLP Trustees who are not interested persons of the Trust are referred to as Independent Trustees. Each of the Trustees serves as a trustee of each PRINCIPAL UNDERWRITER of the 73 U.S. registered investment portfolios for which Pioneer Pioneer Funds Distributor, Inc. Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Trusts"). The address for all Interested Trustees and all officers of the Portfolio is 60 State Street, Boston, Massachusetts 02109. LEGAL COUNSEL The Trust's statement of additional information provides more detailed Wilmer Cutler Pickering Hale and Dorr LLP information regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-225-6292. SHAREOWNER SERVICES AND TRANSFER Proxy Voting Policies and Procedures of the Trust are available without Pioneer Investment Management Shareholder Services, Inc. charge, upon Agent request, by calling our toll free number (1-800-225-6292). This information is also available online at pioneerfunds.com.
- -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE John F. Cogan, Jr. (78)* Chairman of the Serves until successor Trustee and President Serves Director of Harbor Board, Trustee and trustee is elected or until retirement or removal; Global Company, Ltd. President earlier retirement Deputy Chairman and a Director or removal of Pioneer Global Asset Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------ Osbert M. Hood (52)** Trustee and Serves until successor President and Chief Executive None Executive Vice trustee is elected or Officer, PIM-USA since May 2003 President earlier retirement or (Director since January 2001); removal President and Director of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------
17 PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE David R. Bock **(61) Trustee since Serves until a Senior Vice President and Chief Director of The 3050 K. Street NW, 2005. successor trustee is Financial Officer, I-trax, Inc. Enterprise Social Washington, DC 20007 elected or earlier (publicly traded health care Investment Company retirement or removal. services company) (privately-held (2001-present); Managing affordable housing Partner, Federal City Capital finance company); Advisors (boutique merchant Director of New York bank) (1995-2000; 2002 to 2004); Mortgage Trust Executive Vice President and (publicly traded Chief Financial Officer, mortgage REIT) Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Mary K. Bush (56) Trustee since Serves until successor President, Bush International Director of Brady 3509 Woodbine Street, 2000. trustee is elected or (international financial Corporation Chevy Chase, MD 20815 earlier retirement or advisory firm) (industrial removal identification and specialty coated material products manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - ------------------------------------------------------------------------------------------------------------------------------------ Margaret B.W. Graham (57) Trustee since Serves until successor Founding Director, The Winthrop None 1001 Sherbrooke Street 2000. trustee is elected or Group, Inc. (consulting firm); West, Montreal, Quebec, earlier retirement or Professor of Management, Faculty Canada H3A 1G5 removal of Management, McGill University - ------------------------------------------------------------------------------------------------------------------------------------ Marguerite A. Piret (56) Trustee since Serves until successor President and Chief Executive Director of New One Boston Place, 1995. trustee is elected or Officer, Newbury, Piret & America High Income 28th Floor, earlier retirement or Company, Inc. (investment Fund, Inc. Boston, MA 02108 removal banking firm) (closed-end investment company) - ------------------------------------------------------------------------------------------------------------------------------------ Stephen K. West (76) Trustee since Serves until successor Senior Counsel, Sullivan & Director, The Swiss 125 Broad Street, 1995. trustee is elected or Cromwell (law firm) Helvetia Fund, Inc. New York, NY 10004 earlier retirement or (closed-end removal investment company) and AMVESCAP PLC (investment managers) - ------------------------------------------------------------------------------------------------------------------------------------ John Winthrop (68) Trustee since Serves until successor President, John Winthrop & Co., None One North Adgers Wharf, 2000. trustee is elected or Inc. (private investment firm) Charleston, SC 29401 earlier retirement or removal - ------------------------------------------------------------------------------------------------------------------------------------
18 PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior None discretion of the Vice President - Legal of Board Pioneer; and Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Christopher J. Kelley (40) Assistant Serves at the Assistant Vice President and None Secretary discretion of the Senior Counsel of Pioneer since Board July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering None Secretary discretion of the Hale and Dorr LLP; Assistant Board Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Vincent Nave (59) Treasurer Serves at the Vice President - Fund None discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ------------------------------------------------------------------------------------------------------------------------------------ Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer None Treasurer discretion of the since 2004; Treasurer and Senior Board Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None Treasurer discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None Treasurer discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - ------------------------------------------------------------------------------------------------------------------------------------
19 PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE Katharine Kim Sullivan (31) Assistant Serves at the Fund Administration Manager - None Treasurer discretion of the Fund Accounting, Administration Board and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of None Officer discretion of the Pioneer (Director of Compliance Board and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 20 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. 21 [LOGO] PIONEER INVESTMENTS(R) [PIONEER INVESTMENTS(R) LOGO] PIONEER VARIABLE CONTRACTS TRUST PIONEER HIGH YIELD VCT PORTFOLIO -- CLASS I SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST TABLE OF CONTENTS Pioneer High Yield VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 11 Notes to Financial Statements 15 Report of Independent Registered Public Accounting Firm 19 Trustees, Officers and Service Providers 20
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT WWW.PIONEERFUNDS.COM. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT HTTP://WWW.SEC.GOV. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST PORTFOLIO UPDATE 12/31/04 PORTFOLIO DIVERSIFICATION (As a percentage of total investment in securities) [PIE CHART] U.S Corporate Bonds 64.6% Convertible Corporate Bonds 30.3% Temporary Cash Investment 2.7% Convertible Performed Stocks 2.4%
MATURITY DISTRIBUTION (As a percentage of total investment in securities) [PIE CHART] 4-6 years 48.8% 6-8 years 11.2% 8+ years 8.5% 1-3 years 16.5% 3-4 years 15.0%
FIVE LARGEST HOLDINGS (As a percentage of long-term holdings) 1. Mueller Industries, Inc. 6.0%, 11/1/14 3.97% 2. Corning, Inc., 5.9%, 3/15/14 3.42 3. CMS Energy Corp. 7.75%, 8/1/10 3.03 4. Bowater, Inc., 6.5%, 6/15/13 3.02 5. SCI Systems, Inc., 3.0%, 3/15/07 2.68
The Portfolio is actively managed, and current holdings may be different. PERFORMANCE UPDATE 12/31/04 PRICES AND DISTRIBUTIONS
12/31/04 12/31/03 Net Asset Value per Share $ 11.67 $ 11.45
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ 0.6177 $ - $ 0.047
PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in Pioneer High Yield VCT Portfolio at net asset value, compared to that of Merrill Lynch (ML) High Yield Master II Index and of the ML Index of Convertible Bonds (Speculative Quality). Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [LINE GRAPH]
ML Convertible ML High Yield Pioneer Bond Speculative Master II High Yield Quality Index Index VCT Portfolio "5/00" 10,000 10,000 10,000 8,424 9,770 10,623 7,882 10,207 12,387 "12/02" 7,744 10,013 12,211 10,529 12,830 16,215 "12/04" 11,861 14,227 17,517
Index comparisons begin on 4/30/00. The ML High Yield Master II Index is a commonly accepted measure of the performance of high yield securities. Convertible Bonds (speculative quality) is a commonly accepted measure of the performance of speculative grade convertible bond securities. Index returns assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in any Index. AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004) Net Asset Value Life-of-Class 12.27% (5/1/00) 1 Year 8.03
All total returns shown assume reinvestment of distributions at net asset value. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Please refer to the variable product's annual report for performance that reflects the deduction of the variable products fees and charges. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST COMPARING ONGOING PORTFOLIO EXPENSES As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER HIGH YIELD VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004.
SHARE CLASS I II - ------------------------------------------ -------------- -------------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,077.61 $ 1,076.31 Expenses Paid During Period* $ 4.11 $ 5.50
* Expenses are equal to the Portfolio's annualized expense ratio of 0.79% and 1.05% for Class I and Class II shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER HIGH YIELD VCT PORTFOLIO Based on a hypothetical 5% return per year before expenses, reflecting the period from July 1, 2004 through December 31, 2004.
SHARE CLASS I II - ------------------------------------------ -------------- -------------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,021.22 $ 1,019.91 Expenses Paid During Period* $ 4.00 $ 5.35
* Expenses are equal to the Portfolio's annualized expense ratio of 0.79% and 1.05% for Class I and Class II shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 Q: HOW DID THE PORTFOLIO PERFORM? A: During the 12 months ended December 31, 2004, the Portfolio's Class I shares had a total return based on net asset value of 8.03%. By comparison, the Merrill Lynch High Yield Master II Index returned 10.87%. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: WHAT WAS THE ENVIRONMENT LIKE FOR THE HIGH-YIELD MARKET DURING 2004? A: All sectors of the high-yield market generally rallied, reflecting a pick-up in the economy. Defaults continued to decline steadily from their peak in 2002. Although short-term interest rates were on the rise - as the Federal Reserve Board began to implement a tightening policy - high-yield bonds continued to offer a substantial yield advantage over comparable-maturity Treasuries and cash equivalents. Furthermore, the supply of newly issued high-yield corporate bonds was not sufficient to meet the demand for higher-yielding securities. As a result, high-yield bond prices continued to rise. Q. WHY DID THE PORTFOLIO'S PERFORMANCE LAG THAT OF THE MERRILL LYNCH HIGH YIELD MASTER II INDEX? A. Because of its investments in convertible bonds. Convertibles underperformed conventional high-yield bonds because they tend to be more sensitive to the changes in short-term interest rates that we experienced than high-yield issues. In addition, the period was characterized by underlying equity-market volatility that was lower than historical averages, a factor that also typically leads to the underperformance of convertible securities. Overall, the lower credit tiers of the market performed best, at a time when we were moving the Portfolio's average credit quality higher. The Portfolio had minimal exposure to the distressed and lower-tier credits that led the market during the past 12 months, particularly in such sectors as telecommunications and media. Q: WHICH INVESTMENTS PROVED TO BE SOME OF THE TOP PERFORMERS DURING THE FISCAL YEAR? WHICH DISAPPOINTED? A: Tesoro Petroleum, a West Coast refiner, profited from tighter supply/demand conditions. Millennium Chemicals, benefited from its acquisition by Lyondell, as well as from a brighter outlook for basic chemicals. Several biotechnology holdings also fared well, including Cubist Pharmaceuticals, which offers a drug for soft-tissue infections; CV Therapeutics, which sells products to treat angina; and Human Genome, which advanced due to clinical successes and management's focus on reducing research and development expenditures. Disappointments included Intermet, an auto-parts manufacturer that defaulted on its debt due to raw materials pricing pressure. Two technology holdings also lagged, Maxtor, a data storage manufacturer, and Adaptec, which makes computer-networking products. Those securities fell in concert with the technology sector, which struggled through most of the year because of weaker-than-expected corporate technology spending. Q: WHAT IS YOUR OUTLOOK? A: We remain optimistic that the economy should continue to grow near its long-term historical average during the coming year. While the Fed is likely to continue to raise short-term rates, we expect any increases to be gradual. In addition, we anticipate that defaults should remain below long-term averages, providing solid support for high-yield bonds. Because the high-yield market has experienced such a run-up in the recent past, we believe that returns in 2005 will be driven more by interest income than by capital appreciation. We have been able to find the best value in the higher-quality tiers of the market. They should be better insulated if financial market volatility increases. Although convertible securities detracted from Portfolio performance, we believe that, over time, they offer an opportunity to participate in the future growth of the underlying stocks, making the asset class attractive to long-term-oriented investors. Investments in high-yield or lower-rated securities are subject to greater-than-average risk. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. A WORD ABOUT RISK: Investments in high-yield or lower-rated securities are subject to greater-than-average risk. When interest rates rise, the prices of fixed-income securities in the Portfolio will generally fall. Conversely, when interest rates fall the prices of fixed income securities in the Portfolio will generally rise. When concentrating on one issuer, the Portfolio is sensitive to changes in the value of these securities. Investments in the Portfolio are subject to possible loss due to the financial failure of underlying securities and their inability to meet their debt obligations. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all Portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. The high-yield market generated solid returns during the 12 months ended December 31, 2004. In the following interview, Portfolio Manager Margaret Patel describes the market backdrop and why the Portfolio underperformed its benchmark index. 4 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST SCHEDULE OF INVESTMENTS 12/31/04
S&P/MOODY'S RATINGS (UNAUDITED) VALUE SHARES CONVERTIBLE PREFERRED STOCKS - 2.5% MATERIALS - 2.5% CONSTRUCTION MATERIALS - 0.1% 1,750 B-/B1 TXI Capital Trust I, 5.5%, 6/30/28 $ 88,638 ------------ DIVERSIFIED METALS & Mining - 2.4% 3,000 B-/NR Freeport-McCorp., 5.5%, 12/31/49 (144A) $ 2,932,500 ------------ TOTAL MATERIALS $ 3,021,138 ------------ TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $3,077,338) $ 3,021,138 ------------ PRINCIPAL AMOUNT USD ($) CONVERTIBLE CORPORATE BONDS - 32.0% MATERIALS - 5.4% COMMODITY CHEMICALS - 0.4% 200,000 B+/B1 Millenium Chemicals Inc., 4.0%, 11/15/23 (144A) $ 458,750 ------------ DIVERSIFIED METALS & Mining - 1.4% 500,000 B+/B1 Freeport McMoran Copper & Gold, Inc., 7.0%, 2/11/11 $ 750,000 500,000 B+/B1 Massey Energy Co., 4.75% 5/15/23 994,375 ------------ $ 1,744,375 ------------ GOLD - 0.9% 1,000,000 NR/NR Coeur D'Alene Mines Corp., 1.25%, 1/15/24 $ 865,000 250,000 BBB+/NR Placer Dome Inc., 2.75%, 10/15/23 306,563 ------------ $ 1,171,563 ------------ SPECIALTY CHEMICALS - 0.4% 800,000 BBB/Baa3 RPM International Inc., 1.389%, 5/13/33 $ 462,000 ------------ STEEL - 2.3% 3,000,000 B-/NR Graftech International, 1.625%, 1/15/24 (144A) $ 2,778,750 ------------ TOTAL MATERIALS $ 6,615,438 ------------ CAPITAL GOODS - 4.2% AEROSPACE & Defense - 1.8% 1,725,000 B/B2 Alliant Technology Systems, 2.75%, 2/15/24 (144A) $ 1,826,344 400,000 NR/NR EDO Corp., 5.25%, 4/15/07 436,000 ------------ $ 2,262,344 ------------ CONSTRUCTION & Engineering - 1.1% 875,000 NR/NR Quanta Services, Inc., 4.0%, 7/1/07 $ 831,250 500,000 B/NR Quanta Services, 4.5%, 10/1/23 545,000 ------------ $ 1,376,250 ------------ ELECTRICAL COMPONENT & Equipment - 1.0% 2,595,000 NR/B1 Roper Industries Inc., 1.4813%, 1/15/34 $ 1,229,381 ------------ INDUSTRIAL MACHINERY - 0.3% 300,000 BB-/NR Kaydon Corp., 4.0%, 5/23/23 $ 380,625 ------------ TOTAL CAPITAL GOODS $ 5,248,600 ------------ MEDIA - 1.9% ADVERTISING - 1.9% 1,800,000 BB+/Baa3 Interpublic Group Co., 4.5%, 3/15/23 $ 2,358,000 ------------ TOTAL MEDIA $ 2,358,000 ------------
The accompanying notes are an integral part of these financial statements. 5 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST SCHEDULE OF INVESTMENTS 12/31/04 (continued)
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) VALUE RETAILING - 1.2% SPECIALTY STORES - 1.2% 1,500,000 B+/B3 Sonic Automotive, Inc., 5.25%, 5/7/09 $ 1,492,500 ------------ TOTAL RETAILING $ 1,492,500 ------------ HEALTH CARE EQUIPMENT & SERVICES - 0.7% HEALTH CARE EQUIPMENT - 0.7% 375,000 NR/NR Epix Medical, 3.0%, 6/15/24 (144A) $ 338,438 600,000 NR/NR Wilson Greatbatch Technology, 2.25%, 6/15/13 541,500 ------------ TOTAL HEALTH CARE EQUIPMENT & Services $ 879,938 ------------ PHARMACEUTICALS & BIOTECHNOLOGY - 5.7% BIOTECHNOLOGY - 0.9% 300,000 NR/NR Cubist Pharmaceuticals, 5.5%, 11/1/08 $ 283,875 850,000 NR/NR CV Therapeutics, 4.75%, 3/7/07 875,500 ------------ $ 1,159,375 ------------ PHARMACEUTICALS - 4.8% 2,615,000 NR/NR Ivax Corp., Conv, 1.875%, 12/15/24 (144A) $ 2,696,719 2,500,000 B/NR Valeant Pharmaceuticals 3.0%, 8/16/10 2,753,125 400,000 NR/NR Vertex Pharmaceuticals Inc., 5.75%, 2/15/11 (144A) 403,500 ------------ $ 5,853,344 ------------ TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 7,012,719 ------------ REAL ESTATE - 0.6% REAL ESTATE MANAGEMENT & DEVELOPMENT - 0.6% 500,000 CCC+/Caa1 LNR Property Corp., 5.5%, 3/1/23 $ 695,625 ------------ TOTAL REAL ESTATE $ 695,625 ------------ SOFTWARE & SERVICES - 0.9% APPLICATION SOFTWARE - 0.7% 200,000 NR/NR Mentor Graphics, 6.875%, 6/15/07 $ 210,250 500,000 NR/NR Serena Software, 1.5%, 12/15/23 586,250 ------------ $ 796,500 ------------ IT CONSULTING & OTHER SERVICES - 0.2% 400,000 NR/NR Safeguard Scientifics, 2.625%, 3/15/24 $ 294,500 ------------ TOTAL SOFTWARE & SERVICES $ 1,091,000 ------------ TECHNOLOGY HARDWARE & EQUIPMENT - 6.1% COMMUNICATIONS EQUIPMENT - 1.2% 1,500,000 B-/NR Adaptec Inc., 0.75%, 12/22/23 $ 1,428,750 ------------ COMPUTER STORAGE & PERIPHERALS - 0.6% 700,000 NR/B2 Maxtor Corp., 6.8%, 4/30/10 $ 713,125 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.2% 300,000 B+/NR Flir Systems, Inc., 3.0%, 6/1/23 $ 487,500 1,000,000 NR/NR Veeco Instruments, 4.125%, 12/21/08 987,500 ------------ $ 1,475,000 ------------ ELECTRONIC MANUFACTURING SERVICES - 2.7% 3,500,000 B+/Ba3 SCI Systems, Inc., 3.0%, 3/15/07 $ 3,377,500 ------------ TECHNOLOGY DISTRIBUTORS - 0.4% 400,000 NR/R Bell Microproducts, Inc., 3.75%, 3/5/24 $ 456,500 ------------ TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 7,450,875 ------------
The accompanying notes are an integral part of these financial statements. 6 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) VALUE SEMICONDUCTORS - 5.2% SEMICONDUCTOR EQUIPMENT - 3.9% 700,000 B-/NR Advanced Energy Industries, Inc., 5.25%, 11/15/06 $ 675,500 200,000 NR/NR Axcelis Technologies, 4.25%, 1/15/07 198,500 700,000 NR/NR Brooks Automation, Inc., 4.75%, 6/1/08 681,624 500,000 B-/NR Cymer, Inc., 3.5%, 2/15/09 497,500 2,700,000 B-/NR FEI Co., 5.5%, 8/15/08 2,727,000 ------------ $ 4,780,124 ------------ SEMICONDUCTORS - 1.3% 1,300,000 CCC/NR Conexant Systems, Inc., 4.0%, 2/1/07 (a) $ 1,176,500 500,000 B/NR LSI Logic Corp., 4.0%, 5/15/10 469,375 ------------ $ 1,645,875 ------------ TOTAL SEMICONDUCTORS $ 6,425,999 ------------ TOTAL CONVERTIBLE CORPORATE BONDS (Cost $38,069,020) $ 39,270,694 ------------ CORPORATE BONDS - 68.1% ENERGY - 3.6% OIL & GAS EQUIPMENT AND SERVICES - 0.2% 200,000 BB-/Ba3 Grant Prideco Escrow, 9.0%, 12/15/09 $ 221,500 ------------ OIL & GAS REFINING MARKETING & TRANSPORTATION - 3.4% 300,000 B+/B1 Frontier Oil Corp., 6.625%, 10/1/11 (144A) $ 306,000 1,555,000 BB-/B2 Tesoro Petroleum Corp., 9.625%, 11/1/08 1,694,950 1,900,000 BB-/B2 Tesoro Petroleum Corp., 9.625%, 4/1/12 2,185,000 ------------ $ 4,185,950 ------------ TOTAL ENERGY $ 4,407,450 ------------ MATERIALS - 16.4% COMMODITY CHEMICALS - 4.7% 1,800,000 B+/B1 Arco Chemical Co., 9.8%, 2/1/20 $ 2,052,000 2,500,000 BB+/Ba2 Nova Chemicals Corp., 7.875%, 9/15/25 2,587,500 1,000,000 BB+/Ba2 Nova Chemicals Corp., 7.4%, 4/1/09 1,092,500 ------------ $ 5,732,000 ------------ DIVERSIFIED METALS & MINING - 1.1% 1,375,000 B+/B1 Freeport-McMoran Copper & Gold, 6.875%, 2/1/09 $ 1,366,406 ------------ METAL & GLASS CONTAINERS - 2.1% 1,500,000 B/B3 Crown Cork & Seal Co., Inc., 7.375%, 12/15/26 $ 1,410,000 1,000,000 B+/B1 Crown Holdings, 9.5%, 3/1/11 1,140,000 ------------ $ 2,550,000 ------------ PAPER PRODUCTS - 5.8% 2,250,000 BB-/Ba3 Abitibi-Consolidated, Inc., 8.55%, 8/1/10 $ 2,438,438 885,000 BB/Ba3 Bowater Canada Finance, 7.95%, 11/15/11 953,652 3,800,000 BB/Ba3 Bowater, Inc., 6.5%, 6/15/13 3,800,540 ------------ $ 7,192,630 ------------ SPECIALTY CHEMICALS - 2.7% 2,200,000 B+/B1 Millenium America, Inc., 7.625%, 11/15/26 $ 2,167,000 1,000,000 B+/B1 Millenium America, Inc., 9.25%, 6/15/08 1,137,500 ------------ $ 3,304,500 ------------ TOTAL MATERIALS $ 20,145,536 ------------
The accompanying notes are an integral part of these financial statements. 7 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST SCHEDULE OF INVESTMENTS 12/31/04 (continued)
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) VALUE CAPITAL GOODS - 11.3% AEROSPACE & DEFENSE - 5.6% 2,500,000 B/B2 DRS Technologies, Inc., 6.875%, 11/1/13 $ 2,612,500 700,000 B/B2 DRS Technologies, Inc., 6.875%, 11/1/13 (144A) 731,500 1,525,000 B+/B1 Esterline Technology, 7.75%, 6/15/13 1,666,063 850,000 BB-/Ba3 L-3 Communications Corp., 5.875%, 1/15/15 (144A) 847,875 1,000,000 BB-/Ba3 L-3 Communications Corp., 6.125%, 1/15/14 1,030,000 ------------ $ 6,887,938 ------------ INDUSTRIAL MACHINERY - 5.7% 800,000 B/B3 JLG Industries, Inc., 8.375%, 6/15/12 $ 856,000 800,000 B+/B1 Manitowoc Co., Inc., 7.125%, 11/1/13 866,000 5,100,000 NR/NR Mueller Industries, Inc. 6.0%, 11/1/14 4,998,000 300,000 BB+/Ba3 SPX Corp., 7.5%, 1/1/13 325,500 ------------ $ 7,045,500 ------------ TOTAL CAPITAL GOODS $ 13,933,438 ------------ TRANSPORTATION - 0.4% AIR FREIGHT & COURIERS - 0.4% 500,000 BB-/B1 Petroleum Helicopters, 9.375%, 5/1/09 $ 547,500 ------------ TOTAL TRANSPORTATION $ 547,500 ------------ AUTOMOBILES & COMPONENTS - 0.2% TIRES & RUBBER - 0.2% 300,000 B-/B3 Goodyear Tire & Rubber, 7.857%, 8/15/11 (a) $ 304,500 ------------ TOTAL AUTOMOBILES & COMPONENTS $ 304,500 ------------ MEDIA - 1.8% ADVERTISING - 1.8% 2,000,000 BB+/Baa3 Interpublic Group, Inc., 7.25%, 8/15/11 $ 2,171,242 ------------ TOTAL MEDIA $ 2,171,242 ------------ RETAILING - 2.3% DEPARTMENT STORES - 0.8% 1,000,000 BB+/Ba2 J.C. Penney Co., Inc., 7.625%, 3/1/97 $ 1,065,000 ------------ SPECIALTY STORES - 1.5% 1,790,000 B/B3 Pep Boys-Manny Moe Jack, 7.5%, 12/15/14 $ 1,814,613 ------------ TOTAL RETAILING $ 2,879,613 ------------ HEALTH CARE EQUIPMENT & SERVICES - 1.9% HEALTH CARE FACILITIES - 0.4% 500,000 BB+/Ba2 HCA, Inc., 6.25%, 2/15/13 $ 504,384 ------------ HEALTH CARE SUPPLIES - 1.5% 1,700,000 B-/Caa1 Inverness Medical Innovation, 8.75%, 2/15/12 $ 1,776,500 ------------ TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 2,280,884 ------------ PHARMACEUTICALS & BIOTECHNOLOGY - 2.3% PHARMACEUTICALS - 2.3% 2,700,000 BB-/B1 Valeant Pharmaceuticals, 7.0%, 12/15/11 $ 2,808,000 ------------ TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 2,808,000 ------------
The accompanying notes are an integral part of these financial statements. 8 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) VALUE REAL ESTATE - 9.6% REAL ESTATE MANAGEMENT & DEVELOPMENT - 5.4% 2,635,000 BB-/Ba3 Forest City Enterprises, 7.625%, 6/1/15 $ 2,793,100 2,300,000 CCC+/Caa1 LNR Property Co., 7.25%, 10/15/13 2,590,375 1,100,000 CCC+/Caa1 LNR Property Co., 7.625%, 7/15/13 1,248,500 ------------ $ 6,631,975 ------------ REAL ESTATE INVESTMENT TRUSTS - 4.2% 500,000 B+/B3 BF Saul Real Estate Investment Trust, 7.5%, 3/1/14 $ 515,000 2,300,000 B/B1 Crescent Real Estate, 9.25%, 4/15/09 2,518,500 2,000,000 CCC+/B2 Meristar Hospitality Corp., 9.125%, 1/15/11 2,160,000 ------------ $ 5,193,500 ------------ TOTAL REAL ESTATE $ 11,825,475 ------------ TECHNOLOGY HARDWARE & EQUIPMENT - 9.1% COMMUNICATIONS EQUIPMENT - 4.1% 4,300,000 BB+/Ba2 Corning, Inc., 5.9%, 3/15/14 $ 4,309,536 700,000 BB+/Ba2 Corning, Inc., 6.2%, 3/15/16 701,770 ------------ $ 5,011,306 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.7% 1,835,000 B/B2 General Cable Corp., 9.5%, 11/15/10 $ 2,073,550 ------------ TECHNOLOGY DISTRIBUTORS - 3.3% 2,550,000 BBB-/Baa3 Arrow Electronic, Inc., 6.875%, 6/1/18 $ 2,724,145 1,200,000 BBB-/Baa3 Arrow Electronic, Inc., 6.875%, 7/1/13 1,317,504 ------------ $ 4,041,649 ------------ TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 11,126,505 ------------ UTILITIES - 9.2% ELECTRIC UTILITIES - 6.1% 3,000,000 B-/B3 Allegheny Energy Supply, 7.8%, 3/15/11 (a) $ 3,270,000 1,750,000 B-/B3 Allegheny Energy Supply, 8.25%, 4/15/12 (144A) 1,955,624 1,000,000 B+/B1 CMS Energy Corp., 7.5%, 1/15/09 1,065,000 1,000,000 B+/B1 CMS Energy Corp., 8.5%, 4/15/11 1,136,250 ------------ $ 7,426,874 ------------ MULTI-UTILITIES & UNREGULATED POWER - 3.1% 3,490,000 B+/B1 CMS Energy Corp., 7.75%, 8/1/10 $ 3,817,187 ------------ TOTAL UTILITIES $ 11,244,061 ------------ TOTAL CORPORATE BONDS (Cost $79,489,329) $ 83,674,204 ------------
The accompanying notes are an integral part of these financial statements. 9 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST SCHEDULE OF INVESTMENTS 12/31/04 (continued)
S&P/MOODY'S RATINGS SHARES (UNAUDITED) VALUE TEMPORARY CASH INVESTMENT - 2.9% SECURITY LENDING COLLATERAL - 2.9% 3,541,345 Securities Lending Investment Fund, 2.18% $ 3,541,345 ------------ TOTAL TEMPORARY CASH INVESTMENT (Cost $3,541,345) $ 3,541,345 ------------ TOTAL INVESTMENTS IN SECURITIES - 105.5% (Cost $124,177,032) $129,507,381 ------------ OTHER ASSETS AND LIABILITIES - (5.5)% $ (6,705,919) ------------ TOTAL NET ASSETS - 100.0% $122,801,462 ============
N/R Not rated by either S&P or Moody's * Non-income producing security 144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At December 31, 2004, the value of these securities amounted to $15,276,000 or 12.4% of net assets. (a) At December 31, 2004, the following securities were out on loan:
SHARES SECURITY MARKET VALUE 1,899,750 Allegheny Energy Supply, 7.8%, 03/15/11 $ 2,070,728 1,136,000 Conexant Systems Inc., 4.0%, 2/1/07 1,028,080 285,000 Goodyear Tire & Rubber, 7.857%, 8/15/11 289,275 ------------ TOTAL $ 3,388,083 ------------
The accompanying notes are an integral part of these financial statements. 10 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST FINANCIAL HIGHLIGHTS
5/1/00 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED TO CLASS I (a) 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 11.45 $ 9.27 $ 10.33 $ 9.82 $ 10.00 ------- ------- ------- ------- ------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.62 $ 0.76 $ 0.92 $ 0.95 $ 0.61 Net realized and unrealized gain (loss) on investments 0.27 2.18 (1.06) 0.62 (0.18) ------- ------- ------- ------- -------- Net increase (decrease) from investment operations $ 0.89 $ 2.94 $ (0.14) $ 1.57 $ 0.43 Distributions to shareowners: Net investment income (0.62) (0.76) (0.92) (0.95) (0.61) Net realized gain (0.05) -- -- (0.11) -- ------- ------- ------- ------- -------- Net increase (decrease) in net asset value $ 0.22 $ 2.18 $ (1.06) $ 0.51 $ (0.18) ------- ------- ------- ------- -------- Net asset value, end of period $ 11.67 $ 11.45 $ 9.27 $ 10.33 $ 9.82 ======= ======= ======= ======= ======== Total return* 8.03% 32.78% (1.42)% 16.60% 4.12% Ratio of net expenses to average net assets+ 0.78% 0.89% 1.02% 1.15% 1.25%** Ratio of net investment income (loss) to average net assets+ 5.40% 7.22% 9.39% 9.15% 9.18%** Portfolio turnover rate 42% 48% 42% 36% 33% Net assets, end of period (in thousands) $70,890 $66,587 $41,111 $32,331 $ 6,849 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.78% 0.89% 1.02% 1.28% 2.35%** Net investment income (loss) 5.40% 7.22% 9.39% 9.02% 8.08%**
(a) Shares of Pioneer High Yield VCT Portfolio were first publicly offered on May 1, 2000 * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. ** Annualized. + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 11 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST STATEMENT OF ASSETS AND LIABILITIES ASSETS: Investment in securities, at value (including securities loaned of $3,388,083) (Cost $124,177,032) $ 129,507,381 Cash 392,872 Receivables -- Fund shares sold 100,052 Dividends, interest and foreign taxes withheld 1,768,626 Other 4,893 ------------- Total assets $ 131,773,824 ------------- LIABILITIES: Payables -- Investment securities purchased $ 333,848 Fund shares repurchased 4,952,077 Upon return for securities loaned 3,541,345 Due to affiliates 83,826 Accrued expenses 61,266 ------------- Total liabilities $ 8,972,362 ------------- NET ASSETS: Paid-in capital $ 113,693,485 Undistributed net investment income (loss) 42,906 Accumulated undistributed net realized gain (loss) 3,734,722 Net unrealized gain (loss) on: Investments 5,330,349 ------------- Total net assets $ 122,801,462 ------------- NET ASSET VALUE PER SHARE: Class I: No par value (unlimited number of shares authorized) Net assets $ 70,889,843 Shares outstanding 6,073,809 ------------- Net asset value per share $ 11.67 Class II: No par value (unlimited number of shares authorized) Net assets $ 51,911,619 Shares outstanding 4,447,914 ------------- Net asset value per share $ 11.67
The accompanying notes are an integral part of these financial statements. 12 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST STATEMENT OF OPERATIONS
YEAR ENDED 12/31/04 INVESTMENT INCOME: Dividends $ 28,052 Interest 6,314,255 Income on securities loaned, net 15,124 ------------- Total investment income $ 6,357,431 ------------- EXPENSES: Management fees $ 669,359 Transfer agent fees and expenses 1,806 Distribution fees (Class II) 85,911 Administrative reimbursements 19,997 Custodian fees 21,500 Professional fees 56,459 Printing expense 30,056 Miscellaneous 4,539 ------------- Total expenses $ 889,627 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (6) ------------- Net expenses $ 889,621 ------------- Net investment income (loss) $ 5,467,810 ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 3,746,873 ------------- $ 3,746,873 ------------- Change in net unrealized gain or (loss) from: Investments $ (1,480,061) ------------- $ (1,480,061) ------------- Net gain (loss) on investments, futures contracts and foreign currency transactions $ 2,266,812 ============= Net increase (decrease) in net assets resulting from operations $ 7,734,622 =============
The accompanying notes are an integral part of these financial statements. 13 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 5,467,810 $ 4,106,902 Net realized gain (loss) on investments 3,746,873 1,124,588 Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions (1,480,061) 10,301,474 ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 7,734,622 $ 15,532,964 ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (3,715,003) $ (3,817,405) Class II (1,764,209) (279,944) Net realized gain Class I (265,040) -- Class II (135,300) -- ------------- ------------- Total distributions to shareowners $ (5,879,552) $ (4,097,349) ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 75,619,514 $ 45,609,360 Reinvestment of distributions 5,846,576 4,059,022 Cost of shares repurchased (44,707,455) (18,254,761) ------------- ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ 36,758,635 $ 31,413,621 ------------- ------------- Net increase (decrease) in net assets $ 38,613,705 $ 42,849,236 ------------- ------------- NET ASSETS: Beginning of year $ 84,187,757 $ 41,338,521 ------------- ------------- End of year $ 122,801,462 $ 84,187,757 ============= ============= Undistributed net investment income (loss), end of year $ 42,906 $ 42,283 ============= =============
The accompanying notes are an integral part of these financial statements. 14 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST NOTES TO FINANCIAL STATEMENTS 12/31/04 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer High Yield VCT Portfolio (The Portfolio) is a portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate diversified portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of High Yield Portfolio is to maximize total return through a combination of income and capital appreciation. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The Trust's financial statements have been prepared in conformity with U.S. Generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting years. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements, which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolios are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Trading in foreign equity securities is substantially completed each day at various times prior to the close of the NYSE. The value of such securities used in computing the net asset value of the Portfolio's shares is based on the last sale price on the principal exchange where they traded. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Fixed income securities are valued at prices supplied by independent pricing services, which consider such 15 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) factors as Treasury spreads, yields, maturities and ratings. Valuations may be supplemented by dealers and other sources, as required. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis, net of unrecoverable foreign taxes withheld at the applicable country rates. All discounts/premiums are accreted/amortized for financial reporting purposes. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. The High Yield Portfolio invests in below investment grade (high yield) debt securities and preferred stocks. These high yield securities may be convertible into equity securities of the issuer. Debt securities rated below investment grade are commonly referred to as "junk bonds" and are considered speculative. These securities involve greater risk of loss, are subject to greater price volatility, and are less liquid, especially during years of economic uncertainty or change, than higher rated debt securities. The Portfolio is not diversified, which means that it can invest a higher percentage of its asset in any one issuer than a diversified fund. Being non-diversified may magnify the fund's losses from adverse events affecting a particular issuer. In addition, the non-diversified Portfolios have concentrations in certain asset types, which may subject the Portfolios to additional risks. Further description of these risks is included in the Trust's Prospectus. B. FOREIGN CURRENCY TRANSLATION The books and records of the Portfolio are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent, the net realized gains and losses on foreign currency contracts, disposition of foreign currencies, and the difference between the amount of income accrued and the U.S. dollar actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. C. FORWARD FOREIGN CURRENCY CONTRACTS The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. D. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. In addition to the requirements of the Internal Revenue Code, the Portfolio may also be required to pay local taxes on the recognition of capital gains and/or the repatriation of foreign currencies in certain countries. During the year ended December 31, 2004, the no such taxes were paid. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from or in excess of net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis. 16 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
UNDISTRIBUTED ACCUMULATED NET NET INVESTMENT REALIZED PAID-IN PORTFOLIO INCOME (LOSS) GAIN (LOSS) CAPITAL - ----------------------------------- -------------- --------------- ------- Pioneer High Yield VCT Portfolio $ 12,025 $(12,025) $ (0) ======== ======== ====
The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004, and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003 ---------- ---------- DISTRIBUTIONS PAID FROM: Ordinary Income $5,479,212 $4,097,349 Long-Term capital gain 400,340 -- ---------- ---------- $5,879,552 $4,097,349 Return of Capital -- -- ---------- ---------- Total distributions $5,879,552 $4,097,349 ---------- ---------- DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ 613,388 Undistributed long-term gain/(capital loss carryforward) 3,164,280 Unrealized appreciation (depreciation) 5,330,309 ---------- Total $9,107,977 ==========
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily attributable to the tax deferral of losses on wash sales, returns of capital on REITs, the recognition of unrealized gains or losses on certain futures contracts, and the tax treatment of premium amortization. E. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of the adjusted net assets at the beginning of the day. The Portfolio declares as daily dividends substantially all of its respective net investment income. All dividends are paid on a monthly basis. Short-term capital gain distributions, if any, may be declared with the daily dividends. Distributions paid by the Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. Dividends and distributions to shareowners are recorded on the ex-dividend date. F. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities 17 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. G. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the Portfolio. Management fees are calculated daily at the following annual rate of 0.65% of the Portfolio's average daily net assets. The portion of the Portfolios' expenses attributable to Class II (or Class I for shares in the case of High Yield Portfolios) will be reduced only to the extent such expenses are reduced for Class I shares (or Class II shares). In addition, under the management and administration agreement, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $72,761 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $267 in transfer agent fees payable to PIMSS at December 31, 2004. 4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------ ----------- ------------- -------------- High Yield Portfolio $124,177,071 $6,347,617 $ (1,017,307) $5,330,310 ============ ========== ============ ==========
5. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $83,647,941 and $42,692,245, respectively. 6. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
HIGH YIELD PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - -------------------------------- ---------- ------------- ---------- ------------- CLASS I: Shares sold 2,699,382 $ 30,852,667 2,515,726 $ 26,817,319 Reinvestment of distributions 346,267 3,947,046 357,809 3,779,086 Shares repurchased (2,787,689) (31,727,505) (1,491,103) (15,895,254) ---------- ------------- ---------- ------------- Net increase (decrease) 257,960 $ 3,072,208 1,382,432 $ 14,701,151 ========== ============= ========== ============= CLASS II: Shares sold 3,916,481 $ 44,766,847 1,708,526 $ 18,792,041 Reinvestment of distributions 166,648 1,899,530 25,089 279,836 Shares repurchased (1,171,662) (12,979,950) (221,726) (2,359,726) ---------- ------------- ---------- ------------- Net increase 2,911,467 $ 33,686,427 1,511,889 $ 16,712,470 ========== ============= ========== =============
18 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of Pioneer Variable Contracts Trust and the Class I Shareowners of Pioneer High Yield VCT Portfolio: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer High Yield VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the two years in the period then ended December 31, 2001 were audited by other auditors who have ceased operations and whose report, dated February 8, 2002, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer High Yield VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended in, conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 19 PIONEER HIGH YIELD VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS INVESTMENT ADVISER Pioneer Investment Management, Inc. CUSTODIAN Brown Brothers Harriman & Co. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP PRINCIPAL UNDERWRITER Pioneer Funds Distributor, Inc. LEGAL COUNSEL Wilmer Cutler Pickering Hale and Dorr LLP SHAREOWNER SERVICES AND TRANSFER Pioneer Investment Management Shareholder Services, Inc. TRUSTEES AND OFFICERS The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the Trust's operations. The Trust's Trustees and officers are listed below, together with their principal occupations during the past five years. Trustees who are interested persons of the Portfolio within the meaning of the Investment Company Act of 1940 are referred to as Interested Trustees. Trustees who are not interested persons of the Fund are referred to as Independent Trustees. Each of the Trustees serves as a trustee of each of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Pioneer Funds"). The address for all Interested Trustees and all officers of the Portfolio is 60 State Street, Boston, Massachusetts 02109. The Trust's statement of additional information provides more detailed information regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-225-6292. Proxy Voting Policies and Procedures of the Trust are available without charge, upon Agent request, by calling our toll free number (1-800-225-6292). This information is also available online at pioneerfunds.com. INTERESTED TRUSTEES
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS TRUSTEE John F. Cogan, Jr. (78)* Chairman of the Serves until successor trustee Trustee and President Director of Harbor Global Board, Trustee is elected or earlier Serves until retirement or Company, Ltd. and President retirement or removal removal; Deputy Chairman and a Director of Pioneer Global Asset Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited(Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. Osbert M. Hood (52)** Trustee and Serves until successor trustee President and Chief None Executive Vice is elected or earlier Executive Officer, PIM-USA President retirement or removal since May 2003 (Director since January 2001); President and Director of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
20 PIONEER HIGH YIELD VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS TRUSTEE David R. Bock **(61) Trustee since Serves until a successor Senior Vice President and Director of The 3050 K. Street NW, 2005. trustee is elected or earlier Chief Financial Officer, Enterprise Social Washington, DC 20007 retirement or removal. I-trax, Inc. (publicly Investment Company traded health care services (privately-held company) (2001-present); affordable housing Managing Partner, Federal finance company); City Capital Advisors Director of New York (boutique merchant bank) Mortgage Trust (publicly (1995-2000; 2002 to 2004); traded mortgage REIT) Executive Vice President and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. Mary K. Bush (56) Trustee since Serves until successor President, Bush Director of Brady 3509 Woodbine Street, 2000. trustee is elected or earlier International Corporation (industrial Chevy Chase, MD 20815 retirement or removal. (international financial identification and advisory firm) specialty coated material products manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance (tobacco) Margaret B.W. Graham Trustee since Serves until successor Founding Director, The None (57) 1001 Sherbrooke 2000. trustee is elected or earlier Winthrop Group, Inc. Street West, Montreal, retirement or removal. (consulting firm); Quebec, Canada H3A 1G5 Professor of Management, Faculty of Management, McGill University Marguerite A. Piret (56) Trustee since Serves until successor President and Chief Director of New America One Boston Place, 1995. trustee is elected or earlier Executive Officer, Newbury, High Income Fund, Inc. 28th Floor, retirement or removal. Piret & Company, Inc. (closed-end investment Boston, MA 02108 (investment banking firm) company) Stephen K. West (76) Trustee since Serves until successor Senior Counsel, Sullivan & Director, The Swiss 125 Broad Street, 1995. trustee is elected or earlier Cromwell (law firm) Helvetia Fund, Inc. New York, NY 10004 retirement or removal. (closed-end investment company) and AMVESCAP PLC (investment managers) John Winthrop (68) Trustee since Serves until successor President, John Winthrop & None One North Adgers Wharf, September, trustee is elected or earlier Co., Inc. (private Charleston, SC 29401 2000. retirement or removal. investment firm)
21 PIONEER HIGH YIELD VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS OFFICER Dorothy E. Bourassa (57) Secretary Serves at the discretion of Secretary of PIM-USA; None the Board Senior Vice President - Legal of Pioneer; and Secretary/Clerk of most of PIM- subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 Christopher J. Kelley Assistant Serves at the discretion of Assistant Vice President None (40) Secretary the Board and Senior Counsel of Pioneer since July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 David C. Phelan (47) Assistant Serves at the discretion of Partner, Wilmer Cutler None Secretary the Board Pickering Hale and Dorr LLP; Assistant Secretary of all Pioneer Funds since September 2003 Vincent Nave (59) Treasurer Serves at the discretion of Vice President - Fund None the Board Accounting, Administration and Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) Mark E. Bradley (45) Assistant Serves at the discretion of Deputy Treasurer of Pioneer None Treasurer the Board since 2004; Treasurer and Senior Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 Luis I. Presutti (39) Assistant Serves at the discretion of Assistant Vice President - None Treasurer the Board Fund Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 Gary Sullivan (46) Assistant Serves at the discretion of Fund Accounting Manager - None Treasurer the Board Fund Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002
22 PIONEER HIGH YIELD VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS OFFICER Katharine Kim Sullivan Assistant Serves at the discretion Fund Administration Manager None (31) Treasurer of the Board - Fund Accounting, Administration and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 Martin J. Wolin (37) Chief Compliance Serves at the discretion of Chief Compliance Officer of None Officer the Board Pioneer (Director of Compliance and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds.
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 23 THIS PAGE FOR YOUR NOTES. 24 THIS PAGE FOR YOUR NOTES. 25 [PIONEER INVESTMENTS(R) LOGO] [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST PIONEER MONEY MARKET VCT PORTFOLIO -- CLASS I SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Pioneer Money Market VCT Portfolio Comparing Ongoing Portfolio Expenses 2 Portfolio and Performance Update 3 Schedule of Investments 4 Financial Statements 6 Notes to Financial Statements 10 Report of Independent Registered Public Accounting Firm 13 Trustees, Officers and Service Providers 14 PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT www.pioneerfunds.com. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT http://www.sec.gov. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER MONEY MARKET VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004 SHARE CLASS I --------------------------------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,003.99 Expenses Paid During Period* $ 4.01 * Expenses are equal to the Portfolio's annualized expense ratio of 0.80% for Class I shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER MONEY MARKET VCT PORTFOLIO Based on a hypothetical 5% per year return before expenses, reflecting the period from July 1, 2004 through December 31, 2004 SHARE CLASS I --------------------------------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,021.42 Expenses Paid During Period* $ 4.05 * Expenses are equal to the Portfolio's annualized expense ratio of 0.80% for Class I shares multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 2 PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO AND PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Although the U.S. Federal Reserve started to raise short-term interest rates from the lowest levels reached in more than four decades, 2004 remained a year in which money market investments offered extremely low yields by historical measures. Despite five increases in interest rates between June 30 and December 31, the key Fed Funds Rate ended the year at just 2.25%. Throughout the 12 months ended December 31, 2004, Pioneer Money Market VCT Portfolio maintained a $1 share price and provided modest income consistent with the yields available in the money market. The Portfolio invests exclusively in high-quality money market instruments issued by the U.S. government and domestic corporations and banks. All issues have the highest ratings from the two nationally recognized ratings organizations: A1 by Standard & Poor's Investors Services and P1 by Moody's Investor Services. (Ratings apply to underlying securities, not Portfolio shares.) In the following discussion, Andrew D. Feltus reviews the investment environment and the strategies that affected Pioneer Money Market VCT Portfolio over the 12 months ended December 31, 2004. Mr. Feltus is a member of Pioneer's Fixed Income Group, which is responsible for the daily management of the Portfolio. Q: HOW DID THE PORTFOLIO PERFORM DURING 2004? A: For the 12 months ended December 31, 2004, Pioneer Money Market VCT Portfolio had a total return of 0.65% at net asset value. On December 31, 2004, the Portfolio's seven-day effective yield for Class A shares was 1.38%. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE YEAR? A: For virtually the entire first half of 2004, the influential Fed Funds Rate remained at a 46-year low of 1.00%. The situation began to change when the Federal Reserve raised the rate on June 30 by one-quarter of one percentage point and signaled that it intended to initiate further increases on a gradual basis. The central bank raised the rate four more times, and the Fed Funds Rate stood at 2.25% at the end of the year. The rate increases occurred against a backdrop of continued economic growth and hints of an increase in inflationary pressure. Economic growth, as measured by growth in Gross Domestic Product (GDP), rose by an average annualized rate of 4.6% during the first nine months of 2004. Affected by the higher costs of energy, the Consumer Price Index rose to about 3.5% by the end of November. While periodic concerns about low new-job creation did arise, in general the Federal Reserve Board believed that the economy was gathering enough strength that monetary policy could be tightened to avert the possibility of increasing inflationary threats. At the end of the year, the Federal Reserve was widely expected to continue to raise short-term rates further in 2005. Q: WHAT WERE YOUR PRINCIPAL STRATEGIES IN THIS LOW-INTEREST RATE ENVIRONMENT? A: We held to our commitment to high-quality money market instruments. We started gradually to lower the Portfolio's effective duration so that we could take advantage of higher yields available as the Federal Reserve Board proceeded with its rate increases. At the end of the year, the effective duration of the Fund was 45 days, down from 67 days just six months earlier. Q: WHAT IS YOUR INVESTMENT OUTLOOK? A: We anticipate that the economy will show sustained growth in 2005 and that the Federal Reserve Board will maintain its policy of raising short-term grates gradually. At the same time, because of budget pressures and concern about the federal deficit, the government is likely to put new brakes on spending. The combination of the tighter monetary policy and restrained fiscal policy may act as a drag on the pace of economic growth and ultimately cause a possible change in monetary policy. If economic growth does begin to slow, the Federal Reserve may revise its current bias toward raising short-term rates. However, until that appears imminent, we intend to continue to keep the Portfolio's effective duration relatively short to enable us to invest in newer, higher-yielding securities that have the potential to raise the level of income to be distributed to shareholders. PRICES AND DISTRIBUTIONS 12/31/04 12/31/03 Net Asset Value per Share $ 1.00 $ 1.00 DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ 0.0065 $ -- $ -- A WORD ABOUT RISK: INVESTING IN FOREIGN AND/OR EMERGING MARKETS SECURITIES INVOLVES RISKS RELATING TO INTEREST RATES, CURRENCY EXCHANGE RATES, ECONOMIC, AND POLITICAL CONDITIONS. ALTHOUGH THE PORTFOLIO SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE PORTFOLIO. PORTFOLIO SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004) - ----------------------- NET ASSET VALUE - ----------------------- Life-of-Class 3.59% (3/1/95) 5 Years 2.68% 1 Year 0.46% All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report for performance that reflects the deduction of the variable product's fees and charges. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Returns and principal values fluctuate so that your investment, when redeemed, may be worth more or less than its original cost. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. 3 PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE COLLATERALIZED MORTGAGE OBLIGATIONS - 2.3% BANKS - 2.3% THRIFTS & MORTGAGE FINANCE - 2.3% $ 994,371 Federal Home Loan Mortgage Corp. Multifamily VRD Certificate, Floating rate, 1/15/42 $ 994,371 ------------ TOTAL BANKS $ 994,371 ------------ TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $994,371) $ 994,371 ------------ CORPORATE BONDS - 43.8% CAPITAL GOODS - 5.3% INDUSTRIAL CONGLOMERATES - 3.0% 500,000 General Electric Capital Corp., Floating Rate, 12/16/05 $ 500,000 800,000 General Electric Capital Corp., Floating Rate, 1/9/06 800,760 ------------ $ 1,300,760 ------------ INDUSTRIAL MACHINERY - 2.3% 1,000,000 Caterpillar Financial Service Corp., Floating Rate, 4/25/05 $ 1,000,956 ------------ TOTAL CAPITAL GOODS $ 1,000,956 ------------ FOOD & DRUG RETAILING - 4.7% HYPERMARKETS & SUPERCENTERS - 4.7% 2,000,000 Wal-Mart Stores, Inc., Floating Rate, 2/22/05 $ 1,999,932 ------------ TOTAL FOOD & DRUG RETAILING $ 1,999,932 ------------ BANKS - 7.8% DIVERSIFIED BANKS - 7.8% 750,000 Bank of America Corp., Floating Rate, 1/31/05 $ 750,226 750,000 Bank of America Corp., Floating Rate, 4/28/05 750,535 1,000,000 Wells Fargo Financial, 6.75%, 6/1/05 1,018,429 800,000 Wells Fargo Financial, 7.6%, 5/3/05 813,625 ------------ $ 3,332,815 ------------ TOTAL BANKS $ 3,332,815 ------------ DIVERSIFIED FINANCIALS - 23.7% ASSET MANAGEMENT & CUSTODY BANKS - 2.2% 910,000 Mellon Funding Corp., 7.5%, 6/15/05 $ 930,828 ------------ CONSUMER FINANCE - 8.6% 450,000 American Express Credit, Floating Rate, 10/14/05 450,377 $ 1,200,000 American Express, Floating Rate, 4/18/05 $ 1,200,531 1,000,000 National Rural Utilities, 6.125%, 5/15/05 1,014,686 1,000,000 National Rural Utilities, 1.76%, 3/10/05 1,000,682 ------------ $ 3,666,276 ------------ INVESTMENT BANKING & BROKERAGE - 3.0% 200,000 Lehman Brothers Holdings, 8.75%, 3/15/05 $ 202,621 600,000 Merrill Lynch, 4.54%, 3/08/05 602,393 500,000 Merrill Lynch, Floating Rate, 12/9/05 500,000 ------------ $ 1,305,014 ------------ DIVERSIFIED FINANCIAL SERVICES - 9.9% 125,000 Associates Corp., 6.10%, 1/15/05 $ 125,217 1,000,000 Associates Corp., Floating Rate, 6/27/05 1,000,000 1,200,000 Bank One Corp., Floating Rate, 8/23/05 1,201,226 175,000 Citigroup Global Markets, 6.25%, 6/15/05 178,036 750,000 Citigroup Inc., Floating Rate, 9/1/05 750,404 1,000,000 First Union Corp., Floating Rate, 3/31/05 1,001,598 ------------ $ 4,256,481 ------------ TOTAL DIVERSIFIED FINANCIALS $ 10,158,599 ------------ REAL ESTATE - 2.3% REAL ESTATE MANAGEMENT & DEVELOPMENT - 2.3% 1,000,000 Security Capital Group, 7.8%, 1/19/05 $ 1,002,987 ------------ TOTAL REAL ESTATE $ 1,002,987 ------------ TOTAL CORPORATE BONDS (Cost $18,796,049) $ 18,796,049 ------------ U.S. GOVERNMENT AGENCY OBLIGATIONS - 17.5% BANKS - 9.3% THRIFTS & MORTGAGE FINANCE - 9.3% 1,000,000 Federal National Mortgage Association, 1.56%, 5/16/05 $ 1,000,000 1,000,000 Federal National Mortgage Association, Floating Rate, 4/28/05 999,967 2,000,000 Freddie Mac, Floating Rate, 2/4/05 1,999,949 ------------ $ 3,999,916 ------------ TOTAL BANKS $ 3,999,916 ------------ 4 The accompanying notes are an integral part of these financial statements. PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE GOVERNMENT - 8.2% $ 1,000,000 Federal Home Loan Mortgage Corp., 1.28%, 4/22/05 $ 1,000,000 1,000,000 Federal Home Loan Mortgage Corp., 1.38%, 3/28/05 1,000,000 500,000 Federal Home Loan Mortgage Corp., 1.47%, 3/1/05 500,000 1,000,000 Federal Home Loan Mortgage Corp., 1.7%, 5/24/05 1,000,000 ------------ TOTAL GOVERNMENT $ 3,500,000 ------------ TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $7,499,916) $ 7,499,916 ------------ TEMPORARY CASH INVESTMENTS - 36.6% COMMERCIAL PAPER - 21.2% 1,000,000 AIG Funding, Inc., 2.23%, 1/18/05 $ 999,053 1,000,000 Caterpillar, 2.25%, 1/20/05 998,813 1,000,000 Coca Cola Co., 2.17%, 1/24/05 998,613 1,000,000 Coca Cola Co., 2.21%, 1/12/05 999,325 1,000,000 Federal National Mortgage Association, 2.27%, 2/2/05 997,981 2,000,000 IBM Corp., 2.20%, 1/25/05 1,997,067 1,000,000 Minnesota Mining, 2.20%, 1/5/05 999,756 1,106,000 Paccar Financial, 2.28%, 1/12/05 1,105,230 ------------ $ 9,095,838 ------------ REPURCHASE AGREEMENT - 15.4% $ 6,600,000 UBS Warburg, Inc., 1.00% dated 12/31/04, repurchase price of $6,600,000 plus accrued interest on 1/3/05 collateralized by $6,277,000 U.S. Treasury Bill, 6.5%, 10/15/06 $ 6,600,000 ------------ TOTAL TEMPORARY CASH INVESTMENTS (Cost $15,695,838) $ 15,695,838 ------------ TOTAL INVESTMENTS IN SECURITIES - 100.2% (Cost $42,986,174) $ 42,986,174 ------------ OTHER ASSETS AND LIABILITIES - (0.2)% $ (89,982) ------------ TOTAL NET ASSETS - 100.0% $ 42,896,192 ============ The accompanying notes are an integral part of these financial statements. 5 PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED CLASS I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- ------- -------- Increase (decrease) from investment operations: Net investment income $ 0.007 $ 0.006 $ 0.01 $ 0.03 $ 0.06 -------- -------- -------- -------- -------- Distributions to shareowners: Net investment income (0.007) (0.006) (0.01) (0.03) (0.06) -------- -------- -------- -------- -------- Net asset value, end of period $ 1.000 $ 1.000 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total return* 0.65% 0.56% 1.19% 3.39% 5.71% Ratio of net expenses to average net assets+ 0.74% 0.72% 0.78% 0.78% 0.76% Ratio of net investment income to average net assets+ 0.66% 0.58% 1.11% 3.16% 5.58% Net assets, end of period (in thousands) $ 42,896 $ 34,736 $ 59,521 $ 49,545 $ 36,979 Ratios with no waiver of fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.74% 0.72% 0.78% 0.78% 0.76% Net investment income 0.66% 0.58% 1.11% 3.16% 5.58% Ratios with waiver of fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.74% 0.72% 0.78% 0.78% 0.75% Net investment income 0.66% 0.58% 1.11% 3.16% 5.59%
* Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. + Ratios with no reduction for fees paid indirectly. 6 The accompanying notes are an integral part of these financial statements. PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (Cost $36,386,174) $ 36,386,174 Repurchase Agreement (Cost $6,600,000) 6,600,000 ------------ Total investment in securities (Cost $42,986,174) $ 42,986,174 Cash 44,755 Receivables -- Investment securities sold 65,132 Fund shares sold 567 Dividends, interest and foreign taxes withheld 122,921 Other 2,807 ------------ Total assets $ 43,222,356 ------------ LIABILITIES: Payables -- Fund shares repurchased $ 259,932 Dividends 1,474 Due to affiliates 17,912 Accrued expenses 37,855 Other 8,991 ------------ Total liabilities $ 326,164 ------------ NET ASSETS: Paid-in capital $ 42,897,250 Undistributed net investment income (loss) 2,001 Accumulated undistributed net realized gain (loss) (3,059) ------------ Total net assets $ 42,896,192 ------------ NET ASSET VALUE PER SHARE: CLASS I: No par value (unlimited number of shares authorized) Net assets $ 42,896,192 Shares outstanding 42,901,207 ------------ Net asset value per share $ 1.00 The accompanying notes are an integral part of these financial statements. 7 PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- YEAR ENDED 12/31/04 INVESTMENT INCOME: Interest $ 430,188 --------- Total investment income $ 430,188 --------- EXPENSES: Management fees $ 153,638 Transfer agent fees and expenses 1,510 Administrative reimbursements 18,500 Custodian fees 24,343 Professional fees 25,656 Miscellaneous 1,228 --------- Total expenses $ 224,875 --------- Net expenses $ 224,875 --------- Net investment income (loss) $ 205,313 --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net increase (decrease) in net assets resulting from operations $ 205,313 ========= 8 The accompanying notes are an integral part of these financial statements. PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 205,313 $ 277,950 Net realized gain (loss) on investments -- 2,354 ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 205,313 280,304 ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (203,312) $ (277,950) ------------- ------------- Total distributions to shareowners $ (203,312) $ (277,950) ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 18,483,037 $ 27,291,288 Class I shares issued in reorganization 21,976,837 -- Reinvestment of distributions 203,307 277,946 Cost of shares repurchased (32,505,228) (52,356,043) ------------- ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ 8,157,953 $ (24,786,809) ------------- ------------- Net increase (decrease) in net assets $ 8,159,954 $ (24,784,455) ------------- ------------- NET ASSETS: Beginning of year $ 34,736,238 $ 59,520,693 ------------- ------------- End of year $ 42,896,192 $ 34,736,238 ============= ============= Undistributed net investment income (loss), end of year $ 2,001 $ -- ============= =============
The accompanying notes are an integral part of these financial statements. 9 PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Money Market VCT Portfolio (The Portfolio) is a portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate diversified portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) The investment objective of Money Market Portfolio is to produce a high level of current income as consistent with preservation of capital. The Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting years. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements, which are in consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Securities are valued at amortized cost, which approximates fair market value. Investments purchased at a discount or premium are valued by amortizing the difference between the original purchase price and maturity value of the issue over the period to maturity. Interest income, including interest in income bearing cash accounts is recorded on the accrual basis. B. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from or in excess of net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2004, Money Market Portfolio had a net capital loss carryforward of $3,059, of which the following amounts will expire between 2010 and 2012 if not utilized: $2,813 in 2010 and $246 in 2012. 10 PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004 and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis. 2004 2003 --------- --------- DISTRIBUTIONS PAID FROM: Ordinary Income $ 203,312 $ 277,950 Long-Term capital gain -- -- --------- --------- $ 203,312 $ 277,950 Return of Capital -- -- --------- --------- Total distributions $ 203,312 $ 277,950 --------- --------- DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ 2,001 Undistributed long-term gain/(capital loss carryforward) (3,059) Unrealized appreciation (depreciation) -- --------- Total $ (1,058) ========= The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily attributable to the tax deferral of losses on wash sales and the tax treatment of premium amortization. C. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of the adjusted net assets at the beginning of the day. The Portfolio declares as daily dividends substantially all of its respective net investment income. All dividends are paid on a monthly basis. Short-term capital gain distributions, if any, may be declared with the daily dividends. Distributions paid by the Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. Dividends and distributions to shareowners are recorded on the ex-dividend date. D. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. E. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 11 PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the Portfolio. Management fees are calculated daily at the following annual rate of 0.50% of the Portfolio's average daily net assets. In addition, under the management and administration agreement, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $17,777 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $135 in transfer agent fees payable to PIMSS at December 31, 2004. 4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------ ------------ ------------ -------------- Money Market Portfolio $ 42,986,174 $ 0 $ 0 $ 0 ============ === === ===
5. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of U.S. Government obligations for the year ended December 31, 2004, were $102,657,000 and $90,158,000, respectively. 6. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
MONEY MARKET PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - --------------------------------------- ----------- ------------- ----------- ------------- CLASS I: Shares sold 18,483,037 $ 18,483,037 27,291,288 $ 27,291,288 Class I shares issued in reorganization 21,976,837 21,976,837 -- -- Reinvestment of distributions 203,307 203,307 277,946 277,946 Shares repurchased (32,505,228) (32,505,228) (52,356,043) (52,356,043) ----------- ------------- ----------- ------------- Net increase 8,157,953 $ 8,157,953 (24,786,809) $ (24,786,809) =========== ============= =========== =============
7. MERGER INFORMATION On December 8, 2004, beneficial owners of Safeco RST Money Market Portfolio ("Money Market"), one of the six portfolios that comprised Safeco Resource Series Trust, approved a proposed Agreement and Plan of Reorganization that provided for the mergers listed below. These tax-free reorganizations were accomplished on December 10, 2004 ("Closing Date"), by exchanging all of the Safeco's net assets for Class I shares as indicated below, based on Class I shares' ending net asset value on the Closing Date. The following charts show the details of the reorganizations as of that closing date Closing Date:
PIONEER SAFECO RST PIONEER MONEY MARKET MONEY MARKET MONEY MARKET VCT PORTFOLIO PORTFOLIO VCT PORTFOLIO PIONEER MONEY MARKET VCT PORTFOLIO (PRE-REORGANIZATION) (PRE-REORGANIZATION) (POST-REORGANIZATION) - ---------------------------------- -------------------- -------------------- --------------------- Net Assets $ 23,493,648 $ 21,976,837 $ 67,613,266 Shares Outstanding 23,500,655 21,976,837 45,477,492 Class I Shares Issued 21,976,837
12 PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS I SHAREOWNERS OF PIONEER MONEY MARKET VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Money Market VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the two years in the period ended December 31, 2001 were audited by other auditors who have ceased operations and whose report, dated February 8, 2002, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Money Market VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ ERNST & YOUNG LLP Boston, Massachusetts February 11, 2005 13 PIONEER MONEY MARKET VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - -------------------------------------------------------------------------------- INVESTMENT ADVISER TRUSTEES AND OFFICERS Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the Trust's operations. The Trust's Trustees and officers are listed CUSTODIAN below, together with their principal occupations during the past five Brown Brothers Harriman & Co. years. Trustees who are interested persons of the Portfolio within the meaning of the Investment Company Act of 1940 are referred to as Interested Trustees. Trustees who are not interested persons of the INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Trust are referred to as Independent Trustees. Each of the Trustees Ernst & Young LLP serves as a trustee of each of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address for all PRINCIPAL UNDERWRITER Interested Trustees and all officers of the Portfolio is 60 State Pioneer Funds Distributor, Inc Street, Boston, Massachusetts 02109. The Trust's statement of additional information provides more LEGAL COUNSEL detailed information regarding the Trust's Trustees and is available Wilmer Cutler Pickering Hale and Dorr LLP upon request, without charge, by calling 1-800-225-6292. Proxy Voting Policies and Procedures of the Trust are available SHAREOWNER SERVICES AND TRANSFER without charge, upon Agent request, by calling our toll free number Pioneer Investment Management Shareholder Services, Inc. (1-800-225-6292). This information is also available online at pioneerfunds.com.
- -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE John F. Cogan, Jr. (78)* Chairman of the Serves until Trustee and President Serves until Director of Harbor Global Board, Trustee successor retirement or removal; Deputy Chairman Company, Ltd. and President trustee is and a Director of Pioneer Global Asset elected or Management S.p.A. ("PGAM"); earlier Non-Executive Chairman and a Director retirement or of Pioneer Investment Management USA removal Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). * Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------ Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive Officer, None Executive successor PIM-USA since May 2003 (Director since Vice President trustee is January 2001); President and Director elected or of Pioneer since May 2003; Chairman earlier and Director of Pioneer retirement or Investment Management Shareholder removal Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. ** Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------
14 PIONEER MONEY MARKET VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE David R. Bock** (61) Trustee since Serves until a Senior Vice President and Chief Director of The Enterprise 3050 K. Street NW, 2005. successor Financial Officer, I-trax, Inc. Social Investment Company Washington, DC 20007 trustee is (publicly traded health care services (privately-held affordable elected or company) (2001 - present); Managing housing finance company); earlier Partner, Federal City Capital Advisors Director of New York retirement or (boutique merchant bank) (1995 - 2000; Mortgage Trust (publicly removal 2002 to 2004); Executive Vice traded mortgage REIT) President and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000 - 2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Mary K. Bush (56) Trustee since Serves until President, Bush International Director of Brady Corporation 3509 Woodbine Street, 2000. successor (international financial advisory (Industrial identification Chevy Chase, MD 20815 trustee is (industrial identification and specialty coated material elected or firm) products manufacturer), earlier Millennium Chemicals, Inc. retirement or (commodity chemicals), removal Mortgage Guaranty Insurance Reynolds Corporation, and R. J.Tobacco Inc.Holdings, (tobacco) - ------------------------------------------------------------------------------------------------------------------------------------ Margaret B.W.Graham (57) Trustee since Serves until Founding Director, The Winthrop Group, None 1001 Sherbrooke Street 2000. successor Inc. (consulting firm); Professor of West, Montreal, Quebec, trustee is Management, Faculty of Management, Canada H3A 1G5 elected or McGill University earlier retirement or removal - ------------------------------------------------------------------------------------------------------------------------------------ Marguerite A. Piret (56) Trustee since Serves until President and Chief Executive Officer, Director of New America High One Boston Place, 1995. successor Newbury, Piret & Company, Inc. Income Fund, Inc. (closed-end 28th Floor, trustee is (investment banking firm) investment company) Boston, MA 02108 elected or earlier retirement or removal - ------------------------------------------------------------------------------------------------------------------------------------ Stephen K. West (76) Trustee since Serves until Senior Counsel, Sullivan & Cromwell Director, The Swiss Helvetia 125 Broad Street, 1995. successor (law firm) Fund, Inc. (closed-end New York, NY 10004 trustee is investment company) and elected or AMVESCAP PLC (investment earlier managers) retirement or removal - ------------------------------------------------------------------------------------------------------------------------------------ John Winthrop (68) Trustee since Serves until President, John Winthrop & Co., Inc. None One North Adgers Wharf, September, successor (private investment firm) Charleston, SC 29401 2000. trustee is elected or earlier retirement or removal - ------------------------------------------------------------------------------------------------------------------------------------
15 PIONEER MONEY MARKET VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS OFFICER Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior Vice None discretion President - Legal of Pioneer; and of the Board Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Christopher J.Kelley(40) Assistant Serves at the Assistant Vice President and Senior None Secretary discretion Counsel of Pioneer since July 2002; of the Board Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering Hale None Secretary discretion and Dorr LLP; Assistant Secretary of of the Board all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Vincent Nave (59) Treasurer Serves at the Vice President - Fund Accounting, None discretion of Administration and Custody Services of the Board Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ------------------------------------------------------------------------------------------------------------------------------------ Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer since None Treasurer discretion of 2004; Treasurer and Senior Vice the Board President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None Treasurer discretion of Accounting, Administration and Custody the Board Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None Treasurer discretion of Accounting, Administration and Custody the Board Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - ------------------------------------------------------------------------------------------------------------------------------------
16 PIONEER MONEY MARKET VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS OFFICER Katharine Kim Sullivan) Assistant Serves at the Fund Administration Manager - Fund None (31) Treasurer discretion of Accounting, Administration and Custody the Board Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Martin J. Wolin (37) Chief Serves at the Chief Compliance Officer of Pioneer None Compliance discretion of (Director of Compliance and Senior Officer the Board Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 17 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. 18 [LOGO] PIONEER Investments(R) [PIONEER INVESTMENTS(R) LOGO] PIONEER VARIABLE CONTRACTS TRUST PIONEER SMALL CAP VALUE VCT PORTFOLIO -- CLASS I SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST TABLE OF CONTENTS Pioneer Small Cap Value VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 9 Notes to Financial Statements 13 Report of Independent Registered Public Accounting Firm 17 Trustees, Officers and Service Providers 18
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT WWW.PIONEERFUNDS.COM. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT HTTP://WWW.SEC.GOV. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST PORTFOLIO UPDATE 12/31/04 PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [PIE CHART] U.S. Common Stocks 89.9% Exchange Traded Fund 0.8% International Common Stocks 1.8% Depositary Receipts for International Stocks 3.4% Temporary Cash Investment 4.1%
SECTOR DISTRIBUTION (As a percentage of equity holdings) [PIE CHART] Financials 28.4% Telecommunication Services 0.9% Consumer Staples 4.2% Utilities 4.6% Energy 7.5% Materials 8.0% Information Technology 8.6% Health Care 9.0% Consumer Discretionary 10.2% Industrials 18.6%
FIVE LARGEST HOLDINGS (As a percentage of equity holdings) 1. Insight Enterprises, Inc. 2.26% 2. Southwestern Energy Co. 2.05 3. PacifiCare Health Systems 1.83 4. Pediatrix Medical Group, Inc. 1.79 5. Wabtec Corp. 1.75
The Portfolio is actively managed, and current holdings may be different. PERFORMANCE UPDATE 12/31/04 PRICES AND DISTRIBUTIONS
12/31/04 12/31/03 Net Asset Value per Share $ 15.02 $ 12.50
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ - $ - $ -
PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in Pioneer Small Cap Value VCT Portfolio at net asset value, compared to that of the Russell 2000 Value Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [LINE GRAPH]
PIONEER SMALL CAP RUSSELL 2000 VALUE VCT PORTFOLIO VALUE INDEX 11/01 10,000 10,000 10,574 10,612 12/02 8,979 9,400 12,160 13,727 12/04 14,611 16,781
The Russell 2000 Value Index measures the performance of U.S. small-cap value stocks. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004)
NET ASSET VALUE Life-of-Class 13.79% (11/8/01) 1 Year 20.16
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST COMPARING ONGOING PORTFOLIO EXPENSES As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER SMALL CAP VALUE VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004.
SHARE CLASS I II - --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,112.59 $ 1,111.53 Expenses Paid During Period* $ 6.60 $ 7.90
* Expenses are equal to the Portfolio's annualized expense ratio of 1.24% and 1.49% for Class I and Class II shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER SMALL CAP VALUE VCT PORTFOLIO Based on a hypothetical 5% return per year before expenses, reflecting the period from July 1, 2004 through December 31, 2004.
SHARE CLASS I II - ------------------------------------ ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,018.85 $ 1,017.39 Expenses Paid During Period* $ 6.30 $ 7.55
* Expenses are equal to the Portfolio's annualized expense ratio of 1.24% and 1.49% for Class I and Class II shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 Successful stock selection among energy, transportation and health care companies helped Pioneer Small Cap Value VCT Portfolio perform well over the past 12 months. In the following discussion, portfolio manager David Adams and assistant portfolio manager Jack McPherson review the economic background and detail some of the steps they took to bolster Portfolio performance. Q. HOW DID THE PORTFOLIO PERFORM OVER THIS PERIOD? A. For the twelve-month period ended December 31, 2004, Pioneer Small Cap Value VCT Portfolio returned 20.16% at net asset value. In comparison, the Russell 2000 Value Index, the Fund's benchmark, returned 22.25%. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q. WHAT WAS THE INVESTMENT BACKGROUND FOR SMALL-CAP VALUE STOCKS OVER THIS PERIOD? A. Value issues - those stocks that are selling at a significant discount to our estimation of their intrinsic value - were leaders within the small-cap universe for the full 12-month period despite periods of outperformance by growth stocks. Strong job creation in the spring raised fears of rising interest rates, driving down financial and other traditional value sectors seen as vulnerable to rising rates. Value issues rebounded sharply over the summer as investors positioned their portfolios more defensively during the runup to the presidential election. With the election decided, growth sectors and a smattering of lower quality issues moved higher in November. But the gains recorded between June and August were enough to position value stocks significantly ahead for the period. Q. WHICH AREAS OF THE PORTFOLIO HAD THE GREATEST IMPACT ON RESULTS? A. As energy prices rose, we maintained a heavily overweighted position among energy issues compared to the benchmark. That, plus sharp gains by a number of our selections, made the energy sector the biggest contributor to strong returns. Southwestern Energy, an Arkansas-based exploration and production company, capitalized on high prices by expanding production at existing operating fields and advancing development of more recently discovered reserves. Massey Energy, an Appalachian coal company, saw prices for the metallurgical coal used in steel manufacturing increase sharply for the first time in decades, driven by unprecedented demand from China and elsewhere. Illustrating how our patient, value-focused style is designed to work, we were rewarded this year for our purchase of Swift Energy, a longer-term holding. Swift has stabilized its troubled New Zealand operations and increased oil and gas production from its key Lake Washington reserves. We took some profits in Swift, as continued good news pushed its price higher. Increasing global oil consumption aided results at Stelmar Shipping, which saw strong demand for its fleet of modern, doublehulled tankers. Stelmar has also been approached by potential acquirers. Genesee and Wyoming, which acquires short-line trackage from larger railroads, chiefly in the U.S. and Australia, benefited from expanded shipping volumes of coal and grains. Forward Air, a broker of shipping services for corporations, increased its market share as economic expansion heightened demand for cost-efficient transportation management. Our large exposure to health care services was another positive. Pacificare benefited from federal incentives aimed at steering Medicare patients to managed care plans. Pacificare, the market leader, is also recovering from operational problems, another reason its stock has moved higher. The migration of patients to managed care programs also aided Amerigroup, a large provider of health care programs for beneficiaries of Medicare and other public assistance programs. Shares of Chemed rose when it acquired full ownership of Vitas, a hospice company. Vitas is expected to gain from regulations favoring home care for terminally ill Medicare patients, instead of costly hospital stays. Our underweight position in real estate investment trusts and other interest rate-sensitive financial sectors, also helped returns. Q. WHAT AREAS HELD BACK PERFORMANCE? A. Technology stocks suffered from spotty business conditions. Orders shrank for Remec's telecommunication equipment, but we have retained our commitment because the potential sale of Remec's defense business may enhance the value of the telecom division. Advanced Energy and Applied Films, manufacturers of semiconductor capital equipment, were hurt by uncertain demand for new manufacturers' facilities. Insight Enterprises, a direct distributor of information technology products and services, was an exception. Improving fundamentals and a modest upturn in personal and corporate IT spending boosted Insight's stock. Graftech International slumped following disappointing third quarter earnings. Graftech may not have been aggressive enough in negotiating 2005 contracts for its graphite electrodes, used in steel making. We added to holdings when shares fell, because we think investor reaction has been overblown. Rewards Network, which markets restaurant and other discount programs to consumers, continued to disappoint as skepticism grew over its hotel initiatives and its ability to sign up more restaurants. Q. WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND THE MARKETS? A. Overall, we think the economic outlook is favorable, with slow, steady growth and rising interest rates a likely scenario. But the stock market may already have taken that outlook into account; the markets enjoyed a strong run over the summer and moved higher once again in November. The rise in small-cap value stocks has been exceptional, implying that returns could be more modest over the next several months. This increases the challenge for investors like us to find good long-term values in the marketplace. However, our value methodology helps us to find reasonably priced stocks throughout the market cycle. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. A WORD ABOUT RISK: Investing in small companies may offer the potential for higher returns, but these companies are also subject to greater short-term price fluctuations than larger, more established companies. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 4 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST SCHEDULE OF INVESTMENTS 12/31/04
SHARES VALUE COMMON STOCKS - 90.2% ENERGY - 6.9% OIL & GAS DRILLING - 2.3% 1,525 Atwood Oceanics, Inc.* $ 79,453 26,736 Key Energy Services, Inc.* 315,485 14,500 Todco* 267,090 ----------- $ 662,028 ----------- OIL & GAS EQUIPMENT & SERVICES - 2.2% 14,200 Gulfmarkt Offshore, Inc.* $ 316,234 10,240 Maverick Tube Corp.* 310,272 ----------- $ 626,506 ----------- OIL & GAS EXPLORATION & PRODUCTION - 2.4% 5,900 Penn Virginia Corp. $ 239,363 5,395 Swift Energy Co.* 156,131 7,769 Unit Corp.* 296,853 ----------- $ 692,347 ----------- TOTAL ENERGY $ 1,980,881 ----------- MATERIALS - 7.2% DIVERSIFIED METALS & MINING - 1.2% 9,914 Massey Energy Co. $ 346,494 ----------- GOLD - 1.0% 7,350 Glamis Gold, Ltd.* $ 126,126 24,300 IAMGOLD Corp. 160,623 ----------- $ 286,749 ----------- METAL & GLASS CONTAINERS - 0.8% 5,137 Jarden Corp.* $ 223,151 ----------- PAPER PRODUCTS - 1.8% 16,193 Domtar, Inc. $ 195,450 11,400 Flowserve Corp.* 313,956 ----------- $ 509,406 ----------- PRECIOUS METALS & MINERALS - 0.2% 28,125 Cambior, Inc.* $ 75,094 ----------- SPECIALTY CHEMICALS - 0.4% 3,875 Great Lakes Chemical Corp. $ 110,399 ----------- STEEL - 1.9% 3,575 Carpenter Technology $ 208,995 34,893 Graftech International, Ltd.* 330,088 ----------- $ 539,083 ----------- TOTAL MATERIALS $ 2,090,376 ----------- CAPITAL GOODS - 8.1% AEROSPACE & DEFENSE - 0.2% 4,875 INTRADO, INC.* $ 58,988 ----------- CONSTRUCTION, FARM MACHINERY & HEAVY TRUCKS - 1.6% 21,575 Wabtec Corp. $ 459,979 ----------- CONSTRUCTION & ENGINEERING - 1.1% 5,070 Granite Construction, Inc. $ 134,862 7,825 Insituform Technologies, Inc.* 177,393 ----------- $ 312,255 ----------- ELECTRICAL COMPONENTS & EQUIPMENT - 0.7% 23,479 Power-One, Inc.* $ 209,433 ----------- INDUSTRIAL CONGLOMERATES - 1.5% 20,760 Cornell Co., Inc.* $ 315,137 7,796 NN, Inc. 102,985 ----------- $ 418,122 ----------- INDUSTRIAL MACHINERY - 1.9% 5,687 Joy Global, Inc. $ 246,986 3,125 Kaydon Corp. 103,188 1,894 Nacco Industries, Inc. 199,628 ----------- $ 549,802 ----------- TRADING COMPANIES & DISTRIBUTORS - 1.1% 11,830 Applied Industrial Technologies, Inc. $ 324,128 ----------- TOTAL CAPITAL GOODS $ 2,332,707 ----------- COMMERCIAL SERVICES & SUPPLIES - 5.6% DATA PROCESSING SERVICES - 0.4% 10,000 Gartner Group, Inc.* $ 124,600 ----------- DIVERSIFIED COMMERCIAL SERVICES - 4.1% 5,878 Chemed Corp. $ 394,473 18,400 Central Parking Corp. 278,760 14,335 Profit Recovery Group International* 72,105 27,255 Rent-Way, Inc.* (a) 218,313 8,100 Watson Wyatt & Co. Holdings 218,295 ----------- $ 1,181,946 ----------- EMPLOYMENT SERVICES - 1.1% 36,400 On Assignment, Inc.* $ 188,916 5,670 Korn/Ferry International* 117,653 ----------- $ 306,569 ----------- TOTAL COMMERCIAL SERVICES & SUPPLIES $ 1,613,115 ----------- TRANSPORTATION - 3.3% MARINE - 0.8% 2,400 Arlington Tankers, Ltd.* $ 55,080 3,677 Stelmar Shipping, Ltd. 175,430 ----------- $ 230,510 ----------- RAILROADS - 1.3% 13,043 Genesee & Wyoming, Inc.* $ 365,334 -----------
The accompanying notes are an integral part of these financial statements. 5 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST SCHEDULE OF INVESTMENTS 12/31/04 (continued)
SHARES VALUE TRUCKING - 1.2% 16,775 Central Freight Lines, Inc.* $ 105,683 3,968 Dollar Thrifty Automotive Group* 119,834 2,800 Forward Air Corp.* 125,160 ----------- $ 350,677 ----------- TOTAL TRANSPORTATION $ 946,521 ----------- AUTOMOBILES & COMPONENTS - 0.6% AUTO PARTS & EQUIPMENT - 0.6% 10,395 Federal Signal Corp. $ 183,576 ----------- TOTAL AUTOMOBILES & COMPONENTS $ 183,576 ----------- CONSUMER DURABLES & APPAREL - 1.1% APPAREL, ACCESSORIES & LUXURY GOODS - 1.1% 18,968 Charming Shoppes, Inc.* $ 177,730 4,250 Kellwood Co. 146,625 ----------- $ 324,355 ----------- TOTAL CONSUMER DURABLES & APPAREL $ 324,355 ----------- HOTELS, RESTAURANTS & LEISURE - 0.7% HOTELS, RESORTS & CRUISE LINES - 0.1% 11,500 Jameson Inns, Inc.* $ 22,655 ----------- RESTAURANTS - 0.6% 9,619 O'Charley's, Inc.* $ 188,051 ----------- TOTAL HOTELS, RESTAURANTS & LEISURE $ 210,706 ----------- MEDIA - 0.5% ADVERTISING - 0.2% 6,566 EMAK Worldwide, Inc.* $ 65,660 ----------- PUBLISHING - 0.3% 7,340 Advanced Marketing Services, Inc. $ 73,840 ----------- TOTAL MEDIA $ 139,500 ----------- RETAILING - 6.4% APPAREL RETAIL - 0.8% 5,295 Stage Stores, Inc.* $ 219,848 ----------- CATALOG RETAIL - 2.1% 28,975 Insight Enterprises, Inc.* $ 594,567 ----------- COMPUTER & ELECTRONICS RETAIL - 0.4% 16,750 Tweeter Home Entertainment Group, Inc.* $ 114,738 ----------- SPECIALTY STORES - 3.1% 7,075 Claire's Stores, Inc. $ 150,344 5,052 Guitar Center, Inc.* 266,190 23,407 Hancock Fabrics, Inc. 242,731 6,348 School Specialty, Inc.* 244,779 ----------- $ 904,044 ----------- TOTAL RETAILING $ 1,833,197 ----------- FOOD & DRUG RETAILING - 1.9% FOOD DISTRIBUTORS - 0.6% 12,050 B & G Foods, Inc. $ 180,509 ----------- FOOD RETAIL - 1.3% 8,808 Fresh Del Monte Produce, Inc. $ 260,805 11,625 Wild Oats Markets, Inc.* 102,416 ----------- $ 363,221 ----------- TOTAL FOOD & DRUG RETAILING $ 543,730 ----------- FOOD, BEVERAGE & TOBACCO - 0.2% PACKAGED FOODS & MEATS - 0.2% 1,925 American Italian Pasta Co. (a) $ 44,756 ----------- TOTAL FOOD, BEVERAGE & TOBACCO $ 44,756 ----------- HOUSEHOLD & PERSONAL PRODUCTS - 1.7% HOUSEHOLD PRODUCTS - 1.3% 15,279 Nu Skin Enterprises, Inc. $ 387,781 ----------- PERSONAL PRODUCTS - 0.4% 4,825 NBTY, Inc.* $ 115,848 ----------- TOTAL HOUSEHOLD & PERSONAL PRODUCTS $ 503,629 ----------- HEALTH CARE EQUIPMENT & SERVICES - 7.6% HEALTH CARE DISTRIBUTORS - 2.3% 4,585 Amerigroup Corp. $ 346,901 12,125 Cross Country Healthcare, Inc.* (a) 219,220 3,475 Chattem, Inc.* 115,023 ----------- $ 681,144 ----------- HEALTH CARE EQUIPMENT - 0.5% 3,000 Analogic Corp. $ 134,370 ----------- HEALTH CARE FACILITIES - 0.9% 3,350 Sunrise Senior Living, Inc.* (a) $ 155,306 2,783 Triad Hospitals, Inc.* 103,555 ----------- $ 258,861 ----------- HEALTH CARE SERVICES - 2.2% 7,327 Pediatrix Medical Group, Inc.* $ 469,294 8,275 Providence Service Corp.* 173,527 ----------- $ 642,821 ----------- MANAGED HEALTH CARE - 1.7% 8,530 PacifiCare Health Systems* $ 482,116 ----------- TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 2,199,312 ----------- PHARMACEUTICALS & BIOTECHNOLOGY - 0.5% BIOTECHNOLOGY - 0.5% 17,655 Kendle International, Inc.* $ 155,364 ----------- TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 155,364 -----------
The accompanying notes are an integral part of these financial statements. 6 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SHARES VALUE BANKS - 8.7% DIVERSIFIED BANKS - 3.9% 4,131 Banner Corp. $ 128,846 15,230 BankAtlantic Bancorp, Inc. 303,077 1,100 Community Bancorp* 33,660 11,050 Provident Financial Services, Inc. 214,039 20,325 Texas Capital Bancshares, Inc.* 439,427 ----------- $ 1,119,049 ----------- REGIONAL BANKS - 4.0% 7,000 Alliance Bankshares Corp.* $ 108,850 27,425 Cardinal Financial Corp.* 305,789 3,875 City National Corp. 273,769 1,775 Irwin Financial Corp. 50,392 23,150 Sterling Bancshares, Inc. 330,351 1,705 Whitney Holding Corp. 76,708 ----------- $ 1,145,859 ----------- THRIFTS & MORTGAGE FINANCE - 0.8% 3,475 BankUnited Financial Corp.* $ 111,026 9,475 First Niagara Financial Group, Inc. 132,176 ----------- $ 243,202 ----------- TOTAL BANKS $ 2,508,110 ----------- DIVERSIFIED FINANCIALS - 6.7% CONSUMER FINANCE - 0.9% 25,856 Medallion Financial Corp. $ 250,803 ----------- CONSUMER FINANCE - 1.4% 7,025 Advanta Corp. $ 158,906 7,478 Advanta Corp. (Class B) 181,491 11,000 Rewards Network, Inc.* (a) 77,000 ----------- $ 417,397 ----------- INVESTMENT BANKING & BROKERAGE - 2.9% 7,000 A.G. Edwards, Inc. $ 302,470 23,689 Apollo Investment Corp. 357,704 4,050 Piper Jaffray Co.* 194,198 ----------- $ 854,372 ----------- SPECIALIZED FINANCE - 1.5% 10,225 Assured Guaranty, Ltd. $ 201,126 5,843 Financial Federal Corp.* 229,046 ----------- $ 430,172 ----------- TOTAL DIVERSIFIED FINANCIALS $ 1,952,744 ----------- INSURANCE - 3.7% INSURANCE BROKERS - 0.2% 1,800 Platinum Underwriter Holdings, Ltd. $ 55,980 ----------- PROPERTY & CASUALTY INSURANCE - 2.9% 3,825 American Safety Insurance Group, Ltd.* $ 62,501 6,826 IPC Holdings, Ltd. 296,999 27,525 Quanta Capital Holdings (144A)* 253,781 2,925 RLI Corp. 121,592 2,525 Selective Insurance Group, Inc. (a) 111,706 ----------- $ 846,579 ----------- REINSURANCE - 0.6% 6,950 Odyssey Re Holdings, Corp. (a) $ 175,210 ----------- TOTAL INSURANCE $ 1,077,769 ----------- REAL ESTATE - 5.7% REAL ESTATE MANAGEMENT & DEVELOPMENT - 0.8% 3,875 Corrections Corp. of America* $ 156,744 2,626 Levitt Corp. 80,277 ----------- $ 237,021 ----------- REAL ESTATE INVESTMENT TRUSTS - 4.9% 9,913 BioMed Property Trust, Inc. $ 220,168 10,650 Capital Trust, Inc. 327,062 1,928 Entertainment Properties Trust 85,892 18,425 Feldman Mall Properties, Inc.* (a) 239,709 15,915 Provident Senior Living* 254,640 6,350 Saxon Capital, Inc. 152,337 4,271 Universal Health Realty, Inc. 137,227 ----------- $ 1,417,035 ----------- TOTAL REAL ESTATE $ 1,654,056 ----------- SOFTWARE & SERVICES - 4.2% APPLICATION SOFTWARE - 0.8% 13,779 SPSS, Inc.* $ 215,504 ----------- DATA PROCESSING & OUTSOURCED SERVICES - 0.7% 16,142 Pegusus Systems, Inc.* $ 203,389 ----------- INTERNET SOFTWARE & SERVICES - 1.2% 7,625 Internet Security Systems, Inc.* $ 177,281 12,275 PEC Solutions, Inc.* 173,937 ----------- $ 351,218 ----------- SYSTEMS SOFTWARE - 1.5% 24,550 Borland Software Corp.* $ 286,744 7,025 Sybase, Inc.* 140,149 ----------- $ 426,893 ----------- TOTAL SOFTWARE & SERVICES $ 1,197,004 ----------- TECHNOLOGY HARDWARE & EQUIPMENT - 3.1% COMMUNICATIONS EQUIPMENT - 1.9% 4,575 Black Box Corp. $ 219,692 47,375 Remec, Inc.* 341,574 ----------- $ 561,266 -----------
The accompanying notes are an integral part of these financial statements. 7 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST SCHEDULE OF INVESTMENTS 12/31/04 (continued)
SHARES VALUE COMPUTER STORAGE & PERIPHERALS - 0.3% 4,425 Electronics For Imaging, Inc.* $ 77,039 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.4% 11,425 Planar Systems, Inc.* $ 128,303 ----------- TECHNOLOGY DISTRIBUTORS - 0.5% 3,075 Tech Data Corp.* $ 139,605 TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 906,213 ----------- SEMICONDUCTORS - 0.6% SEMICONDUCTOR EQUIPMENT - 0.3% 3,593 Advanced Energy Industries, Inc.* $ 32,804 2,837 Brooks Automations, Inc.* 48,853 ----------- $ 81,657 ----------- SEMICONDUCTORS - 0.3% 9,370 HI/FN, Inc.* $ 86,391 ----------- TOTAL SEMICONDUCTORS $ 168,048 ----------- TELECOMMUNICATION SERVICES - 0.8% WIRELESS TELECOM SERVICES - 0.8% 26,003 Boston Communications Group, Inc.* $ 240,268 ----------- TOTAL TELECOMMUNICATION SERVICES $ 240,268 ----------- UTILITIES - 4.2% GAS UTILITIES - 3.5% 5,600 AGL Resources, Inc. $ 186,144 6,505 People's Energy Corp. 285,895 10,649 Southwestern Energy Co.* 539,787 ----------- $ 1,011,826 ----------- MULTI-UTILITIES & UNREGULATED POWER - 0.5% 2,350 Energen Corp. $ 138,533 ----------- UTILITIES - 0.2% 1,625 UGI Corp. $ 66,479 ----------- TOTAL UTILITIES $ 1,216,838 ----------- TOTAL COMMON STOCKS (Cost $20,981,073) $26,022,775 ----------- EXCHANGE TRADED FUND - 0.8% 1,150 iShares Russell 2000 Value ETF (a) $ 221,904 ----------- TOTAL EXCHANGE TRADED FUND (Cost $162,579) $ 221,904 ----------- TEMPORARY CASH INVESTMENT - 3.9% SECURITY LENDING COLLATERAL - 3.9% 1,134,938 Securities Lending Investment Fund, 2.18% $ 1,134,938 ----------- TOTAL TEMPORARY CASH INVESTMENT (Cost $1,134,938) $ 1,134,938 ----------- TOTAL INVESTMENTS IN SECURITIES - 94.9% (Cost $22,278,590) $27,379,617 ----------- OTHER ASSETS AND LIABILITIES - 5.1% $ 1,458,402 ----------- TOTAL NET ASSETS - 100.0% $28,838,019 -----------
* Non-income producing security (a) At December 31, 2004, the following securities were out on loan:
SHARES SECURITY MARKET VALUE 1,700 American Italian Pasta Co. $ 39,525 3,735 Cross Country Healthcare, Inc.* 67,529 16,500 Feldman Mall Properties, Inc.* 214,500 1,045 iShares Russell 2000 Value (ETF) 201,643 5,320 Odyssey Re Holdings, Corp. 134,117 24,685 Rent-Way, Inc.* 197,727 4,964 Rewards Network, Inc.* 34,748 1,425 Selective Insurance Group, Inc. 63,042 3,110 Sunrise Senior Living, Inc.* 144,180 ----------- TOTAL $ 1,097,011 -----------
The accompanying notes are an integral part of these financial statements. 8 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEAR ENDED 11/08/01 TO CLASS I (a) 12/31/04 12/31/03 12/31/02 12/31/01 Net asset value, beginning of period $ 12.50 $ 9.23 $ 10.87 $ 10.00 ------- ------- -------- ------- Increase (decrease) from investment operations: Net investment income (loss) $ (0.03) $ -- $ (0.01) $ 0.01 Net realized and unrealized gain (loss) on investments and foreign currency transactions 2.55 3.27 (1.63) 0.86 ------- ------- -------- ------- Net increase (decrease) from investment operations $ 2.52 $ 3.27 $ (1.64) $ 0.87 Distributions to shareowners Net investment income -- -- (0.00)(b) 0.00 Net realized gain -- -- (0.00)(b) -- ------- ------- -------- ------- Net increase (decrease) in net asset value $ 2.52 $ 3.27 $ (1.65) $ 0.87 ------- ------- -------- ------- Net asset value, end of period $ 15.02 $ 12.50 $ 9.23 $ 10.87 ======= ======= ======== ======= Total return* 20.16% 35.43% (15.08)% 8.70% Ratio of net expenses to average net assets+ 1.25% 1.25% 1.25% 1.21%** Ratio of net investment income (loss) to average net assets+ (0.21)% 0.03% (0.05)% 0.86%** Portfolio turnover rate 36% 74% 50% 0% Net assets, end of period (in thousands) $17,993 $12,049 $ 6,603 $ 504 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.30% 2.40% 2.76% 77.48%** Net investment income (loss) (0.26)% (1.12)% (1.56)% (75.41)%** Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.25% 1.25% 1.25% 1.21% Net investment income (loss) (0.21)% 0.03% (0.05)% 0.86%
(a) Shares of Pioneer Small Cap Value VCT Portfolio were first publicly offered on November 8, 2001. (b) Amount rounds to less than one cent per share * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. ** Annualized + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 9 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST STATEMENT OF ASSETS AND LIABILITIES 12/31/04 ASSETS: Investment in securities, at value (including securities loaned of $1,097,011) (Cost $ 27,379,617 $22,278,590) Cash 2,653,135 Receivables -- Fund shares sold 70,286 Variation margin 1,125 Dividends, interest and foreign taxes withheld 37,933 Other 2,057 ------------ Total assets $ 30,144,153 ------------ LIABILITIES: Payables -- Fund shares repurchased $ 94,176 Upon return of securities loaned 1,134,938 Due to affiliates 19,919 Accrued expenses 57,101 Other ------------ Total liabilities $ 1,306,134 ------------ NET ASSETS: Paid-in capital $ 22,990,110 Undistributed net investment income (loss) 260 Accumulated undistributed net realized gain (loss) 713,557 Net unrealized gain (loss) on: Investments 5,101,027 Futures contracts 33,165 ------------ Total net assets $ 28,838,019 ------------ NET ASSET VALUE PER SHARE: Class I: No par value (unlimited number of shares authorized) Net assets $ 17,992,938 Shares outstanding 1,197,698 ------------ Net asset value per share $ 15.02 Class II: No par value (unlimited number of shares authorized) Net assets $ 10,845,081 Shares outstanding 725,478 ------------ Net asset value per share $ 14.95
The accompanying notes are an integral part of these financial statements. 10 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST STATEMENT OF OPERATIONS
YEAR ENDED 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $349) $ 193,923 Interest 20,839 Income on securities loaned, net 2,778 ---------- Total investment income $ 217,540 ---------- EXPENSES: Management fees $ 153,423 Distribution fees (Class II) 15,087 Administrative reimbursements 18,500 Custodian fees 38,476 Professional fees 45,386 Printing expense 11,214 Miscellaneous 1,717 ---------- Total expenses $ 283,803 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (9,953) Less fees paid indirectly (815) ---------- Net expenses $ 273,035 ---------- Net investment income (loss) $ (55,495) ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $1,576,824 Futures contracts 167,366 ---------- $1,744,190 ---------- Change in net unrealized gain or (loss) from: Investments $2,521,390 Futures contracts 10,731 ---------- $2,532,121 ---------- Net gain (loss) on investments, futures contracts and foreign currency transactions $4,276,311 ========== Net increase (decrease) in net assets resulting from operations $4,220,816 ==========
The accompanying notes are an integral part of these financial statements. 11 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ (55,495) $ 2,125 Net realized gain (loss) on investments 1,744,190 (334,168) Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions 2,532,121 3,353,942 ------------ ------------- Net increase (decrease) in net assets resulting from operations $ 4,220,816 $ 3,021,899 ------------ ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 14,302,057 $ 15,752,093 Cost of shares repurchased (4,493,153) (10,568,904) ------------ ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ 9,808,904 $ 5,183,189 ------------ ------------- Net increase (decrease) in net assets $ 14,029,720 $ 8,205,088 ------------ ------------- NET ASSETS: Beginning of year $ 14,808,299 $ 6,603,211 ------------ ------------- End of year $ 28,838,019 $ 14,808,299 ============ ============= Undistributed net investment income (loss), end of year $ 260 $ 3,664 ============ =============
The accompanying notes are an integral part of these financial statements. 12 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST NOTES TO FINANCIAL STATEMENTS 12/31/04 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Small Cap Value VCT Portfolio (the Portfolio) a Portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class II shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class II shares only) The Portfolio commenced operations on May 1, 2003. Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of Small Cap Value Portfolio is to seek capital appreciation. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements, which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolio are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of 13 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes withheld on capital gains at the applicable country rates. Small capitalization stocks, while offering the potential for higher returns, such as those in the portfolio may be subject to greater short-term price fluctuations than securities of larger companies. B. FUTURES CONTRACTS The Portfolio may enter into futures transactions to hedge against changes in interest rates, securities prices, and currency rates or to seek to increase total return. Upon entering into a futures contract, the Portfolio is required to deposit with a broker an amount of cash or securities equal to the minimum "initial margin" requirements of the associated futures exchange. Subsequent payments for futures contracts ("variation margin") are paid or received by the Portfolio, depending on the daily fluctuation in the value of the contracts, and are recorded by the Portfolio as unrealized gains or losses. When the contract is closed, the Portfolio realize a gain or loss equal to the difference between the opening and closing value of the contract. The use of futures contracts involves, to varying degrees, elements of market risk which may exceed the amounts recognized by the Portfolio. Changes in the value of the contracts may not directly correlate to the changes in the value of the underlying securities. These risks may decrease the effectiveness of the Portfolio's hedging and trading strategies and potentially result in a loss. As of December 31, 2004, Small Company Portfolio had the following open contracts:
NUMBER OF CONTRACTS SETTLEMENT MARKET UNREALIZED TYPE LONG/(SHORT) MONTH VALUE GAIN/(LOSS) -------------- ------------ ---------- ---------- ----------- Small Cap Value Portfolio Russell 2000 5 March 2005 $1,634,875 $33,165
C. FOREIGN CURRENCY TRANSLATION The books and records of the Portfolio are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent, the net realized gains and losses on foreign currency contracts, disposition of foreign currencies, and the difference between the amount of income accrued and the U.S. dollar actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. D. FORWARD FOREIGN CURRENCY CONTRACTS The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. E. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. 14 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis.
UNDISTRIBUTED ACCUMULATED NET NET INVESTMENT REALIZED GAIN PAID-IN PORTFOLIO INCOME (LOSS) (LOSS) CAPITAL - ---------------------------------------- ---------------- ---------------- ------------- Pioneer Small Cap Value VCT Portfolio $52,091 $6,157 $(58,248) ======= ====== ========
The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004 and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003 ---------- ---------- DISTRIBUTIONS PAID FROM: Ordinary Income $ -- $ -- Long-Term capital gain -- -- ---------- ---------- $ -- $ -- Return of Capital -- -- ---------- ---------- Total distributions $ -- $ -- ========== ========== DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ -- Undistributed long-term gain/(capital loss carryforward) 1,086,729 Unrealized appreciation (depreciation) 4,761,280 ---------- Total $5,848,009 ==========
The difference between book-basis and tax-basis unrealized appreciation is primarily attributable to the tax deferral of losses on wash sales. F. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of the adjusted net assets at the beginning of the day. Distributions paid by the Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. G. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the 15 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. H. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the portfolios. Management fees are calculated daily at the following annual rate of 0.75% of the Portfolio's average daily net assets. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $17,466 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $268 in transfer agent fees payable to PIMSS at December 31, 2004 4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ---------- ------------ ------------ -------------- Small Cap Value Portfolio $22,618,337 $5,335,071 $ (573,791) $4,761,280 =========== ========== ========== ==========
5. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $16,213,181 and $6,667,416, respectively. 6. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
SMALL CAP VALUE PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - -------------------------------- ------------ --------------- --------------- --------------- CLASS II: Shares sold 510,952 $ 6,774,823 1,276,588 $ 13,058,675 Reinvestment of distributions -- -- -- -- Shares repurchased (277,189) (3,672,701) (1,028,432) (10,409,382) -------- ------------ ---------- ------------- Net increase 233,763 $ 3,102,122 248,156 $ 2,649,293 ======== ============ ========== ============= CLASS II: Shares sold 566,136 $ 7,527,234 235,328 $ 2,693,418 Reinvestment of distributions -- -- -- -- Shares repurchased (61,897) (820,452) (14,089) (159,522) -------- ------------ ---------- ------------- Net increase 504,239 $ 6,706,782 221,239 $ 2,533,896 -------- ------------ ---------- -------------
16 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS I SHAREOWNERS OF PIONEER SMALL CAP VALUE VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Small Cap Value VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the period ended December 31, 2001 were audited by other auditors who have ceased operations and whose report, dated February 8, 2002, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Small Cap Value VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 17 PIONEER SMALL CAP VALUE VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS INVESTMENT ADVISER Pioneer Investment Management, Inc. CUSTODIAN Brown Brothers Harriman & Co. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP PRINCIPAL UNDERWRITER Pioneer Funds Distributor, Inc. LEGAL COUNSEL Wilmer Cutler Pickering Hale and Dorr LLP SHAREOWNER SERVICES AND TRANSFER Pioneer Investment Management Shareholder Services, Inc. TRUSTEES AND OFFICERS The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the Trust's operations. The Trust's Trustees and officers are listed below, together with their principal occupations during the past five years. Trustees who are interested persons of the Portfolio within the meaning of the Investment Company Act of 1940 are referred to as Interested Trustees. Trustees who are not interested persons of the Trust are referred to as Independent Trustees. Each of the Trustees serves as a trustee of each of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address for all Interested Trustees and all officers of the Portfolio is 60 State Street, Boston, Massachusetts 02109. The Trust's statement of additional information provides more detailed information regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-225-6292. Proxy Voting Policies and Procedures of the Trust are available without charge, upon Agent request, by calling our toll free number (1-800-225-6292). This information is also available online at pioneerfunds.com.
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS HELD NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS BY THIS TRUSTEE John F. Cogan, Jr. (78)* Chairman of the Serves until successor Trustee and President Director of Harbor Global Board, Trustee trustee is elected or Serves until retirement or Company, Ltd. and President earlier retirement or removal; Deputy Chairman removal and a Director of Pioneer Global Asset Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. Osbert M. Hood (52)** Trustee and Serves until successor President and Chief None Executive Vice trustee is elected or Executive Officer, PIM-USA President earlier retirement since May 2003 (Director or removal since January 2001); President and Director of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
18 PIONEER SMALL CAP VALUE VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) INDEPENDENT TRUSTEES
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS HELD NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS BY THIS TRUSTEE David R. Bock** (61) Trustee Since 2005. Serves Senior Vice President and Director of The Enterprise 3050 K. Street NW, until a successor Chief Financial Officer, Social Investment Company Washington, DC 20007 trustee is elected I-trax, Inc. (publicly (privately-held affordable or earlier retirement traded health care services housing finance company); or removal. company) (2001-present); Director of New York Managing Partner, Federal Mortgage Trust (publicly City Capital Advisors traded mortgage REIT) (boutique merchant bank) (1995-2000; 2002 to 2004); Executive Vice President and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. Mary K. Bush (56) Trustee since Serves until successor President, Bush Director of Brady 3509 Woodbine Street, 2000. trustee is elected or International Corporation (industrial Chevy Chase, MD 20815 earlier retirement or (international financial identification and specialty removal advisory firm) coated material products manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) Margaret B.W. Graham (57) Trustee since Serves until successor Founding Director, The None 1001 Sherbrooke Street 2000. trustee is elected or Winthrop Group, Inc. West, Montreal, Quebec, earlier retirement or (consulting firm); Canada H3A 1G5 removal Professor of Management, Faculty of Management, McGill University Marguerite A. Piret (56) Trustee since Serves until successor President and Chief Director of New America High One Boston Place, 1995. trustee is elected or Executive Officer, Newbury, Income Fund, Inc. 28th Floor, earlier retirement or Piret & Company, Inc. (closed-end investment Boston, MA 02108 removal (investment banking firm) company) Stephen K. West (76) Trustee since Serves until successor Senior Counsel, Sullivan & Director, The Swiss Helvetia 125 Broad Street, 1995. trustee is elected or Cromwell (law firm) Fund, Inc. (closed-end New York, NY 10004 earlier retirement investment company) and or removal AMVESCAP PLC (investment managers) John Winthrop (68) Trustee since Serves until successor President, John Winthrop & None One North Adgers Wharf, September, 2000. trustee is elected or Co., Inc. (private Charleston, SC 29401 earlier retirement investment firm) or removal
19 PIONEER SMALL CAP VALUE VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS OFFICER Dorothy E. Bourassa Secretary Serves at the discretion Secretary of PIM-USA; None (57) of the Board Senior Vice President - Legal of Pioneer; and Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 Christopher J. Kelley Assistant Serves at the discretion Assistant Vice President None (40) Secretary of the Board and Senior Counsel of Pioneer since July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 David C. Phelan (47) Assistant Serves at the discretion Partner, Wilmer Cutler None Secretary of the Board Pickering Hale and Dorr LLP; Assistant Secretary of all Pioneer Funds since September 2003 Vincent Nave (59) Treasurer Serves at the discretion Vice President - Fund None of the Board Accounting, Administration and Custody Services of Pioneer and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) Mark E. Bradley (45) Assistant Serves at the discretion Deputy Treasurer of Pioneer None Treasurer of the Board since 2004; Treasurer and Senior Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 Luis I. Presutti (39) Assistant Serves at the discretion Assistant Vice President - None Treasurer of the Board Fund Accounting, Administration and Custody Services of Pioneer and Assistant Treasurer of all of the Pioneer Funds since November 2000 Gary Sullivan (46) Assistant Serves at the discretion Fund Accounting Manager - None Treasurer of the Board Fund Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002
20 PIONEER SMALL CAP VALUE VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS OFFICER Katharine Kim Sullivan Assistant Serves at the discretion Fund Administration Manager None (31) Treasurer of the Board - Fund Accounting, Administration and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 Martin J. Wolin (37) Chief Compliance Serves at the discretion Chief Compliance Officer of None Officer of the Board Pioneer (Director of Compliance and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds.
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 21 [PIONEER INVESTMENTS(R) LOGO] [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Small Cap Value II VCT Portfolio -- Class I Shares ANNUAL REPORT December 31, 2004 PIONEER VARIABLE CONTRACTS TRUST ================================================================================ ================================================================================
Table of Contents - -------------------------------------------------------------------------------- Pioneer Small Cap Value II VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 7 Notes to Financial Statements 11 Report of Independent Registered Public Accounting Firm 15 Trustees, Officers and Service Providers 16
Please consider a Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about a Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, contact your adviser, call 1-800-225-6292 or visit our website at www.pioneerfunds.com. The Trust files a complete statement of investments with the Securities and Exchange Commission for the first and the third quarters for each fiscal year on Form N-Q. Shareowners may view the filed Form N-Q by visiting the Commission's web site at http://www.sec.gov. The filed form may also be viewed and copied at the Commission's Public Reference Room in Washington, D.C. Information regarding the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST ================================================================================ PORTFOLIO UPDATE 12/31/04 ================================================================================ Portfolio Diversification (As a percentage of total investment portfolio) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
U.S. Common Stocks 92.2% Temporary Cash Investment 5.9% Exchange Traded Fund 1.9%
Sector Distribution (As a percentage of equity holdings) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
Financials 35.1% Consumer Discretionary 19.8% Industrials 16.4% Information Technology 11.2% Energy 8.0% Consumer Staples 3.8% Materials 3.1% Utilities 1.6% Health Care 1.0%
Five Largest Holdings (As a percentage of equity holdings)
1. World Fuel Services Corp. 3.40% 2. Champion Enterprises, Inc. 3.32 3. Cash America International, Inc. 3.12 4. Lone Star Technologies, Inc. 3.01 5. Landstar System, Inc. 2.90
Holdings will vary for other periods. This list excludes temporary cash and derivative investments. ================================================================================ PERFORMANCE UPDATE 12/31/04 ================================================================================ Prices and Distributions
12/31/04 12/31/03 Net Asset Value per Share $ 20.44 $ 17.00 Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ - $ 0.3371 $ -
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Small Cap Value II VCT Portfolio at net asset value, compared to that of the Russell 2000 Value Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Russell 2000 Pioneer Small Cap Value Index Value II VCT Portfolio 4/97 10,000 10,000 12,840 13,020 12/98 10,278 12,180 11,861 11,999 12/00 11,147 14,737 13,504 16,804 12/02 12,888 14,884 18,402 21,735 12/04 22,327 26,570
The Russell 2000 Value Index is a measure of the performance of the value-oriented stocks in the Russell 2000 Index. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 11.04% (11/9/01) 5 Years 13.48% 1 Year 21.33%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. - -------------------------------------------------------------------------------- Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST ================================================================================ COMPARING ONGOING PORTFOLIO EXPENSES ================================================================================ As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value [divide] $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Small Cap Value II VCT Portfolio Based on actual returns from July 1, 2004 through December 31, 2004.
Share Class I ------------------------------------------------------------ Beginning Account Value on 7/1/04 $1,000.00 Ending Account Value on 12/31/04 $1,124.05 Expenses Paid During Period* $ 5.37
* Expenses are equal to the Portfolio's annualized expense ratio of 1.00% for Class I shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Small Cap Value II VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from July 1, 2004 through December 31, 2004.
Share Class I ------------------------------------------------------------ Beginning Account Value on 7/1/04 $1,000.00 Ending Account Value on 12/31/04 $1,020.06 Expenses Paid During Period* $ 5.08
* Expenses are equal to the Portfolio's annualized expense ratio of 1.00% for Class I shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST ================================================================================ PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 ================================================================================ David Adams, portfolio manager, and Jack McPherson, assistant portfolio manager, have been managing Pioneer Small Cap Value II VCT Portfolio since Pioneer became the investment manager of the former Safeco Funds on August 2, 2004. Mr. Adams has 12 years of industry experience and has been part of Pioneer's small-cap team since its inception in 1995. Mr. McPherson has 13 years of industry experience. Q: Will the management style of the Portfolio change? A: Our primary emphasis will be on bringing the Portfolio in line with Pioneer's more diversified investment approach. At year end, the Portfolio held 54 stocks; over time, we expect to increase that figure to around 120. Our portfolio building process is bottom-up, meaning that stock selection takes precedence over sector weightings. Whether we will retain existing holdings depends on our review of each company's finances and operations, as well as its current and potential valuation. In the specific case of financial companies, we intend to reduce the Portfolio's exposure to holdings that could be vulnerable to rising rates. Q: Please describe the investment environment for small-cap value stocks during 2004. A: Small-capitalization stocks recorded another year of strong performance, outdistancing large caps for the sixth straight year. Traditional value sectors lagged early in 2004, when economic growth seemed about to surge. But value stocks recovered as investors grew cautious in the months preceding the presidential election; they then rode a tide of rising equity prices through year end. Small-cap value issues led their growth counterparts for the fourth year in the last five, although investors were leaning toward growth sectors late in the year. In general, small companies benefited from greater efficiency in operations and expanded operating margins that brought more of each dollar to the bottom line. Q: How did the Portfolio perform during the year? A: For the twelve months ended December 31, 2004, the Portfolio returned 21.33% at net asset value. This result was roughly in line with the Portfolio's benchmark, the Russell 2000 Value Index, which returned 22.25% over the same period. Q: What factors most affected performance? A: Stock selection was the key to overall results, with sector weightings having a smaller impact. Building Materials Holding, a provider of construction services and materials to builders and contractors, moved sharply higher, thanks to continued strength in the housing market. The improving domestic economy was good news for Landstar Systems, which coordinates transportation needs between shippers and transportation providers. Shares of SWS, a well regarded Texas banking and securities firm, also moved up. The Portfolio was hurt most by Hangar Orthopedics Group, a provider of orthotic and prosthetic services, which was beset by operating issues and disappointing earnings. Inventory problems pressured shares of Concord Camera, a marketer of private label digital cameras. Other decliners included Hypercom, which supplies credit card terminals and communications systems for transmitting electronic payments, and Hanover Capital Mortgage, a specialized real estate investment trust. Q: What is your outlook for the economy and the markets? A: We are generally optimistic. We think the economy will continue to grow slowly and steadily, giving companies the opportunity to expand profits further. Rising interest rates are also likely in that scenario, but we think the Federal Reserve Board will stay committed to its program of moderate hikes. Good long-term values can be hard to find after an extended rise like the one we have recently seen. But the higher prices go, the more likely some stocks may be to decline sharply on bad news. As value-focused investors, we view those declines as moments of opportunity, because they often produce attractive valuations that go unnoticed in the marketplace. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. - -------------------------------------------------------------------------------- A Word About Risk: Investing in small companies may offer the potential for higher returns, but these companies are also subject to greater short-term price fluctuations than larger, more established companies. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 4 Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST ================================================================================ SCHEDULE OF INVESTMENTS 12/31/04 ================================================================================
Shares Value COMMON STOCKS - 96.6% Energy - 7.7% Integrated Oil & Gas - 2.9% 49,925 LONE STAR TECH* $ 1,670,491 ----------- Oil & Gas Drilling - 1.5% 73,225 Key Energy Services, Inc.* $ 864,055 ----------- Oil & Gas Refining Marketing & Transportation - 3.3% 37,900 World Fuel Services Corp. $ 1,887,420 ----------- Total Energy $ 4,421,966 ----------- Materials - 2.9% Construction Materials - 1.6% 15,825 Florida Rock Industries, Inc. $ 942,062 ----------- Steel - 1.3% 22,700 Schnitzer Steel Industries, Inc.* $ 770,211 ----------- Total Materials $ 1,712,273 ----------- Capital Goods - 8.0% Aerospace & Defense - 4.3% 21,900 Precision Castparts Corp.* $ 1,438,392 21,800 United Defense Industries, Inc.* 1,030,050 ----------- $ 2,468,442 ----------- Construction & Engineering - 3.7% 51,650 Astec Industries, Inc.* $ 888,897 37,800 URS Corp.* 1,213,380 ----------- $ 2,102,277 ----------- Total Capital Goods $ 4,570,719 ----------- Commercial Services & Supplies - 1.7% Diversified Commercial Services - 1.7% 20,625 Regis Corp. $ 951,844 ----------- Total Commercial Services & Supplies $ 951,844 ----------- Transportation - 6.2% Air Freight & Couriers - 1.9% 52,625 Pacer International, Inc.* $ 1,118,808 ----------- Trucking - 4.3% 18,575 Arkansas Best Corp.* $ 833,832 21,900 Landstar System, Inc.* 1,612,716 ----------- $ 2,446,548 ----------- Total Transportation $ 3,565,356 ----------- Consumer Durables & Apparel - 6.0% Homebuilding - 5.2% 7,625 Beazer Homes USA, Inc.* $ 1,114,851 156,025 Champion Enterprises, Inc.* 1,844,216 ----------- $ 2,959,067 ----------- Shares Value Housewares & Specialties - 0.4% 10,100 Furniture Brands International, Inc.* $ 253,005 ----------- Photographic Products - 0.4% 94,900 Concord Camera Corp.* $ 217,321 ----------- Total Consumer Durables & Apparel $ 3,429,393 ----------- Hotels, Restaurants & Leisure - 3.7% Casinos & Gaming - 2.6% 34,475 Ameristar Casinos, Inc.* $ 1,486,217 ----------- Restaurants - 1.1% 16,650 Jack In The Box, Inc.* $ 613,886 ----------- Total Hotels, Restaurants & Leisure $ 2,100,103 ----------- Retailing - 9.5% Catalog Retail - 2.4% 67,125 Insight Enterprises, Inc.* $ 1,377,405 ----------- Home Improvement Retail - 2.7% 40,800 Building Materials Holding Corp. $ 1,562,232 ----------- Specialty Stores - 4.4% 52,625 Foot Locker, Inc. $ 1,417,191 84,100 Hollywood Entertainment Corp.* 1,100,869 ----------- $ 2,518,060 ----------- Total Retailing $ 5,457,697 ----------- Food, Beverage & Tobacco - 3.7% Packaged Foods & Meats - 2.5% 9,125 Lancaster Colony Corp.* $ 391,189 42,000 Sensient Technologies Corp.* 1,007,580 ----------- $ 1,398,769 ----------- Tobacco - 1.2% 14,700 Universal Corp/VA* $ 703,248 ----------- Total, Food Beverage & Tobacco $ 2,102,017 ----------- Health Care Equipment & Services - 1.0% Health Care Facilities - 1.0% 69,800 Hanger Orthopedic Group, Inc.* $ 565,380 ----------- Total Health Care Equipment & Services $ 565,380 ----------- Banks - 9.1% Regional Banks - 6.2% 39,400 Central Pacific Financial Corp.* $ 1,425,098 32,100 Greater Bay Bancorp 894,948 26,110 Hanmi Financial Corp. 938,393 8,743 Provident Bankshares Corp.* 317,983 ----------- $ 3,576,422 ----------- Thrifts & Mortgage Finance - 2.9% 20,925 BankUnited Financial Corp.* $ 668,554 21,290 PFF Bancorp, Inc.* 986,366 ----------- $ 1,654,920 ----------- Total Banks $ 5,231,342 -----------
The accompanying notes are an integral part of these financial statements. 5 Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST ================================================================================ SCHEDULE OF INVESTMENTS 12/31/04 (continued) ================================================================================
Shares Value Diversified Financials - 11.2% Consumer Finance - 5.7% 62,925 AmeriCredit Corp.* $ 1,538,516 58,300 Cash America International, Inc.* 1,733,259 ----------- $ 3,271,775 ----------- Investment Banking & Brokerage - 3.6% 56,237 Apollo Investment Corp. $ 849,179 55,200 SWS Group, Inc. 1,209,984 ----------- $ 2,059,163 ----------- Other Diversified Finance Services - 1.9% 5,800 iShares Russell 2000 Value (ETF) $ 1,119,168 ----------- Total Diversified Financials $ 6,450,106 ----------- Insurance - 6.9% Life & Health Insurance - 1.9% 13,100 Stancorp Financial Group, Inc. $ 1,080,750 ----------- Property & Casualty Insurance - 5.0% 15,350 First American Corp. $ 539,399 50,675 Ohio Casualty Corp.* 1,176,167 27,500 RLI Corp. 1,143,175 ----------- $ 2,858,741 ----------- Total Insurance $ 3,939,491 ----------- Real Estate - 6.8% REITs - 6.8% 16,225 Alexandria Real Estate Equities, Inc. $ 1,207,465 16,000 Camden Property Trust 816,000 31,775 First Potomac Realty Trust 724,470 51,100 Hanover Capital Mortgage Holdings, Inc. 551,880 28,025 Impac Mortgage Holdings, Inc. 635,327 ----------- $ 3,935,142 ----------- Total Real Estate $ 3,935,142 ----------- Software & Services - 0.8% Data Processing & Outsourced Services - 0.8% 78,500 Hypercom Corp.* $ 464,720 ----------- Total Software & Services $ 464,720 ----------- Technology Hardware & Equipment - 8.9% Communications Equipment - 2.8% 19,125 Black Box Corp. $ 918,383 16,225 Plantronics Inc. 672,851 ----------- $ 1,591,234 ----------- Computer Storage & Peripherals - 1.7% 30,600 Imation Corp. $ 973,998 ----------- Electronic Equipment & Instruments - 0.6% 8,050 Landauer, Inc. $ 367,885 ----------- Electronic Manufacturer Services - 2.0% 33,175 Benchmark Electronics, Inc.* $ 1,131,268 ----------- Shares Value Technology Distributors - 1.8% 28,775 Anixter International, Inc.* $ 1,035,612 ----------- Total Technology Hardware & Equipment $ 5,099,997 ----------- Semiconductors - 1.1% Semiconductors - 1.1% 113,725 Lattice Semiconductor Corp.* $ 648,233 ----------- Total Semiconductors $ 648,233 ----------- Utilities - 1.5% Electric Utilities - 1.5% 28,450 IDACORP, Inc.* $ 869,711 ----------- Total Utilities $ 869,711 ----------- TOTAL COMMON STOCKS (Cost $35,972,099) $55,515,490 ----------- Principal Amount TEMPORARY CASH INVESTMENTS - 6.1% Repurchase Agreement - 6.1% $3,500,000 UBS Warburg, Inc., 1.00%, dated 12/31/04, repurchase price of 3,500,000 plus accrued interest on 1/3/05 collateralized by $3,329,000 U.S. Treasury Bill, 6.5%, 10/15/06 $ 3,500,000 ----------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $3,500,000) $ 3,500,000 ----------- TOTAL INVESTMENTS IN SECURITIES - 102.7% (Cost $39,472,099) $59,015,490 ----------- OTHER ASSETS AND LIABILITIES - (2.7)% $(1,552,314) ----------- TOTAL NET ASSETS - 100.0% $57,463,176 ===========
* Non-Income producing security 6 The accompanying notes are an integral part of these financial statements. Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST ================================================================================ FINANCIAL HIGHLIGHTS ================================================================================
Year Ended Year Ended Year Ended Year Ended Year Ended Class I 12/31/04 (a) 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 17.00 $ 12.16 $ 12.81 $ 10.68 $ 11.39 ------- ------- ------- ------- -------- Increase (decrease) from investment operations: Net investment income $ 0.10 $ 0.09 $ 0.07 $ 0.13 $ 0.02 Net realized and unrealized gain (loss) on investments and foreign currency transactions 3.68 5.10 ( 0.65) 2.13 ( 0.71) ------- ------- ------- ------- -------- Net increase (decrease) from investment operations $ 3.78 $ 5.19 $ (0.58) $ 2.26 $ (0.69) Distributions to shareowners: Net investment income -- ( 0.09) ( 0.07) ( 0.13) ( 0.02) Net realized gain ( 0.34) ( 0.26) -- -- -- ------- ------- ------- ------- -------- Net increase (decrease) in net asset value $ 3.44 $ 4.84 $ (0.65) $ 2.13 $ (0.71) ------- ------- ------- ------- -------- Net asset value, end of period $ 20.44 $ 17.00 $ 12.16 $ 12.81 $ 10.68 ======= ======= ======= ======= ======== Total return* 21.33% 42.78% ( 4.56)% 21.15%+ ( 6.02)%+ Ratio of net expenses to average net assets 1.01% 1.05% 1.03% 0.96% 0.95% Ratio of net investment income to average net assets 0.57% 0.71% 0.54% 1.26% 0.22% Portfolio turnover rate 27% 50% 56% 97% 116% Net assets, end of period (in thousands) $57,463 $40,405 $24,663 $21,598 $ 14,199
(a) Effective August 2, 2004, PIM became the sub-advisor of the Fund and subsequently became the advisor on December 10, 2004. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. + The total return would have been lower had certain expenses not been reduced during the periods shown. The accompanying notes are an integral part of these financial statements. 7 Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST ================================================================================ STATEMENT OF ASSETS AND LIABILITIES 12/31/04 ================================================================================
ASSETS: Investment in securities, at value (cost $39,472,099) $59,015,490 Cash 33,272 Receivables -- Fund shares sold 29,557 Dividends, interest and foreign taxes withheld 78,623 ----------- Total assets $59,156,942 ----------- LIABILITIES: Payables -- Investment securities purchased $ 1,465,475 Fund shares repurchased 160,827 Due to affiliates 24,775 Accrued expenses 42,689 ----------- Total liabilities $ 1,693,766 ----------- NET ASSETS: Paid-in capital $37,709,695 Undistributed net investment income (loss) 271,007 Accumulated undistributed net realized gain (loss) (60,917) Net unrealized gain (loss) on: Investments 19,543,391 ----------- Total net assets $57,463,176 ----------- NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $57,463,176 Shares outstanding 2,810,750 ----------- Net asset value per share $ 20.44
8 The accompanying notes are an integral part of these financial statements. Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST ================================================================================ STATEMENT OF OPERATIONS ================================================================================
Year Ended 12/31/04 INVESTMENT INCOME: Dividends $ 701,161 Interest 29,616 Income on securities loaned, net 8,093 ---------- Total investment income $ 738,870 ---------- EXPENSES: Management fees $ 392,303 Transfer agent fees 125 Administrative fees 1,028 Custodian fees 11,018 Professional fees 27,599 Printing 29,749 Fees and expenses of nonaffiliated trustees 3,986 Miscellaneous 2,844 ---------- Total expenses $ 468,652 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (837) ---------- Less fees paid indirectly Net expenses $ 467,815 ---------- Net investment income (loss) $ 271,055 ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $1,150,972 ---------- $1,150,972 ---------- Change in net unrealized gain or loss from: Investments $8,540,937 ---------- $8,540,937 ---------- Net gain (loss) on investments, futures contracts and foreign currency transactions $9,691,909 ---------- Net increase (decrease) in net assets resulting from operations $9,962,964 ==========
The accompanying notes are an integral part of these financial statements. 9 Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST ================================================================================ STATEMENTS OF CHANGES IN NET ASSETS ================================================================================
Year Ended Year Ended 12/31/04 12/31/03 FROM OPERATIONS: Net investment income $ 271,055 $ 214,079 Net realized gain on investments 1,150,972 971,323 Change in net unrealized gain on investments, futures contracts and foreign currency transactions 8,540,937 10,096,277 ------------ ----------- Net increase in net assets resulting from operations $ 9,962,964 $11,281,679 ------------ ----------- DISTRIBUTIONS TO SHAREOWNERS Net investment income: Class I $ -- $ (214,274) Net realized gain Class I (928,706) (599,944) ------------ ----------- Total distributions to shareowners $ (928,706) $ (814,218) ------------ ----------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 19,072,784 $12,609,222 Reinvestment of distributions 928,706 814,218 Cost of shares repurchased (11,977,166) (8,149,243) ------------ ----------- Net increase in net assets resulting from fund share transactions $ 8,024,324 $ 5,274,197 ------------ ----------- Net increase in net assets $ 17,058,582 $15,741,658 NET ASSETS: Beginning of year 40,404,594 24,662,936 ------------ ----------- End of year $ 57,463,176 $40,404,594 ------------ ----------- Undistributed net investment income, end of year $ 271,007 $ -- ============ ===========
10 The accompanying notes are an integral part of these financial statements. Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST ================================================================================ NOTES TO FINANCIAL STATEMENTS 12/31/04 ================================================================================ 1. Organization and Significant Accounting Policies The Pioneer Small Cap Value II VCT Portfolio (the Portfolio) (formerly Safeco Small-Cap Value Portfolio) a Portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two seperate diversified portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: Portfolios: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. As of December 31, 2004, no Class II shares were outstanding for the Portfolio. The Portfolio, organized on December 10, 2004, is the successor to the Safeco RST Small Cap Value Portfolio. Safeco RST Growth Opportunities Portfolio, one of six series of portfolios that comprised Safeco Resource Series Trust, transferred all of the net assets of Trust shares in exchange for the Portfolio's Class I shares in a one-to-one exchange ratio, on December 10, 2004, pursuant to an agreement and plan of reorganization (the "reorganization" which was approved by the shareholders of Safeco RST Small Cap Value Portfolio on December 8, 2004). The Portfolio had no assets or liabilities prior to the reorganization. Accordingly, the reorganization, which was a tax-free exchange, had no effect on the portfolio's operations. The investment objective of The Pioneer Small Cap Value II VCT Portfolio is to seek capital appreciation. The Trust's financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements, which are consistent with those generally accepted in the investment company industry: A. Security Valuation Security transactions are recorded as of trade date. Net asset values for the portfolio are computed once daily, on each day the New York Stock Exchange is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately 11 Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST ================================================================================ NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) ================================================================================ reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. Small capitalization stocks, while offering the potential for higher returns, such as those the Small Cap Value II Portfolios may be subject to greater short-term price fluctuations than securities of larger companies. B. Taxes It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis.
- ----------------------------------------------------------------------------------------- Undistributed Accumulated Net Investment Realized Paid-In Portfolio Income (Loss) Gain (Loss) Capital - ----------------------------------------------------------------------------------------- Pioneer Small Cap Value II VCT Portfolio $ (48) $48 $ (0) ===== === ===== =========================================================================================
The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004, and the distributions paid during the year ended December 31, 2004 on a tax basis as of December 31, 2004. There were no distributions paid during the fiscal year ended December 31, 2003.
- ----------------------------------------------------------------------------------------- 2004 2003 - ----------------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 213,236 $458,985 Long- Term capital gain 715,470 355,233 ----------- -------- $ 928,706 $814,218 Return of Capital -- -- ----------- -------- Total distributions $ 928,706 $814,218 =========== ======== Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ 271,007 Undistributed long-term gain/(capital loss carryforward) 34,830 Unrealized appreciation (depreciation) 19,447,644 ----------- Total $19,753,481 =========== =========================================================================================
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily attributable to the tax deferral of losses on wash sales, returns of capital on REITs, the recognition of unrealized gains or losses on certain futures contracts, and the tax treatment of premium amortization. 12 Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST ================================================================================ C. Portfolio Shares The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. D. Securities Lending The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Portfolio. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Portfolio has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Portfolio invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. E. Repurchase Agreements With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. Management Agreement PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the portfolio. Management fees are calculated at the following annual rate of 0.75% of the Portfolio's average daily net assets. Prior to the reorganization, the Portfolio was advised by Safeco Asset Management, which received an annual fee equal to 0.85% of its average daily net assets. Through December 10, 2006, PIM has agreed not to impose all or a portion of its management fee and to assume other operating expenses of the Portfolio to the extent necessary to limit Class I expenses to 1.01% of the average daily net assets attributable to Class I shares. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $24,650 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. Transfer Agent Since the reorganization, PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $125 in transfer agent fees payable to PIMSS at December 31, 2004. Prior to the reorganization Safeco Services Corporation was the transfer and shareholder services agency. 4. Aggregate Unrealized Appreciation and Depreciation At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
- -------------------------------------------------------------------------------------------- Net Gross Gross Appreciation/ Tax Cost Appreciation Depreciation (Depreciation) - -------------------------------------------------------------------------------------------- Small Cap Value II Portfolio $39,567,846 $20,420,997 $(973,353) $19,447,644 =========== =========== ========= =========== ============================================================================================
13 Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST ================================================================================ NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) ================================================================================ 5. Portfolio Transactions The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $18,918,127 and $11,889,509, respectively. 6. Capital Shares At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
- ------------------------------------------------------------------------------------------------------ Small Cap Value II Portfolio '04 Shares '04 Amount '03 Shares '03 Amount - ------------------------------------------------------------------------------------------------------ Safeco Trust Shares: Shares sold -- Safeco 1,011,658 $ 18,295,281 882,446 $ 12,609,222 Reinvestment of Distributions 47,480 928,706 49,142 814,288 Shares repurchased -- Safeco (637,527) (11,437,564) (582,906) (8,149,243) Shares transferred in reorganization (2,800,798) (55,427,794) Class I: Shares Sold 38,614 777,503 Shares repurchased (26,593) (539,602) Shares issued in reorganization 2,800,798 55,427,794 --------------------------------------------------------- Net increase (decrease) 433,632 $ 8,024,324 348,722 $ 5,274,197 ========================================================= ======================================================================================================
14 Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST ================================================================================ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ================================================================================ To the Board of Trustees of Pioneer Variable Contracts Trust and the Class I Shareowners of Pioneer Small Cap Value II VCT Portfolio: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Small Cap Value II VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust, (the "Trust"), (formerly Small-Cap Value Portfolio, one of the portfolios that comprised the Safeco Resource Series Trust) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Small Cap Value II VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ ERNST & YOUNG LLP Boston, Massachusetts February 11, 2005 15 Pioneer Small Cap Value II VCT Portfolio
==================================================================================================================================== TRUSTEES, OFFICERS AND SERVICE PROVIDERS ==================================================================================================================================== Investment Adviser Trustees and Officers Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for Custodian the Trust's operations. The Trust's Trustees and officers are listed Brown Brothers Harriman & Co. below, together with their principal occupations during the past five years. Trustees who are interested persons of the Portfolio within the Independent Registered Public Accounting Firm meaning of the Investment Company Act of 1940 are referred to as Ernst & Young LLP Interested Trustees. Trustees who are not interested persons of the Trust are referred to as Independent Trustees. Each of the Trustees Principal Underwriter serves as a trustee of each of the 73 U.S. registered investment Pioneer Funds Distributor, Inc. portfolios for which Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address for all Legal Counsel Interested Trustees and all officers of the Portfolio is 60 State Wilmer Cutler Pickering Hale and Dorr LLP Street, Boston, Massachusetts 02109. Shareowner Services and Transfer The Trust's statement of additional information provides more detailed Pioneer Investment Management Shareholder Services, Inc. information regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-225-6292. Proxy Voting Policies and Procedures of the Trust are available without charge, upon Agent request, by calling our toll free number (1-800-225-6292). This information is also available online at pioneerfunds.com. ==================================================================================================================================== INTERESTED TRUSTEES ==================================================================================================================================== POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE John F. Cogan, Jr. (78)* Chairman of the Serves until Trustee and President Serves Director of Harbor Board, Trustee and successor trustee is until retirement or removal; Global Company, Ltd. President elected or earlier Deputy Chairman and a Director retirement or of Pioneer Global Asset removal Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. ==================================================================================================================================== Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive None Executive Vice successor trustee is Officer, PIM-USA since May President elected or earlier 2003 (Director since January retirement or removal 2001); President and Director of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. ====================================================================================================================================
16 Pioneer Small Cap Value II VCT Portfolio ================================================================================ TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) ================================================================================
==================================================================================================================================== INDEPENDENT TRUSTEES ==================================================================================================================================== POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE David R. Bock **(61) Trustee since 2005. Serves until a Senior Vice President and Director of The 3050 K. Street NW, successor trustee Chief Financial Officer, Enterprise Social Washington, DC 20007 is elected or earlier I-trax, Inc. (publicly traded Investment Company retirement or removal. health care services company) (privately-held (2001-present); Managing affordable housing Partner, Federal City Capital finance company); Advisors (boutique merchant Director of New York bank)(1995 -2000; 2002 to Mortgage Trust (publicly 2004); Executive Vice traded mortgage REIT) President and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) * Mr. Bock became a Trustee of the Trust on January 1, 2005 ==================================================================================================================================== Mary K. Bush (56) Trustee since 2000. Serves until President, Bush International Director of Brady 3509 Woodbine Street, successor trustee (international financial Corporation (industrial Chevy Chase, MD 20815 is elected or earlier advisory firm) identification and retirement or removal specialty coated material products manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) ==================================================================================================================================== Margaret B.W. Graham (57) Trustee since 2000. Serves until Founding Director, The None 1001 Sherbrooke Street successor trustee Winthrop Group, Inc. West, Montreal, Quebec, is elected or earlier (consulting firm); Professor Canada H3A 1G5 retirement or removal of Management, Faculty of Management, McGill University ==================================================================================================================================== Marguerite A. Piret (56) Trustee since 1995. Serves until President and Chief Executive Director of New America One Boston Place, successor trustee Officer, Newbury, Piret & High Income Fund, Inc. 28th Floor, is elected or earlier Company, Inc. (investment (closed-end investment Boston, MA 02108 retirement or removal banking firm) company) ==================================================================================================================================== Stephen K. West (76) Trustee since 1995. Serves until Senior Counsel, Sullivan & Director, The Swiss 125 Broad Street, successor trustee Cromwell (law firm) Helvetia Fund, Inc. New York, NY 10004 is elected or earlier (closed-end investment retirement or removal company) and AMVESCAP PLC (investment managers) ==================================================================================================================================== John Winthrop (68) Trustee since Serves until President, John Winthrop & Co., None One North Adgers Wharf, September, 2000. successor trustee Inc. (private investment firm) Charleston, SC 29401 is elected or earlier retirement or removal ====================================================================================================================================
17 Pioneer Small Cap Value II VCT Portfolio ================================================================================ TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) ================================================================================
==================================================================================================================================== TRUST OFFICERS ==================================================================================================================================== POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior None discretion of Vice President - Legal of the Board Pioneer; and Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 ==================================================================================================================================== Christopher J. Kelley (40) Assistant Secretary Serves at the Assistant Vice President and None discretion of Senior Counsel of Pioneer the Board since July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 ==================================================================================================================================== David C. Phelan (47) Assistant Secretary Serves at the Partner, Wilmer Cutler None discretion of Pickering Hale and Dorr LLP; the Board Assistant Secretary of all Pioneer Funds since September 2003 ==================================================================================================================================== Vincent Nave (59) Treasurer Serves at the Vice President - Fund None discretion of Accounting, Administration and the Board Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) ==================================================================================================================================== Mark E. Bradley (45) Assistant Treasurer Serves at the Deputy Treasurer of Pioneer None discretion of since 2004; Treasurer and the Board Senior Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 ==================================================================================================================================== Luis I. Presutti (39) Assistant Treasurer Serves at the Assistant Vice President - None discretion of Fund Accounting, the Board Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 ==================================================================================================================================== Gary Sullivan (46) Assistant Treasurer Serves at the Fund Accounting Manager - Fund None discretion of Accounting, Administration and the Board Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 ====================================================================================================================================
18 Pioneer Small Cap Value II VCT Portfolio ================================================================================ TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) ================================================================================
==================================================================================================================================== TRUST OFFICERS ==================================================================================================================================== POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE Katharine Kim Sullivan (31) Assistant Treasurer Serves at the Fund Administration Manager - None discretion of Fund Accounting, the Board Administration and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 ==================================================================================================================================== Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of None Officer discretion of Pioneer (Director of the Board Compliance and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. ====================================================================================================================================
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 19 [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST PIONEER REAL ESTATE SHARES VCT PORTFOLIO -- CLASS I SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Pioneer Real Estate Shares VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 6 Notes to Financial Statements 10 Report of Independent Registered Public Accounting Firm 15 Trustees, Officers and Service Providers 16 PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT www.pioneerfunds.com. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT http://www.sec.gov. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] U.S. Common Stocks 92.1% Temporary Cash Investment 7.9% SECTOR DISTRIBUTION (As a percentage of equity holdings) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Office 20.3% Apartmet 18.6% Regional Mall 13.4% Industrials 13.1% Shopping Center 12.0% Hotel 10.1% Diversified 7.7% Self Storage 4.0% Manufactured Homes 0.4% Health Care 0.4% FIVE LARGEST HOLDINGS (As a percentage of equity holdings) 1. Simon DeBartolo Group, Inc. 6.58% 2. Boston Properties, Inc. 5.08 3. AvalonBay Communities, Inc. 4.82 4. Equity Residential Property Trust 4.37 5. Catellus Development Corp. 4.19 The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- PRICES AND DISTRIBUTIONS 12/31/04 12/31/03 Net Asset Value per Share $ 24.30 $ 18.57 DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ 0.4466 $ 0.2128 $ 0.1166 - -------------------------------------------------------------------------------- PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in PIONEER REAL ESTATE SHARES VCT PORTFOLIO at net asset value, compared to that of the Wilshire Real Estate Securities Index. Portfolio returns are based on net asset value and do not reflect applicable insurance fees and surrender charges. [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Wilshire Real Estate Pioneer Real Estate Securities Index Shares VCT Portfolio 3/95 10,000 10,000 11,322 11,696 12/96 15,497 15,875 18,565 19,235 12/98 15,330 15,629 14,841 14,977 12/00 19,403 19,397 21,431 20,911 12/02 21,983 21,440 30,133 28,890 12/04 40,622 39,215 Index comparison begins on 2/28/95. The Wilshire Real Estate Securities Index is a market-capitalization weighted measure of the performance of real estate investment trusts (equity and hybrid) and real estate operating companies. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004) - -------------------------------------------------------------------------------- NET ASSET VALUE - -------------------------------------------------------------------------------- Life-of-Class 14.90% (3/1/95) 5 Years 21.23% 1 Year 35.74% All total returns shown assume reinvestment of distributions at net asset value. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Please refer to variable product's annual report for performance that reflects the deduction of the variable products fees and charges. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER REAL ESTATE SHARES VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,263.87 $ 1,262.50 Expenses Paid During Period* $ 5.77 $ 7.18 * Expenses are equal to the Portfolio's annualized expense ratio of 1.01% and 1.26% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER REAL ESTATE SHARES VCT PORTFOLIO Based on a hypothetical 5% return per year return before expenses, reflecting the period from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,020.21 $ 1,018.95 Expenses Paid During Period* $ 5.15 $ 6.41 * Expenses are equal to the Portfolio's annualized expense ratio of 1.01% and 1.26% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- A WORD ABOUT RISK: THE PORTFOLIO INVESTS IN REIT SECURITIES, THE VALUE OF WHICH CAN FALL FOR A VARIETY OF REASONS, SUCH AS DECLINES IN RENTAL INCOME, POOR PROPERTY MANAGEMENT, ENVIRONMENTAL LIABILITIES, UNINSURED DAMAGE, INCREASED COMPETITION, OR CHANGES IN REAL ESTATE TAX LAWS. CALL 800-688-9915 OR VISIT www.pioneerfunds.com FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE RETURNS FOR THE PORTFOLIO DO NOT REFLECT THE DEDUCTION OF EXPENSES ASSOCIATED WITH VARIABLE PRODUCTS, SUCH AS MORTALITY AND EXPENSE RISK CHARGES, SEPARATE ACCOUNT CHARGES, AND SALES CHARGES. THESE EXPENSES WOULD REDUCE THE OVERALL RETURNS SHOWN. PERFORMANCE RESULTS REFLECT ANY APPLICABLE EXPENSE WAIVERS IN EFFECT DURING THE PERIODS SHOWN. WITHOUT SUCH WAIVERS, PERFORMANCE WOULD BE LOWER. WAIVERS MAY NOT BE IN EFFECT FOR ALL PORTFOLIOS. CERTAIN FEE WAIVERS ARE CONTRACTUAL THROUGH A SPECIFIED PERIOD. OTHERWISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION. For the fifth year in a row, real estate stocks achieved positive returns and outperformed the broader market indices. As Matthew Troxell of AEW Capital Management, L.P. explains in the following interview, it will fall to astute stock selection to identify the real estate investments most likely to continue this momentum into the New Year after such a rewarding multi-year rally. Q: HOW DID THE PORTFOLIO PERFORM DURING FISCAL 2004? A: Performance by property type was universally strong. For the 12 months ended December 31, 2004, Class I shares rose 35.74% at net asset value. This performance slightly outperformed the 34.81% return for the Wilshire Real Estate Securities Index for the same period. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: WHAT INVESTMENTS CONTRIBUTED TO PERFORMANCE? A: Strong operating fundamentals at the property level and solid consumer spending patterns boosted returns of regional mall real estate investment trusts (REITs). One of the Portfolio's largest holdings, Simon Property Group, performed strongly in the last quarter of the fiscal year. This REIT announced the acquisition of Chelsea Property Group (also held by the Portfolio) during the first half of the fiscal year. Initially, investors reacted negatively. But we viewed the proposed merger very positively, because Chelsea Property Group, which owns factory outlet shopping centers in Japan as well as in the United States, would add international diversity and a new retail avenue of growth to Simon's current portfolio. Each company's board of directors and Chelsea's shareholders unanimously approved the definitive merger agreement, and the company's stock rallied nicely. While the outlook for the office sector is improving as a result of positive job growth, it takes longer for the improvements to manifest themselves at the property owner level. (Tenants must first use their existing empty space before seeking new office space.) Boston Properties, Inc., which holds a portfolio of high-quality buildings in markets with high barriers to entry, exemplifies the kind of resilient, well-managed company that has weathered the office downturn better than many of its counterparts. This office REIT returned 42.5% for 2004. A sector of the real estate market that recovered well in 2004 was apartments. AvalonBay Communities, Inc. was one of the Portfolio's best performing stocks for the reporting period. Like the office sector, multi-family housing is benefiting from positive job growth, which helps increase demand for apartments. In addition, we're seeing tremendous demand for the conversion of apartments to condominiums in a number of markets, including southeast Florida and southern California, where the price of owning a home is prohibitive for many people. This increased demand is improving fundamentals while condo conversion demand provides support for asset prices - a scenario that creates a natural price support. In the lodging sector, our selection of hotels did well, but it was the presence of Starwood Hotels and Resorts that dramatically impacted performance with its 64.7% return for 2004. This hotel, like many in its universe, saw great improvement in occupancy rates - resulting in a greater number of rooms being rented in 2004 than 2003. Much of the improvement was due to the ability of management to increase room rates, which is a more powerful driver of profitability than occupancy rates. Q: ANY STOCKS PROVE TO BE DISAPPOINTING? A: Despite the positive performance of industrial stocks, the sector detracted from performance relatively speaking, since the group underperformed the index. The Portfolio's investments in Liberty Property Trust, an office and industrial REIT, lagged the market due to investor concerns about management's decision to delay construction of a new office building in downtown Philadelphia until an anchor tenant was found. When Comcast signed on as a tenant, the stock recovered. We remain confident that management at Liberty has a good understanding of their business and holds strong assets. Q: WHAT IS YOUR OUTLOOK? A: With the underlying fundamentals improving, real estate stocks appear poised to continue strengthening. However, after such impressive performance during the past five years, we would not be surprised to see a moderating of performance returns in 2005. As the proverbial tide lifts all boats, we expect to take a more cautious approach, knowing that astute stock picking will be challenging but all the more important in the upcoming months. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. 4 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - -------------------------------------------------------------------------------- SHARES VALUE COMMON STOCKS - 97.7% HOTELS, RESTAURANTS & LEISURE - 5.4% HOTELS, RESORTS & CRUISE LINES - 5.4% 93,500 Hilton Hotels Corp. $ 2,126,190 54,000 Starwood Hotels & Resorts 3,153,600 ------------- $ 5,279,790 ------------- TOTAL HOTELS, RESTAURANTS & LEISURE $ 5,279,790 ------------- DIVERSIFIED FINANCIALS - 3.3% DIVERSIFIED FINANCIAL SERVICES - 3.3% 86,000 Brookfield Properties Corp. (a) $ 3,216,400 ------------- TOTAL DIVERSIFIED FINANCIALS $ 3,216,400 ------------- REAL ESTATE - 89.1% REAL ESTATE MANAGEMENT & DEVELOPMENT - 4.5% 131,500 Catellus Development Corp. $ 4,023,900 27,500 Kite Realty Group Trust 420,200 ------------- $ 4,444,100 ------------- REAL ESTATE INVESTMENT TRUSTS - 84.6% 38,000 Apartment Investment & Management Co. $ 1,464,520 46,200 AMB Property Corp. 1,866,018 40,000 Arden Realty Group, Inc. 1,508,800 102,000 Archstone Communities Trust 3,906,600 61,500 AvalonBay Communities, Inc. 4,630,950 20,500 BioMed Property Trust, Inc. 455,305 75,500 Boston Properties, Inc. 4,882,585 6,200 Capital Automotive 220,255 44,600 Camden Property Trust 2,274,600 19,000 Carramerica Realty Corp. 627,000 21,000 Corporate Office Properties 616,350 74,000 Developers Diversifies Realty Corp. 3,283,380 53,000 Duke Realty Investments, Inc. 1,809,420 11,300 Equity Lifestyle Properties, Inc. 403,975 86,000 Equity Office Properties Trust 2,504,320 116,000 Equity Residential Property Trust (a) 4,196,880 12,100 First Potomac Realty Trust 275,880 38,000 Federal Realty Investment Trust 1,962,700 74,500 General Growth Properties, Inc. 2,693,920 51,000 Highwoods Properties, Inc. 1,412,700 196,800 Host Marriott Corp. 3,404,640 14,500 Hospitality Properties Trust 667,000 9,000 Healthcare Realty Trust, Inc. 366,300 24,500 iStar Financial, Inc. 1,108,870 16,500 Kimco Realty Corp. 956,835 12,000 Kilroy Realty Corp. 513,000 82,000 Liberty Property Trust 3,542,400 30,900 The Macerich Co. $ 1,940,520 90,900 ProLogis Trust 3,938,697 30,800 Pan Pacific Retail Properties, Inc. 1,931,160 41,000 Prentiss Properties Trust 1,566,200 44,000 Public Storage, Inc. 2,453,000 25,000 PS Business Parks, Inc. 1,127,500 53,600 Regency Centers Corp. 2,969,440 10,800 Spirit Finance Corp.* (a) 136,620 30,500 Shurgard Storage Centers, Inc. 1,342,305 24,700 Strategic Hotel Capital, Inc. 407,550 97,800 Simon DeBartolo Group, Inc. 6,324,726 63,400 Taubman Centers, Inc. 1,898,830 70,400 Trizec Properties Inc. 1,331,968 57,000 United Dominion Realty Trust 1,413,600 36,500 Vornado Realty Trust (a) 2,778,745 ------------- $ 83,116,064 ------------- TOTAL REAL ESTATE $ 87,560,164 ------------- TOTAL COMMON STOCKS (Cost $63,722,198) $ 96,056,354 ------------- TEMPORARY CASH INVESTMENT - 8.4% SECURITY LENDING COLLATERAL - 8.4% 8,225,580 Securities Lending Investment Fund, 2.18% $ 8,225,580 ------------- TOTAL TEMPORARY CASH INVESTMENT (Cost $8,225,580) $ 8,225,580 ------------- TOTAL INVESTMENTS IN SECURITIES - 106.1% (Cost $71,947,778) $ 104,281,934 ------------- OTHER ASSETS AND LIABILITIES - (6.1)% $ (6,035,766) ------------- TOTAL NET ASSETS - 100.0% $ 98,246,168 ============= * Non-income producing security (a) At December 31, 2004, the following securities were out on loan: SHARES SECURITY MARKET VALUE 81,700 Brookfield Properties Corp. $ 3,055,580 58,700 Equity Residential Property Trust 2,123,766 10,260 Spirit Finance Corp.* 129,789 34,675 Vornado Realty Trust 2,639,808 ----------- TOTAL $ 7,948,943 =========== The accompanying notes are an integral part of these financial statements. 5 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED CLASS I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 18.57 $ 14.47 $ 14.77 $ 14.42 $ 11.73 -------- -------- -------- -------- -------- Increase (decrease) from investment operations: Net investment income $ 0.50 $ 0.74 $ 0.62 $ 0.68 $ 0.71 Net realized and unrealized gain (loss) on investments 6.01 4.16 (0.23) 0.40 2.67 -------- -------- -------- -------- -------- Net increase (decrease) from investment operations $ 6.51 $ 4.90 $ 0.39 $ 1.08 $ 3.38 Distributions to shareowners: Net investment income ( 0.45) (0.64) (0.69) (0.56) (0.59) Net realized gain ( 0.33) -- -- -- -- Tax return of capital -- (0.16) -- (0.17) (0.10) -------- -------- -------- -------- -------- Net increase (decrease) in net asset value $ 5.73 $ 4.10 $ (0.30) $ 0.35 $ 2.69 -------- -------- -------- -------- -------- Net asset value, end of period $ 24.30 $ 18.57 $ 14.47 $ 14.77 $ 14.42 ======== ======== ======== ======== ======== Total return* 35.74% 34.75% (2.53)% 7.80% 29.51% Ratio of net expenses to average net assets+ 0.98% 1.03% 1.07% 1.16% 1.10% Ratio of net investment income to average net assets+ 2.41% 4.49% 4.76% 4.71% 5.02% Portfolio turnover rate 35% 20% 29% 34% 31% Net assets, end of period (in thousands) $ 36,447 $ 31,891 $ 29,873 $ 33,026 $ 32,982 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.98% 1.03% 1.07% 1.16% 1.10% Net investment income 2.41% 4.49% 4.76% 4.71% 5.02% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.98% 1.03% 1.07% 1.16% 1.10% Net investment income 2.41% 4.49% 4.76% 4.71% 5.02%
(a) Amount rounds to less than one cent per share. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. + Ratios with no reduction for fees paid indirectly. 6 The accompanying notes are an integral part of these financial statements. PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $7,948,943) (Cost $71,947,778) $ 104,281,934 Cash 2,220,578 Receivables -- Fund shares sold 15,950 Dividends, interest and foreign taxes withheld 561,625 Other 3,635 ------------- Total assets $ 107,083,722 ------------- LIABILITIES: Payables -- Investment securities purchased $ 404,407 Fund shares repurchased 60,248 Upon return for securities loaned 8,225,580 Due to affiliates 82,031 Accrued expenses 65,288 ------------- Total liabilities $ 8,837,554 ------------- NET ASSETS: Paid-in capital $ 62,351,060 Undistributed net investment income (loss) 286,854 Accumulated undistributed net realized gain (loss) 3,274,098 Net unrealized gain (loss) on: Investments 32,334,156 ------------- Total net assets $ 98,246,168 ------------- NET ASSET VALUE PER SHARE: CLASS I: No par value (unlimited number of shares authorized) Net assets $ 36,447,028 Shares outstanding 1,499,747 ------------- Net asset value per share $ 24.30 CLASS II: No par value (unlimited number of shares authorized) Net assets $ 61,799,140 Shares outstanding 2,547,790 ------------- Net asset value per share $ 24.26
The accompanying notes are an integral part of these financial statements. 7 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- YEAR ENDED 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $3,560) $ 2,668,265 Interest 28,012 Income on securities loaned, net 1,856 ------------ Total investment income $ 2,698,133 ------------ EXPENSES: Management fees $ 632,167 Transfer agent fees and expenses 3,007 Distribution fees (Class II) 117,814 Administrative reimbursements 18,500 Custodian fees 34,727 Professional fees 46,225 Printing expense 37,031 Miscellaneous 2,572 ------------ Total expenses $ 892,043 Net expenses $ 892,043 ------------ Net investment income (loss) $ 1,806,090 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 7,508,438 ------------ $ 7,508,438 ------------ Change in net unrealized gain or loss from: Investments $ 15,633,552 ------------ $ 15,633,552 ------------ Net gain (loss) on investments, futures contracts and foreign currency transactions $ 23,141,990 ============ Net increase (decrease) in net assets resulting from operations $ 24,948,080 ============ 8 The accompanying notes are an integral part of these financial statements. PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 1,806,090 $ 2,666,503 Net realized gain (loss) on investments 7,508,438 (441,521) Change in net unrealized gain or loss on investments, futures contracts and foreign currency transactions 15,633,552 15,916,594 ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 24,948,080 $ 18,141,576 ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (707,216) $ (1,049,939) Class II (916,414) (1,121,546) Net Realized Gains Class I (493,376) -- Class II (803,210) -- Tax return of capital Class I -- (372,973) Class II -- (398,048) ------------- ------------- Total distributions to shareowners $ (2,920,216) $ (2,942,506) ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 20,027,996 $ 9,753,610 Reinvestment of distributions 2,920,216 2,942,506 Cost of shares repurchased (18,513,875) (17,969,003) ------------- ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ 4,434,337 $ (5,272,887) ------------- ------------- Net increase (decrease) in net assets $ 26,462,201 $ 9,926,183 ------------- ------------- NET ASSETS: Beginning of year $ 71,783,967 $ 61,857,784 ------------- ------------- End of year $ 98,246,168 $ 71,783,967 ============= ============= Undistributed net investment income (loss), end of year $ 286,854 $ 153,315 ============= =============
The accompanying notes are an integral part of these financial statements. 9 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Real Estate Shares VCT Portfolio (the Portfolio) a Portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value I Portfolio) (Class II shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of Real Estate Shares Portfolio pursues long-term capital growth, with current income as a secondary objective. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The Trust's financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in the preparation of its financial statements which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolio are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the NYSE. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on 10 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- income bearing cash accounts, is recorded on the accrual basis. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. Because Real Estate Shares Portfolio invests a substantial portion of its assets in real estate investment trusts (REITs), the Portfolio may be subject to certain risks associated with direct investments in REITs. REITs may be affected by changes in the value of their underlying properties and by defaults by borrowers or tenants. REITs depend generally on their ability to generate cash flow to make distributions to shareowners, and certain REITs have self-liquidation provisions by which mortgages held may be paid in full and return of capital distributions may be made at any time. In addition, the performance of a REIT may be affected by its failure to qualify for tax-free pass-through of income under the Internal Revenue Code or its failure to maintain exemption from registration under the Investment Company Act of 1940. B. FUTURES CONTRACTS The Portfolio may enter into futures transactions to hedge against changes in interest rates, securities prices, and currency rates or to seek to increase total return. Upon entering into a futures contract, the Portfolio is required to deposit with a broker an amount of cash or securities equal to the minimum "initial margin" requirements of the associated futures exchange. Subsequent payments for futures contracts ("variation margin") are paid or received by the Portfolio, depending on the daily fluctuation in the value of the contracts, and are recorded by the Portfolio as unrealized gains or losses. When the contract is closed, the Portfolio realize a gain or loss equal to the difference between the opening and closing value of the contract. The use of futures contracts involves, to varying degrees, elements of market risk which may exceed the amounts recognized by the Portfolio. Changes in the value of the contracts may not directly correlate to the changes in the value of the underlying securities. These risks may decrease the effectiveness of the Portfolio's hedging and trading strategies and potentially result in a loss. As of December 31, 2004, Real Estate Shares had no open contracts. C. FOREIGN CURRENCY TRANSLATION The books and records of the Portfolio are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent, the net realized gains and losses on foreign currency contracts, disposition of foreign currencies, and the difference between the amount of income accrued and the U.S. dollar actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. D. FORWARD FOREIGN CURRENCY CONTRACTS The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. E. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. A portion of the dividend income recorded by Real Estate Shares Portfolio is from distributions by publicly 11 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- traded REITs, and such distributions for tax purposes may also consist of capital gains and return of capital. The actual return of capital and capital gains portions of such distributions will be determined by formal notifications from the REITs subsequent to the calendar year-end. Distributions received from the REITs that are determined to be a return of capital are recorded by the Trust as a reduction of the cost basis of the securities held and those determined to be capital gains are reflected as such on the statement of operations. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis.
UNDISTRIBUTED NET ACCUMULATED NET INVESTMENT INCOME REALIZED PORTFOLIO (LOSS) GAIN (LOSS) PAID-IN CAPITAL - ---------------------------------------- ----------------- --------------- --------------- Pioneer Real Estate Shares VCT Portfolio $ (48,921) $ 19,456 $ 29,465 ========= ======== ========
The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004 and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003* ----------- ---------- DISTRIBUTIONS PAID FROM: Ordinary Income $ 2,449,917 $ 2,171,485 Long-Term capital gain 470,299 -- ----------- ----------- $ 2,920,216 $ 2,171,485 ----------- ----------- Return of Capital -- 771,021 Total distributions $ 2,920,216 $ 2,942,506 =========== =========== DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed long-term gain/(capital loss carryforward) $ 3,564,562 REIT Dividend Payable 286,854 Unrealized appreciation (depreciation) 32,043,692 ----------- Total $35,895,108 ===========
The difference between book-basis and tax-basis unrealized appreciation is primarily attributable to the tax deferral of losses on wash sales. * Included in the Portfolio's distributions from 2003 ordinary income is $192,564 in excess of investment company taxable income, which, in accordance with U.S. tax law, is taxable to shareowners as ordinary income distributions. The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily attributable to the tax deferral of losses on wash sales, returns of capital on REITs, the recognition of unrealized gains or losses on certain futures contracts, and the tax treatment of premium amortization. F. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of 12 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of the adjusted net assets at the beginning of the day. Distributions paid by a Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. Dividends and distributions to shareowners are recorded on the ex-dividend date. G. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. H. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the Portfolio. Management fees are calculated daily at the following annual rate of 0.80% of the Portfolio's average daily net assets. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $68,694 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $270 in transfer agent fees payable to PIMSS at December 31, 2004. 4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------- ------------ ------------ -------------- Real Estate Shares Portfolio $ 72,238,242 $ 32,121,655 $ (77,963) $ 32,043,692 ============ ============ ========= ============
13 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- 5. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $33,759,977 and $26,732,885, respectively. 6. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
REAL ESTATE SHARES PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - ----------------------------- ---------- ------------- ---------- ------------ CLASS II: Shares sold 151,466 $ 3,192,487 153,884 $ 2,545,266 Reinvestment of distributions 56,986 1,200,592 87,137 1,422,912 Shares repurchased (425,846) (8,497,885) (588,199) (9,201,017) -------- ------------- -------- ------------ Net increase (217,394) $ (4,104,806) (347,178) $ (5,232,839) ======== ============= ======== ============ CLASS II: Shares sold 820,863 $ 16,835,509 424,038 $ 7,208,344 Reinvestment of distributions 81,377 1,719,624 92,474 1,519,594 Shares repurchased (505,041) (10,015,990) (578,790) (8,767,986) -------- ------------- -------- ------------ Net increase 397,199 $ 8,539,143 (62,278) $ (40,048) ======== ============= ======== ============
14 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS I SHAREOWNERS OF PIONEER REAL ESTATE SHARES VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Real Estate Shares VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of two years in the period ended December 31, 2001 were audited by other auditors who have ceased operations and whose report, dated February 8, 2002, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Real Estate Shares VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ ERNEST & YOUNG LLP Boston, Massachusetts February 11, 2005 15 PIONEER REAL ESTATE SHARES VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - -------------------------------------------------------------------------------- INVESTMENT ADVISER TRUSTEES AND OFFICERS Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the Trust's operations. The Trust's Trustees and officers are listed below, CUSTODIAN together with their principal occupations during the past five years. Brown Brothers Harriman & Co. Trustees who are interested persons of the Portfolio within the meaning of the Investment Company Act of 1940 are referred to as Interested Trustees. Trustees who are not interested persons of the Trust are INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM referred to as Independent Trustees. Each of the Trustees serves as a Ernst & Young LLP trustee of each of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Pioneer Funds"). The address for all Interested PRINCIPAL UNDERWRITER Trustees and all officers of the Portfolio is 60 State Street, Boston, Pioneer Funds Distributor, Inc. Massachusetts 02109. The Trust's statement of additional information provides more detailed LEGAL COUNSEL information regarding the Trust's Trustees and is available upon Wilmer Cutler Pickering Hale and Dorr LLP request, without charge, by calling 1-800-225-6292. Proxy Voting Policies and Procedures of the Trust are available without SHAREOWNER SERVICES AND TRANSFER charge, upon Agent request, by calling our toll free number Pioneer Investment Management Shareholder Services, Inc. (1-800-225-6292). This information is also available online at pioneerfunds.com.
- -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS THIS TRUSTEE John F. Cogan, Jr. (78)* Chairman of the Serves until Trustee and President Serves Director of Harbor Global Board, Trustee and successor trustee is until retirement or removal; Company, Ltd. President elected or earlier Deputy Chairman and a Director retirement or removal of Pioneer Global Asset Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds) * Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------ Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive None Executive Vice successor trustee Officer, PIM-USA since May President is elected or earlier 2003 (Director since January retirement 2001); President and Director or removal of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer ofPIM-USA, November 2000; May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. ** Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------
16 PIONEER REAL ESTATE SHARES VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS THIS TRUSTEE David R. Bock **(61) Trustee since Serves until a Senior Vice President and Director of The Enterprise 3050 K. Street NW, 2005. successor trustee is Chief Financial Officer, Social Investment Company Washington, DC 20007 elected or earlier I-trax, Inc.(publicly traded (privately-held affordable retirement or health care services company) housing finance company); removal. (2001-present); Managing Director of New York Partner, Federal City Capital Mortgage Trust (publicly Advisors (boutique merchant traded mortgage REIT) bank) (1995-2000; 2002 to 2004); Executive Vice President and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Mary K. Bush (56) Trustee since Serves until President, Bush International Director of Brady 3509 Woodbine Street, 2000. successor trustee is (international financial Corporation (industrial Chevy Chase, MD 20815 elected or earlier advisory firm) identification and retirement or removal specialty coated material products manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc.(tobacco) - ------------------------------------------------------------------------------------------------------------------------------------ Margaret B.W. Trustee since Serves until Founding Director, The None Graham (57) 2000. successor trustee Winthrop Group, Inc. 1001 Sherbrooke Street is elected or earlier (consulting firm); Professor West, Montreal, Quebec, retirement or removal of Management, Faculty of Canada H3A 1G5 Management, McGill University - ------------------------------------------------------------------------------------------------------------------------------------ Marguerite A. Piret (56) Trustee since Serves until President and Chief Executive Director of New America One Boston Place, 1995. successor trustee Officer, Newbury, Piret & High Income Fund, Inc. 28th Floor, is elected or earlier Company, Inc. (investment (closed-end investment Boston, MA 02108 retirement or removal banking firm) company) - ------------------------------------------------------------------------------------------------------------------------------------ Stephen K. West (76) Trustee since Serves until Senior Counsel, Sullivan & Director, The Swiss 125 Broad Street, 1995. successor trustee Cromwell (law firm) Helvetia Fund, Inc. New York, NY 10004 is elected or earlier (closed-end investment retirement or removal company) and AMVESCAP PLC (investment managers) - ------------------------------------------------------------------------------------------------------------------------------------ John Winthrop (68) Trustee since Serves until President, John Winthrop & None One North Adgers Wharf, September, 2000. successor trustee is Co., Inc.(private investment Charleston, SC 29401 elected or earlier firm) retirement or removal - ------------------------------------------------------------------------------------------------------------------------------------
17 PIONEER REAL ESTATE SHARES VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS THIS OFFICER Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior None discretion of the Vice President - Legal of Board Pioneer; and Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Christopher J. Assistant Serves at the Assistant Vice President and None Kelley (40) Secretary discretion of the Senior Counsel of Pioneer Board since July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler None Secretary discretion of the Pickering Hale and Dorr LLP; Board Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Vincent Nave (59) Treasurer Serves at the Vice President - Fund None discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ------------------------------------------------------------------------------------------------------------------------------------ Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer None Treasurer discretion of the since 2004; Treasurer and Board Senior Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - None Treasurer discretion of the Fund Accounting, Board Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None Treasurer discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - ------------------------------------------------------------------------------------------------------------------------------------
18 PIONEER REAL ESTATE SHARES VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS THIS OFFICER Katharine Kim Assistant Serves at the Fund Administration Manager - None Sullivan (31) Treasurer discretion of the Fund Accounting, Board Administration and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of None Officer discretion of the Pioneer (Director of Board Compliance and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 19 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. 20 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. 21 [LOGO] PIONEER Investments(R) [LOGO] PIONEER Investments (R) PIONEER VARIABLE CONTRACTS TRUST PIONEER AMERICA INCOME VCT PORTFOLIO -- CLASS II SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Pioneer America Income VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 10 Notes to Financial Statements 14 Report of Independent Registered Public Accounting Firm 18 Trustees, Officers and Service Providers 19 PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT www.pioneerfunds.com. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT http://www.sec.gov. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] U.S. Government Securities 92.3% U.S. Government Agency Obligations 3.9% Temporary Cash Investment 3.3% U.S. Corporate Bonds 0.5% MATURITY DISTRIBUTION (As a percentage of total investment portfolio) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] 0-1 years 3.0% 1-3 years 66.6% 3-4 years 4.9% 4-6 years 16.2% 6-8 years 0.9% 8+ years 8.4% FIVE LARGEST HOLDINGS (As a percentage of long-term holdings) 1. U.S. Treasury Notes, 6.5%, 2/15/10 11.92% 2. U.S. Treasury Notes, 6.25%, 8/15/23 4.85 3. Federal Home Loan Mortgage Corp., 6.0%, 3/1/33 2.72 4. U.S. Treasury Notes, 6.375%, 8/15/27 2.49 5. Federal Home Loan Mortgage Corp., 6.0%, 5/1/34 2.08 The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- PRICES AND DISTRIBUTIONS 12/31/04 12/31/03 Net Asset Value per Share $ 10.12 $ 10.37 DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ 0.5557 $ -- $ -- - -------------------------------------------------------------------------------- PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in PIONEER AMERICA INCOME VCT PORTFOLIO at net asset value, compared to that of the Lehman Brothers Fixed-Rate Mortgage- Backed Securities Index and of Lehman Brothers Government Bond Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] - --------------------------------------------------------------- GROWTH OF $10,000 - --------------------------------------------------------------- LEHMAN GOVERNMENT LEHMAN FIXED DATE VALUE BOND INDEX RATE MORTGAGE INDEX 3/31/1995 $ 10,000 $ 10,000 $ 10,000 $ 10,555 $ 11,302 $ 11,098 12/31/1996 $ 10,665 $ 11,615 $ 11,693 $ 11,536 $ 12,727 $ 12,802 12/31/1998 $ 12,445 $ 13,981 $ 13,694 $ 12,092 $ 13,667 $ 13,947 12/31/2000 $ 13,480 $ 15,477 $ 15,505 $ 14,317 $ 16,598 $ 16,779 12/31/2002 $ 15,755 $ 18,506 $ 18,246 $ 16,340 $ 18,943 $ 18,802 12/31/2004 $ 16,837 $ 19,604 $ 19,687 Index comparisons begin 2/28/95. The Lehman Brothers Government Bond Index measures the performance of the U.S. government bond market. The Lehman Brothers Fixed Rate Mortgage Index measures the performance of the government and mortgage securities markets. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in any Index. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004) - -------------------------------------------------------------------------------- NET ASSET VALUE - -------------------------------------------------------------------------------- Life-of-Class (3/1/95) 5.43% 5 Years 6.84 1 Year 3.04 All total returns shown assume reinvestment of distributions at net asset value. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Please refer to variable product's annual report for performance that reflects the deduction of the variable products fees and charges. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers, performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER AMERICA INCOME VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,032.65 $ 1,031.22 Expenses Paid During Period* $ 4.07 $ 5.28 * Expenses are equal to the Portfolio's annualized expense ratio of 0.80% and 1.03% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER AMERICA INCOME VCT PORTFOLIO Based on a hypothetical 5% return per year before expenses, reflecting the period from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,021.17 $ 1,019.81 Expenses Paid During Period* $ 4.05 $ 5.25 * Expenses are equal to the Portfolio's annualized expense ratio of 0.80%, and 1.03% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- A WORD ABOUT RISK: GOVERNMENT GUARANTEES APPLY TO THE UNDERLYING SECURITIES ONLY AND NOT TO THE PRICES AND YIELDS OF THE PORTFOLIO. WHEN INTEREST RATES RISE, THE PRICES OF FIXED INCOME SECURITIES IN THE FUND WILL GENERALLY FALL. CONVERSELY, WHEN INTEREST RATES FALL THE PRICES OF FIXED INCOME SECURITIES IN THE FUND WILL GENERALLY RISE. THE PORTFOLIO MAY INVEST IN MORTGAGE-BACKED SECURITIES, WHICH DURING TIMES OF FLUCTUATING INTEREST RATES MAY INCREASE OR DECREASE MORE THAN OTHER FIXED-INCOME SECURITIES. MORTGAGE-BACKED SECURITIES ARE ALSO SUBJECT TO PRE-PAYMENTS. INVESTMENTS IN THE FUND ARE SUBJECT TO POSSIBLE LOSS DUE TO THE FINANCIAL FAILURE OF UNDERLYING SECURITIES AND THEIR INABILITY TO MEET THEIR DEBT OBLIGATIONS. CALL 800-688-9915 OR VISIT www.pioneerfunds.com FOR THE MOST RECENT MONTH-END PER FORMANCE RESULTS. CURRENT PER FORMANCE MAY BE LOWER OR HIGHER THAN THE PER FORMANCE DATA QUOTED. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE RETURNS FOR THE PORTFOLIO DO NOT REFLECT THE DEDUCTION OF EXPENSES ASSOCIATED WITH VARIABLE PRODUCTS, SUCH AS MORTALITY AND EXPENSE RISK CHARGES, SEPARATE ACCOUNT CHARGES, AND SALES CHARGES. THESE EXPENSES WOULD REDUCE THE OVERALL RETURNS SHOWN. PERFORMANCE RESULTS REFLECT ANY APPLICABLE EXPENSE WAIVERS IN EFFECT DURING THE PERIODS SHOWN. WITHOUT SUCH WAIVERS, PER FORMANCE WOULD BE LOWER. WAIVERS MAY NOT BE IN EFFECT FOR ALL PORTFOLIOS. CERTAIN FEE WAIVERS ARE CONTRACTUAL THROUGH A SPECIFIED PERIOD. OTHERWISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION. Investors in U.S. Government and agency securities were rewarded with a relatively attractive level of income during the 12-month period ended December 31, 2004. Richard Schlanger, a member of the Pioneer fixed-income team, discusses the factors that affected the fixed-income market and the Portfolio over the past 12 months. Q: HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD? A: For the 12-month period ended December 31, 2004, Class II shares of Pioneer America Income VCT Portfolio produced a total return of 3.04%. The Portfolio performed in line with its benchmark, the Lehman Brothers Government Bond Index which returned 3.48% for the same period, but underperformed the 4.70% return of the Lehman Brothers Fixed-Rate Mortgage-Backed Index. At the end of the period, the 30-day SEC yield for Class II shares was 3.34%. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE PERIOD? A: As economic growth improved, the Federal reserve began raising short-term interest rates. Initially, the Fed's actions caused Treasury yields to move higher; but when it appeared that inflation was under control, the yield curve flattened, and short-term yields moved higher and prices declined; and longer-term yields fell or remained stable, boosting prices. The yield curve shows the relationship between bond yields and maturity lengths. An enormous amount of Treasury buying by overseas investors was also instrumental in keeping Treasury yields low. Q: HOW DID YOU MANAGE THE PORTFOLIO IN THIS ENVIRONMENT? A: Mortgage-backed securities accounted for 68.3% of net assets, and Treasury securities, 28.8% of net assets. There was also a 2.9% cash position. All of the mortgages were issued by Government Sponsored Enterprises (GSEs), with about 37.5% of the mortgage position invested in securities issued by the Government National Mortgage Association (Ginnie Mae). (Ginnie Mae securities are backed by the full faith and credit of the U.S. government; however, a full faith and credit backing applies to underlying Portfolio securities and not to Portfolio shares.) About 18.8% of the mortgages were from the Federal National Mortgage Association (Fannie Mae,) and 11.6% from the Federal Home Loan Mortgage Corporation (Freddie Mac). In the Treasury portion of the Portfolio, we emphasized securities with short to intermediate durations. We expected yields to move higher and wanted to minimize the price volatility that would naturally occur as yields rose. Therefore, we kept duration shorter than the benchmark. Measured in years, duration measures a bond's price sensitivity to interest-rate changes. A shorter duration can protect a portfolio from price declines as yields rise. We were premature, however, in our expectation of higher yields. As a result, our short-duration strategy worked against the Portfolio. Long-term Treasuries outperformed. Q: WHAT CONTRIBUTED MOST TO PERFORMANCE? A: The significant overweight in mortgage-backed securities made the largest positive impact, as mortgages outperformed other fixed-income assets. Minimizing prepayment risk by selecting specific mortgage pools also helped drive performance. The flatter yield curve, which boosted the prices of longer-term Treasury securities, also benefited results. Q: WHAT DETRACTED FROM PERFORMANCE? A: The Portfolio's underweight in long-term Treasuries. We continue to believe, however, that yields on such Treasuries are artificially low, given the weak U.S. dollar, the growing trade imbalance and a Fed that is likely to continue raising interest rates. Q: WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A: In the short term, we expect the investment environment to remain unchanged and are unlikely to alter the Portfolio significantly during the first quarter of 2005. We plan to remain overweight in mortgage securities. In February, Federal Reserve Chairman Alan Greenspan will make his semi-annual Humphrey-Hawkins testimony before Congressional committees. At that time, we will learn what to expect in the way of Fed interest-rate policy and what the central bank's thinking is about the prospects for accelerating inflation. Whenever the Fed raises rates, there is a lag effect; and it can take as long as a year for higher rates to affect the economy. Over the next several months, we will be closely monitoring data to determine the appropriate action to take should the economic backdrop change. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. 4 PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE COLLATERALIZED MORTGAGE OBLIGATIONS - 0.4% GOVERNMENT - 0.4% $ 176,290 Freddie Mac, 5.0%, 1/15/16 $ 179,566 ------------ TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $182,044) $ 179,566 ------------ CORPORATE BONDS - 0.5% MISCELLANEOUS - 0.5% 250,000 Private Export Funding, 3.375%, 2/15/09 $ 246,378 ------------ TOTAL CORPORATE BONDS (Cost $250,000) $ 246,378 ------------ U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 95.8% 275,973 Fannie Mae, 5.5%, 6/1/23 $ 282,311 250,000 Fannie Mae, Floating Rate Note, 3/1/19 247,845 250,000 Federal Farm Credit Bank, 3.25%, 6/15/07 249,358 400,000 Federal Farm Credit Bank, 4.9%, 3/17/14 390,855 100,000 Federal Farm Credit Bank, 5.88%, 9/8/08 107,537 200,000 Federal Farm Credit Bank, Medium Term Note, 6.38%, 11/27/06 211,468 400,000 Federal Home Loan Bank, 4.53%, 10/30/06 409,193 850,000 Federal Home Loan Bank, 5.875%, 11/15/07 905,489 300,000 Federal Home Loan Bank, 5.89%, 6/30/08 322,649 290,891 Federal Home Loan Mortgage Corp., 5.5%, 9/1/34 295,700 251,395 Federal Home Loan Mortgage Corp., 6.0%, 2/1/33 260,053 1,175,562 Federal Home Loan Mortgage Corp., 6.0%, 3/1/33 1,214,904 899,518 Federal Home Loan Mortgage Corp., 6.0%, 5/1/34 929,668 105,850 Federal Home Loan Mortgage Corp., 6.0%, 10/1/32 109,496 218,792 Federal Home Loan Mortgage Corp., 6.0%, 11/1/32 226,328 488,433 Federal Home Loan Mortgage Corp., 6.0%, 11/1/32 505,255 57,634 Federal Home Loan Mortgage Corp., 6.0%, 12/1/32 59,619 187,579 Federal Home Loan Mortgage Corp., 6.0%, 12/1/32 194,040 76,135 Federal Home Loan Mortgage Corp., 6.5%, 1/1/29 80,041 62,203 Federal Home Loan Mortgage Corp., 6.5%, 2/1/32 65,331 38,797 Federal Home Loan Mortgage Corp., 6.5%, 3/1/29 40,770 104,969 Federal Home Loan Mortgage Corp., 6.5%, 3/1/11 111,272 51,493 Federal Home Loan Mortgage Corp., 6.5%, 4/1/31 54,083 295,687 Federal Home Loan Mortgage Corp., 6.5%, 4/1/32 310,484 102,288 Federal Home Loan Mortgage Corp., 6.5%, 7/1/32 107,407 313,916 Federal Home Loan Mortgage Corp., 6.5%, 7/1/16 332,419 101,667 Federal Home Loan Mortgage Corp., 6.5%, 10/1/31 106,780 140,000 Federal Home Loan Mortgage Corp., 6.7%, 1/5/07 149,258 28,003 Federal Home Loan Mortgage Corp., 7.0%, 2/1/31 29,688 31,723 Federal Home Loan Mortgage Corp., 7.0%, 3/1/32 33,769 3,927 Federal Home Loan Mortgage Corp., 7.0%, 4/1/30 4,163 54,342 Federal Home Loan Mortgage Corp., 7.0%, 4/1/32 57,612 9,139 Federal Home Loan Mortgage Corp., 7.0%, 6/1/31 9,688 4,628 Federal Home Loan Mortgage Corp., 7.0%, 7/1/31 4,906 12,064 Federal Home Loan Mortgage Corp., 7.0%, 9/1/31 12,786 51,676 Federal Home Loan Mortgage Corp., 7.5%, 8/1/31 55,390 279,272 Federal National Mortgage Association, 4.5%, 4/1/19 278,559 111,964 Federal National Mortgage Association, 5.0%, 3/1/09 113,931
The accompanying notes are an integral part of these financial statements. 5 PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE U.S. GOVERNMENT AND AGENCY OBLIGATIONS - (CONT.) $ 251,032 Federal National Mortgage Association, 5.0%, 7/1/19 $ 255,213 268,174 Federal National Mortgage Association, 5.5%, 2/1/33 272,313 377,212 Federal National Mortgage Association, 5.5%, 3/1/18 390,263 290,566 Federal National Mortgage Association, 5.5%, 3/1/34 295,159 397,281 Federal National Mortgage Association, 5.5%, 4/1/18 412,484 458,366 Federal National Mortgage Association, 5.5%, 4/1/19 474,224 406,282 Federal National Mortgage Association, 5.5%, 9/1/33 412,816 425,363 Federal National Mortgage Association, 5.5%, 11/1/33 432,203 597,379 Federal National Mortgage Association, 6.0%, 3/1/33 618,531 157,145 Federal National Mortgage Association, 6.0%, 4/1/33 162,709 219,343 Federal National Mortgage Association, 6.0%, 5/1/33 226,908 187,628 Federal National Mortgage Association, 6.0%, 6/1/33 194,099 198,880 Federal National Mortgage Association, 6.0%, 7/1/34 205,753 227,731 Federal National Mortgage Association, 6.0%, 9/1/34 235,601 60,951 Federal National Mortgage Association, 6.0%, 10/1/32 63,109 96,547 Federal National Mortgage Association, 6.0%, 11/1/32 99,965 137,611 Federal National Mortgage Association, 6.0%, 11/1/32 142,484 314,302 Federal National Mortgage Association, 6.0%, 11/1/32 325,431 267,902 Federal National Mortgage Association, 6.0%, 12/1/11 281,400 65,962 Federal National Mortgage Association, 6.0%, 12/1/31 68,299 57,772 Federal National Mortgage Association, 6.5%, 1/1/29 60,686 46,300 Federal National Mortgage Association, 6.5%, 1/1/32 48,605 116,621 Federal National Mortgage Association, 6.5%, 1/1/32 122,426 29,107 Federal National Mortgage Association, 6.5%, 3/1/32 30,564 45,679 Federal National Mortgage Association, 6.5%, 3/1/32 47,953 48,840 Federal National Mortgage Association, 6.5%, 3/1/32 51,296 100,354 Federal National Mortgage Association, 6.5%, 3/1/32 105,334 121,433 Federal National Mortgage Association, 6.5%, 4/1/32 127,459 59,308 Federal National Mortgage Association, 6.5%, 7/1/21 62,594 106,676 Federal National Mortgage Association, 6.5%, 7/1/32 111,970 486,710 Federal National Mortgage Association, 6.5%, 7/1/34 510,579 63,447 Federal National Mortgage Association, 6.5%, 8/1/32 66,595 205,197 Federal National Mortgage Association, 6.5%, 8/1/32 215,379 101,389 Federal National Mortgage Association, 6.5%, 8/1/32 106,435 57,390 Federal National Mortgage Association, 6.5%, 9/1/32 60,238 12,729 Federal National Mortgage Association, 6.5%, 10/1/31 13,363 95,957 Federal National Mortgage Association, 6.5%, 10/1/31 100,733 93,880 Federal National Mortgage Association, 6.5%, 11/1/28 98,652 13,239 Federal National Mortgage Association, 7.0%, 1/1/29 14,046 38,406 Federal National Mortgage Association, 7.0%, 1/1/32 40,714 8,740 Federal National Mortgage Association, 7.0%, 5/1/31 9,268 26,507 Federal National Mortgage Association, 7.0%, 7/1/31 28,100 40,400 Federal National Mortgage Association, 7.0%, 8/1/19 43,079 64,486 Federal National Mortgage Association, 7.0%, 9/1/18 68,802 170,257 Federal National Mortgage Association, 7.0%, 9/1/30 180,633 26,521 Federal National Mortgage Association, 7.5%, 2/1/31 28,417 73,023 Federal National Mortgage Association, 9.0%, 4/1/33 79,055 300,000 Freddie Mac, 5.25%, 11/15/12 305,040 247,909 Government National Mortgage Association, 4.5%, 6/15/34 242,051 488,855 Government National Mortgage Association, 4.5%, 6/15/34 477,304
6 The accompanying notes are an integral part of these financial statements. PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE U.S. GOVERNMENT AND AGENCY OBLIGATIONS - (CONT.) $ 438,519 Government National Mortgage Association, 4.5%, 8/15/33 $ 428,316 329,901 Government National Mortgage Association, 5.0%, 7/15/17 339,859 196,084 Government National Mortgage Association, 5.0%, 7/15/19 201,156 248,621 Government National Mortgage Association, 5.0%, 11/20/19 254,089 201,597 Government National Mortgage Association, 5.5%, 2/15/19 210,260 246,379 Government National Mortgage Association, 5.5%, 3/15/33 251,875 191,210 Government National Mortgage Association, 5.5%, 4/15/31 195,673 270,409 Government National Mortgage Association, 5.5%, 4/15/33 276,441 425,040 Government National Mortgage Association, 5.5%, 6/15/17 443,325 244,603 Government National Mortgage Association, 5.5%, 7/15/19 255,097 337,566 Government National Mortgage Association, 5.5%, 7/15/33 345,096 249,372 Government National Mortgage Association, 5.5%, 10/15/34 254,822 199,585 Government National Mortgage Association, 5.5%, 11/20/34 203,759 135,810 Government National Mortgage Association, 6.0%, 1/15/33 140,939 289,888 Government National Mortgage Association, 6.0%, 1/15/33 300,636 266,577 Government National Mortgage Association, 6.0%, 2/15/18 280,921 502,825 Government National Mortgage Association, 6.0%, 2/15/33 521,469 281,601 Government National Mortgage Association, 6.0%, 3/15/34 292,058 481,495 Government National Mortgage Association, 6.0%, 3/15/34 499,377 118,398 Government National Mortgage Association, 6.0%, 5/15/17 124,759 169,002 Government National Mortgage Association, 6.0%, 6/20/16 177,564 430,701 Government National Mortgage Association, 6.0%, 7/15/23 449,745 186,862 Government National Mortgage Association, 6.0%, 7/20/19 196,282 198,278 Government National Mortgage Association, 6.0%, 8/15/19 208,939 193,812 Government National Mortgage Association, 6.0%, 8/15/34 201,187 199,269 Government National Mortgage Association, 6.0%, 8/15/34 206,669 159,562 Government National Mortgage Association, 6.0%, 9/15/32 165,568 376,937 Government National Mortgage Association, 6.0%, 9/15/33 390,912 149,538 Government National Mortgage Association, 6.0%, 9/15/34 155,091 54,936 Government National Mortgage Association, 6.0%, 10/15/32 57,003 100,101 Government National Mortgage Association, 6.0%, 10/15/32 103,869 158,187 Government National Mortgage Association, 6.0%, 10/15/32 164,141 186,854 Government National Mortgage Association, 6.0%, 10/15/32 193,887 349,345 Government National Mortgage Association, 6.0%, 10/15/34 362,319 499,075 Government National Mortgage Association, 6.0%, 10/15/34 517,609 209,478 Government National Mortgage Association, 6.0%, 11/15/32 217,362 272,746 Government National Mortgage Association, 6.0%, 11/15/32 283,860 306,538 Government National Mortgage Association, 6.0%, 12/15/32 319,918 288,866 Government National Mortgage Association, 6.5%, 1/15/34 304,148 37,525 Government National Mortgage Association, 6.5%, 2/15/29 39,551 38,193 Government National Mortgage Association, 6.5%, 2/15/32 40,591 24,629 Government National Mortgage Association, 6.5%, 3/15/26 26,010 52,950 Government National Mortgage Association, 6.5%, 4/15/17 56,480 120,823 Government National Mortgage Association, 6.5%, 4/15/17 128,879 43,252 Government National Mortgage Association, 6.5%, 4/15/32 45,571 47,217 Government National Mortgage Association, 6.5%, 4/15/32 49,748 83,717 Government National Mortgage Association, 6.5%, 5/15/29 88,284 174,227 Government National Mortgage Association, 6.5%, 5/15/29 183,633 220,009 Government National Mortgage Association, 6.5%, 5/15/29 231,986 71,073 Government National Mortgage Association, 6.5%, 5/15/31 74,882
The accompanying notes are an integral part of these financial statements. 7 PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE U.S. GOVERNMENT AND AGENCY OBLIGATIONS - (CONT.) $ 35,969 Government National Mortgage Association, 6.5%, 6/15/17 $ 38,367 60,894 Government National Mortgage Association, 6.5%, 6/15/28 64,223 69,534 Government National Mortgage Association, 6.5%, 6/15/28 73,356 9,091 Government National Mortgage Association, 6.5%, 6/15/29 9,581 72,881 Government National Mortgage Association, 6.5%, 6/15/31 76,787 354,205 Government National Mortgage Association, 6.5%, 6/15/31 373,187 34,467 Government National Mortgage Association, 6.5%, 6/15/32 36,314 46,460 Government National Mortgage Association, 6.5%, 6/15/32 48,951 50,698 Government National Mortgage Association, 6.5%, 6/15/32 53,415 117,221 Government National Mortgage Association, 6.5%, 7/15/31 123,503 109,376 Government National Mortgage Association, 6.5%, 7/15/32 115,239 104,642 Government National Mortgage Association, 6.5%, 9/15/31 110,250 134,252 Government National Mortgage Association, 6.5%, 10/15/31 141,447 40,151 Government National Mortgage Association, 6.5%, 12/15/31 42,303 81,034 Government National Mortgage Association, 6.5%, 12/15/31 85,377 16,161 Government National Mortgage Association, 7.0%, 1/15/26 17,231 40,750 Government National Mortgage Association, 7.0%, 1/15/29 43,347 60,301 Government National Mortgage Association, 7.0%, 2/15/28 64,192 44,369 Government National Mortgage Association, 7.0%, 2/15/31 47,159 117,595 Government National Mortgage Association, 7.0%, 2/20/29 124,683 52,848 Government National Mortgage Association, 7.0%, 3/15/28 56,258 26,131 Government National Mortgage Association, 7.0%, 4/15/28 27,817 30,698 Government National Mortgage Association, 7.0%, 5/15/31 32,629 141,847 Government National Mortgage Association, 7.0%, 5/15/32 150,755 37,838 Government National Mortgage Association, 7.0%, 6/15/29 40,249 45,696 Government National Mortgage Association, 7.0%, 7/15/26 48,723 20,983 Government National Mortgage Association, 7.0%, 7/15/29 22,320 45,098 Government National Mortgage Association, 7.0%, 7/15/29 47,972 38,315 Government National Mortgage Association, 7.0%, 8/15/31 40,725 23,557 Government National Mortgage Association, 7.0%, 9/15/27 25,088 63,087 Government National Mortgage Association, 7.0%, 11/15/28 67,158 6,305 Government National Mortgage Association, 7.0%, 12/15/30 6,702 22,876 Government National Mortgage Association, 7.5%, 1/15/31 24,569 33,466 Government National Mortgage Association, 7.5%, 1/15/32 35,941 1,856 Government National Mortgage Association, 7.5%, 6/15/23 2,007 2,186 Government National Mortgage Association, 7.5%, 8/15/23 2,364 8 Government National Mortgage Association, 7.5%, 8/15/29 8 7,983 Government National Mortgage Association, 7.5%, 8/15/29 8,575 9,870 Government National Mortgage Association, 7.5%, 10/15/22 10,677 33,802 Government National Mortgage Association, 7.5%, 10/15/29 36,312 44,869 Government National Mortgage Association, 7.5%, 11/15/29 48,201 125,390 Government National Mortgage Association I, 6.0%, 2/15/29 130,320 75,232 Government National Mortgage Association I, 7.0%, 11/15/30 79,969 39,724 Government National Mortgage Association I, 7.0%, 12/15/30 42,226 386,916 Government National Mortgage Association II, 5.0%, 12/20/18 395,665 453,100 Government National Mortgage Association II, 5.5%, 2/20/34 462,576 477,815 Government National Mortgage Association II, 5.5%, 7/20/19 496,824 373,784 Government National Mortgage Association II, 6.0%, 6/20/34 387,198 279,628 Government National Mortgage Association II, 6.0%, 11/20/33 289,646 83,628 Government National Mortgage Association II, 6.0%, 12/20/18 87,866
8 The accompanying notes are an integral part of these financial statements. PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE U.S. GOVERNMENT AND AGENCY OBLIGATIONS - (CONT.) $ 46,129 Government National Mortgage Association II, 6.5%, 9/20/31 $ 48,500 44,673 Government National Mortgage Association II, 6.5%, 8/20/28 47,030 60,358 Government National Mortgage Association II, 6.5%, 12/20/28 63,525 22,993 Government National Mortgage Association II, 7.0%, 1/20/31 24,358 57,526 Government National Mortgage Association II, 7.0%, 5/20/26 61,139 9,749 Government National Mortgage Association II, 7.5%, 8/20/27 10,451 3,516 Government National Mortgage Association II, 8.0%, 8/20/25 3,815 12,000 Tennessee Valley Authority, Variable Rate Note, 6/1/28 299,880 1,850,000 U.S. Treasury Bonds, 6.25%, 8/15/23 2,165,873 400,000 U.S. Treasury Bonds, 7.25%, 5/15/16 500,687 375,000 U.S. Treasury Notes, 4.75%, 5/15/14 390,791 925,000 U.S. Treasury Notes, 6.375%, 8/15/27 1,110,722 4,700,000 U.S. Treasury Notes, 6.5%, 2/15/10 5,321,095 ------------ TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $43,313,182) $ 44,212,173 ------------ TEMPORARY CASH INVESTMENT - 3.3% REPURCHASE AGREEMENT - 3.3% 1,500,000 UBS Warburg, Inc., 1.00%, dated 12/31/04, repurchase price of $1,500,000 plus accrued interest on 1/3/05 collateralized by $1,495,000 U.S. Treasury Bill, 6.75%, 5/15/05 $ 1,500,000 ------------ TOTAL TEMPORARY CASH INVESTMENT (Cost $1,500,000) $ 1,500,000 ------------ TOTAL INVESTMENTS IN SECURITIES - 100.0% (Cost $45,245,226) $ 46,138,116 ------------ OTHER ASSETS AND LIABILITIES - (0.0)% $ (5,019) ------------ TOTAL NET ASSETS - 100.0% $ 46,133,097 ============
The accompanying notes are an integral part of these financial statements. 9 PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
YEAR ENDED 5/1/03 TO CLASS II (A) 12/31/04 12/31/03 Net asset value, beginning of period $ 10.37 $ 10.57 -------- ------- Increase (decrease) from investment operations: Net investment income $ 0.41 $ 0.21 Net realized and unrealized loss on investments and foreign currency transactions (0.11) (0.15) -------- ------- Net increase from investment operations $ 0.30 $ 0.06 Distributions to shareowners: Net investment income (0.55) (0.26) Net realized gain -- -- -------- ------- Net decrease in net asset value $ (0.25) $ (0.20) -------- ------- Net asset value, end of period $ 10.12 $ 10.37 ======== ======= Total return* 3.04% 2.60% Ratio of net expenses to average net assets+ 1.06%** 1.01%** Ratio of net investment income to average net assets+ 3.29%** 2.42%** Portfolio turnover rate 37%** 34% Net assets, end of period (in thousands) $ 13,791 $ 2,637 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.06%** 1.01%** Net investment income 3.29%** 2.42%**
(a) Class II shares were first publicly offered on May 1, 2003. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period.) ** Annualized. + Ratios with no reduction for fees paid indirectly. 10 The accompanying notes are an integral part of these financial statements. PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (Cost $45,245,226) $ 46,138,116 Cash 20,754 Receivables-- Dividends, interest and foreign taxes withheld 368,514 Other 2,900 ------------ Total assets $ 46,530,284 ------------ LIABILITIES: Payables-- Investment securities purchased $ 201,361 Fund shares repurchased 113,148 Due to affiliates 26,826 Accrued expenses 55,852 ------------ Total liabilities $ 397,187 ------------ NET ASSETS: Paid-in capital $ 46,546,165 Undistributed net investment income (loss) (264,827) Accumulated undistributed net realized gain (loss) (1,041,130) Net unrealized gain (loss) on: Investments 892,889 ------------ Total net assets $ 46,133,097 ------------ NET ASSET VALUE PER SHARE: CLASS I: No par value (unlimited number of shares authorized) Net assets $ 32,341,802 Shares outstanding 3,199,958 ------------ Net asset value per share $ 10.11 CLASS II: No par value (unlimited number of shares authorized) Net assets $ 13,791,295 Shares outstanding 1,362,373 ------------ Net asset value per share $ 10.12 The accompanying notes are an integral part of these financial statements. 11 PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- YEAR ENDED 12/31/04 INVESTMENT INCOME: Interest (net of foreign taxes withheld of $0) $ 1,995,831 ----------- Total investment income $ 1,995,831 ----------- EXPENSES: Management fees $ 243,809 Transfer agent fees and expenses 2,896 Distribution fees (Class II) 19,905 Administrative reimbursements 18,500 Custodian fees 18,454 Professional fees 52,915 Printing expense 11,737 Miscellaneous 2,020 ----------- Total expenses $ 370,236 ----------- Net expenses $ 370,236 ----------- Net investment income (loss) $ 1,625,595 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 206,989 ----------- $ 206,989 ----------- Change in net unrealized gain or (loss) from: Investments $ (352,583) ----------- $ (352,583) ----------- Net gain (loss) on investments, futures contracts and foreign currency transactions $ (145,594) =========== Net increase (decrease) in net assets resulting from operations $ 1,480,001 =========== 12 The accompanying notes are an integral part of these financial statements. PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 1,625,595 $ 2,011,935 Net realized gain (loss) on investments 206,989 193,917 Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions (352,583) (1,192,887) ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 1,480,001 $ 1,012,965 ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (2,102,796) $ (2,321,232) Class II (401,489) (26,127) ------------- ------------- Total distributions to shareowners $ (2,504,285) $ (2,347,359) ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 15,160,465 $ 10,875,454 Reinvestment of distributions 2,504,258 2,347,346 Cost of shares repurchased (17,669,980) (34,276,542) ------------- ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ (5,257) $ (21,053,742) ------------- ------------- Net increase (decrease) in net assets $ (1,029,541) $ (22,388,141) ------------- ------------- NET ASSETS: Beginning of year $ 47,162,638 $ 69,550,779 ------------- ------------- End of year $ 46,133,097 $ 47,162,638 ============= ============= Undistributed net investment income (loss), end of year $ (264,827) $ 231,501 ============= =============
The accompanying notes are an integral part of these financial statements. 13 PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer America Income VCT Portfolio (The Portfolio) is a portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio)(Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio)(Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) The Portfolio commenced operations on May 1, 2003. Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of America Income Portfolio is to produce a high level of current income as consistent with preservation of capital. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting years. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in the preparation of its financial statements, which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolios are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Trading in foreign equity securities is substantially completed each day at various times prior to the close of the NYSE. The value of such securities used in computing the net asset value of the Portfolio's shares is based on the last sale price on the principal exchange where they traded. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Fixed income securities are valued at prices supplied by independent pricing services, which consider such factors as Treasury spreads, yields, maturities and 14 PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- ratings.Valuations may be supplemented by dealers and other sources, as required. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. B. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from or in excess of net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2003, America Income Trust Portfolio had a net capital loss carryforward of $989,590, of which the following amounts will expire between 2008 and 2012 if not utilized: $382,424 in 2008, $435,523 in 2011 and $171,643 in 2012. The portfolio elected to defer $47,565 in capital losses recognized between November 1, 2004 and December 31, 2004 to its fiscal year ending December 31, 2005. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis. UNDISTRIBUTED ACCUMULATED NET NET INVESTMENT REALIZED GAIN PAID-IN PORTFOLIO INCOME (LOSS) (LOSS) CAPITAL - -------------------- -------------- --------------- -------- Pioneer America Income VCT Portfolio $ 382,362 $ (368,055) $ (14,307) ========= ========== ========= 15 PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004 and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003 ----------- ----------- DISTRIBUTIONS PAID FROM: Ordinary Income $ 2,504,285 $ 2,347,359 Long-Term capital gain/capital loss carryforward -- -- ----------- ----------- $ 2,504,285 $ 2,347,359 Return of Capital -- -- =========== =========== Total distributions $ 2,504,285 $ 2,347,359 =========== =========== DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ -- Undistributed long-term gain/(capital loss carryforward) (989,590) Post-October Loss Deferred (47,565) Unrealized appreciation (depreciation) 624,087 ----------- Total $ (413,068) ===========
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily attributable to the tax deferral of losses on wash sales, returns of capital on REITs, the recognition of unrealized gains or losses on certain futures contracts, and the tax treatment of premium amortization. C. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of the adjusted-net assets at the beginning of the day. The Portfolio declares as daily dividends substantially all of its respective net investment income. All dividends are paid on a monthly basis. Short-term capital gain distributions, if any, may be declared with the daily dividends. Distributions paid by the Portfolio with respect to each class of shares are calculated in the amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. Dividends and distributions to shareowners are recorded on the ex-dividend date. D. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. E. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only 16 PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the portfolios. Management fees are calculated daily at the following annual rate of 0.55% of the Portfolio's average daily net assets. In addition, under the management and administration agreement, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $23,654 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT Pioneer Investment Management Shareholder Services, Inc. (PIMSS), a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $271 in transfer agent fees payable to PIMSS at December 31, 2004. 4. DISTRIBUTION PLANS The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares. Included in due to affiliates is $2,901 payable to PFD at December 31, 2004. 5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------ ------------ ------------ -------------- America Income Portfolio $ 45,514,028 $ 677,456 $ (53,369) $ 624,088 ============ ========= ========= =========
6. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of U.S Government obligations for the year ended December 31, 2004, were $15,946,349 and 17,221,316, respectively. 7. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
AMERICA INCOME PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - ----------------------------- ------------ ------------- ------------ ------------- CLASS I: Shares sold 245,204 $ 2,472,061 711,258 $ 8,118,733 Reinvestment of distributions 206,467 2,102,795 221,712 2,321,232 Shares repurchased (1,551,998) (15,847,044) (3,202,256) (34,132,706) ------------ ------------- ------------ ------------- Net increase (1,100,327) $ (11,272,188) (2,269,286) $ (23,692,741) ============ ============= ============ ============= CLASS II Shares sold 1,247,751 $ 12,688,404 265,643 $ 2,756,721 Reinvestment of distributions 39,513 401,463 2,521 26,114 Shares repurchased (179,116) (1,822,936) (13,939) (143,836) ------------ ------------- ------------ ------------- Net increase 1,108,148 $ 11,266,931 254,225 $ 2,638,999 ============ ============= ============ =============
17 PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS II SHAREOWNERS OF PIONEERAMERICA INCOME VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer America Income VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust") as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer America Income VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the statements of changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 18 PIONEER AMERICA INCOME VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - -------------------------------------------------------------------------------- INVESTMENT ADVISER TRUSTEES AND OFFICERS Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the Trust's operations. The Trust's Trustees and officers are CUSTODIAN listed below, together with their principal occupations during the Brown Brothers Harriman & Co. past five years. Trustees who are interested persons of the Portfolio within the meaning of the Investment Company Act of 1940 are referred to as Interested Trustees. Trustees who are not interested persons INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM of the Trust are referred to as Independent Trustees.Each of the Ernst & Young LLP Trustees serves as a trustee of each of the 73 U.S.registered investment portfolios for which Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Pioneer Funds"). PRINCIPAL UNDERWRITER The address for all Interested Trustees and all officers of Pioneer Funds Distributor, Inc. the Portfolio is 60 State Street, Boston, Massachusetts 02109. The Trust's statement of additional information provides more detailed LEGAL COUNSEL information regarding the Trust's Trustees and is available upon Wilmer Cutler Pickering Hale and Dorr LLP request, without charge, by calling 1-800-225-6292. Proxy Voting Policies and Procedures of the Trust are available SHAREOWNER SERVICES AND TRANSFER without charge, upon Agent request, by calling our toll free number Pioneer Investment Management Shareholder Services, Inc. (1-800-225-6292). This information is also available online at pioneerfunds.com.
- -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE John F. Cogan, Jr. Chairman of the Serves until Trustee and President Serves until Director of Harbor Global (78)* Board, Trustee successor trustee retirement or removal; Deputy Chairman Company, Ltd. and President is elected or and a Director of Pioneer Global Asset earlier retirement Management S.p.A. ("PGAM"); or removal Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ----------------------------------------------------------------------------------------------------------------------------------- Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive Officer, None Executive Vice successor trustee PIM-USA since May 2003 (Director since President is elected or January 2001); President and Director earlier retirement of Pioneer since May 2003; Chairman or removal and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - -----------------------------------------------------------------------------------------------------------------------------------
19 PIONEER AMERICA INCOME VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE David R. Bock** (61) Trustee since Serves until a Senior Vice President and Chief Director of The Enterprise 3050 K. Street NW, 2005. successor trustee Financial Officer, I-trax, Inc. Social Investment Company Washington, DC 20007 is elected or (publicly traded health care services (privately-held affordable earlier retirement company) (2001-present); Managing housing finance company); or removal. Partner, Federal City Capital Director of New York Advisors (boutique merchant Mortgage Trust (publicly bank)(1995-2000; 2002 to 2004); traded mortgage REIT) Executive Vice President and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ----------------------------------------------------------------------------------------------------------------------------------- Mary K. Bush (56) Trustee since Serves until President, Bush International Director of Brady 3509 Woodbine Street, 2000. successor trustee (international financial advisory Corporation (industrial Chevy Chase, MD 20815 is elected or firm) identification and earlier retirement specialty coated material or removal products manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - ----------------------------------------------------------------------------------------------------------------------------------- Margaret B.W. Graham Trustee since Serves until Founding Director, The Winthrop None (57) 1001 Sherbrooke 2000. successor trustee Group, Inc. (consulting firm); Street West, is elected or Professor of Management, Faculty of Montreal, Quebec, earlier retirement Management, McGill University Canada H3A 1G5 or removal - ----------------------------------------------------------------------------------------------------------------------------------- Marguerite A. Piret Trustee since Serves until President and Chief Executive Director of New America (56) One Boston 1995. successor trustee Officer, Newbury, Piret & Company, High Income Fund, Inc. Place, 28th Floor, is elected or Inc. (investment banking firm) (closed-end investment Boston, MA 02108 earlier retirement company) or removal - ----------------------------------------------------------------------------------------------------------------------------------- Stephen K. West (76) Trustee since Serves until Senior Counsel, Sullivan & Cromwell Director, The Swiss Helvetia 125 Broad Street, New 1995. successor trustee (law firm) Fund, Inc. (closed-end York, NY 10004 is elected or investment company) and earlier retirement AMVESCAP PLC (investment or removal managers) - ----------------------------------------------------------------------------------------------------------------------------------- John Winthrop (68) Trustee since Serves until President, John Winthrop & Co., Inc. None One North Adgers September, successor trustee (private investment firm) Wharf, Charleston, SC 2000. is elected or 29401 earlier retirement or removal - -----------------------------------------------------------------------------------------------------------------------------------
20 PIONEER AMERICA INCOME VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS OFFICER Dorothy E. Bourassa Secretary Serves at the Secretary of PIM-USA; Senior Vice None (57) discretion of the President - Legal of Pioneer; and Board Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 - ----------------------------------------------------------------------------------------------------------------------------------- Christopher J. Assistant Serves at the Assistant Vice President and Senior None Kelley (40) Secretary discretion of the Counsel of Pioneer since July 2002; Board Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ----------------------------------------------------------------------------------------------------------------------------------- David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering Hale None Secretary discretion of the and Dorr LLP; Assistant Secretary of Board all Pioneer Funds since September 2003 - ----------------------------------------------------------------------------------------------------------------------------------- Vincent Nave (59) Treasurer Serves at the Vice President - Fund Accounting, None discretion of the Administration and Custody Services of Board Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ----------------------------------------------------------------------------------------------------------------------------------- Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer since 2004; None Treasurer discretion of the Treasurer and Senior Vice President, Board CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ----------------------------------------------------------------------------------------------------------------------------------- Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None Treasurer discretion of the Accounting, Administration and Custody Board Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ----------------------------------------------------------------------------------------------------------------------------------- Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None Treasurer discretion of the Accounting, Administration and Custody Board Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - -----------------------------------------------------------------------------------------------------------------------------------
21 PIONEER AMERICA INCOME VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS OFFICER Katharine Kim Assistant Serves at the Fund Administration Manager - Fund None Sullivan (31) Treasurer discretion of the Accounting, Administration and Custody Board Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ----------------------------------------------------------------------------------------------------------------------------------- Martin J. Wolin (37) Chief Serves at the Chief Compliance Officer of Pioneer None Compliance discretion of the (Director of Compliance and Senior Officer Board Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - -----------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 22 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. 23 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. 24 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. 25 [LOGO] PIONEER Investment (R) [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio -- Class II Shares ANNUAL REPORT December 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- T a b l e o f C o n t e n t s - -------------------------------------------------------------------------------- Pioneer Balanced VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 6 Financial Statements 13 Notes to Financial Statements 17 Report of Independent Registered Public Accounting Firm 21 Trustees, Officers and Service Providers 22
Please consider a Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about a Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, contact your adviser, call 1-800-225-6292 or visit our website at www.pioneerfunds.com. The Trust files a complete statement of investments with the Securities and Exchange Commission for the first and the third quarters for each fiscal year on Form N-Q. Shareowners may view the filed Form N-Q by visiting the Commission's web site at http://www.sec.gov. The filed form may also be viewed and copied at the Commission's Public Reference Room in Washington, D.C. Information regarding the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330. PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- Portfolio Diversification (As a percentage of total investment portfolio) Collateralized Mortgage Obligations 0.3% Asset Backed Securities 0.4% U.S Government Agency Obligations 0.4% Depositary Receipts For International Stocks 2.0% U.S Corporate Bonds 11.7% U.S Government Securities 22.5% U.S Common Stocks 62.7% Sector Distribution (As a percentage of long-term holdings) Utilities 0.4% Telecommunication Services 2.4% Materials 3.4% Energy 6.5% Industrials 7.1% Health Care 9.1% Consumer Discretionary 10.3% Information Technology 10.9% Financials 11.9% Consumer Staples 15.1% Government Obligations 22.9% Five Largest Holdings (As a percentage of long-term holdings) 1. Berkshire Hathaway, Inc. (Class B) 3.37% 2. First Data Corp. 3.10 3. Microsoft Corp. 3.08 4. Northrop Grumman Corp. 3.03 5. Wm. Wrigley Jr. Co. 2.82
The portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- Prices and Distributions
12/31/04 12/31/03 - -------------------------------------------------------------------------------- Net Asset Value per Share $ 14.38 $ 14.02 - --------------------------------------------------------------------------------
Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ 0.2769 $ - $ -
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Balanced VCT Portfolio at net asset value, compared to that of the Standard & Poor's (S&P) 500 Index and the Lehman Brothers Aggregate Bond Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. {The following table was depicted as a line chart in the printed material.]
Pioneer Balanced VCT Portfolio S&P 500 Index Lehman Brothers Aggregate Bond Text Mar-95 10000 10000 10000 11825 11279 12533 Dec-96 13412 11686 15406 15535 12817 20543 Dec-98 15474 13929 26417 15825 13812 31974 Dec-00 16647 15418 29068 16230 16720 25623 Dec-02 14527 18435 19961 17258 19192 25684 Dec-04 18050 20025 28476
Index comparison begins 2/28/95. The Standard & Poor's 500 Stock Index (the S&P 500) is a commonly used measure of the broad U.S. stock market. The Lehman Brothers Aggregate Bond Index is a measure of the U.S. bond market. Index returns assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. Portfolio returns are based on net asset value and do not reflect any annuity-related costs. You cannot invest directly in any Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
Net Asset Value Life-of-Class 6.40% (3/1/95) 5 Years 2.67 1 Year 4.59
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report for performance that reflects the deduction of the variable product's fees and charges.The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value [divided by] $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Balanced VCT Portfolio Based on actual returns from July 1, 2004 through December 31, 2004.
Share Class I II - -------------------------------------------------------------------------------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,028.06 $ 1,027.51 Expenses Paid During Period* $ 4.67 $ 6.03 - --------------------------------------------------------------------------------
* Expenses are equal to the Portfolio's annualized expense ratio of 0.92% and 1.18% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Balanced VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from July 1, 2004 through December 31, 2004.
Share Class I II - -------------------------------------------------------------------------------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,020.61 $ 1,019.15 Expenses Paid During Period* $ 4.65 $ 6.00 - --------------------------------------------------------------------------------
* Expenses are equal to the Portfolio's annualized expense ratio of 0.92%, and 1.18% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- The domestic economy continued its rebound during 2004, encouraging the Federal Reserve to begin raising short-term interest rates, which had reached the lowest levels in 46 years. The yields of longer-term bonds showed little movement over the year, however, despite some interim volatility in the spring. Corporate bonds and mortgage-backed securities performed well. The equity markets delivered positive performance over the year, with small- and mid-cap stocks outperforming large-company equities and value stocks outpacing growth stocks. In the following interview, Timothy Mulrenan, who is responsible for the equity portfolio of Pioneer Balanced VCT Portfolio, and Richard Schlanger, who is responsible for the Portfolio's fixed-income portfolio, discuss the markets and the factors that affected performance during 2004. Throughout the year, the Portfolio kept its allocations to equities and bonds relatively stable, with about 64% of assets in stocks and about 36% in fixed income investments. Q: How did the Portfolio perform during 2004? A: Class II shares of Pioneer Balanced VCT Portfolio shares had a total return of 4.59% at net asset value during the 12 months ended December 31, 2004. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: What was the investment environment like during the period? A: The economy was healthy, growing at a moderate rate throughout 2004. Evidence of a sustained economic recovery was clear enough that, beginning on June 30, the Federal Reserve Board began raising the overnight interbank lending rate, the Fed Funds Rate, in an effort to avoid any increase in inflationary pressures. By the end of the year, the Fed Funds Rate had risen from 1.00% to 2.25%, with the Fed indicating it intended to continue to raise the rate at a "measured" pace. During a year in which the value of the U.S. dollar on international currency exchanges fell dramatically and energy prices rose significantly, longer-term interest rates remained surprisingly stable for much of the year. In fact, the yield of the 10-year Treasury ended 2004 at 4.22%, very close to its level at the start of the year. As the improving economy helped lift corporate profits, corporate bonds significantly outperformed government bonds. Mortgage-backed securities also did better than Treasuries in a year in which securities that paid a higher coupon tended to deliver higher returns. In the equity markets, stock prices did not move greatly during the first 10 months of the year. However, after the November elections and the end of political uncertainty about control of the federal government, stocks staged a strong rally. Small- and mid-cap stocks and value stocks outperformed large-cap stocks and growth stocks. Q: What were your strategies in managing the fixed-income assets of the Portfolio during the year? A: We emphasized the "spread" sectors - corporates and mortgages - and kept the portfolio's duration, or sensitivity to interest rate changes, close to that of the benchmark Lehman Brothers Aggregate Bond Index. For much of the year, we kept our investments in high-yielding, lower-rated corporate bonds at about 8.5% of fixed income assets, close to our limit of 10%. However, we did lower that to about 7.6% of fixed income assets by the end of the year, increasing our investments in mortgage-backed securities to almost half the portfolio. This was because, after strong performance by corporate bonds, we found that mortgage securities offered very attractive relative value, as they provided almost as much income as corporate securities, but with higher credit quality. At the end of 2004, average credit quality was AA-, up from the A+ average rating of a year earlier. Both because we were cautious in taking interest rate risk and because we increased our investments in mortgages, the Portfolio's duration was 3.93 years, down from 4.26 years at the end of 2003. Both our sector selection and our decision to keep the Portfolio's sensitivity to interest rate changes close to that of the benchmark aided performance during the year. A Word About Risk: When interest rates rise, the prices of fixed income securities in the fund will generally fall. Conversely, when interest rates fall the prices of fixed income securities in the fund will generally rise. Investments in the fund are subject to possible loss due to the financial failure of underlying securities and their inability to meet their debt obligations. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 4 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- Q: What were the principal factors affecting the performance of the equity investments during 2004? A: During a year in which high-quality, large-company growth stocks were not in favor, the best performance tended to come from our investments in the energy and consumer staples sectors. Several of our holdings in the information technology sector also supported performance, while many of the most notable detractors were in health care and consumer discretionary investments. The price of oil rose substantially in 2004, helping lift the performance of the entire energy sector. Our best-performing energy investments included Encana, a Canadian exploration and production company, and Varco International, which provides oil field equipment and services to energy companies. Varco eventually received an attractive acquisition offer from National Oil Well. In consumer staples, top performers included two of our five largest holdings: Wrigley's and Gillette. In addition, CVS, the pharmacy chain, rose substantially as its earnings outlook improved with the acquisition of many stores formerly operated by the Eckerd chain. Chewing gum leader Wrigleys appreciated on good earnings growth, its improving outlook with the acquisition of the Altoids and Lifesavers brands, and inroads into the markets in China and India. Gillette gained on successful new product introductions and excellent cost management. In information technology, Symantec's stock price appreciated with strong sales of its anti-virus software. Newmont Mining, the world's largest gold mining company, was another holding that did well. In health care, our investments in large pharmaceutical companies detracted from results during a difficult year for the industry. The largest disappointment was Pfizer, a major position in the portfolio. Pfizer's stock price plummeted late in the year amid controversies about possible side effects of its Cox-2 pain inhibitor, Celebrex. The news came after Merck, a smaller holding in the portfolio, withdrew its Cox-2 pain inhibitor from the market entirely. Among consumer discretionary holdings, the most notable drag on performance was our investment in Viacom, which declined 17% during the year, primarily because of disappointing advertising sales in its radio station division. As the year progressed, we sold some of our more successful investments, notably Symantec and Newmont Mining because of concerns about the high valuations that they had attained. As we did so, we invested in Vodaphone, the wireless communications company based in the U.K.; Guidant, a leading medical device company which later received an acquisition offer from Johnson & Johnson; and Avaya, a telecommunications equipment company that is a leader in providing Voice Over Internet Protocol technology to corporations. Q: What is your investment outlook? A: We believe the economy will continue to expand and the Federal Reserve will maintain its policy of raising short-term interest rates. Longer-term rates may rise more slowly. As this happens, the "yield curve" will flatten as the difference between short-term rates and longer-term rates narrows. If this scenario unfolds, we may take a more "bar-belled" approach to the fixed income portfolio, investing in both short-maturity (less than two years) and longer-maturity securities (more than 10 years) but de-emphasizing intermediate-term issues which may be the most vulnerable to the risk of price loss from rising rates. We may also take some profits in mortgage investments if their prices begin to look less appealing and look for more attractive opportunities in corporate securities. In the equity market, we believe corporate profits will continue to improve, but at a decelerating rate. We think stock prices will track earnings growth, which in turn should track nominal Gross Domestic Product growth. We intend to continue to emphasize high quality, stable-growth companies. Historically, these companies have done relatively well as corporate profit growth begins decelerating as the economy enters a new, slower-growth stage in the business cycle. The consumer staples and health care sectors typically perform well in such an environment. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. 5 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 63.5% Energy - 5.5% Integrated Oil & Gas - 0.4% 3,900 Exxon Mobil Corp. $ 199,914 ----------- Oil & Gas Drilling - 4.8% 8,700 Encana Corp. $ 496,422 33,400 ENSCO International, Inc. 1,060,116 22,000 Varco International, Inc.* 641,300 ----------- $ 2,197,838 ----------- Oil & Gas Exploration & Production - 0.3% 3,900 Pioneer Natural Resources Co. $ 136,890 ----------- Total Energy $ 2,534,642 ----------- Materials - 2.0% Precious Metals & Minerals - 2.0% 21,800 Newmont Mining Corp. $ 968,138 ----------- Total Materials $ 968,138 ----------- Capital Goods - 2.9% Aerospace & Defense - 3.0% 25,000 Northrop Grumman Corp. $ 1,359,000 ----------- Total Capital Goods $ 1,359,000 ----------- Commercial Services & Supplies - 0.7% Diversified Commercial Services - 0.7% 7,400 Cintas Corp. $ 324,564 ----------- Total Commercial Services & Supplies $ 324,564 ----------- Transportation - 2.5% Trucking - 2.5% 13,400 United Parcel Service $ 1,145,164 ----------- Total Transportation $ 1,145,164 ----------- Media - 3.7% Broadcasting & Cable Television - 1.4% 8,800 Clear Channel Communications, Inc. $ 294,712 10,200 Comcast Corp.* 334,968 ----------- $ 629,680 ----------- Movies & Entertainment - 2.3% 29,319 Viacom, Inc. (Class B) $ 1,066,918 ----------- Total Media $ 1,696,598 ----------- Retailing - 3.9% Apparel Retail - 1.5% 16,400 Liz Claiborne, Inc. $ 692,244 ----------- General Merchandise Stores - 2.2% 32,000 Family Dollar Stores, Inc. $ 999,360 -----------
Shares Value Specialty Stores - 0.2% 6,491 Blockbuster, Inc. $ 61,924 6,491 Blockbuster, Inc. (Class B) 57,186 ----------- $ 119,110 ----------- Total Retailing $ 1,810,714 ----------- Food & Drug Retailing - 5.5% Drug Retail - 1.0% 9,900 CVS Corp. $ 446,193 ----------- Food Distributors - 0.8% 6,400 Cardinal Health, Inc. $ 372,160 ----------- Food Retail - 2.8% 18,300 Wm. Wrigley Jr. Co. $ 1,266,177 ----------- Hypermarkets & Supercenters - 0.9% 7,800 Wal-Mart Stores, Inc. $ 411,996 ----------- Total Food & Drug Retailing $ 2,496,526 ----------- Food, Beverage & Tobacco - 5.3% Distillers & Vintners - 2.1% 19,200 Anheuser-Busch Co., Inc. $ 974,016 ----------- Soft Drinks - 3.2% 7,900 The Coca-Cola Co. $ 328,877 21,800 PepsiCo, Inc. 1,137,960 ----------- $ 1,466,837 ----------- Total Food, Beverage & Tobacco $ 2,440,853 ----------- Household & Personal Products - 3.7% Household Products - 0.9% 9,300 Estee Lauder Co. $ 425,661 ----------- Personal Products - 2.8% 28,100 Gillette Co. $ 1,258,318 ----------- Total Household & Personal Products $ 1,683,979 ----------- Health Care Equipment & Services - 4.5% Health Care Distributors - 1.7% 17,800 Wyeth $ 758,102 ----------- Health Care Equipment - 2.8% 17,300 Biomet, Inc. $ 750,647 7,700 Guidant Corp. 555,170 ----------- $ 1,305,817 ----------- Total Health Care Equipment & Services $ 2,063,919 ----------- Pharmaceuticals & Biotechnology - 3.7% Biotechnology - 0.9% 6,516 Amgen, Inc.* $ 418,001 -----------
6 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - --------------------------------------------------------------------------------
Shares Value Pharmaceuticals - 2.8% 4,000 Eli Lilly & Co. $ 227,000 39,288 Pfizer, Inc. 1,056,454 ----------- $ 1,283,454 ----------- Total Pharmaceuticals & Biotechnology $ 1,701,455 ----------- Diversified Financials - 3.0% Asset Management & Custody Banks - 1.1% 15,700 The Bank of New York Co., Inc. $ 524,694 ----------- Consumer Finance - 1.5% 12,300 American Express Co. $ 693,351 ----------- Investment Banking & Brokerage - 0.4% 2,900 Merrill Lynch & Co., Inc. $ 173,333 ----------- Total Diversified Financials $ 1,391,378 ----------- Insurance - 4.6% Property & Casualty Insurance - 4.6% 515 Berkshire Hathaway, Inc. (Class B)* $ 1,512,040 6,900 Progressive Corp. 585,396 ----------- $ 2,097,436 ----------- Total Insurance $ 2,097,436 ----------- Software & Services - 6.9% Application Software - 3.9% 51,800 Microsoft Corp. $ 1,383,578 15,400 Symantec Corp.* 396,704 ----------- $ 1,780,282 -----------
Shares Value Data Processing & Outsourced Services - 3.0% 32,700 First Data Corp. $ 1,391,058 ----------- Total Software & Services $ 3,171,340 ----------- Technology Hardware & Equipment - 2.4% Communications Equipment - 0.3% 9,500 Avaya Inc.* $ 163,400 ----------- Computer Hardware - 1.6% 34,222 Hewlett-Packard Co. $ 717,635 ----------- Electronic Manufacture Services - 0.5% 8,500 Molex, Inc. $ 226,526 ----------- Total Technology Hardware & Equipment $ 1,107,561 ----------- Semiconductors - 0.4% 7,800 Intel Corp. $ 182,442 ----------- Total Semiconductors $ 182,442 ----------- Telecommunication Services - 1.9% Wireless Telecommunication Services - 1.9% 32,300 Vodafone Group Plc. (A.D.R.) $ 884,374 ----------- Total Telecommunication Services $ 884,374 ----------- TOTAL COMMON STOCKS (Cost $24,770,144) $29,060,083 -----------
The accompanying notes are an integral part of these financial statements. 7 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value ASSET BACKED SECURITIES - 0.3% Diversified Financials - 0.2% Diversified Financial Services - 0.1% 84,728 BBB-/Baa2 PF Export Receivable Master Trust, 6.436%, 6/1/15 (144A) $ 84,212 ----------- Total Diversified Financials $ 84,212 ----------- Utilities - 0.1% Electric Utilities - 0.1% 70,950 BB-/Ba2 FPL Energy Wind Funding, 6.876%, 6/27/17 (144A) $ 73,167 ----------- Total Utilities $ 73,167 ----------- TOTAL ASSET BACKED SECURITIES (Cost $158,096) $ 157,379 ----------- COLLATERALIZED MORTGAGE OBLIGATIONS - 0.3% Diversified Financials - 0.3% Diversified Financial Services - 0.3% 100,000 BBB-/Baa3 Tower 2004-1A E, 5.395%, 1/15/34 $ 99,814 50,000 BB/NR Tower 2004-2A F, 6.376%, 12/15/14 49,750 ----------- Total Diversified Financials $ 149,564 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $150,000) $ 149,564 ----------- CORPORATE BONDS - 11.5% Energy - 0.8% Integrated Oil & Gas - 0.2% 30,000 BBB+/Baa1 Occidental Petroleum, 7.65%, 2/15/06 $ 31,406 40,000 BBB+/Baa1 Occidental Petroleum, 6.75%, 1/15/12 45,407 ----------- $ 76,813 ----------- Oil & Gas Exploration & Production - 0.2% 100,000 BBB-/NR Gazprom International SA, 7.201%, 2/1/20 (144A) $ 105,750 ----------- Oil & Gas Refining Marketing & Transportation - 0.4% 205,000 BBB/Ba1 Magellan Midstream Partners, L.P., 6.45%, 6/1/14 $ 221,688 ----------- Total Energy $ 404,251 ----------- Materials - 1.2% Commodity Chemicals - 0.2% 100,000 BB+/Ba2 Nova Chemicals, Ltd., 6.5%, 1/15/12 $ 106,000 ----------- Diversified Metals & Mining - 0.3% 125,000 BBB-/Baa3 Inco, Ltd., 7.2%, 9/15/32 $ 145,687 ----------- Metal & Glass Containers - 0.1% 40,000 BBB/Baa2 Tenneco Packaging, 8.125%, 6/15/17 $ 49,943 ----------- Paper Packaging - 0.4% 150,000 A/A2 Bemis Co., Inc., 6.7%, 7/1/05 $ 152,563 ----------- Paper Products - 0.2% 100,000 BB-/Ba3 Abitibi-Consolidated, Inc., 6.95%, 4/1/08 $ 103,000 ----------- Total Materials $ 557,193 -----------
8 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Capital Goods - 0.7% Construction & Engineering - 0.1% 50,000 B+/Ba3 Shaw Group Inc., 10.75%, 3/15/10 $ 55,125 ----------- Electrical Components & Equipment - 0.2% 75,000 BBB-/Ba1 Thomas & Betts Corp., 7.25%, 6/1/13 $ 82,269 ----------- Industrial Conglomerates - 0.2% 55,000 AAA/Aaa General Electric Capital Corp., 6.125%, 2/22/11 $ 60,246 30,000 AAA/Aaa General Electric Capital Corp., 6.75%, 3/15/32 35,114 ----------- $ 95,360 ----------- Industrial Machinery - 0.2% 100,000 B+/Ba2 Sun Sage BV, 8.25%, 3/26/09 (144A) $ 105,000 ----------- Total Capital Goods $ 337,754 ----------- Commercial Services & Supplies - 0.0% Diversified Commercial Services - 0.0% 25,000 BBB+/Baa1 Deluxe Corp., 3.5%, 10/1/07 (144A) $ 24,678 ----------- Total Commercial Services & Supplies $ 24,678 ----------- Automobiles & Components - 0.4% Automobile Manufacturers - 0.4% 200,000 BBB-/Baa2 General Motors, 7.2%, 1/15/11 $ 205,128 ----------- Total Automobiles & Components $ 205,128 ----------- Hotels, Restaurants & Leisure - 0.5% Hotels, Resorts & Cruise Lines - 0.5% 200,000 BBB-/Baa3 Hilton Hotels, 7.625%, 12/1/12 $ 233,885 ----------- Total Hotels, Restaurants & Leisure $ 233,885 ----------- Media - 1.2% Broadcasting & Cable Television - 0.8% 250,000 BBB/Baa3 Comcast Cable Corp., 7.125%, 6/15/13 $ 289,636 100,000 BBB-/Baa3 Cox Communications, 7.125%, 10/1/12 112,086 ----------- $ 401,722 ----------- Publishing - 0.4% 170,000 BBB-/Baa3 News America, Inc., 7.3%, 4/30/28 $ 194,794 ----------- Total Media $ 596,516 ----------- Retailing - 0.2% Specialty Stores - 0.2% 100,000 BB/Ba2 Toys "R" Us, 7.875%, 4/15/13 $ 99,250 ----------- Total Retailing $ 99,250 ----------- Food, Beverage & Tobacco - 0.4% Tobacco - 0.4% 150,000 BBB/Baa2 Altria Group, Inc., 7.0%, 11/4/13 $ 162,532 ----------- Total Food, Beverage & Tobacco $ 162,532 ----------- Health Care Equipment & Services - 0.7% Health Care Facilities - 0.5% 200,000 BB+/Ba2 HCA, Inc., 6.3%, 10/1/12 $ 202,841 ----------- Health Care Supplies - 0.2% 100,000 BBB-/Ba1 Bausch & Lomb, 7.125%, 8/1/28 $ 106,550 ----------- Total Health Care Equipment & Services $ 309,391 -----------
The accompanying notes are an integral part of these financial statements. 9 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Banks - 0.3% Diversified Banks - 0.3% 50,000 NR/Aaa KFW - Kredit Wiederaufbau, 2.75%, 5/8/07 $ 49,209 75,000 AA-/Aa2 National Westminster, 7.375%, 10/1/09 85,383 ----------- $ 134,592 ----------- Total Banks $ 134,592 ----------- Diversified Financials - 1.3% Consumer Finance - 0.2% 100,000 A/A2 SLM Corp., Floating Rate Note, 7/25/14 $ 99,642 ----------- Investment Banking & Brokerage - 0.2% 75,000 B+/B1 E*Trade Financial Corp., 8.0%, 6/15/11 (144A) $ 80,625 ----------- Diversified Financial Services - 0.4% 100,000 A-/Baa3 Brascan Corp., 5.75%, 3/1/10 $ 105,806 100,000 BBB-/Baa3 Glencore Funding LLC, 6.0%, 4/15/14 (144A) 96,748 ----------- $ 202,554 ----------- Specialized Finance - 0.5% 100,000 NR/Baa3 Tengizchevroil LLP, 6.124%, 11/15/14 (144A) $ 100,250 100,000 B/B2 MDP Acquistions, 9.625%, 10/1/12 111,500 ----------- $ 211,750 ----------- Total Diversified Financials $ 594,571 ----------- Insurance - 1.2% Life & Health Insurance - 0.2% 100,000 BB+/Ba1 Provident Co., Inc., 7.0%, 7/15/18 $ 96,625 ----------- Multi-Line Insurance - 0.1% 50,000 A/Baa1 Loew Corp., 5.25%, 3/15/16 $ 48,353 ----------- Property & Casualty Insurance - 0.7% 85,000 BBB-/NR Kingsway America, Inc., 7.5%, 2/1/14 $ 88,126 100,000 BBB-/Baa3 Arch Capital Group, Ltd., 7.35%, 5/1/34 106,616 150,000 BB/Baa3 Ohio Casualty Corp., 7.3%, 6/15/14 161,429 ----------- $ 356,171 ----------- Reinsurance - 0.2% 100,000 BBB-/Baa3 Odyssey Re Holdings, 7.65%, 11/1/13 $ 110,296 ----------- Total Insurance $ 611,445 ----------- Real Estate - 0.6% Real Estate Investment Trusts - 0.6% 150,000 BBB-/Baa3 Hospitality Properties Trust, 6.75%, 2/15/13 $ 165,629 100,000 BBB-/Baa3 Colonial Reality LP, 6.15%, 4/15/13 103,869 ----------- $ 269,498 ----------- Total Real Estate $ 269,498 ----------- Technology Hardware & Equipment - 0.9% Communications Equipment - 0.1% 50,000 BB/Ba3 Rogers Wireless Inc., Floating Rate Note, 12/15/10 (144A) $ 52,376 ----------- Computer Hardware - 0.8% 250,000 BBB-/Baa3 NCR Corp., 7.125%, 6/15/09 $ 276,039 100,000 BB+/Ba1 Unisys Corp., 6.875%, 3/15/10 107,000 ----------- $ 383,039 ----------- Total Technology Hardware & Equipment $ 435,415 -----------
10 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Telecommunication Services - 0.4% Integrated Telecommunication Services - 0.4% 100,000 BBB+/Ba3 Intelsat, Ltd. 6.5%, 11/1/13 $ 91,000 100,000 BBB+/Baa2 Telecom Italia Capital, 5.25%, 11/15/13 101,074 ----------- $ 192,074 ----------- Total Telecommunication Services $ 192,074 ----------- Utilities - 0.2% Electric Utilities - 0.2% 95,000 BBB-/Baa3 FLP Energy American Wind LLC, 6.639%, 6/20/23 (144A) $ 101,306 ----------- Total Utilities $ 101,306 ----------- TOTAL CORPORATE BONDS (Cost $4,957,864) $ 5,269,479 ----------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 22.5% Government - 22.5% 449,572 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 1/1/34 $ 457,005 186,807 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 9/1/17 193,183 159,028 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 10/1/16 164,515 1,156,543 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/33 1,196,375 105,004 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/32 108,620 35,818 AAA/Aaa Federal Home Loan Mortgage Corp., 6.5%, 5/1/09 37,582 56,705 AAA/Aaa Federal Home Loan Mortgage Corp., 6.5%, 7/1/33 59,741 17,789 AAA/Aaa Federal Home Loan Mortgage Corp., 6.5%, 11/1/33 18,671 145,347 AAA/Aaa Federal National Mortgage Association, 5.0%, 6/1/34 144,284 203,751 AAA/Aaa Federal National Mortgage Association, 5.5%, 2/1/17 210,912 127,905 AAA/Aaa Federal National Mortgage Association, 5.5%, 3/1/34 129,926 222,719 AAA/Aaa Federal National Mortgage Association, 5.5%, 4/1/34 226,239 263,593 AAA/Aaa Federal National Mortgage Association, 5.5%, 9/1/34 267,760 299,126 AAA/Aaa Federal National Mortgage Association, 5.5%, 10/1/34 303,854 223,574 AAA/Aaa Federal National Mortgage Association, 5.5%, 11/1/33 227,169 136,532 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/33 141,241 110,000 AAA/Aaa Federal National Mortgage Association, 6.125%, 3/15/12 122,216 67,610 AAA/Aaa Federal National Mortgage Association, 6.5%, 4/1/29 71,353 143,018 AAA/Aaa Federal National Mortgage Association, 6.5%, 7/1/32 150,115 94,578 AAA/Aaa Federal National Mortgage Association, 6.5%, 7/1/32 99,286 21,208 AAA/Aaa Federal National Mortgage Association, 6.5%, 8/1/13 22,509 20,623 AAA/Aaa Federal National Mortgage Association, 6.5%, 8/1/14 21,886 62,139 AAA/Aaa Federal National Mortgage Association, 6.5%, 9/1/32 65,442 50,412 AAA/Aaa Federal National Mortgage Association, 6.5%, 10/1/32 52,914 17,685 AAA/Aaa Federal National Mortgage Association, 6.5%, 10/1/32 18,562 67,948 AAA/Aaa Federal National Mortgage Association, 6.5%, 12/1/21 71,713 10,000 AAA/Aaa Federal National Mortgage Association, 7.125%, 6/15/10 11,494 36,108 AAA/Aaa Federal National Mortgage Association, 9.0%, 4/1/33 39,090 389,233 AAA/Aaa Freddie Mac, 5.0%, 4/1/34 386,788 241,158 AAA/Aaa Freddie Mac, 5.0%, 5/1/34 239,643 150,000 AAA/Aaa Freddie Mac, 5.75%, 1/15/12 163,413 45,389 AAA/Aaa Freddie Mac, 6.0%, 6/1/34 46,910 260,832 AAA/Aaa Freddie Mac, 6.0%, 11/1/33 269,561 115,459 AAA/Aaa Government National Mortgage Association, 5.0%, 4/15/34 115,601 96,149 AAA/Aaa Government National Mortgage Association, 5.5%, 4/15/33 98,294
The accompanying notes are an integral part of these financial statements. 11 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value (U.S. Government and Agency Obligations Cont.) 239,253 AAA/Aaa Government National Mortgage Association, 5.5%, 8/15/19 $ 249,518 166,589 AAA/Aaa Government National Mortgage Association, 5.5%, 8/15/33 170,305 51,297 AAA/Aaa Government National Mortgage Association, 5.5%, 9/15/33 52,490 353,413 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/32 367,116 133,507 AAA/Aaa Government National Mortgage Association, 6.5%, 5/15/33 140,575 53,615 AAA/Aaa Government National Mortgage Association, 6.5%, 10/15/28 56,547 262,925 AAA/Aaa Government National Mortgage Association I, 5.5%, 6/15/33 268,789 183,588 AAA/Aaa Government National Mortgage Association I, 5.5%, 7/15/33 187,683 148,787 AAA/Aaa Government National Mortgage Association I, 6.0%, 9/15/32 154,387 467,764 AAA/Aaa Government National Mortgage Association I, 6.0%, 9/15/33 485,108 297,330 AAA/Aaa Government National Mortgage Association II, 6.0%, 10/20/33 308,997 181,240 AAA/Aaa Government National Mortgage Association II, 5.5%, 2/20/34 185,030 25,322 AAA/Aaa Government National Mortgage Association II, 7.5%, 9/20/29 27,092 470,000 AAA/Aaa U.S. Treasury Notes, 4.0%, 11/15/12 469,210 300,000 AAA/Aaa U.S. Treasury Notes, 4.75%, 11/15/08 314,214 200,000 AAA/Aaa U.S. Treasury Notes, 4.75%, 5/15/14 208,422 130,000 AAA/Aaa U.S. Treasury Notes, 5.375%, 2/15/31 140,573 500,000 AAA/Aaa U.S. Treasury Notes, 5.625%, 5/15/08 536,289 ----------- Total Government $10,276,212 ----------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $10,185,772) $10,276,212 ----------- TOTAL INVESTMENTS IN SECURITIES - 98.1% (Cost $40,221,876) $44,912,717 ----------- OTHER ASSETS AND LIABILITIES - 1.9% $ 851,493 ----------- TOTAL NET ASSETS - 100.0% $45,764,210 -----------
(A.D.R.) American Depositary Receipt * Non-income producing security 144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At December 31, 2004, the value of these securities amounted to $824,112 or 1.8% of net assets. NR Not rated by either S&P or Moody's 12 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended 5/1/03 to Class II (a) 12/31/04 12/31/03 Net asset value, beginning of period $ 14.02 $ 12.67 ------- ------- Increase from investment operations: Net investment income $ 0.22 $ 0.14 Net realized and unrealized gain on investments 0.42 1.40 ------- ------- Net increase from investment operations $ 0.64 $ 1.54 Distributions to shareowners: Net investment income ( 0.28) ( 0.19) ------- Net increase in net asset value $ 0.36 $ 1.35 ------- -------- Net asset value, end of period $ 14.38 $ 14.02 ------- -------- Total return* 4.59% 12.17% Ratio of net expenses to average net assets+ 1.19% 1.11%** Ratio of net investment income to average net assets+ 1.81% 1.12%** Portfolio turnover rate 30% 37%** Net assets, end of period (in thousands) $10,452 $ 3,390 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.19% 1.11%** Net investment income 1.81% 1.12%**
(a) Class II shares were first publicly offered on May 1, 2003. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period.) ** Annualized. + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 13 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (Cost $40,221,876) $ 44,912,717 Cash 770,401 Receivables -- Fund shares sold 615 Dividends, interest and foreign taxes withheld 169,693 Other 3,050 ------------ Total assets $ 45,856,476 ------------ LIABILITIES: Payables -- Fund shares repurchased $ 7,826 Due to affiliates 30,009 Accrued expenses 54,431 ------------ Total liabilities $ 92,266 ------------ NET ASSETS: Paid-in capital $ 46,401,274 Undistributed net investment income (loss) 14,409 Accumulated undistributed net realized gain (loss) (5,342,314) Net unrealized gain (loss) on: Investments 4,690,841 ------------ Total net assets $ 45,764,210 ------------ NET ASSET VALUE PER SHARE: Class I: No par value (unlimited number of shares authorized) Net assets $ 35,312,051 Shares outstanding 2,451,399 ------------ Net asset value per share $ 14.40 Class II: No par value (unlimited number of shares authorized) Net assets $ 10,452,159 Shares outstanding 726,928 ------------ Net asset value per share $ 14.38
14 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - --------------------------------------------------------------------------------
Year Ended 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $1,615) $ 452,044 Interest (net of foreign taxes withheld of $94) 825,144 ---------- Total investment income $1,277,188 ---------- EXPENSES: Management fees $ 288,949 Transfer agent fees and expenses 2,987 Distribution fees (Class II) 16,887 Administrative reimbursements 18,500 Custodian fees 18,175 Professional fees 53,197 Printing expense 17,844 Miscellaneous 3,205 ---------- Total expenses $ 419,744 ---------- Net expenses $ 419,744 ---------- Net investment income (loss) $ 857,444 ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $1,099,149 ---------- $1,099,149 ---------- Change in net unrealized gain or (loss) from: Investments $ 127,896 ---------- $ 127,896 ---------- Net gain (loss) on investments, futures contracts and foreign currency transactions $1,157,438 ---------- Net increase (decrease) in net assets resulting from operations $2,084,489 ----------
The accompanying notes are an integral part of these financial statements. 15 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Year Ended Year Ended 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 857,444 $ 718,572 Net realized gain (loss) on investments 1,099,149 336,352 Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions 127,896 5,309,842 ------------ ------------ Net increase (decrease) in net assets resulting from operations $ 2,084,489 $ 6,364,766 ------------ ------------ DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (789,468) $ (800,491) Class II (155,092) (20,067) ------------ ------------ Total distributions to shareowners $ (944,560) $ (820,558) ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 8,978,890 $ 4,068,440 Reinvestment of distributions 944,549 820,551 Cost of shares repurchased (9,461,531) (9,119,455) ------------ ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ 461,908 $ (4,230,464) ------------ ------------ Net increase (decrease) in net assets $ 1,601,837 $ 1,313,744 ------------ ------------ NET ASSETS: Beginning of year $ 44,162,373 $ 42,848,629 ------------ ------------ End of year $ 45,764,210 $ 44,162,373 ------------ ------------ Undistributed net investment income (loss), end of year $ 14,409 $ 12,808 ------------ ------------
16 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 1. Organization and Significant Accounting Policies The Pioneer Balanced VCT Portfolio is a portfolio of the Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate diversified portfolios fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: Portfolios: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) The Portfolio commenced operations on May 1, 2003. Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The investment objectives of Balanced Portfolio are capital growth and current income. Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting years. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements, which are consistent with those generally accepted in the investment company industry: A. Security Valuation Security transactions are recorded as of trade date. Net asset value for the portfolio is computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Trading in foreign equity securities is substantially completed each day at various times prior to the close of the NYSE. The value of such securities used in computing the net asset value of the Portfolio's shares, based on the last sale price on the principal exchange where they traded. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. 17 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) - -------------------------------------------------------------------------------- Fixed income securities are valued at prices supplied by independent pricing services, which consider such factors as Treasury spreads, yields, maturities and ratings. Valuations may be supplemented by dealers and other sources, as required. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis, net of unrecoverable foreign taxes withheld at the applicable country rates. All discounts/premiums are accreted/amortized for financial reporting purposes. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. B. Futures Contracts The Portfolio may enter into futures transactions to hedge against changes in interest rates, securities prices, and currency rates or to seek to increase total return. Upon entering into a futures contract, the Portfolio is required to deposit with a broker an amount of cash or securities equal to the minimum "initial margin" requirements of the associated futures exchange. Subsequent payments for futures contracts ("variation margin") are paid or received by the Portfolio, depending on the daily fluctuation in the value of the contracts, and are recorded by the Portfolio as unrealized gains or losses. When the contract is closed, the Portfolio realizes a gain or loss equal to the difference between the opening and closing value of the contract. The use of futures contracts involves, to varying degrees, elements of market risk which may exceed the amounts recognized by the Portfolio. Changes in the value of the contracts may not directly correlate to the changes in the value of the underlying securities. These risks may decrease the effectiveness of the Portfolio's hedging and trading strategies and potentially result in a loss. As of December 31, 2004, the portfolio had no open futures contracts. C. Taxes It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from or in excess of net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2004, Balanced VCT Portfolio had a capital loss carryforward of $5,161,356, of which will the following amounts expire between 2010 and 2011 if not utilized: $2,571,211 in 2010, and $2,590,145, in 2011. The portfolio elected to defer $90,901 in capital losses recognized between November 1, 2004 and December 31, 2004 to its fiscal year ending December 31, 2005. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis.
- -------------------------------------------------------------------------------- Undistributed Net Accumulated Net Investment Income Realized Gain Paid-In Portfolio (Loss) (Loss) Capital - -------------------------------------------------------------------------------- Pioneer Balanced VCT Portfolio $88,717 $ (88,717) $ (0) ------- --------- ---- - --------------------------------------------------------------------------------
18 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004 and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis. - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------- 2004 2003 --------------- ----------- Distributions paid from: Ordinary Income $ 944,560 $820,558 Long-Term capital gain -- -- ------------ -------- $ 944,560 $820,558 Return of Capital -- -- ------------ -------- Total distributions $ 944,560 $820,558 ------------ -------- Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ 13,132 Undistributed long-term gain/(capital loss carryforward) (5,161,356) Post-October loss deferred (90,901) Unrealized appreciation (depreciation) 4,602,061 ------------ Total $ (637,064) ------------ - ----------------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily attributable to the tax deferral of losses on wash sales, and the tax treatment of premium amortization. D. Portfolio Shares The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of the adjusted net assets at the beginning of the day. Dividends and distributions to shareowners are recorded on the ex-dividend date. Distributions paid by the Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. E. Securities Lending The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. F. Repurchase Agreements With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 19 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) - -------------------------------------------------------------------------------- 2. Management Agreement PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the Portfolio. Management fees are calculated daily at the following annual rate of 0.65% of the Portfolio's average daily net assets. In addition, under the management and administration agreement, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $27,524 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. Transfer Agent PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $272 in transfer agent fees payable to PIMSS at December 31, 2004. 4. Distribution Plans The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares. Included in due to affiliates is $2,213 payable to PFD at December 31, 2004. 5. Aggregate Unrealized Appreciation and Depreciation At December 31, 2004, the Portfolio's aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
- ----------------------------------------------------------------------------------------- Net Gross Gross Appreciation/ Portfolio Tax Cost Appreciation Depreciation (Depreciation) - ----------------------------------------------------------------------------------------- Balanced Portfolio $40,310,656 $5,154,366 $ (552,305) $4,602,061 - -----------------------------------------------------------------------------------------
6. Portfolio Transactions The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $6,958,907 and $6,637,518, respectively. The cost of purchase and the proceeds from sales in U.S. Government obligations were $7,113,072 and $6,465,950, respectively. 7. Capital Shares At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
- ----------------------------------------------------------------------------------------- Balanced Portfolio '04 Shares '04 Amount '03 Shares '03 Amount - ----------------------------------------------------------------------------------------- CLASS I: Shares sold 78,321 $ 1,113,192 58,603 $ 777,329 Reinvestment of distributions 55,609 789,468 60,877 800,492 Shares repurchased (586,843) (8,291,593) (705,902) (9,066,098) ------------------------------------------------------- Net increase (decrease) (452,913) (6,388,933) (586,422) $ (7,488,277) ------------------------------------------------------- CLASS II: Shares sold 557,386 $ 7,865,698 244,252 $ 3,291,111 Reinvestment of distributions 10,920 155,081 1,455 20,059 Shares repurchased (83,119) (1,169,938) (3,966) (53,357) ------------------------------------------------------ Net increase 485,187 $ 6,850,841 241,741 $ 3,257,813 ------------------------------------------------------ - -----------------------------------------------------------------------------------------
20 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Board of Trustees of Pioneer Variable Contracts Trust and the Class II Shareowners of Pioneer Balanced VCT Portfolio: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Balanced VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust") as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Balanced VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young Boston, Massachusetts February 11, 2005 21
- ----------------------------------------------------------------------------------------------------------------------------------- Pioneer Balanced VCT Portfolio - ----------------------------------------------------------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - ----------------------------------------------------------------------------------------------------------------------------------- Investment Adviser Trustees and Officers Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the Trust's operations. The Trust's Trustees and officers are listed below, together Custodian with their rincipal occupations during the past five years. Trustees who Brown Brothers Harriman & Co are interested persons of the Portfolio within the meaning of the Investment Company Act of 1940 are referred to as Interested Trustees. Independent Registered Public Accounting Firm Trustees who are not interested persons of the Trust are referred to as Ernst & Young LLP Trustees. Each of the Trustees serves as a trustee of each of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, Principal Underwriter Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address Pioneer Funds Distributor, Inc. for all Interested Trustees and all officers of the Portfolio is 60 State Street, Boston, Massachusetts 02109. Legal Counsel The Trust's statement of additional information provides more detailed Wilmer Cutler Pickering Hale and Dorr LLP information regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-225-6292. Shareowner Services and Transfer Proxy Voting Policies and Procedures of the Trust are available without Pioneer Investment Management Shareholder Services, charge, upon Agent request, by calling our toll free number Inc. (1-800-225-6292). This information is also available online at pioneerfunds.com. Pioneer Investment Management Shareholder Services, Inc. online at pioneerfunds.com. online at pioneerfunds.com. - ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES - ----------------------------------------------------------------------------------------------------------------------------------- POSITIONS HELD PRINCIPAL OCCUPATION DURING NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS TRUSTEE John F. Cogan, Chairman of the Serves until Trustee and President Serves Director of Harbor Global Company, Ltd. Jr. (78)* Board, Trustee successor trustee until retirement or removal President and is elected or or earlier retirement Deputy removal Chairman and a Director of Pioneer Global Asset Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Manage ("PIM-USA"); Chairman and a Director of Pio of Pioneer Alternative Investment Managemen (Dublin); President and a Director of Pione Investment Management (Bermuda) Limited and funds; President and Director of Pioneer Fu Inc. ("PFD"); President of all of the Pione Of Counsel (since 2000, partner prior to 20 Pickering Hale and Dorr LLP (counsel to PIM Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------ Osbert M. Hood Trustee and Serves until President and Chief Executive None (52)** Executive Vice successor trustee is Officer, PIM-USA since May 2003 President elected or earlier (Director since January 2001); retirement or removal President and Director of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------------ Pioneer Balanced VCT Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) - ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------------ POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS THIS TRUSTEE David R. Trustee since Serves until a Senior Vice President and Director of The Enterprise Social Investment Bock** (61) 2005 successor trustee is Chief Financial Officer, Company (privately-held affordable housing 3050 K. elected or earlier I-trax, Inc (publicly traded finance company); Director of New York Street NW, retirement or removal.health care services Mortgage Trust (publicly traded mortgage Washington, company) (2001-present); REIT) DC 20007 Managing Partner, Federal City Capital Advisors (boutique merchant bank)(1995-2000; 2002 to 2004); Executive Vice President and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Mary K. Bush Trustee since Serves until President, Bush International Director of Brady Corporation (industrial (56) 3509 2000. successor trustee is (international inancial identification and specialty coated material Woodbine elected or earlier advisory firm) products manufacturer), Millennium Street, retirement or removal Chemicals, Inc. (commodity chemicals), Chevy Chase, Mortgage Guaranty Insurance Corporation, MD 20815 and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - ------------------------------------------------------------------------------------------------------------------------------------ Margaret Trustee since Serves until Founding Director, The None B.W. Graham 2000. successor trustee is Winthrop Group, Inc. (57) 1001 elected or earlier (consulting firm); Professor Sherbrooke retirement or removal of Management, Faculty of Street West, Management, McGill Montreal, University Quebec, Canada H3A 1G5 - ------------------------------------------------------------------------------------------------------------------------------------ Marguerite Trustee since Serves untill President, and Cheif Executive Director of New American high Income Fund, A. Piret 1995. successor Officer, Newbury, Piret & Inc.(closed-end investment company) (56) One trustee is Company, Inc. (investment Boston elected or banking firm) Place, 28th earlier Floor, retirement Boston, MA or removal 02108 - ------------------------------------------------------------------------------------------------------------------------------------ Stephen K. Trustee since Serves until Senior Counsel, Sullivan & Director,The Swiss Helvetic Fund, Inc. West (76) 1995. successor trustee Cromwell (law firm) (closed-end investment company) and AMVESCAP 125 Broad is elected or earlier PLC (investment managers) Street, New retirement or removal York, NY 10004 - ------------------------------------------------------------------------------------------------------------------------------------ John Trustee since Serves until President, John Winthrop & Co., None Winthrop September, successor trustee Inc.(private investment firm) (68) One 2000. is elected or earlier North Adgers retirement or removal Wharf, Charleston, SC 29401 - ------------------------------------------------------------------------------------------------------------------------------------
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Pioneer Balanced VCT Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) - ------------------------------------------------------------------------------------------------------------------------------------ TRUST OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS OFFICER Dorothy E. Secretary Serves at the discretion Secretary of PIM-USA; Senior None Bourassa (57) of the Board Vice President - Legal of Pioneer; and Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Complianc of PIM-USA from April 1998 through October 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Christopher J. Assistant Serves at the discretion Assistant Vice President and None Kelley (40) Secretary of the Board Senior Counsel of Pioneer since July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ David C. Assistant Serves at the discretion Partner, Wilmer Cutler None Phelan (47) Secretary of the Board Pickering Hale and Dorr LLP; Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Vincent Treasurer Serves at the discretion Vice President-Fund None Nave (59) of the Board Accounting, Administration and Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ------------------------------------------------------------------------------------------------------------------------------------ Mark E. Assistant Serves at the discretion Deputy Treasurer of Pioneer None Bradley (45) Treasurer of the Board since 2004; Treasurer and Senior Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Luis I. Assistant Serves at the discretion Assistant Vice President - None Presutti (39) Treasurer of the Board Fund Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Gary Sullivan Assistant Serves at the discretion Fund Accounting Manager - None (46) Treasurer of the Board Fund Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - ------------------------------------------------------------------------------------------------------------------------------------
24
- ------------------------------------------------------------------------------------------------------------------------------------ Pioneer Balanced VCT Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) - ------------------------------------------------------------------------------------------------------------------------------------ TRUST OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ POSITIONS HELD PRINCIPAL OCCUPATION NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS OFFICER Katharine Kim Assistant Serves at the discretion Fund Administration Manager - None Sullivan (31) Treasurer of the Board Fund Accounting, Administration and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Martin J. Wolin Chief Serves at the discretion Chief Compliance Officer of None (37) Compliance of the Board Pioneer (Director of Officer Compliance and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 25 [LOGO] PIONEER INVESTMENTS(R) PIONEER VARIABLE CONTRACTS TRUST PIONEER MID CAP VALUE VCT PORTFOLIO -- CLASS II SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Pioneer Mid Cap Value VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 9 Notes to Financial Statements 13 Report of Independent Registered Public Accounting Firm 18 Trustees, Officers and Service Providers 19 PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT www.pioneerfunds.com. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT http://www.sec.gov. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] U.S. Common Stocks 90.8% Temporary Cash Investment 8.2% Depositary Receipts for International Stocks 1.0% SECTOR DISTRIBUTION (As a percentage of equity holdings) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Financials 20.1% Consumer Discretionary 19.7% Information Technology 12.6% Industrials 11.1% Materials 8.7% Health Care 8.5% Consumer Staples 7.7% Energy 6.0% Utilities 5.5% Telecommunication Services 0.1% FIVE LARGEST HOLDINGS (As a percentage of equity holdings) 1. Foot Locker Inc. 2.55% 2. Mattel, Inc. 2.19% 3. Safeway, Inc. 1.81% 4. Triad Hospitals, Inc. 1.76% 5. CIGNA Corp. 1.76% The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- PRICES AND DISTRIBUTIONS 12/31/04 12/31/03 Net Asset Value per Share $ 24.44 $ 20.32 DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ 0.0598 $ -- $ 0.2095 - -------------------------------------------------------------------------------- PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in PIONEER MID CAP VALUE VCT PORTFOLIO at net asset value, compared to that of the Russell Midcap Value Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Russell Midcap Value Index Pioneer Mid Cap Value VCT Portfolio* 3/95 10000 10000 12263 11685 12/96 14748 13193 19812 16294 12/98 20820 14734 20799 16615 12/00 24789 19800 25369 21032 12/02 22920 18639 31643 25551 12/04 39142 31114 Index comparison begins 2/28/95. The Russell Midcap Value Index measures the performance of U.S. mid-cap value stocks. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in any Index. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004) - -------------------------------------------------------------------------------- NET ASSET VALUE - -------------------------------------------------------------------------------- Life-of-Class 12.12% (3/1/95) 5 Years 13.37% 1 Year 21.77% All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER MID CAP VALUE VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,121.91 $ 1,120.03 Expenses Paid During Period* $ 3.88 $ 5.20 * Expenses are equal to the Portfolio's annualized expense ratio of 0.73% and 0.98% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER MID CAP VALUE VCT PORTFOLIO Based on a hypothetical 5% return per year before expenses, reflecting the period from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,021.52 $ 1,020.26 Expenses Paid During Period* $ 3.70 $ 4.95 * Expenses are equal to the Portfolio's annualized expense ratio of 0.73%, and 0.98% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- A WORD ABOUT RISK: INVESTING IN MID-SIZED COMPANIES MAY OFFER THE POTENTIAL FOR HIGHER RETURNS, BUT THESE COMPANIES ARE ALSO SUBJECT TO GREATER SHORT-TERM PRICE FLUCTUATIONS THAN LARGER, MORE ESTABLISHED COMPANIES. CALL 800-688-9915 OR VISIT www.pioneerfunds.com FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE RETURNS FOR THE PORTFOLIO DO NOT REFLECT THE DEDUCTION OF EXPENSES ASSOCIATED WITH VARIABLE PRODUCTS, SUCH AS MORTALITY AND EXPENSE RISK CHARGES, SEPARATE ACCOUNT CHARGES, AND SALES CHARGES. THESE EXPENSES WOULD REDUCE THE OVERALL RETURNS SHOWN. PERFORMANCE RESULTS REFLECT ANY APPLICABLE EXPENSE WAIVERS IN EFFECT DURING THE PERIODS SHOWN. WITHOUT SUCH WAIVERS PERFORMANCE WOULD BE LOWER. WAIVERS MAY NOT BE IN EFFECT FOR ALL PORTFOLIOS. CERTAIN FEE WAIVERS ARE CONTRACTUAL THROUGH A SPECIFIED PERIOD. OTHERWISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION. Domestic equity markets moved in fits and starts, both up and down, through the first nine months of 2004 before finally staging a strong rally following the November elections. In the final two months of the year, stock indices moved upward, with small- and mid-cap companies outperforming large-cap corporations, and value stocks outpacing growth stocks. In the following interview, Rod Wright discusses the market environment and factors that affected performance during 2004. Mr. Wright is responsible for day-to-day portfolio management of Pioneer Mid Cap Value VCT Portfolio. Q: HOW DID THE PORTFOLIO PERFORM? A: The Portfolio delivered strong results, despite trailing its benchmark index. For the 12 months ended December 31, 2004, Class II shares of the Portfolio had a total return of 21.77% at net asset value, while the Russell Midcap Value Index returned 23.71%. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: WHAT WERE THE PRINCIPAL FACTORS THAT AFFECTED PERFORMANCE? A: The Portfolio participated in the final end-of-year rally that raised stock averages. For much of the year, a variety of factors and potential problems affected investors, who worried about the effects of rising interest rates, increasing energy prices, instability in Iraq and the political uncertainty resulting from a fiercely contested Presidential election. During the year, our selections in the health care, telecommunications, energy, financials and utilities sectors helped performance, while investments in materials, technology, industrials and consumer staples sectors detracted from results. Q: WHAT WERE SOME OF THE INDIVIDUAL INVESTMENTS THAT HAD THE GREATEST IMPACT ON PORTFOLIO RESULTS? A: Although technology investments tended to be a drag on performance, one technology company - NCR - had the single greatest positive impact on the Portfolio's return. NCR, which already had established itself as a leader in producing ATM and automatic retail scanning and check-out equipment, saw greatly improved results from its technology that helps companies store and manage large quantities of data. NCR's stock had been selling at a deep discount, but the effects of a corporate reorganization and the policies of a new management team helped lead to greatly improved earnings. Reliant Energy, which is involved in both electric power generation and in power distribution, was the Portfolio's second-largest contributor, as its stock appreciated after a reorganization of company debt. Other stocks that helped performance substantially included: Transocean, which operates oil drilling rigs and benefited from rising oil prices; W.W. Grainger, a national distributor of industrial parts and machinery, which enjoyed improved earnings as a result of a restructuring; and Ball, a packaging company which manufactures cans and bottles for beverage companies. Two health care sector investments that helped were: Becton Dickinson, a medical supply company; and Cigna, an HMO. Also adding to results were three companies involved in acquisitions at premiums to their stock valuations: Charter Bank, which was taken over by Citizens Bank, a unit of Royal Bank of Scotland; Apogent Technology, a producer of research equipment for medical laboratories, which was acquired by Fisher Scientific; and Veritas Software, a developer of data management software, which announced it was being acquired by Symantec. Holdings that detracted from results included UTStarcom, a manufacturer of inexpensive hand-held telephones, which was hurt by intense competition in China. While we sold our position in UTStarcom, we retained three other stocks that were a drag on performance: Safeway, toy company Mattel and mortgage insurer PMI, all of which gained but still lagged the mid-cap value market. Portfolio results were held back by not owning three companies that were performance leaders during 2004: TXU, a Texas utility; Apple Computer, the developer of the popular iPod product; and Monsanto, which produces genetically modified seeds for the agriculture industry. Q: WHAT IS YOUR INVESTMENT OUTLOOK? A: We are reasonably optimistic about the economy and investment opportunities in the stock market. After a year in which corporate earnings rose faster than stock prices, stock valuations - as measured by price/earnings ratios - are more reasonable than they were a year ago. At the same time, interest rates remain low by historical standards, even though the Federal Reserve has raised short-term rates several times, while the economy continues to expand and support rising corporate earnings. Investors are watching several issues very carefully. They include: oil prices, which recently have declined; the elections and political instability in Iraq; and general geopolitical concerns. Positive news about any of these issues could help rally the stock market. Although we expect to continue to de-emphasize stocks of companies that may be vulnerable to rapid increases in interest rates, we are moderately bullish about the overall market. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. 4 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - -------------------------------------------------------------------------------- SHARES VALUE COMMON STOCKS - 99.8% ENERGY - 5.9% INTEGRATED OIL & GAS - 0.9% 7,700 BP Amoco Plc (A.D.R.) $ 449,680 129,540 Occidental Petroleum Corp. 7,559,954 ------------- $ 8,009,634 ------------- OIL & GAS DRILLING - 2.8% 175,915 ENSCO International, Inc. $ 5,583,542 111,530 Nabors Industries, Inc.* 5,720,374 30,000 Pride International, Inc* 616,200 141,630 Transocean Offshore, Inc.* 6,003,696 102,035 Weatherford International, Inc.* 5,234,396 ------------- $ 23,158,208 ------------- OIL & GAS EXPLORATION & PRODUCTION - 2.0% 14,200 Apache Corp. $ 718,094 11,700 Anadarko Petroleum Corp. 758,277 185,022 Devon Energy Corp. 7,201,056 203,585 Pioneer Natural Resources Co. 7,145,834 19,300 XTO Energy, Inc. 682,834 ------------- $ 16,506,095 ------------- OIL & GAS REFINING MARKETING & TRANSPORTATION - 0.3% 27,385 Sun Co., Inc. $ 2,237,628 ------------- TOTAL ENERGY $ 49,911,565 ------------- MATERIALS - 8.6% COMMODITY CHEMICALS - 1.2% 171,545 Air Products & Chemicals, Inc. $ 9,944,464 ------------- DIVERSIFIED CHEMICAL - 1.6% 7,200 Olin Corp. $ 158,544 197,420 PPG Industries, Inc. 13,456,147 ------------- $ 13,614,691 ------------- DIVERSIFIED METALS & MINING - 1.8% 141,700 Freeport-McMoRan Copper & Gold, Inc. (Class B) $ 5,417,191 100,785 Phelps Dodge Corp. 9,969,652 ------------- $ 15,386,843 ------------- METAL & GLASS CONTAINERS - 1.6% 305,720 Ball Corp. $ 13,445,566 ------------- PAPER PRODUCTS - 2.3% 278,467 Flowserve Corp.* $ 7,668,981 351,900 Meadwestvaco Corp. 11,925,891 ------------- $ 19,594,872 ------------- SPECIALTY CHEMICALS - 0.1% 16,500 Ecolab, Inc. $ 579,645 ------------- Total Materials $ 72,566,081 ------------- CAPITAL GOODS - 5.2% AEROSPACE & DEFENSE - 1.0% 11,800 Northrop Grumman Corp. $ 641,448 166,500 United Defense Industries, Inc.* 7,867,125 ------------- $ 8,508,573 ------------- CONSTRUCTION, FARM MACHINERY & HEAVY TRUCKS - 0.1% 13,100 Terex Corp.* $ 624,215 ------------- ELECTRICAL COMPONENT & EQUIPMENT - 1.3% 627,890 Symbol Technologies, Inc. $ 10,862,497 ------------- INDUSTRIAL CONGLOMERATES - 2.8% 259,780 American Standard Co., Inc.* $ 10,734,110 148,520 ITT Industries, Inc. 12,542,514 ------------- $ 23,276,624 ------------- TOTAL CAPITAL GOODS $ 43,271,909 ------------- COMMERCIAL SERVICES & SUPPLIES - 4.3% COMMERCIAL PRINTING - 1.4% 344,740 R.R. Donnelly & Sons Co. $ 12,165,875 ------------- DIVERSIFIED COMMERCIAL SERVICES - 1.3% 26,700 FTI Consulting, Inc.* $ 562,569 209,010 H & R Block, Inc. 10,241,490 ------------- $ 10,804,059 ------------- ENVIRONMENTAL SERVICES - 1.6% 396,435 Republic Services, Inc. $ 13,296,430 ------------- TOTAL COMMERCIAL SERVICES & SUPPLIES $ 36,266,364 ------------- TRANSPORTATION - 1.7% AIR FREIGHT & COURIERS - 0.1% 9,600 Expeditors International of Washington, Inc. $ 536,448 ------------- AIRLINES - 0.6% 294,810 Southwest Airlines Co. $ 4,799,507 ------------- RAILROADS - 1.0% 139,920 Canadian National Railway Co. $ 8,570,100 ------------- TOTAL TRANSPORTATION $ 13,906,055 ------------- AUTOMOBILES & COMPONENTS - 0.1% AUTOMOBILE MANUFACTURERS - 0.1% 19,300 Monaco Coach Corp. $ 397,001 8,800 PACCAR, Inc. 708,224 ------------- $ 1,105,225 ------------- TOTAL AUTOMOBILES & COMPONENTS $ 1,105,225 ------------- The accompanying notes are an integral part of these financial statements. 5 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- SHARES VALUE CONSUMER DURABLES & APPAREL - 4.5% APPAREL, ACCESSORIES & LUXURY GOODS - 0.3% 99,391 The Limited Brands, Inc. $ 2,287,981 ------------- HOUSEWARES & SPECIALTIES - 0.8% 31,700 Leggett & Platt, Inc. $ 901,231 174,600 Yankee Candle Co.* 5,793,228 ------------- $ 6,694,459 ------------- LEISURE PRODUCTS - 2.2% 940,930 Mattel, Inc. $ 18,338,726 ------------- PHOTOGRAPHIC PRODUCTS - 1.2% 316,300 Eastman Kodak Co. (a) $ 10,200,675 ------------- TOTAL CONSUMER DURABLES & APPAREL $ 37,521,841 ------------- HOTELS, RESTAURANTS & LEISURE - 1.7% HOTELS, RESORTS & CRUISE LINES - 0.1% 27,600 Ambassadors Group, Inc. $ 982,836 ------------- RESTAURANTS - 1.6% 333,400 Ruby Tuesday, Inc. $ 8,695,072 91,905 Tricon Global Restaurants, Inc. 4,336,078 ------------- $ 13,031,150 ------------- TOTAL HOTELS, RESTAURANTS & LEISURE $ 14,013,986 ------------- MEDIA - 3.7% ADVERTISING - 1.7% 1,066,400 The Interpublic Group of Co., Inc.* $ 14,289,760 ------------- BROADCASTING & CABLE TV - 1.2% 275,200 Entercom Communications Corp.* $ 9,876,928 ------------- MOVIES & ENTERTAINMENT - 0.8% 315,360 Regal Entertainment Group (a) $ 6,543,720 16,900 Viacom, Inc. (Class B) 614,991 ------------- $ 7,158,711 ------------- TOTAL MEDIA $ 31,325,399 ------------- RETAILING - 9.6% APPAREL RETAIL - 1.1% 221,900 Liz Claiborne, Inc. $ 9,366,399 ------------- DEPARTMENT STORES - 0.7% 150,300 J.C. Penney Co., Inc. $ 6,222,420 ------------- GENERAL MERCHANDISE STORES - 0.8% 265,100 American Greetings Corp. (a) $ 6,720,285 ------------- INTERNET RETAIL - 1.4% 418,500 InterActive Corp.* $ 11,558,970 ------------- SPECIALTY STORES - 5.6% 984,000 Blockbuster, Inc. (a) $ 9,387,360 793,230 Foot Locker, Inc. 21,361,684 210,700 Tiffany & Co. 6,736,079 471,700 Toys "R" Us, Inc.* 9,655,699 ------------- $ 47,140,822 ------------- TOTAL RETAILING $ 81,008,896 ------------- FOOD & DRUG RETAILING - 7.6% DRUG RETAIL - 1.3% 233,170 CVS Corp. $ 10,508,972 ------------- FOOD DISTRIBUTORS - 1.3% 9,800 Amerisourcebergen Corp. $ 575,064 322,700 McKesson HBOC, Inc. 10,152,142 21,900 Performance Food Group Co.* 589,329 ------------- $ 11,316,535 ------------- FOOD RETAIL - 3.4% 284,790 ConAgra, Inc. $ 8,387,066 111,818 Dean Foods Co.* 3,684,403 62,000 Kroger Co.* 1,087,480 770,100 Safeway, Inc. 15,201,774 ------------- $ 28,360,723 ------------- HYPERMARKETS & SUPERCENTERS - 1.6% 447,870 BJ'S Wholesale Club, Inc.* (a) $ 13,046,453 13,000 Costco Wholesale Corp. 629,330 ------------- $ 13,675,783 ------------- TOTAL FOOD & DRUG RETAILING $ 63,862,013 ------------- FOOD, BEVERAGE & TOBACCO - 0.1% SOFT DRINKS - 0.1% 13,600 PepsiCo, Inc. $ 709,920 ------------- TOTAL FOOD, BEVERAGE & TOBACCO $ 709,920 ------------- HEALTH CARE EQUIPMENT & SERVICES - 6.5% HEALTH CARE DISTRIBUTORS - 0.8% 147,700 Par Pharmaceutical Co., Inc.* $ 6,111,826 21,200 Wyeth 902,908 ------------- $ 7,014,734 ------------- HEALTH CARE FACILITIES - 3.0% 971,100 Tenet Healthcare Corp.* $ 10,662,678 397,360 Triad Hospitals, Inc.* 14,785,766 ------------- $ 25,448,444 ------------- HEALTH CARE SERVICES - 0.8% 17,200 Accredo Health, Inc.* $ 476,784 111,330 Laboratory Corp. of America Holdings* 5,546,461 23,200 Ims Health, Inc. 538,472 ------------- $ 6,561,717 ------------- 6 The accompanying notes are an integral part of these financial statements. PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SHARES VALUE HEALTH CARE SUPPLIES - 0.1% 11,200 Cooper Co., Inc. $ 790,608 ------------- MANAGED HEALTH CARE - 1.8% 180,400 CIGNA Corp. $ 14,715,228 ------------- TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 54,530,731 ------------- PHARMACEUTICALS & BIOTECHNOLOGY - 2.0% PHARMACEUTICALS - 2.0% 648,200 IVAX Corp.* (a) $ 10,254,524 356,100 Mylan Laboratories, Inc. (a) 6,295,848 23,900 Pfizer, Inc. 642,671 ------------- $ 17,193,043 ------------- TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 17,193,043 ------------- BANKS - 7.1% DIVERSIFIED BANKS - 0.0% 10,200 U.S. Bancorp $ 319,464 ------------- REGIONAL BANKS - 4.7% 120,600 City National Corp. $ 8,520,390 175,830 KeyCorp 5,960,637 184,865 Marshall & Ilsley Corp. 8,171,033 264,456 North Fork Bancorporation, Inc. 7,629,556 28,852 Washington Banking Co. 523,664 36,000 West Coast Bancorp Oregon 914,760 120,200 Zions Bancorporation 8,177,206 ------------- $ 39,897,246 ------------- THRIFTS & MORTGAGE FINANCE - 2.4% 145,098 Countrywide Financial Corp. $ 5,370,077 323,160 The PMI Group, Inc. 13,491,930 21,500 Washington Mutual, Inc. 909,020 ------------- $ 19,771,027 ------------- TOTAL BANKS $ 59,987,737 ------------- DIVERSIFIED FINANCIALS - 6.6% CONSUMER FINANCE - 1.4% 18,414 White Mountains Insurance Group, Ltd. $ 11,895,444 ------------- ASSET MANAGEMENT & CUSTODY BANKS - 1.2% 314,990 Federated Investors, Inc. $ 9,575,696 23,600 Waddell & Reed Financial, Inc. 563,804 ------------- $ 10,139,500 ------------- CONSUMER FINANCE - 1.7% 29,000 MBNA Corp. $ 817,510 832,100 Providian Financial Corp.* 13,704,687 ------------- $ 14,522,197 ------------- INVESTMENT BANKING & BROKERAGE - 2.3% 322,000 A.G. Edwards, Inc. $ 13,913,620 248,150 Investment Technology Group, Inc.* 4,963,000 ------------- $ 18,876,620 ------------- TOTAL DIVERSIFIED FINANCIALS $ 55,433,761 ------------- INSURANCE - 6.4% INSURANCE BROKERS - 2.3% 278,410 Platinum Underwriter Holdings, Ltd. $ 8,658,551 259,540 Willis Group Holdings, Ltd. (a) 10,685,262 ------------- $ 19,343,813 ------------- LIFE & HEALTH INSURANCE - 2.0% 111,030 Jefferson - Pilot Corp. $ 5,769,119 6,900 Stancorp Financial Group, Inc. 569,250 554,700 UNUM Corp. (a) 9,951,318 ------------- $ 16,289,687 ------------- PROPERTY & CASUALTY INSURANCE - 2.1% 64,905 Ambac Financial Group, Inc. $ 5,330,648 238,000 Safeco Corp. 12,433,120 ------------- $ 17,763,768 ------------- TOTAL INSURANCE $ 53,397,268 ------------- SOFTWARE & SERVICES - 4.4% APPLICATION SOFTWARE - 1.6% 71,100 Captaris, Inc.* $ 366,876 14,600 Intuit, Inc.* 642,546 18,200 Microsoft Corp. 486,122 407,100 Veritas Software Corp.* 11,622,705 ------------- $ 13,118,249 ------------- DATA PROCESSING & OUTSOURCED SERVICES - 2.7% 584,730 The BISYS Group, Inc.* $ 9,618,809 14,800 Fiserv, Inc.* 594,812 437,829 SunGard Data Systems, Inc.* 12,403,696 ------------- $ 22,617,317 ------------- SYSTEMS SOFTWARE - 0.1% 19,020 Netiq Corp.* $ 232,234 36,000 WatchGuard Technologies, Inc.* 159,480 ------------- $ 391,714 ------------- TOTAL SOFTWARE & SERVICES $ 36,127,280 ------------- TECHNOLOGY, HARDWARE & EQUIPMENT - 8.0% COMMUNICATIONS EQUIPMENT - 2.0% 356,600 Century Telephone Enterprises, Inc. $ 12,648,602 480,221 Tellabs, Inc.* 4,125,098 ------------- $ 16,773,700 ------------- The accompanying notes are an integral part of these financial statements. 7 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- SHARES VALUE COMPUTER HARDWARE - 0.6% 76,360 NCR Corp.* $ 5,286,403 ------------- COMPUTER STORAGE & PERIPHERALS - 3.1% 275,600 Imation Corp. $ 8,772,348 277,500 Sandisk Corp.* 6,929,174 333,900 Storage Technology Corp.* 10,554,579 ------------- $ 26,256,101 ------------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.1% 123,980 W.W. Grainger, Inc. $ 8,259,548 28,000 Ingram Micro, Inc.* 582,400 ------------- $ 8,841,948 ------------- TECHNOLOGY DISTRIBUTORS - 1.2% 150,320 Fisher Scientific International, Inc.* $ 9,376,962 19,600 Tektronix, Inc. 592,115 ------------- $ 9,969,077 ------------- TOTAL TECHNOLOGY, HARDWARE & EQUIPMENT $ 67,127,229 ------------- SEMICONDUCTORS - 0.2% SEMICONDUCTOR EQUIPMENT - 0.0% 24,500 FEI Co.* $ 514,500 ------------- SEMICONDUCTORS - 0.2% 36,300 Intel Corp. $ 849,057 36,700 Micron Technology, Inc.* 453,245 50,400 Triquint Semiconductor, Inc.* 224,280 ------------- $ 1,526,582 ------------- TOTAL SEMICONDUCTORS $ 2,041,082 ------------- TELECOMMUNICATION SERVICES - 0.1% INTEGRATED TELECOMMUNICATION SERVICES - 0.1% 20,600 SBC Communications, Inc. $ 530,862 14,700 Verizon Communications, Inc. 595,498 ------------- $ 1,126,360 ------------- TOTAL TELECOMMUNICATION SERVICES $ 1,126,360 ------------- UTILITIES - 5.5% ELECTRIC UTILITIES - 4.1% 45,800 Avista Corp. $ 809,286 168,475 Constellation Energy Group 7,364,041 131,915 Entergy Corp. 8,916,137 122,500 NSTAR 6,649,300 322,500 PG&E Corp.* 10,732,800 ------------- $ 34,471,564 ------------- MULTI-UTILITIES & UNREGULATED POWER - 1.4% 836,100 Reliant Energy* (a) $ 11,412,762 ------------- TOTAL UTILITIES $ 45,884,323 ------------- TOTAL COMMON STOCKS (Cost $694,162,506) $ 838,318,071 ------------- PRINCIPAL AMOUNT VALUE TEMPORARY CASH INVESTMENTS - 8.9% REPURCHASE AGREEMENT - 0.9% $ 7,500,000 UBS Warburg, Inc., 1.00%, dated 12/31/04, repurchase price of $7,500,000 plus accrued interest on 1/3/05 collateralized by $7,133,000 U.S. Treasury Bill, 6.5%, 10/15/2006 $ 7,500,000 ------------- SHARES SECURITY LENDING COLLATERAL - 8.0% 67,222,325 Securities Lending Investment Fund, 2.18% $ 67,222,325 ------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $74,722,325) $ 74,722,325 ------------- TOTAL INVESTMENTS IN SECURITIES - 108.7% (Cost $768,884,831) $ 913,040,396 ------------- OTHER ASSETS AND LIABILITIES - (8.7%) $ (73,064,457) ------------- TOTAL NET ASSETS - 100.0% $ 839,975,936 ============= (A.D.R.) American Depositary Receipt * Non-income producing security (a) At December 31, 2004, the following securities were out on loan: SHARES SECURITY MARKET VALUE 261,495 American Greetings Corp. $ 6,628,898 386,336 BJ'S Wholesale Club, Inc.* 11,253,968 775,700 Blockbuster, Inc. 7,400,178 100,000 Eastman Kodak Co. 3,225,000 122,760 IVAX Corp.* 1,942,063 338,295 Mylan Laboratories, Inc. 5,981,056 294,557 Regal Entertainment Group 6,112,058 214,400 Reliant Energy* 2,926,560 521,740 UNUM Corp. 9,360,016 245,613 Willis Group Holdings, Ltd. 10,111,886 ------------ TOTAL $ 64,941,683 ============ 8 The accompanying notes are an integral part of these financial statements. PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 5/1/00 TO CLASS II (a) 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 20.32 $ 14.86 $ 17.28 $ 17.75 $ 16.89 ---------- ---------- -------- -------- ------- Increase (decrease) from investment operations: Net investment income $ 0.01 $ 0.06 $ 0.04 $ 0.14 $ 0.07 Net realized and unrealized gain (loss) on investments 4.38 5.44 (1.96) 0.94 2.01 ---------- ---------- -------- -------- ------- Net increase (decrease) from investment operations $ 4.39 $ 5.50 $ (1.92) $ 1.08 $ 2.08 Distributions to shareowners: Net investment income (0.06) (0.04) (0.04) (0.08) (0.13) Net realized gain (0.21) -- (0.46) (1.47) (1.09) ---------- ---------- -------- -------- ------- Net increase (decrease) in net asset value $ 4.12 $ 5.46 $ (2.42) $ (0.47) $ 0.86 ---------- ---------- -------- -------- ------- Net asset value, end of period $ 24.44 $ 20.32 $ 14.86 $ 17.28 $ 17.75 ========== ========== ======== ======== ======= Total return* 21.77% 37.09% (11.38)% 6.22% 13.35% Ratio of net expenses to average net assets+ 0.97% 1.00% 1.07% 1.11% 1.01%** Ratio of net investment income to average net assets+ 0.29% 0.60% 0.24% 0.10% 0.37%** Portfolio turnover rate 55% 52% 68% 95% 85% Net assets, end of period (in thousands) $ 536,837 $ 211,120 $ 61,038 $ 10,195 $ 1,943 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.97% 1.00% 1.07% 1.11% 1.01%** Net investment income 0.29% 0.60% 0.24% 0.10% 0.37%** Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.97% 1.00% 1.07% 1.11% 1.01%** Net investment income 0.29% 0.60% 0.24% 0.10% 0.37%**
(a) The Per share data presented above is based upon the average shares outstanding for the period presented. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. ** Annualized. + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 9 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - --------------------------------------------------------------------------------
ASSETS: Investment in securities, at value (including securities loaned of $64,941,683) (Cost $768,884,831) $ 913,040,396 Receivables-- Investment securities sold 1,342,101 Fund shares sold 206,665 Dividends, interest and foreign taxes withheld 591,214 Other 14,869 ------------- Total assets $ 915,195,245 ------------- LIABILITIES: Payables -- Investment securities purchased $ 2,861,531 Fund shares repurchased 4,004,450 Upon return of securities loaned 67,222,328 Due to bank 434,663 Due to affiliates 582,759 Accrued expenses 113,578 ------------- Total liabilities $ 75,219,309 ------------- NET ASSETS: Paid-in capital $ 647,879,874 Undistributed net investment income (loss) 2,164,900 Accumulated undistributed net realized gain (loss) 45,775,597 Net unrealized gain (loss) on: Investments 144,155,565 ------------- Total net assets $ 839,975,936 ------------- NET ASSET VALUE PER SHARE: CLASS I: No par value (unlimited number of shares authorized) Net assets $ 303,138,450 Shares outstanding 12,289,796 ------------- Net asset value per share $ 24.67 CLASS II: No par value (unlimited number of shares authorized) Net assets $ 536,837,486 Shares outstanding 21,966,264 ------------- Net asset value per share $ 24.44
10 The accompanying notes are an integral part of these financial statements. PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTOF OPERATIONS - -------------------------------------------------------------------------------- YEAR ENDED 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $12,629) $ 7,019,067 Interest 207,829 Income on securities loaned, net 24,175 ------------- Total investment income $ 7,251,071 ------------- EXPENSES: Management fees $ 3,753,733 Transfer agent fees and expenses 3,195 Distribution fees (Class II) 936,681 Administrative reimbursements 117,136 Custodian fees 100,959 Professional fees 67,108 Printing expense 107,301 Fees and expenses of nonaffiliated trustees 3,413 Miscellaneous 7,185 ------------- Total expenses $ 5,096,711 Less fees paid indirectly (10,627) ------------- Net expenses $ 5,086,084 ------------- Net investment income (loss) $ 2,164,987 ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 53,898,712 ------------- $ 53,898,712 ------------- Change in net unrealized gain or (loss) from: Investments $ 70,310,429 ------------- $ 70,310,429 ------------- Net gain (loss) on investments, futures contracts and foreign currency transactions $ 124,209,141 ============= Net increase (decrease) in net assets resulting from operations $ 126,374,128 ============= The accompanying notes are an integral part of these financial statements. 11 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 2,164,987 $ 1,803,484 Net realized gain (loss) on investments 53,898,712 6,004,760 Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions 70,310,429 75,230,670 ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 126,374,128 $ 83,038,914 ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (711,725) $ (438,494) Class II (1,067,643) (236,135) Net realized gain Class I (1,863,831) -- Class II (3,740,321) -- ------------- ------------- Total distributions to shareowners $ (7,383,520) $ (674,629) ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 331,791,818 $ 161,143,658 Class I shares issued in reorganization 49,670,328 -- Reinvestment of distributions 7,383,520 674,611 Cost of shares repurchased (49,217,509) (44,550,616) ------------- ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ 339,628,157 $ 117,267,653 ------------- ------------- Net increase (decrease) in net assets $ 458,618,765 $ 199,631,938 ------------- ------------- NET ASSETS: Beginning of year $ 381,357,171 $ 181,725,233 ------------- ------------- End of year $ 839,975,936 $ 381,357,171 ============= ============= Undistributed net investment income (loss), end of year $ 2,164,900 $ 1,779,281 ============= =============
12 The accompanying notes are an integral part of these financial statements. PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Mid Cap Value VCT Portfolio (the Portfolio) a Portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate diversified portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of Mid Cap Value Portfolio is to seek capital appreciation. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in the preparation of its financial statements which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolio are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 13 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. B. FUTURES CONTRACTS The Portfolio may enter into futures transactions to hedge against changes in interest rates, securities prices, and currency rates or to seek to increase total return. Upon entering into a futures contract, the Portfolio is required to deposit with a broker an amount of cash or securities equal to the minimum "initial margin" requirements of the associated futures exchange. Subsequent payments for futures contracts ("variation margin") are paid or received by the Portfolio, depending on the daily fluctuation in the value of the contracts, and are recorded by the Portfolio as unrealized gains or losses. When the contract is closed, the Portfolio realize a gain or loss equal to the difference between the opening and closing value of the contract. The use of futures contracts involves, to varying degrees, elements of market risk which may exceed the amounts recognized by the Portfolio. Changes in the value of the contracts may not directly correlate to the changes in the value of the underlying securities. These risks may decrease the effectiveness of the Portfolio's hedging and trading strategies and potentially result in a loss. As of December 31, 2004, Mid Cap Value Portfolio had no open contracts. C. FOREIGN CURRENCY TRANSLATION The books and records of the Portfolio are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent, the net realized gains and losses on foreign currency contracts, disposition of foreign currencies, and the difference between the amount of income accrued and the U.S. dollar actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. D. FORWARD FOREIGN CURRENCY CONTRACTS The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. E. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2004, Mid Cap Value VCT Portfolio had a capital loss carryforward of $5,981,262, of which the following amounts will expire between 2009 and 2010 if not utilized: $3,451,474 in 2009 and $2,529,788 in 2010. 14 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004 and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003 ------------- --------- DISTRIBUTIONS PAID FROM: Ordinary Income $ 3,095,474 $ 674,629 Long-Term capital gain 4,288,046 -- ------------- --------- $ 7,383,520 $ 674,629 Return of Capital -- -- ------------- --------- Total distributions $ 7,383,520 $ 674,629 ============= ========= DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ 6,505,614 Capital loss carryforward from merger 48,549,164 Undistributed long-term gain/ (capital loss carryforward) (5,981,262) Unrealized appreciation (depreciation) 143,022,546 ------------- Total $ 192,096,062 =============
The difference between book-basis and tax-basis unrealized appreciation is primarily attributable to the tax deferral of losses on wash sales. F. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of the adjusted net assets at the beginning of the day. Distributions paid by a Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. Dividends and distributions to shareowners are recorded on the ex-dividend date. G. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. H. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining 15 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the portfolio. Management fees are calculated daily at the following annual rate of 0.65% of the Portfolio's average daily net assets. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $467,669 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $520 in transfer agent fees payable to PIMSS at December 31, 2004. 4. DISTRIBUTION PLANS The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares. Included in due to affiliates is $114,570 payable to PFD at December 31, 2004. 5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------- ------------- ------------ -------------- Mid Cap Value Portfolio $ 770,017,850 $ 149,310,096 $ (6,287,550) $ 143,022,546
6. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $609,010,425 and $312,401,269, respectively. 7. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
MID CAP VALUE PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - --------------------------------------- ---------- ------------- ---------- ------------- CLASS I: Shares sold 3,133,632 $ 68,612,090 2,677,744 $ 46,157,551 Class I shares issued in reorganization 2,087,866 49,670,328 -- -- Reinvestment of distributions 117,982 2,575,556 26,084 438,476 Shares repurchased (1,365,569) (29,591,496) (2,465,836) (40,592,863) ---------- ------------- ---------- ------------- Net increase 3,973,911 $ 91,266,478 237,992 $ 6,003,164 ========== ============= ========== ============= CLASS II: Shares sold 12,236,512 $ 263,179,728 6,515,291 $ 114,986,107 Reinvestment of distributions 221,974 4,807,964 93,450 236,135 Shares repurchased (881,455) (19,626,013) (1,080,224) (3,957,753) ---------- ------------- ---------- ------------- Net increase 11,577,031 $ 248,361,679 6,280,420 $ 111,264,489 ========== ============= ========== =============
16 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- 8. MERGER INFORMATION On December 8, 2004, beneficial owners of Safeco RST Core Equity Portfolio ("Core Equity"), Safeco RST Money Market Portfolio ("Money Market") and Safeco RST Multi-Cap Core Portfolio ("Multi-Cap"), three of the six portfolios that comprised Safeco Resource Series Trust, approved a proposed Agreement and Plan of Reorganization that provided for the mergers listed below. These tax-free reorganizations were accomplished on December 10, 2004 ("Closing Date"), by exchanging all of the Safeco's net assets for Class I shares as indicated below, based on Class I shares' ending net asset value on the Closing Date. The following charts show the details of the reorganizations as of that closing date Closing Date:
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER SAFECO RST PIONEER MID CAP VALUE MULTI-CAP CORE MID CAP VALUE VCT PORTFOLIO PORTFOLIO VCT PORTFOLIO (PRE-REORGANIZATION) (PRE-REORGANIZATION) (POST-REORGANIZATION) -------------------- -------------------- --------------------- Net Assets $ 757,206,652 $ 49,670,328 $ 858,922,877 Shares Outstanding 32,072,498 2,399,533 34,160,364 Class I Shares Issued 2,087,866
UNREALIZED REALIZED APPRECIATION ON CLOSING GAIN (LOSS) DATE ON CLOSING DATE ----------------------- ------------------- Safeco RST Multi-Cap Core Portfolio $ 5,550,191 $ 7,992,587
17 PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS II SHAREOWNERS OF PIONEER MID CAP VALUE VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Mid Cap Value VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the two years in the period ended December 31, 2001 were audited by other auditors who have ceased operations and whose report, dated February 8, 2002, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Mid Cap Value VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 18 PIONEER MID CAP VALUE VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are CUSTODIAN responsible for the Trust's operations. The Trust's Trustees and Brown Brothers Harriman & Co. officers are listed below, together with their principal occupations during the past five years. Trustees who are INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM interested persons of the Portfolio within the meaning of the Ernst & Young LLP Investment Company Act of 1940 are referred to as Interested Trustees. Trustees who are not interested persons of the Trust PRINCIPAL UNDERWRITER are referred to as Independent Trustees. Each of the Trustees Pioneer Funds Distributor, Inc. serves as a trustee of each of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, Inc. LEGAL COUNSEL ("Pioneer") serves as investment adviser (the "Trust"). The Wilmer Cutler Pickering Hale and Dorr LLP address for all Interested Trustees and all officers of the Portfolio is 60 State Street, Boston, Massachusetts 02109. SHAREOWNER SERVICES AND TRANSFER Pioneer Investment Management Shareholder Services, Inc. The Trust's statement of additional information provides more detailed information regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-225-6292. Proxy Voting Policies and Procedures of the Trust are available without charge, upon Agent request, by calling our toll free number (1-800-225-6292). This information is also available online at pioneerfunds.com.
- -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS HELD BY THIS TRUSTEE John F. Cogan, Chairman of the Serves until Trustee and President Serves until Director of Harbor Jr. (78)* Board, Trustee and successor trustee retirement or removal; Deputy Chairman Global Company, Ltd. President is elected or and a Director of Pioneer Global Asset earlier retirement Management S.p.A. ("PGAM"); or removal Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). * Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ----------------------------------------------------------------------------------------------------------------------------------- Osbert M. Hood Trustee and Executive Serves until President and Chief Executive Officer, None (52)** Vice President successor trustee PIM-USA since May 2003 (Director since is elected or January 2001); President and Director earlier retirement of Pioneer since May 2003; Chairman or removal and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. ** Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - -----------------------------------------------------------------------------------------------------------------------------------
19 PIONEER MID CAP VALUE VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS HELD BY THIS TRUSTEE David R. Bock** Trustee since 2005. Serves until a Senior Vice President and Chief Director of The (61) 3050 K. successor trustee Financial Officer, I-trax, Inc. Enterprise Social Street NW, is elected or (publicly traded health care services Investment Company Washington, DC earlier retirement company) (2001-present); Managing (privately-held 20007 or removal. Partner, Federal City Capital Advisors affordable housing (boutique merchant bank) (1995-2000; finance company); 2002 to 2004); Executive Vice Director of New York President and Chief Financial Officer, Mortgage Trust Pedestal Inc. (internet-based mortgage (publicly traded trading company) (2000-2002) mortgage REIT) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ----------------------------------------------------------------------------------------------------------------------------------- Mary K. Bush Trustee since 2000. Serves until President, Bush International Director of Brady (56) 3509 successor trustee (international financial advisory firm) Corporation (industrial Woodbine Street, is elected or identification and Chevy Chase, MD earlier retirement specialty coated 20815 or removal material products manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - ----------------------------------------------------------------------------------------------------------------------------------- Margaret B.W. Trustee since 2000. Serves until Founding Director, The Winthrop Group, None Graham (57) 1001 successor trustee Inc. (consulting firm); Professor of Sherbrooke is elected or Management, Faculty of Management, Street West, earlier retirement McGill University Montreal, or removal Quebec, Canada H3A 1G5 - ----------------------------------------------------------------------------------------------------------------------------------- Marguerite A. Trustee since 1995. Serves until President and Chief Executive Officer, Director of New America Piret (56) One successor trustee Newbury, Piret & Company, Inc. High Income Fund, Inc. Boston Place, is elected or (investment banking firm) (closed-end investment 28th Floor, earlier retirement company) Boston, MA 02108 or removal - ----------------------------------------------------------------------------------------------------------------------------------- Stephen K. West Trustee since 1995. Serves until Senior Counsel, Sullivan & Cromwell Director, The Swiss (76) 125 Broad successor trustee (law firm) Helvetia Fund, Inc. Street, New is elected or (closed-end investment York, NY 10004 earlier retirement company) and AMVESCAP or removal PLC (investment managers) - ----------------------------------------------------------------------------------------------------------------------------------- John Winthrop Trustee since Serves until President, John Winthrop & Co., Inc. None (68) One North September, 2000. successor trustee (private investment firm) Adgers Wharf, is elected or Charleston, SC earlier retirement 29401 or removal - -----------------------------------------------------------------------------------------------------------------------------------
20 PIONEER MID CAP VALUE VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS HELD BY THIS OFFICERS Dorothy E. Secretary Serves at the Secretary of PIM-USA; Senior Vice None Bourassa (57) discretion of the President - Legal of Pioneer; and Board Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 - ----------------------------------------------------------------------------------------------------------------------------------- Christopher J. Assistant Secretary Serves at the Assistant Vice President and Senior None Kelley (40) discretion of the Counsel of Pioneer since July 2002; Board Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ----------------------------------------------------------------------------------------------------------------------------------- David C. Phelan Assistant Secretary Serves at the Partner, Wilmer Cutler Pickering Hale None (47) discretion of the and Dorr LLP; Assistant Secretary of Board all Pioneer Funds since September 2003 - ----------------------------------------------------------------------------------------------------------------------------------- Vincent Nave (59) Treasurer Serves at the Vice President - Fund Accounting, None discretion of the Administration and Custody Services of Board Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ----------------------------------------------------------------------------------------------------------------------------------- Mark E. Bradley Assistant Treasurer Serves at the Deputy Treasurer of Pioneer since None (45) discretion of the 2004; Treasurer and Senior Vice Board President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ----------------------------------------------------------------------------------------------------------------------------------- Luis I. Presutti Assistant Treasurer Serves at the Assistant Vice President - Fund None (39) discretion of the Accounting, Administration and Custody Board Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ----------------------------------------------------------------------------------------------------------------------------------- Gary Sullivan Assistant Treasurer Serves at the Fund Accounting Manager - Fund None (46) discretion of the Accounting, Administration and Custody Board Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - -----------------------------------------------------------------------------------------------------------------------------------
21 PIONEER MID CAP VALUE VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS HELD BY THIS OFFICERS Katharine Kim Assistant Treasurer Serves at the Fund Administration Manager - Fund None Sullivan (31) discretion of the Accounting, Administration and Custody Board Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ----------------------------------------------------------------------------------------------------------------------------------- Martin J. Wolin Chief Compliance Serves at the Chief Compliance Officer of Pioneer None (37) Officer discretion of the (Director of Compliance and Senior Board Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - -----------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 22 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. [LOGO] PIONEER INVESTMENTS(R) [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST PIONEER EMERGING MARKETS VCT PORTFOLIO -- CLASS II SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Pioneer Emerging Markets VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 10 Notes to Financial Statements 14 Report of Independent Registered Public Accounting Firm 19 Trustees, Officers and Service Providers 20 PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT WWW.PIONEERFUNDS.COM. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT HTTP://WWW.SEC.GOV. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] International Common Stocks 55.8% Depositary Receipts for International Stocks 29.3% Temporary Cash Investment 7.7% U.S. Common Stocks 5.5% International Preferred Stocks 1.7% GEOGRAPHICAL DISTRIBUTION (As a percentage of equity holdings) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] South Korea 20.9% Brazil 14.5% Taiwan 7.5% South Africa 7.1% Russia 6.8% Mexico 6.2% Turkey 6.0% India 5.5% Malaysia 5.2% Indonesia 2.8% Chile 2.8% Thailand 2.3% Poland 2.2% People's Republic of China 2.0% Peru 1.4% Singapore 1.3% Philippines 1.3% Czech Republic 1.1% Hungary 1.1% Other (individually less than 1%) 2.0% FIVE LARGEST HOLDINGS (As a percentage of equity holdings) 1. Samsung Electronics Co. 3.67% 2. Petrobras Brasileiro SA (A.D.R.) 3.43 3. Companhia Vale do Rio Doce (A.D.R.) 2.47 4. Telefonos de Mexico SA 1.76 5. Lukoil Holding (A.D.R.) 1.74 The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- PRICES AND DISTRIBUTIONS 12/31/04 12/31/03 Net Asset Value per Share $ 20.33 $ 17.26 DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ 0.1286 $ -- $ -- - -------------------------------------------------------------------------------- PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in PIONEER EMERGING MARKETS VCT PORTFOLIO at net asset value, compared to that of the Morgan Stanley Capital International (MSCI) Emerging Markets Free Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Pioneer Emerging MSCI Emerging Markets VCT Portfolio Markets Free Index 10/98 10,000 10,000 10,486 10,675 18,695 17,766 12/00 12,317 12,330 11,410 12,037 12/02 11,247 11,315 17,756 17,682 12/04 21,070 22,267 The Morgan Stanley Capital International (MSCI) Emerging Markets Free Index measures the performance of emerging market stocks. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (As of 12/31/2004) - -------------------------------------------------------------------------------- NET ASSET VALUE - -------------------------------------------------------------------------------- Life-of-Class 12.84% (10/30/98) 5 Years 2.42 1 Year 18.67 All total returns shown assume reinvestment of distributions at net asset value. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Please refer to the variable product's annual report for performance that reflects the deduction of the variable products fees and charges. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER EMERGING MARKETS VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,251.10 $ 1,249.55 Expenses Paid During Period* $ 9.82 $ 11.14 * Expenses are equal to the Portfolio's annualized expense ratio of 1.73% and 1.97% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER EMERGING MARKETS VCT PORTFOLIO Based on a hypothetical 5% return per year before expenses, reflecting the period from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,016.34 $ 1,015.13 Expenses Paid During Period* $ 8.79 $ 9.98 * Expenses are equal to the Portfolio's annualized expense ratio of 1.73% and 1.97% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- A WORD ABOUT RISK: INVESTING IN FOREIGN AND/OR EMERGING MARKETS SECURITIES INVOLVES RISKS RELATING TO INTEREST RATES, CURRENCY EXCHANGE RATES, ECONOMIC, AND POLITICAL CONDITIONS. CALL 800-688-9915 OR VISIT WWW.PIONEERFUNDS.COM FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE RETURNS FOR THE PORTFOLIO DO NOT REFLECT THE DEDUCTION OF EXPENSES ASSOCIATED WITH VARIABLE PRODUCTS, SUCH AS MORTALITY AND EXPENSE RISK CHARGES, SEPARATE ACCOUNT CHARGES, AND SALES CHARGES. THESE EXPENSES WOULD REDUCE THE OVERALL RETURNS SHOWN. PERFORMANCE RESULTS REFLECT ANY APPLICABLE EXPENSE WAIVERS IN EFFECT DURING THE PERIODS SHOWN. WITHOUT SUCH WAIVERS PERFORMANCE WOULD BE LOWER. WAIVERS MAY NOT BE IN EFFECT FOR ALL PORTFOLIOS. CERTAIN FEE WAIVERS ARE CONTRACTUAL THROUGH A SPECIFIED PERIOD. OTHERWISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION. For the 12 months ended December 31, 2004, Pioneer Emerging Markets VCT Portfolio Class II shares delivered a total return of 18.67%. Over the same time period, the MSCI Emerging Markets Free Index had a total return of 25.95%. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. In the following discussion, Christopher Smart and Sam Polyak, portfolio managers of the Portfolio, review the last 12 months and look ahead to next year. Q. AFTER AN EXTRAORDINARY PERFORMANCE IN 2003, HOW DID EMERGING MARKETS FARE THIS YEAR? A. With still strong economic growth in the United States and China, supported by an accommodative monetary policy in most countries, emerging markets turned in yet another outstanding year. In the 12 months ending December 31, 2004, the MSCI Emerging Markets Index outperformed the MSCI World Index by approximately 11 percentage points and the S&P 500 Index by approximately 14 percentage points. While global rates began to rise, the moderate strength of the recovery made for a more gradual adjustment. Moreover, a weakening U.S. dollar throughout the year had two distinct effects on the emerging world. On the one hand, it helped reduce the sovereign debt burdens of many developing countries, as a significant portion of their debt is in U.S. dollars, while it helped cool inflationary expectations as their currencies gained in relative value. While the Chinese economy slowed somewhat from the excessive pace of its expansion early in the year, it was still on track to grow near 10%, which provided good support for global commodity prices like coal, iron ore, steel and soybeans. Q. HOW DID THE PORTFOLIO FARE IN THIS ENVIRONMENT? A. The Portfolio's exposure to these favorable trends generally boosted performance during the period. Our exposures to Turkey and India were especially helpful as these markets benefited from strong acceleration in domestic demand. We also benefited from the inclusion of stocks like Yanzhou Coal Mining, which rose 41% as the rapid rise of Chinese coal prices boosted its profits. In Brazil, Companhia Vale do Rio Doce, one of the world's largest producers of iron ore, rose nearly 42% as the firm posted record profits on the strength of global commodity prices. Finally, our decision to limit our exposure to technology firms was also helpful, as major stocks in that sector in Taiwan, Israel, and Korea underperformed the benchmark dramatically. Performance was hurt over the last year from our positive view of Russia and our negative view of South Africa. The high oil price, which produced significant inflows of money into the Russian economy and growth near 7%, was not enough to overcome investor concerns about political developments that appeared to threaten the course for further economic and political reform. In South Africa, meanwhile, a surge in easy credit and domestic spending provided an unexpected boon to many banks, retailers and industrial companies, even as the strong currency undercut the profits of the mining industry. Q. HOW DO YOU CHOOSE WHAT STOCKS TO BUY? A. Our process moves along two tracks. We look at our markets from the top down, to find countries where the economies are growing, where interest rates are falling and where there is a stable or improving political climate. At the same time, from the bottom up, we screen stocks in our universe for attractive valuations and growth prospects. We examine the economic sector in which a company operates and attempt to assess the management's ability to take advantage of growth opportunities. Together with our investment colleagues in Singapore and Dublin, we model the company's future revenue and profit streams to find stocks where the market may be underestimating the ability to create value. If a stock meets these criteria within a favorable environment of economic growth, it becomes a good candidate for the Portfolio. We believe the Portfolio contains some of the world's best growth prospects at some of the world's best valuations. Individually, the stocks may be riskier than most, but the Portfolio construction helps to mitigate at least some of that risk. Q. WHAT DO YOU EXPECT IN 2005? A. Emerging markets have outperformed developed markets significantly in the last few years. Still, we continue to believe that valuations are attractive and growth prospects remain good, especially when compared to the alternatives in developed markets. Performance in 2005 will remain vulnerable to a rapid adjustment in global currencies or a sharp decline in global demand. Still, weak job growth in the United States, Europe and Japan will discourage monetary authorities from moving too quickly on rate increases, which should continue to provide ample liquidity for key emerging markets. Barring an unforeseen adjustment, the combination could potentially make for another year of good performance in relative and absolute terms. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. 4 PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - -------------------------------------------------------------------------------- SHARES VALUE PREFERRED STOCKS - 2.8% MATERIALS - 0.6% DIVERSIFIED METALS & Mining - 0.6% 274,000 Caemi Mineracao E Metalurgia SA* $ 235,211 ------------ TOTAL MATERIALS $ 235,211 ------------ CAPITAL GOODS - 0.1% INDUSTRIAL CONGLOMERATES - 0.1% 3,445 LG Corp. $ 37,249 ------------ TOTAL CAPITAL GOODS $ 37,249 ------------ BANKS - 1.1% DIVERSIFIED BANKS - 1.1% 2,893 Banco Itau Holding Financeira $ 434,604 ------------ TOTAL BANKS $ 434,604 ------------ TELECOMMUNICATION SERVICES - 1.0% INTEGRATED TELECOMMUNICATION SERVICES - 0.5% 12,301 Tele Norte Leste Participacoes (A.D.R.) $ 207,518 ------------ WIRELESS TELECOMMUNICATION SERVICES - 0.5% 6,900 Telemig Celular Participacoes (A.D.R.) $ 194,787 ------------ TOTAL TELECOMMUNICATION SERVICES $ 402,305 ------------ TOTAL PREFERRED STOCKS (Cost $626,782) $ 1,109,369 ------------ COMMON STOCKS - 93.1% ENERGY - 9.7% INTEGRATED OIL & Gas - 6.9% 225,000 CNOOC, Ltd. $ 121,671 5,480 Lukoil Holding (A.D.R.) 649,939 35,300 Petrobras Brasileiro (A.D.R.) 1,278,213 13,500 Surgutneftegaz (A.D.R.) (a) 504,900 46,000 Yukos 135,125 ------------ $ 2,689,848 ------------ OIL & GAS EQUIPMENT AND SERVICES - 0.5% 3,000 Samchully co., ltd. $ 188,049 ------------ OIL & GAS EXPLORATION & PRODUCTION - 1.5% 431,600 China Petroleum & Chemicals $ 177,043 179,000 Panva Gas Holdings, Ltd.* 79,998 2,700 Mol Magyar Olaj 189,702 34,200 PTT Public Co., Ltd. 152,199 ------------ $ 598,942 ------------ OIL & GAS REFINING MARKETING & TRANSPORTATION - 0.8% 220,000 China Aviation Oil Singapore $ 0 1,598,800 Petron Corp. 92,507 8,000 Polski Koncern Nafto (G.D.R.) 201,520 ------------ $ 294,027 ------------ TOTAL ENERGY $ 3,770,866 ------------ MATERIALS - 15.3% COMMODITY CHEMICALS - 1.9% 3,869 Daelim Industrial Co. $ 200,997 4,900 LG Petrochemical Co., Ltd. 122,997 7,000 Reliance Industries, Ltd. (144A) 179,340 12,010,000 Ultrapar Participacoes SA 230,614 ------------ $ 733,948 ------------ CONSTRUCTION MATERIALS - 1.3% 5,150 Asia Cement Co., Ltd. $ 169,070 35,006,000 Akcansa Cimento AS* 123,565 543,800 Lafarge Malayan Cement Bhd 104,451 14,400 Siam City Cement Co., Ltd. 90,384 ------------ $ 487,470 ------------ DIVERSIFIED CHEMICAL - 0.4% 270,234 Sinopac Holdings Co. $ 158,850 ------------ DIVERSIFIED METALS & MINING - 5.1% 5,500 Anglo American Platinum Corp., Ltd.* $ 201,487 37,700 Companhia Vale do Rio Doce (A.D.R.) 919,126 4,900 Freeport-McMoRan Copper & Gold, Inc. (Class B) 187,327 17,200 KGHM Polska Miedz SA 178,622 6,300 Norilsk Nickel 344,138 127,000 Yanzhou Coal Mining 181,077 ------------ $ 2,011,777 ------------ FERTILIZERS & AGRICULTURAL CHEMICALS - 0.5% 38,600 Makhteshim-Agan Industries, Ltd. $ 207,372 ------------ GOLD - 0.7% 30,100 IAMGOLD Corp. $ 198,961 172,000 Zijin Mining Group Co., Ltd. 77,965 ------------ $ 276,926 ------------ PAPER PRODUCTS - 0.5% 5,270 Aracruz Cellulose SA (A.D.R.) $ 198,679 ------------ PRECIOUS METALS & MINERALS - 3.3% 1,750 Anglogold Ashanti, Ltd. $ 63,338 16,400 Anglogold Ashanti, Ltd. (A.D.R.)(a) 596,140 23,200 Compania de Minas Buenaventura SA 531,280 507,100 PT Aneka Tambang TBK 94,184 ------------ $ 1,284,942 ------------ SPECIALTY CHEMICALS - 0.4% 85,501 Formosa Plastic Corp. $ 146,510 ------------ STEEL - 1.2% 4,400 Pohang Iron & Steel Co., Ltd. (A.D.R.) (a) $ 195,932 16,800 Remgro, Ltd. 280,885 ------------ $ 476,817 ------------ TOTAL MATERIALS $ 5,983,291 ------------ The accompanying notes are an integral part of these financial statements. 5 PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- SHARES VALUE CAPITAL GOODS - 5.7% BUILDING PRODUCTS - 0.8% 12,500 Daewoo Heavy Industries & Machinery, Ltd. $ 185,824 2,530 Hanil Cement Co., Ltd. 146,478 ------------ $ 332,302 ------------ CONSTRUCTION & ENGINEERING - 1.7% 379,435 CTCI Corp. $ 240,994 9,600 LG Construction, Ltd. 264,226 10,740 Kyeryong Construction Industrial Co., Ltd. 166,135 ------------ $ 671,355 ------------ ELECTRICAL COMPONENTS & EQUIPMENT - 0.7% 14,900 Bharat Heavy Electricals (Demat Shares) $ 265,190 ------------ INDUSTRIAL CONGLOMERATES - 1.8% 23,200 Copec-Compania Petroleos $ 185,767 6,825 LG Corp. 111,148 59,798,000 KOC Holding AS* 390,489 ------------ $ 687,404 ------------ INDUSTRIAL MACHINERY - 0.7% 19,400 Daewood Heavy Industries & Machinery, Ltd. $ 150,353 187,000 Yungtay Engineering Co., Ltd. 112,884 ------------ $ 263,237 ------------ TOTAL CAPITAL GOODS $ 2,219,488 ------------ COMMERCIAL SERVICES & SUPPLIES - 0.8% DIVERSIFIED COMMERCIAL SERVICES - 0.8% 20,956 Bidvest Group, Ltd. $ 297,387 ------------ TOTAL COMMERCIAL SERVICES & SUPPLIES $ 297,387 ------------ TRANSPORTATION - 1.7% AIR FREIGHT & COURIERS - 0.2% 153,400 Singapore Post, Ltd. $ 83,604 ------------ MARINE - 1.1% 68,000 Samsung Heavy Industries Co., Ltd. $ 424,004 ------------ RAILROADS - 0.4% 34,300 Malaysia International Shipping Bhd. $ 138,033 ------------ TOTAL TRANSPORTATION $ 645,641 ------------ AUTOMOBILES & COMPONENTS - 3.0% AUTOMOBILE MANUFACTURERS - 3.0% 3,500 Hyundai Motor Co., Ltd. $ 187,440 10,530 Hyundai Heavy Industries 350,212 143,653 PT Astra International 148,538 178,200 Sime Darby Bhd. 281,310 17,499 Tata Motors 204,293 ------------ $ 1,171,793 ------------ TOTAL AUTOMOBILES & COMPONENTS $ 1,171,793 ------------ CONSUMER DURABLES & APPAREL - 1.2% HOMEBUILDING - 0.8% 563,500 Ayala Land, Inc. $ 73,325 110,200 Corporacion GEO, S.A. de CV* 220,538 ------------ $ 293,863 ------------ LEISURE PRODUCTS - 0.4% 6,000 Bajaj Auto, Ltd. (Demat Shares) $ 156,909 ------------ TOTAL CONSUMER DURABLES & APPAREL $ 450,772 ------------ HOTELS, RESTAURANTS & LEISURE - 0.4% HOTELS, RESORTS & CRUISE LINES - 0.3% 9,200 Indian Hotels Co., Ltd. $ 116,755 ------------ RESTAURANTS - 0.1% 105,000 Jollibee Foods Corp. $ 53,329 ------------ TOTAL HOTELS, RESTAURANTS & LEISURE $ 170,084 ------------ MEDIA - 3.0% ADVERTISING - 0.3% 6,200 G2R, Inc. $ 106,368 ------------ BROADCASTING & CABLE TELEVISION - 1.3% 306,200 ABS-CBN Broadcasting Corp. $ 101,221 3,100 Grupo Televisa SA (A.D.R.) 187,550 518,000 Media Prima Bhd* 233,097 ------------ $ 521,868 ------------ MOVIES & ENTERTAINMENT - 1.0% 322,800 Grammy Entertainment Plc $ 142,825 57,700 Zee Telefilms, Ltd. 228,241 ------------ $ 371,066 ------------ PUBLISHING - 0.4% 69,716,000 Hurriyet Gazetecilik ve Matbaacilik AS* $ 164,400 ------------ TOTAL MEDIA $ 1,163,702 ------------ RETAILING - 0.1% DISTRIBUTORS - 0.1% 6,955 The Spar Group, Ltd.* $ 26,468 ------------ TOTAL RETAILING $ 26,468 ------------ FOOD & DRUG RETAILING - 2.7% FOOD DISTRIBUTORS - 0.6% 7,300 Compania Cervecerias Unidas SA (a) $ 184,179 12,000 Kimberly-Clark de Mexico, S.A. de C.V. 41,461 ------------ $ 225,640 ------------ FOOD RETAIL - 2.1% 12,000 Brasil Distr Pao Acu (A.D.R.) $ 307,200 3,780 CJ Corp. 258,377 94,000 President Chain Store Corp. 150,760 6,955 Tiger Brands, Ltd. 119,373 ------------ $ 835,710 ------------ TOTAL FOOD & DRUG RETAILING $ 1,061,350 ------------ 6 The accompanying notes are an integral part of these financial statements. PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SHARES VALUE FOOD, BEVERAGE & TOBACCO - 7.2% BREWERS - 0.3% 3,950 Efes Breweries International (G.D.R.) (144A)* $ 118,500 ------------ DISTILLERS & VINTNERS - 1.9% 9,966,000 Andalou efes Biracilik VE $ 201,470 12,500 Companhia de Bebidas PR (A.D.R.) 354,125 68,500 Grupo Modelo SA de CV 188,478 ------------ $ 744,073 ------------ PACKAGED FOODS & MEATS - 0.4% 1,390 Pulmuone Co., Ltd. $ 69,770 71,017 Rainbow Chicken, Ltd. 94,261 ------------ $ 164,031 ------------ SOFT DRINKS - 2.3% 9,100 Coca-Cola FEMSA, S.A. de C.V. (A.D.R.) $ 216,216 14,200 Embotelladora Andina SA (A.D.R.) 186,659 7,900 Fomento Economico Mexicano SA de C.V. 415,619 140,600 Sermsuk Public Co., Ltd. 78,840 ------------ $ 897,334 ------------ TOBACCO - 2.3% 17,000 British American Tabacco (Malaysia) Bhd $ 204,631 6,200 Korea Tobacco 185,442 300 Philip Morris CR AS 226,620 97,200 PT Gudang Garam Public Co., Ltd. 141,995 186,500 PT Hanjaya Mandala Sampoerna Tbk 133,739 ------------ $ 892,427 ------------ TOTAL FOOD, BEVERAGE & TOBACCO $ 2,816,365 ------------ HOUSEHOLD & PERSONAL PRODUCTS - 1.4% HOUSEHOLD PRODUCTS - 0.7% 44,940,000 Arcelik AS* $ 275,188 ------------ PERSONAL PRODUCTS - 0.7% 8,750 Natura Cosmeticos SA $ 255,318 ------------ TOTAL HOUSEHOLD & PERSONAL PRODUCTS $ 530,506 ------------ PHARMACEUTICALS & BIOTECHNOLOGY - 0.6% PHARMACEUTICALS - 0.6% 21,500 Aurobindo Pharma, Ltd. $ 160,964 110,200 PT Tempo Scan Pacific 90,209 ------------ $ 251,173 ------------ TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 251,173 ------------ BANKS - 9.7% DIVERSIFIED BANKS - 9.2% 9,666 Banco Bradesco SA $ 242,230 33,800 Bangkok Bank, Ltd. 99,045 230,950 Chinatrust Financial Holding Co., Ltd. 275,222 149,000 Commerce Asset Holdings Bhd 184,232 10,300 Hana Bank 256,452 131,000 Hong Leong Bank Bhd 189,532 91,000 Kasikornbank (Class F) 131,380 12,000 Kookmin Bank (A.D.R.)*(a) 468,960 1,900 Kookmin Bank* 74,078 58,700 Malayan Banking Bhd 182,208 162,700 Metropolitan Bank & Trust Co. 76,831 407,500 PT Bank Central Asia Tbk 130,758 2,136,076 PT Lippo Bank 161,097 79,800 Siam Commercial Bank Plc (Foreign) 100,073 22,549 Standard Bank Group, LTD. 262,607 13,600 State Bank of India 205,117 35,354,000 Turkiye Is Bankasi (Isbank)* 195,369 11,400 Uniao de Bancos Brasileiros S.A. (Unibanco) (G.D.R.) (144A) 361,608 ------------ $ 3,596,799 ------------ REGIONAL BANKS - 0.5% 218,000 First Financial Holdings $ 186,317 ------------ TOTAL BANKS $ 3,783,116 ------------ DIVERSIFIED FINANCIALS - 5.1% DIVERSIFIED FINANCIAL SERVICES - 5.1% 732,700 Bank Mandiri $ 151,926 485,344 China Development Financial* 233,397 70,000 Citic Pacific, Ltd. 198,911 143,900 FirstRand, Ltd. 340,126 137,000 Fubon Group 139,979 102,656,000 Haci Omer Sabanci Holding AS* 399,700 109,000 MCL Ladn, Ltd. 100,790 250,900 RHB Capital Berhad 154,431 76,900 Sanlam, Ltd. 176,233 632,700 SM Prime Holdings 86,753 ------------ $ 1,982,246 ------------ TOTAL DIVERSIFIED FINANCIALS $ 1,982,246 ------------ INSURANCE - 1.6% LIFE & HEALTH INSURANCE - 0.4% 7,900 Cathay Financial Holding Co., Ltd. (144A) $ 158,790 ------------ MULTI-LINE INSURANCE - 1.2% 47,567,000 Aksigorta AS* $ 190,550 3,600 Samsung Fire & Marine Insurance 284,036 ------------ $ 474,586 ------------ TOTAL INSURANCE $ 633,376 ------------ The accompanying notes are an integral part of these financial statements. 7 PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- SHARES VALUE REAL ESTATE - 0.4% REAL ESTATE MANAGEMENT & DEVELOPMENT - 0.4% 98,200 Wheelock Properties (Singapore), Ltd. $ 147,092 ------------ TOTAL REAL ESTATE $ 147,092 ------------ SOFTWARE & SERVICES - 0.5% APPLICATION SOFTWARE - 0.5% 4,032 Infosys Technologies, Ltd. $ 194,681 ------------ TOTAL SOFTWARE & SERVICES $ 194,681 ------------ TECHNOLOGY HARDWARE & EQUIPMENT - 2.3% SEMICONDUCTORS - 1.2% 44,269 Hon Hai Precision Industry $ 204,496 171,005 Taiwan Semiconductor Manufacturing Co. 271,274 ------------ $ 475,770 ------------ COMMUNICATIONS EQUIPMENT - 0.5% 8,600 Matav Rt (A.D.R.) $ 209,926 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.6% 24,000 Elec & Eltek International Co., Ltd. $ 68,147 2,350 LG Electronics, Inc. 145,098 ------------ $ 213,245 ------------ TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 898,941 ------------ SEMICONDUCTORS - 4.1% 3,130 Samsung Electronics $ 1,365,942 390,870 United Microelectronics Corp., Ltd. 251,691 ------------ $ 1,617,633 ------------ TOTAL SEMICONDUCTORS $ 1,617,633 ------------ TELECOMMUNICATION SERVICES - 13.0% INTEGRATED TELECOMMUNICATION SERVICES - 6.8% 4,900 Brasil Telecom Participacoes SA $ 186,935 24,800 Compania de Telephonos de Chile SA (A.D.R.) 278,752 18,900 KT Corp. (a) 412,209 29,587 Mahanagar Telephone Nigam, Ltd. 236,104 29,900 Mahanagar Telephone (Demat) 107,028 3,100 Maroc Telecom* 35,394 11,900 SPT Telecom AS 197,306 40,000 Telekom Malaysia 122,064 17,100 Telefonos de Mexico SA (a) 655,272 68,800 Telekomunikacja Polska SA 451,545 ------------ $ 2,682,609 ------------ WIRELESS TELECOMMUNICATION SERVICES - 6.2% 27,200 Advanced Service Co., Ltd. $ 74,868 7,700 Alumax, Inc. 403,095 9,900 Korea Telecom Freetel Co. 236,755 1,100 Mobile Telesystems (A.D.R.) (a) 152,361 21,637 SK Telecom Co., Ltd. (a) 481,423 142,500 StarHub, Ltd.* 96,026 146,000 Taiwan Cellular Corp. 163,007 16,447 Turkcell Iletism Hizmet (A.D.R.) 297,691 42,700 Venfin, Ltd. 189,718 8,700 Vimpel-Communications (A.D.R.)* 314,418 ------------ $ 2,409,362 ------------ TOTAL TELECOMMUNICATION SERVICES $ 5,091,971 ------------ UTILITIES - 3.6% ELECTRIC UTILITIES - 2.3% 1,200 Cemig SA (A.D.R.) $ 29,448 1,206,235 Enersis SA* 205,109 14,600 Korea Electric Power Corp. 378,682 10,060 Unified Energy System (G.D.R.) 276,101 ------------ $ 889,340 ------------ GAS UTILITIES - 0.9% 5,100 Gazprom (A.D.R.)* (a) $ 180,908 5,900 Korea Gas Corp. 182,884 ------------ $ 363,792 ------------ MULTI-UTILITIES & UNREGULATED POWER - 0.4% 283,600 YTL Power International Bhd $ 134,320 ------------ TOTAL UTILITIES $ 1,387,452 ------------ TOTAL COMMON STOCKS (Cost $26,091,813) $ 36,295,394 ------------ RIGHTS/WARRANTS - 0.0% COMMERCIAL SERVICES & SUPPLIES - 0.0% DIVERSIFIED COMMERCIAL SERVICES - 0.0% 1,580 Bidvest Group, Ltd., Exp. 12/8/06* $ 6,714 ------------ TOTAL COMMERCIAL SERVICES & SUPPLIES $ 6,714 ------------ TOTAL RIGHTS/WARRANTS (Cost $0) $ 6,714 ------------ 8 The accompanying notes are an integral part of these financial statements. PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SHARES VALUE TEMPORARY CASH INVESTMENT - 8.3% SECURITY LENDING COLLATERAL - 8.3% 3,125,761 Securities Lending Investment Fund, 2.18% $ 3,125,761 ------------ TOTAL TEMPORARY CASH INVESTMENT (Cost $3,125,761) $ 3,125,761 ------------ TOTAL INVESTMENTS IN SECURITIES - 104.2% (Cost $29,844,356)(b) $ 40,537,238 ------------ OTHER ASSETS AND LIABILITIES - (4.2)% $ (1,557,033) ------------ TOTAL NET ASSETS - 100.0% $ 38,980,205 ============ (A.D.R.) American Depositary Receipt (G.D.R.) Global Depositary Receipt * Non-income producing security 144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At December 31, 2004, the value of these securities amounted to $818,238 or 2.1% of net assets. (a) At December 31, 2004, the following securities were out on loan: SHARES SECURITY MARKET VALUE 15,575 Anglogold Ashanti, Ltd.(A.D.R.) $ 566,151 590 Compania Cervecerias Unidas SA 14,886 155 Gazprom (A.D.R.)* 5,343 11,365 Kookmin Bank*(A.D.R.) 444,144 15,905 KT Corp. 346,888 976 Mobile Telesystems (A.D.R.) 135,186 4,105 Pohang Iron & Steel Co., Ltd. (A.D.R.) 182,796 13,090 SK Telecom Co., Ltd. 291,253 12,620 Surgutneftegaz (A.D.R.) 471,988 15,565 Telefonos de Mexico SA 596,451 ----------- TOTAL $ 3,055,085 =========== (b) Distributions of investments by country of issue, as a percentage of total equity holdings (excluding temporary cash investments) is as follows: South Korea 20.9% Brazil 14.5 Taiwan 7.5 South Africa 7.1 Russia 6.8 Mexico 6.2 Turkey 6.0 India 5.5 Malaysia 5.2 Indonesia 2.8 Chile 2.8 Thailand 2.3 Poland 2.2 People's Republic of China 2.0 Peru 1.4 Singapore 1.3 Philippines 1.3 Czech Republic 1.1 Hungary 1.1 Other (individually less than 1%) 2.0 ----- 100.0% ===== The accompanying notes are an integral part of these financial statements. 9 PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 5/1/00 TO CLASS II (a) 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 17.26 $ 10.98 $ 11.19 $ 12.08 $ 18.02 -------- -------- ------- ------- ------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.16 $ 0.12 $ 0.02 $ 0.09 $ (0.02) Net realized and unrealized gain (loss) on investments and foreign currency transactions 3.04 6.21 (0.17) (0.98) (5.59) -------- -------- ------- ------- ------- Net increase (decrease) from investment operations $ 3.20 $ 6.33 $ (0.15) $ (0.89) $ (5.61) Distributions to shareowners: Net investment income (0.13) (0.05) (0.06) -- -- Net realized gain -- -- -- -- (0.33) -------- -------- ------- ------- ------- Net increase (decrease) in net asset value $ 3.07 $ 6.28 $ (0.21) $ (0.89) $ (5.94) -------- -------- ------- ------- ------- Net asset value, end of period $ 20.33 $ 17.26 $ 10.98 $ 11.19 $ 12.08 ======== ======== ======= ======= ======= Total return* 18.73% 57.87% (1.42)% (7.37)% (31.65)% Ratio of net expenses to average net assets+ 1.99% 1.99% 1.99% 1.90% 2.11%** Ratio of net investment income (loss) to average net assets+ 0.88% 1.04% 0.28% 1.05% (0.73)%** Portfolio turnover rate 66% 79% 124% 175% 156% Net assets, end of period (in thousands) $ 30,347 $ 26,537 $ 8,852 $ 7,861 $ 5,819 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 2.11% 2.65% 3.11% 4.12% 4.47%** Net investment income (loss) 0.76% 0.38% (0.84)% (1.17)% (3.09)%** Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.99% 1.99% 1.99% 1.90% 2.09%** Net investment income (loss) 0.88% 1.04% 0.28% 1.05% (0.71)%**
(a) Class 2 shares were first publicly offered on May 1, 2000. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period.) ** Annualized. + Ratios with no reduction for fees paid indirectly. 10 The accompanying notes are an integral part of these financial statements. PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $3,055,085) (Cost $29,844,356) $ 40,537,238 Cash 1,524,906 Foreign currencies, at value (Cost $97,982) 116,115 Receivables -- Investment securities sold 34,194 Dividends, interest and foreign taxes withheld 161,539 Other 5,163 ------------ Total assets $ 42,379,155 ------------ LIABILITIES: Payables -- Investment securities purchased $ 15,338 Fund shares repurchased 86,231 Upon return of securities loaned 3,125,761 Reserve for repatriation taxes 35,490 Due to affiliates 45,670 Accrued expenses 90,460 ------------ Total liabilities $ 3,398,950 ------------ NET ASSETS: Paid-in capital $ 30,602,099 Undistributed net investment income (loss) 44,879 Accumulated undistributed net realized gain (loss) (2,331,912) Net unrealized gain (loss) on: Investments 10,657,392 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies 7,747 ------------ Total net assets $ 38,980,205 ------------ NET ASSET VALUE PER SHARE: CLASS I: No par value (unlimited number of shares authorized) Net assets $ 8,632,913 Shares outstanding 421,530 ------------ Net asset value per share $ 20.48 CLASS II: No par value (unlimited number of shares authorized) Net assets $ 30,347,292 Shares outstanding 1,493,013 ------------ Net asset value per share $ 20.33
The accompanying notes are an integral part of these financial statements. 11 PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - --------------------------------------------------------------------------------
YEAR ENDED 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $146,637) $ 972,424 Interest 6,531 Income on securities loaned, net 8,227 ------------ Total investment income $ 987,182 ------------ EXPENSES: Management fees $ 395,468 Transfer agent fees and expenses 3,020 Distribution fees (Class II) 66,163 Administrative reimbursements 18,500 Custodian fees 137,409 Professional fees 55,020 Printing expense 15,712 Miscellaneous 15,036 ------------ Total expenses $ 706,328 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (41,545) Less fees paid indirectly (90) ------------ Net expenses $ 664,693 ------------ Net investment income (loss) $ 322,489 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments (Net of foreign capital gains taxes of $179,850) $ 5,608,134 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (34,951) ------------ $ 5,573,183 ------------ Change in net unrealized gain or (loss) from: Investments (net of decrease in reserve for repatriation taxes of $348,151) $ 17,838 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies 4,855 ------------ $ 22,693 ------------ Net gain (loss) on investments, futures contracts and foreign currency transactions $ 5,595,876 ============ Net increase (decrease) in net assets resulting from operations $ 5,918,365 ============
12 The accompanying notes are an integral part of these financial statements. PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 322,489 $ 262,378 Net realized gain (loss) on investments 5,573,183 1,187,664 Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions 22,693 10,449,480 ------------- ------------ Net increase (decrease) in net assets resulting from operations $ 5,918,365 $ 11,899,522 ------------- ------------ DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (65,091) $ (25,889) Class II (196,317) (60,429) ------------- ------------ Total distributions to shareowners $ (261,408) $ (86,319) ------------- ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 9,587,268 $ 16,360,576 Reinvestment of distributions 259,912 85,767 Cost of shares repurchased (11,459,650) (8,062,148) ------------- ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ (1,612,470) $ 8,384,195 ------------- ------------ Net increase (decrease) in net assets $ 4,044,487 $ 20,197,398 NET ASSETS: Beginning of year 34,935,718 14,738,320 ------------- ------------ End of year $ 38,980,205 $ 34,935,718 ============= ============ Undistributed net investment income (loss), end of year $ 44,879 $ 198,789 ============= ============
The accompanying notes are an integral part of these financial statements. 13 PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Emerging Markets Portfolio (the Portfolio) is a Portfolio of the Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate diversified portfolios fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value I Portfolio)(Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio)(Class I shares only) Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The investment objective of Emerging Markets VCT Portfolio is to seek long-term capital growth. The Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting years. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in the preparation of its financial statements which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolios are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Trading in foreign equity securities is substantially completed each day at various times prior to the close of the NYSE. The value of such securities used in computing the net asset value of the Portfolio's shares, based on the last sale price on the principal exchange where they traded. The principal exchanges and markets for such securities have closing times prior to the close of the NYSE. However, the value of these securities may be influenced by changes in global markets occurring after the closing times of the local exchanges and markets up to the time the Portfolios determines their net asset values. Consequently, the Board of Trustees of the Trust has determined that the use of daily fair valuations as provided by a pricing service is appropriate for the Portfolios. The Portfolios may also take into consideration other significant events in determining the fair value of these securities. At December 31, 2004, there were no fair valued securities except as follows. All securities that trade in 14 PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- foreign markets whose closing prices are as of times prior to the close of the New York Stock Exchange ("NYSE") and that are held by Emerging Markets Portfolio are fair valued using vendor-supplied pricing updates for each security to the time of the close of the NYSE. At December 31, 2004, the valuation of China Aviation Oil Singapore was determined by The Board of Trustees of the Trust. Thus, the Portfolio's securities valuations may differ from prices reported by the various local exchanges and markets. Temporary cash investments and securities held by the Portfolio are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis, net of unrecoverable foreign taxes withheld at the applicable country rates. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. The Portfolio's investments in emerging markets or countries with limited or developing markets may subject the Portfolio to a greater degree of risk than in a developed market. Risks associated with these developing markets include political, social or economic factors and may affect the price of the Portfolio's investments and income generated by these investments, as well as the Portfolio's ability to repatriate such amounts. B. FOREIGN CURRENCY TRANSLATION The books and records of the Portfolio are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent, the net realized gains and losses on foreign currency contracts, disposition of foreign currencies, and the difference between the amount of income accrued and the U.S. dollar actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. C. FORWARD FOREIGN CURRENCY CONTRACTS The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. (see note 8) D. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. In addition to the requirements of the Internal Revenue Code, the Portfolio may also be required to pay local taxes on the recognition of capital gains and/or the repatriation of foreign currencies in certain countries. During the year ended December 31, 2004, no such taxes were paid. In determining the daily net asset value, the Portfolio estimates the reserve for such taxes, if any, associated with investments in certain countries. The estimated reserve for taxes on capital gains is based on the net unrealized appreciation on certain portfolio securities, the holding year of such securities and the related tax rates, tax loss carryforward (if applicable) and other such factors. The estimated reserve for taxes on repatriation of foreign currencies is based on principal balances and/or unrealized appreciation of applicable securities, the holding year of such investments and the related tax rates and other such factors. As of December 31, 2004, the Portfolio had $35,490 in reserves related to taxes on the repatriation of foreign currencies. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying 15 PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2004, Emerging Markets VCT Portfolio had a capital loss carryforward of $2,040,887 of which the following amounts will expire between 2009 and 2010 if not utilized: $864,104 in 2009 and $1,176,783 in 2010. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis.
UNDISTRIBUTED NET ACCUMULATED NET INVESTMENT REALIZED PAID-IN PORTFOLIO INCOME (LOSS) GAIN (LOSS) CAPITAL --------------------------------------- ----------------- --------------- ------- Pioneer Emerging Markets VCT Portfolio $ (214,991) $ 214,991 $ -- ========== ========= ====
The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004 and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003 ------------ -------- DISTRIBUTIONS PAID FROM: Ordinary Income $ 261,408 $ 86,319 Long-Term capital gain -- -- ------------ -------- $ 261,408 $ 86,319 Return of Capital -- -- ------------ -------- Total distributions $ 261,408 $ 86,319 ============ ======== DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ 211,876 Undistributed long-term gain/(capital loss carryforward) (2,040,887) Unrealized appreciation (depreciation) 10,207,117 ------------ Total $ 8,378,106 ============
For the fiscal year ending December 31, 2004, Emerging Markets Portfolio has elected to pass through foreign tax credits of $325,677.The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily attributable to the tax deferral of losses on wash sales and the tax basis adjustments on Passive Foreign Investment Company (PFIC) holdings and the mark to market on forward currency contracts. E. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of the shares based on the respective percentage of adjusted net assets at the beginning of the day. Dividends and distributions to shareowners are recorded on the ex-dividend date. Distributions paid by the Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. 16 PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- F. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. G. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the portfolio. Management fees are calculated daily at the following annual rate of 1.15% of the Portfolio's average daily net assets. The portion of the Portfolio's expenses attributable to Class II will be reduced only to the extent such expenses are reduced for Class I shares (or Class II shares). In addition, under the management and administration agreement, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $39,145 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $271 in transfer agent fees payable to PIMSS at December 31, 2004. 4. DISTRIBUTION PLANS The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares. Included in due to affiliates is $6,254 payable to PFD at December 31, 2004. 5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------ ------------ ------------ -------------- Emerging Markets Portfolio $ 30,302,378 $ 11,097,178 $ (862,318) $ 10,234,860 ============ ============ ========== ============
17 PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- 6. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $22,233,472 and $24,663,852, respectively. 7. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
EMERGING MARKETS PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNTS - ----------------------------- ---------- ------------ ---------- ------------ CLASS I: Shares sold 72,945 $ 1,305,983 143,611 $ 1,837,255 Reinvestment of distributions 3,952 63,595 2,017 25,338 Shares repurchased (138,809) (2,377,707) (195,769) (2,390,316) -------- ------------ --------- ------------ Net increase (decrease) (61,912) $ (1,008,129) (50,141) $ (528,316) ======== ============ ========= ============ CLASS II: Shares sold 468,119 $ 8,281,285 1,162,017 $ 14,523,321 Reinvestment of distributions 12,278 196,317 4,838 60,429 Shares repurchased (524,708) (9,081,943) (435,883) (5,671,239) -------- ------------ --------- ------------ Net increase (decrease) (44,311) $ (604,341) 730,972 $ 8,912,511 ======== ============ ========= ============
8. FORWARD FOREIGN CURRENCY CONTRACTS During the year ended December 31, 2004, certain Portfolios had entered into various contracts that obligate the Portfolios to deliver currencies at specified future dates. At the maturity of a contract, the Portfolios must make delivery of the foreign currency. Alternatively, prior to the settlement date of a portfolio hedge, the Portfolio may close out such contracts by entering into an offsetting hedge contract. As of December 31, 2004, the Portfolio had no outstanding portfolio or settlement hedges. 18 PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS II SHAREOWNERS OF PIONEER EMERGING MARKETS VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Emerging Markets VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the two years in the period ended December 31, 2001 were audited by other auditors who have ceased operations and whose report, dated February 8, 2002, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Emerging Markets VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S generally accepted accounting principles. /s/ ERNEST & YOUNG LLP Boston, Massachusetts February 11, 2005 19 PIONEER EMERGING MARKETS VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The CUSTODIAN officers of the Trust are responsible for the Brown Brothers Harriman & Co. Trust's operations. The Fund's Trustees and officers are listed below, together with their INDEPENDENT REGISTERED PUBLIC ACCOUTING FIRM principal occupations during the past five years. Ernst & Young LLP Trustees who are interested persons of the Portfolio within the meaning of the Investment PRINCIPAL UNDERWRITER Company Act of 1940 are referred to as Interested Pioneer Funds Distributor, Inc. Trustees. Trustees who are not interested persons of the Trust are referred to as Independent LEGAL COUNSEL Trustees. Each of the Trustees serves as a trustee Wilmer Cutler Pickering Hale and Dorr LLP of each of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, SHAREOWNER SERVICES AND TRANSFER Inc. ("Pioneer") serves as investment adviser (the Pioneer Investment Management Shareholder Services, Inc. "Pioneer Funds"). The address for all Interested Trustees and all officers of the Portfolio is 60 State Street, Boston, Massachusetts 02109. The Trust's statement of additional information provides more detailed information regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-225-6292. Proxy Voting Policies and Procedures of the Trust are available without charge, upon Agent request, by calling our toll free number (1-800-225-6292). This information is also available online at pioneerfunds.com.
- -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS BY THIS TRUSTEE John F. Cogan, Jr. (78)* Chairman of the Serves until Trustee and President Serves Director of Harbor Global Board, Trustee successor trustee until retirement or removal; Company, Ltd. and President is elected or Deputy Chairman and a Director earlier retirement of Pioneer Global Asset or removal Chairman and a Director of Pioneer Management S.p.A. ("PGAM"); Non-Executive Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Pioneer Alternative Investment Director of Management(Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------ Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive None Executive Vice successor trustee Officer, PIM-USA since May 2003 President is elected or (Director since January 2001); earlier retirement President and Director of or removal Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------
20 PIONEER EMERGING MARKETS VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS BY THIS TRUSTEE David R. Bock **(61) Trustee since 2005. Serves until a Senior Vice President and Chief Director of The Enterprise 3050 K. Street NW, successor trustee Financial Officer, I-trax, Inc. Social Investment Company Washington, DC 20007 is elected or (publicly traded health care (privately-held affordable earlier retirement services company) housingfinance company); or removal. (2001-present); Managing Director of New York Partner, Federal City Capital Mortgage Trust (publicly Advisors (boutique merchant traded mortgage bank)(1995-2000; 2002 to 2004); REIT) Executive Vice President and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Mary K. Bush (56) Trustee since 2000. Serves until President, Bush International Director of Brady 3509 Woodbine Street, successor trustee (international financial Corporation (industrial Chevy Chase, MD 20815 is elected or advisory firm) identification and earlier retirement specialty coated material or removal products manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - ------------------------------------------------------------------------------------------------------------------------------------ Margaret B.W. Graham (57) Trustee since 2000. Serves until Founding Director, The Winthrop None 1001 Sherbrooke Street successor trustee Group, Inc. (consulting firm); West, Montreal, Quebec, is elected or Professor of Management, Canada H3A 1G5 earlier retirement Faculty of Management, McGill or removal University - ------------------------------------------------------------------------------------------------------------------------------------ Marguerite A. Piret (56) Trustee since 1995. Serves until President and Chief Director of New America One Boston Place, successor trustee Executive Officer, Newbury, High Income Fund, Inc. 28th Floor, is elected or Piret & Company, Inc. (closed-end investment Boston, MA 02108 earlier (investment banking firm) company) retirement or removal - ------------------------------------------------------------------------------------------------------------------------------------ Stephen K. West (76) Trustee since 1995. Serves until Senior Counsel, Sullivan & Director, The Swiss 125 Broad Street, successor trustee Helvetia Fund, Inc. (closed-end New York, NY 10004 is elected or Cromwell (law firm) investment company) and earlier retirement AMVESCAP PLC (investment or removal managers) - ------------------------------------------------------------------------------------------------------------------------------------ John Winthrop (68) Trustee since Serves President, John None One North Adgers Wharf, September, 2000. until successor Winthrop & Co., Inc. (private Charleston, SC 29401 trustee is elected investment firm) or earlier retirement or removal - ------------------------------------------------------------------------------------------------------------------------------------
21 PIONEER EMERGING MARKETS VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS BY THIS OFFICER Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior None discretion of the Vice President - Legal of Board Pioneer; and Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Christopher J. Kelley(40) Assistant Secretary Serves at the Assistant Vice President and None discretion of the Senior Counsel of Pioneer since Board July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ David C. Phelan (47) Assistant Secretary Serves at the Partner, Wilmer Cutler None discretion of the Pickering Hale and Dorr LLP; Board Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Vincent Nave (59) Treasurer Serves at the Vice President - Fund None discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ------------------------------------------------------------------------------------------------------------------------------------ Mark E. Bradley (45) Assistant Treasurer Serves at the Deputy Treasurer of Pioneer None discretion of the since 2004; Treasurer and Board Senior Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Luis I. Presutti (39) Assistant Treasurer Serves at the Assistant Vice President - Fund None discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Gary Sullivan (46) Assistant Treasurer Serves at the Fund Accounting Manager - Fund None discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - ------------------------------------------------------------------------------------------------------------------------------------
22 PIONEER EMERGING MARKETS VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS BY THIS OFFICER Katharine Kim Sullivan Assistant Treasurer Serves at the Fund Administration Manager - None (31) discretion of the Fund Accounting, Administration Board and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of None Officer discretion of the Pioneer (Director of Compliance Board and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 23 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. [LOGO] PIONEER Investments(R) [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST PIONEER EQUITY INCOME VCT PORTFOLIO -- CLASS II SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Pioneer Equity Income VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 8 Notes to Financial Statements 12 Report of Independent Registered Public Accounting Firm 16 Trustees, Officers and Service Providers 17 PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT www.pioneerfunds.com. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT http://www.sec.gov. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] U.S. Common Stocks 94.2% Temporary Cash Investment 4.5% Convertible Preferred Stocks 1.2% Convertible Corporate Bonds 0.1% SECTOR DISTRIBUTION (As a percentage of equity holdings) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Financials 21.9% Utilities 16.8% Consumer Discretionary 12.1% Industrials 10.0% Energy 9.8% Materials 7.2% Telecommunication Services 6.5% Consumer Staples 6.4% Health Care 6.2% Information Technology 3.1% FIVE LARGEST HOLDINGS (As a percentage of equity holdings) 1. PACCAR, Inc. 4.48% 2. Exxon Mobil Corp. 3.35 3. ChevronTexaco Corp. 3.31 4. Washington Mutual, Inc. 3.07 5. T. Rowe Price Associates, Inc. 2.61 The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- PRICES AND DISTRIBUTIONS 12/31/04 12/31/03 Net Asset Value per Share $ 20.68 $ 18.19 DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ 0.3951 $ -- $ -- - -------------------------------------------------------------------------------- PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in PIONEER EQUITY INCOME VCT PORTFOLIO at net asset value, compared to that of the Russell 1000 Value Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Russell 1000 Pioneer Equity Value Index Income VCT Portfolio Mar-95 10,000 10,000 12,632 12,003 Dec-96 15,366 13,791 20,773 18,591 Dec-98 24,021 22,355 25,787 22,256 Dec-00 27,597 25,480 26,054 23,659 2-Dec 22,010 19,862 28,620 24,285 4-Dec 33,339 28,180 Index comparison begins 2/28/95. The Russell 1000 Value Index measures the performance of large-cap U.S. value stocks. Index returns assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. Portfolio returns are based on net asset value and do not reflect any annuity-related costs. You cannot invest directly in any Index. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004) - -------------------------------------------------------------------------------- NET ASSET VALUE - -------------------------------------------------------------------------------- Life-of-Class 11.41% (3/1/95) 5 Years 4.83 1 Year 16.04 All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER EQUITY INCOME VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,119.78 $ 1,117.81 Expenses Paid During Period* $ 3.82 $ 5.19 * Expenses are equal to the Portfolio's annualized expense ratio of 0.72% and 0.98% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER EQUITY INCOME VCT PORTFOLIO Based on a hypothetical 5% return per year return before expenses, reflecting the period from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,021.52 $ 1,020.21 Expenses Paid During Period* $ 3.65 $ 4.95 * Expenses are equal to the Portfolio's annualized expense ratio of 0.72% and 0.98% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- CALL 800-688-9915 OR VISIT www.pioneerfunds.com FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE RETURNS FOR THE PORTFOLIO DO NOT REFLECT THE DEDUCTION OF EXPENSES ASSOCIATED WITH VARIABLE PRODUCTS, SUCH AS MORTALITY AND EXPENSE RISK CHARGES, SEPARATE ACCOUNT CHARGES, AND SALES CHARGES. THESE EXPENSES WOULD REDUCE THE OVERALL RETURNS SHOWN. PERFORMANCE RESULTS REFLECT ANY APPLICABLE EXPENSE WAIVERS IN EFFECT DURING THE PERIODS SHOWN. PERFORMANCE RESULTS REFLECT ANY APPLICABLE EXPENSE WAIVERS IN EFFECT DURING THE PERIODS SHOWN. WITHOUT SUCH WAIVERS PERFORMANCE WOULD BE LOWER. WAIVERS MAY NOT BE IN EFFECT FOR ALL PORTFOLIOS. CERTAIN FEE WAIVERS ARE CONTRACTUAL THROUGH A SPECIFIED PERIOD. OTHER WISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION. In the following discussion, John Carey, portfolio manager of Pioneer Equity Income VCT Portfolio, reviews the past year and gives an overview of the Portfolio' performance over that period. Q: HOW DID THE PORTFOLIO PERFORM VERSUS ITS BENCHMARK? TO WHAT DO YOU ATTRIBUTE THE PERFORMANCE? A: Class II shares of Pioneer Equity Income VCT Portfolio showed a good gain in 2004, rising by 16.04% at net asset value. That was in line with the Russell 1000 Value Index, which rose by 16.49%. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. As a whole, it was, as the numbers suggest, a good year for stocks, though most of the performance came in the second half and particularly in the fourth quarter. During the earlier part of the year, the market largely backed and filled as investors worried about rising interest rates, the war in Iraq, the weak dollar, rising oil prices, terrorist threats, and the upcoming Presidential election. Around the middle of October, however, the market as measured by most major indexes, began to move higher, and it continued the upward move following the election and right through to the end of the year. The sectors in the Russell 1000 Value Index performing above average for the year were energy, utilities, industrials, consumer staples, and materials, and those performing below average were telecommunications services, financials, consumer discretionary, information technology, and health care. Pioneer Equity Income VCT Portfolio was overweight in four of the five top performing sectors, and underweight in three of the five underperforming sectors. Oddly enough, though, the principal contributor to relative positive performance for the Portfolio was our stock selection in one of the underperforming sectors, financials, our biggest underweight relative to the index! The performance was attributable to premium take-over offers received by two of our banks, Charter One Financial and SouthTrust, and significant price increases for T. Rowe Price, a money-management company, and Simon Property Group, a real-estate investment trust. We also did not own any shares of Citigroup, an important index name that underperformed. At the same time, while we were appropriately underweight in information technology, we happened to own a very poor performer in the sector, convertible preferred shares of Electronic Data Systems, which we did sell during the year. Industrials and materials were bright spots for both the index and the Portfolio. In addition to being overweight in both sectors, we enjoyed superior performance from our holdings relative to the sector averages. Positive stand-outs for us in those sectors were PACCAR, builder of heavy trucks, and Roanoke Electric Steel, a small steel mill. Offsetting negative-return contributions came from holdings in the troubled health-care sector, where we were overweight and also suffered from below-average results from Eli Lilly and Merck. Q: WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE YEAR? A: In total, we added 18 holdings to the Portfolio and eliminated 16. With the favorable fundamentals in energy, materials, and industrials, we looked for additional investments in those sectors. Occidental Petroleum (oil and natural gas), Valspar (coatings and specialty chemicals), Phelps Dodge (copper mining), ServiceMaster (commercial and residential maintenance services), and Vulcan Materials (construction materials) were situations we found attractive. With our value orientation, we also looked in some of the underperforming sectors for names we thought unaccountably cheap. In financials, we added Comerica, U.S. Bancorp, and State Street, and we also received shares of Wachovia in exchange for SouthTrust, which Wachovia acquired. In consumer discretionary, we bought Tupperware and common shares of Ford Motor in addition to our previous position in Ford convertible preferred shares; in information technology, we added Motorola; and in health care, we purchased Bristol-Myers Squibb and a small position in a new issue of convertible securities from Schering-Plough. Rounding out our additions were Clorox in consumer staples and Atmos Energy, Equitable Resources, and Ameren in utilities. Securities liquidated included stocks such as Biomet and Illinois Tool Works on which we had taken significant profits and whose prices we thought adequately reflected values, and stocks such as Pfizer and Coca-Cola about which we became concerned in a longer-term fundamental way. Other names sold during the year were Deere, Norfolk Southern, Tribune, Sears Roebuck, Bank of America, Merrill Lynch, St. Paul Travelers, Equity Office Properties, Electonic Data Systems convertible preferred, and Hewlett-Packard. The most meaningful effects of our trading on sector weights were in materials and utilities, where our weightings increased versus the portfolio weightings in the sectors at yearend 2003, and in health care, where our weighting decreased versus a year ago, though part of the decrease was due just to weak share-price moves for our health-care stocks relative to large price increases in some other sectors. Q: WHAT IS YOUR OUTLOOK FOR 2005? A: The economic outlook appears favorable over the coming year. Interest rates are expected to continue rising, but not so fast that they should present impediments to further economic growth. We think earnings growth should continue, albeit potentially at a slower pace than in 2003 and 2004. Federal tax law, with the maximum 15% tax rate on qualified dividends and 15% rate on long-term capital gains, is likewise favorable to the stock market. Of course there are concerns, including energy and other commodity prices and the high trade and Federal budget deficits. We aim to mitigate the risk from those factors by investing on the one hand in companies benefiting from rising materials prices and, on the other hand, avoiding companies with poor cost controls. Otherwise we are always interested in companies that not only can do better but that also have a plan in place and a management committed to achieve the better results. A good economy creates more opportunities for companies to execute such turnarounds. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. 4 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - -------------------------------------------------------------------------------- SHARES VALUE CONVERTIBLE PREFERRED STOCKS - 1.2% AUTOMOBILES & COMPONENTS - 1.1% AUTOMOBILE MANUFACTURERS - 1.1% 2,600 General Motors, 5.25%, 3/6/32 $ 59,800 57,414 Ford Cap Trust, 6.50%, 1/15/32 3,025,718 ------------- $ 3,085,518 ------------- TOTAL AUTOMOBILES & COMPONENTS $ 3,085,518 ------------- PHARMACEUTICALS & BIOTECHNOLOGY - 0.1% PHARMACEUTICALS - 0.0% 4,255 Schering-Plough Corp., 6.0%, 9/14/07 $ 247,322 ------------- TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 247,322 ------------- PRINCIPAL AMOUNT USD ($) TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $3,000,714) $ 3,332,840 ------------- CONVERTIBLE CORPORATE BOND - 0.1% RETAILING - 0.1% APPAREL RETAIL - 0.1% 200,000 GAP Inc., 5.75%, 3/15/09 $ 265,250 ------------- TOTAL RETAILING $ 265,250 ------------- TOTAL CONVERTIBLE CORPORATE BOND (Cost $200,000) $ 265,250 ------------- SHARES COMMON STOCKS - 94.2% ENERGY - 9.3% INTEGRATED OIL & GAS - 9.3% 71,813 ConocoPhillips $ 6,235,523 169,714 ChevronTexaco Corp. 8,911,682 176,110 Exxon Mobil Corp. 9,027,399 36,142 Occidental Petroleum Corp. 2,109,247 ------------- $ 26,283,851 ------------- TOTAL ENERGY $ 26,283,851 ------------- MATERIALS - 6.9% COMMODITY CHEMICALS - 1.6% 51,941 Air Products & Chemicals, Inc. $ 3,011,020 28,233 E.I. du Pont de Nemours and Co. 1,384,829 ------------- $ 4,395,849 ------------- CONSTRUCTION MATERIALS - 0.7% 36,142 Vulcan Materials Co. $ 1,973,715 ------------- DIVERSIFIED CHEMICAL - 0.9% 37,925 PPG Industries, Inc. $ 2,584,968 ------------- DIVERSIFIED METALS & MINING - 1.0% 29,700 Phelps Dodge Corp. $ 2,937,924 ------------- PAPER PRODUCTS - 0.8% 64,436 Meadwestvaco Corp. $ 2,183,736 ------------- SPECIALTY CHEMICALS - 0.8% 42,784 Valspar Corp. $ 2,139,628 ------------- STEEL - 1.1% 51,012 Nucor Corp. $ 2,669,968 20,704 Roanoke Electric Steel Corp. 427,972 ------------- $ 3,097,940 ------------- TOTAL MATERIALS $ 19,313,760 ------------- CAPITAL GOODS - 8.1% AEROSPACE & DEFENSE - 2.7% 53,284 Boeing Co. $ 2,758,513 46,899 General Dynamics Corp. 4,905,635 ------------- $ 7,664,148 ------------- ELECTRICAL COMPONENTS & EQUIPMENT - 1.5% 60,925 Emerson Electric Co. $ 4,270,843 ------------- INDUSTRIAL CONGLOMERATES - 2.8% 66,280 Johnson Controls, Inc. $ 4,204,803 33,767 United Technologies Corp. 3,489,819 ------------- $ 7,694,622 ------------- INDUSTRIAL MACHINERY - 1.1% 28,397 Gorman-Rupp Co. $ 653,131 95,208 The Timken Co. 2,477,312 ------------- $ 3,130,443 ------------- TOTAL CAPITAL GOODS $ 22,760,056 ------------- COMMERCIAL SERVICES & SUPPLIES - 0.6% EMPLOYMENT SERVICES - 0.6% 128,355 Servicemaster Co. $ 1,770,015 ------------- TOTAL COMMERCIAL SERVICES & SUPPLIES $ 1,770,015 ------------- TRANSPORTATION - 0.9% RAILROADS - 0.9% 52,265 Burlington Northern, Inc. $ 2,472,657 ------------- TOTAL TRANSPORTATION $ 2,472,657 ------------- AUTOMOBILES & COMPONENTS - 5.7% AUTOMOBILE MANUFACTURERS - 5.7% 154,894 Ford Motor Corp. $ 2,267,648 46,700 General Motors Corp. 1,870,802 149,912 PACCAR, Inc. 12,064,918 ------------- $ 16,203,368 ------------- TOTAL AUTOMOBILES & COMPONENTS $ 16,203,368 ------------- CONSUMER DURABLES & APPAREL - 0.4% HOUSEWARES & SPECIALTIES - 0.4% 47,700 Tupperware Corp. $ 988,344 ------------- TOTAL CONSUMER DURABLES & APPAREL $ 988,344 ------------- The accompanying notes are an integral part of these financial statements. 5 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- SHARES VALUE MEDIA - 3.1% MOVIES & ENTERTAINMENT - 1.7% 149,253 Cedar Fair, L.P. $ 4,910,424 ------------- PUBLISHING - 1.4% 41,821 McGraw-Hill Co., Inc. $ 3,828,294 ------------- TOTAL MEDIA $ 8,738,718 ------------- RETAILING - 1.2% DEPARTMENT STORES - 1.2% 111,354 May Department Stores Co. $ 3,273,808 ------------- TOTAL RETAILING $ 3,273,808 ------------- FOOD, BEVERAGE & TOBACCO - 4.7% PACKAGED FOODS & MEATS - 4.2% 152,313 Campbell Soup Co. $ 4,552,636 62,343 General Mills, Inc. 3,099,071 76,105 H.J. Heinz Co., Inc. 2,967,334 48,430 Sara Lee Corp. 1,169,100 ------------- $ 11,788,141 ------------- SOFT DRINKS - 0.5% 29,533 PepsiCo, Inc. $ 1,541,623 ------------- TOTAL FOOD, BEVERAGE & TOBACCO $ 13,329,764 ------------- HOUSEHOLD & PERSONAL PRODUCTS - 1.4% HOUSEHOLD PRODUCTS - 1.4% 40,479 Colgate-Palmolive Co. $ 2,070,906 30,353 Clorox Co. 1,788,702 ------------- $ 3,859,608 ------------- TOTAL HOUSEHOLD & PERSONAL PRODUCTS $ 3,859,608 ------------- HEALTH CARE EQUIPMENT & SERVICES - 4.0% HEALTH CARE DISTRIBUTORS - 3.2% 99,784 Abbott Laboratories $ 4,654,924 28,800 Bristol-Myers Squibb Co. 737,856 59,163 Johnson & Johnson 3,752,117 ------------- $ 9,144,897 HEALTH CARE EQUIPMENT - 0.8% 39,446 Becton, Dickinson & Co. $ 2,240,533 ------------- TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 11,385,430 ------------- PHARMACEUTICALS & BIOTECHNOLOGY - 1.8% PHARMACEUTICALS - 1.8% 59,789 Eli Lilly & Co. $ 3,393,026 53,124 Merck & Co., Inc. 1,707,405 ------------- $ 5,100,431 ------------- TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 5,100,431 ------------- BANKS - 11.7% DIVERSIFIED BANKS - 4.4% 25,400 Comerica, Inc. $ 1,549,908 88,909 U.S. Bancorp 2,784,630 83,196 Wachovia Corp. 4,376,110 60,514 Wells Fargo & Co. 3,760,945 ------------- $ 12,471,593 ------------- REGIONAL BANKS - 4.3% 64,229 First Horizon National Corp. $ 2,768,912 100,062 National City Corp. 3,757,328 76,456 SunTrust Banks, Inc. 5,648,569 ------------- $ 12,174,809 ------------- THRIFTS & MORTGAGE FINANCE - 3.0% 195,686 Washington Mutual, Inc. $ 8,273,604 ------------- TOTAL BANKS $ 32,920,006 ------------- DIVERSIFIED FINANCIALS - 4.8% ASSET MANAGEMENT & CUSTODY BANKS - 4.1% 61,735 Eaton Vance Corp. $ 3,219,480 27,800 State Street Corp. 1,365,536 113,009 T. Rowe Price Associates, Inc. 7,029,160 ------------- $ 11,614,176 ------------- INVESTMENT BANKING & BROKERAGE - 0.7% 44,506 A.G. Edwards, Inc. $ 1,923,104 ------------- TOTAL DIVERSIFIED FINANCIALS $ 13,537,280 ------------- INSURANCE - 3.2% PROPERTY & CASUALTY INSURANCE - 3.2% 57,533 Chubb Corp. $ 4,424,288 89,632 Safeco Corp. 4,682,376 ------------- $ 9,106,664 ------------- TOTAL INSURANCE $ 9,106,664 ------------- REAL ESTATE - 1.2% REAL ESTATE INVESTMENT TRUSTS - 1.2% 53,284 Simon DeBartolo Group, Inc. $ 3,445,876 ------------- TOTAL REAL ESTATE $ 3,445,876 ------------- SOFTWARE & SERVICES - 0.9% APPLICATION SOFTWARE - 0.3% 32,011 Microsoft Corp. $ 855,014 ------------- DATA PROCESSING & OUTSOURCED SERVICES - 0.6% 40,616 Automatic Data Processing, Inc. $ 1,801,320 ------------- TOTAL SOFTWARE & SERVICES $ 2,656,334 ------------- TECHNOLOGY HARDWARE & EQUIPMENT - 2.0% COMMUNICATIONS EQUIPMENT - 0.6% 91,600 Motorola, Inc. $ 1,575,520 ------------- 6 The accompanying notes are an integral part of these financial statements. PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SHARES VALUE COMPUTER HARDWARE - 1.4% 62,145 Diebold, Inc. $ 3,463,341 6,402 IBM Corp. 631,109 ------------- $ 4,094,450 ------------- TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 5,669,970 ------------- TELECOMMUNICATION SERVICES - 6.2% INTEGRATED TELECOMMUNICATION SERVICES - 6.2% 53,541 Alltel Corp. $ 3,146,069 140,143 BellSouth Corp. 3,894,574 175,340 SBC Communications, Inc. 4,518,512 64,047 AT&T Corp. 1,220,736 113,589 Verizon Communications, Inc. 4,601,490 ------------- $ 17,381,381 ------------- TOTAL TELECOMMUNICATION SERVICES $ 17,381,381 ------------- UTILITIES - 16.1% ELECTRIC UTILITIES - 10.2% 79,358 Ameren Corp. $ 3,979,010 66,696 American Electric Power Co., Inc. 2,290,341 121,608 Constellation Energy Group 5,315,486 76,537 Consolidated Edison, Inc. 3,348,494 34,077 FPL Group, Inc. 2,547,256 108,460 Great Plains Energy, Inc. 3,284,169 66,088 NSTAR 3,587,257 127,476 Southern Co. 4,272,996 ------------- $ 28,625,009 ------------- GAS UTILITIES - 4.2% 15,400 Atmos Energy Corp. $ 421,190 128,160 KeySpan Energy Corp. 5,055,912 124,991 Questar Corp. 6,369,541 ------------- $ 11,846,643 ------------- MULTI-UTILITIES & UNREGULATED POWER - 1.1% 50,083 Equitable Resources, Inc. $ 3,038,035 ------------- WATER UTILITIES - 0.6% 73,317 Aqua America, Inc. $ 1,802,861 ------------- TOTAL UTILITIES $ 45,312,548 ------------- TOTAL COMMON STOCKS (Cost $200,659,301) $ 265,509,869 ------------- PRINCIPAL AMOUNT VALUE TEMPORARY CASH INVESTMENT - 4.5% REPURCHASE AGREEMENT - 4.5% $ 12,700,000 UBS Warburg, Inc., 1.00%, dated 12/31/04, repurchase price of $12,700,000 plus accrued interest on 1/3/05 collateralized by $12,654,000 U.S. Treasury Bill, 6.75%, 5/15/05 $ 12,700,000 ------------- TOTAL TEMPORARY CASH INVESTMENT (Cost $12,700,000) $ 12,700,000 ------------- TOTAL INVESTMENTS IN SECURITIES - 100.0% (Cost $216,560,015) $ 281,807,959 ------------- OTHER ASSETS AND LIABILITIES - 0.0% $ 117,819 ------------- TOTAL NET ASSETS - 100.0% $ 281,925,778 ============= The accompanying notes are an integral part of these financial statements. 7 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED CLASS II 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 18.19 $ 15.18 $ 18.49 $ 21.37 $ 20.82 -------- -------- -------- --------- ------- Incr-ease (decrease) from investment operations: Net investment income $ 0.36 $ 0.32 $ 0.31 $ 0.34 $ 0.29 Net realized and unrealized gain (loss) on investments and foreign currency transactions 2.53 3.02 (3.25) (1.84) 2.45 -------- -------- -------- --------- ------- Net increase (decrease) from investment operations $ 2.89 $ 3.34 $ (2.94) $ (1.50) $ 2.74 Distributions to shareowners: Net investment income (0.40) (0.33) (0.37) (0.32) (0.45) Net realized gain -- -- -- (1.06) (1.74) -------- -------- -------- --------- ------- Net increase (decrease) in net asset value $ 2.49 $ 3.01 $ (3.31) $ (2.88) $ 0.55 -------- -------- -------- --------- ------- Net asset value, end of period $ 20.68 $ 18.19 $ 15.18 $ 18.49 $ 21.37 ======== ======== ======== ========= ======= Total return* 16.04% 22.27% (16.05)% (7.15)% 14.49% Ratio of net expenses to average net assets+ 0.98% 1.02% 1.07% 1.02% 0.96% Ratio of net investment income to average net assets+ 2.16% 2.29% 2.25% 1.77% 1.99% Portfolio turnover rate 19% 12% 12% 13% 13% Net assets, end of period (in thousands) $ 93,691 $ 60,355 $ 27,084 $ 17,948 $ 8,456 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.98% 1.02% 1.07% 1.02% 0.96% Net investment income 2.16% 2.29% 2.25% 1.77% 1.99% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.98% 1.02% 1.07% 1.02% 0.96% Net investment income 2.16% 2.29% 2.25% 1.77% 1.99%
* Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. + Ratios with no reduction for fees paid indirectly. 8 The accompanying notes are an integral part of these financial statements. PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (Cost $216,560,015) $ 281,807,959 Cash 154,992 Receivables-- Fund shares sold 257,005 Dividends, interest and foreign taxes withheld 725,532 Other 7,531 ------------- Total assets $ 282,953,019 ------------- LIABILITIES: Payables-- Fund shares repurchased 758,304 Due to affiliates 181,072 Accrued expenses 87,865 ------------- Total liabilities $ 1,027,241 ------------- NET ASSETS: Paid-in capital $ 228,847,694 Undistributed net investment income (loss) 1,228,049 Accumulated undistributed net realized gain (loss) (13,397,909) Net unrealized gain (loss) on: Investments 65,247,944 ------------- Total net assets $ 281,925,778 ------------- NET ASSET VALUE PER SHARE: CLASS I: No par value (unlimited number of shares authorized) Net assets $ 188,234,469 Shares outstanding 9,147,953 ------------- Net asset value per share $ 20.58 CLASS II: No par value (unlimited number of shares authorized) Net assets $ 93,691,309 Shares outstanding 4,529,535 ------------- Net asset value per share $ 20.68 The accompanying notes are an integral part of these financial statements. 9 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- YEAR ENDED 12/31/04 INVESTMENT INCOME: Dividends $ 7,227,744 Interest 128,972 Income on securities loaned, net 7,190 ------------ Total investment income $ 7,363,906 ------------ EXPENSES: Management fees $ 1,531,353 Transfer agent fees and expenses 3,000 Distribution fees (Class II) 181,888 Administrative reimbursements 30,408 Custodian fees 43,740 Professional fees 52,063 Printing expense 41,880 Fees and expenses of nonaffiliated trustees 1,681 Miscellaneous 8,282 ------------ Total expenses $ 1,894,295 Less fees paid indirectly (4,731) ------------ Net expenses $ 1,889,564 ------------ Net investment income (loss) $ 5,474,342 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 2,001,864 ------------ $ 2,001,864 ------------ Change in net unrealized gain or (loss) from: Investments $ 29,937,321 ------------ $ 29,937,321 ------------ Net gain (loss) on investments, futures contracts and foreign currency transactions $ 31,939,185 ============ Net increase (decrease) in net assets resulting from operations $ 37,413,527 ============ 10 The accompanying notes are an integral part of these financial statements. PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 5,474,342 $ 4,413,641 Net realized gain (loss) on investments 2,001,864 (634,370) Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions 29,937,321 34,115,732 ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 37,413,527 $ 37,895,003 ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (3,809,792) $ (3,313,897) Class II (1,595,526) (860,942) ------------- ------------- Total distributions to shareowners $ (5,405,318) $ (4,174,839) ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 63,295,941 $ 52,433,019 Reinvestment of distributions 5,405,317 4,174,840 Cost of shares repurchased (34,772,572) (34,680,633) ------------- ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ 33,928,686 $ 21,927,226 ------------- ------------- Net increase (decrease) in net assets $ 65,936,895 $ 55,647,390 ------------- ------------- NET ASSETS: Beginning of year $ 215,988,883 $ 160,341,493 ------------- ------------- End of year $ 281,925,778 $ 215,988,883 ============= ============= Undistributed net investment income (loss), end of year $ 1,228,049 $ 1,156,984 ============= =============
The accompanying notes are an integral part of these financial statements. 11 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Equity Income VCT Portfolio is a portfolio of the Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate diversified portfolios fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio)(Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The investment objective of Equity Income Portfolio is to seek capital appreciation. Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting years. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in the preparation of its financial statements which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset value for the portfolio is computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Trading in foreign equity securities is substantially completed each day at various times prior to the close of the NYSE. The value of such securities used in computing the net asset value of the Portfolio's shares, based on the last sale price on the principal exchange where they traded. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Fixed income securities are valued at prices supplied by independent pricing services, which consider such factors as Treasury spreads, yields, maturities and 12 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- ratings. Valuations may be supplemented by dealers and other sources, as required. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis, net of unrecoverable foreign taxes withheld at the applicable country rates. All discounts/premiums are accreted/amortized for financial reporting purposes. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. B. FUTURES CONTRACTS The Portfolio may enter into futures transactions to hedge against changes in interest rates, securities prices, and currency rates or to seek to increase total return. Upon entering into a futures contract, the Portfolio is required to deposit with a broker an amount of cash or securities equal to the minimum "initial margin" requirements of the associated futures exchange. Subsequent payments for futures contracts ("variation margin") are paid or received by the Portfolio, depending on the daily fluctuation in the value of the contracts, and are recorded by the Portfolio as unrealized gains or losses. When the contract is closed, the Portfolio realizes a gain or loss equal to the difference between the opening and closing value of the contract. The use of futures contracts involves, to varying degrees, elements of market risk which may exceed the amounts recognized by the Portfolio. Changes in the value of the contracts may not directly correlate to the changes in the value of the underlying securities. These risks may decrease the effectiveness of the Portfolio's hedging and trading strategies and potentially result in a loss. As of December 31, 2004, the portfolio had no open futures contracts. C. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from or in excess of net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. The portfolio elected to defer $229,369 in capital losses recognized between November 1, 2004 and December 31, 2004, to its fiscal year ending December 31, 2005. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2004, Equity Income VCT Portfolio had a capital loss carryforward of $13,046,273, of which will the following amounts expire between 2009 and 2011 if not utilized: $3,961,413 in 2009, $6,407,206 in 2010, and $2,677,654, in 2011. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis.
UNDISTRIBUTED ACCUMULATED NET NET INVESTMENT REALIZED GAIN PAID-IN PORTFOLIO INCOME (LOSS) CAPITAL - ----------------------------------- -------------- --------------- --------- Pioneer Equity Income VCT Portfolio $ 2,041 $ (44,116) $ (42,075)
13 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004, and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003 ------------- ----------- DISTRIBUTIONS PAID FROM: Ordinary Income $ 5,405,318 $ 4,174,839 Long-Term capital gain -- -- ------------- ----------- $ 5,405,318 $ 4,174,839 Return of Capital -- -- ------------- ----------- Total distributions $ 5,405,318 $ 4,174,839 ============= =========== DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ -- Undistributed long-term gain/(capital loss carryforward) (13,046,273) Unrealized appreciation (depreciation) 66,353,726 Post-October loss deferred (229,369) ------------- Total $ 53,078,084 =============
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily attributable to the tax deferral of losses on wash sales, returns of capital on REITs, and the recognition of unrealized gains or losses on certain futures contracts. D. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of the adjusted net assets at the beginning of the day. Dividends and distributions to shareowners are recorded on the ex-dividend date. Distributions paid by a Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. E. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. F. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment 14 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the Portfolio. Management fees are calculated daily at the following annual rate of 0.65% of thePortfolio's average daily net assets. In addition, under the management and administration agreement, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $160,961 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $271 in transfer agent fees payable to PIMSS at December 31, 2004. 4. DISTRIBUTION PLANS The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares. Included in due to affiliates is $19,840 payable to PFD at December 31, 2004. 5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolio's aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ PORTFOLIO TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) - ----------------------- ------------- ------------ ------------ -------------- Equity Income Portfolio $ 215,454,233 $ 69,454,959 $ (3,101,223) $ 66,353,726
6. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $72,185,977 and $44,337,103, respectively. 7. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
EQUITY INCOME PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - ----------------------------- ---------- ------------- ---------- ------------- CLASS I: Shares sold 1,757,096 $ 33,474,454 1,544,529 $ 24,668,979 Reinvestment of distributions 198,654 3,809,791 204,954 3,313,898 Shares repurchased (1,411,407) (26,451,072) (1,964,325) (30,892,038) ---------- ------------- ---------- ------------- Net increase (decrease) 544,343 $ 10,833,173 (214,842) $ (2,909,161) ========== ============= ========== ============= CLASS II: Shares sold 1,571,139 $ 29,821,487 1,723,515 $ 27,764,040 Reinvestment of distributions 82,473 1,595,526 54,432 860,942 Shares repurchased (442,520) (8,231,500) (242,114) (3,788,595) ---------- ------------- ---------- ------------- Net increase 1,211,092 $ 23,095,513 1,533,833 $ 24,836,387 ========== ============= ========== =============
15 PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS II SHAREOWNERS OF PIONEER EQUITY INCOME VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Equity Income VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the two years in the period ended December 31, 2001 were audited by other auditors who have ceased operations and whose report, dated February 8, 2002, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Equity Income VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 16 PIONEER EQUITY INCOME VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the Trust's operations. The Trust's Trustees and officers are listed below, CUSTODIAN together with their principal occupations during the past five years. Brown Brothers Harriman & Co. Trustees who are interested persons of the Portfolio within the meaning of the Investment Company Act of 1940 are referred to as Interested Trustees. Trustees who are not interested persons of the Trust are INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM referred to as Independent Trustees. Each of the Trustees serves as a Ernst & Young LLP trustee of each of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address for all Interested PRINCIPAL UNDERWRITER Trustees and all officers of the Portfolio is 60 State Street, Boston, Pioneer Funds Distributor, Inc. Massachusetts 02109. The Trust's statement of additional information provides more detailed LEGAL COUNSEL information regarding the Trust's Trustees and is available upon Wilmer Cutler Pickering Hale and Dorr LLP request, without charge, by calling 1-800-225-6292. Proxy Voting Policies and Procedures of the Trust are available without SHAREOWNER SERVICES AND TRANSFER charge, upon Agent request, by calling our toll free number Pioneer Investment Management Shareholder Services, Inc. (1-800-225-6292). This information is also available online at pioneerfunds.com.
- -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS HELD BY THIS TRUSTEE John F. Cogan, Jr. (78)* Chairman of the Serves until Trustee and President Serves until Director of Harbor Board, Trustee successor trustee is retirement or removal; Deputy Global Company, Ltd. and President elected or earlier Chairman and a Director of Pioneer retirement or removal Global Asset Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds) * Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------ Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive None Executive Vice successor trustee is Officer, PIM-USA since May 2003 President elected or earlier (Director since January 2001); retirement or removal President and Director of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. ** Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------
17 PIONEER EQUITY INCOME VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS HELD BY THIS TRUSTEE David R. Bock **(61) Trustee since Serves until a Senior Vice President and Chief Director of The 3050 K. Street NW, 2005. successor trustee is Financial Officer, I-trax, Inc. Enterprise Social Washington, DC 20007 elected or earlier (publicly traded health care services Investment Company retirement or company) (2001-present); Managing (privately-held removal. Partner, Federal City Capital affordable housing Advisors (boutique merchant finance company); bank)(1995-2000; 2002 to 2004); Director of New York Executive Vice President and Chief Mortgage Trust Financial Officer, Pedestal Inc. (publicly traded (internet-based mortgage trading mortgage REIT) company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Mary K. Bush (56) Trustee since Serves until President, Bush International Director of Brady 3509 Woodbine 2000. successor trustee is (international financial advisory Corporation Street, Chevy Chase, elected or earlier firm) (industrial MD 20815 retirement or removal identification and specialty coated material products manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - ------------------------------------------------------------------------------------------------------------------------------------ Margaret B.W. Graham Trustee since Serves until Founding Director, The Winthrop None (57) 2000. successor trustee is Group, Inc. (consulting firm); 1001 Sherbrooke elected or earlier Professor of Management, Faculty of Street West, Montreal, retirement or removal Management, McGill University Quebec, Canada H3A 1G5 - ------------------------------------------------------------------------------------------------------------------------------------ Marguerite A. Piret Trustee since Serves until President and Chief Executive Director of New (56) 1995. successor trustee is Officer, Newbury, Piret & Company, America High Income One Boston Place, elected or earlier Inc. (investment banking firm) Fund, Inc. (closed- 28th Floor, Boston, retirement or removal end investment MA 02108 company) - ------------------------------------------------------------------------------------------------------------------------------------ Stephen K. West (76) Trustee since Serves until Senior Counsel, Sullivan & Cromwell Director, The Swiss 125 Broad Street, 1995. successor trustee is (law firm) Helvetia Fund, Inc. New York, NY 10004 elected or earlier (closed-end retirement or removal investment company) and AMVESCAP PLC (investment managers) - ------------------------------------------------------------------------------------------------------------------------------------ John Winthrop (68) Trustee since Serves until President, John Winthrop & Co., Inc. None One North Adgers Wharf, September, 2000. successor trustee is (private investment firm) Charleston, SC 29401 elected or earlier retirement or removal - ------------------------------------------------------------------------------------------------------------------------------------
18 PIONEER EQUITY INCOME VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS HELD BY THIS TRUSTEE Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior Vice None discretion of the President - Legal of Pioneer; and Board Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Christopher J. Kelley Assistant Serves at the Assistant Vice President and Senior None (40) Secretary discretion of the Counsel of Pioneer since July 2002; Board Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering Hale None Secretary discretion of the and Dorr LLP; Assistant Secretary of Board all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Vincent Nave (59) Treasurer Serves at the Vice President - Fund Accounting, None discretion of the Administration and Custody Services Board of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ------------------------------------------------------------------------------------------------------------------------------------ Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer since None Treasurer discretion of the 2004; Treasurer and Senior Vice Board President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None Treasurer discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None Treasurer discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - ------------------------------------------------------------------------------------------------------------------------------------
19 PIONEER EQUITY INCOME VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS HELD BY THIS TRUSTEE Katharine Kim Assistant Serves at the Fund Administration Manager - Fund None Sullivan (31) Treasurer discretion of the Accounting, Administration and Board Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of Pioneer None Officer discretion of the (Director of Compliance and Senior Board Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 20 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. [LOGO] PIONEER Investments(R) [LOGO] PIONEER INVESTMENTS(R) PIONEER VARIABLE CONTRACTS TRUST PIONEER FUND VCT PORTFOLIO -- CLASS II SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Pioneer Fund VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 6 Financial Statements 10 Notes to Financial Statements 14 Report of Independent Registered Public Accounting Firm 19 Trustees, Officers and Service Providers 20 PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT www.pioneerfunds.com. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT http://www.sec.gov. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] U.S. Common Stocks 94.6% Depositary Receipts for International Stocks 2.5% Temporary Cash Investments 1.8% International Common Stocks 1.1% SECTOR DISTRIBUTION (As a percentage of equity holdings) Financials 15.7% Information Technology 15.5% Consumer Discretionary Consumer 14.0% Industrials 13.2% Health Care 12.3% Consumer Staples 10.1% Energy 7.9% Materials 6.5% Services 3.1% Telecommunication Services 3.1% Utilities 1.7% FIVE LARGEST HOLDINGS (As a percentage of equity holdings) 1. Exxon Mobil Corp. 2.58% 2. ChevronTexaco Corp. 2.18 3. Target Corp. 2.04 4. United Technologies Corp. 1.98 5. Microsoft Corp. 1.97 The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- PRICES AND DISTRIBUTIONS 12/31/04 12/31/03 Net Asset Value per Share $ 20.51 $ 18.66 DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ 0.1766 $ -- $ -- - -------------------------------------------------------------------------------- PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in PIONEER FUND VCT PORTFOLIO at net asset value, compared to that of the Standard & Poor's (S&P) 500 Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. S&P 500 Pioneer Fund VCT Portfolio 10/97 10000 10000 10643 10545 12/98 13686 13257 16565 15312 12/00 15060 15561 13275 13836 12/02 10342 11173 13306 13791 12/04 14747 15298 The Standard & Poor's 500 Stock Index (the S&P 500) is a commonly used measure of the broad U.S. stock market. Index returns assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. Portfolio returns are based on net asset value and do not reflect any annuity-related costs. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004) - -------------------------------------------------------------------------------- NET ASSET VALUE - -------------------------------------------------------------------------------- Life-of-Class 6.11% (10/31/97) 5 Years -0.02 1 Year 10.93 All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS.Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER FUND VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,090.36 $ 1,088.30 Expenses Paid During Period* $ 3.72 $ 5.02 * Expenses are equal to the Portfolio's annualized expense ratio of 0.71% and 0.96% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER FUND VCT PORTFOLIO Based on a hypothetical 5% return per year before expenses, reflecting the period from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,021.57 $ 1,020.31 Expenses Paid During Period* $ 3.60 $ 4.85 * Expenses are equal to the Portfolio's annualized expense ratio of 0.71% and 0.96% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- CALL 800-688-9915 OR VISIT www.pioneer funds.com FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PER FORMANCE DATA QUOTED. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE RETURNS FOR THE PORTFOLIO DO NOT REFLECT THE DEDUCTION OF EXPENSES ASSOCIATED WITH VARIABLE PRODUCTS, SUCH AS MORTALITY AND EXPENSE RISK CHARGES, SEPARATE ACCOUNT CHARGES, AND SALES CHARGES. THESE EXPENSES WOULD REDUCE THE OVERALL RETURNS SHOWN. PERFORMANCE RESULTS REFLECT ANY APPLICABLE EXPENSE WAIVERS IN EFFECT DURING THE PERIODS SHOWN. WITHOUT SUCH WAIVERS PERFORMANCE WOULD BE LOWER. WAIVERS MAY NOT BE IN EFFECT FOR ALL PORTFOLIOS. CERTAIN FEE WAIVERS ARE CONTRACTUAL THROUGH A SPECIFIED PERIOD. OTHER WISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION. In the following discussion, John Carey, portfolio manager of Pioneer Fund VCT Portfolio, reviews the past year and gives an overview of the Portfolio's performance over that period. Q: HOW DID THE PORTFOLIO PERFORM VERSUS ITS BENCHMARK? TO WHAT DO YOU ATTRIBUTE THE PERFORMANCE? A: Pioneer Fund VCT Portfolio achieved respectable returns in 2004. Class II shares of the Portfolio rose 10.93% at net asset value for the calendar year. Most of the gain came in the fourth quarter, which saw the Portfolio rise 9.11%. By comparison, the Standard & Poor's 500 Index increased by 11.04% for the year and 9.23% in the fourth quarter. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. For Pioneer Fund VCT Portfolio, the better than average performance was derived both from our solid weightings in many of the old-economy stocks, especially in energy, industrials, and materials, and from our good stock selection in the four sectors that underperformed the S&P 500 average, consumer staples, financials, health care, and information technology. Among our best performing stocks were Norfolk Southern and PACCAR in industrials and T. Rowe Price in financials, but we also benefited from having only modest relative exposure to Pfizer and Cisco Systems (which we sold during the year) and no holdings of Coca-Cola, all stocks that did poorly. We did suffer from having above-market weightings in two of the dismal semi-conductor names, Applied Materials and Texas Instruments, but on the whole we managed to avoid most of the "disaster" stocks. We were particularly pleased that consumer discretionary, the sector we had highlighted in our annual report for 2003 as the major culprit in our relative underperformance versus the S&P during that year, was a positive contributor to fund performance in 2004. Three of our largest gains were from stocks in that sector: McGraw-Hill, Target, and John Wiley & Sons. Q: WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE SECOND HALF? A: The list of 32 additions to and 10 deletions from the portfolio in the second half of 2004 makes it look as though the period was a singularly busy one for Pioneer Fund VCT Portfolio. Actually it was just a normally busy time, but due to the merger of an acquired fund, the Safeco Core Equity Fund, into Pioneer Fund VCT Portfolio during December, we ended up with some new, transferred positions. Most of the Safeco fund, overlapped with positions already owned in Pioneer Fund, but we inherited the others as well. Rather than "throwing them all out with the wash," we thought that we would take our time to study them in the expectation that some might prove to be worthwhile longer-term holdings for Pioneer Fund VCT Portfolio. The merger itself marked an exciting increase to the asset base of Pioneer Fund VCT Portfolio, and also to our shareholder family. To our new, formerly Safeco shareholders, a hearty welcome! The total effect of the portfolio activity on sector weights was modest, with no sector weighting going up or down by as much as 2%. Materials, industrials, consumer discretionary, information technology, and telecommunications services all increased as a percentage of the Fund portfolio, and energy, consumer staples, health care, financials, and utilities all decreased. As examples, in materials we added: BHP Billiton, a major Australian-based mining and minerals company; Inco, the Canadian nickel producer; and Newmont Mining, a leading gold miner. Two new materials names came from the Safeco fund, Praxair, supplier of industrial gases, and Ball, a packaging company. Among industrials, Northrup Grumman and Ingersoll-Rand were both Safeco holdings, and in the case of consumer discretionary, five of the eight new stocks came from the Safeco fund. The two largest additions, however, were our own purchases, Nordstrom and Gap, both of them retailing companies showing signs of meaningful operational improvement over the past couple of years. Information technology rose somewhat with: our purchase of Veritas Software, which has received a merger proposal from another portfolio company, Symantec; the receipt of shares of Freescale Semiconductor from our holding Motorola; and the inclusion of EMC, an information storage specialist, from the Safeco fund. Telecommunications saw one purchase by us, Nextel Communications, and two additions attributable to the Safeco fund, CenturyTel and Verizon. Subsequent to our purchase of Nextel, the company entered into merger discussions with Sprint. In regard to the sectors where the weightings decreased, the reasons in some cases had to do with weaker relative share-price performance and in other cases with sales from the portfolio. In energy, we realized a gain on a large position in Smith International and replaced it with a smaller holding of Schlumberger. With consumer staples, despite the addition of two small positions from the Safeco portfolio, Kellogg and Kimberly Clark, the sector declined as a percent of the Fund due to underperformance versus the market averages. In the case of health care, it was a combination of selling in excess of purchasing and woeful stock performance from some of the pharmaceuticals, especially Mylan Labs, which announced an acquisition that many investors thought ill conceived. During the six months, we realized significant percentage gains on our sales of Biomet and Wellpoint Health Networks, while adding two names in the health-care equipment and supplies industry, Stryker and Medtronic, and one name in biotechnology, Amgen. Medtronic and Amgen were both from the Safeco fund. 4 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- Financials saw SouthTrust stock exchanged for shares of Wachovia in a merger and our shares of Charter One Financial acquired for cash by the Royal Bank of Scotland. We sold our position in St. Paul Travelers after discouragement over the company's need to set up additional reserves following the merger creating the company. Finally, in utilities, we sold a position in Vectren and received a smaller position in Exelon from the Safeco fund. Q: WHAT IS YOUR OUTLOOK FOR 2005? A: The economic outlook appears favorable over the coming year. Interest rates are expected to continue rising, but not so fast that they should present impediments to further economic growth. Earnings growth will moderate somewhat, which is normal as a business cycle lengthens, but should still be adequate to fuel additional share-price advances. Federal tax law, with the maximum 15% tax rate on qualified dividends and long-term capital gains, is likewise favorable to the stock market. Of course there are concerns, including energy and other commodity prices and the high trade and Federal budget deficits. At some point, too, investors will begin looking ahead to the next downturn in the economy and thinking about ways to position themselves more defensively. A lot rides on the length of the current business cycle. That is, will this be a "normal" cycle of four years or thereabouts, or could it become another extended cycle like the one of the 1990s, which continued for more than six years? Making the forecasting even more difficult is the unusual circumstance that this is a wartime cycle, with some economic activity not conforming to more predictable business patterns. As always, though, we are mainly interested in companies that have the financial and management strengths to survive and do well regardless of the economic climate, and especially companies with the potential, as well as a plan and the management commitment, to do better than they have in the past. A good economy creates more opportunities for such companies to achieve improved results. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. 5 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - -------------------------------------------------------------------------------- SHARES VALUE COMMON STOCKS - 98.9% ENERGY - 7.8% INTEGRATED OIL & GAS - 5.8% 20,126 BP Amoco Plc (A.D.R.) $ 1,175,358 31,052 ConocoPhillips 2,696,245 241,264 ChevronTexaco Corp. 12,668,773 292,714 Exxon Mobil Corp. 15,004,520 44,680 Occidental Petroleum Corp. 2,607,525 ------------- $ 34,152,421 ------------- OIL & GAS DRILLING - 0.7% 60,277 Schlumberger, Ltd. $ 4,035,545 ------------- OIL & GAS EXPLORATION & PRODUCTION - 1.3% 99,995 Apache Corp. $ 5,056,747 70,551 Pioneer Natural Resources Co. 2,476,340 ------------- $ 7,533,087 ------------- TOTAL ENERGY $ 45,721,053 ------------- MATERIALS - 6.5% ALUMINUM - 0.6% 117,716 Alcoa, Inc. $ 3,698,637 ------------- COMMODITY CHEMICALS - 1.3% 27,138 Air Products & Chemicals, Inc. $ 1,573,190 46,466 E.I. du Pont de Nemours and Co. 2,279,157 88,000 Praxair, Inc. 3,885,200 ------------- $ 7,737,547 ------------- DIVERSIFIED CHEMICAL - 0.3% 21,688 PPG Industries, Inc. $ 1,478,254 ------------- DIVERSIFIED METALS & MINING - 2.7% 112,522 BHP Billiton, Ltd. (A.D.R) $ 2,702,778 81,386 Inco, Ltd.* 2,993,377 39,803 Phelps Dodge Corp. 3,937,313 200,118 Rio Tinto Plc 5,886,829 ------------- $ 15,520,297 ------------- METAL & GLASS CONTAINERS - 0.8% 104,000 Ball Corp. $ 4,573,920 ------------- PAPER PRODUCTS - 0.3% 53,073 Meadwestvaco Corp. $ 1,798,644 ------------- PRECIOUS METALS & MINERALS - 0.3% 40,047 Newmont Mining Corp. $ 1,778,487 ------------- SPECIALTY CHEMICALS - 0.2% 39,222 Ecolab, Inc. $ 1,377,869 ------------- TOTAL MATERIALS $ 37,963,655 ------------- CAPITAL GOODS - 10.3% AEROSPACE & DEFENSE - 1.4% 48,104 General Dynamics Corp. $ 5,031,678 54,000 Northrop Grumman Corp. 2,935,440 ------------- $ 7,967,118 ------------- ELECTRICAL COMPONENTS & EQUIPMENT - 2.1% 65,964 Emerson Electric Co. $ 4,624,076 206,300 General Electric Co. 7,529,950 ------------- $ 12,154,026 ------------- INDUSTRIAL CONGLOMERATES - 4.5% 79,790 Illinois Tool Works, Inc. $ 7,394,937 120,984 Johnson Controls, Inc. 7,675,225 111,551 United Technologies Corp. 11,528,796 ------------- $ 26,598,958 ------------- INDUSTRIAL MACHINERY - 2.3% 40,569 Caterpillar, Inc. $ 3,955,883 86,222 Deere & Co. 6,414,917 40,000 Ingersoll-Rand Co. 3,212,000 ------------- $ 13,582,800 ------------- TOTAL CAPITAL GOODS $ 60,302,902 ------------- COMMERCIAL SERVICES & SUPPLIES - 0.5% OFFICE SERVICES & SUPPLIES - 0.5% 58,698 Canon, Inc. (A.D.R.) $ 3,184,953 ------------- TOTAL COMMERCIAL SERVICES & SUPPLIES $ 3,184,953 ------------- TRANSPORTATION - 2.3% AIRLINES - 0.5% 170,807 Southwest Airlines Co. $ 2,780,738 ------------- RAILROADS - 1.5% 50,040 Burlington Northern, Inc. $ 2,367,392 180,893 Norfolk Southern Corp. 6,546,518 ------------- $ 8,913,910 ------------- TRUCKING - 0.3% 21,253 United Parcel Service (a) $ 1,816,281 ------------- TOTAL TRANSPORTATION $ 13,510,929 ------------- AUTOMOBILES & COMPONENTS - 2.1% AUTOMOBILE MANUFACTURERS - 2.1% 253,315 Ford Motor Corp. $ 3,708,532 108,616 PACCAR, Inc. 8,741,416 ------------- $ 12,449,948 ------------- TOTAL AUTOMOBILES & COMPONENTS $ 12,449,948 ------------- 6 The accompanying notes are an integral part of these financial statements. PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SHARES VALUE CONSUMER DURABLES & APPAREL - 0.6% APPAREL, ACCESSORIES & LUXURY GOODS - 0.2% 65,267 Gap, Inc. $ 1,378,439 ------------- HOUSEWARES & SPECIALTIES - 0.4% 84,000 Leggett & Platt, Inc. $ 2,388,120 ------------- TOTAL CONSUMER DURABLES & APPAREL $ 3,766,559 ------------- MEDIA - 4.5% ADVERTISING - 0.6% 43,791 Omnicom Group $ 3,692,457 ------------- MOVIES & ENTERTAINMENT - 0.2% 51,957 The Walt Disney Co. $ 1,444,405 ------------- PUBLISHING - 3.7% 48,893 Elsevier NV $ 665,764 90,111 Gannett Co. 7,362,069 149,146 John Wiley & Sons, Inc. 5,196,247 78,179 McGraw-Hill Co., Inc. 7,156,506 28,800 Tribune Co. 1,213,632 ------------- $ 21,594,218 ------------- TOTAL MEDIA $ 26,731,080 ------------- RETAILING - 6.5% APPAREL RETAIL - 0.2% 24,633 Liz Claiborne, Inc. $ 1,039,759 ------------- COMPUTER & ELECTRONICS RETAIL - 0.6% 60,000 Best Buy Co., Inc. $ 3,565,200 11,064 Game Stop Corp. (Class B)* 247,944 ------------- $ 3,813,144 ------------- DEPARTMENT STORES - 2.0% 80,000 Kohl's Corp.* $ 3,933,600 88,332 May Department Stores Co. 2,596,961 118,523 Nordstrom, Inc. 5,538,580 ------------- $ 12,069,141 ------------- GENERAL MERCHANDISE STORES - 2.2% 34,432 Family Dollar Stores, Inc. $ 1,075,311 228,656 Target Corp. 11,874,106 ------------- $ 12,949,417 ------------- HOME IMPROVEMENT RETAIL - 1.3% 110,000 Home Depot, Inc. $ 4,701,400 48,716 Lowe's Co., Inc. 2,805,554 ------------- $ 7,506,954 ------------- SPECIALTY STORES - 0.2% 30,603 Barnes & Noble, Inc.* $ 987,559 ------------- TOTAL RETAILING $ 38,365,974 ------------- FOOD & DRUG RETAILING - 2.5% DRUG RETAIL - 0.9% 139,003 Walgreen Co. $ 5,333,545 ------------- FOOD DISTRIBUTORS - 1.4% 83,493 Cardinal Health, Inc. $ 4,855,118 84,201 Sysco Corp. 3,213,952 ------------- $ 8,069,070 ------------- FOOD RETAIL - 0.2% 28,200 Kellogg Co. $ 1,259,412 ------------- TOTAL FOOD & DRUG RETAILING $ 14,662,027 ------------- FOOD, BEVERAGE & TOBACCO - 3.7% PACKAGED FOODS & MEATS - 2.1% 86,457 Campbell Soup Co. $ 2,584,200 44,844 General Mills, Inc. 2,229,195 73,219 H.J. Heinz Co., Inc. 2,854,809 54,767 Hershey Foods Corp. 3,041,759 76,005 Sara Lee Corp. 1,834,761 $ 12,544,724 SOFT DRINKS - 1.6% 178,941 PepsiCo, Inc. $ 9,340,720 ------------- TOTAL FOOD, BEVERAGE & TOBACCO $ 21,885,444 ------------- HOUSEHOLD & PERSONAL PRODUCTS - 3.8% HOUSEHOLD PRODUCTS - 3.2% 90,211 Colgate-Palmolive Co. $ 4,615,195 15,015 Clorox Co. 884,834 80,030 Estee Lauder Co. 3,662,973 171,470 Procter & Gamble Co. 9,444,568 ------------- $ 18,607,570 ------------- PERSONAL PRODUCTS - 0.6% 58,000 Kimberly-Clark Corp. $ 3,816,980 ------------- TOTAL HOUSEHOLD & PERSONAL PRODUCTS $ 22,424,550 ------------- HEALTH CARE EQUIPMENT & SERVICES - 6.6% HEALTH CARE DISTRIBUTORS - 3.4% 204,554 Abbott Laboratories $ 9,542,444 163,188 Johnson & Johnson 10,349,383 ------------- $ 19,891,827 ------------- HEALTH CARE EQUIPMENT - 2.8% 73,222 Becton, Dickinson & Co. $ 4,159,010 32,057 Guidant Corp. 2,311,310 85,000 Medtronic, Inc. 4,221,950 123,159 Stryker Corp. 5,942,422 ------------- $ 16,634,692 ------------- The accompanying notes are an integral part of these financial statements. 7 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- SHARES VALUE MANAGED HEALTH CARE - 0.4% 23,937 United Healthcare Group, Inc. $ 2,107,174 ------------- TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 38,633,693 ------------- PHARMACEUTICALS & BIOTECHNOLOGY - 5.6% BIOTECHNOLOGY - 0.8% 68,200 Amgen, Inc.* $ 4,375,030 ------------- PHARMACEUTICALS - 4.8% 55,362 Barr Laboratorie, Inc. $ 2,521,185 95,302 Eli Lilly & Co. 5,408,389 236,082 Merck & Co., Inc. 7,587,675 104,212 Mylan Laboratories, Inc. (a) 1,842,468 56,907 Novartis AG 2,876,080 78,800 Pfizer, Inc. 2,118,932 18,810 Roche Holdings AG (A.D.R) 2,184,311 180,617 Schering-Plough Corp. 3,771,283 ------------- $ 28,310,323 ------------- TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 32,685,353 ------------- BANKS - 8.1% DIVERSIFIED BANKS - 3.7% 288,277 U.S. Bancorp $ 9,028,836 41,456 Wachovia Corp. 2,180,586 174,435 Wells Fargo & Co. 10,841,135 ------------- $ 22,050,557 ------------- REGIONAL BANKS - 3.1% 98,868 First Horizon National Corp. $ 4,262,199 59,000 Fifth Third Bancorp 2,789,520 140,351 National City Corp. 5,270,180 57,444 SunTrust Banks, Inc. 4,243,963 23,185 Zions Bancorporation 1,577,276 ------------- $ 18,143,138 ------------- THRIFTS & MORTGAGE FINANCE - 1.3% 177,481 Washington Mutual, Inc. $ 7,503,897 ------------- Total Banks $ 47,697,592 ------------- DIVERSIFIED FINANCIALS - 5.4% ASSET MANAGEMENT & CUSTODY BANKS - 2.6% 114,875 The Bank of New York Co., Inc. $ 3,839,123 45,290 Federated Investors, Inc. 1,376,816 77,103 State Street Corp. 3,787,299 101,277 T. Rowe Price Associates, Inc. 6,299,429 ------------- $ 15,302,667 ------------- CONSUMER FINANCE - 2.2% 138,272 American Express Co. $ 7,794,393 172,000 MBNA Corp. 4,848,680 ------------- $ 12,643,073 ------------- INVESTMENT BANKING & BROKERAGE - 0.6% 60,698 Merrill Lynch & Co., Inc. $ 3,627,919 ------------- DIVERSIFIED FINANCIAL SERVICES - 0.0% 1 Citigroup, Inc. $ 48 ------------- TOTAL DIVERSIFIED FINANCIALS $ 31,573,707 ------------- INSURANCE - 1.9% MULTI-LINE INSURANCE - 0.9% 78,394 American International Group, Inc. $ 5,148,134 ------------- PROPERTY & CASUALTY INSURANCE - 1.0% 56,844 Chubb Corp. $ 4,371,304 33,919 Safeco Corp. 1,771,929 ------------- $ 6,143,233 ------------- TOTAL INSURANCE $ 11,291,367 ------------- SOFTWARE & SERVICES - 5.5% APPLICATION SOFTWARE - 3.1% 44,591 Adobe Systems, Inc. $ 2,797,639 429,081 Microsoft Corp. 11,460,754 62,259 Symantec Corp.* 1,603,792 82,800 Veritas Software Corp.* 2,363,940 ------------- $ 18,226,125 ------------- DATA PROCESSING & OUTSOURCED SERVICES - 2.4% 107,497 Automatic Data Processing, Inc. $ 4,767,492 38,501 Computer Sciences Corp.* 2,170,301 26,882 DST Systems, Inc.* 1,401,090 29,998 Fiserv, Inc.* 1,205,620 158,920 SunGard Data Systems, Inc.* 4,502,204 ------------- $ 14,046,707 ------------- TOTAL SOFTWARE & SERVICES $ 32,272,832 ------------- TECHNOLOGY HARDWARE & EQUIPMENT - 6.2% COMMUNICATIONS EQUIPMENT - 2.1% 95,000 Century Telephone Enterprises, Inc. $ 3,369,650 221,762 Motorola, Inc. 3,814,306 326,377 Nokia Corp. (A.D.R) 5,114,328 ------------- $ 12,298,284 ------------- COMPUTER HARDWARE - 3.7% 27,643 Diebold, Inc. $ 1,540,544 203,265 Dell, Inc.* 8,565,587 76,270 Hewlett-Packard Co. 1,599,382 81,063 IBM Corp. 7,991,191 403,137 Sun Microsystems, Inc.* 2,168,877 ------------- $ 21,865,581 ------------- COMPUTER STORAGE & PERIPHERALS - 0.4% 160,000 EMC Corp.* $ 2,379,200 ------------- TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 36,543,065 ------------- 8 The accompanying notes are an integral part of these financial statements. PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SHARES VALUE SEMICONDUCTORS - 3.6% SEMICONDUCTOR EQUIPMENT - 0.9% 308,306 Applied Materials, Inc.* $ 5,272,033 ------------- SEMICONDUCTORS - 2.7% 24,815 Freescale Semiconductors, Inc.* $ 455,602 349,426 Intel Corp. 8,173,074 294,793 Texas Instruments, Inc. 7,257,804 ------------- $ 15,886,480 ------------- TOTAL SEMICONDUCTORS $ 21,158,513 ------------- TELECOMMUNICATION SERVICES - 3.1% INTEGRATED TELECOMMUNICATION SERVICES - 3.0% 23,765 Alltel Corp. $ 1,396,431 146,005 BellSouth Corp. 4,057,479 218,671 SBC Communications, Inc. 5,635,151 164,000 Verizon Communications, Inc. 6,643,640 ------------- $ 17,732,701 ------------- WIRELESS TELECOMMUNICATION SERVICES - 0.1% 17,897 Nextel Communications, Inc.* $ 536,910 ------------- TOTAL TELECOMMUNICATION SERVICES $ 18,269,611 ------------- UTILITIES - 1.7% ELECTRIC UTILITIES - 1.4% 32,838 American Electric Power Co., Inc. $ 1,127,655 36,216 Consolidated Edison, Inc. 1,584,450 90,000 Exelon Corp. 3,966,300 57,799 Southern Co. 1,937,422 ------------- $ 8,615,827 ------------- GAS UTILITIES - 0.2% 27,431 KeySpan Energy Corp. $ 1,082,153 ------------- WATER UTILITIES - 0.1% 18,826 Aqua America, Inc. $ 462,931 ------------- TOTAL UTILITIES $ 10,160,911 ------------- TOTAL COMMON STOCKS (Cost $459,723,725) $ 581,255,718 ------------- PRINCIPAL AMOUNT VALUE TEMPORARY CASH INVESTMENTS - 1.8% REPURCHASE AGREEMENT - 1.2% $ 7,300,000 UBS Warburg, Inc., 1.00%, dated 12/31/04, repurchase price of $7,300,000 plus accrued interest on 1/3/05 collateralized by $6,902,000 U.S. Treasury Bill, 5.625%, 5/15/08 $ 7,300,000 ------------- SHARES SECURITY LENDING COLLATERAL - 0.6% 3,264,285 Securities Lending Investment Fund, 2.18% $ 3,264,286 ------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $10,564,285) $ 10,564,286 ------------- TOTAL INVESTMENTS IN SECURITIES - 100.7% (Cost $470,288,010) $ 591,820,004 ------------- OTHER ASSETS AND LIABILITIES - (0.7)% $ (4,056,175) ------------- TOTAL NET ASSETS - 100.0% $ 587,763,829 ============= (A.D.R.) American Depositary Receipt * Non-income producing security (a) At December 31, 2004, the following securities were out on loan: SHARES SECURITY MARKET VALUE 99,001 Mylan Laboratories, Inc. $ 1,750,338 16,979 United Parcel Service 1,451,025 ----------- TOTAL $ 3,201,363 =========== The accompanying notes are an integral part of these financial statements. 9 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 5/1/00 TO CLASS II (a) 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 18.66 $ 15.25 $ 19.05 $ 22.65 $ 23.28 --------- -------- -------- -------- ------- Increase (decrease) from investment operations: Net investment income $ 0.18 $ 0.14 $ 0.13 $ 0.14 $ 0.12 Net realized and unrealized gain (loss) on investments and foreign currency transactions 1.85 3.42 (3.78) (2.59) (0.45) --------- -------- -------- -------- ------- Net increase (decrease) from investment operations $ 2.03 $ 3.56 $ (3.65) $ (2.45) $ (0.33) Distributions to shareowners: Net investment income (0.18) (0.15) (0.15) (0.13) (0.17) Net realized gain -- -- -- (1.02) (0.13) --------- -------- -------- -------- ------- Net increase (decrease) in net asset value $ 1.85 $ 3.41 $ (3.80) $ (3.60) $ (0.63) --------- -------- -------- -------- ------- Net asset value, end of period $ 20.51 $ 18.66 $ 15.25 $ 19.05 $ 22.65 ========= ======== ======== ======== ======= Total return* 10.93% 23.44% (19.25)% (11.09)% (1.61)% Ratio of net expenses to average net assets+ 0.96% 1.00% 1.06% 1.04% 0.93%** Ratio of net investment income to average net assets+ 1.00% 0.87% 0.84% 0.49% 0.47%** Portfolio turnover rate 17% 11% 11% 7% 19%** Net assets, end of period (in thousands) $ 133,627 $ 87,488 $ 36,218 $ 12,674 $ 2,894 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.96% 1.00% 1.06% 1.04% 0.93%** Net investment income 1.00% 0.87% 0.84% 0.49% 0.47%**
(a) Class II shares were first publicly offered on May 1, 2000. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period.) ** Annualized. + Ratios with no reduction for fees paid indirectly. 10 The accompanying notes are an integral part of these financial statements. PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $3,201,363) (Cost $470,288,010) $ 591,820,004 Receivables - Fund shares sold 408,198 Dividends, interest and foreign taxes withheld 1,035,978 Other 40,546 ------------- Total assets $ 593,304,726 ------------- LIABILITIES: Payables-- Investment securities purchased $ 1,000,388 Upon return for securities loaned 3,264,284 Due to bank 848,222 Due to affiliates 307,212 Accrued expenses 120,791 ------------- Total liabilities $ 5,540,897 ------------- NET ASSETS: Paid-in capital $ 535,852,814 Undistributed net investment income (loss) 433,753 Accumulated undistributed net realized gain (loss) (70,054,73) Net unrealized gain (loss) on: Investments 121,531,994 ------------- Total net assets $ 587,763,829 ------------- NET ASSET VALUE PER SHARE: CLASS I: No par value (unlimited number of shares authorized) Net assets $ 454,136,359 Shares outstanding 22,081,959 ------------- Net asset value per share $ 20.57 CLASS II: No par value (unlimited number of shares authorized) Net assets $ 133,627,470 Shares outstanding 6,513,968 ------------- Net asset value per share $ 20.51
The accompanying notes are an integral part of these financial statements. 11 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- YEAR ENDED 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $27,542) $ 5,255,783 Interest 158,731 Income on securities loaned, net 9,868 ------------ Total investment income $ 5,424,382 ------------ EXPENSES: Management fees $ 1,790,664 Transfer agent fees and expenses 2,736 Distribution fees (Class II) 273,949 Administrative reimbursements 24,868 Custodian fees 47,602 Professional fees 59,072 Printing expense 30,024 ------------ Total expenses $ 2,228,915 Less fees paid indirectly (4,581) ------------ Net expenses $ 2,224,334 ------------ Net investment income (loss) $ 3,200,048 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 1,095,419 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (11,040) ------------ $ 1,084,379 ------------ Change in net unrealized gain or (loss) from: Investments $ 30,978,376 ------------ $ 30,978,376 ------------ Net gain (loss) on investments, futures contracts and foreign currency transactions $ 32,062,755 ============ Net increase (decrease) in net assets resulting from operations $ 35,262,803 ============ 12 The accompanying notes are an integral part of these financial statements. PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 3,200,048 $ 2,086,873 Net realized gain (loss) on investments 1,084,379 (8,525,302) Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions 30,978,376 49,662,141 ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 35,262,803 $ 43,223,712 ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (1,685,576) $ (1,580,150) Class II (1,069,680) (520,900) ------------- ------------- Total distributions to shareowners $ (2,755,256) $ (2,101,050) ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 60,072,885 $ 58,651,489 Class I shares issued in reorganization 298,220,832 -- Reinvestment of distributions 2,755,256 2,101,050 Cost of shares repurchased (48,119,744) (37,658,369) ------------- ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ 312,929,229 $ 23,094,170 ------------- ------------- Net increase (decrease) in net assets $ 345,436,776 $ 64,216,832 NET ASSETS: Beginning of year 242,327,053 178,110,221 ------------- ------------- End of year $ 587,763,829 $ 242,327,053 ============= ============= Undistributed net investment income (loss), end of year $ 433,753 $ -- ============= =============
The accompanying notes are an integral part of these financial statements. 13 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Fund VCT Portfolio (the Portfolio) a Portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value I Portfolio) (Class II shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of Fund Portfolio is to seek capital appreciation. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The Trust's financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in the preparation of its financial statements which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolio are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the NYSE. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. 14 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. B. FUTURES CONTRACTS The Portfolio may enter into futures transactions to hedge against changes in interest rates, securities prices, and currency rates or to seek to increase total return. Upon entering into a futures contract, the Portfolio is required to deposit with a broker an amount of cash or securities equal to the minimum "initial margin" requirements of the associated futures exchange. Subsequent payments for futures contracts ("variation margin") are paid or received by the Portfolio, depending on the daily fluctuation in the value of the contracts, and are recorded by the Portfolio as unrealized gains or losses. When the contract is closed, the Portfolio realize a gain or loss equal to the difference between the opening and closing value of the contract. The use of futures contracts involves, to varying degrees, elements of market risk which may exceed the amounts recognized by the Portfolio. Changes in the value of the contracts may not directly correlate to the changes in the value of the underlying securities. These risks may decrease the effectiveness of the Portfolio's hedging and trading strategies and potentially result in a loss. As of December 31, 2004, Fund Portfolio had no open contracts. C. FOREIGN CURRENCY TRANSLATION The books and records of the Portfolio are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent, the net realized gains and losses on foreign currency contracts, disposition of foreign currencies, and the difference between the amount of income accrued and the U.S. dollar actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. D. FORWARD FOREIGN CURRENCY CONTRACTS The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. E. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2004, Fund VCT Portfolio had a capital loss carryforward of $69,351,655, of which the following amounts will expire between 2009 and 2011 if not utilized: $20,833,698 in 2009, $35,500,430 in 2010 and $13,017,527 in 2011. The Portfolio has elected to defer $23,515 in capital losses recognized between November 1, 2004 and December 31, 2004 to its fiscal year ended December 31, 2005. 15 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis. UNDISTRIBUTED NET ACCUMULATED NET INVESTMENT INCOME REALIZED GAIN PAID-IN PORTFOLIO (LOSS) (LOSS) CAPITAL - -------------------------- ----------------- --------------- ------- Pioneer Fund VCT Portfolio $ (11,039) $ 11,039 $ (0) ========= ======== ==== The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004 and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003 ------------- ----------- DISTRIBUTIONS PAID FROM: Ordinary Income $ 2,755,256 $ 2,101,050 Long-Term capital gain -- -- ------------- ----------- $ 2,755,256 $ 2,101,050 Return of Capital -- -- ------------- ----------- Total distributions $ 2,755,256 $ 2,101,050 ============= =========== DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ 433,753 Undistributed long-term gain/(Capital loss carryforward) (69,351,655) Unrealized appreciation (depreciation) 120,852,432 Post-October loss deferred (23,515) ------------- Total $ 51,911,015 =============
The difference between book-basis and tax-basis unrealized appreciation is primarily attributable to the tax deferral of losses on wash sales. F. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II Shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of the adjusted net assets at the beginning of the day. Distributions paid by a Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. Dividends and distributions to shareowners are recorded on the ex-dividend date. 16 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- G. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. H. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the portfolio. Management fees are calculated daily at the following annual rate of 0.65% of the Portfolio's average daily net assets. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $278,054 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $269 in transfer agent fees payable to PIMSS at December 31, 2004. 4. DISTRIBUTION PLANS The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares. Included in due to affiliates is $28,889 payable to PFD at December 31, 2004. 5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows: NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------- ------------- ------------- -------------- Fund Portfolio $ 470,964,572 $ 139,688,987 $ (18,836,555) $ 120,852,432 ============= ============= ============= ============= 6. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $102,950,656 and $46,364,816, respectively. 17 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- 7. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
FUND PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - --------------------------------------- ---------- ------------- ---------- ------------- CLASS I: Shares sold 451,723 $ 8,690,214 519,126 $ 8,479,870 Class I shares issued in reorganization 14,822,109 298,220,832 -- -- Reinvestment of distributions 87,609 1,685,576 94,945 1,580,150 Shares repurchased (1,561,121) (29,970,569) (1,616,113) (25,664,887) ---------- - ----------- ---------- ------------- Net increase 13,800,320 $ 278,626,053 (1,002,042) $ (15,604,867) ========== ============= ========== ============= CLASS II: Shares sold 2,721,468 $ 51,382,671 3,031,681 $ 50,171,619 Reinvestment of distribution 55,486 1,069,680 30,685 520,900 Shares repurchased (952,397) (18,149,175) (747,392) (12,093,482) ---------- ------------- ---------- ------------- Net increase 1,824,557 $ 34,303,176 2,314,974 $ 38,599,037 ========== ============= ========== =============
8. MERGER INFORMATION On December 8, 2004, beneficial owners of Safeco RST Core Equity Portfolio ("Core Equity"), Safeco RST Money Market Portfolio ("Money Market") and Safeco RST Multi-Cap Core Portfolio ("Multi-Cap"), three of the six portfolios that comprised Safeco Resource Series Trust, approved a proposed Agreement and Plan of Reorganization that provided for the mergers listed below. These tax-free reorganizations were accomplished on December 10, 2004 ("Closing Date"), by exchanging all of the Safeco's net assets for Class I shares as indicated below, based on Class I shares' ending net asset value on the Closing Date. The following charts show the details of the reorganizations as of that closing date Closing Date:
PIONEER FUND VCT SAFECO RST CORE PIONEER FUND VCT PORTFOLIO EQUITY PORTFOLIO PORTFOLIO (PRE-REORGANIZATION) (PRE-REORGANIZATION) (POST-REORGANIZATION) -------------------- -------------------- --------------------- Net Assets $ 281,591,969 $ 298,220,832 $ 879,147,352 Shares Outstanding 13,990,134 12,804,673 28,812,243 Class I Shares Issued 14,822,109
UNREALIZED APPRECIATION ON REALIZED GAIN/(LOSS) CLOSING DATE ON CLOSING DATE --------------- -------------------- Safeco RST Core Equity Portfolio $ 68,714,366 $ 20,662,968 18 PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS II SHAREOWNERS OF PIONEER FUND VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Fund VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the two years in the period ended December 31, 2001 were audited by other auditors who have ceased operations and whose report, dated February 8, 2002, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Fund VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 19 PIONEER FUND VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the Trust's operations. The Trust's Trustees and officers are listed below, CUSTODIAN together with their principal occupations during the past five years. Brown Brothers Harriman & Co. Trustees who are interested persons of the Portfolio within the meaning of the Investment Company Act of 1940 are referred to as Interested Trustees. Trustees who are not interested persons of the Trust are INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM referred to as Independent Trustees. Each of the Trustees serves as a Ernst & Young LLP trustee of each of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address for all Interested PRINCIPAL UNDERWRITER Trustees and all officers of the Portfolio is 60 State Street, Boston, Pioneer Funds Distributor, Inc. Massachusetts 02109. The Trust's statement of additional information provides more detailed LEGAL COUNSEL information regarding the Trust's Trustees and is available upon Wilmer Cutler Pickering Hale and Dorr LLP request, without charge, by calling 1-800-225-6292. Proxy Voting Policies and Procedures of the Trust are available without SHAREOWNER SERVICES AND TRANSFER charge, upon Agent request, by calling our toll free number Pioneer Investment Management Shareholder Services, Inc. (1-800-225-6292) This information is also available online at pioneerfunds.com.
- -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS HELD NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS BY THIS TRUSTEE John F. Cogan, Jr. Chairman of the Serves until Trustee and President Serves until Director of Harbor Global (78)* Board, Trustee and successor trustee retirement or removal; Deputy Company, Ltd. President is elected or Chairman and a Director of Pioneer earlier retirement Global Asset Management S.p.A. or removal ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds) Director of Harbor Global Company, Ltd. *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ----------------------------------------------------------------------------------------------------------------------------------- Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive None Executive Vice successor trustee Officer, PIM-USA since May 2003 President is elected or (Director since January 2001); earlier retirement President and Director of Pioneer or removal since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - -----------------------------------------------------------------------------------------------------------------------------------
20 PIONEER EQUITY INCOME VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS HELD NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS BY THIS TRUSTEE David R. Bock **(61) Trustee since Serves until a Senior Vice President and Chief Director of The 3050 K. Street NW, 2005. successor trustee Financial Officer, I-trax, Inc. Enterprise Social Washington, DC 20007 is elected or (publicly traded health care Investment Company earlier retirement services company) (2001-present); (privately-held or removal. Managing Partner, Federal City affordable housing Capital Advisors (boutique merchant finance company); bank)(1995-2000; 2002 to 2004); Director of New York Executive Vice President and Chief Mortgage Trust (publicly Financial Officer, Pedestal Inc. traded mortgage REIT) (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ----------------------------------------------------------------------------------------------------------------------------------- Mary K. Bush (56) 3509 Trustee since Serves until President, Bush International Director of Brady Woodbine Street, Chevy 2000. successor trustee (international financial advisory Corporation (industrial Chase, MD 20815 is elected or firm) identification and earlier retirement specialty coated material or removal products manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - ----------------------------------------------------------------------------------------------------------------------------------- Margaret B.W. Graham Trustee since Serves until Founding Director, The Winthrop None (57) 1001 Sherbrooke 2000. successor trustee Group, Inc. (consulting firm); Street West, Montreal, is elected or Professor of Management, Faculty of Quebec, Canada H3A 1G5 earlier retirement Management, McGill University or removal - ----------------------------------------------------------------------------------------------------------------------------------- Marguerite A. Piret Trustee since Serves until President and Chief Executive Director of New America (56) One Boston Place, 2000. successor trustee Officer, Newbury, Piret & Company, High Income Fund, Inc. 28th Floor, Boston, MA is elected or Inc. (investment banking firm) (closed-end investment 02108 earlier retirement company) or removal - ----------------------------------------------------------------------------------------------------------------------------------- Stephen K. West (76) Trustee since Serves until Senior Counsel, Sullivan & Cromwell Director, The Swiss 125 Broad Street, New 2000. successor trustee (law firm) Helvetia Fund, Inc. York, NY 10004 is elected or (closed-end investment earlier retirement company) and AMVESCAP PLC or removal (investment managers) - ----------------------------------------------------------------------------------------------------------------------------------- John Winthrop (68) One Trustee since Serves until President, John Winthrop & Co., Inc. None North Adgers Wharf, September, 2000. successor trustee (private investment firm) Charleston, SC 29401 is elected or earlier retirement or removal - -----------------------------------------------------------------------------------------------------------------------------------
21 PIONEER EQUITY INCOME VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS HELD NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS BY THIS OFFICER Dorothy E. Bourassa Secretary Serves at the Secretary of PIM-USA; Senior Vice None (57) discretion of the President - Legal of Pioneer; and Board Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 - ----------------------------------------------------------------------------------------------------------------------------------- Christopher J. Kelley Assistant Serves at the Assistant Vice President and Senior None (40) Secretary discretion of the Counsel of Pioneer since July 2002; Board Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ----------------------------------------------------------------------------------------------------------------------------------- David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering None Secretary discretion of the Hale and Dorr LLP; Assistant Board Secretary of all Pioneer Funds since September 2003 - ----------------------------------------------------------------------------------------------------------------------------------- Vincent Nave (59) Treasurer Serves at the Vice President - Fund Accounting, None discretion of the Administration and Custody Services Board of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ----------------------------------------------------------------------------------------------------------------------------------- Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer since None Treasurer discretion of the 2004; Treasurer and Senior Vice Board President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ----------------------------------------------------------------------------------------------------------------------------------- Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None Treasurer discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ----------------------------------------------------------------------------------------------------------------------------------- Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None Treasurer discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - -----------------------------------------------------------------------------------------------------------------------------------
22 PIONEER EQUITY INCOME VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS HELD NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS BY THIS OFFICER Katharine Kim Sullivan Assistant Serves at the Fund Administration Manager - Fund None (31) Treasurer discretion of the Accounting, Administration and Board Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ----------------------------------------------------------------------------------------------------------------------------------- Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of Pioneer None Officer discretion of the (Director of Compliance and Senior Board Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - -----------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM,the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 23 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. 24 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. 25 [LOGO] PIONEER INVESTMENTS(R) [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST PIONEER GROWTH SHARES VCT PORTFOLIO -- CLASS II SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Pioneer Growth Shares VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 8 Notes to Financial Statements 12 Report of Independent Registered Public Accounting Firm 16 Trustees, Officers and Service Providers 17 PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT www.pioneerfunds.com. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT http://www.sec.gov. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] U.S. Common Stocks 87.9% Depositary Receipts for International Stocks 11.1% Temporary Cash Investment 1.0% SECTOR DISTRIBUTION (As a percentage of equity holdings) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Information Technology 22.9% Health Care 21.2% Consumer Staples 13.4% Financials 10.9% Industrials 10.8% Consumer Discretionary 10.7% Materials 4.5% Telecommunication Services 4.1% Energy 1.5% FIVE LARGEST HOLDINGS (As a percentage of equity holdings) 1. Microsoft Corp. 4.97% 2. Pfizer, Inc. 4.05 3. American International Group, Inc. 3.57 4. Sandisk Corp. 3.47 5. Amgen, Inc. 2.99 The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- PRICES AND DISTRIBUTIONS 12/31/04 12/31/03 Net Asset Value per Share $ 12.87 $ 12.10 DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ -- $ -- $ -- - -------------------------------------------------------------------------------- PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in PIONEER GROWTH SHARES VCT PORTFOLIO at net asset value, compared to that of the Russell 1000 Growth Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Pioneer Growth Shares VCT Portfolio* S&P 500 Russell 1000 Index 10/97 10000 10000 10000 10222 10643 10646 12/98 13521 13686 13522 14539 16565 16351 12/00 13539 15060 15079 10934 13275 13202 12/02 7099 10342 10343 8855 13306 13436 12/04 9419 14747 14966 The Russell 1000 Growth Index measures the performance of large-cap U.S. growth stocks. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004) - -------------------------------------------------------------------------------- NET ASSET VALUE - -------------------------------------------------------------------------------- Life-of-Class -0.83% (10/31/97) 5 Years -8.32% 1 Year 6.36% All total returns shown assume reinvestment of distributions at net asset value. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. CALL 800-688-9915 OR VISIT www.pioneerfunds.com FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS.Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Please refer to variable product's annual report for performance that reflects the deduction of the variable products fees and charges. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER GROWTH SHARES VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,077.66 $ 1,076.08 Expenses Paid During Period* $ 5.30 $ 6.95 * Expenses are equal to the Portfolio's annualized expense ratio of 1.01% and 1.33% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER GROWTH SHARES VCT PORTFOLIO Based on a hypothetical 5% return per year before expenses, reflecting the period from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,020.31 $ 1,018.85 Expenses Paid During Period* $ 5.15 $ 6.76 * Expenses are equal to the Portfolio's annualized expense ratio of 1.01% and 1.33% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- A WORD ABOUT RISK: CALL 800-688-9915 OR VISIT www.pioneerfunds.com FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PER FORMANCE DATA QUOTED. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE RETURNS FOR THE PORTFOLIO DO NOT REFLECT THE DEDUCTION OF EXPENSES ASSOCIATED WITH VARIABLE PRODUCTS, SUCH AS MORTALITY AND EXPENSE RISK CHARGES, SEPARATE ACCOUNT CHARGES, AND SALES CHARGES. THESE EXPENSES WOULD REDUCE THE OVERALL RETURNS SHOWN. PERFORMANCE RESULTS REFLECT ANY APPLICABLE EXPENSE WAIVERS IN EFFECT DURING THE PERIODS SHOWN. WITHOUT SUCH WAIVERS PERFORMANCE WOULD BE LOWER. WAIVERS MAY NOT BE IN EFFECT FOR ALL PORTFOLIOS. CERTAIN FEE WAIVERS ARE CONTRACTUAL THROUGH A SPECIFIED PERIOD. OTHERWISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION. Helped by a late-year rally, equities produced returns consistent with long-term historical averages during 2004, but large-cap growth stocks tended to underperform large-cap value stocks, as well as small- and mid-cap issues. In the following interview, Christopher Galizio discusses the factors that affected the performance of Pioneer Growth Shares VCT Portfolio during 2004. Mr. Galizio is responsible for day-to-day investment management of the Portfolio. Q: HOW DID THE PORTFOLIO PERFORM DURING 2004? A: For the 12-month period ended December 31, 2004, the Portfolio's Class II shares had a total return of 6.36%. During the same 12-month period, the Russell 1000 Growth Index, a common benchmark for large-company growth stocks, returned 6.30%. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE YEAR? A: While the stock market produced good returns, large-cap growth stocks tended to underperform the market as well as other types of stocks, especially value stocks. The reason was predominately because the best-performing sectors tended to have more value stocks. The low-interest-rate environment, for example, helped the performance of financial service companies, while fast-rising commodity prices helped lift the valuations of companies in the energy and materials sectors. Similarly, the economic expansion aided the industrial sector, which enjoyed increasing sales and improved profitability. All these sectors tend to have greater concentrations of value companies than growth companies. At the same time, we saw underperformance by two sectors with high concentrations of growth companies - health care and information technology. In health care, the large pharmaceutical companies in particular underperformed both because some successful products were losing patent protection and because other products became embroiled in questions about possible harmful side effects. The most notable products affected by these side-effect questions were Pfizer's two Cox-2 pain inhibitors, Celebrex and Bextra, both of which suffered declines in sales, and Merck's Cox-2 inhibitor Vioxx, which was withdrawn from the market. In the case of information technology, slowing demand and a build-up of inventories undermined the earnings growth of several companies, especially in the semiconductor industry. Q: WHAT WERE YOUR PRINCIPAL STRATEGIES AND HOW DID THEY AFFECT PERFORMANCE? A: We had repositioned the Portfolio shortly before the mid-point of the year, reducing holdings in both health care and information technology. The adjusted portfolio performed strongly during the final six months of 2004. We liquidated our position in Pfizer before the questions arose about Celebrex, and our lack of exposure to that controversy was a big help to Portfolio performance. At the same time, we retained a holding in Merck and even added to it after its stock price fell to a very attractive level. We also reduced investments in information technology, substantially lowering our holdings of semiconductor companies, and we de-emphasized consumer staples, which we believed had risen to high valuations. As we did so, we added to our investments in basic materials, financial services and telecommunications services. In basic materials, we increased our investments in copper companies, notably Freeport-McMoRan and Phelps Dodge, both of which faced very favorable demand-supply outlooks for the foreseeable future. In financial services, we added to investments in major companies such as Citigroup, Bank of America, credit-card issuer MBNA, and the government-sponsored mortgage organization, Freddie Mac. We reduced our exposure to the insurance industry, eliminating AIG before its stock plummeted amid questions about financial arrangements with brokers. After AIG's stock price collapsed, we reinvested in the company to take advantage of its attractive valuation. Q: WHAT WERE SOME OF THE INVESTMENTS THAT MOST INFLUENCED PERFORMANCE? A: The two decisions that most helped performance were the liquidation of the position in Pfizer and the overweighting of Phelps Dodge. Macrovision, a software company that we overweighted in the second half of the year, rose by 30% after we purchased it. Macrovision is a leader in producing an anti-piracy technology designed to protect material on both DVDs and CDs from unauthorized copying. National retailer Target was another excellent performer, as its same-store sales improved faster than rival Wal-Mart. We sold our position in Target after its stock had risen to a high valuation. Altria, the former Philip Morris, also supported performance when it rallied following a favorable court ruling in a tobacco liability case. U.K.-based wireless phone company Vodafone was another stock that appreciated in anticipation of the success of its investments in the next generation of wireless technology. Nextel, which later received an acquisition offer, and France Telecom were two other wireless investments that performed very well In health care, a leading performer was medical equipment company Guidant, which received a favorable takeover proposal from Johnson & Johnson. Several investments proved disappointing. Corinthian Colleges, which operates several campus-based programs, ran into trouble when its enrollment growth failed to meet expectations. When its price began to recover, we liquidated our investment. Lexar, which manufactures flash memory chips for cell phones, declined when it was forced to pay much higher prices for the flash technology that is part of its chip. Other technology holdings that detracted from results included UTStarcomm, which we have sold, and Samsung Electronics, which we have retained because we like the company's long-term prospects. Relative to the market, performance was held back because we did not own any shares of several companies that performed very well, including Johnson & Johnson, GE, United Health Group, eBay and Qualcomm. Q: WHAT IS YOUR INVESTMENT OUTLOOK? A: We base our investment decisions on our analysis of the fundamental strengths and prospects of individual companies in relation to their stock prices, rather than on any top-down sector decisions based on macroeconomic analysis. At the start of the new year, we continued to have a favorable opinion about many materials companies and believed the long-term outlook for copper companies was particularly favorable. We also had overweight positions in industrials, financial services and telecommunications services sector. Within those sectors, the companies with the largest weightings were metals, insurance and wireless communications providers. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. 4 PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - -------------------------------------------------------------------------------- SHARES VALUE COMMON STOCKS - 99.5% ENERGY - 1.5% INTEGRATED OIL & GAS - 0.9% 6,100 Occidental Petroleum Corp. $ 355,996 ------------ OIL & GAS REFINING MARKETING & TRANSPORTATION - 0.6% 9,700 Repsol SA (A.D.R.) $ 253,170 ------------ TOTAL ENERGY $ 609,166 ------------ MATERIALS - 4.4% DIVERSIFIED METALS & MINING - 4.4% 27,100 Freeport-McMoRan Copper & Gold, Inc. (Class B) $ 1,036,033 7,300 Phelps Dodge Corp. 722,116 ------------ $ 1,758,149 ------------ TOTAL MATERIALS $ 1,758,149 ------------ CAPITAL GOODS - 9.0% INDUSTRIAL CONGLOMERATES - 6.6% 12,200 American Standard Co., Inc.* $ 504,104 5,700 Illinois Tool Works, Inc. 528,276 6,400 Johnson Controls, Inc. 406,016 20,200 Tyco International, Ltd. 721,948 4,700 United Technologies Corp. 485,745 ------------ $ 2,646,089 ------------ INDUSTRIAL MACHINERY - 2.4% 12,800 Deere & Co. $ 952,320 ------------ TOTAL CAPITAL GOODS $ 3,598,409 ------------ COMMERCIAL SERVICES & SUPPLIES - 1.8% DIVERSIFIED COMMERCIAL SERVICES - 0.8% 1,300 Apollo Group, Inc.* $ 104,923 3,300 The Dun & Bradstreet Corp.* 196,845 ------------ $ 301,768 ------------ OFFICE SERVICES & SUPPLIES - 1.0% 7,700 Canon, Inc. (A.D.R.) $ 417,802 ------------ TOTAL COMMERCIAL SERVICES & SUPPLIES $ 719,570 ------------ CONSUMER DURABLES & APPAREL - 1.4% APPAREL, ACCESSORIES & LUXURY GOODS - 1.4% 22,500 TJX Companies, Inc. $ 565,425 ------------ TOTAL CONSUMER DURABLES & APPAREL $ 565,425 ------------ HOTELS, RESTAURANTS & LEISURE - 1.9% RESTAURANTS - 1.9% 9,400 Ruby Tuesday, Inc. $ 245,152 10,600 Tricon Global Restaurants, Inc. 500,108 ------------ $ 745,260 ------------ TOTAL HOTELS, RESTAURANTS & LEISURE $ 745,260 ------------ MEDIA - 3.7% BROADCASTING & CABLE TELEVISION - 1.8% 65,800 Liberty Media Corp.* $ 722,484 ------------ MOVIES & ENTERTAINMENT - 1.9% 27,000 The Walt Disney Co. $ 750,600 ------------ TOTAL MEDIA $ 1,473,084 ------------ RETAILING - 3.8% APPAREL RETAIL - 0.7% 6,800 Liz Claiborne, Inc. $ 287,028 ------------ COMPUTER & ELECTRONICS RETAIL - 1.1% 7,500 Best Buy Co., Inc. $ 445,650 ------------ HOME IMPROVEMENT RETAIL - 2.0% 13,500 Lowe's Co., Inc. $ 777,465 ------------ TOTAL RETAILING $ 1,510,143 ------------ FOOD & DRUG RETAILING - 2.4% FOOD DISTRIBUTORS - 2.4% 16,300 Cardinal Health, Inc. $ 947,845 ------------ TOTAL FOOD & DRUG RETAILING $ 947,845 ------------ FOOD, BEVERAGE & TOBACCO - 6.7% SOFT DRINKS - 4.2% 9,500 Fomento Economico Mexicano SA de C.V. $ 499,795 22,800 PepsiCo, Inc. 1,190,160 ------------ $ 1,689,955 ------------ TOBACCO - 2.5% 16,200 Altria Group, Inc. $ 989,820 ------------ TOTAL FOOD, BEVERAGE & TOBACCO $ 2,679,775 ------------ HOUSEHOLD & PERSONAL PRODUCTS - 4.3% HOUSEHOLD PRODUCTS - 2.5% 18,300 Procter & Gamble Co. $ 1,007,964 ------------ PERSONAL PRODUCTS - 1.8% 18,000 Avon Products, Inc. $ 696,600 ------------ TOTAL HOUSEHOLD & PERSONAL PRODUCTS $ 1,704,564 ------------ The accompanying notes are an integral part of these financial statements. 5 PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- SHARES VALUE HEALTH CARE EQUIPMENT & SERVICES - 6.8% HEALTH CARE DISTRIBUTORS - 1.9% 29,800 Bristol-Myers Squibb Co. $ 763,476 ------------ HEALTH CARE EQUIPMENT - 3.1% 11,800 AstraZeneca Plc (A.D.R.) $ 429,402 11,600 Guidant Corp. 836,360 ------------ $ 1,265,762 ------------ HEALTH CARE FACILITIES - 0.8% 7,900 HCA, Inc. $ 315,684 ------------ HEALTH CARE SUPPLIES - 1.0% 7,500 Smith & Nephew Plc (A.D.R.) $ 388,200 ------------ TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 2,733,122 ------------ PHARMACEUTICALS & BIOTECHNOLOGY - 14.1% BIOTECHNOLOGY - 5.0% 18,558 Amgen, Inc.* $ 1,190,496 14,000 Gilead Sciences, Inc.* 489,860 6,800 ImClone Systems, Inc.* 313,344 ------------ $ 1,993,700 ------------ PHARMACEUTICALS - 9.1% 17,900 IVAX Corp.* $ 283,178 32,200 Merck & Co., Inc. 1,034,908 59,900 Pfizer, Inc. 1,610,711 35,100 Schering-Plough Corp. 732,888 ------------ $ 3,661,685 ------------ TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 5,655,385 ------------ BANKS - 1.3% DIVERSIFIED BANKS - 1.3% 5,100 Bank of America Corp. $ 239,649 5,100 Wachovia Corp. 268,260 ------------ $ 507,909 ------------ TOTAL BANKS $ 507,909 ------------ DIVERSIFIED FINANCIALS - 3.7% CONSUMER FINANCE - 1.2% 16,700 MBNA Corp. $ 470,773 ------------ OTHER DIVERSIFIED FINANCE SERVICES - 2.5% 21,100 Citigroup, Inc. $ 1,016,598 ------------ TOTAL DIVERSIFIED FINANCIALS $ 1,487,371 ------------ INSURANCE - 5.9% LIFE & Health Insurance - 1.5% 14,800 Aflac, Inc. $ 589,632 ------------ MULTI-LINE INSURANCE - 3.5% 21,600 American International Group, Inc. $ 1,418,472 ------------ PROPERTY & CASUALTY INSURANCE - 0.9% 7,900 ACE, Ltd. $ 337,725 ------------ TOTAL INSURANCE $ 2,345,829 ------------ SOFTWARE & SERVICES - 9.1% APPLICATION SOFTWARE - 5.9% 74,000 Microsoft Corp. $ 1,976,540 15,500 Macrovision Corp.* 398,660 ------------ $ 2,375,200 ------------ HOME ENTERTAINMENT SOFTWARE - 1.2% 13,400 Take-Two Interactive Software, Inc.* (a) $ 466,186 ------------ IT CONSULTING & OTHER SERVICES - 2.0% 29,900 Accenture, Ltd.* $ 807,300 ------------ TOTAL SOFTWARE & SERVICES $ 3,648,686 ------------ TECHNOLOGY HARDWARE & EQUIPMENT - 12.1% COMMUNICATIONS EQUIPMENT - 1.6% 37,400 Avaya, Inc.* $ 643,280 ------------ COMPUTER HARDWARE - 4.1% 5,700 Diebold, Inc. $ 317,661 9,300 Dell, Inc.* 391,902 45,200 Hewlett-Packard Co. 947,844 ------------ $ 1,657,407 ------------ COMPUTER STORAGE & PERIPHERALS - 3.5% 55,300 Sandisk Corp.* $ 1,380,841 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.9% 5,300 Samsung Electronics $ 1,160,700 ------------ TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 4,842,228 ------------ SEMICONDUCTORS - 3.1% 42,900 Taiwan Semiconductor Manufacturing Co. (A.D.R.) $ 364,221 36,000 Texas Instruments, Inc. 886,320 ------------ $ 1,250,541 ------------ TOTAL SEMICONDUCTORS $ 1,250,541 ------------ TELECOMMUNICATION SERVICES - 2.5% WIRELESS TELECOMMUNICATION SERVICES - 2.5% 36,400 Vodafone Group Plc (A.D.R.) $ 996,632 ------------ TOTAL TELECOMMUNICATION SERVICES $ 996,632 ------------ TOTAL COMMON STOCKS (Cost $36,802,330) $ 39,779,093 ------------ 6 The accompanying notes are an integral part of these financial statements. PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SHARES VALUE TEMPORARY CASH INVESTMENT - 1.0% SECURITY LENDING COLLATERAL - 1.0% 413,820 Securities Lending Investment Fund, 2.18% $ 413,820 ------------ TOTAL TEMPORARY CASH INVESTMENT (Cost $413,820) $ 413,820 ------------ TOTAL INVESTMENTS IN SECURITIES - 100.4% (Cost $37,216,150) $ 40,192,913 ------------ OTHER ASSETS AND LIABILITIES - (0.4)% $ (143,560) ------------ TOTAL NET ASSETS - 100.0% $ 40,049,353 ============ (A.D.R.) American Depositary Receipt * Non-income producing security (a) At December 31, 2004, the following securities were out on loan: SHARES SECURITY MARKET VALUE 11,495 Take-Two Interactive Software, Inc.* $ 399,911 --------- TOTAL $ 399,911 ========= The accompanying notes are an integral part of these financial statements. 7 PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 5/1/00 TO CLASS II (a) 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 12.10 $ 9.70 $ 14.94 $ 18.50 $ 21.68 ------- ------- -------- -------- ------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.06 $ (0.02) $ (0.13) $ (0.05) $ (0.03) Net realized and unrealized gain (loss) on investments 0.71 2.42 (5.11) (3.51) (1.23) ------- ------- -------- -------- ------- Net increase (decrease) from investment operations $ 0.77 $ 2.40 $ (5.24) $ (3.56) $ (1.26) Distributions to shareowners: Net investment income -- -- -- -- -- Net realized gain -- -- -- -- (1.92) ------- ------- -------- -------- ------- Net increase (decrease) in net asset value $ 0.77 $ 2.40 $ (5.24) $ (3.56) $ (3.18) ------- ------- -------- -------- ------- Net asset value, end of period $ 12.87 $ 12.10 $ 9.70 $ 14.94 $ 18.50 ======= ======= ======== ======== ======= Total return* 6.36% 24.74% (35.07)% (19.24)% (6.36)% Ratio of net expenses to average net assets+ 1.25% 1.44% 1.63% 1.58% 1.03% Ratio of net investment income (loss) to average net assets+ 0.74% (0.40)% (0.64)% (0.61)% (0.33)% Portfolio turnover rate 206% 58% 86% 111% 95% Net assets, end of period (in thousands) $ 7,749 $ 3,049 $ 263 $ 658 $ 203 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.26% 1.44% 1.63% 1.58% 0.73% Net investment income (loss) 0.73% (0.40)% (0.64)% (0.61)% (0.11)%
(a) Class 2 shares were first publicly offered on May 1, 2000. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period. + Ratios with no reduction for fees paid indirectly. 8 The accompanying notes are an integral part of these financial statements. PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - --------------------------------------------------------------------------------
ASSETS: Investment in securities, at value (including securities loaned of $399,911) (Cost $37,216,150) $ 40,192,913 Cash 400,152 Receivables -- Investment securities sold 106,827 Fund shares sold 368 Dividends, interest and foreign taxes withheld 72,271 Other 3,207 ------------- Total assets $ 40,775,738 ------------- LIABILITIES: Payables -- Investment securities purchased $ 204,180 Fund shares repurchased 20,701 Upon return of securities loaned 413,820 Due to affiliates 27,526 Accrued expenses 60,198 ------------- Total liabilities $ 726,425 ------------- NET ASSETS: Paid-in capital $ 76,637,190 Undistributed net investment income (loss) 271,723 Accumulated undistributed net realized gain (loss) (39,836,323) Net unrealized gain (loss) on: Investments 2,976,763 ------------- Total net assets $ 40,049,353 ------------- NET ASSET VALUE PER SHARE: CLASS I: No par value (unlimited number of shares authorized) Net assets $ 32,299,874 Shares outstanding 2,477,134 ------------- Net asset value per share $ 13.04 CLASS II: No par value (unlimited number of shares authorized) Net assets $ 7,749,479 Shares outstanding 601,971 ------------- Net asset value per share $ 12.87
The accompanying notes are an integral part of these financial statements. 9 PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - --------------------------------------------------------------------------------
YEAR ENDED 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $4,478) $ 644,743 Interest 6,132 Income on securities loaned, net 1,712 ----------- Total investment income $ 652,587 ----------- EXPENSES: Management fees $ 265,832 Transfer agent fees and expenses 3,020 Distribution fees (Class II) 13,265 Administrative reimbursements 18,500 Custodian fees 30,320 Professional fees 34,166 Printing expense 14,534 Miscellaneous 2,307 ----------- Total expenses $ 381,944 Less fees paid indirectly (1,080) ----------- Net expenses $ 380,864 ----------- Net investment income (loss) $ 271,723 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 1,562,700 ----------- $ 1,562,700 ----------- Change in net unrealized gain or (loss) from: Investments (the change in reserve for repatriation taxes of $86,981) $ 618,844 ----------- $ 618,844 ----------- Net gain (loss) on investments, futures contracts and foreign currency transactions $ 2,181,544 =========== Net increase (decrease) in net assets resulting from operations $ 2,453,267 ===========
10 The accompanying notes are an integral part of these financial statements. PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR YEAR ENDED ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net Investment Income (Loss) $ 271,723 $ (20,270) Net realized gain (loss) on investments 1,562,700 (3,697,565) Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions 618,844 11,680,101 ------------ ------------ Net increase (decrease) in net assets resulting from operations $ 2,453,267 $ 7,962,266 ------------ ------------ DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ -- $ (4,477) ------------ ------------ Total distributions to shareowners $ -- $ (4,477) ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 5,638,676 $ 4,104,812 Reinvestment of distributions -- 4,477 Cost of shares repurchased (6,840,932) (8,277,302) ------------ ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ (1,202,256) $ (4,168,013) ------------ ------------ Net increase (decrease) in net assets $ 1,251,011 $ 3,789,776 ------------ ------------ NET ASSETS: Beginning of year $ 38,798,342 $ 35,008,566 ------------ ------------ End of year $ 40,049,353 $ 38,798,342 ------------ ------------ Undistributed net investment income (loss), end of year $ 271,723 $ -- ============ ============
The accompanying notes are an integral part of these financial statements. 11 PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Growth Shares VCT Portfolio (the Portfolio) a Portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate diversified portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio(Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio(High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of Growth Shares Portfolio is to seek capital appreciation. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in the preparation of its financial statements, which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolio are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 12 PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. B. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. Capital loss carryforwards are available to offset future realized capital gains. At December 31, Growth Shares VCT Portfolio had a capital loss carryforward of $38,789,169, of which the amounts will expire between 2008 and 2011 if not utilized: $2,404,543 in 2008, $9,820,202 in $19,245,183 in 2010 and $7,319,241 in 2011. The portfolio elected to defer $389,332 in currency losses recognized between November 1, 2004 and December 31, 2004 to its fiscal year ending December 31, 2005. The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004 and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003 ------------- -------- DISTRIBUTIONS PAID FROM: Ordinary Income $ -- $ 4,477 Long-Term capital gain -- -- ------------- ------- $ -- $ 4,477 Return of Capital -- -- ------------- ------- Total distributions $ -- $ 4,477 ============= ======= DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ 271,723 Undistributed long-term gain/(capital loss carryforward) (38,789,169) Unrealized appreciation (depreciation) 2,318,941 Post-October loss deferred (389,332) ------------- ------- Total $ (36,587,837) ============= =======
The difference between book-basis and tax-basis unrealized appreciation is primarily attributable to the tax deferral of losses on wash sales. C. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and the distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of the adjusted net assets at the beginning of the day. Distributions paid by the Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and 13 PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- Class II shares can bear different transfer agent and distribution fees. D. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. E. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the portfolio. Management fees are calculated daily at the following annual rate of 0.70% of the Portfolio's average daily net assets. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $25,622 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $271 in transfer agent fees payable to PIMSS at December 31, 2004 4. DISTRIBUTION PLANS The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares. Included in due to affiliates is $1,633 payable to PFD at December 31, 2004. 5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------ ------------ ------------ -------------- Growth Shares Portfolio $ 37,873,972 $ 3,044,465 $ (725,524) $ 2,318,941 ============ =========== ========== ===========
14 PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- 6. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $77,027,440 and $77,443,920, respectively. 7. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
GROWTH SHARES PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT ---------- ------------ ---------- ----------- CLASS II: Shares sold 66,360 $ 806,587 91,892 $ 1,012,931 Reinvestment of distributions -- -- 403 4,477 Shares repurchased (515,053) (6,176,527) (731,375) (7,757,809) -------- ------------ -------- ------------ Net increase (448,693) $ (5,369,940) (639,080) $ (6,740,401) -------- ------------ -------- ------------ CLASS II: Shares sold 406,516 $ 4,832,089 271,796 $ 3,091,881 Reinvestment of distributions -- -- -- -- Shares repurchased (56,565) (664,405) 46,885) (519,493) -------- ------------ -------- ------------ Net increase 349,951 $ 4,167,684 224,911 $ 2,572,388 ======== ============ ======== ============
15 PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS II SHAREOWNERS OF PIONEER GROWTH SHARES VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Growth Shares VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the two years in the period ended December 31, 2001 were audited by other auditors who have ceased operations and whose report, dated February 8, 2002, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Growth Shares VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 16 PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - -------------------------------------------------------------------------------- INVESTMENT ADVISER TRUSTEES AND OFFICERS Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the Trust's operations. The Trust's Trustees and officers are listed below, together CUSTODIAN with their principal occupations during the past five years. Trustees Brown Brothers Harriman & Co. who are interested persons of the Portfolio within the meaning of the Investment Company Act of 1940 are referred to as Interested Trustees. Trustees who are not interested persons of the Trust are referred to as INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Independent Trustees. Each of the Trustees serves as a trustee of each Ernst & Young LLP of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Pioneer Funds"). The address for all Interested Pioneer Funds PRINCIPAL UNDERWRITER Distributor, Inc. Trustees and all officers of the Portfolio is 60 State Pioneer Funds Distributor, Inc. Street, Boston, Massachusetts 02109. The Trust's statement of additional information provides more detailed LEGAL COUNSEL information regarding the Trust's Trustees and is available upon request, Wilmer Cutler Pickering Hale and Dorr LLP without charge, by calling 1-800-225-6292. Proxy Voting Policies and Procedures of the Trust are available without SHAREOWNER SERVICES AND TRANSFER charge, upon Agent request, by calling our toll free number Pioneer Investment Management Shareholder Services, Inc. (1-800-225-6292). This information is also available online at pioneerfunds.com.
- -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE John F. Cogan, Jr. (78)* Chairman of the Serves until successor Trustee and President Serves Director of Harbor President earlier retirement or until retirement or removal; Global Company, Ltd. removal Deputy Chairman and a Director of Pioneer Global Asset Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). * Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ---------------------------------------------------------------------------------------------------------------------------------- Osbert M. Hood (52)** Trustee and Serves until successor President and Chief Executive None Executive Vice trustee is elected or Officer, PIM-USA since May President earlier retirement or 2003 (Director since January removal 2001); President and Director of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. ** Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ----------------------------------------------------------------------------------------------------------------------------------
17 PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE David R. Bock **(61) Trustee since Serves until a Senior Vice President and Chief Director of The 3050 K. Street NW, 2005. successor trustee is Financial Officer, I-trax, Inc. Enterprise Washington, DC 20007 elected or earlier (publicly traded health care Social Investment retirement or removal. services company) (2001-- Company (privately present); Managing Partner, -held affordable Federal City Capital Advisors housing finance (boutique merchant bank)(1995 company); Director of -2000; 2002 to 2004); Executive New York Mortgage Vice President and Chief Trust (publicly Financial Officer, Pedestal traded mortgage Inc. (internet-based mortgage REIT) trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ---------------------------------------------------------------------------------------------------------------------------------- Mary K. Bush (56) Trustee since Serves until successor President, Bush International Director of Brady 3509 Woodbine Street, 2000. trustee is elected (international financial Corporation Chevy Chase, MD 20815 or earlier retirement advisory firm) (industrial or removal identification and material products specialty coated manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. tobacco) - ---------------------------------------------------------------------------------------------------------------------------------- Margaret B.W. Graham (57) Trustee since Serves until successor Founding Director, The Winthrop None 1001 Sherbrooke Street 2000. trustee is elected or Group, Inc. (consulting firm); West, Montreal, Quebec, earlier retirement Professor of Management, Faculty Canada H3A 1G5 or removal of Management, McGill University - ---------------------------------------------------------------------------------------------------------------------------------- Marguerite A. Piret (56) Trustee since Serves until successor President and Chief Executive Director of New One Boston Place, 1995. trustee is elected or Officer, Newbury, Piret & America High Income 28th Floor, earlier retirement Company, Inc. (investment Fund,Inc. (closed-end Boston, MA 02108 or removal banking firm) - ---------------------------------------------------------------------------------------------------------------------------------- Stephen K. West (76) Trustee since Serves until successor Senior Counsel, Sullivan & Director, The Swiss 125 Broad Street, 1995. trusteeis elected or Cromwell (law firm) Helvetia Fund, Inc. New York, NY 10004 earlier retirement (closed-end or removal investment company) and AMVESCAP PLC (investment managers) - ---------------------------------------------------------------------------------------------------------------------------------- John Winthrop (68) Trustee since Serves until successor President, John Winthrop & Co., None One North Adgers Wharf, September, 2000. trustee is elected or Inc. (private investment firm) Charleston, SC 29401 or removal earlier retirement - ----------------------------------------------------------------------------------------------------------------------------------
18 PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior None discretion of the Vice President - Legal of Board Pioneer; and Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 - ---------------------------------------------------------------------------------------------------------------------------------- Christopher J. Kelley (40) Assistant Serves at the Assistant Vice President and None Secretary discretion of the Senior Counsel of Pioneer Board since July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ---------------------------------------------------------------------------------------------------------------------------------- David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering None Secretary discretion of the Hale and Dorr LLP; Assistant Board Secretary of all Pioneer Funds since September 2003 - ---------------------------------------------------------------------------------------------------------------------------------- Vincent Nave (59) Treasurer Serves at the Vice President - Fund None discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ---------------------------------------------------------------------------------------------------------------------------------- Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer None Treasurer discretion of the since 2004; Treasurer and Board Senior Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ---------------------------------------------------------------------------------------------------------------------------------- Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None Treasurer discretion of the Accounting, Administration Board and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ---------------------------------------------------------------------------------------------------------------------------------- Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None Treasurer discretion of the Accounting, Administration Board and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - ----------------------------------------------------------------------------------------------------------------------------------
19 PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE Katharine Kim Sullivan (31) Assistant Serves at the Fund Administration Manager - None Treasurer discretion Fund Accounting,Administration of the Board and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ---------------------------------------------------------------------------------------------------------------------------------- Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of None Officer discretion of the Pioneer (Director of Compliance Board and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - ----------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 20 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. 21 [LOGO] PIONEER Investments(R) [LOGO] PIONEER INVESTMENT(R) PIONEER VARIABLE CONTRACTS TRUST PIONEER HIGH YIELD VCT PORTFOLIO -- CLASS II SHARES ANNUAL REPORT DECEMBER 31 , 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Pioneer High Yield VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 11 Notes to Financial Statements 15 Report of Independent Registered Public Accounting Firm 20 Trustees, Officers and Service Providers 21 PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT www.pioneerfunds.com. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT http://www.sec.gov. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- PORTFOLIO DIVERSIFICATION (As a percentage of total investment in securities) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] U.S. Corporate Bonds 64.6% Convertible Corporate Bonds 30.3% Temporary Cash Investment 2.7% Convertible Preferred Stocks 2.4% MATURITY DISTRIBUTION (As a percentage of total investment in securities) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] 1-3 years 16.5% 3-4 years 15.0% 4-6 years 48.8% 6-8 years 11.2% 8+ years 8.5% FIVE LARGEST HOLDINGS (As a percentage of long-term holdings) 1. Mueller Industries, Inc. 6.0%, 11/1/14 3.97% 2. Corning, Inc., 5.9%, 3/15/14 3.42 3. CMS Energy Corp. 7.75%, 8/1/10 3.03 4. Bowater, Inc., 6.5%, 6/15/13 3.02 5. SCI Systems, Inc., 3.0%, 3/15/07 2.68 The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- PRICES AND DISTRIBUTIONS 12/31/04 12/31/03 Net Asset Value per Share $ 11.67 $ 11.45 DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ 0.5891 $ -- $ 0.047 - -------------------------------------------------------------------------------- PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in Pioneer High Yield VCT Portfolio at net asset value, compared to that of Merrill Lynch (ML) High Yield Master II Index and of the ML Index of Convertible Bonds (Speculative Quality). Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Pioneer High Yield ML High Yield ML Convertible Bonds VCT Portfolio Master II Index Speculative Quality Index May-00 10000 10000 10000 10608 9770 8424 12390 10207 7882 2-Dec 12090 10013 7744 16022 12830 10529 4-Dec 17265 14227 11861 + Index comparisons begin on 4/30/00. The ML High Yield Master II Index is a commonly accepted measure of the performance of high yield securities. Convertible Bonds (speculative quality) is a commonly accepted measure of the performance of speculative grade convertible bond securities. Index returns assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in any Index. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004) - -------------------------------------------------------------------------------- NET ASSET VALUE - -------------------------------------------------------------------------------- Life-of-Class (5/1/00) 11.92% 1 Year 7.76 All total returns shown assume reinvestment of distributions at net asset value. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Please refer to variable product's annual report for performance that reflects the deduction of the variable products fees and charges. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER HIGH YIELD VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,077.61 $ 1,076.31 Expenses Paid During Period* $ 4.11 $ 5.50 * Expenses are equal to the Portfolio's annualized expense ratio of 0.79% and 1.05% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER HIGH YIELD VCT PORTFOLIO Based on a hypothetical 5% return per year before expenses, reflecting the period from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,021.22 $ 1,019.91 Expenses Paid During Period* $ 4.00 $ 5.35 * Expenses are equal to the Portfolio's annualized expense ratio of 0.79% and 1.05% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- A WORD ABOUT RISK: INVESTMENTS IN HIGH YIELD OR LOWER-RATED SECURITIES ARE SUBJECT TO GREATER-THAN-AVERAGE RISK. WHEN INTEREST RATES RISE, THE PRICES OF FIXED-INCOME SECURITIES IN THE PORTFOLIO WILL GENERALLY FALL. CONVERSELY, WHEN INTEREST RATES FALL THE PRICES OF FIXED INCOME SECURITIES IN THE PORTFOLIO WILL GENERALLY RISE. WHEN CONCENTRATING ON ONE ISSUER, THE PORTFOLIO IS SENSITIVE TO CHANGES IN THE VALUE OF THESE SECURITIES.INVESTMENTS IN THE PORTFOLIO ARE SUBJECT TO POSSIBLE LOSS DUE TO THE FINANCIAL FAILURE OF UNDERLYING SECURITIES AND THEIR INABILITY TO MEET THEIR DEBT OBLIGATIONS. CALL 800-688-9915 OR VISIT www.pioneerfunds.com FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PER FORMANCE DATA QUOTED. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE RETURNS FOR THE PORTFOLIO DO NOT REFLECT THE DEDUCTION OF EXPENSES ASSOCIATED WITH VARIABLE PRODUCTS, SUCH AS MORTALITY AND EXPENSE RISK CHARGES, SEPARATE ACCOUNT CHARGES, AND SALES CHARGES. THESE EXPENSES WOULD REDUCE THE OVERALL RETURNS SHOWN. PERFORMANCE RESULTS REFLECT ANY APPLICABLE EXPENSE WAIVERS IN EFFECT DURING THE PERIODS SHOWN. WITHOUT SUCH WAIVERS PERFORMANCE WOULD BE LOWER. WAIVERS MAY NOT BE IN EFFECT FOR ALL PORTFOLIOS. CERTAIN FEE WAIVERS ARE CONTRACTUAL THROUGH A SPECIFIED PERIOD. OTHER WISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION. The high-yield market generated solid returns during the 12 months ended December 31, 2004. In the following interview, portfolio manager Margaret Patel describes the market backdrop and why the Portfolio underperformed its benchmark index. Q: HOW DID THE PORTFOLIO PERFORM? A: During the 12 months ended December 31, 2004, the Portfolio's Class II shares had a total return based on net asset value of 7.76%. By comparison, the Merrill Lynch High Yield Master II Index returned 10.87%. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: WHAT WAS THE ENVIRONMENT LIKE FOR THE HIGH-YIELD MARKET DURING 2004? A: All sectors of the high-yield market generally rallied, reflecting a pick-up in the economy. Defaults continued to decline steadily from their peak in 2002. Although short-term interest rates were on the rise - as the Federal Reserve Board began to implement a tightening policy - high-yield bonds continued to offer a substantial yield advantage over comparable-maturity Treasuries and cash equivalents. Furthermore, the supply of newly issued high-yield corporate bonds was not sufficient to meet the demand for higher-yielding securities. As a result, high-yield bond prices continued to rise. Q. WHY DID THE PORTFOLIO'S PERFORMANCE LAG THAT OF THE MERRILL LYNCH HIGH YIELD MASTER II INDEX? A. Because of its investments in convertible bonds. Convertibles underperformed conventional high-yield bonds because they tend to be more sensitive to the changes in short-term interest rates that we experienced than high-yield issues. In addition, the period was characterized by underlying equity-market volatility that was lower than historical averages, a factor that also typically leads to the underperformance of convertible securities. Overall, the lower credit tiers of the market performed best, at a time when we were moving the Portfolio's average credit quality higher. The Portfolio had minimal exposure to the distressed and lower-tier credits that led the market during the past 12 months, particularly in such sectors as telecommunications and media. Q: WHICH INVESTMENTS PROVED TO BE SOME OF THE TOP PERFORMERS DURING THE FISCAL YEAR? WHICH DISAPPOINTED? A: Tesoro Petroleum, a West Coast refiner, profited from tighter supply/demand conditions. Millennium Chemicals, benefited from its acquisition by Lyondell, as well as from a brighter outlook for basic chemicals. Several biotechnology holdings also fared well, including Cubist Pharmaceuticals, which offers a drug for soft-tissue infections; CV Therapeutics, which sells products to treat angina; and Human Genome, which advanced due to clinical successes and management's focus on reducing research and development expenditures. Disappointments included Intermet, an auto-parts manufacturer that defaulted on its debt due to raw materials pricing pressure.Two technology holdings also lagged, Maxtor, a data storage manufacturer, and Adaptec, which makes computer-networking products. Those securities fell in concert with the technology sector, which struggled through most of the year because of weaker-than-expected corporate technology spending. Q: WHAT IS YOUR OUTLOOK? A: We remain optimistic that the economy should continue to grow near its long-term historical average during the coming year. While the Fed is likely to continue to raise short-term rates, we expect any increases to be gradual. In addition, we anticipate that defaults should remain below long-term averages, providing solid support for high-yield bonds. Because the high-yield market has experienced such a run-up in the recent past, we believe that returns in 2005 will be driven more by interest income than by capital appreciation. We have been able to find the best value in the higher-quality tiers of the market. They should be better insulated if financial market volatility increases. Although convertible securities detracted from Portfolio performance, we believe that, over time, they offer an opportunity to participate in the future growth of the underlying stocks, making the asset class attractive to long-term-oriented investors. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. 4 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
S&P/MOODY'S RATINGS SHARES (UNAUDITED) VALUE CONVERTIBLE PREFERRED STOCKS - 2.5% MATERIALS - 2.5% CONSTRUCTION MATERIALS - 0.1% 1,750 B-/B1 TXI Capital Trust I, 5.5%, 6/30/28 $ 88,638 ------------- DIVERSIFIED METALS & MINING - 2.4% 3,000 B-/NR Freeport-McCorp., 5.5%, 12/31/49 (144A) $ 2,932,500 ------------- TOTAL MATERIALS $ 3,021,138 ------------- TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $3,077,338) $ 3,021,138 -------------
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) CONVERTIBLE CORPORATE BONDS - 32.0% MATERIALS - 5.4% COMMODITY CHEMICALS - 0.4% 200,000 B+/B1 Millenium Chemicals Inc., 4.0%, 11/15/23 (144A) $ 458,750 ------------- DIVERSIFIED METALS & MINING - 1.4% 500,000 B+/B1 Freeport McMoran Copper & Gold, Inc., 7.0%, 2/11/11 $ 750,000 500,000 B+/B1 Massey Energy Co., 4.75% 5/15/23 994,375 ------------- $ 1,744,375 ------------- GOLD - 0.9% 1,000,000 NR/NR Coeur D'Alene Mines Corp., 1.25%, 1/15/24 $ 865,000 250,000 BBB+/NR Placer Dome Inc., 2.75%, 10/15/23 306,563 ------------- $ 1,171,563 ------------- SPECIALTY CHEMICALS - 0.4% 800,000 BBB/Baa3 RPM International Inc., 1.389%, 5/13/33 $ 462,000 ------------- STEEL - 2.3% 3,000,000 B-/NR Graftech International, 1.625%, 1/15/24 (144A) $ 2,778,750 ------------- TOTAL MATERIALS $ 6,615,438 ------------- CAPITAL GOODS - 4.2% AEROSPACE & DEFENSE - 1.8% 1,725,000 B/B2 Alliant Technology Systems, 2.75%, 2/15/24 (144A) $ 1,826,344 400,000 NR/NR EDO Corp., 5.25%, 4/15/07 436,000 ------------- $ 2,262,344 ------------- CONSTRUCTION & ENGINEERING - 1.1% 875,000 NR/NR Quanta Services, Inc., 4.0%, 7/1/07 $ 831,250 500,000 B/NR Quanta Services, 4.5%, 10/1/23 545,000 ------------- $ 1,376,250 ------------- ELECTRICAL COMPONENT & EQUIPMENT - 1.0% 2,595,000 NR/B1 Roper Industries Inc., 1.4813%, 1/15/34 $ 1,229,381 ------------- INDUSTRIAL MACHINERY - 0.3% 300,000 BB-/NR Kaydon Corp., 4.0%, 5/23/23 $ 380,625 ------------- TOTAL CAPITAL GOODS $ 5,248,600 ------------- MEDIA - 1.9% ADVERTISING - 1.9% 1,800,000 BB+/Baa3 Interpublic Group Co., 4.5%, 3/15/23 $ 2,358,000 ------------- TOTAL MEDIA $ 2,358,000 -------------
The accompanying notes are an integral part of these financial statements. 5 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) VALUE RETAILING - 1.2% SPECIALTY STORES - 1.2% 1,500,000 B+/B3 Sonic Automotive, Inc., 5.25%, 5/7/09 $ 1,492,500 ------------- TOTAL RETAILING $ 1,492,500 ------------- HEALTH CARE EQUIPMENT & SERVICES - 0.7% HEALTH CARE EQUIPMENT - 0.7% 375,000 NR/NR Epix Medical, 3.0%, 6/15/24 (144A) $ 338,438 600,000 NR/NR Wilson Greatbatch Technology, 2.25%, 6/15/13 541,500 ------------- TOTAL HEALTH CARE EQUIPMENT & Services $ 879,938 ------------- PHARMACEUTICALS & BIOTECHNOLOGY - 5.7% BIOTECHNOLOGY - 0.9% 300,000 NR/NR Cubist Pharmaceuticals, 5.5%, 11/1/08 $ 283,875 850,000 NR/NR CV Therapeutics, 4.75%, 3/7/07 875,500 ------------- $ 1,159,375 ------------- PHARMACEUTICALS - 4.8% 2,615,000 NR/NR Ivax Corp., Conv, 1.875%, 12/15/24 (144A) $ 2,696,719 2,500,000 B/NR Valeant Pharmaceuticals 3.0%, 8/16/10 2,753,125 400,000 NR/NR Vertex Pharmaceuticals Inc., 5.75%, 2/15/11 (144A) 403,500 ------------- $ 5,853,344 ------------- TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 7,012,719 ------------- REAL ESTATE - 0.6% REAL ESTATE MANAGEMENT & DEVELOPMENT - 0.6% 500,000 CCC+/Caa1 LNR Property Corp., 5.5%, 3/1/23 $ 695,625 ------------- TOTAL REAL ESTATE $ 695,625 ------------- SOFTWARE & SERVICES - 0.9% APPLICATION SOFTWARE - 0.7% 200,000 NR/NR Mentor Graphics, 6.875%, 6/15/07 $ 210,250 500,000 NR/NR Serena Software, 1.5%, 12/15/23 586,250 ------------- $ 796,500 ------------- IT CONSULTING & OTHER SERVICES - 0.2% 400,000 NR/NR Safeguard Scientifics, 2.625%, 3/15/24 $ 294,500 ------------- TOTAL SOFTWARE & SERVICES $ 1,091,000 ------------- TECHNOLOGY HARDWARE & EQUIPMENT - 6.1% COMMUNICATIONS EQUIPMENT - 1.2% 1,500,000 B-/NR Adaptec Inc., 0.75%, 12/22/23 $ 1,428,750 ------------- COMPUTER STORAGE & PERIPHERALS - 0.6% 700,000 NR/B2 Maxtor Corp., 6.8%, 4/30/10 $ 713,125 ------------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.2% 300,000 B+/NR Flir Systems, Inc., 3.0%, 6/1/23 $ 487,500 1,000,000 NR/NR Veeco Instruments, 4.125%, 12/21/08 987,500 ------------- $ 1,475,000 ------------- ELECTRONIC MANUFACTURING SERVICES - 2.7% 3,500,000 B+/Ba3 SCI Systems, Inc., 3.0%, 3/15/07 $ 3,377,500 ------------- TECHNOLOGY DISTRIBUTORS - 0.4% 400,000 NR/R Bell Microproducts, Inc., 3.75%, 3/5/24 $ 456,500 ------------- Total Technology Hardware & Equipment $ 7,450,875 -------------
6 The accompanying notes are an integral part of these financial statements. PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) VALUE SEMICONDUCTORS - 5.2% SEMICONDUCTOR EQUIPMENT - 3.9% 700,000 B-/NR Advanced Energy Industries, Inc., 5.25%, 11/15/06 $ 675,500 200,000 NR/NR Axcelis Technologies, 4.25%, 1/15/07 198,500 700,000 NR/NR Brooks Automation, Inc., 4.75%, 6/1/08 681,624 500,000 B-/NR Cymer, Inc., 3.5%, 2/15/09 497,500 2,700,000 B-/NR FEI Co., 5.5%, 8/15/08 2,727,000 ------------- $ 4,780,124 ------------- SEMICONDUCTORS - 1.3% 1,300,000 CCC/NR Conexant Systems, Inc., 4.0%, 2/1/07 (a) $ 1,176,500 500,000 B/NR LSI Logic Corp., 4.0%, 5/15/10 469,375 ------------- $ 1,645,875 ------------- TOTAL SEMICONDUCTORS $ 6,425,999 ------------- TOTAL CONVERTIBLE CORPORATE BONDS (Cost $38,069,020) $ 39,270,694 ------------- CORPORATE BONDS - 68.1% ENERGY - 3.6% OIL & GAS EQUIPMENT AND SERVICES - 0.2% 200,000 BB-/Ba3 Grant Prideco Escrow, 9.0%, 12/15/09 $ 221,500 ------------- OIL & GAS REFINING MARKETING & TRANSPORTATION - 3.4% 300,000 B+/B1 Frontier Oil Corp., 6.625%, 10/1/11 (144A) $ 306,000 1,555,000 BB-/B2 Tesoro Petroleum Corp., 9.625%, 11/1/08 1,694,950 1,900,000 BB-/B2 Tesoro Petroleum Corp., 9.625%, 4/1/12 2,185,000 ------------- $ 4,185,950 ------------- TOTAL ENERGY $ 4,407,450 ------------- MATERIALS - 16.4% COMMODITY CHEMICALS - 4.7% 1,800,000 B+/B1 Arco Chemical Co., 9.8%, 2/1/20 $ 2,052,000 2,500,000 BB+/Ba2 Nova Chemicals Corp., 7.875%, 9/15/25 2,587,500 1,000,000 BB+/Ba2 Nova Chemicals Corp., 7.4%, 4/1/09 1,092,500 ------------- $ 5,732,000 ------------- DIVERSIFIED METALS & MINING - 1.1% 1,375,000 B+/B1 Freeport-McMoran Copper & Gold, 6.875%, 2/1/09 $ 1,366,406 ------------- METAL & GLASS CONTAINERS - 2.1% 1,500,000 B/B3 Crown Cork & Seal Co., Inc., 7.375%, 12/15/26 $ 1,410,000 1,000,000 B+/B1 Crown Holdings, 9.5%, 3/1/11 1,140,000 ------------- $ 2,550,000 ------------- PAPER PRODUCTS - 5.8% 2,250,000 BB-/Ba3 Abitibi-Consolidated, Inc., 8.55%, 8/1/10 $ 2,438,438 885,000 BB/Ba3 Bowater Canada Finance, 7.95%, 11/15/11 953,652 3,800,000 BB/Ba3 Bowater, Inc., 6.5%, 6/15/13 3,800,540 ------------- $ 7,192,630 ------------- SPECIALTY CHEMICALS - 2.7% 2,200,000 B+/B1 Millenium America, Inc., 7.625%, 11/15/26 $ 2,167,000 1,000,000 B+/B1 Millenium America, Inc., 9.25%, 6/15/08 1,137,500 ------------- $ 3,304,500 ------------- TOTAL MATERIALS $ 20,145,536 -------------
The accompanying notes are an integral part of these financial statements. 7 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) VALUE CAPITAL GOODS - 11.3% AEROSPACE & DEFENSE - 5.6% 2,500,000 B/B2 DRS Technologies, Inc., 6.875%, 11/1/13 $ 2,612,500 700,000 B/B2 DRS Technologies, Inc., 6.875%, 11/1/13 (144A) 731,500 1,525,000 B+/B1 Esterline Technology, 7.75%, 6/15/13 1,666,063 850,000 BB-/Ba3 L-3 Communications Corp., 5.875%, 1/15/15 (144A) 847,875 1,000,000 BB-/Ba3 L-3 Communications Corp., 6.125%, 1/15/14 1,030,000 ------------- $ 6,887,938 ------------- INDUSTRIAL MACHINERY - 5.7% 800,000 B/B3 JLG Industries, Inc., 8.375%, 6/15/12 $ 856,000 800,000 B+/B1 Manitowoc Co., Inc., 7.125%, 11/1/13 866,000 5,100,000 NR/NR Mueller Industries, Inc. 6.0%, 11/1/14 4,998,000 300,000 BB+/Ba3 SPX Corp., 7.5%, 1/1/13 325,500 ------------- $ 7,045,500 ------------- TOTAL CAPITAL GOODS $ 13,933,438 ------------- TRANSPORTATION - 0.4% AIR FREIGHT & COURIERS - 0.4% 500,000 BB-/B1 Petroleum Helicopters, 9.375%, 5/1/09 $ 547,500 ------------- TOTAL TRANSPORTATION $ 547,500 ------------- AUTOMOBILES & COMPONENTS - 0.2% TIRES & RUBBER - 0.2% 300,000 B-/B3 Goodyear Tire & Rubber, 7.857%, 8/15/11 (a) $ 304,500 ------------- TOTAL AUTOMOBILES & COMPONENTS $ 304,500 ------------- MEDIA - 1.8% ADVERTISING - 1.8% 2,000,000 BB+/Baa3 Interpublic Group, Inc., 7.25%, 8/15/11 $ 2,171,242 ------------- TOTAL MEDIA $ 2,171,242 ------------- RETAILING - 2.3% DEPARTMENT STORES - 0.8% 1,000,000 BB+/Ba2 J.C. Penney Co., Inc., 7.625%, 3/1/97 $ 1,065,000 ------------- SPECIALTY STORES - 1.5% 1,790,000 B/B3 Pep Boys-Manny Moe Jack, 7.5%, 12/15/14 $ 1,814,613 ------------- TOTAL RETAILING $ 2,879,613 ------------- HEALTH CARE EQUIPMENT & SERVICES - 1.9% HEALTH CARE FACILITIES - 0.4% 500,000 BB+/Ba2 HCA, Inc., 6.25%, 2/15/13 $ 504,384 ------------- HEALTH CARE SUPPLIES - 1.5% 1,700,000 B-/Caa1 Inverness Medical Innovation, 8.75%, 2/15/12 $ 1,776,500 ------------- TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 2,280,884 ------------- PHARMACEUTICALS & BIOTECHNOLOGY - 2.3% PHARMACEUTICALS - 2.3% 2,700,000 BB-/B1 Valeant Pharmaceuticals, 7.0%, 12/15/11 $ 2,808,000 ------------- TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 2,808,000 -------------
8 The accompanying notes are an integral part of these financial statements. PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) VALUE REAL ESTATE - 9.6% REAL ESTATE MANAGEMENT & DEVELOPMENT - 5.4% 2,635,000 BB-/Ba3 Forest City Enterprises, 7.625%, 6/1/15 $ 2,793,100 2,300,000 CCC+/Caa1 LNR Property Co., 7.25%, 10/15/13 2,590,375 1,100,000 CCC+/Caa1 LNR Property Co., 7.625%, 7/15/13 1,248,500 ------------- $ 6,631,975 ------------- REAL ESTATE INVESTMENT TRUSTS - 4.2% 500,000 B+/B3 BF Saul Real Estate Investment Trust, 7.5%, 3/1/14 $ 515,000 2,300,000 B/B1 Crescent Real Estate, 9.25%, 4/15/09 2,518,500 2,000,000 CCC+/B2 Meristar Hospitality Corp., 9.125%, 1/15/11 2,160,000 ------------- $ 5,193,500 ------------- TOTAL REAL ESTATE $ 11,825,475 ------------- TECHNOLOGY HARDWARE & EQUIPMENT - 9.1% COMMUNICATIONS EQUIPMENT - 4.1% 4,300,000 BB+/Ba2 Corning, Inc., 5.9%, 3/15/14 $ 4,309,536 700,000 BB+/Ba2 Corning, Inc., 6.2%, 3/15/16 701,770 ------------- $ 5,011,306 ------------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.7% 1,835,000 B/B2 General Cable Corp., 9.5%, 11/15/10 $ 2,073,550 ------------- TECHNOLOGY DISTRIBUTORS - 3.3% 2,550,000 BBB-/Baa3 Arrow Electronic, Inc., 6.875%, 6/1/18 $ 2,724,145 1,200,000 BBB-/Baa3 Arrow Electronic, Inc., 6.875%, 7/1/13 1,317,504 ------------- $ 4,041,649 ------------- TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 11,126,505 ------------- UTILITIES - 9.2% ELECTRIC UTILITIES - 6.1% 3,000,000 B-/B3 Allegheny Energy Supply, 7.8%, 3/15/11 (a) $ 3,270,000 1,750,000 B-/B3 Allegheny Energy Supply, 8.25%, 4/15/12 (144A) 1,955,624 1,000,000 B+/B1 CMS Energy Corp., 7.5%, 1/15/09 1,065,000 1,000,000 B+/B1 CMS Energy Corp., 8.5%, 4/15/11 1,136,250 ------------- $ 7,426,874 ------------- MULTI-UTILITIES & UNREGULATED POWER - 3.1% 3,490,000 B+/B1 CMS Energy Corp., 7.75%, 8/1/10 $ 3,817,187 ------------- TOTAL UTILITIES $ 11,244,061 ------------- TOTAL CORPORATE BONDS (Cost $79,489,329) $ 83,674,204 -------------
The accompanying notes are an integral part of these financial statements. 9 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - --------------------------------------------------------------------------------
S&P/MOODY'S RATINGS SHARES (UNAUDITED) VALUE TEMPORARY CASH INVESTMENT - 2.9% SECURITY LENDING COLLATERAL - 2.9% 3,541,345 Securities Lending Investment Fund, 2.18% $ 3,541,345 ------------- TOTAL TEMPORARY CASH INVESTMENT (Cost $3,541,345) $ 3,541,345 ------------- TOTAL INVESTMENTS IN SECURITIES - 105.5% (Cost $124,177,032) $ 129,507,381 ------------- OTHER ASSETS AND LIABILITIES - (5.5)% $ (6,705,919) ------------- TOTAL NET ASSETS - 100.0% $ 122,801,462 =============
N/R. Not rated by either S&P or Moody's * Non-income producing security 144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At December 31, 2004, the value of these securities amounted to $15,276,000 or 12.4% of net assets. (a) At December 31, 2004, the following securities were out on loan: SHARES SECURITY MARKET VALUE 1,899,750 Allegheny Energy Supply, 7.8%, 03/15/11 $ 2,070,728 1,136,000 Conexant Systems Inc., 4.0%, 2/1/07 1,028,080 285,000 Goodyear Tire & Rubber, 7.857%, 8/15/11 289,275 ----------- TOTAL $ 3,388,083 =========== 10 The accompanying notes are an integral part of these financial statements. PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED 5/1/01 TO CLASS II (a) 12/31/04 12/31/03 12/31/02 12/31/01 Net asset value, beginning of period $ 11.46 $ 9.28 $ 10.33 $ 10.51 -------- -------- ------- ------- Increase (decrease) from investment operations: Net investment income $ 0.58 $ 0.76 $ 0.80 $ 0.60 Net realized and unrealized gain (loss) on investments and foreign currency transactions 0.27 2.17 (1.05) (0.07) -------- -------- ------- ------- Net increase (decrease) from investment operations $ 0.85 $ 2.93 $ (0.25) $ 0.53 Distributions to shareowners: Net investment income (0.59) (0.75) (0.80) (0.60) Net realized gain (0.05) -- -- (0.11) -------- -------- ------- ------- Net increase (decrease) in net asset value $ 0.21 $ 2.18 $ (1.05) $ (0.18) -------- -------- ------- ------- Net asset value, end of period $ 11.67 $ 11.46 $ 9.28 $ 10.33 ======== ======== ======= ======= Total return* 7.76% 32.64% (2.42)% 5.39% Ratio of net expenses to average net assets+ 1.04% 1.09% 1.82% 1.39%** Ratio of net investment income to average net assets+ 5.12% 6.33% 8.67% 8.94%** Portfolio turnover rate 42% 48% 42% 36% Net assets, end of period (in thousands) $ 51,912 $ 17,601 $ 228 $ 28 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.04% 1.09% 1.82% 1.50%** Net investment income 5.12% 6.33% 8.67% 8.83%** Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.04% 1.09% 0.97% 0.85%** Net investment income 5.12% 6.33% 0.01% 0.07%**
(a) Class II shares were first publicly offered on May 1, 2001. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period.) ** Annualized. + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 11 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $3,388,083) (Cost $124,177,032) $ 129,507,381 Cash 392,872 Receivables-- Fund shares sold 100,052 Dividends, interest and foreign taxes withheld 1,768,626 Other 4,893 ------------- Total assets $ 131,773,824 ------------- LIABILITIES: Payables-- Investment securities purchased $ 333,848 Fund shares repurchased 4,952,077 Upon return for securities loaned 3,541,345 Due to affiliates 83,826 Accrued expenses 61,266 ------------- Total liabilities $ 8,972,362 ------------- NET ASSETS: Paid-in capital $ 113,693,485 Undistributed net investment income (loss) 42,906 Accumulated undistributed net realized gain (loss) 3,734,722 Net unrealized gain (loss) on: Investments 5,330,349 ------------- Total net assets $ 122,801,462 ------------- NET ASSET VALUE PER SHARE: CLASS I: No par value (unlimited number of shares authorized) Net assets $ 70,889,843 Shares outstanding 6,073,809 ------------- Net asset value per share $ 11.67 CLASS II: No par value (unlimited number of shares authorized) Net assets $ 51,911,619 Shares outstanding 4,447,914 ------------- Net asset value per share $ 11.67
12 The accompanying notes are an integral part of these financial statements. PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- YEAR ENDED 12/31/04 INVESTMENT INCOME: Dividends $ 28,052 Interest 6,314,255 Income on securities loaned, net 15,124 ------------ Total investment income $ 6,357,431 ------------ EXPENSES: Management fees $ 669,359 Transfer agent fees and expenses 1,806 Distribution fees (Class II) 85,911 Administrative reimbursements 19,997 Custodian fees 21,500 Professional fees 56,459 Printing expense 30,056 Miscellaneous 4,539 ------------ Total expenses $ 889,627 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (6) ------------ Net expenses $ 889,621 ------------ Net investment income (loss) $ 5,467,810 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 3,746,873 ------------ $ 3,746,873 ------------ Change in net unrealized gain or (loss) from: Investments $ (1,480,061) ------------ $ (1,480,061) ------------ Net gain (loss) on investments, futures contracts and foreign currency transactions $ 2,266,812 ============ Net increase (decrease) in net assets resulting from operations $ 7,734,622 ============ The accompanying notes are an integral part of these financial statements. 13 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 5,467,810 $ 4,106,902 Net realized gain (loss) on investments 3,746,873 1,124,588 Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions (1,480,061) 10,301,474 ------------- ------------ Net increase (decrease) in net assets resulting from operations $ 7,734,622 $ 15,532,964 ------------- ------------ DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (3,715,003) $ (3,817,405) Class II (1,764,209) (279,944) Net realized gain Class I (265,040) -- Class II (135,300) -- ------------- ------------ Total distributions to shareowners $ (5,879,552) $ (4,097,349) ------------- ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 75,619,514 $ 45,609,360 Reinvestment of distributions 5,846,576 4,059,022 Cost of shares repurchased (44,707,455) (18,254,761) ------------- ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ 36,758,635 $ 31,413,621 ------------- ------------ Net increase (decrease) in net assets $ 38,613,705 $ 42,849,236 NET ASSETS: Beginning of year 84,187,757 41,338,521 ------------- ------------ End of year $ 122,801,462 $ 84,187,757 ============= ============ Undistributed net investment income (loss), end of year $ 42,906 $ 42,283 ============= ============
14 The accompanying notes are an integral part of these financial statements. PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer High Yield VCT Portfolio (The Portfolio) is a portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of High Yield Portfolio is to maximize total return through a combination of income and capital appreciation. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The Trust's financial statements have been prepared in conformity with U.S. Generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting years. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in the preparation of its financial statements, which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolios are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Trading in foreign equity securities is substantially completed each day at various times prior to the close of the NYSE. The value of such securities used in computing the net asset value of the Portfolio's shares is based on the last sale price on the principal exchange where they traded. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Fixed income securities are valued at prices supplied by independent pricing services, which consider such factors as Treasury spreads, yields, maturities and ratings. Valuations may be supplemented by dealers and other sources, as required. Securities for which 15 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis, net of unrecoverable foreign taxes withheld at the applicable country rates. All discounts/premiums are accreted/amortized for financial reporting purposes. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. The High Yield Portfolio invests in below investment grade (high yield) debt securities and preferred stocks. These high yield securities may be convertible into equity securities of the issuer. Debt securities rated below investment grade are commonly referred to as "junk bonds" and are considered speculative. These securities involve greater risk of loss, are subject to greater price volatility, and are less liquid, especially during years of economic uncertainty or change, than higher rated debt securities. The Portfolio is not diversified, which means that it can invest a higher percentage of its asset in any one issuer than a diversified fund. Being non-diversified may magnify the fund's losses from adverse events affecting a particular issuer. In addition, the non-diversified Portfolios have concentrations in certain asset types, which may subject the Portfolios to additional risks. Further description of these risks is included in the Trust's Prospectus. B. FOREIGN CURRENCY TRANSLATION The books and records of the Portfolio are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent, the net realized gains and losses on foreign currency contracts, disposition of foreign currencies, and the difference between the amount of income accrued and the U.S. dollar actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. C. FORWARD FOREIGN CURRENCY CONTRACTS The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. D. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. In addition to the requirements of the Internal Revenue Code, the Portfolio may also be required to pay local taxes on the recognition of capital gains and/or the repatriation of foreign currencies in certain countries. During the year ended December 31, 2004, the no such taxes were paid. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from or in excess of net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. 16 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis. UNDISTRIBUTED NET ACCUMULATED NET INVESTMENT INCOME REALIZED GAIN PAID-IN PORTFOLIO (LOSS) (LOSS) CAPITAL - -------------------------------- ----------------- --------------- ------- Pioneer High Yield VCT Portfolio $ 12,025 $ (12,025) $ (0) ======== ========= ==== The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004 and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003 ----------- ----------- DISTRIBUTIONS PAID FROM: Ordinary Income $ 5,479,212 $ 4,097,349 Long-Term capital gain $ 400,340 $ -- ----------- ----------- $ 5,879,552 $ 4,097,349 =========== =========== Return of Capital $ -- $ -- ----------- ----------- Total distributions $ 5,879,552 $ 4,097,349 =========== =========== DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ 613,388 Undistributed long-term gain/(capital loss carryforward) $ 3,164,280 Unrealized appreciation (depreciation) $ 5,330,309 ----------- Total $ 9,107,977
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily attributable to the tax deferral of losses on wash sales, returns of capital on REITs, the recognition of unrealized gains or losses on certain futures contracts, and the tax treatment of premium amortization. E. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of the adjusted net assets at the beginning of the day. The Portfolio declares as daily dividends substantially all of its respective net investment income. All dividends are paid on a monthly basis. Short-term capital gain distributions, if any, may be declared with the daily dividends. Distributions paid by a Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. Dividends and distributions to shareowners are recorded on the ex-dividend date. 17 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- F. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. G. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the portfolio. Management fees are calculated daily at the following annual rate of 0.65% of the Portfolio's average daily net assets. calculated daily at the following annual rate of 0.65% of the Portfolio's average daily net assets. The portion of the Portfolios' expenses attributable to Class II (or Class I for shares in the case of High Yield Portfolios) will be reduced only to the extent such expenses are reduced for Class I shares (or Class II shares). Each class will reimburse PIM no more than the amount by which that class' expenses were reduced. In addition, under the management and administration agreement, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $72,671 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $267 in transfer agent fees payable to PIMSS at December 31, 2004. 4. DISTRIBUTION PLANS The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares. Included in due to affiliates is $10,888 payable to PFD at December 31, 2004. 5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------- ------------ ------------- -------------- High Yield Portfolio $ 124,177,071 $ 6,347,617 $ (1,017,307) $ 5,330,310 ============= =========== ============ ===========
6. Portfolio Transactions The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $83,647,941 and $42,692,245, respectively. 18 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- 7. Capital Shares At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
HIGH YIELD PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - ----------------------------- ---------- ------------- ----------- ------------ CLASS I: Shares sold 2,699,382 $ 30,852,667 2,515,726 $ 26,817,319 Reinvestment of distributions 346,267 3,947,046 357,809 3,779,086 Shares repurchased (2,787,689) (31,727,505) (1,491,103) (15,895,254) ---------- ------------- --------- ------------ Net increase (decrease) 257,960 $ 3,072,208 1,382,432 $ 14,701,151 ========== ============= ========= ============ CLASS II: Shares sold 3,916,481 $ 44,766,847 1,708,526 $ 18,792,041 Reinvestment of distributions 166,648 1,899,530 25,089 279,836 Shares repurchased (1,171,662) (12,979,950) (221,726) (2,359,726) ---------- ------------- --------- ------------ Net increase 2,911,467 $ 33,686,427 1,511,889 $ 16,712,470 ========== ============= ========= ============
19 PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS II SHAREOWNERS OF PIONEER HIGH YIELD VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer High Yield VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer High Yield VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 20 PIONEER HIGH YIELD VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - -------------------------------------------------------------------------------- INVESTMENT ADVISER TRUSTEES AND OFFICERS Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for CUSTODIAN the Trust's operations. The Trust's Trustees and officers are Brown Brothers Harriman & Co. listed below, together with their principal occupations during the past five years. Trustees who are interested persons of the Portfolio INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM within the meaning of the Investment Company Act of 1940 are referred Ernst & Young LLP to as Interested Trustees. Trustees who are not interested persons of the Trust are referred to as Independent Trustees.Each of the PRINCIPAL UNDERWRITER Trustees serves as a trustee of each of the 73 U.S.registered Pioneer Funds Distributor, Inc. investment portfolios for which Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Pioneer Funds"). The address for all Interested Trustees and all officers of LEGAL COUNSEL the Portfolio is 60 State Street, Boston, Massachusetts 02109. Wilmer Cutler Pickering Hale and Dorr LLP The Trust's statement of additional information provides more detailed information regarding the Trust's Trustees and is available upon SHAREOWNER SERVICES AND TRANSFER request, without charge, by calling 1-800-225-6292. Pioneer Investment Management Shareholder Services, Inc. Proxy Voting Policies and Procedures of the Trust are available without charge, upon Agent request, by calling our toll free number (1-800-225-6292). This information is also available online at pioneerfunds.com.
- -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE John F. Cogan, Jr. Chairman of the Serves until Trustee and President Serves until Director of Harbor Global (78)* Board, Trustee successor trustee retirement or removal; Deputy Chairman Company, Ltd. and President is elected or and a Director of Pioneer Global Asset earlier retirement Management S.p.A. ("PGAM"); or removal Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ----------------------------------------------------------------------------------------------------------------------------------- Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive Officer, None Executive Vice successor trustee PIM-USA since May 2003 (Director since President is elected or January 2001); President and Director earlier retirement of Pioneer since May 2003; Chairman or removal and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - -----------------------------------------------------------------------------------------------------------------------------------
21 PIONEER HIGH YIELD VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE David R. Bock** (61) Trustee since Serves until a Senior Vice President and Chief Director of The Enterprise 3050 K. Street NW, 2005. successor trustee Financial Officer, I-trax, Inc. Social Investment Company Washington, DC 20007 is elected or (publicly traded health care services (privately-held affordable earlier retirement company) (2001-present); Managing housing finance company); or removal. Partner, Federal City Capital Director of New York Advisors (boutique merchant Mortgage Trust (publicly bank)(1995-2000; 2002 to 2004); traded mortgage REIT) Executive Vice President and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ----------------------------------------------------------------------------------------------------------------------------------- Mary K. Bush (56) Trustee since Serves until a President, Bush International Director of Brady 3509 Woodbine Street, 2000. successor trustee (international financial advisory Corporation (industrial Chevy Chase, MD 20815 is elected or firm) identification and earlier retirement specialty coated material or removal. products manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - ----------------------------------------------------------------------------------------------------------------------------------- Margaret B.W. Graham Trustee since Serves until a Founding Director, The Winthrop None (57) 2000. successor trustee Group, Inc. (consulting firm); 1001 Sherbrooke is elected or Professor of Management, Faculty of Street West, earlier retirement Management, McGill University Montreal, Quebec, or removal. Canada H3A 1G5 - ----------------------------------------------------------------------------------------------------------------------------------- Marguerite A. Piret Trustee since Serves until a President and Chief Executive Director of New America (56) 1995. successor trustee Officer, Newbury, Piret & Company, High Income Fund, Inc. One Boston Place, is elected or Inc. (investment banking firm) (closed-end investment 28th Floor, earlier retirement company) Boston, MA 02108 or removal. - ----------------------------------------------------------------------------------------------------------------------------------- Stephen K. West (76) Trustee since Serves until a Senior Counsel, Sullivan & Cromwell Director, The Swiss Helvetia 125 Broad Street, New 1995. successor trustee (law firm) Fund, Inc. (closed-end York, NY 10004 is elected or investment company) and earlier retirement AMVESCAP PLC (investment or removal. managers) - ----------------------------------------------------------------------------------------------------------------------------------- John Winthrop (68) Trustee since Serves until a President, John Winthrop & Co., Inc. None One North Adgers September, successor trustee (private investment firm) Wharf, Charleston, SC 2000. is elected or 29401 earlier retirement or removal. - -----------------------------------------------------------------------------------------------------------------------------------
22 PIONEER HIGH YIELD VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS OFFICER Dorothy E. Bourassa Secretary Serves at the Secretary of PIM-USA; Senior Vice None (57) discretion of the President - Legal of Pioneer; and Board Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 - ----------------------------------------------------------------------------------------------------------------------------------- Christopher J. Assistant Serves at the Assistant Vice President and Senior None Kelley (40) Secretary discretion of the Counsel of Pioneer since July 2002; Board Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ----------------------------------------------------------------------------------------------------------------------------------- David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering Hale None Secretary discretion of the and Dorr LLP; Assistant Secretary of Board all Pioneer Funds since September 2003 - ----------------------------------------------------------------------------------------------------------------------------------- Vincent Nave (59) Treasurer Serves at the Vice President - Fund Accounting, None discretion of the Administration and Custody Services of Board Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ----------------------------------------------------------------------------------------------------------------------------------- Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer since 2004; None Treasurer discretion of the Treasurer and Senior Vice President, Board CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ----------------------------------------------------------------------------------------------------------------------------------- Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None Treasurer discretion of the Accounting, Administration and Custody Board Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ----------------------------------------------------------------------------------------------------------------------------------- Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None Treasurer discretion of the Accounting, Administration and Custody Board Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - -----------------------------------------------------------------------------------------------------------------------------------
23 PIONEER HIGH YIELD VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS OFFICER Katharine Kim Assistant Serves at the Fund Administration Manager - Fund None Sullivan (31) Treasurer discretion of the Accounting, Administration and Custody Board Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ----------------------------------------------------------------------------------------------------------------------------------- Martin J. Wolin (37) Chief Serves at the Chief Compliance Officer of Pioneer None Compliance discretion of the (Director of Compliance and Senior Officer Board Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - -----------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 24 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. [LOGO] PIONEER Investment(R) [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio -- Class II Shares ANNUAL REPORT December 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- T a b l e o f C o n t e n t s - -------------------------------------------------------------------------------- Pioneer International Value VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 9 Notes to Financial Statements 13 Report of Independent Registered Public Accounting Firm 18 Trustees, Officers and Service Providers 19
Please consider a Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about a Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, contact your adviser, call 1-800-225-6292 or visit our website at www.pioneerfunds.com. The Trust files a complete statement of investments with the Securities and Exchange Commission for the first and the third quarters for each fiscal year on Form N-Q. Shareowners may view the filed Form N-Q by visiting the Commission's web site at http://www.sec.gov. The filed form may also be viewed and copied at the Commission's Public Reference Room in Washington, D.C. Information regarding the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330. PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 Sector Distribution (As a percentage of total investment portfolio) [THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.] U.S. Common Stocks 1.5% Temporary Cash Investments 3.4% Depositary Receipts for International Stocks 3.9% International Common Stocks 91.2% Geographical Distribution Sector (As a percentage of equity holdings) Other(individually less then 1%) 3.8% Hungary 1.1% Australia 1.0% Belgium 1.0% Brazil 1.0% Turkey 1.3% Ireland 1.5% South Korea 1.5% Netherlands 3.6% Italy 4.2% Spain 4.9% Germany 5.4% Switzerland 7.9% United Kingdom 15.9% France 16.3% Japan 30.6 Five Largest Holdings (As a percentage of equity holdings) 1. BP Amoco Plc 3.17% 2. Vodafone Group Plc 2.76 3. Total SA 2.33 4. Mitsubishi Tokyo Financial Group, Inc. 2.26 5. Toyota Motor Co. 2.23
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 Prices and Distributions
12/31/04 12/31/03 Net Asset Value per Share $ 11.84 $ 10.04
Distributions per Share Short-Term Long-Term (1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains $ 0.0431 $ - $ -
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer International Value VCT Portfolio at net asset value, compared to that of the Morgan Stanley Capital International (MSCI) All Country World Free (ACWF) ex. U.S. Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Pioneer International Value VCT Portfolio MSCI AC WId Fr USA Mar-95 10000 10000 10945 10960 Dec-96 11819 11691 12227 11929 Dec-98 11012 13655 15859 17877 Dec-00 12260 15177 9326 12218 Dec-02 8064 10425 10675 14740 Dec-04 12641 17891
Index comparison begins on 2/28/95. The Morgan Stanley Capital International (MSCI) All Country World Free Index measures the performance of developed and emerging market stock markets. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004)
Net Asset Value Life-of-Class 2.40% (3/1/95) 5 Years -4.43% 1 Year 18.42%
All total returns shown assume reinvestment of distributions at net asset value. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Please refer to the variable product's annual report for performance that reflects the deduction of the variable products fees and charges. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. 2 PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer International Value VCT Portfolio Based on actual returns from July 1, 2004 through December 31, 2004.
Share Class I II - --------------------------------------------------------------------------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,146.73 $ 1,146.15 Expenses Paid During Period* $ 9.74 $ 11.58 - ---------------------------------------------------------------------------
* Expenses are equal to the Portfolio's annualized expense ratio of 1.80% and 2.15% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer International Value VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from July 1, 2004 through December 31, 2004.
Share Class I II - --------------------------------------------------------------------------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,016.34 $ 1,014.43 Expenses Paid During Period* $ 9.14 $ 10.87 - ---------------------------------------------------------------------------
* Expenses are equal to the Portfolio's annualized expense ratio of 1.80% and 2.15% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 International stocks appreciated strongly during 2004, despite higher interest rates and rising oil prices. As Portfolio Manager Christopher Smart explains, investments in economically sensitive industries across Japan, Europe and emerging markets were strong contributors to performance. Q: How did the Portfolio perform? A: For the 12 months ended December 31, 2004, Class II shares rose 18.42% at net asset value. However, with the disappointing performance of a few stocks, it lagged the Morgan Stanley Capital International (MSCI) All Country World Free Index, which rose 21.36% for the same period. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. We've been underweighting technology stocks for some time out of concern for their valuations and weak demand in developed countries. Nevertheless, their limited presence in the Portfolio still detracted from performance. Nokia (Finland) and Ericsson (Sweden) suffered from inadequate product lines in an increasingly competitive market for mobile telephones. We saw opportunity in Hitachi Chemical (Japan), which we viewed as a promising, yet undervalued, manufacturer of electronic component materials. Unfortunately, concerns about the semiconductor cycle and weak personal computer sales drove the stock price down during the second half of the fiscal year. Outside the technology sector, two holdings domiciled in Switzerland were disappointing. Nestle S.A., the Swiss food giant, declined as the company's sales growth and profitability came in below expectations. We continue to believe that the stock will recover, as Nestle delivers on its promises to cut operating costs and improve its overall margins. Astra Zeneca's failure to secure approval for its anti-clotting medicine Exanta hurt expectations for future results, but we remain optimistic that its pipeline retains value. Q: What investments contributed to performance? A: Japanese stocks, helped by a recovery in the property market, proved very advantageous despite a retreat in the final months of the fiscal year. Investments in prefabricated housing and construction materials manufacturer Sekisui Chemical Company and Daiwa House rose considerably during the reporting period. Also, quality retail chains like Ryohin Keikaku Co. and clothing chain Fast Retailing enjoyed strong growth in operating profits. Investments in European cyclical stocks, which had lagged the market earlier this year, also posted gains. Electric utility E.on AG (Germany) appreciated sharply, as investors gained confidence in management's ability to sell non-core assets in real estate and the chemicals industry and boost its dividend pay-out ratio. The construction and engineering firm ACS benefited from strong growth in revenues from road, infrastructure and building contracts mainly in Spain, where economic expansion and European Union financing have supported a construction boom. Belgacom, which posted lackluster performance following its initial listing in March, recovered handsomely in the fall. High global oil prices have given management at Total SA (France) and ENI S.p.A (Italy) the opportunity to broaden its ambitions for new exploration and expansion of downstream businesses. Q: What can you tell us about the Portfolio's investments in emerging markets? A: Some limited but key investments in emerging markets helped performance considerably. Last spring, emerging markets were negatively affected by fears of global inflation and the Federal Reserve Board's (the Fed) tighter monetary policy. We thought that the Fed's interest rate increases would be gradual and that the ensuing fall in stock prices in these markets was overblown. Three new holdings exemplify our strategy in emerging markets. For the first time in more than a decade, real wages in Brazil are rising after weathering the effects of currency devaluation and inflation. Brazil's third largest bank, Unibanco, is a new holding that should profit from a continued acceleration of consumer spending and its growth in its credit card business and consumer lending. In Turkey, Koc Holdings rose nearly 30% during the recent quarter, as Turkey's accession into the European union took one small step closer to reality. Mobile operator Turkcell has increased its customer base by more than 22% over the last year, and minutes of usage by subscribers continues to climb. Q: What is your outlook? A: Barring any unforeseen events that could severely hamper the European recovery, the valuations of most stocks remain extremely attractive compared to the United States, and the earnings growth potential is good. We are also optimistic about prospects for a Japanese recovery, as land prices appreciate and consumers begin to spend again. In key emerging markets, like Turkey and Brazil, we think we'll continue to find investment opportunities, where falling inflation and interest rates have released powerful forces of domestic demand. Any information in this shareholder report regarding market or economic trends or the factors influencing the Portfolio's historical or future performance are statements of the opinion of Portfolio management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. A Word About Risk: Investing in foreign and/or emerging markets securities involves risks relating to interest rates, currency exchange rates, economic, and political conditions. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 4 PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
Shares Value PREFERRED STOCK - 0.5% Telecommunication Services - 0.5% Integrated Telecommunication Services - 0.5% 8,400 Tele Norte Leste Participacoes (A.D.R.) $ 141,708 ----------- TOTAL PREFERRED STOCK (Cost $101,323) $ 141,708 ----------- COMMON STOCKS - 98.7% Energy - 6.3% Integrated Oil & Gas - 2.7% 30,110 BP Amoco Plc $ 293,457 17,400 Eni S.p.A. 436,278 ----------- $ 729,735 ----------- Oil & Gas Refining Marketing & Transportation - 3.6% 12,600 Repsol SA $ 327,551 2,960 Total SA 647,924 ----------- $ 975,475 ----------- Total Energy $ 1,705,210 ----------- Materials - 8.1% Commodity Chemicals - 1.3% 4,700 BASF India, Ltd. $ 337,955 ----------- Construction Materials - 2.9% 9,600 CRH Plc $ 256,586 6,200 Italcementi S.p.A. 99,690 1,600 Lafarge Br 154,175 1,980 Vinci SA (a) 265,469 ----------- $ 775,920 ----------- Diversified Metals & Mining - 1.6% 3,850 Freeport-McMoRan Copper & Gold, Inc. (Class B) $ 147,186 2,100 Norilsk Nickel 114,713 5,390 Rio Tinto Plc 158,384 ----------- $ 420,283 ----------- Industrial Gases - 1.3% 62,000 Taiyo Nippon Sanso Corp. $ 364,928 ----------- Steel - 1.0% 23,102 Broken Hill Proprietary Co., Ltd. $ 277,355 ----------- Total Materials $ 2,176,441 ----------- Capital Goods - 9.1% Aerospace & Defense - 0.3% 2,700 European Aeronautic Defence $ 78,322 -----------
Shares Value Construction & Engineering - 4.4% 11,649 ACS, Actividades de Construccion y Servicios, SA $ 265,916 4,000 Compagnie de Saint Gobain 240,262 119,200 Kajima Corp. 514,067 940 Technip 173,459 ----------- $ 1,193,704 ----------- Electrical Components & Equipment - 1.6% 55,800 Mitsubishi Electric Corp. $ 274,245 2,400 Schneider Electric SA 166,700 ----------- $ 440,945 ----------- Industrial Conglomerates - 0.5% 20,892,000 KOC Holding AS* $ 136,428 ----------- Industrial Machinery - 2.3% 3,800 Atlas Copco AB $ 171,478 36,600 OSG Corp. (a) 443,151 ----------- $ 614,629 ----------- Total Capital Goods $ 2,464,028 ----------- Commercial Services & Supplies - 0.8% Diversified Commercial Services - 0.8% 8,100 TNT Post Group NV $ 219,979 ----------- Total Commercial Services & Supplies $ 219,979 ----------- Transportation - 1.8% Railroads - 1.8% 88 East Japan Railway Co. $ 490,631 ----------- Total Transportation $ 490,631 ----------- Automobiles & Components - 3.1% Auto Parts & Equipment - 0.4% 1,500 Compagnie Generale des Etablissements Michelin $ 96,033 ----------- Automobile Manufacturers - 2.7% 2,500 Bayerische Motoren Werke AG $ 112,628 15,300 Toyota Motor Co. 625,414 ----------- $ 738,042 ----------- Total Automobiles & Components $ 834,075 ----------- Consumer Durables & Apparel - 0.6% Apparel, Accessories & Luxury Goods - 0.6% 1,000 Adidas-Salomon AG $ 161,016 ----------- Total Consumer Durables & Apparel $ 161,016 ----------- Hotels, Restaurants & Leisure - 3.1% Casinos & Gaming - 1.7% 8,200 Sega Sammy Holdings, Inc.* $ 450,679 -----------
The accompanying notes are an integral part of these financial statements. 5 PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - --------------------------------------------------------------------------------
Shares Value Restaurants - 1.4% 37,200 Compass Group Plc $ 175,549 12,000 GUS plc 216,315 ----------- $ 391,864 ----------- Total Hotels, Restaurants & Leisure $ 842,543 ----------- Media - 1.7% Advertising - 0.3% 3,000 Publicis SA $ 97,030 ----------- Publishing - 1.4% 11,200 Reed Elsevier Plc $ 102,875 8,400 Vivendi Universal* 269,088 ----------- $ 371,963 ----------- Total Media $ 468,993 ----------- Retailing - 4.2% Distributors - 1.6% 34,000 Mitsubishi Corp. $ 439,416 ----------- General Merchandise Stores - 2.6% 6,900 Ito Yokado, Ltd. $ 290,671 7,900 Ryohin Keikaku Co., Ltd. 397,075 ----------- $ 687,746 ----------- Total Retailing $ 1,127,162 ----------- Food & Drug Retailing - 3.8% Drug Retail - 0.6% 13,500 Boots Co., Plc $ 169,621 ----------- Food Retail - 3.2% 7,266 Koninklijke Ahold NV (144A)* $ 56,227 1,700 Nestle SA (Registered Shares) 444,812 55,700 Tesco Plc 344,340 ----------- $ 845,379 ----------- Total Food & Drug Retailing $ 1,015,000 ----------- Food, Beverage & Tobacco - 3.1% Tobacco - 3.1% 16,020 British American Tobacco Plc $ 275,853 50 Japan Tobacco, Inc. 570,938 ----------- $ 846,791 ----------- Total Food, Beverage & Tobacco $ 846,791 ----------- Household & Personal Products - 1.5% Household Products - 1.5% 28,300 Shiseido Co., Ltd. $ 410,008 ----------- Total Household & Personal Products $ 410,008 -----------
Shares Value Health Care Equipment & Services - 0.5% Health Care Supplies - 0.5% 800 Nobel Biocare Holding AG $ 144,687 ----------- Total Health Care Equipment & Services $ 144,687 ----------- Pharmaceuticals & Biotechnology - 5.7% Pharmaceuticals - 5.7% 9,332 AstraZeneca Plc $ 339,115 8,590 GlaxoSmithKline Plc 202,082 3,200 Novartis 160,026 3,138 Roche Holdings AG 358,390 4,280 Sanofi-Aventis 342,093 1,670 Schering AG 124,482 ----------- $ 1,526,188 ----------- Total Pharmaceuticals & Biotechnology $ 1,526,188 ----------- Banks - 11.5% Diversified Banks - 11.5% 7,400 Allied Irish Banks Plc $ 152,745 16,225 Barclays Plc 182,278 18,200 Banco Bilbao Vizcaya Argentaria SA 322,105 50,800 Banca Intesa S.p.A. 243,983 5,000 BNP Paribas SA 361,801 9,645 Credit Agricole SA 290,387 7,930 CS Group* 334,083 18,000 Development Bank of Singapore, Ltd. 177,261 17,200 HSBC Holding Plc 289,924 4,100 Kookmin Bank (A.D.R.)* (a) 160,228 12,520 Royal Bank of Scotland Group Plc 420,264 5,100 Uniao de Bancos Brasileiros S.A. (Unibanco) (G.D.R.) (144A) 161,772 ----------- $ 3,096,831 ----------- Total Banks $ 3,096,831 ----------- Diversified Financials - 9.3% Consumer Finance - 1.8% 13,600 Credit Saison Co., Ltd. $ 497,009 ----------- Diversified Financial Services - 6.7% 12,400 ING Groep NV $ 374,947 2,800 Lagardere S.C.A. 201,682 3,319 Societe Generale 335,463 50,000 Sumitomo Trust Bank 361,633 6,350 UBS AG 529,152 ----------- $ 1,802,877 ----------- Specialized Finance - 0.8% 3,400 Deutsche Boerse AG $ 204,294 ----------- Total Diversified Financials $ 2,504,180 -----------
6 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Insurance - 2.4% Life & Health Insurance - 0.7% 5,300 Assicurazioni Generali $ 179,543 ----------- Multi-Line Insurance - 1.7% 11,600 AXA $ 287,272 1,080 Zurich Financial Services* 179,517 ----------- $ 466,789 ----------- Total Insurance $ 646,332 ----------- Real Estate - 1.5% Real Estate Management & Development - 1.5% 34,000 Mitsui Fudosan Co. $ 414,847 ----------- Total Real Estate $ 414,847 ----------- Software & Services - 0.5% IT Consulting & Other Services - 0.5% 2,100 Atos Origin* $ 142,448 ----------- Total Software & Services $ 142,448 ----------- Technology Hardware & Equipment - 5.5% Semiconductors - 0.9% 9,500 Philips Electronics NV $ 251,307 ----------- Computer Hardware - 0.4% 35,300 Dixons Group Plc $ 103,036 ----------- Electronic Equipment & Instruments - 2.6% 3,900 Nidec Corp. $ 476,798 2,490 Siemens 210,719 ----------- $ 687,517 ----------- Office Electronics - 1.6% 32,500 Konica Minolta Holdings, Inc.* $ 432,715 ----------- Total Technology Hardware & Equipment $ 1,474,575 ----------- Semiconductors - 2.5% Semiconductor Equipment - 1.6% 7,100 Tokyo Electron, Ltd. $ 439,022 ----------- Semiconductors - 0.9% 250 Samsung Electronics $ 109,101 15,900 Taiwan Semiconductor Manufacturing Co. (A.D.R.) 134,991 ----------- $ 244,092 ----------- Total Semiconductors $ 683,114 ----------- Telecommunication Services - 9.8% Alternate Carriers - 1.3% 11,000 France Telecom $ 363,354 -----------
Shares Value Integrated Telecommunication Services - 4.2% 6,500 Belgacom SA* $ 280,528 16,200 British Sky Broadcasting Plc 174,818 17,500 Mahanagar Telephone Nigam, Ltd. 139,650 18,730 Telefonica SA 352,014 46,486 Telecom Italia S.p.A. 189,794 ----------- $ 1,136,804 ----------- Wireless Telecommunciation Services - 4.3% 1,000 Mobile Telesystems (A.D.R.) (a) $ 138,510 6,500 SK Telecom Co., Ltd. (a) 144,625 12,091 Turk ell Iletism Hizmet (A.D.R.) 218,847 243,611 Vodafone Group Plc 659,444 ----------- $ 1,161,426 ----------- Total Telecommunication Services $ 2,661,584 ----------- Utilities - 2.3% Electric Utilities - 2.3% 3,533 E.On AG $ 321,530 2,700 Iberdrola SA* 68,502 23,300 National Grid Transco Plc 221,864 ----------- $ 611,896 ----------- Total Utilities $ 611,896 ----------- TOTAL COMMON STOCKS (Cost $20,557,882) $26,668,559 ----------- TEMPORARY CASH INVESTMENT - 3.5% Security Lending Collateral - 3.5% 946,907 Securities Lending Investment Fund, 2.18% $ 946,907 ----------- TOTAL TEMPORARY CASH INVESTMENT (Cost $946,907) $ 946,907 ----------- TOTAL INVESTMENTS IN SECURITIES - 102.7% (Cost $21,606,112)(b) $27,757,174 ----------- OTHER ASSETS AND LIABILITIES - (2.7)% $ (764,844) ----------- TOTAL NET ASSETS - 100.0% $26,992,333 ===========
The accompanying notes are an integral part of these financial statements. 7 PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (continued) - -------------------------------------------------------------------------------- (A.D.R.) American Depositary Receipt (G.D.R.) Global Depository Receipt 144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At December 31, 2004, the value of these securities amounted to $217,999 or 0.8% of net assets. * Non-income producing security (a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value 3,895 Kookmin Bank (A.D.R.) * $ 152,217 950 Mobile Telesystems (A.D.R.) 131,585 30,700 OSG Corp. 371,776 570 SK Telecom Co., Ltd. 12,683 1,800 Vinci SA 241,344 --------- Total $ 909,605 =========
(b) Distributions of investments by country of issue, as a percentage of total equity holdings (excluding temporary cash investments) is as follows: Japan 30.6% France 16.3 United Kingdom 15.9 Switzerland 7.9 Germany 5.4 Spain 4.9 Italy 4.2 Netherlands 3.6 South Korea 1.5 Ireland 1.5 Turkey 1.3 Brazil 1.1 Belgium 1.0 Austrialia 1.0 Other (individually less than 1%) 3.8 ----- 100.0% =====
8 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended 5/1/03 to Class II (a) 12/31/04 12/31/03 Net asset value, beginning of period $ 10.04 $ 7.76 ======== ========= Increase (decrease) from investment operations: Net investment income (loss) $ (0.02) $ 0.05 Net realized and unrealized gain on investments and foreign currency transactions 1.86 2.29 -------- -------- Net increase from investment operations 1.84 2.34 -------- -------- Distributions to shareholders: Net investment income $ (0.04) $ (0.06) Net increase (decrease) in net asset value $ 1.80 $ 2.28 -------- --------- Net asset value, end of period $ 11.84 $ 10.04 -------- --------- Total return* 18.42% 30.31%** Ratio of net expenses to average net assets+ 2.13% 2.02%** Ratio of net investment loss to average net assets+ ( 0.11)% ( 0.81)%** Portfolio turnover rate 129% 99% Net assets, end of period (in thousands) $ 4,133 $ 1,081 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 2.13% 2.02%** Net investment loss ( 0.11)% ( 0.81)%
(a) Class 2 shares were first publicly offered on May 1, 2003. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period.) ** Annualized. + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 9 PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $909,605) (Cost $ 27,757,174 $21,606,112) Cash 678,505 Receivables -- Investment securities sold 432,458 Dividends, interest and foreign taxes withheld 43,107 Forward foreign currency settlement contracts, net 4,089 Other 1,841 ------------- Total assets $ 28,917,174 ------------- LIABILITIES: Payables -- Investment securities purchased $ 867,838 Fund shares repurchased 11,283 Upon return of securities loaned 946,907 Due to affiliates 25,455 Accrued expenses 73,358 ------------- Total liabilities $ 1,924,841 ------------- NET ASSETS: Paid-in capital $ 34,920,512 Undistributed net investment income (loss) 30,080 Accumulated undistributed net realized gain (loss) (14,107,986) Net unrealized gain (loss) on: Investments 6,151,062 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (1,335) ------------- Total net assets $ 26,992,333 ------------- NET ASSET VALUE PER SHARE: Class I: No par value (unlimited number of shares authorized) Net assets $ 22,859,452 Shares outstanding 1,923,744 ------------- Net asset value per share $ 11.88 Class II: No par value (unlimited number of shares authorized) Net assets $ 4,132,881 Shares outstanding 349,111 ------------- Net asset value per share $ 11.84
10 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - --------------------------------------------------------------------------------
Year Ended 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $53,248) $ 499,250 Interest 4,330 Income on securities loaned, net 14,304 ---------- Total investment income $ 517,884 ---------- EXPENSES: Management fees $ 237,439 Transfer agent fees and expenses 2,971 Distribution fees (Class II) 5,526 Administrative reimbursements 18,500 Custodian fees 70,086 Professional fees 62,141 Printing expense 13,358 Miscellaneous 14,409 ---------- Total expenses $ 424,430 ---------- Net expenses $ 424,430 ---------- Net investment income (loss) $ 93,454 ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $2,873,604 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (63,278) ---------- $2,810,326 ---------- Change in net unrealized gain or (loss) from: Investments (the change in reserve for repatriation taxes of $86,981) $1,321,708 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (11,522) ---------- $1,310,186 ---------- Net gain (loss) on investments, futures contracts and foreign currency transactions $4,120,512 ========== Net increase (decrease) in net assets resulting from operations $4,213,966 ==========
The accompanying notes are an integral part of these financial statements. 11 PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Year Ended Year Ended 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 93,454 $ 136,624 Net realized gain (loss) on investments 2,810,326 (857,791) Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions 1,310,186 6,236,488 ------------ ----------- Net increase (decrease) in net assets resulting from operations $ 4,213,966 $ 5,515,321 ------------ ----------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (113,573) $ (146,246) Class II (8,890) (4) ------------ ------------ Total distributions to shareowners $ (122,463) $ (146,250) ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 4,380,480 $ 2,253,340 Reinvestment of distributions 122,460 146,246 Cost of shares repurchased (5,189,620) (5,452,468) ------------ ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ (686,680) $(3,052,882) ------------ ------------ Net increase (decrease) in net assets $ 3,404,823 $ 2,316,189 ------------ ------------ NET ASSETS: Beginning of year $ 23,587,510 $21,271,321 ------------ ------------ End of year $ 26,992,333 $23,587,510 ------------ ------------ Undistributed net investment income (loss), end of year $ 30,080 $ 122,367 ============ ============
12 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer International Value Portfolio (the Portfolio) is a Portfolio of the Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate diversified portfolios fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: Portfolios: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value I Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) The Portfolio commenced operations on May 1, 2003. Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The investment objective of International Value VCT Portfolio is to seek long-term capital growth. The Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting years. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in the preparation of its financial statements. which are consistent with those generally accepted in the investment company industry: A. Security Valuation Security transactions are recorded as of trade date. Net asset values for the portfolios are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Trading in foreign equity securities is substantially completed each day at various times prior to the close of the NYSE. The value of such securities used in computing the net asset value of the Portfolio's shares, based on the last sale price on the principal exchange where they traded, are determined as of such times. The principal exchanges and markets for such securities have closing times prior to the close of the NYSE. However, the value of these securities may be influenced by changes in global markets occurring after the closing times of the local exchanges and markets up to the time the Portfolio determines its net asset value. Consequently, the Board of Trustees of the Portfolio has determined that the use of daily fair valuations as provided by a pricing service is appropriate for the Portfolio. The Portfolio may also take into 13 PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) - -------------------------------------------------------------------------------- consideration other significant events in determining the fair value of these securities. Thus, the Portfolio's securities valuations may differ from prices reported by the various local exchanges and markets. At December 31, 2004, there were no fair valued securities except as follows. All securities that trade in foreign markets whose closing prices are as of times prior to the close of the NYSE and that are held by International Value Portfolio are fair valued using vendor-supplied pricing updates for each security to the time of the close of the NYSE. Temporary cash investments and securities held by the Portfolio are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis, net of unrecoverable foreign taxes withheld at the applicable country rates. The Portfolio's investments in emerging markets or countries with limited or developing markets may subject the Portfolio to a greater degree of risk than in a developed market. Risks associated with these developing markets include political, social or economic factors and may affect the price of the Portfolio's investments and income generated by these investments, as well as the Portfolio's ability to repatriate such amounts. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. B. Foreign Currency Translation The books and records of the Portfolio are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent, the net realized gains and losses on foreign currency contracts, disposition of foreign currencies, and the difference between the amount of income accrued and the U.S. dollar actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. C. Forward Foreign Currency Contracts The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. (see Note 8) D. Taxes It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. In addition to the requirements of the Internal Revenue Code, the Portfolio may also be required to pay local taxes on the recognition of capital gains and/or the repatriation of foreign currencies in certain countries. During the year ended December 31, 2004, no such taxes were paid. In determining the daily net asset value, the Portfolio estimates the reserve for such taxes, if any, associated with investments in certain countries. The estimated reserve for taxes on capital gains is based on the net unrealized appreciation on certain portfolio securities, the holding year of such securities and the related tax rates, tax loss carryforward (if applicable) and other such factors. The estimated reserve for taxes on repatriation of foreign currencies is based on principal balances and/or unrealized appreciation of applicable securities, the holding year of such investments and the related tax rates and other such factors. As of December 31, 2004, the Portfolio had no reserves related to taxes on the repatriation of foreign currencies. The amounts and characterizations of distributions to shareowners for financial reporting purposes are 14 PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2004, International Value VCT Portfolio had a capital loss carryforward of $14,094,402 of which the following amounts will expire between 2009 and 2011 if not utilized: $6,653,888 in 2009, $5,309,516 in 2010 and $2,130,998 in 2011. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the Portfolio and are designed to present the portfolio's capital accounts on a tax basis. - -------------------------------------------------------------------------------
Undistributed Accumulated Net Net Investment Realized Gain Paid-In Portfolio Income (Loss) (Loss) Capital - -------------------------------------------------------------------------------------- Pioneer International Value VCT Portfolio $(63,278) $63,278 $-- ========= ======= ==== - --------------------------------------------------------------------------------------
The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004 and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis. - --------------------------------------------------------------------------------
2004 2003 - ------------------------------------------------------------------------------------------ Distributions paid from: Ordinary Income $ 122,463 $146,250 Long-Term capital gain -- -- ----------- -------- $ 122,463 $146,250 Return of Capital -- -- ----------- -------- Total distributions $ 122,463 $146,250 =========== ======== Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ 34,169 Undistributed long-term gain/(capital loss carryforward) (14,094,402) Unrealized appreciation (depreciation) 6,132,054 ----------- Total $(7,928,179) ============ - ------------------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily attributable to the tax deferral of losses on wash sales, and the mark to market on forward currency contracts. E. Portfolio Shares The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class I shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of the adjusted net assets at the beginning of the day. Dividends and distributions to shareowners are recorded on the ex-dividend date. Distributions paid by the Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II 15 PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) - -------------------------------------------------------------------------------- shares can bear different transfer agent and distribution fees. F. Securities Lending The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. G. Repurchase Agreements With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. Management Agreement PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the portfolio. Management fees are calculated daily at the following annual rate of 1.00% of the Portfolio's average daily net assets. In addition, under the management and administration agreement, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $24,357 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. Transfer Agent PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $270 in transfer agent fees payable to PIMSS at December 31, 2004. 4. Distribution Plans The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares. Included in due to affiliates is $828 payable to PFD at December 31, 2004. 5. Aggregate Unrealized Appreciation and Depreciation At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows: - --------------------------------------------------------------------------------
Net Gross Gross Appreciation/ Tax Cost Appreciation Depreciation (Depreciation) - --------------------------------------------------------------------------------------------------- International Value Portfolio $21,619,696 $6,175,716 $ (38,238) $6,137,478 =========== ========== ========== ========== - ---------------------------------------------------------------------------------------------------
16 PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- 6. Portfolio Transactions The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $30,362,933 and $30,703,827, respectively. 7. Capital Shares At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: - --------------------------------------------------------------------------------
International Value Portfolio '04 Shares '04 Amount '03 Shares '03 Amount - --------------------------------------------------------------------------------------------------- CLASS I: Shares sold 125,954 $ 1,319,269 148,266 $ 1,260,116 Reinvestment of distributions 10,994 113,572 17,452 146,246 Shares repurchased (449,994) (4,643,483) (658,580) (5,442,461) -------- ------------ -------- ------------ Net increase (decrease) (313,046) $ (3,210,642) (492,862) $ (4,036,099) ========= ============= ========= ============= CLASS II: Shares sold 294,244 $ 3,061,211 108,723 $ 993,224 Reinvestment of distributions 862 8,888 -- -- Shares repurchased (53,626) (546,137) (1,092) (10,077) -------- ------------ -------- ------------ Net increase (decrease) 241,480 $ 2,523,962 107,631 $ 983,217 ======== ============= ========= ============= - ---------------------------------------------------------------------------------------------------
8. Forward Foreign Currency Contracts During the year ended December 31, 2004, certain Portfolios had entered into various contracts that obligate the Portfolios to deliver currencies at specified future dates. At the maturity of a contract, the Portfolios must make delivery of the foreign currency. Alternatively, prior to the settlement date of a portfolio hedge, the Portfolio may close out such contracts by entering into an offsetting hedge contract. As of December 31, 2004, the Portfolio had no outstanding portfolio hedges. Outstanding forward currency settlement contracts were as follows: - --------------------------------------------------------------------------------
Net Gross Settlement Gross Receivable/ Portfolio Receivable Date Payable (Payable) - --------------------------------------------------------------------------------------------------- International Value Portfolio $ (432,458) 1/3/05 $ (429,646) $ (2,812) International Value Portfolio $ 867,839 1/3/05 $ 860,938 $ 6,901 - ---------------------------------------------------------------------------------------------------
17 PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of Pioneer Variable Contracts Trust and the Class II Shareowners of Pioneer International Value VCT Portfolio: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer International Value VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust") as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer International Value VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young Boston, Massachusetts February 11, 2005 18
Pioneer International Value VCT Portfolio - ----------------------------------------------------------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - ----------------------------------------------------------------------------------------------------------------------------------- Investment Adviser Trustees and Officers Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the Trust's operations. The Trust's Trustees and officers are listed below, together Custodian with their rincipal occupations during the past five years. Trustees who Brown Brothers Harriman & Co are interested persons of the Portfolio within the meaning of the Investment Company Act of 1940 are referred to as Interested Trustees. Independent Registered Public Accounting Firm Trustees who are not interested persons of the Trust are referred to as Ernst & Young LLP Trustees. Each of the Trustees serves as a trustee of each of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, Principal Underwriter Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address Pioneer Funds Distributor, Inc. for all Interested Trustees and all officers of the Portfolio is 60 State Street, Boston, Massachusetts 02109. Legal Counsel The Trust's statement of additional information provides more detailed Wilmer Cutler Pickering Hale and Dorr LLP information regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-225-6292. Shareowner Services and Transfer Proxy Voting Policies and Procedures of the Trust are available without Pioneer Investment Management Shareholder Services, charge, upon Agent request, by calling our toll free number Inc. (1-800-225-6292). This information is also available online at pioneerfunds.com. Pioneer Investment Management Shareholder Services, Inc. online at pioneerfunds.com. online at pioneerfunds.com.
- ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEES - ----------------------------------------------------------------------------------------------------------------------------------- POSITIONS HELD PRINCIPAL OCCUPATION DURING NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS TRUSTEE John F. Cogan, Chairman of the Serves until Trustee and President Serves Director of Harbor Global Company, Ltd. Jr. (78)* Board, Trustee successor trustee until retirement or removal President and is elected or or earlier retirement Deputy removal Chairman and a Director of Pioneer Global Asset Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Manage ("PIM-USA"); Chairman and a Director of Pio of Pioneer Alternative Investment Managemen (Dublin); President and a Director of Pione Investment Management (Bermuda) Limited and funds; President and Director of Pioneer Fu Inc. ("PFD"); President of all of the Pione Of Counsel (since 2000, partner prior to 20 Pickering Hale and Dorr LLP (counsel to PIM Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------ Osbert M. Hood Trustee and Serves until President and Chief Executive None (52)** Executive Vice successor trustee is Officer, PIM-USA since May 2003 President elected or earlier (Director since January 2001); retirement or removal President and Director of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------
19
Pioneer International Value VCT Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) - ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------------ POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS THIS TRUSTEE David R. Trustee since Serves until a Senior Vice President and Director of The Enterprise Social Investment Bock** (61) 2005 successor trustee is Chief Financial Officer, Company (privately-held affordable housing 3050 K. elected or earlier I-trax, Inc (publicly traded finance company); Director of New York Street NW, retirement or removal.health care services Mortgage Trust (publicly traded mortgage Washington, company) (2001-present); REIT) DC 20007 Managing Partner, Federal City Capital Advisors (boutique merchant bank)(1995-2000; 2002 to 2004); Executive Vice President and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Mary K. Bush Trustee since Serves until President, Bush International Director of Brady Corporation (industrial (56) 3509 2000. successor trustee is (international inancial identification and specialty coated material Woodbine elected or earlier advisory firm) products manufacturer), Millennium Street, retirement or removal Chemicals, Inc. (commodity chemicals), Chevy Chase, Mortgage Guaranty Insurance Corporation, MD 20815 and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - ------------------------------------------------------------------------------------------------------------------------------------ Margaret Trustee since Serves until Founding Director, The None B.W. Graham 2000. successor trustee is Winthrop Group, Inc. (57) 1001 elected or earlier (consulting firm); Professor Sherbrooke retirement or removal of Management, Faculty of Street West, Management, McGill Montreal, University Quebec, Canada H3A 1G5 - ------------------------------------------------------------------------------------------------------------------------------------ Marguerite Trustee since Serves untill President, and Chief Executive Director of New American High Income Fund, A. Piret 1995. successor Officer, Newbury, Piret & Inc.(closed-end investment company) (56) One trustee is Company, Inc. (investment Boston elected or banking firm) Place, 28th earlier Floor, retirement Boston, MA or removal 02108 - ------------------------------------------------------------------------------------------------------------------------------------ Stephen K. Trustee since Serves until Senior Counsel, Sullivan & Director, The Swiss Helvetic Fund, Inc. West (76) 1995. successor trustee Cromwell (law firm) (closed-end investment company) and AMVESCAP 125 Broad is elected or earlier PLC (investment managers) Street, New retirement or removal York, NY 10004 - ------------------------------------------------------------------------------------------------------------------------------------ John Trustee since Serves until President, John Winthrop & CO., None Winthrop September, successor trustee Inc.(private investment firm) (68) One 2000. is elected or earlier North Adgers retirement or removal Wharf, Charleston, SC 29401 - ------------------------------------------------------------------------------------------------------------------------------------
20
Pioneer International Value VCT Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) - ------------------------------------------------------------------------------------------------------------------------------------ TRUST OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS OFFICER Dorothy E. Secretary Serves at the discretion Secretary of PIM-USA; Senior None Bourassa (57) of the Board Vice President - Legal of Pioneer; and Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Complianc of PIM-USA from April 1998 through October 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Christopher J. Assistant Serves at the discretion Assistant Vice President and None Kelley (40) Secretary of the Board Senior Counsel of Pioneer since July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ David C. Assistant Serves at the discretion Partner, Wilmer Cutler None Phelan (47) Secretary of the Board Pickering Hale and Dorr LLP; Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Vincent Treasurer Serves at the discretion Vice President-Fund None Nave (59) of the Board Accounting, Administration and Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ------------------------------------------------------------------------------------------------------------------------------------ Mark E. Assistant Serves at the discretion Deputy Treasurer of Pioneer None Bradley (45) Treasurer of the Board since 2004; Treasurer and Senior Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Luis I. Assistant Serves at the discretion Assistant Vice President - None Presutti (39) Treasurer of the Board Fund Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Gary Sullivan Assistant Serves at the discretion Fund Accounting Manager - None (46) Treasurer of the Board Fund Accounting, Administration and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - ------------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------------ Pioneer International Value VCT Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) - ------------------------------------------------------------------------------------------------------------------------------------ TRUST OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ POSITIONS HELD PRINCIPAL OCCUPATION NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS OFFICER Katharine Kim Assistant Serves at the discretion Fund Administration Manager - None Sullivan (31) Treasurer of the Board Fund Accounting, Administration and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Martin J. Wolin Chief Serves at the discretion Chief Compliance Officer of None (37) Compliance of the Board Pioneer (Director of Officer Compliance and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 22 - -------------------------------------------------------------------------------- This page for your notes. - -------------------------------------------------------------------------------- This page for your notes. - -------------------------------------------------------------------------------- This page for your notes. [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO -- CLASS II SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Pioneer Oak Ridge Large Cap Growth VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 7 Notes to Financial Statements 11 Report of Independent Registered Public Accounting Firm 15 Trustees, Officers and Service Providers 16 PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT www.pioneerfunds.com. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT http://www.sec.gov. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER OAK RIDGE LARGE CAP GROWTH VCT PIONEER VARIABLE CONTRACTS TRUST PORTFOLIO - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] U.S. Common Stocks 93.3% Depositary Receipts for International Stocks 6.7% SECTOR DISTRIBUTION (As a percentage of equity holdings) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Information Technology 22.9% Consumer Discretionary 16.8% Industrials 16.6% Health Care 16.3% Financials 14.5% Energy 8.0% Consumer Staples 4.9% FIVE LARGEST HOLDINGS (As a percentage of equity holdings) 1. eBAY, Inc. 3.78% 2. XTO Energy, Inc. 3.53 3. Qualcomm, Inc. 3.31 4. Danaher Corp. 3.31 5. Popular, Inc. 3.28 The Portfolio is actively managed and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- PRICES AND DISTRIBUTIONS 12/31/04 3/15/04 Net Asset Value per Share $ 11.09 $ 10.00 DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (3/15/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ -- $ -- $ -- - -------------------------------------------------------------------------------- PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO at net asset value, compared to that of the Russell 1000 Growth Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Russell 1000 Growth Index Pioneer Oak Ridge Large Cap Growth VCT Portfolio* Growth Index 4-Mar 10000 10000 4-Dec 10548 10851
The Russell 1000 Growth Index measures the performance of large-cap U.S. growth stocks. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in any Index. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004) - -------------------------------------------------------------------------------- NET ASSET VALUE - -------------------------------------------------------------------------------- Life-of-Class 10.90% (3/15/04) All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers fund performance would be lower. Waivers may not be in effect for all funds. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004 SHARE CLASS II --------------------------------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,069.43 Expenses Paid During Period* $ 6.91 * Expenses are equal to the Portfolio's annualized expense ratio of 1.33% for Class I shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO Based on a hypothetical 5% per year return before expenses, reflecting the period from July 1, 2004 through December 31, 2004 SHARE CLASS II --------------------------------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,020.36 Expenses Paid During Period* $ 6.75 * Expenses are equal to the Portfolio's annualized expense ratio of 1.33% for Class I shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- A WORD ABOUT RISK: THE PORTFOLIO INVESTS IN A LIMITED NUMBER OF SECURITIES AND, AS A RESULT, THE PORTFOLIO'S PERFORMANCE MAY BE MORE VOLATILE THAN THE PERFORMANCE OF PORTFOLIOS HOLDING MORE SECURITIES. CALL 800-688-9915 OR VISIT www.pioneerfunds.com FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE RETURNS FOR THE PORTFOLIO DO NOT REFLECT THE DEDUCTION OF EXPENSES ASSOCIATED WITH VARIABLE PRODUCTS, SUCH AS MORTALITY AND EXPENSE RISK CHARGES, SEPARATE ACCOUNT CHARGES, AND SALES CHARGES. THESE EXPENSES WOULD REDUCE THE OVERALL RETURNS SHOWN. PERFORMANCE RESULTS REFLECT ANY APPLICABLE EXPENSE WAIVERS IN EFFECT DURING THE PERIODS SHOWN. WITHOUT SUCH WAIVERS PERFORMANCE WOULD BE LOWER. WAIVERS MAY NOT BE IN EFFECT FOR ALL PORTFOLIOS. CERTAIN FEE WAIVERS ARE CONTRACTUAL THROUGH A SPECIFIED PERIOD. OTHERWISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION. In the following interview, David Klaskin, Pioneer Oak Ridge Large Cap Growth VCT Portfolio's Lead Portfolio Manager, discusses the factors that influenced performance for the period from the Portfolio's inception on March 15, 2004 through December 31, 2004. Q: HOW DID THE U.S. STOCK MARKET PERFORM DURING THE PAST YEAR? A: Stocks performed very well during the past year, as continued global growth, favorable earnings results and improving corporate balance sheets combined to form a solid foundation for the market. While stocks provided a reasonable return, their upward path was very choppy due to weakness in the second and third quarters. During this time, the market was pressured by a number of concerns, including geopolitical tensions, soaring oil prices and rising U.S. interest rates. Investors, therefore, began to rotate into higher-quality stocks with solid fundamentals, and away from the riskier stocks that had been top performers during 2003 and the first quarter of this year. This shift was a positive for the Portfolio, given our focus on higher quality, fundamentally sound companies. Q: HOW DID PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO PERFORM? A: Class II shares of the Portfolio produced a total return of 10.90% at net asset value for the period from the Portfolio's inception on March 15, 2004, through December 31, 2004, outpacing the 7.58% return of the Russell 1000 Growth Index over the same period. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. We are pleased that the Portfolio has performed well both on an absolute basis and relative to its benchmark. While past performance is no guarantee of future results, of course, we believe the Portfolio's strong showing is the result of our disciplined investment style. Like all growth managers, we look for companies with accelerating earnings. However, we also require that two other important factors be in place. First, our research must indicate to us that an issue's earnings growth is sustainable. And second, the stocks we purchase must be reasonably valued in our view, since even fast-growing stocks can be very risky if they are purchased at too rich of a price. We believe this approach is the best way to find companies that are poised to perform well over a three- to five-year time horizon. Q: HOW IS THE PORTFOLIO POSITIONED IN THE TWO LARGEST INDUSTRY SECTORS IN THE RUSSELL 1000 GROWTH INDEX: TECHNOLOGY AND HEALTH CARE? A: We added significant relative value through our approach to the technology sector, which underperformed the general market due to the prospect of slowing sales growth in 2005. In this environment, our relatively conservative positioning - i.e., our focus on reasonably valued, blue chip companies within the sector - paid off. In addition, performance was helped by the fact that technology is the Portfolio's largest sector underweight (a weighting below that of the benchmark). Two of the Portfolio's top performers in technology were Qualcomm, whose business model of earning royalties for its wireless communications technology has enabled the stock to perform well amid broader tech weakness; and Dell Computer, which continues to gain market share from its competitors. The Portfolio also was helped by being underweight in the more cyclical areas within technology, such as semiconductors. In particular, our decision to avoid Intel - which underperformed by a wide margin during the period - proved to be a distinct positive for performance. Turning to health care, we added significant value through our decision to avoid the large-cap pharmaceuticals sector. Although these stocks are now as inexpensive as they were following President Clinton's attempt at sweeping health care reform in 1993, we believe there are not enough new drugs in the pipeline to make up for the lost revenues from drugs that are coming off patent protection. We looked instead for opportunities among service providers and equipment companies, such as Zimmer Holdings - a leading manufacturer of orthopedic products. Zimmer declined in the third quarter on weaker than expected earnings, prompting us to trim the position, but the stock was a strong contributor for the full year. On the negative side, the generic drug maker Teva Pharmaceuticals was one of the Portfolio's leading detractors. We continue to hold the stock, however, as we remain confident in its longer term prospects. Q: WHAT OTHER ELEMENTS OF THE PORTFOLIOS'S POSITIONING AFFECTED PERFORMANCE? A: Energy stocks performed very well during the period, as the rising prices of oil and gas boosted profits for companies in the sector. The Portfolio was helped by both an overweight position and strong stock selection within the group. We received strong performance from XTO Energy, which has demonstrated the ability to manage its business effectively even during difficult times. Apache, an exploration and production company that reported record production and 57% earnings growth during the third quarter, also performed very well. In the consumer discretionary area, the online auction company eBay provided stellar performance. eBay has emerged as a true "category killer," meaning that there is no other company that has come close to being able to establish a stronghold in its market space. While the company's fundamentals remain strong, we have begun to trim the position on the basis of its valuation. Specialty retailers such as Staples and Best Buy also contributed positively to performance. A key detractor within the consumer discretionary group was IAC/InteractiveCorp, which integrates a variety of online businesses. While we believed this would allow the company to benefit from increased online activity, the stock fell following the release of disappointing second quarter results. In the financial sector, we have gradually reduced the presence of companies that are sensitive to interest rate movements - such as traditional banks - given that the Federal Reserve is likely to continue raising rates. At the same time, we have maintained a position in stocks with more diversified business lines that have the potential to benefit from continued strength in the economy, such as Sallie Mae and American Express. A top performer among financials was Popular, which holds a strong market position within Latin America and the fast-growing Hispanic population in the United States. Q: WHAT IS YOUR OUTLOOK FOR THE STOCK MARKET? A: A number of factors continue to work in the market's favor, including steady worldwide growth, the improvement in corporate balance sheets, and companies' growing focus on dividends and share buybacks. However, the risks to market performance, which include rising interest rates and the potential for geopolitical disruptions, remain firmly in place. As a result, we think the post-bubble rally in lower-quality, higher-risk companies has likely run its course, and that should translate into a continued investor preference for higher quality companies with strong fundamentals. In this environment, we believe we can continue to add value through our disciplined, selective approach to investing. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. 4 PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - -------------------------------------------------------------------------------- SHARES VALUE COMMON STOCKS - 94.4% ENERGY - 7.5% OIL & GAS DRILLING - 1.7% 1,640 BJ Services Co. $ 76,326 --------- OIL & GAS EXPLORATION & PRODUCTION - 5.8% 2,145 Apache Corp. $ 108,473 4,139 XTO Energy, Inc. 146,438 --------- $ 254,911 --------- TOTAL ENERGY $ 331,237 --------- CAPITAL GOODS - 12.7% AEROSPACE & DEFENSE - 2.1% 1,270 L-3 Communications Holdings, Inc. $ 93,015 --------- ELECTRICAL COMPONENT & EQUIPMENT - 2.9% 3,515 General Electric Co. $ 128,298 --------- INDUSTRIAL CONGLOMERATES - 5.6% 2,395 Danaher Corp. $ 137,496 3,080 Tyco International, Ltd. 110,079 --------- $ 247,575 --------- INDUSTRIAL MACHINERY - 2.1% 1,124 Ingersoll-Rand Co. $ 90,256 --------- TOTAL CAPITAL GOODS $ 559,144 --------- TRANSPORTATION - 3.0% AIR FREIGHT & COURIERS - 3.0% 1,340 FedEx Corp. $ 131,977 --------- TOTAL TRANSPORTATION $ 131,977 --------- HOTELS, RESTAURANTS & LEISURE - 1.6% CASINOS & GAMING - 1.6% 2,085 International Game Technology $ 71,682 --------- TOTAL HOTELS, RESTAURANTS & LEISURE $ 71,682 --------- MEDIA - 1.8% BROADCASTING & CABLE TELEVISION - 1.8% 2,710 Univision Communications, Inc.* $ 79,322 --------- TOTAL MEDIA $ 79,322 --------- RETAILING - 12.4% COMPUTER & ELECTRONICS RETAIL - 1.9% 1,415 Best Buy Co., Inc. $ 84,079 --------- GENERAL MERCHANDISE STORES - 1.9% 1,635 Target Corp. $ 84,906 --------- HOME IMPROVEMENT RETAIL - 2.1% 1,565 Lowe's Co., Inc. $ 90,128 --------- INTERNET RETAIL - 3.6% 1,350 eBAY, Inc.* $ 156,978 --------- SPECIALTY STORES - 2.9% 3,825 Staples, Inc. $ 128,941 --------- TOTAL RETAILING $ 545,032 --------- FOOD & DRUG RETAILING - 2.2% HYPERMARKETS & SUPERCENTERS - 2.2% 1,850 Wal-Mart Stores, Inc. $ 97,717 --------- TOTAL FOOD & DRUG RETAILING $ 97,717 --------- HOUSEHOLD & PERSONAL PRODUCTS - 2.4% HOUSEHOLD PRODUCTS - 2.4% 1,950 Procter & Gamble Co. $ 107,406 --------- TOTAL HOUSEHOLD & PERSONAL PRODUCTS $ 107,406 --------- HEALTH CARE EQUIPMENT & SERVICES - 10.5% HEALTH CARE DISTRIBUTORS - 1.7% 2,450 Teva Pharmaceutical Industries, Ltd. $ 73,157 --------- HEALTH CARE EQUIPMENT - 2.2% 1,205 Zimmer Holdings, Inc.* $ 96,545 --------- HEALTH CARE SERVICES - 4.4% 2,660 Caremark Rx, Inc.* $ 104,884 935 Quest Diagnostics, Inc. 89,339 --------- $ 194,223 --------- HEALTH CARE SUPPLIES - 2.2% 1,225 Alcon, Inc. $ 98,735 --------- TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 462,660 --------- PHARMACEUTICALS & BIOTECHNOLOGY - 4.8% BIOTECHNOLOGY - 4.8% 1,395 Amgen, Inc.* $ 89,489 2,255 Genentech, Inc.* 122,762 --------- $ 212,251 --------- TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 212,251 --------- BANKS - 5.6% DIVERSIFIED BANKS - 5.6% 4,720 Popular, Inc. $ 136,078 3,495 U.S. Bancorp 109,463 --------- $ 245,541 --------- TOTAL BANKS $ 245,541 --------- DIVERSIFIED FINANCIALS - 6.3% CONSUMER FINANCE - 4.7% 1,585 American Express Co. $ 89,346 2,205 SLM Corp. 117,725 --------- $ 207,071 --------- DIVERSIFIED FINANCIAL SERVICES - 1.6% 1,421 Citigroup, Inc. $ 68,464 --------- TOTAL DIVERSIFIED FINANCIALS $ 275,535 --------- The accompanying notes are an integral part of these financial statements. 5 PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- SHARES VALUE INSURANCE - 1.9% LIFE & HEALTH INSURANCE - 1.9% 2,045 Aflac, Inc. $ 81,473 ----------- TOTAL INSURANCE $ 81,473 ----------- SOFTWARE & SERVICES - 7.1% APPLICATION SOFTWARE - 2.6% 4,280 Microsoft Corp. $ 114,319 ----------- DATA PROCESSING & OUTSOURCED SERVICES - 4.5% 1,835 Affiliated Computer Services, Inc.* $ 110,449 2,045 First Data Corp. 86,994 ----------- $ 197,443 ----------- TOTAL SOFTWARE & SERVICES $ 311,762 ----------- TECHNOLOGY HARDWARE & EQUIPMENT - 10.3% COMMUNICATIONS EQUIPMENT - 3.1% 3,245 Qualcomm, Inc. $ 137,588 ----------- COMPUTER HARDWARE - 4.7% 3,095 Dell, Inc.* $ 130,423 775 IBM Corp. 76,400 ----------- $ 206,823 ----------- TECHNOLOGY DISTRIBUTORS - 2.5% 1,755 Fisher Scientific International,Inc.* $ 109,477 ----------- TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 453,888 ----------- SEMICONDUCTORS - 4.2% 2,967 Marvell Technology Group, Ltd.* $ 105,239 3,275 Texas Instruments, Inc. 80,631 ----------- $ 185,870 ----------- TOTAL SEMICONDUCTORS $ 185,870 ----------- TOTAL COMMON STOCKS (Cost $3,805,081) $ 4,152,497 ----------- TOTAL INVESTMENTS IN SECURITIES - 94.4% (Cost $3,805,081) $ 4,152,497 ----------- OTHER ASSETS AND LIABILITIES - 5.6% $ 244,178 ----------- TOTAL NET ASSETS - 100.0% $ 4,396,675 =========== * Non-income producing security. 6 The accompanying notes are an integral part of these financial statements. PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
3/15/04 TO CLASS II 12/31/04 Net asset value, beginning of period $ 10.00 ------- Increase from investment operations: Net investment income $ 0.03 Net realized and unrealized gain on investments and foreign currency transactions 1.06 ------- Net increase from investment operations $ 1.09 ------- Net increase in net asset value $ 1.09 ------- Net asset value, end of period $ 11.09 ======= Total return* 10.90% Ratio of net expenses to average net assets+ 0.95%** Ratio of net investment income to average net assets+ 0.79%** Portfolio turnover rate 21% Net assets, end of period (in thousands) $ 4,397 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 6.22%** Net investment loss (4.48)%** Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly Net expenses 0.95%** Net investment income 0.79%**
* Assumes initial investment at net asset value at the beginning of the period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of the period. Total return rate is not annualized. ** Annualized. + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 7 PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (Cost $3,805,081) $ 4,152,497 Cash 431,488 Futures collateral Receivables-- Fund shares sold 78,147 Dividends, interest and foreign taxes withheld 3,766 Due from Pioneer Investment Management, Inc. 5,936 Other 486 ----------- Total assets $ 4,672,320 ----------- LIABILITIES: Payables-- Investment securities purchased $ 235,345 Fund shares repurchased 971 Due to affiliates 2,529 Accrued expenses 36,800 ----------- Total liabilities $ 275,645 ----------- NET ASSETS: Paid-in capital $ 4,087,874 Undistributed net investment income (loss) 10,654 Accumulated undistributed net realized gain (loss) (49,269) Net unrealized gain (loss) on: Investments 347,416 ----------- Total net assets $ 4,396,675 ----------- NET ASSET VALUE PER SHARE: CLASS II: (No par value, unlimited number of shares authorized) Net assets $ 4,396,675 Shares outstanding 396,294 ----------- Net asset value per share $ 11.09 ----------- 8 The accompanying notes are an integral part of these financial statements. PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- FOR THE PERIOD FROM 3/15/04 (COMMENCEMENT OF OPERATIONS) TO 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $82) $ 21,407 Interest 1,652 --------- Total investment income $ 23,059 --------- EXPENSES: Management fees $ 9,922 Transfer agent fees 1,261 Distribution fees 3,308 Administrative fees 13,875 Custodian fees 18,027 Professional fees 25,896 Printing 9,641 Fees and expenses of nonaffiliated trustees 99 Miscellaneous 238 --------- Total expenses $ 82,267 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (69,698) Less fees paid indirectly --------- Net expenses $ 12,569 --------- Net investment income (loss) $ 10,490 --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) from: Investments $ (49,269) --------- $ (49,269) --------- Change in net unrealized gain or loss from: Investments $ 347,416 --------- $ 347,416 --------- Net gain (loss) on investments contracts $ 298,147 ========= Net increase (decrease) in net assets resulting from operations $ 308,637 ========= The accompanying notes are an integral part of these financial statements. 9 PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGESIN NET ASSETS - -------------------------------------------------------------------------------- FOR THE PERIOD FROM 3/15/04 (COMMENCEMENT OF OPERATIONS) TO 12/31/04 FROM OPERATIONS: Net investment income $ 10,490 Net realized gain (loss) on investments (49,269) Change in net unrealized gain or loss on investments, futures contracts and foreign currency transactions 347,416 ----------- Net increase (decrease) in net assets resulting from operations $ 308,637 ----------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 4,148,102 Cost of shares repurchased (60,064) ----------- Net increase in net assets resulting from Fund share transactions $ 4,088,038 ----------- Net increase in net assets $ 4,396,675 NET ASSETS: End of period $ 4,396,675 =========== Undistributed net investment income (loss), end of period $ 10,654 =========== 10 The accompanying notes are an integral part of these financial statements. PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Oak Ridge Large Cap Growth VCT Portfolio (the Portfolio) a Portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware statutory trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate diversified portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) The Oak Ridge Large Cap Growth VCT Portfolio commenced operations on March 15, 2004. Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of Oak Ridge Large Cap Growth Portfolio is capital appreciation. The financial statements and financial highlights of all other portfolios are presented in separate books. The Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in the preparation of its financial statements which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolio are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 11 PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. B. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. The portfolio elected to defer $27,697 in capital losses recognized between November 1, 2004 and December 31, 2004 to its fiscal year ending December 31, 2005. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2004, Oak Ridge Large Cap Growth VCT Portfolio had a capital loss carryforward of $29,924, which will expire in 2012 if not utilized. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis.
UNDISTRIBUTED ACCUMULATED NET INVESTMENT REALIZED PAID-IN PORTFOLIO INCOME (LOSS) GAIN (LOSS) CAPITAL - ------------------------------------------------ -------------- ----------- ------- Pioneer Oak Ridge Large Cap Growth VCT Portfolio $ (164) $ (0) $ (164) ====== ==== ======
The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004, on a tax basis. There were no distributions paid during the fiscal year ended December 31, 2004. 2004 --------- DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ 10,654 Undistributed long-term gain/ (capital loss carryforward) (16,924) Post-October loss deferred (27,697) Unrealized appreciation (depreciation) 342,768 --------- Total $ 308,801 ========= The difference between book-basis and tax-basis unrealized appreciation is primarily attributable to the tax deferral of losses on wash sales. C. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the period ended December 31, 2004. Distribution fees for Class II shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. 12 PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- D. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. E. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the portfolio. Management fees are calculated daily at the following annual rate of 0.75% of the Portfolio's average daily net assets. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $1,542 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $135 in transfer agent fees payable to PIMSS at December 31, 2004. 4. DISTRIBUTION PLANS The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares. Included in due to affiliates is $852 payable to PFD at December 31, 2004. 5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ----------- ------------ ------------ -------------- Oak Ridge Large Cap Growth Portfolio $ 3,809,729 $ 357,009 $ (14,241) $ 342,768 =========== ========= ========== =========
13 PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- 6. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the period ended December 31, 2004, were $4,202,207 and $347,858, respectively. 7. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: OAK RIDGE LARGE CAP GROWTH PORTFOLIO '04 SHARES '04 AMOUNT - ------------------------------------ ---------- ----------- CLASS II: Shares sold 402,048 $ 4,148,102 Reinvestment of distributions -- -- Shares repurchased (5,754) (60,064) -------- ----------- Net increase 396,294 $ 4,088,038 ======== =========== 14 PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS II SHAREOWNERS OF PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Oak Ridge Large Cap Growth VCT Portfolio, one of the portfolios constituting the Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statements of operations and changes in net assets, and the finan-cial highlights, for the period from March 15, 2004 (commencement of operations) to December 31, 2004. These finan-cial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Oak Ridge Large Cap Growth VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations, changes in its net assets, and the financial highlights, for the period from March 15, 2004 (commencement of operations) to December 31, 2004 in conformity with U.S. generally accepted accounting principles. Ernst & Young LLP Boston, Massachusetts February 11, 2005 15 PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - -------------------------------------------------------------------------------- INVESTMENT ADVISER TRUSTEES AND OFFICERS Pioneer Investment The Trust's Board of Trustees provides broad supervision over the Management, Inc. affairs of the Trust. The officers of the Trust are responsible for the Trust's operations. The Trust's Trustees and officers are listed below, together with their principal occupations during the past five CUSTODIAN years. Trustees who are interested persons of the Portfolio within the Brown Brothers Harriman & Co. meaning of the Investment Company Act of 1940 are referred to as Interested Trustees. Trustees who are not interested persons of the Trust are referred to as Independent Trustees. Each of the Trustees INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM serves as a trustee of each of the 73 U.S. registered investment Ernst & Young LLP portfolios for which Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address for all Interested Trustees and all officers of the Portfolio is 60 State PRINCIPAL UNDERWRITER Street, Boston, Massachusetts 02109. Pioneer Funds Distributor, Inc. The Trust's statement of additional information provides more detailed information regarding the Trust's Trustees and is available upon LEGAL COUNSEL request, without charge, by calling 1-800-225-6292. Hale and Dorr LLP Proxy Voting Policies and Procedures of the Trust are available without charge, upon Agent request, by calling our toll free number SHAREOWNER SERVICES AND TRANSFER (1-800-225-6292). This information is also available online at Pioneer Investment Management Shareholder Services, Inc. pioneerfunds.com.
- -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD NAME AND AGE WITH THE TRUST TERM OF OFFICE PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS HELD FIVE YEARS BY THIS TRUSTEE John F. Cogan, Jr. Chairman of the Serves until Trustee and President Serves Director of Harbor (78)* Board, Trustee successor trustee until retirement or removal; Global Company, Ltd. and is elected or Deputy Chairman and a Director President earlier retirement of Pioneer Global Asset or removal Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). * Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - -------------------------------------------------------------------------------------------------------------------------- Osbert M. Hood Trustee and Serves until President and Chief Executive None (52)** Executive successor trustee Officer, PIM-USA since May Vice President is elected or 2003 (Director since January earlier retirement 2001); President and Director or removal of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. ** Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - --------------------------------------------------------------------------------------------------------------------------
16 PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - -------------------------------------------------------------------------------- POSITIONS HELD NAME AND AGE WITH THE TRUST TERM OF OFFICE PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS HELD FIVE YEARS BY THIS TRUSTEE David R. Bock Trustee since Serves until a Senior Vice President and Chief Director of The **(61) 2005. successor Financial Officer, I-trax, Inc. Enterprise Social 3050 K. Street NW, trustee is elected (publicly traded health care Investment Company Washington, DC or earlier services company) (privately-held 20007 retirement or (2001-present); Managing affordable housing removal. Partner, Federal City Capital finance company); Advisors (boutique merchant Director of New York bank)(1995 -2000; 2002 to Mortgage Trust (publicly 2004); Executive Vice President traded mortgage REIT) and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - -------------------------------------------------------------------------------------------------------------------------- Mary K. Bush (56) Trustee since Serves until President, Bush International Director of Brady 3509 Woodbine 2000. successor trustee (international financial Corporation (industrial Street, is elected or advisory firm) identification and Chevy Chase, MD earlier retirement specialty coated material 20815 or removal products manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - -------------------------------------------------------------------------------------------------------------------------- Margaret B.W. Trustee since Serves until Founding Director, The Winthrop None Graham (57) 2000. successor trustee Group, Inc. (consulting firm); 1001 Sherbrooke is elected or Professor of Management, Faculty Street earlier retirement of Management, McGill West, Montreal, or removal University Quebec, Canada H3A 1G5 - -------------------------------------------------------------------------------------------------------------------------- Marguerite A. Trustee since Serves until President and Chief Executive Director of New America Piret (56) 1995. successor trustee Officer, Newbury, Piret & High Income Fund, One Boston Place, is elected or Company, Inc. (investment Inc. (closed-end 28th Floor, earlier retirement banking firm) investment company) Boston, MA 02108 or removal - -------------------------------------------------------------------------------------------------------------------------- Stephen K. West Trustee since Serves until Senior Counsel, Sullivan & Director, The Swiss (76) 1995. successor trustee Cromwell (law firm) Helvetia Fund, Inc. 125 Broad Street, is elected or (closed-end investment New York, NY 10004 earlier retirement company) and or removal AMVESCAP PLC (investment managers) - -------------------------------------------------------------------------------------------------------------------------- John Winthrop (68) Trustee since Serves until President, John Winthrop & Co., None One North Adgers September, 2000. successor trustee Inc. (private investment firm) Wharf, is elected or Charleston, SC earlier retirement 29401 or removal - --------------------------------------------------------------------------------------------------------------------------
17 PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD NAME AND AGE WITH THE TRUST TERM OF OFFICE PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS HELD FIVE YEARS BY THIS OFFICER Dorothy E. Secretary Serves at the Secretary of PIM-USA; Senior None Bourassa (57) discretion Vice President - Legal of of the Board Pioneer; and Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 - -------------------------------------------------------------------------------------------------------------------------- Christopher J. Assistant Serves at the Assistant Vice President and None Kelley (40) Secretary discretion Senior Counsel of Pioneer since of the Board July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - -------------------------------------------------------------------------------------------------------------------------- David C. Phelan Assistant Serves at the Partner, Wilmer Cutler Pickering None (47) Secretary discretion Hale and Dorr LLP; Assistant of the Board Secretary of all Pioneer Funds since September 2003 - -------------------------------------------------------------------------------------------------------------------------- Vincent Nave (59) Treasurer Serves at the Vice President - Fund None discretion Accounting, Administration and of the Board Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - -------------------------------------------------------------------------------------------------------------------------- Mark E. Bradley Assistant Serves at the Deputy Treasurer of Pioneer None (45) Treasurer discretion since 2004; Treasurer and Senior of the Board Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - -------------------------------------------------------------------------------------------------------------------------- Luis I. Presutti Assistant Serves at the Assistant Vice President - Fund None (39) Treasurer discretion Accounting, Administration of the Board and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - -------------------------------------------------------------------------------------------------------------------------- Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None Treasurer discretion Accounting, Administration of the Board and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - --------------------------------------------------------------------------------------------------------------------------
18 PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD NAME AND AGE WITH THE TRUST TERM OF OFFICE PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS HELD FIVE YEARS BY THIS OFFICER Katharine Kim Assistant Serves at the Fund Administration Manager - None Sullivan (31) Treasurer discretion Fund Accounting, of the Board Administration and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - -------------------------------------------------------------------------------------------------------------------------- Martin J. Wolin Chief Compliance Serves at the Chief Compliance Officer of None (37) Officer discretion Pioneer (Director of Compliance of the Board and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - --------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PIM, Pioneer and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 19 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. 20 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. 21 [LOGO] PIONEER Investments(R) [LOGO] PIONEER INVESTMENTS(R) PIONEER VARIABLE CONTRACTS TRUST PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO -- CLASS II SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Pioneer Papp America-Pacific Rim VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 6 Notes to Financial Statements 10 Report of Independent Registered Public Accounting Firm 13 Trustees, Officers and Service Providers 14 PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT WWW.PIONEERFUNDS.COM. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT HTTP://WWW.SEC.GOV. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] U.S. Common Stocks 95.4% Depositary Receipts for International Stocks 4.6% SECTOR DISTRIBUTION PORTFOLIO (As a percentage of equity holdings) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Information Technology 30.3% Health Care 20.5% Industrials 13.9% Consumer Staples 13.3% Financials 11.7% Consumer Discretionary 7.9% Energy 2.4% FIVE LARGEST HOLDINGS (As a percentage of equity holdings) 1. Medtronic, Inc. 4.79% 2. Johnson & Johnson 4.76 3. General Electric Co. 4.70 4. Expeditors International of Washington, Inc. 4.65 5. Estee Lauder Co. 4.58 The Portfolios is actively managed and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- PRICES AND DISTRIBUTIONS 12/31/04 3/15/04 Net Asset Value per Share $ 10.14 $ 10.00 DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (3/15/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ -- $ -- $ -- - -------------------------------------------------------------------------------- PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO at net asset value, compared to that of the Russell 1000 Growth Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Russell 1000 Growth Index Pioneer Papp America-Pacific Rim VCT Portfolio* 3/31/2004 10000 10000 12/4/2004 10548 10020
The Russell 1000 Growth Index measures the performance of large-cap U.S. growth stocks. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in any Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of December 31, 2004) - -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Fund 1.40% (3/15/04) All total returns shown assume reinvestment of distributions at net asset value. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Please refer to the variable product's annual report for performance that reflects the deduction of the variable products fees and charges. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER PAPP AMERICA-PACIFIC RIM FUND VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004. SHARE CLASS II --------------------------------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 Ending Account Value on 12/31/04 $ 991.20 Expenses Paid During Period* $ 6.65 * Expenses are equal to the Portfolio's annualized expense ratio of 1.33% for Class II shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER PAPP AMERICA-PACIFIC RIM FUND VCT PORTFOLIO Based on a hypothetical 5% per year return before expenses, reflecting the period from July 1, 2004 through December 31, 2004. SHARE CLASS II --------------------------------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,020.36 Expenses Paid During Period* $ 6.75 * Expenses are equal to the Portfolio's annualized expense ratio of 1.33% for Class II, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- A WORD ABOUT RISK: INVESTING IN FOREIGN AND/OR EMERGING MARKETS SECURITIES INVOLVES RISKS RELATING TO INTEREST RATES, CURRENCY EXCHANGE RATES, ECONOMIC, AND POLITICAL CONDITIONS. THE PORTFOLIO INVESTS IN A LIMITED NUMBER OF SECURITIES AND, AS A RESULT, THE PORTFOLIO'S PERFORMANCE MAY BE MORE VOLATILE THAN THE PERFORMANCE OF PORTFOLIO'S HOLDING MORE SECURITIES. INVESTING IN THE SECURITIES OF U.S. ISSUERS WITH SUBSTANTIAL FOREIGN ACTIVITIES INVOLVES MANY OF THE SAME RISKS AS INVESTING IN THE SECURITIES OF FOREIGN ISSUERS. CALL 800-688-9915 OR VISIT WWW.PIONEERFUNDS.COM FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE RETURNS FOR THE PORTFOLIO DO NOT REFLECT THE DEDUCTION OF EXPENSES ASSOCIATED WITH VARIABLE PRODUCTS, SUCH AS MORTALITY AND EXPENSE RISK CHARGES, SEPARATE ACCOUNT CHARGES, AND SALES CHARGES. THESE EXPENSES WOULD REDUCE THE OVERALL RETURNS SHOWN. PERFORMANCE RESULTS REFLECT ANY APPLICABLE EXPENSE WAIVERS IN EFFECT DURING THE PERIODS SHOWN. WITHOUT SUCH WAIVERS PERFORMANCE WOULD BE LOWER. WAIVERS MAY NOT BE IN EFFECT FOR ALL PORTFOLIOS. CERTAIN FEE WAIVERS ARE CONTRACTUAL THROUGH A SPECIFIED PERIOD. OTHERWISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION. With stocks of small or lesser quality companies very much in favor in 2004, large-company growth stocks sat out the market's rally for much of the year. However, as Rosellen Papp, a member of the Portfolio's management team, discusses in the following interview, these out-of-favor, large-capitalization stocks have become quite attractive and may be poised for a turnaround in 2005. Q: HOW DID THE PORTFOLIO PERFORM FOR THE FISCAL YEAR? A: Despite the positive fundamentals underlying the sound, well managed, large-company stocks in your Portfolio, this sector of the equity market posted lackluster returns for the abbreviated fiscal year under review. From the Portfolio's inception on March 15, 2004 through December 31, 2004, the Portfolio's Class II shares returned 1.40% at net asset value. In comparison, the Russell 1000 Growth Index climbed 7.58% for the same period. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: COULD YOU TALK MORE SPECIFICALLY ABOUT WHICH COMPANIES HURT PERFORMANCE FOR THE FISCAL YEAR? A: Certainly. With the exception of Internet companies, technology stocks as a group were out of favor during the fiscal year. Investments in Intel did poorly in 2004 after doubling in price in 2003. Microsoft's stock price ended the year down a bit for the year. However, this growth company paid a special one-time income dividend of $3 per share last fall, which, when factored in, translated into a positive return for the stock for the year. This, in turn, caused the Portfolio to pay an income dividend to our shareowners - the first time since 1997. With the world's population aging, we think the health care sector will be a natural beneficiary. However, pharmaceutical stocks took a hit last fall when Merck (not held by the Portfolio) pulled Vioxx from the market as a result of safety concerns about this blockbuster painkiller. The Portfolio holds Pfizer, which produces a drug called Celebrex in the same Cox-2 inhibitor family, but the FDA has not requested the removal of this painkiller from the market. We will continue to monitor this holding. With the "baby boomers" in their peak saving years, preparing for college costs and retirement, we expect financial services stocks to perform well over time. However, the trend to higher interest rates took a toll on this group during the reporting period, depressing stock prices of financial services companies. We think the Portfolio's financial holdings were unjustly targeted, especially State Street Corp., which rallied strongly during the fourth quarter of 2004. Q: COULD YOU MENTION A COUPLE OF INVESTMENTS THAT HELPED PERFORMANCE? A: Expeditors International of Washington, Inc. is an international airfreight forwarding company that is profiting from increased trade volume between Asia and the rest of the globe. This company experienced strong revenue growth in 2004 due in large part to its China-to-Europe and China-to-United States trade routes. Chevron is one of the largest crude oil and liquified natural gas (LNG) producers in the Asian Rim, and its stock appreciated nicely. We think Chevron offers a low risk approach to investing in the energy sector through its historic partnership with China National Offshore Oil Corp to drill off Mainland China. Q: WHAT IS YOUR OUTLOOK FOR 2005? A: Small-capitalization companies completed their sixth straight year of strong returns in 2004. Likewise, value stocks have enjoyed robust performance for the past few years. After such strong performance, many market observers believe that the overlooked, large-capitalization growth companies may be poised for a rally. Large-company technology and pharmaceutical stocks, which floundered in 2004, may offer some of the most compelling investment opportunities in 2005. It'll be critical to be invested in such underappreciated stocks when the market finally turns in their favor, and a recovery begins in earnest. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. 4 PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - -------------------------------------------------------------------------------- SHARES VALUE COMMON STOCKS - 98.2% ENERGY - 2.4% INTEGRATED OIL & GAS - 2.4% 640 ChevronTexaco Corp. $ 33,606 ----------- TOTAL ENERGY $ 33,606 ----------- CAPITAL GOODS - 9.0% ELECTRICAL COMPONENT & EQUIPMENT - 9.0% 900 Emerson Electric Co. $ 63,090 1,800 General Electric Co. 65,700 ----------- $ 128,790 ----------- TOTAL CAPITAL GOODS $ 128,790 ----------- TRANSPORTATION - 4.6% AIR FREIGHT & COURIERS - 4.6% 1,165 Expeditors International of Washington, Inc. $ 65,100 ----------- TOTAL TRANSPORTATION $ 65,100 ----------- MEDIA - 4.5% ADVERTISING - 4.5% 1,170 WPP Group Plc (A.D.R.) $ 63,941 ----------- TOTAL MEDIA $ 63,941 ----------- RETAILING - 3.3% SPECIALTY STORES - 3.3% 1,450 Tiffany & Co. $ 46,357 ----------- TOTAL RETAILING $ 46,357 ----------- FOOD & DRUG RETAILING - 4.4% FOOD RETAIL - 4.4% 900 Wm. Wrigley Jr. Co. $ 62,271 ----------- TOTAL FOOD & DRUG RETAILING $ 62,271 ----------- HOUSEHOLD & PERSONAL PRODUCTS - 8.7% HOUSEHOLD PRODUCTS - 8.7% 1,170 Colgate-Palmolive Co. $ 59,857 1,400 Estee Lauder Co. 64,078 ----------- $ 123,935 ----------- TOTAL HOUSEHOLD & PERSONAL PRODUCTS $ 123,935 ----------- HEALTH CARE EQUIPMENT & SERVICES - 17.7% HEALTH CARE DISTRIBUTORS - 4.7% 1,050 Johnson & Johnson $ 66,591 ----------- HEALTH CARE EQUIPMENT - 9.1% 1,350 Medtronic, Inc. $ 67,055 1,300 Stryker Corp. 62,725 ----------- $ 129,780 ----------- HEALTH CARE SERVICES - 3.9% 2,400 IMS Health, Inc. $ 55,704 ----------- TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 252,075 ----------- PHARMACEUTICALS & BIOTECHNOLOGY - 2.5% PHARMACEUTICALS - 2.5% 1,300 Pfizer, Inc. $ 34,957 ----------- TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 34,957 ----------- DIVERSIFIED FINANCIALS - 8.0% ASSET MANAGEMENT & CUSTODY BANKS - 8.0% 1,200 State Street Corp. $ 58,944 880 T. Rowe Price Associates, Inc. 54,736 ----------- $ 113,680 ----------- TOTAL DIVERSIFIED FINANCIALS $ 113,680 ----------- INSURANCE - 3.5% MULTI-LINE INSURANCE - 3.5% 770 American International Group, Inc. $ 50,566 ----------- TOTAL INSURANCE $ 50,566 ----------- SOFTWARE & SERVICES - 3.9% APPLICATION SOFTWARE - 3.9% 2,100 Microsoft Corp. $ 56,091 ----------- TOTAL SOFTWARE & SERVICES $ 56,091 ----------- TECHNOLOGY HARDWARE & EQUIPMENT - 14.9% COMMUNICATIONS EQUIPMENT - 2.6% 1,900 Cisco Systems, Inc. * $ 36,670 ----------- COMPUTER HARDWARE - 4.8% 442 Hewlett-Packard Co. $ 9,269 600 IBM Corp. 59,148 ----------- $ 68,417 ----------- COMPUTER STORAGE & PERIPHERALS - 2.0% 1,900 EMC Corp.* $ 28,253 ----------- ELECTRONIC MANUFACTURING SERVICES - 5.5% 2,200 Molex, Inc. $ 58,630 729 National Instruments Corp. 19,865 ----------- $ 78,495 ----------- TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 211,835 ----------- SEMICONDUCTORS - 10.9% SEMICONDUCTOR EQUIPMENT - 1.2% 1,000 Applied Materials, Inc. * $ 17,100 ----------- SEMICONDUCTORS - 9.7% 2,500 Intel Corp. $ 58,475 1,100 Linear Technology Corp. 42,635 1,400 Microchip Technology 37,324 ----------- $ 138,434 ----------- TOTAL SEMICONDUCTORS $ 155,534 ----------- TOTAL INVESTMENTS IN SECURITIES - 98.2% (Cost $1,336,778) $ 1,398,738 ----------- OTHER ASSETS AND LIABILITIES - 1.8% $ 25,718 ----------- TOTAL NET ASSETS - 100.0% $ 1,424,456 =========== (A.D.R.) American Depositary Receipt * Non-Income producing security The accompanying notes are an integral part of these financial statements. 5 PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- 3/15/04 TO CLASS II 12/31/04 Net asset value, beginning of period $ 10.00 ------- Increase from investment operations: Net investment income $ 0.05 Net realized and unrealized gain on investments 0.09 ------- Net increase from investment operations $ 0.14 ------- Net increase in net asset value $ 0.14 ------- Net asset value, end of period $ 10.14 ------- Total return* 1.40% Ratio of net expenses to average net assets+ 0.95%** Ratio of net investment income to average net assets+ 1.40%** Portfolio turnover rate 7% Net assets, end of period (in thousands) 1,424 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 15.01%** Net investment loss (12.68)%** Ratios with waives of management fees and assumptions of expenses by PIM and reduction for fees paid indirectly Net expenses 0.95%** Net investment income 1.40%** * Assumes initial investment at net asset value at the beginning of the period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of the period. Portfolio turnover rate is not annualized. ** Annualized. + Ratios with no reduction for fees paid indirectly. 6 The accompanying notes are an integral part of these financial statements. PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (Cost $1,336,778) $ 1,398,738 Cash 88,296 Receivables-- Dividends, interest and foreign taxes withheld 1,102 Due from Pioneer Investment Management, Inc. 6,431 ----------- Total assets $ 1,494,567 ----------- LIABILITIES: Payables-- Investment securities purchased $ 24,330 Fund shares repurchased 573 Due to affiliates 1,967 Accrued expenses 43,241 ----------- Total liabilities $ 70,111 ----------- NET ASSETS: Paid-in capital $ 1,363,484 Undistributed net investment income (loss) 7,000 Accumulated undistributed net realized gain (loss) (7,988) Net unrealized gain (loss) on: Investments 61,960 ----------- Total net assets $ 1,424,456 ----------- NET ASSET VALUE PER SHARE: CLASS II: (No par value, unlimited number of shares authorized) Net assets $ 1,424,456 Shares outstanding 140,432 ----------- Net asset value per share $ 10.14 The accompanying notes are an integral part of these financial statements. 7 PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- FOR THE PERIOD FROM 3/15/04 (COMMENCEMENT OF OPERATIONS) TO 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $29) $ 11,041 Interest 555 --------- Total investment income $ 11,596 --------- EXPENSES: Management fees $ 3,700 Transfer agent fees 1,260 Distribution fees 1,233 Administrative fees 13,875 Custodian fees 10,533 Professional fees 33,930 Printing 9,715 Fees and expenses of nonaffiliated trustees 99 Miscellaneous 165 --------- Total expenses $ 74,510 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (69,824) --------- Net expenses $ 4,686 --------- Net investment income (loss) $ 6,910 --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) from: Investments $ (7,988) --------- $ (7,988) --------- Change in net unrealized gain or loss from: Investments $ 61,960 --------- $ 61,960 --------- Net gain (loss) on investments $ 53,972 ========= Net increase (decrease) in net assets resulting from operations $ 60,882 ========= 8 The accompanying notes are an integral part of these financial statements. PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
FOR THE PERIOD FROM 3/15/04 (COMMENCEMENT OF OPERATIONS) TO 12/31/04 FROM OPERATIONS: Net investment income $ 6,910 Net realized gain (loss) on investments (7,988) Change in net unrealized gain or loss on investments, futures contracts and foreign currency transactions 61,960 ----------- Net increase (decrease) in net assets resulting from operations $ 60,882 ----------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 1,395,044 Cost of shares repurchased (31,470) ----------- Net increase in net assets resulting from Fund share transactions $ 1,363,574 ----------- Net increase in net assets $ 1,424,456 NET ASSETS: End of period $ 1,424,456 =========== Undistributed net investment income (loss), end of period $ 7,000 ===========
The accompanying notes are an integral part of these financial statements. 9 PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Papp America-Pacific Rim VCT Portfolio (the Portfolio), a Portfolio of Pioneer Variable Contracts Trust (the Trust), which is a Delaware statutory trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate diversified portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio)(Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) The Papp America-Pacific Rim VCT Portfolio commenced operations on March 15, 2004. Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of Papp America-Pacific Rim Portfolio is to seek capital appreciation. The financial statements and financial highlights of all other portfolios are presented in separate books. The Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in the preparation of its financial statements which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolio are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 10 PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. B. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2004, Papp America Pacific Rim VCT Portfolio had a capital loss carryforward of $7,988, which will expire in 2012 if not utilized. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis.
UNDISTRIBUTED NET ACCUMULATED INVESTMENT INCOME REALIZED GAIN PORTFOLIO (LOSS) (LOSS) PAID-IN CAPITAL - ----------------------------------------- ----------------- ------------- --------------- Pioneer America-Pacific Rim VCT Portfolio $ 90 $ (0) $ (90) ==== ==== =====
The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004 on a tax basis. There were no distributions paid during the fiscal year ended December 31, 2004. 2004 - -------------------------------------- -------- DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ 7,000 Undistributed long-term gain/ (capital loss carryforward) (7,998) Unrealized appreciation (depreciation) 61,960 -------- Total $ 60,972 ======== C. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the period ended December 31, 2004. Distribution fees are calculated based on the average daily net asset values attributable to Class I and Class II shares of the Portfolio, respectively. D. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the portfolio. Management fees are calculated daily at the following annual rate of 0.75% of the Portfolio's average daily net assets. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $1,542 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 11 PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $135 in transfer agent fees payable to PIMSS at December 31, 2004. 4. DISTRIBUTION PLANS The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares. Included in due to affiliates is $290 payable to PFD at December 31, 2004. 5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ PORTFOLIO TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) - ---------------------------------- ----------- ------------ ------------ -------------- Papp America-Pacific Rim Portfolio $ 1,336,778 $ 80,723 $ (18,763) $ 61,960 =========== ======== ========= ========
6. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the period ended December 31, 2004, were $1,389,018 and $44,253, respectively. 7. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: PAPP AMERICA-PACIFIC RIM PORTFOLIO '04 SHARES '04 AMOUNT - ---------------------------------- ---------- ----------- CLASS II: Shares sold 143,712 $ 1,395,044 Reinvestment of distributions -- -- Shares repurchased (3,280) (31,470) ------- ----------- Net increase 140,432 $ 1,363,574 ======= =========== 12 PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES OF THE PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS II SHAREOWNERS OF PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Papp America-Pacific Rim VCT Portfolio, one of the portfolios constituting the Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statements of operations and changes in net assets, and the financial highlights, for the period from March 15, 2004 (commencement of operations) to December 31, 2004. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Papp America-Pacific Rim VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations, changes in its net assets, and the financial highlights, for the period from March 15, 2004 (commencement of operations) to December 31, 2004 in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 13 PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the Trust's CUSTODIAN operations. The Trust's Trustees and officers are listed below, together Brown Brothers Harriman & Co. with their principal occupations during the past five years. Trustees who are interested persons of the Portfolio within the meaning of the INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Investment Company Act of 1940 are referred to as Interested Trustees. Ernst & Young LLP Trustees who are not interested persons of the Trust are referred to as Independent Trustees. Each of the Trustees serves as a trustee of each PRINCIPAL UNDERWRITER of the 73 U.S. registered investment portfolios for which Pioneer Pioneer Funds Distributor, Inc. Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Trusts"). The address for all Interested Trustees and all officers of the Portfolio is 60 State Street, Boston, Massachusetts 02109. LEGAL COUNSEL The Trust's statement of additional information provides more detailed Wilmer Cutler Pickering Hale and Dorr LLP information regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-225-6292. SHAREOWNER SERVICES AND TRANSFER Proxy Voting Policies and Procedures of the Trust are available without Pioneer Investment Management Shareholder Services, Inc. charge, upon Agent request, by calling our toll free number (1-800-225-6292). This information is also available online at pioneerfunds.com.
- -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE John F. Cogan, Jr. Chairman of the Serves until Trustee and President Serves Director of Harbor (78)* Board, Trustee successor trustee until retirement or removal; Global Company, Ltd. and President is elected or Deputy Chairman and a Director earlier retirement of Pioneer Global Asset or removal Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin) President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------ Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive None Executive Vice successor trustee Officer, PIM-USA since May 2003 President is elected or (Director since January 2001); earlier retirement President and Director of or removal Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------
14 PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE David R. Bock **(61) Trustee since Serves until a Senior Vice President and Chief Director of The 3050 K. Street NW, 2005. successor trustee Financial Officer, I-trax, Inc. Enterprise Social Washington, DC 20007 is elected or (publicly traded health care Investment Company earlier retirement services company) (privately-held or removal. (2001-present); Managing Partner, affordable housing Federal City Capital Advisors finance company); (boutique merchant bank) (1995-2000; Director of New York 2002 to 2004); Executive Vice Mortgage Trust President and Chief Financial Officer, (publicly traded mortgage REIT) Pedestal Inc. (internet-based mortgage trading company) 2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Mary K. Bush (56) Trustee since Serves until President, Bush International Director of Brady 3509 Woodbine Street, 2000. successor trustee (international financial Corporation (industrial Chevy Chase, MD 20815 is elected or advisory firm) identification and earlier retirement specialty coated or removal material products manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - ------------------------------------------------------------------------------------------------------------------------------------ Margaret B.W. Trustee since Serves until Founding Director, The Winthrop None Graham (57) 2000. successor trustee Group, Inc. (consulting firm); 1001 Sherbrooke is elected or Professor of Management, Faculty Street West, earlier retirement of Management, McGill University Montreal, Quebec, or removal Canada H3A 1G5 - ------------------------------------------------------------------------------------------------------------------------------------ Marguerite A. Trustee since Serves until President and Chief Executive Director of New Piret (56) 1995. successor trustee Officer, Newbury, Piret & Company, America High Income One Boston Place, is elected or Inc. (investment banking firm) Fund, Inc. (closed-end 28th Floor, earlier retirement investment company) Boston, MA 02108 or removal - ------------------------------------------------------------------------------------------------------------------------------------ Stephen K. West (76) Trustee since Serves until Senior Counsel, Sullivan & Director, The Swiss 125 Broad Street, 1995. successor trustee Cromwell (law firm) Helvetia Fund, Inc. New York, NY 10004 is elected or (closed-end investment earlier retirement company) and AMVESCAP or removal PLC (investment managers) - ------------------------------------------------------------------------------------------------------------------------------------ John Winthrop (68) Trustee since Serves until President, John Winthrop & Co., None One North Adgers September 2000. successor trustee Inc. (private investment firm) Wharf, is elected or Charleston, SC 29401 earlier retirement or removal - ------------------------------------------------------------------------------------------------------------------------------------
15 Pioneer Papp America-Pacific Rim VCT Portfolio - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS OFFICER Dorothy E. Bourassa Secretary Serves at the Secretary of PIM-USA; Senior None (57) discretion of the Vice President - Legal of Board Pioneer; and Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Christopher J. Assistant Serves at the Assistant Vice President and None Kelley (40) Secretary discretion of the Senior Counsel of Pioneer since Board July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering None Secretary discretion of the Hale and Dorr LLP; Assistant Board Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Vincent Nave (59) Treasurer Serves at the Vice President - Fund None discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ------------------------------------------------------------------------------------------------------------------------------------ Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer None Treasurer discretion of the since 2004; Treasurer and Senior Board Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None Treasurer discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None Treasurer discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - ------------------------------------------------------------------------------------------------------------------------------------
16 PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE Katharine Kim Assistant Serves at the Fund Administration Manager - None Sullivan (31) Treasurer discretion of the Fund Accounting, Administration Board and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Martin J. Wolin (37) Chief Serves at the Chief Compliance Officer of None Compliance discretion of the Pioneer (Director of Compliance Officer Board and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 17 [LOGO] PIONEER INVESTMENTS(R) [LOGO] PIONEER INVESTMENTS(R) PIONEER VARIABLE CONTRACTS TRUST PIONEER SMALL CAP VALUE VCT PORTFOLIO -- CLASS II SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Pioneer Small Cap Value VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 9 Notes to Financial Statements 13 Report of Independent Registered Public Accounting Firm 17 Trustees, Officers and Service Providers 18 PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT www.pioneerfunds.com. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT http://www.sec.gov. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] U.S. Common Stocks 89.9% Temporary Cash Investment 4.1% Depositary Receipts for International Stocks 3.4% International Common Stocks 1.8% Exchange Traded Fund 0.8% SECTOR DISTRIBUTION (As a percentage of equity holdings) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Financials 28.4% Industrials 18.6% Consumer Discretionary 10.2% Health Care 9.0% Information Technology 8.6% Materials 8.0% Energy 7.5% Utilities 4.6% Consumer Staples 4.2% Telecommunication Services 0.9% FIVE LARGEST HOLDINGS (As a percentage of equity holdings) 1. Insight Enterprises, Inc. 2.26% 2. Southwestern Energy Co. 2.05 3. PacifiCare Health Systems 1.83 4. Pediatrix Medical Group, Inc. 1.79 5. Wabtec Corp. 1.75 The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- PRICES AND DISTRIBUTIONS 12/31/04 12/31/03 Net Asset Value per Share $ 14.95 $ 12.47 DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ -- $ -- $ -- - -------------------------------------------------------------------------------- PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in PIONEER SMALL CAP VALUE VCT PORTFOLIO at net asset value, compared to that of the Russell 2000 Value Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Pioneer Small Cap Value VCT Portfolio Russell 2000 Value Index 11/01 10000 10000 10572 10612 12/02 8980 9400 12132 13727 12/04 14545 16781 Index comparison begins 11/30/01. The Russell 2000 Value Index measures the performance of U.S. small-cap value stocks. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004) - -------------------------------------------------------------------------------- NET ASSET VALUE - -------------------------------------------------------------------------------- Life-of-Class 13.62% (11/8/01) 1 Year 19.89 All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS.Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER SMALL CAP VALUE VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,112.59 $ 1,111.53 Expenses Paid During Period* $ 6.60 $ 7.90 * Expenses are equal to the Portfolio's annualized expense ratio of 1.24% and 1.49% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER SMALL CAP VALUE VCT PORTFOLIO Based on a hypothetical 5% return per year before expenses, reflecting the period from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,018.85 $ 1,017.39 Expenses Paid During Period* $ 6.30 $ 7.55 * Expenses are equal to the Portfolio's annualized expense ratio of 1.24% and 1.49% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- A WORD ABOUT RISK: INVESTING IN SMALL COMPANIES MAY OFFER THE POTENTIAL FOR HIGHER RETURNS, BUT THESE COMPANIES ARE ALSO SUBJECT TO GREATER SHORT-TERM PRICE FLUCTUATIONS THAN LARGER, MORE ESTABLISHED COMPANIES. CALL 800-688-9915 OR VISIT www.pioneerfunds.com FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PER FORMANCE DATA QUOTED. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE RETURNS FOR THE PORTFOLIO DO NOT REFLECT THE DEDUCTION OF EXPENSES ASSOCIATED WITH VARIABLE PRODUCTS, SUCH AS MORTALITY AND EXPENSE RISK CHARGES, SEPARATE ACCOUNT CHARGES, AND SALES CHARGES. THESE EXPENSES WOULD REDUCE THE OVERALL RETURNS SHOWN. PERFORMANCE RESULTS REFLECT ANY APPLICABLE EXPENSE WAIVERS IN EFFECT DURING THE PERIODS SHOWN. WITHOUT SUCH WAIVERS PERFORMANCE WOULD BE LOWER. WAIVERS MAY NOT BE IN EFFECT FOR ALL PORTFOLIOS. CERTAIN FEE WAIVERS ARE CONTRACTUAL THROUGH A SPECIFIED PERIOD. OTHER WISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION. Successful stock selection among energy, transportation and health care companies helped Pioneer Small Cap Value VCT Portfolio perform well over the past 12 months. In the following discussion, portfolio manager David Adams and assistant portfolio manager Jack McPherson review the economic background and detail some of the steps they took to bolster Portfolio performance. Q: HOW DID THE PORTFOLIO PERFORM OVER THIS PERIOD? A. For the twelve-month period ended December 31, 2004, Class II shares of Pioneer Small Cap Value VCT Portfolio returned 19.89% at net asset value. In comparison, the Russell 2000 Value Index, the Fund's benchmark, returned 22.25%. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: WHAT WAS THE INVESTMENT BACKGROUND FOR SMALL-CAP VALUE STOCKS OVER THIS PERIOD? A. Value issues - those stocks that are selling at a significant discount to our estimation of their intrinsic value - were leaders within this small-cap universe for the full 12-month period despite periods of outperformance by growth stocks. Strong job creation in the spring raised fears of rising interest rates, driving down financial and other traditional value sectors seen as vulnerable to rising rates. Value issues rebounded sharply over the summer as investors positioned their portfolios more defensively during the runup to the presidential election. With the election decided, growth sectors and a smattering of lower quality issues moved higher in November. But the gains recorded between June and August were enough to position value stocks significantly ahead for the period. Q: WHICH AREAS OF THE PORTFOLIO HAD THE GREATEST IMPACT ON RESULTS? A. As energy prices rose, we maintained a heavily overweighted position among energy issues compared to the benchmark. That, plus sharp gains by a number of our selections, made the energy sector the biggest contributor to strong returns. Southwestern Energy, an Arkansas-based exploration and production company, capitalized on high prices by expanding production at existing operating fields and advancing development of more recently discovered reserves. Massey Energy, an Appalachian coal company, saw prices for the metallurgical coal used in steel manufacturing increase sharply for the first time in decades, driven by unprecedented demand from China and elsewhere. Illustrating how our patient, value-focused style is designed to work, we were rewarded this year for our purchase of Swift Energy, a longer-term holding. Swift has stabilized its troubled New Zealand operations and increased oil and gas production from its key Lake Washington reserves. We took some profits in Swift, as continued good news pushed its price higher. Increasing global oil consumption aided results at Stelmar Shipping, which saw strong demand for its fleet of modern, doublehulled tankers. Stelmar has also been approached by potential acquirers. Genesee and Wyoming, which acquires short-line trackage from larger railroads, chiefly in the U.S. and Australia, benefited from expanded shipping volumes of coal and grains. Forward Air, a broker of shipping services for corporations, increased its market share as economic expansion heightened demand for cost-efficient transportation management. Our large exposure to health care services was another positive. Pacificare benefited from federal incentives aimed at steering Medicare patients to managed care plans. Pacificare, the market leader, is also recovering from operational problems, another reason its stock has moved higher. The migration of patients to managed care programs also aided Amerigroup, a large provider of health care programs for beneficiaries of Medicare and other public assistance programs. Shares of Chemed rose when it acquired full ownership of Vitas, a hospice company. Vitas is expected to gain from regulations favoring home care for terminally ill Medicare patients, instead of costly hospital stays. Our underweight position in real estate investment trusts and other interest rate-sensitive financial sectors, also helped returns. Q: WHAT AREAS HELD BACK PERFORMANCE? A. Technology stocks suffered from spotty business conditions. Orders shrank for Remec's telecommunication equipment, but we have retained our commitment because the potential sale of Remec's defense business may enhance the value of the telecom division. Advanced Energy and Applied Films, manufacturers of semiconductor capital equipment, were hurt by uncertain demand for new manufacturers' facilities. Insight Enterprises, a direct distributor of information technology products and services, was an exception. Improving fundamentals and a modest upturn in personal and corporate IT spending boosted Insight's stock. Graftech International slumped following disappointing third quarter earnings. Graftech may not have been aggressive enough in negotiating 2005 contracts for its graphite electrodes, used in steel making. We added to holdings when shares fell, because we think investor reaction has been overblown. Rewards Network, which markets restaurant and other discount programs to consumers, continued to disappoint as skepticism grew over its hotel initiatives and its ability to sign up more restaurants. Q: WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND THE MARKETS? A. Overall, we think the economic outlook is favorable, with slow, steady growth and rising interest rates a likely scenario. But the stock market may already have taken that outlook into account; the markets enjoyed a strong run over the summer and moved higher once again in November. The rise in small-cap value stocks has been exceptional, implying that returns could be more modest over the next several months. This increases the challenge for investors like us to find good long-term values in the marketplace. However, our value methodology helps us to find reasonably priced stocks throughout the market cycle. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. 4 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - -------------------------------------------------------------------------------- SHARES VALUE COMMON STOCKS - 90.2% ENERGY - 6.9% OIL & GAS DRILLING - 2.3% 1,525 Atwood Oceanics, Inc.* $ 79,453 26,736 Key Energy Services, Inc.* 315,485 14,500 Todco* $ 267,090 ------------ $ 662,028 ------------ OIL & GAS EQUIPMENT & SERVICES - 2.2% 14,200 Gulfmarkt Offshore, Inc.* $ 316,234 10,240 Maverick Tube Corp.* 310,272 ------------ $ 626,506 ------------ OIL & GAS EXPLORATION & PRODUCTION - 2.4% 5,900 Penn Virginia Corp. $ 239,363 5,395 Swift Energy Co.* 156,131 7,769 Unit Corp.* 296,853 ------------ $ 692,347 ------------ TOTAL ENERGY $ 1,980,881 ------------ MATERIALS - 7.2% DIVERSIFIED METALS & MINING - 1.2% 9,914 Massey Energy Co. $ 346,494 ------------ GOLD - 1.0% 7,350 Glamis Gold, Ltd.* $ 126,126 24,300 IAMGOLD Corp. 160,623 ------------ $ 286,749 ------------ METAL & GLASS CONTAINERS - 0.8% 5,137 Jarden Corp.* $ 223,151 ------------ PAPER PRODUCTS - 1.8% 16,193 Domtar, Inc. $ 195,450 11,400 Flowserve Corp.* 313,956 ------------ $ 509,406 ------------ PRECIOUS METALS & MINERALS - 0.2% 28,125 Cambior, Inc.* $ 75,094 ------------ SPECIALTY CHEMICALS - 0.4% 3,875 Great Lakes Chemical Corp. $ 110,399 ------------ STEEL - 1.9% 3,575 Carpenter Technology $ 208,995 34,893 Graftech International, Ltd.* 330,088 ------------ $ 539,083 ------------ TOTAL MATERIALS $ 2,090,376 ------------ CAPITAL GOODS - 8.1% AEROSPACE & DEFENSE - 0.2% 4,875 Intrado, Inc.* $ 58,988 ------------ CONSTRUCTION, FARM MACHINERY & HEAVY TRUCKS - 1.6% 21,575 Wabtec Corp. $ 459,979 ------------ CONSTRUCTION & ENGINEERING - 1.1% 5,070 Granite Construction, Inc. $ 134,862 7,825 Insituform Technologies, Inc.* 177,393 ------------ $ 312,255 ------------ ELECTRICAL COMPONENTS & EQUIPMENT - 0.7% 23,479 Power-One, Inc.* $ 209,433 ------------ INDUSTRIAL CONGLOMERATES - 1.5% 20,760 Cornell Co., Inc.* $ 315,137 7,796 NN, Inc. 102,985 ------------ $ 418,122 ------------ INDUSTRIAL MACHINERY - 1.9% 5,687 Joy Global, Inc. $ 246,986 3,125 Kaydon Corp. 103,188 1,894 Nacco Industries, Inc. 199,628 ------------ $ 549,802 ------------ TRADING COMPANIES & DISTRIBUTORS - 1.1% 11,830 Applied Industrial Technologies, Inc. $ 324,128 ------------ TOTAL CAPITAL GOODS $ 2,332,707 ------------ COMMERCIAL SERVICES & SUPPLIES - 5.6% DATA PROCESSING SERVICES - 0.4% 10,000 Gartner Group, Inc.* $ 124,600 ------------ DIVERSIFIED COMMERCIAL SERVICES - 4.1% 5,878 Chemed Corp. $ 394,473 18,400 Central Parking Corp. 278,760 14,335 Profit Recovery Group International* 72,105 27,255 Rent-Way, Inc.* (a) 218,313 8,100 Watson Wyatt & Co. Holdings 218,295 ------------ $ 1,181,946 ------------ EMPLOYMENT SERVICES - 1.1% 36,400 On Assignment, Inc.* $ 188,916 5,670 Korn/Ferry International* 117,653 ------------ $ 306,569 ------------ TOTAL COMMERCIAL SERVICES & SUPPLIES $ 1,613,115 ------------ TRANSPORTATION - 3.3% MARINE - 0.8% 2,400 Arlington Tankers, Ltd.* $ 55,080 3,677 Stelmar Shipping, Ltd. 175,430 ------------ $ 230,510 ------------ RAILROADS - 1.3% 13,043 Genesee & Wyoming, Inc.* $ 365,334 The accompanying notes are an integral part of these financial statements. 5 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- SHARES VALUE TRUCKING - 1.2% 16,775 Central Freight Lines, Inc.* $ 105,683 3,968 Dollar Thrifty Automotive Group* 119,834 2,800 Forward Air Corp.* 125,160 ------------ $ 350,677 ------------ TOTAL TRANSPORTATION $ 946,521 ------------ AUTOMOBILES & COMPONENTS - 0.6% AUTO PARTS & EQUIPMENT - 0.6% 10,395 Federal Signal Corp. $ 183,576 ------------ TOTAL AUTOMOBILES & COMPONENTS $ 183,576 ------------ CONSUMER DURABLES & APPAREL - 1.1% APPAREL, ACCESSORIES & LUXURY GOODS - 1.1% 18,968 Charming Shoppes, Inc.* $ 177,730 4,250 Kellwood Co. 146,625 ------------ $ 324,355 ------------ TOTAL CONSUMER DURABLES & APPAREL $ 324,355 ------------ HOTELS, RESTAURANTS & LEISURE - 0.7% HOTELS, RESORTS & CRUISE LINES - 0.1% 11,500 Jameson Inns, Inc.* $ 22,655 ------------ RESTAURANTS - 0.6% 9,619 O'Charley's, Inc.* $ 188,051 ------------ TOTAL HOTELS, RESTAURANTS & LEISURE $ 210,706 ------------ MEDIA - 0.5% ADVERTISING - 0.2% 6,566 EMAK Worldwide, Inc.* $ 65,660 ------------ PUBLISHING - 0.3% 7,340 Advanced Marketing Services, Inc. $ 73,840 ------------ TOTAL MEDIA $ 139,500 ------------ RETAILING - 6.4% APPAREL RETAIL - 0.8% 5,295 Stage Stores, Inc.* $ 219,848 ------------ CATALOG RETAIL - 2.1% 28,975 Insight Enterprises, Inc.* $ 594,567 ------------ COMPUTER & ELECTRONICS RETAIL - 0.4% 16,750 Tweeter Home Entertainment Group, Inc.* $ 114,738 ------------ SPECIALTY STORES - 3.1% 7,075 Claire's Stores, Inc. $ 150,344 5,052 Guitar Center, Inc.* 266,190 23,407 Hancock Fabrics, Inc. 242,731 6,348 School Specialty, Inc.* 244,779 ------------ $ 904,044 ------------ TOTAL RETAILING $ 1,833,197 ------------ FOOD & DRUG RETAILING - 1.9% FOOD DISTRIBUTORS - 0.6% 12,050 B & G Foods, Inc. $ 180,509 ------------ FOOD RETAIL - 1.3% 8,808 Fresh Del Monte Produce, Inc. $ 260,805 11,625 Wild Oats Markets, Inc.* 102,416 ------------ $ 363,221 ------------ TOTAL FOOD & DRUG RETAILING $ 543,730 ------------ FOOD, BEVERAGE & TOBACCO - 0.2% PACKAGED FOODS & MEATS - 0.2% 1,925 American Italian Pasta Co. (a) $ 44,756 ------------ TOTAL FOOD, BEVERAGE & TOBACCO $ 44,756 ------------ HOUSEHOLD & PERSONAL PRODUCTS - 1.7% HOUSEHOLD PRODUCTS - 1.3% 15,279 Nu Skin Enterprises, Inc. $ 387,781 ------------ PERSONAL PRODUCTS - 0.4% 4,825 NBTY, Inc.* $ 115,848 ------------ TOTAL HOUSEHOLD & PERSONAL PRODUCTS $ 503,629 ------------ HEALTH CARE EQUIPMENT & SERVICES - 7.6% HEALTH CARE DISTRIBUTORS - 2.3% 4,585 Amerigroup Corp. $ 346,901 12,125 Cross Country Healthcare, Inc.* (a) 219,220 3,475 Chattem, Inc.* 115,023 ------------ $ 681,144 ------------ HEALTH CARE EQUIPMENT - 0.5% 3,000 Analogic Corp. $ 134,370 ------------ HEALTH CARE FACILITIES - 0.9% 3,350 Sunrise Senior Living, Inc.* (a) $ 155,306 2,783 Triad Hospitals, Inc.* 103,555 ------------ $ 258,861 ------------ HEALTH CARE SERVICES - 2.2% 7,327 Pediatrix Medical Group, Inc.* $ 469,294 8,275 Providence Service Corp.* 173,527 ------------ $ 642,821 ------------ MANAGED HEALTH CARE - 1.7% 8,530 PacifiCare Health Systems* $ 482,116 ------------ TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 2,199,312 ------------ PHARMACEUTICALS & BIOTECHNOLOGY - 0.5% BIOTECHNOLOGY - 0.5% 17,655 Kendle International, Inc.* $ 155,364 ------------ TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 155,364 ------------ 6 The accompanying notes are an integral part of these financial statements. PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SHARES VALUE BANKS - 8.7% DIVERSIFIED BANKS - 3.9% 4,131 Banner Corp. $ 128,846 15,230 BankAtlantic Bancorp, Inc. 303,077 1,100 Community Bancorp* 33,660 11,050 Provident Financial Services, Inc. 214,039 20,325 Texas Capital Bancshares, Inc.* 439,427 ------------ $ 1,119,049 ------------ REGIONAL BANKS - 4.0% 7,000 Alliance Bankshares Corp.* $ 108,850 27,425 Cardinal Financial Corp.* 305,789 3,875 City National Corp. 273,769 1,775 Irwin Financial Corp. 50,392 23,150 Sterling Bancshares, Inc. 330,351 1,705 Whitney Holding Corp. 76,708 ------------ $ 1,145,859 ------------ THRIFTS & MORTGAGE FINANCE - 0.8% 3,475 BankUnited Financial Corp.* $ 111,026 9,475 First Niagara Financial Group, Inc. 132,176 ------------ $ 243,202 ------------ TOTAL BANKS $ 2,508,110 ------------ DIVERSIFIED FINANCIALS - 6.7% CONSUMER FINANCE - 0.9% 25,856 Medallion Financial Corp. $ 250,803 ------------ CONSUMER FINANCE - 1.4% 7,025 Advanta Corp. $ 158,906 7,478 Advanta Corp. (Class B) 181,491 11,000 Rewards Network, Inc.* (a) 77,000 ------------ $ 417,397 ------------ INVESTMENT BANKING & BROKERAGE - 2.9% 7,000 A.G. Edwards, Inc. $ 302,470 23,689 Apollo Investment Corp. 357,704 4,050 Piper Jaffray Co.* 194,198 ------------ $ 854,372 ------------ SPECIALIZED FINANCE - 1.5% 10,225 Assured Guaranty, Ltd. $ 201,126 5,843 Financial Federal Corp.* 229,046 ------------ $ 430,172 ------------ TOTAL DIVERSIFIED FINANCIALS $ 1,952,744 ------------ INSURANCE - 3.7% INSURANCE BROKERS - 0.2% 1,800 Platinum Underwriter Holdings, Ltd. $ 55,980 ------------ PROPERTY & CASUALTY INSURANCE - 2.9% 3,825 American Safety Insurance Group, Ltd.* $ 62,501 6,826 IPC Holdings, Ltd. 296,999 27,525 Quanta Capital Holdings (144A)* 253,781 2,925 RLI Corp. 121,592 2,525 Selective Insurance Group, Inc. (a) 111,706 ------------ $ 846,579 ------------ REINSURANCE - 0.6% 6,950 Odyssey Re Holdings, Corp. (a) $ 175,210 ------------ TOTAL INSURANCE $ 1,077,769 ------------ REAL ESTATE - 5.7% REAL ESTATE MANAGEMENT & DEVELOPMENT - 0.8% 3,875 Corrections Corp. of America* $ 156,744 2,626 Levitt Corp. 80,277 ------------ $ 237,021 ------------ REAL ESTATE INVESTMENT TRUSTS - 4.9% 9,913 BioMed Property Trust, Inc. $ 220,168 10,650 Capital Trust, Inc. 327,062 1,928 Entertainment Properties Trust 85,892 18,425 Feldman Mall Properties, Inc.* (a) 239,709 15,915 Provident Senior Living* 254,640 6,350 Saxon Capital, Inc. 152,337 4,271 Universal Health Realty, Inc. 137,227 ------------ $ 1,417,035 ------------ TOTAL REAL ESTATE $ 1,654,056 ------------ SOFTWARE & SERVICES - 4.2% APPLICATION SOFTWARE - 0.8% 13,779 SPSS, Inc.* $ 215,504 ------------ DATA PROCESSING & OUTSOURCED SERVICES - 0.7% 16,142 Pegusus Systems, Inc.* $ 203,389 ------------ INTERNET SOFTWARE & SERVICES - 1.2% 7,625 Internet Security Systems, Inc.* $ 177,281 12,275 PEC Solutions, Inc.* 173,937 ------------ $ 351,218 ------------ SYSTEMS SOFTWARE - 1.5% 24,550 Borland Software Corp.* $ 286,744 7,025 Sybase, Inc.* 140,149 ------------ $ 426,893 ------------ TOTAL SOFTWARE & SERVICES $ 1,197,004 ------------ TECHNOLOGY HARDWARE & EQUIPMENT - 3.1% COMMUNICATIONS EQUIPMENT - 1.9% 4,575 Black Box Corp. $ 219,692 47,375 Remec, Inc.* 341,574 ------------ $ 561,266 ------------ The accompanying notes are an integral part of these financial statements. 7 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- SHARES VALUE COMPUTER STORAGE & PERIPHERALS - 0.3% 4,425 Electronics For Imaging, Inc.* $ 77,039 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.4% 11,425 Planar Systems, Inc.* $ 128,303 ------------ TECHNOLOGY DISTRIBUTORS - 0.5% 3,075 Tech Data Corp.* $ 139,605 ------------ TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 906,213 ------------ SEMICONDUCTORS - 0.6% SEMICONDUCTOR EQUIPMENT - 0.3% 3,593 Advanced Energy Industries, Inc.* $ 32,804 2,837 Brooks Automations, Inc.* 48,853 ------------ $ 81,657 ------------ SEMICONDUCTORS - 0.3% 9,370 HI/FN, Inc.* $ 86,391 ------------ TOTAL SEMICONDUCTORS $ 168,048 ------------ TELECOMMUNICATION SERVICES - 0.8% WIRELESS TELECOM SERVICES - 0.8% 26,003 Boston Communications Group, Inc.* $ 240,268 ------------ TOTAL TELECOMMUNICATION SERVICES $ 240,268 ------------ UTILITIES - 4.2% GAS UTILITIES - 3.5% 5,600 AGL Resources, Inc. $ 186,144 6,505 People's Energy Corp. 285,895 10,649 Southwestern Energy Co.* 539,787 ------------ $ 1,011,826 ------------ MULTI-UTILITIES & UNREGULATED POWER - 0.5% 2,350 Energen Corp. $ 138,533 ------------ UTILITIES - 0.2% 1,625 UGI Corp. $ 66,479 ------------ TOTAL UTILITIES $ 1,216,838 ------------ TOTAL COMMON STOCKS (Cost $20,981,073) $ 26,022,775 ------------ EXCHANGE TRADED FUND - 0.8% 1,150 iShares Russell 2000 Value ETF (a) $ 221,904 ------------ TOTAL EXCHANGE TRADED FUND (Cost $162,579) $ 221,904 ------------ TEMPORARY CASH INVESTMENT - 3.9% SECURITY LENDING COLLATERAL - 3.9% 1,134,938 Securities Lending Investment Fund, 2.18% $ 1,134,938 ------------ TOTAL TEMPORARY CASH INVESTMENT (Cost $1,134,938) $ 1,134,938 ------------ TOTAL INVESTMENTS IN SECURITIES - 94.9% (Cost $22,278,590) $ 27,379,617 ------------ OTHER ASSETS AND LIABILITIES - 5.1% $ 1,458,402 ------------ TOTAL NET ASSETS - 100.0% $ 28,838,019 ============ * Non-income producing security (a) At December 31, 2004, the following securities were out on loan: SHARES SECURITY MARKET VALUE 1,700 American Italian Pasta Co. $ 39,525 3,735 Cross Country Healthcare, Inc.* 67,529 16,500 Feldman Mall Properties, Inc.* 214,500 1,045 iShares Russell 2000 Value (ETF) 201,643 5,320 Odyssey Re Holdings, Corp. 134,117 24,685 Rent-Way, Inc.* 197,727 4,964 Rewards Network, Inc.* 34,748 1,425 Selective Insurance Group, Inc. 63,042 3,110 Sunrise Senior Living, Inc.* 144,180 ----------- TOTAL $ 1,097,011 =========== 8 The accompanying notes are an integral part of these financial statements. PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
YEAR ENDED 5/1/03 TO CLASS II (A) 12/31/04 12/31/03 Net asset value, beginning of period $ 12.47 $ 9.11 -------- ------- Increase (decrease) from investment operations: Net investment loss $ (0.03) $ (0.00) Net realized and unrealized gain on investments and foreign currency transactions 2.51 3.37 -------- ------- Net increase from investment operations $ 2.48 $ 3.36 Distributions to shareowners: Net investment income -- -- Net realized gain -- -- -------- ------- Net increase in net asset value $ 2.48 $ 3.36 ------- ------- Net asset value, end of period $ 14.95 $ 12.47 ======== ======= Total return* 19.89% 36.88% Ratio of net expenses to average net assets+ 1.54% 1.58%** Ratio of net investment loss to average net assets+ (0.41)% (0.15)%** Portfolio turnover rate 36% 74% Net assets, end of period (in thousands) $ 10,845 $ 2,760 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.59% 2.65%** Net investment loss (0.46)% (1.22)%** Ratios with waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.54% 1.58%** Net investment loss (0.41)% (0.15)%**
(a) Class II shares were first publicly offered May 1, 2003. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at the net asset value at the end of each period. ** Annualized + Ratios with no reduction for fee paid indirectly The accompanying notes are an integral part of these financial statements. 9 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $1,097,011) (Cost $22,278,590) $ 27,379,617 Cash 2,653,135 Receivables-- Fund shares sold 70,286 Variation margin 1,125 Dividends, interest and foreign taxes withheld 37,933 Other 2,057 ------------ Total assets $ 30,144,153 ------------ LIABILITIES: Payables-- Fund shares repurchased $ 94,176 Upon return of securities loaned 1,134,938 Due to affiliates 19,919 Accrued expenses 57,101 ------------ Total liabilities $ 1,306,134 ------------ NET ASSETS: Paid-in capital $ 22,990,010 Undistributed net investment income (loss) 260 Accumulated undistributed net realized gain (loss) 713,557 Net unrealized gain (loss) on: Investments 5,101,027 Futures contracts 33,165 ------------ Total net assets $ 28,838,019 ------------ NET ASSET VALUE PER SHARE: CLASS I: No par value (unlimited number of shares authorized) Net assets $ 17,992,938 Shares outstanding 1,197,698 ------------ Net asset value per share $ 15.02 CLASS II: No par value (unlimited number of shares authorized) Net assets $ 10,845,081 Shares outstanding 725,478 ------------ Net asset value per share $ 14.95
10 The accompanying notes are an integral part of these financial statements. PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- YEAR ENDED 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $349) $ 193,923 Interest 20,839 Income on securities loaned, net 2,778 ----------- Total investment income $ 217,540 ----------- EXPENSES: Management fees $ 153,423 Distribution fees (Class II) 15,087 Administrative reimbursements 18,500 Custodian fees 38,476 Professional fees 45,386 Printing expense 11,214 Miscellaneous 1,717 ----------- Total expenses $ 283,803 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (9,953) Less fees paid indirectly (815) ----------- Net expenses $ 273,035 ----------- Net investment income (loss) $ (55,495) ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 1,576,824 Futures contracts 167,366 ----------- $ 1,744,190 ----------- Change in net unrealized gain or (loss) from: Investments $ 2,521,390 Futures contracts 10,731 ----------- $ 2,532,121 ----------- Net gain (loss) on investments, futures contracts and foreign currency transactions $ 4,276,311 =========== Net increase (decrease) in net assets resulting from operations $ 4,220,816 =========== The accompanying notes are an integral part of these financial statements. 11 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ (55,495) $ 2,125 Net realized gain (loss) on investments 1,744,190 (334,168) Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions 2,532,121 3,353,942 ------------ ------------ Net increase (decrease) in net assets resulting from operations $ 4,220,816 $ 3,021,899 ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 14,302,057 $ 15,752,093 Cost of shares repurchased (4,493,153) (10,568,904) ------------ ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ 9,808,904 $ 5,183,189 ------------ ------------ Net increase (decrease) in net assets $ 14,029,720 $ 8,205,088 NET ASSETS: Beginning of year $ 14,808,299 $ 6,603,211 ------------ ------------ End of year $ 28,838,019 $ 14,808,299 ============ ============ Undistributed net investment income (loss), end of year $ 260 $ 3,664 ============ ============ 12 The accompanying notes are an integral part of these financial statements. PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Small Cap Value VCT Portfolio (the Portfolio) a Portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class II shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class II shares only) The Portfolio commenced operations on May 1, 2003. Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of Small Cap Value Portfolio is to seek capital appreciation. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in the preparation of its financial statements, which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolio are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of 13 PIONEER VARIABLE CONTRACTS TRUST PIONEER SMALL CAP VALUE VCT PORTFOLIO - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes withheld on capital gains at the applicable country rates. Small capitalization stocks, while offering the potential for higher returns, such as those in the portfolio may be subject to greater short-term price fluctuations than securities of larger companies. B. FUTURES CONTRACTS The Portfolio may enter into futures transactions to hedge against changes in interest rates, securities prices, and currency rates or to seek to increase total return. Upon entering into a futures contract, the Portfolio is required to deposit with a broker an amount of cash or securities equal to the minimum "initial margin" requirements of the associated futures exchange. Subsequent payments for futures contracts ("variation margin") are paid or received by the Portfolio, depending on the daily fluctuation in the value of the contracts, and are recorded by the Portfolio as unrealized gains or losses. When the contract is closed, the Portfolio realize a gain or loss equal to the difference between the opening and closing value of the contract. The use of futures contracts involves, to varying degrees, elements of market risk which may exceed the amounts recognized by the Portfolio. Changes in the value of the contracts may not directly correlate to the changes in the value of the underlying securities. These risks may decrease the effectiveness of the Portfolio's hedging and trading strategies and potentially result in a loss. As of December 31, 2004, Small Company Portfolio had the following open contracts:
NUMBER OF CONTRACTS SETTLEMENT MARKET UNREALIZED FUTURE CONTRACTS TYPE LONG/(SHORT) MONTH VALUE GAIN/(LOSS) - ------------------------- ------------ ------------ ---------- ----------- ----------- SMALL CAP VALUE PORTFOLIO RUSSELL 2000 5 MARCH 2005 $ 1,634,875 $ 33,165
C. FOREIGN CURRENCY TRANSLATION The books and records of the Portfolio are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent, the net realized gains and losses on foreign currency contracts, disposition of foreign currencies, and the difference between the amount of income accrued and the U.S. dollar actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. D. FORWARD FOREIGN CURRENCY CONTRACTS The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. E. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. 14 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis.
UNDISTRIBUTED ACCUMULATED NET NET INVESTMENT REALIZED PAID-IN PORTFOLIO INCOME (LOSS) GAIN (LOSS) CAPITAL - ------------------------------------- -------------- --------------- --------- Pioneer Small Cap Value VCT Portfolio $ 52,091 $ 6,157 $ (58,248) ======== ======= =========
The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004. There were no distributions paid during the years ended December 31, 2004 and December 31, 2003.
2004 2003 ----------- ----------- DISTRIBUTIONS PAID FROM: Ordinary Income $ -- $ -- Long-Term capital gain -- -- ----------- ---- $ -- $ -- Return of Capital -- -- ----------- ---- Total distributions $ -- $ -- =========== ==== DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ -- Undistributed long-term gain/(Capital loss carryforward) 1,086,729 Unrealized appreciation (depreciation) 4,761,280 ----------- ---- Total $ 5,848,009 =========== ====
The difference between book-basis and tax-basis unrealized appreciation is primarily attributable to the tax deferral of losses on wash sales. F. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of the adjusted net assets at the beginning of the day. Distributions paid by a Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. G. SECURITIES LEADING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the 15 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. H. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the portfolios. Management fees are calculated daily at the following annual rate of 0.75% of the Portfolio's average daily net assets. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $17,466 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $268 in transfer agent fees payable to PIMSS at December 31, 2004. 4. DISTRIBUTION PLANS The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares. Included in due to affiliates is $2,185 payable to PFD at December 31, 2004. 5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------ ------------ ------------ -------------- Small Cap Value Portfolio $ 22,618,337 $ 5,335,071 $ (573,791) $ 4,761,280 ============ =========== ========== ===========
6. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations temporary cash investments for the year ended December 31, 2004, were $16,213,181 and $6,667,416, respectively. 7. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in and capital shares were as follows:
SMALL CAP VALUE PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - ----------------------------- ---------- ------------ ---------- ------------- CLASS II: Shares sold 510,952 $ 6,774,823 1,276,588 $ 13,058,675 Reinvestment of distributions -- -- -- -- Shares repurchased (277,189) (3,672,701) (1,028,432) (10,409,382) -------- ------------ ---------- ------------- Net increase 233,763 $ 3,102,122 248,156 $ 2,649,293 ======== ============ ========== ============= CLASS II: Shares sold 566,136 $ 7,527,234 235,328 $ 2,693,418 Reinvestment of distributions -- -- -- -- Shares repurchased (61,897) (820,452) (14,089) (159,522) -------- ------------ ---------- ------------- Net increase 504,239 $ 6,706,782 221,239 $ 2,533,896 ======== ============ ========== =============
16 PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS II SHAREOWNERS OF PIONEER SMALL CAP VALUE VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Small Cap Value Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust") as of December 31, 2004 and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Small Cap Value VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 17 PIONEER SMALL CAP VALUE VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - -------------------------------------------------------------------------------- INVESTMENT ADVISER TRUSTEES AND OFFICERS Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the Trust's CUSTODIAN operations. The Trust's Trustees and officers are listed below, together Brown Brothers Harriman & Co. with their principal occupations during the past five years. Trustees who are interested persons of the Portfolio within the meaning of the INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Investment Company Act of 1940 are referred to as Interested Trustees. Ernst & Young LLP Trustees who are not interested persons of the Trust are referred to as Independent Trustees. Each of the Trustees serves as a trustee of each of PRINCIPAL UNDERWRITER the 73 U.S. registered investment portfolios for which Pioneer Investment Pioneer Funds Distributor, Inc. Management, Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address for all Interested Trustees and all officers of the Portfolio LEGAL COUNSEL is 60 State Street, Boston, Massachusetts 02109. Wilmer Cutler Pickering Hale and Dorr LLP The Trust's statement of additional information provides more detailed information regarding the Trust's Trustees and is available upon request, SHAREOWNER SERVICES AND TRANSFER without charge, by calling 1-800-225-6292. Pioneer Investment Management Shareholder Services, Inc. Proxy Voting Policies and Procedures of the Trust are available without charge, upon Agent request, by calling our toll free number (1-800-225-6292). This information is also available online at pioneerfunds.com.
- -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE John F. Cogan, Chairman of the Serves until Trustee and President Serves until Director of Harbor Global Jr. (78)* Board, Trustee and successor trustee retirement or removal; Deputy Chairman Company, Ltd. President is elected or and a Director of Pioneer Global Asset earlier retirement Management S.p.A. ("PGAM"); or removal Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). * Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------ Osbert M. Hood Trustee and Serves until President and Chief Executive Officer, None (52)** Executive successor trustee PIM-USA since May 2003 (Director since Vice President is elected or January 2001); President and Director of earlier retirement Pioneer since May 2003; Chairman and or removal Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. ** Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------
18 PIONEER SMALL CAP VALUE VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE David R. Bock Trustee since 2005. Serves until a Senior Vice President and Chief Director of The Enterprise **(61) successor trustee Financial Officer, I-trax, Inc. Social Investment Company 3050 K. Street is elected or (publicly traded health care services (privately-held affordable NW, earlier retirement company) (2001-present); Managing housing finance company); Washington, or removal. Partner, Federal City Capital Advisors Director of New York Mortgage DC 20007 (boutique merchant bank) (1995-2000; Trust (publicly traded 2002 to 2004); Executive Vice President mortgage REIT) and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Mary K. Bush Trustee since Serves until President, Bush International Director of Brady Corporation (56) 3509 2000. successor trustee (international financial advisory firm) (industrial identification and Woodbine is elected or specialty coated material Street, Chevy earlier retirement products manufacturer), Chase, MD or removal Millennium Chemicals, Inc. 20815 (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - ------------------------------------------------------------------------------------------------------------------------------------ Margaret B.W. Trustee since Serves until Founding Director, The Winthrop Group, None Graham (57) 2000. successor trustee Inc. (consulting firm); Professor of 1001 is elected or Management, Faculty of Management, Sherbrooke earlier retirement McGill University Street West, or removal Montreal, Quebec, Canada H3A 1G5 - ------------------------------------------------------------------------------------------------------------------------------------ Marguerite A. Trustee since Serves until President and Chief Executive Officer, Director of New America High Piret (56) 1995. successor trustee Newbury, Piret & Company, Inc. Income Fund, Inc. (closed-end One Boston is elected or (investment banking firm) investment company) Place, earlier retirement 28th Floor or removal Boston, MA 02108 - ------------------------------------------------------------------------------------------------------------------------------------ Stephen K. Trustee since Serves until Senior Counsel, Sullivan & Cromwell (law Director, The Swiss Helvetia West (76) 1995. successor trustee firm) Fund, Inc. (closed-end 125 Broad is elected or investment company) and Street, earlier retirement AMVESCAP PLC (investment New York, or removal managers) NY 10004 - ------------------------------------------------------------------------------------------------------------------------------------ John Winthrop Trustee since Serves until President, John Winthrop & Co., Inc. None (68) One North September, 2000. successor trustee (private investment firm) Adgers Wharf, is elected or Charleston, earlier retirement SC 29401 or removal - ------------------------------------------------------------------------------------------------------------------------------------
19 PIONEER SMALL CAP VALUE VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES,OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS OFFICER Dorothy E. Secretary Serves at the Secretary of PIM-USA; Senior Vice None Bourassa (57) discretion of the President - Legal of Pioneer; and Board Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Christopher J. Assistant Serves at the Assistant Vice President and Senior None Kelley (40) Secretary discretion Counsel of Pioneer since July 2002; Vice of the Board President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ David C. Assistant Serves at the Partner, Wilmer Cutler Pickering Hale None Phelan (47) Secretary discretion and Dorr LLP; Assistant Secretary of all of the Board Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Vincent Nave Treasurer Serves at the Vice President - Fund Accounting, None (59) discretion of the Administration and Custody Services of Board Pioneer and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ------------------------------------------------------------------------------------------------------------------------------------ Mark E. Assistant Serves at the Deputy Treasurer of Pioneer since 2004; None Bradley (45) Treasurer discretion of the Treasurer and Senior Vice President, CDC Board IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Luis I. Assistant Serves at the Assistant Vice President - Fund None Presutti (39) Treasurer discretion of the Accounting, Administration and Custody Board Services of Pioneer and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Gary Sullivan Assistant Serves at the Fund Accounting Manager - Fund None (46) Treasurer discretion of the Accounting, Administration and Custody Board Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - ------------------------------------------------------------------------------------------------------------------------------------
20 PIONEER SMALL CAP VALUE VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS OFFICER Katharine Kim Assistant Serves at the Fund Administration Manager - Fund None Sullivan (31) Treasurer discretion of the Accounting, Administration and Custody Board Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Martin J. Chief Compliance Serves at the Chief Compliance Officer of Pioneer None Wolin (37) Officer discretion of the (Director of Compliance and Senior Board Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 21 [LOGO] PIONEER INVESTMENTS(R) [LOGO] PIONEER INVESTMENTS (R) PIONEER VARIABLE CONTRACTS TRUST PIONEER SMALL COMPANY VCT PORTFOLIO -- CLASS II SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Pioneer Small Company VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 9 Notes to Financial Statements 13 Report of Independent Registered Public Accounting Firm 17 Trustees, Officers and Service Providers 18 PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT www.pioneerfunds.com. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT http://www.sec.gov. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [THE FOLLOWING WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] U.S. Common Stocks 94.8% Temporary Cash Investment 4.1% Depositary Receipts for International Stocks 0.7% International Common Stocks 0.4% SECTOR DISTRIBUTION (As a percentage of equity holdings) [THE FOLLOWING WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Financials 23.3% Industrials 15.5% Information Technology 15.0% Health Care 13.9% Consumer Discretionary 13.7% Materials 7.9% Energy 3.5% Consumer Staples 3.4% Telecommunication Services 1.9% Utilities 1.9% FIVE LARGEST HOLDINGS (As a percentage of equity holdings) 1. Swift Transportation Co., Inc. 1.43% 2. Ruby Tuesday, Inc. 1.11 3. Provident Senior Living 0.96 4. Wind River Systems 0.90 5. People's Energy Corp. 0.88 The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- PRICES AND DISTRIBUTIONS 12/31/04 12/31/03 Net Asset Value per Share $ 12.85 $ 11.35 DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ -- $ -- $ -- - -------------------------------------------------------------------------------- PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in PIONEER SMALL COMPANY VCT PORTFOLIO at net asset value, compared to that of the Russell 2000 Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] - --------------------------------- GROWTH OF $10,000 - --------------------------------- RUSSELL DATE VALUE 2000 1/31/2001 $ 10,000 $ 10,000 $ 10,479 $ 9,741 12/31/2002 $ 8,683 $ 7,747 $ 10,865 $ 11,407 12/31/2004 $ 12,301 $ 13,497 The Russell 2000 Index measures U.S. small-cap stocks. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004) - -------------------------------------------------------------------------------- NET ASSET VALUE - -------------------------------------------------------------------------------- Life-of-Class (1/19/01) 6.56% 1 Year 13.22% All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report for performance that reflects the deduction of the variable product's fee and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all porfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER SMALL COMPANY VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004. SHARE CLASS I II ------------------------------------ ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,067.51 $ 1,067.31 Expenses Paid During Period* $ 6.46 $ 7.63 * Expenses are equal to the Portfolio's annualized expense ratio of 1.24% and 1.47% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER SMALL COMPANY VCT PORTFOLIO Based on a hypothetical 5% return per year before expenses, reflecting the period from July 1, 2004 through December 31, 2004. SHARE CLASS I II ------------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,018.85 $ 1,017.70 Expenses Paid During Period* $ 6.30 $ 7.45 * Expenses are equal to the Portfolio's annualized expense ratio of 1.24% and 1.47% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- A WORD ABOUT RISK: INVESTING IN SMALL COMPANIES MAY OFFER THE POTENTIAL FOR HIGHER RETURNS, BUT THESE COMPANIES ARE ALSO SUBJECT TO GREATER SHORT-TERM PRICE FLUCTUATIONS THAN LARGER, MORE ESTABLISHED COMPANIES. CALL 800-688-9915 OR VISIT www.pioneerfunds.com FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PER FORMANCE DATA QUOTED. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE RETURNS FOR THE PORTFOLIO DO NOT REFLECT THE DEDUCTION OF EXPENSES ASSOCIATED WITH VARIABLE PRODUCTS, SUCH AS MORTALITY AND EXPENSE RISK CHARGES, SEPARATE ACCOUNT CHARGES, AND SALES CHARGES. THESE EXPENSES WOULD REDUCE THE OVERALL RETURNS SHOWN. PERFORMANCE RESULTS REFLECT ANY APPLICABLE EXPENSE WAIVERS IN EFFECT DURING THE PERIODS SHOWN. WITHOUT SUCH WAIVERS PERFORMANCE WOULD BE LOWER. WAIVERS MAY NOT BE IN EFFECT FOR ALL PORTFOLIOS. CERTAIN FEE WAIVERS ARE CONTRACTUAL THROUGH A SPECIFIED PERIOD. OTHER WISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION. In the following discussion, co-managers Diego Franzin and Michael Rega review the performance of Pioneer Small Company VCT Portfolio over the year ended December 31, 2004. Diego and Michael assumed day-to-day investment responsibility for the Portfolio on November 1, 2004. Q: HOW DID PIONEER SMALL COMPANY VCT PORTFOLIO PERFORM OVER THIS PERIOD? A: For the twelve months ended December 31, 2004, Class II shares of the Portfolio returned 13.22% at net asset value. The result trailed the Portfolio's benchmark, the Russell 2000 Index, which returned 18.33% over the same period. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: PLEASE DESCRIBE THE BACKGROUND FOR SMALL-COMPANY STOCKS OVER THIS PERIOD. A: Stocks, including small-caps, treaded water for several months in 2004, held back by concern over the economy, election uncertainty and international tensions. With renewed evidence of continued economic growth, and with the election firmly decided, investors returned to equities in the latter months of the year. Driven by profit growth, small-capitalization stocks outperformed large caps for the sixth consecutive year in 2004, marking the longest stretch of small-cap outperformance since the Russell 2000 Index was launched in 1979. Smaller companies increased operating efficiencies and expanded margins, allowing more of each revenue dollar to reach the bottom line. For four of the last five years, value-oriented smaller stocks were dominant, but growth stocks began catching up late in the year. Q: WHICH STOCKS OR SECTORS INFLUENCED PERFORMANCE FAVORABLY? A: One-time coalmine operator Brink's rose as it continued to work down long-standing pension obligations owed to former employees and their families. Canada-based Alliance Atlantis, whose management team is highly regarded in the industry, enjoyed good results from its various Crime Scene Investigation (CSI) television series. Sales targets in China for Nu Skin's health and beauty products fell behind by a few months; after a brief decline, shares rebounded and added to results for the year. We took profits in Chattem, manufacturers of Gold Bond products, in favor of other opportunities. We also took advantage of higher prices to cut real estate investment trust holdings, adding commercial banks, including Irwin Financial and City National, that appear better positioned to profit as a flattening yield curve squeezes profit margins. Corn Products International, a leading producer of corn syrup, benefited from increased operating efficiencies and the probability of greater access to the large Mexican market. Q: WHICH HOLDINGS HAD A NEGATIVE IMPACT OVER THE PERIOD? A: Unsuccessful stock selection nullified an overweight position in the strong energy sector. Being underweight in technology was beneficial, but choices among industrial, materials and technology issues hurt results. Together, those factors account for much of the Portfolio's underperformance compared with its benchmark. Unifi, a maker of synthetic yarns for apparel and home goods, missed earnings targets due to weak pricing and saw some of its customers move production overseas. Rewards Network, which continues to retool its hotel and restaurant discount programs, fell sharply. Cuts in state and federal educational programs combined with a revamping of the SAT test undercut shares of Princeton Review, a test preparation company. And Plato Learning, which offers computer-based job training, fell after ratcheting back revenue expectations. Q: WHAT IS YOUR CURRENT OUTLOOK, AND HOW ARE YOU POSITIONING THE PORTFOLIO? A: We believe the economic expansion will carry over into 2005 even if interest rates rise further. In addition, energy prices may moderate in the face of adequate supplies. In late 2004, growth stocks appeared exceptionally cheap by some traditional measures, and we believe that growth prospects will eventually be reflected in stock prices. In addition, the best performing growth issues had no earnings at all, a sign that investors were attracted to the notion of growth, independent of other factors. With that scenario in mind, we are tightening the Portfolio's growth focus, broadening sector diversification and increasing the Portfolio's roster of stocks. Attractive sectors include health care, as well as deepwater drilling, where drilling rig utilization rates have moved higher. In technology, software companies may benefit as companies look for productivity-enhancing ways to invest sizeable cash holdings accumulated over recent years. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. 4 PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - -------------------------------------------------------------------------------- SHARES VALUE COMMON STOCKS - 98.4% ENERGY - 3.4% OIL & GAS DRILLING - 0.7% 2,100 Stone Energy Corp.* $ 94,689 ------------ OIL & GAS EQUIPMENT & SERVICES - 0.7% 3,100 Maverick Tube Corp.* $ 93,930 ------------ OIL & GAS EXPLORATION & PRODUCTION - 2.0% 2,925 Forest Oil Corp.* (a) $ 92,781 1,600 Houston Exploration Co.* 90,096 2,703 Spinnaker Exploration Co.* 94,794 ------------ $ 277,671 ------------ TOTAL ENERGY $ 466,290 ------------ MATERIALS - 7.7% ALUMINUM - 0.7% 3,900 Century Aluminum Co.* $ 102,414 ------------ GOLD - 0.5% 11,125 IAMGOLD Corp. $ 73,536 ------------ MATERIALS - 0.4% 625 Mega Blocks* $ 9,928 2,950 Mega Blocks, Inc. (144A)* 46,861 ------------ $ 56,789 ------------ METAL & GLASS CONTAINERS - 0.6% 1,775 Kennametal, Inc. $ 88,342 ------------ PAPER PRODUCTS - 1.4% 3,600 Flowserve Corp.* $ 99,144 5,250 Wausau-Mosinee Paper Corp. 93,765 ------------ $ 192,909 ------------ PRECIOUS METALS & MINERALS - 0.7% 8,500 Stillwater Mining Co.* $ 95,710 ------------ SPECIALTY CHEMICALS - 2.7% 3,700 Cambrex Corp. $ 100,270 3,300 H.B. Fuller Co. 94,083 9,700 PolyOne Corp.* 87,882 8,775 Wellman, Inc. 93,805 ------------ $ 376,040 ------------ STEEL - 0.7% 3,200 NS Group, Inc.* $ 88,960 ------------ TOTAL MATERIALS $ 1,074,700 ------------ CAPITAL GOODS - 6.5% AEROSPACE & DEFENSE - 1.2% 5,600 Hexcel Corp.* $ 81,200 7,300 Orbital Sciences Corp.* (a) 86,359 ------------ $ 167,559 ------------ BUILDING PRODUCTS - 0.7% 5,000 Lennox International, Inc. $ 101,750 ------------ CONSTRUCTION, FARM MACHINERY & HEAVY TRUCKS - 0.7% 1,200 The Toro Co. $ 97,620 ------------ CONSTRUCTION & ENGINEERING - 0.7% 5,500 Perini Corp.* $ 91,795 ------------ ELECTRICAL COMPONENTS & EQUIPMENT - 1.2% 2,900 Acuity Brands, Inc. $ 92,220 2,500 Thomas & Betts Corp.* 76,875 ------------ $ 169,095 ------------ INDUSTRIAL CONGLOMERATES - 1.3% 4,900 Brush Engineered Materials, Inc.* $ 90,650 4,700 Tredegar Corp. 94,987 ------------ $ 185,637 ------------ INDUSTRIAL MACHINERY - 0.7% 2,600 Albany International Corp. $ 91,416 ------------ TOTAL CAPITAL GOODS $ 904,872 COMMERCIAL SERVICES & SUPPLIES - 5.3% DATA PROCESSING SERVICES - 0.7% 7,450 Gartner Group, Inc.* $ 92,827 ------------ COMMERCIAL PRINTING - 0.4% 1,675 John H. Harland Co. $ 60,468 ------------ DIVERSIFIED COMMERCIAL SERVICES - 3.1% 2,301 The Brinks Co. $ 90,936 3,650 Central Parking Corp. 55,298 4,394 FTI Consulting, Inc.* 92,582 2,000 Regis Corp. 92,300 5,900 Tetra Tech, Inc* 98,766 ------------ $ 429,882 ------------ EMPLOYMENT SERVICES - 0.6% 14,700 The Princeton Review, Inc.* $ 90,405 ------------ ENVIRONMENTAL SERVICES - 0.5% 12,275 Newpark Resources, Inc.* $ 63,216 ------------ TOTAL COMMERCIAL SERVICES & SUPPLIES $ 736,798 ------------ TRANSPORTATION - 3.5% AIRLINES - 1.4% 2,800 Alaska Air Group, Inc.* $ 93,772 7,600 ExpressJet Holdings, Inc.* 97,888 ------------ $ 191,660 ------------ TRUCKING - 2.1% 2,600 Overnite Corp. $ 96,824 9,100 Swift Transportation Co., Inc.* 195,468 ------------ $ 292,292 ------------ TOTAL TRANSPORTATION $ 483,952 ------------ The accompanying notes are an integral part of these financial statements. 5 PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- SHARES VALUE AUTOMOBILES & COMPONENTS - 1.3% AUTO PARTS & EQUIPMENT - 0.6% 5,400 Aftermarket Technology Corp.* $ 86,940 ------------ AUTOMOBILE MANUFACTURERS - 0.7% 2,300 Winnebago Industries, Inc.* $ 89,838 ------------ TOTAL AUTOMOBILES & COMPONENTS $ 176,778 ------------ CONSUMER DURABLES & APPAREL - 2.7% APPAREL, ACCESSORIES & LUXURY GOODS - 0.7% 10,100 Charming Shoppes, Inc.* $ 94,637 ------------ FOOTWEAR - 0.7% 3,100 Wolverine World Wide, Inc. $ 97,402 ------------ HOUSEWARES & SPECIALTIES - 0.7% 2,775 Yankee Candle Co. $ 92,075 ------------ LEISURE PRODUCTS - 0.6% 3,900 JAKKS Pacific, Inc.* $ 86,229 ------------ TOTAL CONSUMER DURABLES & APPAREL $ 370,343 ------------ HOTELS, RESTAURANTS & LEISURE - 2.4% LEISURE FACILITIES - 0.6% 4,000 Vail Resorts, Inc.* $ 89,680 ------------ RESTAURANTS - 1.8% 5,800 Ruby Tuesday, Inc. $ 151,264 4,900 The Steak n Shake Co.* 98,392 ------------ $ 249,656 ------------ TOTAL HOTELS, RESTAURANTS & LEISURE $ 339,336 ------------ MEDIA - 2.7% ADVERTISING - 0.7% 1,600 R.H. Donnelley Corp.* $ 94,480 ------------ BROADCASTING & CABLE TELEVISION - 0.6% 6,000 Gray Television, Inc. $ 93,000 ------------ MOVIES & ENTERTAINMENT - 0.7% 3,550 Alliance Atlantis Communications, Inc.* $ 97,554 ------------ PUBLISHING - 0.7% 4,875 Journal Register Co.* $ 94,234 ------------ TOTAL MEDIA $ 379,268 ------------ RETAILING - 5.1% APPAREL RETAIL - 1.9% 3,100 Aeropostale, Inc.* $ 91,233 7,500 Guess?, Inc.* 94,125 6,500 Skechers U.S.A.* 84,240 ------------ $ 269,598 ------------ DISTRIBUTORS - 1.2% 3,200 Beacon Roofing Supply, Inc.* $ 63,552 3,500 Wesco International, Inc.* 103,740 ------------ $ 167,292 ------------ GENERAL MERCHANDISE STORES - 0.6% 3,000 American Greetings Corp. $ 76,050 ------------ INTERNET RETAIL - 0.7% 8,000 Netflix, Inc.* $ 98,640 ------------ SPECIALTY STORES - 0.7% 7,400 Payless ShoeSource, Inc.* $ 91,020 ------------ TOTAL RETAILING $ 702,600 ------------ FOOD & DRUG RETAILING - 1.4% FOOD DISTRIBUTORS - 0.7% 1,939 The J.M. Smucker Co. $ 91,269 ------------ FOOD RETAIL - 0.7% 2,300 Sanderson Farms, Inc. $ 99,544 ------------ TOTAL FOOD & DRUG RETAILING $ 190,813 ------------ FOOD, BEVERAGE & TOBACCO - 0.6% AGRICULTURAL PRODUCTS - 0.6% 1,670 Corn Products International, Inc. $ 89,445 ------------ TOTAL FOOD, BEVERAGE & TOBACCO $ 89,445 ------------ HOUSEHOLD & PERSONAL PRODUCTS - 0.7% HOUSEHOLD PRODUCTS - 0.7% 3,850 Nu Skin Enterprises, Inc. $ 97,713 ------------ TOTAL HOUSEHOLD & PERSONAL PRODUCTS $ 97,713 ------------ HEALTH CARE EQUIPMENT & SERVICES - 9.3% HEALTH CARE DISTRIBUTORS - 0.8% 2,300 United Therapeutics Corp.* $ 103,845 ------------ HEALTH CARE EQUIPMENT - 2.0% 2,475 Haemonetics Corp.* $ 89,620 2,575 PolyMedica Corp. 96,022 3,900 Steris Corp.* 92,508 ------------ $ 278,150 ------------ HEALTH CARE FACILITIES - 1.9% 2,600 Lifepoint Hospitals, Inc.* $ 90,532 2,002 Sunrise Senior Living, Inc.* (a) 92,813 1,900 Universal Health Services, Inc. (Class B) 84,550 ------------ $ 267,895 ------------ HEALTH CARE SERVICES - 3.3% 1,700 Cerner Corp.* (a) $ 90,389 3,300 Lifeline Systems, Inc.* 85,008 1,425 Pediatrix Medical Group, Inc.* 91,271 5,025 Providence Service Corp.* 105,374 4,496 Parexel International Corp.* 91,269 ------------ $ 463,311 ------------ HEALTH CARE SUPPLIES - 0.6% 5,800 Merit Medical Systems, Inc.* $ 88,624 ------------ 6 The accompanying notes are an integral part of these financial statements. PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SHARES VALUE MANAGED HEALTH CARE - 0.7% 5,050 First Health Group Corp.* $ 94,486 ------------ TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 1,296,311 ------------ PHARMACEUTICALS & BIOTECHNOLOGY - 4.4% BIOTECHNOLOGY - 3.0% 4,925 Cubist Pharmaceuticals, Inc.* $ 58,263 4,200 Connetics Corp.* 102,018 12,500 Indevus Pharmaceuticals, Inc.* (a) 74,500 7,300 InterMune, Inc.* 96,798 8,600 Regeneron Pharmaceuticals, Inc.* 79,206 ------------ $ 410,785 ------------ PHARMACEUTICALS - 1.4% 4,100 Able Laboratories, Inc.* $ 93,275 3,600 Bone Care International, Inc.* 100,260 ------------ $ 193,535 ------------ TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 604,320 ------------ BANKS - 10.6% DIVERSIFIED BANKS - 1.4% 4,800 Provident Financial Services, Inc. $ 92,976 3,100 Trustmark Corp. 96,317 ------------ $ 189,293 ------------ REGIONAL BANKS - 7.3% 3,700 BancorpSouth, Inc. $ 90,169 3,300 Community Bank System, Inc. 93,225 2,200 Chemical Financial Corp. 94,424 2,600 Central Pacific Financial Corp.* 94,042 1,325 City National Corp. 93,611 2,200 First Community Bancorp 93,940 5,300 First Financial Bancorp 92,750 2,900 Greater Bay Bancorp 80,852 3,500 Irwin Financial Corp. 99,365 3,300 Oriental Financial Group, Inc. 93,423 3,600 Susquehanna Bancshares, Inc. 89,820 ------------ $ 1,015,621 ------------ THRIFTS & MORTGAGE FINANCE - 1.9% 2,300 BankUnited Financial Corp.* $ 73,485 3,025 Commercial Federal Corp. 89,873 2,125 Webster Financial Corp. 107,610 ------------ $ 270,968 ------------ TOTAL BANKS $ 1,475,882 ------------ DIVERSIFIED FINANCIALS - 2.8% CONSUMER FINANCE - 0.7% 3,800 Charter Municipal Mortgage Acceptance Co. $ 92,872 ------------ CONSUMER FINANCE - 1.4% 4,078 Advanta Corp. (Class B) $ 98,973 13,997 Rewards Network, Inc.* (a) 97,979 ------------ $ 196,952 ------------ INVESTMENT BANKING & BROKERAGE - 0.7% 6,078 Apollo Investment Corp. $ 91,778 ------------ TOTAL DIVERSIFIED FINANCIALS $ 381,602 ------------ INSURANCE - 2.6% LIFE & HEALTH INSURANCE - 0.7% 2,100 AmerUs Group Co. $ 95,130 ------------ PROPERTY & CASUALTY INSURANCE - 1.9% 4,600 Bristol West Holdings, Inc. $ 92,000 2,500 Infinity Property & Casualty Corp. 88,000 2,020 Selective Insurance Group, Inc. 89,365 ------------ $ 269,365 ------------ TOTAL INSURANCE $ 364,495 ------------ REAL ESTATE - 6.9% REAL ESTATE INVESTMENT TRUSTS - 6.9% 8,500 Anworth Mortgage Asset Corp. $ 91,035 3,100 Brandywine Realty Trust 91,109 4,577 BioMed Property Trust, Inc. 101,655 2,850 Capital Trust, Inc. 87,524 2,900 Cousins Properties, Inc. 87,783 2,800 Heritage Property Investment Trust 89,852 10,000 MFA Mortgage Investments, Inc. 88,200 2,800 Newcastle Investment Corp. 88,984 8,195 Provident Senior Living* 131,120 1,600 Redwood Trust, Inc. 99,344 ------------ $ 956,606 ------------ TOTAL REAL ESTATE $ 956,606 ------------ SOFTWARE & SERVICES - 6.1% APPLICATION SOFTWARE - 3.4% 3,700 Advent Software, Inc.* $ 75,776 3,500 Macrovision Corp.* 90,020 14,500 Parametric Technology Co.* 85,405 7,100 Valueclick, Inc.* 94,643 9,100 Wind River Systems* 345,844 ------------ $ 691,688 ------------ DATA PROCESSING & OUTSOURCED SERVICES - 0.7% 5,700 The BISYS Group, Inc.* $ 93,765 ------------ HOME ENTERTAINMENT SOFTWARE - 0.7% 12,375 Plato Learning, Inc.* $ 92,194 ------------ INTERNET SOFTWARE & SERVICES - 0.6% 7,000 Earthlink, Inc.* $ 80,640 ------------ The accompanying notes are an integral part of these financial statements. 7 PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- SHARES VALUE SYSTEMS SOFTWARE - 0.7% 8,875 Borland Software Corp.* $ 103,660 ------------ TOTAL SOFTWARE & SERVICES $ 1,061,947 ------------ TECHNOLOGY, HARDWARE & EQUIPMENT - 5.9% NETWORKING EQUIPMENT - 0.6% 13,900 Extreme Networks, Inc.* $ 91,045 ------------ COMMUNICATIONS EQUIPMENT - 2.7% 15,100 Arris Group, Inc.* $ 106,304 4,800 CommScope, Inc.* 90,720 5,200 SeaChange International, Inc.* (a) 90,688 8,500 Symmetricom, Inc.* 82,535 ------------ $ 370,247 ------------ COMPUTER STORAGE & PERIPHERALS - 1.2% 3,500 Intergraph Corp.* $ 94,255 4,000 Novatel Wireless, Inc.* (a) 77,520 ------------ $ 171,775 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.7% 12,400 Identix, Inc.* $ 91,512 ------------ ELECTRONIC MANUFACTURING SERVICES - 0.7% 7,800 TTM Technologies, Inc.* $ 92,040 ------------ TOTAL TECHNOLOGY, HARDWARE & EQUIPMENT $ 816,619 ------------ SEMICONDUCTORS - 2.8% SEMICONDUCTOR EQUIPMENT - 1.4% 11,900 Axcelis Technologies, Inc.* $ 96,747 5,246 Photronics, Inc.* 86,559 500 PortalPlayer, Inc.* 12,340 ------------ $ 195,646 ------------ SEMICONDUCTORS - 1.4% 10,100 MIPS Technologies, Inc.* $ 99,485 20,800 SGC Holding Corp.* 94,432 ------------ $ 193,917 ------------ TOTAL SEMICONDUCTORS $ 389,563 ------------ TELECOMMUNICATION SERVICES - 1.9% INTEGRATED TELECOMMUNICATION SERVICES - 1.3% 7,575 Aeroflex, Inc.* $ 91,809 6,959 CT Communications, Inc. 85,596 ------------ $ 177,405 ------------ WIRELESS TELECOM SERVICES - 0.6% 9,375 Boston Communications Group, Inc.* $ 86,625 ------------ TOTAL TELECOMMUNICATION SERVICES $ 264,030 ------------ UTILITIES - 1.8% ELECTRIC UTILITIES - 0.5% 1,400 CH Energy Group, Inc. $ 67,270 ------------ GAS UTILITIES - 1.3% 2,500 Atmos Energy Corp. $ 68,375 2,750 People's Energy Corp. 120,857 ------------ $ 189,232 ------------ TOTAL UTILITIES $ 256,502 ------------ TOTAL COMMON STOCKS (Cost $12,760,997) $ 13,658,246 ------------ WARRANTS - 0.0% ENERGY - 0.0% OIL & GAS EXPLORATION & PRODUCTION - 0.0% 1,850 Arena Resources Warrants EXP 8/9/08* $ 5,411 ------------ TOTAL WARRANTS (Cost $1,885) $ 5,411 ------------ TEMPORARY CASH INVESTMENT - 4.2% SECURITY LENDING COLLATERAL - 4.2% 579,352 Securities Lending Investment Fund, 2.18% $ 579,352 ------------ TOTAL TEMPORARY CASH INVESTMENT (Cost $579,352) $ 579,352 ------------ TOTAL INVESTMENTS IN SECURITIES - 102.6% (Cost $13,342,234) $ 14,243,009 ------------ OTHER ASSETS AND LIABILITIES - (2.6)% $ (372,893) ------------ TOTAL NET ASSETS - 100.0% $ 13,870,116 ============ * Non-income producing security 144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At December 31, 2004, the value of these securities amounted to $46,861 or 0.3% of net assets. (a) At December 31, 2004, the following securities were out on loan: SHARES SECURITY MARKET VALUE 1,615 Cerner Corp.* $ 85,870 2,779 Forest Oil Corp.* 88,150 11,875 Indevus Pharmaceuticals, Inc.* 70,775 3,800 Novatel Wireless, Inc.* 73,644 6,935 Orbital Sciences Corp.* 82,041 791 Rewards Network, Inc.* 5,537 3,990 SeaChange International, Inc.* 69,586 1,759 Sunrise Senior Living, Inc.* 81,546 --------- TOTAL $ 557,149 ========= 8 The accompanying notes are an integral part of these financial statements. PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED 8/1/01 TO CLASS II (A) 12/31/04 12/31/03 12/31/02 12/31/01 Net asset value, beginning of period $ 11.35 $ 9.07 $ 10.95 $ 11.18 -------- ------- ------- ------- Increase (decrease) from investment operations: Net investment income $ (0.05) $ (0.01) $ (0.01) $ -- Net realized and unrealized gain (loss) on investments and foreign currency transactions 1.55 2.29 (1.87) (0.23) -------- ------- ------- ------- Net increase (decrease) from investment operations $ 1.50 $ 2.28 $ (1.88) $ (0.23) Distributions to shareowners: Net investment income -- -- -- -- Net realized gain -- -- -- -- -------- ------- ------- ------- Net increase (decrease) in net asset value $ 1.50 $ 2.28 $ (1.88) $ (0.23) -------- ------- ------- ------- Net asset value, end of period $ 12.85 $ 11.35 $ 9.07 $ 10.95 ======== ======= ======= ======= Total return* 13.22% 25.14% (17.14)% (2.06)% Ratio of net expenses to average net assets+ 1.48% 1.52% 1.58% 1.68%** Ratio of net investment income (loss) to average net assets+ (0.44)% (0.23)% (0.18)% 0.01%** Portfolio turnover rate 114% 38% 53% 72% Net assets, end of period (in thousands) $ 10,086 $ 7,095 $ 3,419 $ 938 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.76% 2.67% 2.98% 6.71%** Net investment income (loss) (0.72)% (1.38)% (1.58)% 5.02%**
(a) Class 2 shares were first publicly offered on August 1, 2001. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period.) ** Annualized. + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 9 PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $557,149) (Cost $13,342,234) $ 14,243,009 Cash 182,717 Receivables-- Investment securities sold 101,557 Fund shares sold 57,675 Dividends, interest and foreign taxes withheld 25,451 Other 1,556 ------------ Total assets $ 14,611,965 ------------ LIABILITIES: Payables-- Investment securities purchased $ 100,703 Fund shares repurchased 788 Upon return of securities loaned 579,352 Due to affiliates 10,103 Accrued expenses 50,903 ------------ Total liabilities $ 741,849 ------------ NET ASSETS: Paid-in capital $ 11,654,699 Accumulated undistributed net realized gain (loss) 1,314,643 Net unrealized gain (loss) on: Investments 900,774 ------------ Total net assets $ 13,870,116 ------------ NET ASSET VALUE PER SHARE: CLASS I: No par value (unlimited number of shares authorized) Net assets $ 3,784,302 Shares outstanding 291,770 ------------ Net asset value per share $ 12.97 CLASS II: No par value (unlimited number of shares authorized) Net assets $ 10,085,814 Shares outstanding 784,728 ------------ Net asset value per share $ 12.85
10 The accompanying notes are an integral part of these financial statements. PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - --------------------------------------------------------------------------------
YEAR ENDED 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $149) $ 116,978 Interest 5,203 Income on securities loaned, net 2,321 ----------- Total investment income $ 124,502 ----------- EXPENSES: Management fees $ 90,872 Transfer agent fees and expenses 2,009 Distribution fees (Class II) 21,149 Administrative reimbursements 18,500 Custodian fees 26,887 Professional fees 32,556 Printing expense 11,676 Miscellaneous 1,442 ----------- Total expenses $ 205,091 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (33,905) ----------- Net expenses $ 171,186 ----------- Net investment income (loss) $ (46,684) ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 2,004,714 Futures contracts 13,667 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (3,021) ----------- $ 2,015,360 ----------- Change in net unrealized gain or (loss) from: Investments (the change in reserve for repatriation taxes of $86,981) $ (373,588) Futures contracts (11,218) ----------- $ (384,806) ----------- Net gain (loss) on investments, futures contracts and foreign currency transactions $ 1,628,554 =========== Net increase (decrease) in net assets resulting from operations $ 1,583,870 ===========
The accompanying notes are an integral part of these financial statements. 11 PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ (46,684) $ (9,162) Net realized gain (loss) on investments 2,015,360 (296,269) Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions (384,806) 2,171,849 ------------ ------------ Net increase (decrease) in net assets resulting from operations $ 1,583,870 $ 1,866,418 ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 4,450,765 $ 6,156,243 Cost of shares repurchased (3,135,048) (3,911,566) ------------ ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ 1,315,717 $ 2,244,677 ------------ ------------ Net increase (decrease) in net assets $ 2,899,587 $ 4,111,095 ------------ ------------ NET ASSETS: Beginning of year $ 10,970,529 $ 6,859,434 ------------ ------------ End of year $ 13,870,116 $ 10,970,529 ============ ============ Undistributed net investment income (loss), end of year $ -- $ 1,986 ============ ============ 12 The accompanying notes are an integral part of these financial statements. PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Small Company VCT Portfolio (the Portfolio) a Portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate diversified portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class II shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class II shares only) The investment objective of Small Company Portfolio is to seek capital appreciation. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in the preparation of its financial statements which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolio are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if 13 PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- applicable, are reported net of foreign taxes withheld on capital gains at the applicable country rates. Small capitalization stocks, while offering the potential for higher returns, such as those in the portfolio may be subject to greater short-term price fluctuations than securities of larger companies. B. FUTURES CONTRACTS The Portfolio may enter into futures transactions to hedge against changes in interest rates, securities prices, and currency rates or to seek to increase total return. Upon entering into a futures contract, the Portfolio is required to deposit with a broker an amount of cash or securities equal to the minimum "initial margin" requirements of the associated futures exchange. Subsequent payments for futures contracts ("variation margin") are paid or received by the Portfolio, depending on the daily fluctuation in the value of the contracts, and are recorded by the Portfolio as unrealized gains or losses. When the contract is closed, the Portfolio realize a gain or loss equal to the difference between the opening and closing value of the contract. The use of futures contracts involves, to varying degrees, elements of market risk which may exceed the amounts recognized by the Portfolio. Changes in the value of the contracts may not directly correlate to the changes in the value of the underlying securities. These risks may decrease the effectiveness of the Portfolio's hedging and trading strategies and potentially result in a loss. As of December 31, 2004, Small Company Portfolio had no open contracts. C. FOREIGN CURRENCY TRANSLATION The books and records of the Portfolio are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent, the net realized gains and losses on foreign currency contracts, disposition of foreign currencies, and the difference between the amount of income accrued and the U.S. dollar actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. D. FORWARD FOREIGN CURRENCY CONTRACTS The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. E. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amount and characterization of distributions to shareowners for financial reporting purposes is determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis.
UNDISTRIBUTED ACCUMULATED NET NET INVESTMENT REALIZED PAID-IN PORTFOLIO INCOME (LOSS) GAIN (LOSS) CAPITAL - ----------------------------------- -------------- --------------- ---------- Pioneer Small Company VCT Portfolio $ 44,698 $ 15,753 $ (60,451) ======== ======== =========
14 PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004 on a tax basis. There were no distributions paid during the years ended December 31, 2004 and 2003. 2004 2003 ----------- ----- DISTRIBUTIONS PAID FROM: Ordinary Income $ -- $ -- Long-Term capital gain -- -- ----------- ----- $ -- $ -- Return of Capital -- -- ----------- ----- Total distributions $ -- $ -- =========== ===== DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ -- Undistributed long-term gain/(capital loss carryforward) 1,364,989 Unrealized appreciation (depreciation) 850,428 ----------- Total $ 2,215,417 =========== The difference between book-basis and tax-basis unrealized appreciation is primarily attributable to the tax deferral of losses on wash sales. F. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II Shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses(excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of the adjusted net assets at the beginning of the day. Distributions paid by the Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. Dividends and distributions to shareowners are recorded on the ex-dividend date. G. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. H. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining 15 PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the portfolio. Management fees are calculated daily at the following annual rate of 0.75% of the Portfolio's average daily net assets. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $7,619 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $268 in transfer agent fees payable to PIMSS at December 31, 2004 4. DISTRIBUTION PLANS The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares. Included in due to affiliates is $2,216 payable to PFD at December 31, 2004. 5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------ ------------ ------------ -------------- Small Company Portfolio $ 13,392,581 $ 1,098,063 $ (247,635) $ 850,428 ============ =========== ========== =========
6. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $15,556,752 and $13,097,177, respectively. 7. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
SMALL CAP VALUE PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - ----------------------------- ---------- ------------ ---------- ------------ CLASS II: Shares sold 56,890 $ 670,369 286,397 $ 2,774,242 Reinvestment of distributions -- -- -- -- Shares repurchased (103,931) (1,215,329) (324,514) (3,132,628) --------- ------------ --------- ------------ Net increase (47,041) $ (544,960) (38,117) $ (358,386) ========= ============ ========= ============ CLASS II: Shares sold 320,212 $ 3,780,396 328,726 $ 3,382,001 Reinvestment of distributions -- -- -- -- Shares repurchased (160,864) (1,919,719) (80,215) (778,938) --------- ------------ --------- ------------ Net increase 159,348 $ 1,860,677 248,511 $ 2,603,063 ========= ============ ========= ============
16 PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS II SHAREOWNERS OF PIONEER SMALL COMPANY VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Small Company VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the period ended December 31, 2001 were audited by other auditors who have ceased operations and whose report, dated February 8, 2002, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Small Company VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /S/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 17 PIONEER SMALL COMPANY VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - -------------------------------------------------------------------------------- INVESTMENT ADVISER TRUSTEES AND OFFICERS Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust's are responsible for the Trust's CUSTODIAN operations. The Trust's Trustees and officers are listed below, together Brown Brothers Harriman & Co. with their principal occupations during the past five years. Trustees who are interested persons of the Portfolio within the meaning of the INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Investment Company Act of 1940 are referred to as Interested Trustees. Ernst & Young LLP Trustees who are not interested persons of the Trust are referred to as Independent Trustees. Each of the Trustees serves as a trustee of each PRINCIPAL UNDERWRITER of the 73 U.S. registered investment portfolios for which Pioneer Pioneer Funds Distributor, Inc. Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Trusts"). The address for all Interested Trustees and all officers of the Portfolio is 60 State Street, Boston, Massachusetts 02109. LEGAL COUNSEL The Trust's statement of additional information provides more detailed Wilmer Cutler Pickering Hale and Dorr LLP information regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-225-6292. SHAREOWNER SERVICES AND TRANSFER Proxy Voting Policies and Procedures of the Trust are available without Pioneer Investment Management Shareholder Services, Inc. charge, upon Agent request, by calling our toll free number (1-800-225-6292). This information is also available online at pioneerfunds.com.
- -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE John F. Cogan, Jr. (78)* Chairman of the Serves until successor Trustee and President Serves Director of Harbor Board, Trustee and trustee is elected or until retirement or removal; Global Company, Ltd. President earlier retirement Deputy Chairman and a Director or removal of Pioneer Global Asset Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------ Osbert M. Hood (52)** Trustee and Serves until successor President and Chief Executive None Executive Vice trustee is elected or Officer, PIM-USA since May 2003 President earlier retirement or (Director since January 2001); removal President and Director of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------
18 PIONEER SMALL COMPANY VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE David R. Bock **(61) Trustee since Serves until a Senior Vice President and Chief Director of The 3050 K. Street NW, 2005. successor trustee is Financial Officer, I-trax, Inc. Enterprise Social Washington, DC 20007 elected or earlier (publicly traded health care Investment Company retirement or removal. services company) (privately-held (2001-present); Managing affordable housing Partner, Federal City Capital finance company); Advisors (boutique merchant Director of New York bank) (1995-2000; 2002 to 2004); Mortgage Trust Executive Vice President and (publicly traded Chief Financial Officer, mortgage REIT) Pedestal Inc. (Internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Mary K. Bush (56) Trustee since Serves until successor President, Bush International Director of Brady 3509 Woodbine Street, 2000. trustee is elected or (International financial Corporation Chevy Chase, MD 20815 earlier retirement or advisory firm) (industrial removal identification and specialty coated material products manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - ------------------------------------------------------------------------------------------------------------------------------------ Margaret B.W. Graham (57) Trustee since Serves until successor Founding Director, The Winthrop None 1001 Sherbrooke Street 2000. trustee is elected or Group, Inc. (consulting firm); West, Montreal, Quebec, earlier retirement or Professor of Management, Faculty Canada H3A 1G5 removal of Management, McGill University - ------------------------------------------------------------------------------------------------------------------------------------ Marguerite A. Piret (56) Trustee since Serves until successor President and Chief Executive Director of New One Boston Place, 1995. trustee is elected or Officer, Newbury, Piret & America High Income 28th Floor, earlier retirement or Company, Inc. (investment Fund, Inc. Boston, MA 02108 removal bankin.g firm) (closed-end investment company) - ------------------------------------------------------------------------------------------------------------------------------------ Stephen K. West (76) Trustee since Serves until successor Senior Counsel, Sullivan & Director, The Swiss 125 Broad Street, 1995. trustee is elected or Cromwell (law firm) Helvetia Fund, Inc. New York, NY 10004 earlier retirement or (closed-end removal investment company) and AMVESCAP PLC (investment managers) - ------------------------------------------------------------------------------------------------------------------------------------ John Winthrop (68) Trustee since Serves until successor President, John Winthrop & Co., None One North Adgers Wharf, September, trustee is elected or Inc. (private investment firm) Charleston, SC 29401 2000. earlier retirement or removal - ------------------------------------------------------------------------------------------------------------------------------------
19 PIONEER SMALL COMPANY VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS OFFICER Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior None discretion of the Vice President - Legal of Board Pioneer; and Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Christopher J. Kelley (40) Assistant Serves at the Assistant Vice President and None Secretary discretion of the Senior Counsel of Pioneer since Board July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering None Secretary discretion of the Hale and Dorr LLP; Assistant Board Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Vincent Nave (59) Treasurer Serves at the Vice President - Fund None discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ------------------------------------------------------------------------------------------------------------------------------------ Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer None Treasurer discretion of the since 2004; Treasurer and Senior Board Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None Treasurer discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None Treasurer discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - ------------------------------------------------------------------------------------------------------------------------------------
20 PIONEER SMALL COMPANY VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS OFFICER Katharine Kim Sullivan (31) Assistant Serves at the Fund Administration Manager - None Treasurer discretion of the Fund Accounting, Administration Board and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of None Officer discretion of the Pioneer (Director of Compliance Board and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 21 [LOGO] PIONEER INVESTMENTS(R) [LOGO] PIONEER INVESTMENTS(R) PIONEER VARIABLE CONTRACTS TRUST PIONEER STRATEGIC INCOME VCT PORTFOLIO -- CLASS II SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Pioneer Strategic Income VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 15 Notes to Financial Statements 19 Report of Independent Registered Public Accounting Firm 24 Trustees, Officers and Service Providers 25 PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT www.pioneerfunds.com. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT http://www.sec.gov. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [THE FOLLOWING TABLE IS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] U.S. Corporate Bonds 54.3% U.S. Government Securities 24.5% Foreign Government Bonds 12.6% Temporary Cash Investment 2.6% Asset Backed Securities 2.4% Municipal Bonds 1.9% Collateralized Mortgage Obligations 1.0% Convertible Corporate Bonds 0.7% MATURITY DISTRIBUTION (As a percentage of total investment portfolio) [THE FOLLOWING TABLE IS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] 0-1 years 6.5% 1-3 years 31.5% 3-4 years 11.9% 4-6 years 28.5% 6-8 years 14.3% 8+ years 7.3% FIVE LARGEST HOLDINGS (As a percentage of long-term holdings) 1. Federal Home Loan Mortgage Corp., 6.0%, 8/1/34 2.22% 2. Government National Mortgage Association, 6.0%, 8/15/16 1.69 3. Federal National Mortgage Association, 6.375%, 8/15/07 1.44 4. Norwegian Government, 6.75%, 1/15/07 1.38 5. Canadian Government, 4.25%, 9/1/09 1.27 The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- PRICES AND DISTRIBUTIONS 12/31/04 12/31/03 Net Asset Value per Share $ 11.26 $ 11.01 DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ 0.6261 $ -- $ 0.1616 - -------------------------------------------------------------------------------- PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in PIONEER STRATEGIC INCOME VCT PORTFOLIO at net asset value, compared to that of the Lehman Brothers U.S. Universal Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE FOLLOWING TABLE IS REPRESENTED BY A GRAPH IN THE PRINTED MATERIAL.] Lehman U.S. Universal Index Pioneer Strategic Income VCT Portfolio Jul-99 10000 10000 10136 10060 Dec-00 11234 10488 12144 11184 2-Dec 13338 12352 14117 15073 4-Dec 14817 16573 Index comparison begins July 31, 1999. The Lehman Brothers U.S. Universal Index is the union of the U.S. Aggregate Index, the U.S. High Yield Corporate Index, the 144A Index, the Eurodollar Index, the Emerging Markets Index, the non-ERISA portion of the CMBS Index and the CMBS High Yield Index. Municipal debt, private placements and non-dollar-denominated issues are excluded from the Index. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004) - -------------------------------------------------------------------------------- NET ASSET VALUE - -------------------------------------------------------------------------------- Life-of-Class 9.75% (7/29/99) 5 Year 10.50 1 Year 9.95 All total returns shown assume reinvestment of distributions at net asset value. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Please refer to variable product's annual report for performance that reflects the deduction of the variable products fees and charges. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER STRATEGIC INCOME VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,098.98 $ 1,097.41 Expenses Paid During Period* $ 5.15 $ 6.08 * Expenses are equal to the Portfolio's annualized expense ratio of 0.98% and 1.15% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER STRATEGIC INCOME VCT PORTFOLIO Based on a hypothetical 5% return per year before expenses, reflecting the period from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,019.96 $ 1,018.65 Expenses Paid During Period* $ 4.95 $ 5.85 * Expenses are equal to the Portfolio's annualized expense ratio of 0.98% and 1.15% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- A WORD ABOUT RISK: INVESTING IN FOREIGN AND/OR EMERGING MARKETS SECURITIES INVOLVES RISKS RELATING TO INTEREST RATES, CURRENCY EXCHANGE RATES, ECONOMIC, AND POLITICAL CONDITIONS. INVESTMENTS IN HIGH-YIELD OR LOWER-RATED SECURITIES ARE SUBJECT TO GREATER-THAN-AVERAGE RISK. WHEN INTEREST RATES RISE, THE PRICES OF FIXED-INCOME SECURITIES IN THE PORTFOLIO WILL GENERALLY FALL. CONVERSELY, WHEN INTEREST RATES FALL THE PRICES OF FIXED-INCOME SECURITIES IN THE PORTFOLIO WILL GENERALLY RISE. INVESTMENTS IN THE PORTFOLIO ARE SUBJECT TO POSSIBLE LOSS DUE TO THE FINANCIAL FAILURE OF UNDERLYING SECURITIES AND THEIR INABILITY TO MEET THEIR DEBT OBLIGATIONS. THE SECURITIES ISSUED BY U.S. GOVERNMENT SPONSORED ENTITIES (I.E., FNMA, FREDDIE MAC) IS NEITHER GUARANTEED NOR ISSUED BY THE U.S. GOVERNMENT. CALL 800-688-9915 OR VISIT www.pioneerfunds.com FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE RETURNS FOR THE PORTFOLIO DO NOT REFLECT THE DEDUCTION OF EXPENSES ASSOCIATED WITH VARIABLE PRODUCTS, SUCH AS MORTALITY AND EXPENSE RISK CHARGES, SEPARATE ACCOUNT CHARGES, AND SALES CHARGES. THESE EXPENSES WOULD REDUCE THE OVERALL RETURNS SHOWN. PERFORMANCE RESULTS REFLECT ANY APPLICABLE EXPENSE WAIVERS IN EFFECT DURING THE PERIODS SHOWN. WITHOUT SUCH WAIVERS PERFORMANCE WOULD BE LOWER. WAIVERS MAY NOT BE IN EFFECT FOR ALL PORTFOLIOS. CERTAIN FEE WAIVERS ARE CONTRACTUAL THROUGH A SPECIFIED PERIOD. OTHERWISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION. As economies throughout the world grew steadily during 2004, the values of both corporate bonds and emerging market debt tended to rise. At the same time, many non-U.S. currencies gained in value relative to the dollar. In the following discussion, Kenneth J. Taubes discusses the factors that influenced the performance of Strategic Income VCT Portfolio during 2004. Mr. Taubes, Director of Pioneer's Fixed Income Group, oversees the team responsible for daily management of the Portfolio. Q: HOW DID THE PORTFOLIO PERFORM DURING 2004? A: Strategic Income VCT Portfolio performed very well, outpacing its benchmark by a wide margin. For the 12 months ended December 31, 2004, the Portfolio's Class II shares had a total return of 9.95%, while the Lehman U.S. Universal Bond Index returned 4.97%. On December 31, 2004, the Standardized 30-day SEC Yield for Class II shares was 5.40%. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: WHAT FACTORS AFFECTED PORTFOLIO PERFORMANCE? A: With strong economic growth throughout the globe during 2004, corporate cash flows and profits rose, improving overall credit quality in the United States and abroad. The best-performing sectors in the fixed-income markets tended to be those areas that normally carry the highest credit risk - high-yield, corporate bonds and emerging market debt - as strengthening economies improved overall credit quality. The year 2004 also was a period in which the U.S. dollar continued to lose value against major foreign currencies. Taking advantage of the Portfolio's ability to diversify across several different fixed-income sectors, we overweighted the two best-performing sectors - domestic high-yield bonds and emerging market bonds. This strategy substantially contributed to performance, as did our allocations to investment-grade foreign debt that appreciated in value as the dollar fell. Outside the United States, we invested in countries such as Australia and Canada, whose economies benefited from rising commodity prices and tighter monetary policies. In Europe, we invested in Sweden and Norway, both of which also benefited from these factors. Within the emerging markets, we emphasized Brazil and Russia, where economic growth was strong, while adding to commodity-linked bonds in China and India. At the end of the year, U.S. high yield bonds constituted 29.3l% of the Portfolio's assets, while emerging market and international high-yield investments accounted for another 20% of assets. We also emphasized other sectors that offered yield advantages over Treasuries. International investment-grade debt accounted for 17.2% of Portfolio assets, while U.S. mortgage-backed securities constituted 23.5% of Portfolio assets and domestic investment-grade corporate debt accounted for 8.4%. Q: WHAT WERE SOME OF THE INDIVIDUAL HOLDINGS THAT MOST INFLUENCED PORTFOLIO PERFORMANCE? A: Within the emerging markets, the bonds of several Brazilian companies were standout performers, including: brewer AMBEV; steel company CSN; and Telemar, a telecommunications service company. Russian investments that supported performance included bonds of Gazprom, the government-controlled energy company, and Mobil Telesystems, a mobile phone service provider. In India, Vedanta, a mining company with operations in zinc and other materials, performed well. Among European high-yield bonds that performed well were cable companies NTL of the United Kingdom and Kabel of Germany. Domestically, top performers included materials companies Celanese and ICI Huntsman, as well as chemical companies Lyondell and Methanex. Detracting from results were: insurance company Unum Provident, whose bond prices slipped amid controversy over the New York attorney general's investigation of industry practices; and Toys 'R Us, whose restructuring plans remained uncertain. Q: WHAT IS YOUR INVESTMENT OUTLOOK? A: We anticipate continued global economic growth and expect to maintain an emphasis on corporate securities. However, we believe high-yield corporate bonds do not offer as compelling relative values as they did a year ago. We have reduced our high-yield positions somewhat, while increasing our commitment to mortgage-backed securities. In the United States, we anticipate that the Federal Reserve will continue to raise the Fed funds rate at a measured pace during 2005. We believe the market rates for longer-term securities already are close to being fairly valued. As a result, we anticipate that the yield curve - which measures the relationship between short-term and longer-term interest rates - likely will flatten during the year as short-term rates move up. Overall, we believe that wide diversification among different types of fixed-income investments should continue to be a sound strategy. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. 4 PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) VALUE CONVERTIBLE CORPORATE BONDS - 0.7% TECHNOLOGY HARDWARE & EQUIPMENT - 0.3% ELECTRONIC MANUFACTURING SERVICES - 0.3% 150,000 B+/Ba3 SCI Systems, Inc., 3.0%, 3/15/07 $ 144,750 ------------ TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 144,750 ------------ SEMICONDUCTORS - 0.4% SEMICONDUCTOR EQUIPMENT - 0.4% 170,000 NR/NR Brooks Automation, Inc., 4.75%, 6/1/08 $ 165,538 ------------ TOTAL SEMICONDUCTORS $ 165,538 ------------ TOTAL CONVERTIBLE CORPORATE BONDS (Cost $277,820) $ 310,288 ------------ ASSET BACKED SECURITIES - 2.4% DIVERSIFIED FINANCIALS - 0.9% CONSUMER FINANCE - 0.0% DKK 69,512 AA+/Aa1 Realkredit Danmark, 7.0%, 10/1/32 $ 13,387 ------------ DIVERSIFIED FINANCIAL SERVICES - 0.8% 216,055 BBB-/Baa2 PF Export Receivable Master Trust, 6.436%, 6/1/15 (144A) $ 214,739 167,399 BBB/Baa2 Power Receivables Finance, 6.29%, 1/1/12 (144A) 176,179 ------------ $ 390,918 ------------ TOTAL DIVERSIFIED FINANCIALS $ 404,305 ------------ UTILITIES - 1.5% ELECTRIC UTILITIES - 1.5% 233,750 BBB-/Baa3 Empresa Electric Guacolda, 8.625%, 4/30/13 (144A) $ 266,943 425,700 BB-/Ba2 FPL Energy Wind Funding, 6.876%, 6/27/17 (144A) 439,003 ------------ TOTAL UTILITIES $ 705,946 ------------ TOTAL ASSET BACKED SECURITIES (Cost $1,085,047) $ 1,110,251 ------------ COLLATERALIZED MORTGAGE OBLIGATIONS - 0.9% DIVERSIFIED FINANCIALS - 0.9% DIVERSIFIED FINANCIAL SERVICES - 0.9% 160,000 BBB-/Baa3 Tower 2004-1A E, 5.395%, 1/15/34 $ 159,703 265,000 BB/NR Tower 2004-2A F, 6.376%, 12/15/14 263,675 ------------ TOTAL DIVERSIFIED FINANCIALS $ 423,378 ------------ TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $425,000) $ 423,378 ------------ CORPORATE BONDS - 53.8% ENERGY - 5.2% OIL & GAS DRILLING - 0.9% ITL 275,000,000 BBB-/Baa2 Petroleos Mexicanos, 7.375%, 8/13/07 $ 211,697 215,000 BB-/Ba3 Stena AB, 7.0%, 12/1/16 (144A) 212,850 ------------ $ 424,547 ------------ OIL & GAS EQUIPMENT & SERVICES - 0.7% 240,000 BB-/Ba3 Hornbeck Offshore Service , 6.125%, 12/1/14 (144A) $ 241,200 76,000 B+/B3 Transmontaigne, Inc., 9.125%, 6/1/10 82,460 ------------ $ 323,660 ------------
The accompanying notes are an integral part of these financial statements. 5 PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) VALUE OIL & GAS EXPLORATION & PRODUCTION - 2.7% 300,000 B-/B3 Baytex Energy, Ltd., 9.625%, 7/15/10 $ 321,000 60,000 BB-/Ba3 Chesapeake Energy Corp., 6.375%, 6/15/15 (144A) 61,650 55,000 B/B2 Comstock Resources, Inc., 6.875%, 3/1/12 56,788 300,000 BB-/Ba2 Gaz Capital SA, 8.625%, 4/28/34 (144A) 351,000 250,000 BBB-/NR Gazprom International SA., 7.201%, 2/1/20 (144A) 264,375 160,000 B+/B2 Stone Energy Corp., 6.75%, 12/15/14 (144A) 159,600 ------------ $ 1,214,413 ------------ OIL & GAS REFINING MARKETING & TRANSPORTATION - 0.9% 50,000 BB/Ba2 Citgo Petroleum Corp., 6.0%, 10/15/11 (144A) $ 49,750 350,000 BBB/Ba1 Magellan Midstream Partners, L.P., 6.45%, 6/1/14 378,492 ------------ $ 428,242 ------------ TOTAL ENERGY $ 2,390,862 ------------ MATERIALS - 12.2% ALUMINUM - 0.3% 135,000 B-/B3 Imco Recycling Escrow, 9.0%, 11/15/14 144A $ 140,400 ------------ COMMODITY CHEMICALS - 1.1% 110,000 B+/B1 Arco Chemical Co., 9.8%, 2/1/20 $ 125,400 13,000 B+/B1 Lyondell Petrochemical Co., 9.875%, 5/1/07 13,618 300,000 BBB-/Ba1 Methanex Corp., 8.75%, 8/15/12 350,250 ------------ $ 489,268 ------------ CONSTRUCTION MATERIALS - 1.0% NOK 3,200,000 NR/NR Kvaerner A.S., 0.0%, 10/30/11 $ 423,158 60,000 NR/NR Kvaerner A.S., 0.0%, 10/30/11 48,150 ------------ $ 471,308 ------------ DIVERSIFIED CHEMICAL - 0.3% EUR 79,000 CCC+/Caa1 Huntsman ICI Chemicals LLC, 10.125%, 7/1/09 $ 112,881 ------------ DIVERSIFIED METALS & MINING - 2.8% 140,000 B+/B1 Freeport-McMoran Copper & Gold, 10.125%, 2/1/10 $ 159,950 250,000 B+/B1 Freeport-McMoran Copper & Gold, 6.875%, 2/1/09 248,438 100,000 BBB/Ba1 Kennametal, Inc., 7.2%, 6/15/12 111,124 400,000 NR/Ba2 Vale Overseas, Ltd., 8.25%, 1/17/34 421,000 340,000 BB/Ba2 Vedenta Resources Plc, 6.625%, 2/22/10 (144A) 344,050 ------------ $ 1,284,562 ------------ FOREST PRODUCTS - 1.2% 225,000 B+/B1 Ainsworth Lumber, 6.75%, 3/15/14 $ 220,219 300,000 BB-/Ba2 Sino Forest Corp., 9.125%, 8/17/11 (144A) 327,750 ------------ $ 547,969 ------------ METAL & GLASS CONTAINERS - 0.9% EUR 100,000 B+/NR Crown Holdings, 10.25%, 3/1/11 $ 157,482 130,000 B+/B1 Greif Brothers Corp., 8.875%, 8/1/12 144,625 100,000 B+/B2 Vitro Envases Norteamerica, 10.75%, 7/23/11 (144A) 103,750 ------------ $ 405,857 ------------ PAPER PRODUCTS - 0.2% 100,000 BB-/Ba3 Abitibi-Consolidated, Inc., 6.0%, 6/20/13 $ 95,375 ------------
6 The accompanying notes are an integral part of these financial statements. PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) VALUE SPECIALTY CHEMICALS - 2.9% 43,000 B+/B1 Arco Chemical Co., 9.375%, 12/15/05 $ 44,935 340,000 BBB-/Baa3 Basell Finance Co., 8.1%, 3/15/27 (144A) 312,800 300,000 BB+/Baa3 Ferro Corp., 7.125%, 4/1/28 297,432 25,000 BB+/Baa3 Ferro Corp., 7.625%, 5/1/13 25,858 170,000 B-/Caa1 OM Group, Inc., 9.25%, 12/15/11 181,050 EUR 140,000 CCC+/B3 Rhodia SA, 8.0%, 6/1/10 196,717 EUR 45,000 CCC+/Caa1 Rhodia SA, 9.25%, 6/1/11 62,161 50,000 B-/B3 Rockwood Specialties Group, 7.625%, 11/15/14 (144A) 69,832 135,000 B-/B3 United Industries Co., 9.875%, 4/1/09 141,244 ------------ $ 1,332,029 ------------ STEEL - 1.5% 100,000 BB-/B1 CSN Islands IX Corp., 10.0%, 1/15/15 (144A) $ 107,375 225,000 BB-/B1 CSN Islands VIII Corp., 9.75%, 12/16/13 (144A) 240,750 325,000 BBB/B3 Ispat Inland ULC, Floating Rate, 4/1/10 (b) 353,438 ------------ $ 701,563 ------------ TOTAL MATERIALS $ 5,581,212 ------------ CAPITAL GOODS - 4.5% BUILDING PRODUCTS - 1.0% 215,000 BB/Ba3 Asia Aluminum Holdings, 8.0%, 12/23/11 (144A) $ 217,150 195,000 B/B2 Resolution Performance Products, 8.0%, 12/15/09 209,625 50,000 B-/B3 US Concrete, Inc., 8.375%, 4/1/14 53,875 ------------ $ 480,650 ------------ CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS - 0.3% 140,000 B-/B3 American Rock Salt Co., LLC, 9.5%, 3/15/14 $ 146,300 ------------ CONSTRUCTION & ENGINEERING - 1.3% 225,000 CCC+/Caa1 J Ray McDermott SA, 11.0%, 12/15/13 (144A) $ 250,875 315,000 B+/Ba3 Shaw Group, Inc., 10.75%, 3/15/10 (a) 347,288 ------------ $ 598,163 ------------ HEAVY ELECTRICAL EQUIPMENT - 0.9% 398,923 NR/NR Ormat Funding Corp., 8.25%, 12/30/20 $ 398,923 ------------ INDUSTRIAL MACHINERY - 1.0% 175,000 B/B3 JLG Industries, Inc., 8.375%, 6/15/12 (a) $ 187,250 250,000 B+/Ba2 Sun Sage BV, 8.25%, 3/26/09 (144A) 262,500 ------------ $ 449,750 ------------ TOTAL CAPITAL GOODS $ 2,073,786 ------------ COMMERCIAL SERVICES & SUPPLIES - 1.9% DIVERSIFIED COMMERCIAL SERVICES - 1.2% 115,000 B-/B3 Cornell Co's., Inc., 10.75%, 7/1/12 $ 122,906 215,000 CCC+/Caa1 Park-Ohio Industries, Inc., 8.375%, 11/15/14 (144A) 215,000 215,000 B+/B2 United Rentals NA, Inc., 7.75%, 11/15/13 (a) 210,700 ------------ $ 548,606 ------------ ENVIRONMENTAL SERVICES - 0.7% 200,000 B/B3 Clean Harbors, Inc., 11.25%, 7/15/12 (144A) $ 224,000 75,000 B+/B3 IESI Corp., 10.25%, 6/15/12 87,750 ------------ $ 311,750 ------------ TOTAL COMMERCIAL SERVICES & SUPPLIES $ 860,356 ------------
The accompanying notes are an integral part of these financial statements. 7 PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) VALUE TRANSPORTATION - 3.3% AIR FREIGHT & COURIERS - 0.3% 130,000 BB-/B1 Petroleum Helicopters, 9.375%, 5/1/09 $ 142,350 ------------ AIRLINES - 0.9% 35,000 CCC/Caa2 AMR Corp., 9.0%, 8/1/12 (a) $ 28,175 50,000 CCC/Caa2 AMR Corp., 9.0%, 9/15/16 39,000 85,000 CCC/Caa2 AMR Corp., 9.8%, 10/1/21 61,625 150,000 B/B3 Continental Air, Inc., 7.568%, 12/1/06 123,100 25,000 CCC+/Caa1 Northwest Airlines, Inc., 8.7%, 3/15/07 22,125 150,000 CCC+/Caa1 Northwest Airlines, Inc., 9.875%, 3/15/07 (a) 135,375 ------------ $ 409,400 ------------ MARINE - 1.0% 100,000 CCC+/B3 Horizon Lines LLC., 9.0%, 11/1/12 (144A) $ 107,500 325,000 B/B2 Ship Finance International, Ltd., 8.5%, 12/15/13 334,750 ------------ $ 442,250 ------------ RAILROADS - 0.5% 210,000 CCC+/B3 Atlantic Express Transport, 12.0%, 4/15/08 $ 205,013 ------------ TRANSPORTATION - 0.3% 150,000 B/B2 TFM SA De CV, 11.75%, 6/15/09 $ 152,813 ------------ TRUCKING - 0.3% 145,000 B-/B3 Trailer Bridge, Inc. 9.25%, 11/15/11 (144A) $ 148,988 ------------ TOTAL TRANSPORTATION $ 1,500,814 ------------ AUTOMOBILES & COMPONENTS - 0.4% AUTO PARTS & EQUIPMENT - 0.3% 135,000 B-/B3 Tenneco Automotive, Inc., 8.625%, 11/15/14 (144A) $ 140,400 ------------ AUTOMOBILE MANUFACTURERS - 0.1% 35,000 BBB-/A3 Ford Motor Credit Co., 5.8%, 1/12/09 $ 35,775 ------------ TOTAL AUTOMOBILES & COMPONENTS $ 176,175 ------------ CONSUMER DURABLES & APPAREL - 0.6% TEXTILES - 0.6% 240,000 B+/B1 Invista, 9.25%, 5/1/12 (144A) $ 267,600 ------------ TOTAL CONSUMER DURABLES & APPAREL $ 267,600 ------------ MEDIA - 0.7% BROADCASTING & CABLE TELEVISION - 0.7% 150,000 B-/B2 Kabel Deutschland GMBH, 10.625%, 7/1/14 $ 172,500 100,000 B-/B2 Kabel Deutschland, 10.75%, 7/1/14 (144A) 159,518 ------------ $ 332,018 ------------ TOTAL MEDIA $ 332,018 ------------ RETAILING - 0.6% SPECIALTY STORES - 0.6% 145,000 B/B3 Asbury Automotive Group, 8.0%, 3/15/14 $ 143,550 35,000 B/B3 Pep Boys-Manny Moe Jack, 7.5%, 12/15/14 35,481 100,000 BB/Ba2 Toys "R" Us, 7.375%, 10/15/18 92,500 ------------ $ 271,531 ------------ TOTAL RETAILING $ 271,531 ------------
8 The accompanying notes are an integral part of these financial statements. PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) VALUE FOOD & DRUG RETAILING - 0.5% DRUG RETAIL - 0.5% 170,000 CCC/Caa1 Duane Reade, Inc., 9.75%, 8/1/11 (144A) $ 154,700 60,000 B-/B2 Duane Reade, Inc., Floating Rate, 12/15/10 (144A) (b) 60,900 ------------ $ 215,600 ------------ TOTAL FOOD & DRUG RETAILING $ 215,600 ------------ FOOD, BEVERAGE & TOBACCO - 0.8% BREWERS - 0.6% 220,000 BBB/Baa3 Cia Brasileira de Bebida, 8.75%, 9/15/13 $ 256,300 ------------ SOFT DRINKS - 0.2% 80,000 BBB/Baa3 Cia Brasileira de Bebida, 10.5%, 12/15/11 $ 100,400 ------------ TOTAL FOOD, BEVERAGE & TOBACCO $ 356,700 ------------ HEALTH CARE EQUIPMENT & SERVICES - 1.7% HEALTH CARE DISTRIBUTORS - 0.1% 60,000 BB+/Ba2 Omnicare, Inc., 6.125%, 6/1/13 $ 60,300 ------------ HEALTH CARE FACILITIES - 1.3% 350,000 BB+/Ba2 HCA, Inc., 6.3%, 10/1/12 $ 354,972 210,000 BB/Ba1 Mayne Group, Ltd., 5.875%, 12/1/11 (144A) 213,938 ------------ $ 568,910 ------------ HEALTH CARE SUPPLIES - 0.3% 125,000 B-/Caa1 Inverness Medical Innovation, 8.75%, 2/15/12 $ 130,625 ------------ TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 759,835 ------------ BANKS - 0.5% DIVERSIFIED BANKS - 0.5% 200,000 B+/Baa2 Halyk Savings Bank Kazaktn, 8.125%, 10/7/09 (144A) $ 207,500 15,000 BBB+/A1 Skandinaviska Enskilda Bank, 8.125%, 9/6/49 (144A) 16,086 ------------ $ 223,586 ------------ TOTAL BANKS $ 223,586 ------------ DIVERSIFIED FINANCIALS - 7.1% CONSUMER FINANCE - 0.6% 265,000 A/A2 SLM Corp., Floating Rate, 7/25/14 (b) $ 264,051 ------------ INVESTMENT BANKING & BROKERAGE - 2.1% EUR 200,000 B-/B3 BCP Caylux Holdings Lux SCA, 10.375%, 6/15/14 (144A) $ 316,321 EUR 50,000 B-/B3 BCP Caylux Holdings Lux SCA, 9.625%, 6/15/14 (144A) 56,375 325,000 B+/B1 E*Trade Financial Corp., 8.0%, 6/15/11 (144A) 349,375 250,000 B/B3 Refco Finance Holdings, 9.0%, 8/1/12 (144A) 273,750 ------------ $ 995,821 ------------ DIVERSIFIED FINANCIAL SERVICES - 2.9% 157,000 CCC/Caa1 Alamosa Delaware, Inc., 0.0%, 7/31/09 $ 170,345 250,000 BB+/Ba2 Aries Vermogensverwaltng, 9.6%, 10/25/14 (144A) 307,500 210,000 B/B3 Dollar Financial Group, 9.75%, 11/15/11 227,850 425,000 BBB-/Baa3 Glencore Funding LLC, 6.0%, 4/15/14 (144A) 411,178 200,000 B/B1 Sheridan Acquisition Corp., 10.25%, 8/15/11 218,750 ------------ $ 1,335,623 ------------
The accompanying notes are an integral part of these financial statements. 9 PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) VALUE SPECIALIZED FINANCE - 1.4% 95,000 CCC+/B3 Aventine Renewable Energy, Floating Rate, 12/15/11 (144A) (b) $ 95,950 55,000 B-/Caa1 K&F Acquisition, Inc., 7.75%, 11/15/14 (144A) 56,788 145,000 B+/Ba3 Magnachip Semiconductor, Floating Rate, 12/15/11 (b) 148,988 225,000 NR/Baa3 Tengizchevroil LLP, 6.124%, 11/15/14 (144A) 225,563 100,000 B-/B3 UGS Corp., 10.0%, 6/1/12 (144A) 113,750 ------------ $ 641,039 ------------ TOTAL DIVERSIFIED FINANCIALS $ 3,236,534 ------------ INSURANCE - 3.8% LIFE & HEALTH INSURANCE - 1.4% 365,000 B+/B2 Presidential Life Corp., 7.875%, 2/15/09 $ 365,000 300,000 BB+/Ba1 Provident Companies, Inc., 7.0%, 7/15/18 (a) 289,875 ------------ $ 654,875 ------------ MULTI-LINE INSURANCE - 0.5% 210,000 BB/Ba1 Allmerica Financial Corp., 7.625%, 10/15/25 $ 213,929 ------------ PROPERTY & CASUALTY INSURANCE - 1.4% 285,000 BBB-/NR Kingsway America, Inc., 7.5%, 2/1/14 $ 295,480 350,000 BB/Baa3 Ohio Casualty Corp., 7.3%, 6/15/14 376,669 ------------ $ 672,149 ------------ REINSURANCE - 0.5% 200,000 BBB-/Baa3 Odyssey Re Holdings, 7.65%, 11/1/13 $ 220,592 ------------ TOTAL INSURANCE $ 1,761,545 ------------ REAL ESTATE - 1.3% REAL ESTATE MANAGEMENT & DEVELOPMENT - 0.7% 185,000 BB-/Ba3 Forest City Enterprises, 7.625%, 6/1/15 $ 196,100 100,000 CCC+/Caa1 LNR Property Co., 7.25%, 10/15/13 112,624 ------------ $ 308,724 ------------ REAL ESTATE INVESTMENT TRUSTS - 0.6% 120,000 B+/B3 BF Saul Real Estate Investment Trust, 7.5%, 3/1/14 $ 123,600 155,000 B/B1 Crescent Real Estate, 9.25%, 4/15/09 169,723 ------------ $ 293,323 ------------ TOTAL REAL ESTATE $ 602,047 ------------ SOFTWARE & SERVICES - 0.3% APPLICATION SOFTWARE - 0.3% 100,000 B-/B3 Riverdeep Group, Ltd., 9.25%, 4/15/11 $ 145,263 ------------ TOTAL SOFTWARE & SERVICES $ 145,263 ------------ TECHNOLOGY HARDWARE & EQUIPMENT - 0.8% COMMUNICATIONS EQUIPMENT - 0.8% 50,000 BB+/Ba2 Corning, Inc., 5.9%, 3/15/14 $ 50,111 150,000 BB+/Ba2 Corning, Inc., 6.3%, 3/1/09 157,320 200,000 BB/Ba3 Rogers Wireless, Inc., 7.625%, 12/15/11 (144A) 173,358 ------------ $ 380,789 ------------ TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 380,789 ------------
10 The accompanying notes are an integral part of these financial statements. PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) VALUE TELECOMMUNICATION SERVICES - 5.4% INTEGRATED TELECOMMUNICATION SERVICES - 2.5% 325,000 B+/B2 GCI Inc., 7.25%, 2/15/14 $ 325,000 145,000 B+/B2 Innova S De R.L., 9.375%, 9/19/13 164,938 180,000 B-/B3 NTL Cable Plc., 8.75%, 4/15/14 (144A) 272,470 375,000 NR/Baa3 Tele Norte Leste Participacoes, 8.0%, 12/18/13 386,250 ------------ $ 1,148,658 ------------ WIRELESS TELECOMMUNICATION SERVICES - 2.9% 200,000 B-/B2 Inmarsat Finance Plc., 7.625%, 6/3/12 $ 208,000 130,000 CCC+/B3 Iwo Escrow Co., Floating Rate, 1/15/12 (144A) (b) 130,975 170,000 CCC+/B3 MetroPCS, Inc., 10.75%, 10/1/11 (144A) 181,900 150,000 B-/B3 Mobifon Holdings, 12.5%, 7/31/10 (144A) 177,937 115,000 BB-/Ba3 Mobile Telesystems Finance, 8.375%, 10/14/10 (144A) 117,300 CAD 240,000 BB/Ba3 Rogers Cantel, Inc., 10.5%, 6/1/06 214,886 275,000 CCC/Caa1 Ubiquitel Operating Co., 9.875%, 3/1/11 308,688 ------------ $ 1,339,686 ------------ TOTAL TELECOMMUNICATION SERVICES $ 2,488,344 ------------ UTILITIES - 2.2% $ 2,488,344 ELECTRIC UTILITIES - 2.2% 150,000 CCC/Caa1 Alamosa Delaware, 8.5%, 1/31/12 $ 163,875 350,000 NR/NR Juniper Generation, 6.79%, 12/31/14 (144A) 349,992 250,000 BBB-/Baa3 Kiowa Power Partners LLC, 5.737%, 3/30/21 (144A) 251,000 250,000 BB-/Ba2 MSW Energy Holdings, 7.375%, 9/1/10 262,500 ------------ $ 1,027,367 ------------ TOTAL UTILITIES $ 1,027,367 ------------ TOTAL CORPORATE BONDS (Cost $22,963,833) $ 24,651,964 ------------ U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 24.3% 49,633 AAA/Aaa Federal Home Loan Mortgage Corp., 5.0%, 5/1/34 $ 49,321 79,514 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 10/1/16 82,257 199,797 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 11/1/34 203,100 358,609 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 6/1/17 375,630 20,671 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/33 21,383 86,944 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 11/1/33 89,854 450,000 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/34 465,083 15,278 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 2/1/33 15,804 951,792 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 8/1/34 983,694 298,548 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0% 11/1/33 308,540 118,338 AAA/Aaa Federal National Mortgage Association, 5.5%, 12/1/18 122,403 67,990 AAA/Aaa Federal National Mortgage Association, 5.5%, 3/1/18 70,325 128,343 AAA/Aaa Federal National Mortgage Association, 5.5%, 4/1/19 132,783 198,134 AAA/Aaa Federal National Mortgage Association, 5.5%, 5/1/34 201,266 166,061 AAA/Aaa Federal National Mortgage Association, 6.0%, 1/1/34 171,799 13,994 AAA/Aaa Federal National Mortgage Association, 6.0%, 2/1/32 14,490 134,097 AAA/Aaa Federal National Mortgage Association, 6.0%, 7/1/17 140,597 14,754 AAA/Aaa Federal National Mortgage Association, 6.0% 11/1/32 15,276 449,455 AAA/Aaa Federal National Mortgage Association, 6.0%, 11/1/33 464,956 9,894 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/31 10,245 145,157 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/33 150,163
The accompanying notes are an integral part of these financial statements. 11 PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) VALUE U.S. GOVERNMENT AND AGENCY OBLIGATIONS - (CONT.) 177,250 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/33 $ 183,363 AUD 800,000 AAA/Aaa Federal National Mortgage Association, 6.375%, 8/15/07 638,810 11,958 AAA/Aaa Federal National Mortgage Association, 6.5%, 2/1/32 12,554 2,108 AAA/Aaa Federal National Mortgage Association, 6.5%, 7/1/31 2,214 7,397 AAA/Aaa Federal National Mortgage Association, 6.5%, 10/1/31 7,765 1,736 AAA/Aaa Federal National Mortgage Association, 7.0%, 9/1/29 1,842 460 AAA/Aaa Federal National Mortgage Association, 7.5%, 6/1/30 492 188,900 AAA/Aaa Government National Mortgage Association, 4.5%, 5/15/34 184,437 187,405 AAA/Aaa Government National Mortgage Association, 5.5%, 4/20/34 191,324 71,532 AAA/Aaa Government National Mortgage Association, 5.5%, 7/15/34 73,096 496,112 AAA/Aaa Government National Mortgage Association, 5.5%, 10/15/19 517,398 497,067 AAA/Aaa Government National Mortgage Association, 5.5%, 10/15/34 507,930 361,022 AAA/Aaa Government National Mortgage Association, 6.0%, 2/15/18 380,447 51,042 AAA/Aaa Government National Mortgage Association, 6.0%, 2/15/33 52,935 37,103 AAA/Aaa Government National Mortgage Association, 6.0%, 3/15/33 38,478 110,588 AAA/Aaa Government National Mortgage Association, 6.0%, 3/15/33 114,688 72,794 AAA/Aaa Government National Mortgage Association, 6.0%, 3/15/33 75,546 37,990 AAA/Aaa Government National Mortgage Association, 6.0%, 5/15/17 40,031 35,885 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/17 37,813 277,895 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/17 292,826 93,191 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/33 96,646 74,872 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/33 77,648 62,068 AAA/Aaa Government National Mortgage Association, 6.0%, 7/15/33 64,370 132,790 AAA/Aaa Government National Mortgage Association, 6.0%, 7/15/33 137,713 707,891 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/16 745,964 225,479 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/19 237,603 150,775 AAA/Aaa Government National Mortgage Association, 6.0%, 9/15/33 156,365 59,656 AAA/Aaa Government National Mortgage Association, 6.0%, 9/15/33 61,867 101,283 AAA/Aaa Government National Mortgage Association, 6.0%, 10/15/33 105,039 499,075 AAA/Aaa Government National Mortgage Association, 6.0%, 10/15/34 517,609 13,740 AAA/Aaa Government National Mortgage Association, 6.5%, 1/15/30 14,477 43,755 AAA/Aaa Government National Mortgage Association, 6.5%, 1/15/33 46,072 192,578 AAA/Aaa Government National Mortgage Association, 6.5%, 1/15/34 202,766 35,569 AAA/Aaa Government National Mortgage Association, 6.5%, 2/15/32 37,476 52,338 AAA/Aaa Government National Mortgage Association, 6.5%, 3/15/29 55,163 39,310 AAA/Aaa Government National Mortgage Association, 6.5%, 3/15/32 41,418 81,978 AAA/Aaa Government National Mortgage Association, 6.5%, 5/15/33 86,318 4,190 AAA/Aaa Government National Mortgage Association, 6.5%, 6/15/31 4,415 50,371 AAA/Aaa Government National Mortgage Association, 6.5%, 11/15/32 53,071 2,005 AAA/Aaa Government National Mortgage Association, 7.0%, 3/15/31 2,131 4,892 AAA/Aaa Government National Mortgage Association, 7.0%, 3/15/31 5,200 25,219 AAA/Aaa Government National Mortgage Association, 7.5%, 5/15/23 26,943 182,274 AAA/Aaa Government National Mortgage Association II, 5.5%, 3/20/34 186,087 387,393 AAA/Aaa Government National Mortgage Association II, 6.0%, 11/20/33 401,272 175,000 AAA/Aaa U.S. Treasury Notes, 5.25%, 2/15/29 183,572 120,000 AAA/Aaa U.S. Treasury Notes, 5.375%, 2/15/31 129,759 ------------ $ 11,119,922 ------------ TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $10,991,307) $ 11,119,922 ------------
12 The accompanying notes are an integral part of these financial statements. PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) VALUE FOREIGN GOVERNMENT BONDS - 11.9% ITL 530,000,000 B+/B1 Banco Nac De Desen Econo, 8.0%, 4/28/10 $ 397,631 CAD 27,000 AAA/Aaa Government of Canada, 4.25%, 9/1/08 23,139 CAD 659,000 AAA/Aaa Government of Canada, 4.25%, 9/1/09 562,973 CAD 315,000 AAA/Aaa Government of Canada, 5.25%, 6/1/12 281,542 EUR 343,000 AAA/Aaa Government of France, 3.0%, 7/25/09 556,888 SEK 1,665,000 TSY/Aaa Government of Sweden, 5.25%, 3/15/11 274,070 SEK 2,955,000 TSY/Aaa Government of Sweden, 5.5%, 10/8/12 496,200 SEK 2,150,000 TSY/Aaa Government of Sweden, 8.0%, 8/15/07 365,979 JPY 10,000,000 TSY/Tsy Government of Japan, 1.5%, 1/20/05 97,729 NOK 1,320,000 TSY/Aaa Norwegian Government, 6.0%, 5/16/11 246,852 NOK 3,410,000 TSY/Aaa Norwegian Government, 6.75%, 1/15/07 609,083 AUD 532,000 AA/Aa2 Ontario Province, 5.5%, 4/23/13 409,458 AUD 207,000 NR/Aaa Queensland Treasury, 6.0%, 8/14/13 167,600 315,605 BB+/Ba2 Republic of Columbia, 9.75%, 4/9/11 362,946 250,000 BB/Ba1 Republic of Panama, 7.25%, 3/15/15 260,000 185,000 BB-/Ba3 Republic of Peru, 8.375%, 5/3/16 207,200 DEM 180,000 BBB-/Baa3 United Mexican States, 8.25%, 2/24/09 146,377 ------------ $ 5,465,667 ------------ TOTAL FOREIGN GOVERNMENT BONDS (Cost $4,501,809) $ 5,465,667 ------------ SOVEREIGN ISSUES - 0.6% 75,000 CC/B3 Domincan Republic, 9.04%, 1/23/13 (144A) $ 62,063 100,000 BB-/Ba3 Republic of Peru, 9.875%, 2/06/15 122,500 75,000 BB-/Ba3 Republic of Peru, 9.125%, 2/21/12 87,375 ------------ TOTAL SOVEREIGN ISSUES (Cost $266,679) $ 271,938 ------------ MUNICIPAL BONDS - 1.9% GOVERNMENT - 1.0% 90,000 BBB/Baa3 Golden State Tobacco Securitization, 6.75%, 6/1/39 $ 90,050 175,000 B/Caa2 New Jersey Economic Development Authority Special Facility Revenue, 7.0%, 11/15/30 154,257 105,000 BBB/Baa3 Tobacco Settlement Authority Washington, 6.625%, 6/1/32 103,106 60,000 BBB/Baa3 Tobacco Settlement Financing Corp., 7.0%, 6/1/41 60,602 100,000 NR/NR Wayne Charter County SPL, 6.75%, 12/1/15 87,404 ------------ $ 495,419 ------------ MUNI AIRPORT - 0.1% 50,000 B/Caa2 New Jersey Economic Development Authority, 6.25%, 9/15/29 $ 40,630 ------------ MUNI TOBACCO - 0.7% 300,000 BBB/Baa3 Tobacco Settlement Financing Corp., NJ, 6.25%, 6/1/43 $ 279,105 50,000 BBB/Baa3 Tobacco Settlement Financing Corp., NJ, 6.25%, 6/1/42 46,411 ------------ $ 325,516 ------------ TOTAL GOVERNMENT $ 861,565 ------------ TOTAL MUNICIPAL BONDS ------------ (Cost $773,830) $ 861,565 ------------
The accompanying notes are an integral part of these financial statements. 13 PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED) - --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S AMOUNT RATINGS USD ($) (UNAUDITED) VALUE TEMPORARY CASH INVESTMENT - 2.6% SECURITY LENDING COLLATERAL - 2.6% 1,191,203 Securities Lending Investment Fund, 2.18% $ 1,191,203 ------------ TOTAL TEMPORARY CASH INVESTMENT (Cost $1,191,203) $ 1,191,203 ------------ TOTAL INVESTMENTS IN SECURITIES - 99.9% (Cost $42,476,528)(b) $ 45,406,176 ------------ OTHER ASSETS AND LIABILITIES - 0.1% $ 434,717 ------------ TOTAL NET ASSETS - 100.0% $ 45,840,892 ------------
144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At December 31, 2004, the value of these securities amounted to $10,546,821 or 24.1% of net assets. N/R Not rated by either S&P or Moody's TSY Treasury Security (a) At December 31, 2004, the following securities were out on loan: SHARES SECURITY MARKET VALUE 33,250 AMR Corp., 9.0%, 8/1/12 $ 26,766 166,250 JLG Industries, Inc., 8.375%, 6/15/12 177,888 142,250 Northwest Airlines, Inc., 9.875%, 3/15/07 128,381 285,000 Provident Companies, Inc., 7.0%, 7/15/18 276,450 299,250 Shaw Group, Inc., 10.75%, 3/15/10 329,174 204,250 United Rentals NA, Inc., 7.75%, 11/15/13 200,165 ----------- TOTAL $ 1,138,824 =========== (b) Debt obligation initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. NOTE:Principal amounts are denominated in U.S. dollars unless otherwise noted. DEM Deutsche Marks. EURO Euro SEK Swedish Krona. NOK Norwegian Kroner. ITL Italian Lira. CAD Canadian Dollar. AUD Australian Dollar. JPY Japanese Yen. DKK Danish Kroner 14 The accompanying notes are an integral part of these financial statements. PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
YEAR ENDED 5/1/03 TO CLASS II (a) 12/31/04 12/31/03 Net asset value, beginning of period $ 11.01 $ 10.41 --------- ------- Increase from investment operations: Net investment income $ 0.55 $ 0.41 Net realized and unrealized gain on investments and foreign currency transactions 0.49 0.62 --------- ------- Net increase from investment operations $ 1.04 $ 1.03 Distributions to shareowners: Net investment income (0.63) (0.43) Tax return of capital (0.16) -- ---------- ------- Net increase in net asset value $ 0.25 $ 0.60 ---------- ------- Net asset value, end of period $ 11.26 $ 11.01 ========= ======= Total return* 9.95% 10.90% Ratio of net expenses to average net assets+ 1.29% 1.49%** Ratio of net investment income to average net assets+ 5.49% 5.08%** Portfolio turnover rate 53% 68% Net assets, end of period (in thousands) $ 25,027 $ 3,663 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.29% 1.49%** Net investment income 5.49% 5.08%**
(a) Class 2 shares were first publicly offered on May 1, 2003. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period and no sales charges. Total return would be reduced if sales charges were taken into account. ** Annualized. + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 15 PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $1,138,824) (Cost $42,476,528) $ 45,406,176 Cash 529,987 Foreign currencies, at value (Cost $452,063) 590,712 Receivables-- Investment securities sold 79,688 Fund shares sold 132,751 Dividends, interest and foreign taxes withheld 678,848 Other 2,899 ------------ Total assets $ 47,419,061 ------------ LIABILITIES: Payables-- Investment securities purchased $ 181,909 Fund shares repurchased 3,445 Dividends 2,797 Upon return for securities loaned 1,191,203 Forward foreign currency settlement contracts, net 115,451 Due to affiliates 32,524 Accrued expenses 50,840 ------------ Total liabilities $ 1,578,169 ------------ NET ASSETS: Paid-in capital $ 41,872,240 Undistributed net investment income (loss) 311,542 Accumulated undistributed net realized gain (loss) 794,850 Net unrealized gain (loss) on: Investments 2,929,648 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (67,388) ------------ Total net assets $ 45,840,892 ------------ NET ASSET VALUE PER SHARE: CLASS I: No par value (unlimited number of shares authorized) Net assets $ 20,813,544 Shares outstanding 1,848,427 ------------ Net asset value per share $ 11.26 CLASS II: No par value (unlimited number of shares authorized) Net assets $ 25,027,348 Shares outstanding 2,222,576 ------------ Net asset value per share $ 11.26
16 The accompanying notes are an integral part of these financial statements. PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - --------------------------------------------------------------------------------
YEAR ENDED 12/31/04 INVESTMENT INCOME: Interest (net of foreign taxes withheld of $3,344) $ 2,185,006 Income on securities loaned, net 3,989 ----------- Total investment income $ 2,188,995 ----------- EXPENSES: Management fees $ 214,069 Transfer agent fees and expenses 2,896 Distribution fees (Class II) 31,944 Administrative reimbursements 18,500 Custodian fees 21,476 Professional fees 59,577 Printing expense 21,159 Miscellaneous 2,272 ----------- Total expenses $ 371,893 ----------- Net expenses $ 371,893 ----------- Net investment income (loss) $ 1,817,102 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 1,126,982 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (45,775) ----------- $ 1,081,207 ----------- Change in net unrealized gain or (loss) from: Investments $ 817,291 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (49,594) ----------- $ 767,697 ----------- Net gain (loss) on investments, futures contracts and foreign currency transactions $ 1,848,904 =========== Net increase (decrease) in net assets resulting from operations $ 3,666,006 ===========
The accompanying notes are an integral part of these financial statements. 17 PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 1,817,102 $ 1,068,721 Net realized gain (loss) on investments 1,081,207 713,901 Change in net unrealized gain or (loss) on investments, futures contracts and foreign currency transactions 767,697 1,695,515 ------------ ------------ Net increase (decrease) in net assets resulting from operations $ 3,666,006 $ 3,478,137 ------------ ------------ DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (1,210,066) $ (1,087,224) Class II (733,628) (52,386) Net realized gain Class I (294,736) -- Class II (171,204) -- ------------ ------------ Total distributions to shareowners $ (2,409,634) $ (1,139,610) ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 25,764,732 $ 11,160,025 Reinvestment of distributions 2,367,418 1,105,582 Cost of shares repurchased (6,523,479) (6,320,659) ------------ ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ 21,608,671 $ 5,944,948 ------------ ------------ Net increase (decrease) in net assets $ 22,865,043 $ 8,283,475 ------------ ------------ NET ASSETS: Beginning of year $ 22,975,849 $ 14,692,374 ------------ ------------ End of year $ 45,840,892 $ 22,975,849 ============ ============ Undistributed net investment income (loss), end of year $ 311,542 $ 152,569 ============ ============
18 The accompanying notes are an integral part of these financial statements. PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Strategic Income VCT Portfolio (The Portfolio) is a portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate diversified portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) The portfolio commenced operations on May 1, 2003. Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of Strategic Income Portfolio is to produce a high level of current income. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The Trust's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting years. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements, which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolios are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Trading in foreign equity securities is substantially completed each day at various times prior to the close of the NYSE. The value of such securities used in computing the net asset value of the Portfolio's shares is based on the last sale price on the principal exchange where they traded. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. 19 PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. Discounts and premiums on fixed income securities are accreted and amortized, respectively, on a yield-to-maturity basis and are included in interest income. Dividend and interest income from foreign securities are reported net of unrecoverable foreign taxes withheld at the applicable country rates. Fixed income securities are valued at prices supplied by independent pricing services, which consider such factors as Treasury spreads, yields, maturities and ratings. Valuations may be supplemented by dealers and other sources, as required. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis, net of unrecoverable foreign taxes withheld at the applicable country rates. All discounts/premiums are accreted/amortized for financial reporting purposes. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. B. FOREIGN CURRENCY TRANSLATION The books and records of the Portfolio are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent, the net realized gains and losses on foreign currency contracts, disposition of foreign currencies, and the difference between the amount of income accrued and the U.S. dollar actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. C. FORWARD FOREIGN CURRENCY CONTRACTS The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. D. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. In addition to the requirements of the Internal Revenue Code, the Portfolio may also be required to pay local taxes on the recognition of capital gains and/or the repatriation of foreign currencies in certain countries. During the year ended December 31, 2004, no such taxes were paid. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from or in excess of net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. 20 PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis.
UNDISTRIBUTED NET ACCUMULATED NET INVESTMENT INCOME REALIZED PORTFOLIO (LOSS) GAIN (LOSS) PAID-IN CAPITAL - -------------------------------------- ----------------- --------------- --------------- Pioneer Strategic Income VCT Portfolio $ 285,565 $ (285,565) $ (0) ========= ========== ====
The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004 and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003 ----------- ----------- DISTRIBUTIONS PAID FROM: Ordinary Income $ 2,196,847 $ 1,139,610 Long-Term capital gain 212,787 -- ----------- ----------- $ 2,409,634 $ 1,139,610 Return of Capital -- -- ----------- ----------- Total distributions $ 2,409,634 $ 1,139,610 =========== =========== DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ 218,814 Undistributed long-term gain/(capital loss carryforward) 773,272 Unrealized appreciation (depreciation) 2,976,566 ----------- Total $ 3,968,652 ===========
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily attributable to the tax deferral of losses on wash sales and the mark to market of foreign currency contracts. E. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of the adjusted net assets at the beginning of the day. The Portfolio declares as daily dividends substantially all of its respective net investment income. All dividends are paid on a monthly basis. Short-term capital gain distributions, if any, may be declared with the daily dividends. Distributions paid by the Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. Dividends and distributions to shareowners are recorded on the ex-dividend date. F. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral 21 PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. G. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the portfolio. Management fees are calculated daily at the following annual rate of 0.65% of the Portfolio's average daily net assets. The portion of the Portfolios' expenses attributable to Class II will be reduced only to the extent such expenses are reduced for Class I shares (or Class II shares). In addition, under the management and administration agreement, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $27,040 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT (PIMSS), a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $271 in transfer agent fees payable to PIMSS at December 31, 2004. 4. DISTRIBUTION PLANS The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares. Included in due to affiliates is $5,213 payable to PFD at December 31, 2004. 5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------ ------------ ------------ -------------- Strategic Income Portfolio $ 42,477,674 $ 3,004,383 $ (75,881) $ 2,928,502 ============ =========== ========== ============
22 PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- 6. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $25,999,621 and $12,441,146, respectively. The cost of purchases and the proceeds from sales of U.S. Government obligations were $10,658,816 and $4,517,261, respectively. 7. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
STRATEGIC INCOME PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - ----------------------------- ---------- ------------ ---------- ----------- CLASS I: Shares sold 453,590 $ 4,955,590 712,653 $ 7,385,764 Reinvestment of distributions 134,927 1,462,624 100,561 1,053,192 Shares repurchased (494,192) (5,414,640) (579,108) (6,045,569) --------- ------------ ---------- ----------- Net increase 94,325 $ 1,002,986 234,106 $ 2,393,387 ========= ============ ========== =========== CLASS II: Shares sold 1,907,997 $ 20,809,730 353,538 $ 3,774,292 Reinvestment of distributions 83,281 904,794 4,862 52,365 Shares repurchased (101,494) (1,108,839) (25,608) (275,096) --------- ------------ ---------- ----------- Net increase 1,889,784 $ 20,605,685 332,792 $ 3,551,561 ========= ============ ========== ===========
8. FORWARD FOREIGN CURRENCY CONTRACTS During the year ended December 31, 2004, certain Portfolios had entered into various contracts that obligate the Portfolios to deliver currencies at specified future dates. At the maturity of a contract, the Portfolios must make delivery of the foreign currency. Alternatively, prior to the settlement date of a portfolio hedge, the Portfolio may close out such contracts by entering into an offsetting hedge contract. As of December 31, 2004, the Portfolio had no outstanding settlement hedges. Outstanding forward portfolio hedge contracts were as follows:
NET UNREALIZED CONTRACTS TO IN EXCHANGE SETTLEMENT GAIN PORTFOLIO DELIVER FOR DATE VALUE (LOSS) - -------------------------- --------------- ----------- ---------- ------------ ---------- Strategic Income Portfolio AUD (200,000) $ 151,140 2/8/05 $ (156,097) $ (4,957) Strategic Income Portfolio EURO (1,551,000) $ 1,995,676 1/26/05 $ (2,106,170) $ (110,494)
23 PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS II SHAREOWNERS OF PIONEER STRATEGIC INCOME VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Strategic Income VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust") as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Strategic Income VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 24 PIONEER STRATEGIC INCOME VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - -------------------------------------------------------------------------------- INVESTMENT ADVISER TRUSTEES AND OFFICERS Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the CUSTODIAN Trust's operations. The Trust's Trustees and officers are listed below, Brown Brothers Harriman & Co. together with their principal occupations during the past five years. Trustees who are interested persons of the Portfolio within the meaning INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM of the Investment Company Act of 1940 are referred to as Interested Ernst & Young LLP Trustees. Trustees who are not interested persons of the Trust are referred to as Independent Trustees. Each of the Trustees serves as a PRINCIPAL UNDERWRITER trustee of each of the 73 U.S. registered investment portfolios for Pioneer Funds Distributor, Inc. which Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Pioneer Funds"). The address for all Interested LEGAL COUNSEL Trustees and all officers of the Portfolio is 60 State Street, Boston, Wilmer Cutler Pickering Hale and Dorr LLP Massachusetts 02109. SHAREOWNER SERVICES AND TRANSFER The Trust's statement of additional information provides more detailed Pioneer Investment Management Shareholder Services, Inc. information regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-225-6292. Proxy Voting Policies and Procedures of the Trust are available without charge, upon Agent request, by calling our toll free number (1-800-225-6292). This information is also available online at pioneerfunds.com.
- -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE John F. Cogan, Chairman of the Serves until Trustee and President Serves until Director of Harbor Global Jr. (78)* Board, Trustee successor trustee is retirement or removal; Deputy Chairman Company, Ltd. and President elected or earlier and a Director of Pioneer Global Asset retirement or removal Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------ Osbert M. Hood Trustee and Serves until President and Chief Executive Officer, None (52)** Executive Vice successor trustee is PIM-USA since May 2003 (Director since President elected or earlier January 2001); President and Director of retirement or removal Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------
25 PIONEER STRATEGIC INCOME VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE David R. Bock Trustee since Serves until a Senior Vice President and Chief Financial Director of The Enterprise **(61)3050 K. 2005. successor trustee Officer, I-trax, Inc. (publicly traded Social Investment Company Street NW, is elected or earlier health care services company) (privately-held affordable Washington, retirement or (2001-present); Managing Partner, Federal housing finance company); DC 20007 removal. City Capital Advisors (boutique merchant Director of New York Mortgage bank)(1995 -2000; 2002 to 2004); Trust (publicly traded Executive Vice President and Chief mortgage REIT) Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Mary K. Bush Trustee since Serves until President, Bush International Director of Brady Corporation (56)3509 2000. successor trustee (international financial advisory firm) (industrial identification Woodbine is elected or and specialty coated material Street,Chevy earlier retirement products manufacturer), Chase, MD or removal Millennium Chemicals, Inc. 20815 (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - ------------------------------------------------------------------------------------------------------------------------------------ Margaret B.W. Trustee since Serves until Founding Director, The Winthrop Group, None Graham(57) 2000. successor trustee Inc. (consulting firm); Professor of 1001 is elected or Management, Faculty of Management, McGill Sherbrooke earlier retirement University Street West, or removal Montreal, Quebec, Canada H3A 1G5 - ------------------------------------------------------------------------------------------------------------------------------------ Marguerite A. Trustee since Serves until President and Chief Executive Officer, Director of New America High Piret(56) One 1995. successor trustee Newbury, Piret & Company, Inc. Income Fund, Inc. (closed-end Boston Place, is elected or (investment banking firm) investment company) 28th Floor, earlier retirement Boston, MA or removal 02108 - ------------------------------------------------------------------------------------------------------------------------------------ Stephen K. Trustee since Serves until Senior Counsel, Sullivan & Cromwell (law Director, The Swiss Helvetia West(76) 125 1995. successor trustee firm) Fund, Inc. (closed-end Broad Street, is elected or investment company) and New York, NY earlier retirement AMVESCAP PLC (investment 10004 or removal managers) - ------------------------------------------------------------------------------------------------------------------------------------ John Winthrop Trustee since Serves until President, John Winthrop & Co., Inc. None (68)One North September, successor trustee (private investment firm) Adgers Wharf, 2000. is elected or Charleston, SC earlier retirement 29401 or removal - ------------------------------------------------------------------------------------------------------------------------------------
26 PIONEER STRATEGIC INCOME VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
NAME AND AGE POSITIONS HELD TERM OF OFFICE PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY WITH THE TRUST YEARS THIS TRUSTEE Dorothy E. Secretary Serves at the Secretary of PIM-USA; Senior Vice None Bourassa (57) discretion of the President - Legal of Pioneer; and Board Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Christopher J. Assistant Serves at the Assistant Vice President and Senior None Kelley (40) Secretary discretion of the Counsel of Pioneer since July 2002; Vice Board President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ David C. Assistant Serves at the Partner, Wilmer Cutler Pickering Hale and None Phelan (47) Secretary discretion of the Dorr LLP; Assistant Secretary of all Board Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Vincent Nave Treasurer Serves at the Vice President - Fund Accounting, None (59) discretion of the Administration and Custody Services of Board Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ------------------------------------------------------------------------------------------------------------------------------------ Mark E. Assistant Serves at the Deputy Treasurer of Pioneer since 2004; None Bradley (45) Treasurer discretion of the Treasurer and Senior Vice President, CDC Board IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Luis I. Assistant Serves at the Assistant Vice President - Fund None Presutti(39) Treasurer discretion of the Accounting, Administration and Custody Board Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Gary Sullivan Assistant Serves at the Fund Accounting Manager - Fund None (46) Treasurer discretion of the Accounting, Administration and Custody Board Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - ------------------------------------------------------------------------------------------------------------------------------------
27 PIONEER STRATEGIC INCOME VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS OFFICER Katharine Kim Assistant Serves at the Fund Administration Manager - Fund None Sullivan (31) Treasurer discretion of the Accounting, Administration and Custody Board Services since June 2003; Vice President - Mutual Fund Operations Assistant of State Street Corporation from June2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Martin J. Chief Serves at the Chief Compliance Officer of Pioneer None Wolin (37) Compliance discretion of the (Director of Compliance and Senior Officer Board Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 28 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. 29 [LOGO] PIONEER INVESTMENTS(R) [PIONEER INVESTEMNTS(R) LOGO] PIONEER VARIABLE CONTRACTS TRUST PIONEER VALUE VCT PORTFOLIO -- CLASS II SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST TABLE OF CONTENTS Pioneer Value VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 8 Notes to Financial Statements 12 Report of Independent Registered Public Accounting Firm 16 Trustees, Officers and Service Providers 17
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT WWW.PIONEERFUNDS.COM. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT HTTP://WWW.SEC.GOV. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST PORTFOLIO UPDATE 12/31/04 PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [PIE CHART] U.S. Common Stocks 91.9% International Common Stocks 1.8% Depositary Receipts for International Stocks 6.3%
SECTOR DISTRIBUTION (As a percentage of equity holdings) [PIE CHART] Financials 34.0% Energy 11.7% Consumer Discretionary 11.6% Industrials 10.9% Information Technology 6.9% Consumer Staples 6.6% Telecommunication Services 5.9% Health Care 5.7% Materials 5.5% Utilities 1.2%
FIVE LARGEST HOLDINGS (As a percentage of equity holdings) 1. Citigroup, Inc. 4.79% 2. Bank of America Corp. 3.99 3. Merrill Lynch & Co., Inc. 3.18 4. Freddie Mac 2.92 5. Time Warner, Inc. 2.57
The Portfolio is actively managed, and current holdings may be different. PERFORMANCE UPDATE 12/31/04 PRICES AND DISTRIBUTIONS
12/31/04 12/31/03 Net Asset Value per Share $ 13.40 $ 12.04
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ 0.0065 $ 0.0051 $ -
PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in PIONEER VALUE VCT PORTFOLIO at net asset value, compared to that of the Russell 1000 Value Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [LINE GRAPH]
PIONEER VALUE RUSSELL 1000 VCT PORTFOLIO VALUE INDEX ------------- ------------ 5/03 10,000 $ 10,000 12/03 12,040 $ 12,562 12/04 13,413 $ 14,634
The Russell 1000 Value Index measures the performance of the value-oriented stocks in the Russell 1000 Index. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in any Index. AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004) NET ASSET VALUE Life-of-Class 19.22% (5/1/03) 1 Year 11.40
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's annual report for performance that reflects the deduction of the variable product's fees and charge. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers fund performance would be lower. Waivers may not be in effect for all funds. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST COMPARING ONGOING PORTFOLIO EXPENSES As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER VALUE VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004.
SHARE CLASS II - ----------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,079.77 Expenses Paid During Period* $ 7.78
* Expenses are equal to the Portfolio's annualized expense ratio of 1.49% for Class II shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER VALUE VCT PORTFOLIO Based on a hypothetical 5% return per year before expenses, reflecting the period from July 1, 2004 through December 31, 2004.
SHARE CLASS II - ----------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,017.60 Expenses Paid During Period* $ 7.55
* Expenses are equal to the Portfolio's annualized expense ratio of 1.49% for Class II shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 Portfolio Manager J. Rodman Wright describes the economic background and investment strategies that affected results for Pioneer Value VCT Portfolio through 2004's market swings. Q. WHAT WAS THE INVESTMENT BACKGROUND, AND HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD? A. Stocks made little progress for much of last year, until uncertainties about the presidential election faded and oil prices backed down from their record highs. A late year rally then drove major stock indices into the black for the second straight year. For the twelve months ended December 31, 2004, the Portfolio returned 11.40% at net asset value. This result trailed the Portfolio's benchmark, the Russell 1000 Value Index, which returned 16.49% over the same period. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q. WHICH SECTORS OR STOCKS HAD THE GREATEST IMPACT ON RESULTS? A. In technology, stock selection was productive despite weakness in the sector; Symantec's takeover of Veritas Software was key. Similarly, the acquisition of AT&T Wireless by Cingular aided results in telecommunications, but Bell South was down slightly. Our largest decliner was insurer Marsh & McLennan, which came under intense scrutiny from regulators over commission payment practices and other issues. In energy, our modestly overweight position and good stock selection both added to results. High oil prices fed gains at Transocean, a deepwater driller that works under contract to major oil companies. Fees for drilling platforms have tracked the rising cost of oil. Expensive oil also favored Suncor Energy, a Canadian producer, whose costly process for extracting oil from sand and shale deposits benefits disproportionately from rising prices. Avoiding the struggling automobile sector was beneficial, but performance suffered in other consumer areas. Electronics conglomerate Philips NV fell as slack demand pushed down prices of semiconductors. Media stocks, including Viacom and Clear Channel also lagged. Supermarkets, including Kroger, declined under pressure from labor issues and from Walmart's expansion of its grocery initiatives. And discount retailer Kohl's sought to overcome difficult times by revamping its stores and merchandise lines. We were overweighted in the underperforming health care sector. Recall of an important arthritis treatment drove Pfizer down. We had more success with Merck, however, investing while pessimism was greatest following the withdrawal of Vioxx. Merck's price recovered some lost ground later in the period. Industrial conglomerate Tyco Industries boosted returns as it continued its transition from troubled turnaround candidate to successful operating company. Can-maker Ball benefited as beverage consumption increased during Europe's unusually warm summer. Ball also bought back some of its shares, a step that investors welcomed. Mortgage originator Countrywide Financial was a solid contributor as fears that higher mortgage rates would choke off demand never materialized. Regulatory problems drove down shares of the Federal Home Loan Mortgage Corporation, known as Freddie Mac. We acquired shares when valuations sank; Freddie Mac's price recovered later in the year and helped the Portfolio's performance. Providian, which issues credit cards to consumers with questionable credit, tightened financial controls and grew its volume of receivables. Q. WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD? A. We are fairly optimistic about the economy, and prospects for large-cap stocks also appear positive. Last year's gains trailed the growth in corporate earnings, resulting in a more rationally priced equity market than was the case a year ago. Interest rates remain low in absolute terms. Energy prices may slip in 2005, as supplies seem adequate and there is unused capacity in oil-producing nations. After the market's focus on speculative issues in 2003 and on profitable smaller companies in 2004, we think bigger, stronger companies may draw attention next year. We are optimistic that large-cap stocks may perform well in the year ahead. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 4 PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST SCHEDULE OF INVESTMENTS 12/31/04
SHARES VALUE COMMON STOCKS - 98.0% ENERGY - 11.5% INTEGRATED OIL & GAS - 6.5% 2,088 BP Amoco Plc. (A.D.R.) $ 121,939 2,768 ConocoPhillips 240,345 3,324 ChevronTexaco Corp. 174,543 2,821 Occidental Petroleum Corp. 164,634 ---------- $ 701,461 ---------- OIL & GAS DRILLING - 1.6% 2,010 ENSCO International, Inc. $ 63,797 1,002 Nabors Industries, Inc.* 51,393 1,385 Transocean Offshore, Inc.* 58,710 ---------- $ 173,900 ---------- OIL & GAS EXPLORATION & PRODUCTION - 3.4% 1,250 Apache Corp. $ 63,213 1,047 Anadarko Petroleum Corp. 67,856 4,522 Devon Energy Corp. 175,996 1,921 Suncor Energy, Inc. 68,003 ---------- $ 375,068 ---------- TOTAL ENERGY $1,250,429 ---------- MATERIALS - 5.4% COMMODITY CHEMICALS - 1.1% 2,764 Praxair, Inc. $ 122,031 ---------- DIVERSIFIED CHEMICAL - 1.0% 1,550 PPG Industries, Inc. $ 105,648 ---------- DIVERSIFIED METALS & MINING - 1.2% 1,847 Freeport-McMoRan Copper & Gold, Inc. (Class B) $ 70,611 600 Phelps Dodge Corp. 59,352 ---------- $ 129,963 ---------- METAL & GLASS CONTAINERS - 0.8% 1,950 Ball Corp. $ 85,761 ---------- PAPER PRODUCTS - 1.3% 2,110 Weyerhaeuser Co. $ 141,834 ---------- TOTAL MATERIALS $ 585,237 ---------- CAPITAL GOODS - 7.7% AEROSPACE & DEFENSE - 1.0% 2,070 Northrop Grumman Corp. $ 112,525 ---------- ELECTRICAL COMPONENT & EQUIPMENT - 1.9% 5,480 General Electric Co. $ 200,020 ---------- INDUSTRIAL CONGLOMERATES - 3.5% 662 Donaldson Co., Inc. $ 21,568 5,853 Tyco International, Ltd. 209,186 1,420 United Technologies Corp. 146,757 ---------- $ 377,511 ---------- INDUSTRIAL MACHINERY - 1.3% 1,940 Deere & Co. $ 144,336 ---------- TOTAL CAPITAL GOODS $ 834,392 ---------- COMMERCIAL SERVICES & SUPPLIES - 1.5% ENVIRONMENTAL SERVICES - 1.5% 5,471 Waste Management, Inc. $ 163,802 ---------- TOTAL COMMERCIAL SERVICES & SUPPLIES $ 163,802 ---------- TRANSPORTATION - 1.5% AIRLINES - 0.8% 5,429 Southwest Airlines Co. $ 88,384 ---------- RAILROADS - 0.3% 530 Canadian National Railway Co. $ 32,463 ---------- TRUCKING - 0.4% 549 United Parcel Service $ 46,918 ---------- TOTAL TRANSPORTATION $ 167,765 ---------- HOTELS, RESTAURANTS & LEISURE - 0.4% RESTAURANTS - 0.4% 1,523 McDonald's Corp. $ 48,827 ---------- TOTAL HOTELS, RESTAURANTS & LEISURE $ 48,827 ---------- MEDIA - 9.8% ADVERTISING - 1.3% 1,660 Omnicom Group $ 139,971 ---------- BROADCASTING & CABLE TELEVISION - 3.6% 5,770 Clear Channel Communications, Inc. $ 193,237 6,044 Comcast Corp.* 201,144 ---------- $ 394,381 ---------- MOVIES & ENTERTAINMENT - 4.3% 14,113 Time Warner, Inc.* $ 274,357 5,217 Viacom, Inc. (Class B) 189,847 ---------- $ 464,204 ---------- PUBLISHING - 0.6% 762 Gannett Co. $ 62,255 ---------- TOTAL MEDIA $1,060,811 ---------- RETAILING - 1.1% SPECIALTY STORES - 1.1% 4,570 Foot Locker, Inc. $ 123,070 ---------- TOTAL RETAILING $ 123,070 ---------- FOOD & DRUG RETAILING - 3.8% FOOD DISTRIBUTORS - 1.5% 2,880 Cardinal Health, Inc. $ 167,472 ----------
The accompanying notes are an integral part of these financial statements. 5 PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST SCHEDULE OF INVESTMENTS 12/31/04 (continued)
SHARES VALUE FOOD RETAIL - 2.3% 7,333 Kroger Co.* $ 128,621 452 Nestle SA (Registered Shares) 118,049 ---------- $ 246,670 ---------- TOTAL FOOD & DRUG RETAILING $ 414,142 ---------- FOOD, BEVERAGE & TOBACCO - 1.7% SOFT DRINKS - 1.7% 3,453 PepsiCo, Inc. $ 180,247 ---------- TOTAL FOOD, BEVERAGE & TOBACCO $ 180,247 ---------- HOUSEHOLD & PERSONAL PRODUCTS - 1.0% PERSONAL PRODUCTS - 1.0% 1,678 Kimberly-Clark Corp. $ 110,429 ---------- TOTAL HOUSEHOLD & PERSONAL PRODUCTS $ 110,429 ---------- HEALTH CARE EQUIPMENT & SERVICES - 3.5% HEALTH CARE DISTRIBUTORS - 1.0% 2,500 Wyeth $ 106,475 ---------- HEALTH CARE EQUIPMENT - 0.6% 2,010 AstraZeneca Plc (A.D.R.) $ 73,144 ---------- HEALTH CARE FACILITIES - 1.9% 4,912 HCA, Inc. $ 196,284 761 Tenet Healthcare Corp.* 8,356 ---------- $ 204,640 ---------- TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 384,259 ---------- PHARMACEUTICALS & BIOTECHNOLOGY - 2.0% PHARMACEUTICALS - 2.0% 4,320 IVAX Corp.* $ 68,342 2,035 Merck & Co., Inc. 65,405 3,306 Pfizer, Inc. 88,898 ---------- $ 222,645 ---------- TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 222,645 ---------- BANKS - 9.8% DIVERSIFIED BANKS - 5.3% 9,044 Bank of America Corp. $ 424,978 2,432 Wells Fargo & Co. 151,149 ---------- $ 576,127 ---------- REGIONAL BANKS - 1.5% 3,400 Fifth Third Bancorp $ 160,752 ---------- THRIFTS & MORTGAGE FINANCE - 3.0% 530 Countrywide Financial Corp. $ 19,615 4,217 Freddie Mac 310,793 ---------- $ 330,408 ---------- TOTAL BANKS $1,067,287 ---------- DIVERSIFIED FINANCIALS - 14.7% ASSET MANAGEMENT & CUSTODY BANKS - 1.9% 6,263 The Bank of New York Co., Inc. $ 209,309 ---------- CONSUMER FINANCE - 2.0% 12,936 Providian Financial Corp.* $ 213,056 ---------- INVESTMENT BANKING & BROKERAGE - 6.1% 1,435 Goldman Sachs Group, Inc. $ 149,297 2,004 Lehman Brothers Holdings, Inc. 175,310 5,680 Merrill Lynch & Co., Inc. 339,494 ---------- $ 664,101 ---------- DIVERSIFIED FINANCIAL SERVICES - 4.7% 10,594 Citigroup, Inc. $ 510,419 ---------- TOTAL DIVERSIFIED FINANCIALS $1,596,885 ---------- INSURANCE - 6.8% LIFE & HEALTH INSURANCE - 1.1% 6,525 UNUM Corp. $ 117,059 ---------- MULTI-LINE INSURANCE - 1.6% 2,718 American International Group, Inc. $ 178,491 ---------- PROPERTY & CASUALTY INSURANCE - 4.1% 550 ACE, Ltd. $ 23,513 2,589 Allstate Corp. 133,903 1,014 Ambac Financial Group, Inc. 83,280 68 Berkshire Hathaway, Inc. (Class B)* 199,648 ---------- $ 440,344 ---------- TOTAL INSURANCE $ 735,894 ---------- SOFTWARE & SERVICES - 3.9% APPLICATION SOFTWARE - 1.9% 7,190 Veritas Software Corp.* $ 205,275 ---------- DATA PROCESSING & OUTSOURCED SERVICES - 2.0% 5,216 First Data Corp. $ 221,889 ---------- TOTAL SOFTWARE & SERVICES $ 427,164 ---------- TECHNOLOGY HARDWARE & EQUIPMENT - 4.1% COMMUNICATIONS EQUIPMENT - 1.9% 4,053 Motorola, Inc. $ 69,712 8,288 Nokia Corp. (A.D.R.) 129,873 ---------- $ 199,585 ---------- COMPUTER HARDWARE - 1.8% 9,360 Hewlett-Packard Co. $ 196,279 ---------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.4% 1,707 Koninklijke Philips Electronics $ 45,235 ---------- TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 441,099 ----------
The accompanying notes are an integral part of these financial statements. 6 PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SHARES VALUE SEMICONDUCTORS - 0.8% 3,855 Intel Corp. $ 90,168 ----------- TOTAL SEMICONDUCTORS $ 90,168 ----------- TELECOMMUNICATION SERVICES - 5.7% INTEGRATED TELECOMMUNICATION SERVICES - 2.2% 1,538 Alltel Corp. $ 90,372 5,629 BellSouth Corp. 156,430 ----------- $ 246,802 ----------- WIRELESS TELECOMMUNICATION SERVICES - 3.5% 4,060 Nextel Communications, Inc.* $ 121,800 6,615 Vodafone Group Plc (A.D.R.) 181,119 27,881 Vodafone Group Plc 75,549 ----------- $ 378,468 ----------- TOTAL TELECOMMUNICATION SERVICES $ 625,270 ----------- UTILITIES - 1.2% ELECTRIC UTILITIES - 1.2% 367 Dominion Resources, Inc. $ 24,861 2,410 Exelon Corp. 106,208 ----------- $ 131,069 ----------- TOTAL UTILITIES $ 131,069 ----------- TOTAL COMMON STOCKS (Cost $9,714,978) $10,660,891 ----------- TOTAL INVESTMENTS IN SECURITIES - 98.0% (Cost $9,714,978) $10,660,891 ----------- OTHER ASSETS AND LIABILITIES - 2.0% $ 218,094 ----------- TOTAL NET ASSETS - 100.0% $10,878,985 ===========
* Non-Income producing security (A.D.R.) American Depositary Receipt The accompanying notes are an integral part of these financial statements. 7 PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST FINANCIAL HIGHLIGHTS
5/1/03 YEAR ENDED TO CLASS II 12/31/04 12/31/03 (a) Net asset value, beginning of period $ 12.04 $ 10.00 ------- ------- Increase from investment operations: Net investment income $ 0.02 $ 0.01 Net realized and unrealized gain on investments and foreign currency transactions 1.36 2.03 ------- ------- Net increase from investment operations $ 1.38 $ 2.04 Distributions to shareowners: Net income $ (0.01) $ -- Net realized gain (0.01) -- ------- ------- Net increase in net asset value $ 1.36 $ 2.04 ------- ------- Net asset value, end of period $ 13.40 $ 12.04 ======= ======= Total return* 11.40% 20.40% Ratio of net expenses to average net assets+ 1.50% 1.50%** Ratio of net investment income to average net assets+ 0.27% 0.27%** Portfolio turnover rate 52% 24% Net assets, end of period (in thousands) $10,879 $ 1,695 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 3.61% 10.93%** Net investment loss (1.85)% (9.16)%** Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.50% 1.50%** Net investment income 0.27% 0.27%**
(a) Class II shares were first publicly offered on May 1, 2003. * Assumes initial investment at net asset value at the beginning of the period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of the period. ** Annualized. + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 8 PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST STATEMENT OF ASSETS AND LIABILITIES 12/31/04 ASSETS: Investment in securities, at value (Cost $9,714,978)) $ 10,660,891 Cash 509,918 Receivables -- Fund shares sold 11,278 Dividends, interest and foreign taxes withheld 14,872 Due from Pioneer Investment Management, Inc. 3,204 Other 1,073 ------------ Total assets $ 11,201,236 ------------ LIABILITIES: Payables -- Investment securities purchased $ 266,861 Fund shares repurchased 2,510 Due to affiliates 3,950 Accrued expenses 48,930 ------------ Total liabilities $ 322,251 ------------ NET ASSETS: Paid-in capital $ 9,867,799 Undistributed net investment income (loss) 12,435 Accumulated undistributed net realized gain (loss) 52,791 Net unrealized gain (loss) on: Investments 945,913 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies 47 ------------ Total net assets $ 10,878,985 ------------ NET ASSET VALUE PER SHARE: CLASS II: (No par value, unlimited number of shares authorized) Net assets $ 10,878,985 Shares outstanding 812,061 ------------ Net asset value per share $ 13.40
The accompanying notes are an integral part of these financial statements. 9 PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST STATEMENT OF OPERATIONS
YEAR ENDED 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $570) $ 95,075 Interest 2,051 ---------- Total investment income $ 97,126 ---------- EXPENSES: Management fees $ 41,263 Transfer agent fees 1,384 Distribution fees 13,755 Administrative fees 18,500 Custodian fees 48,091 Professional fees 50,449 Printing 23,086 Miscellaneous 2,125 ---------- Total expenses $ 198,653 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (116,128) ---------- Less fees paid indirectly Net expenses $ 82,525 ---------- Net investment income (loss) $ 14,601 ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 56,702 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (634) ---------- $ 56,068 ---------- Change in net unrealized gain or loss from: Investments $ 807,113 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies 45 ---------- $ 807,158 ---------- Net gain (loss) on investments and foreign currency transactions $ 863,226 ========== Net increase (decrease) in net assets resulting from operations $ 877,827 ==========
The accompanying notes are an integral part of these financial statements. 10 PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST STATEMENTS OF CHANGES IN NET ASSETS
5/1/03 (COMMENCEMENT YEAR ENDED OF OPERATIONS 12/31/04 TO 12/31/03 FROM OPERATIONS: Net investment income $ 14,601 $ 1,095 Net realized gain (loss) on investments 56,068 (2,039) Change in net unrealized gain or loss on investments, futures contracts and foreign currency transactions 807,158 138,802 ----------- ---------- Net increase (decrease) in net assets resulting from operations $ 877,827 $ 137,858 ----------- ---------- DISTRIBUTIONS TO SHAREOWNERS Net investment income: Class II $ (2,607) $ -- Net realized gain Class II (2,047) -- ----------- ---------- Total distributions to shareowners $ (4,654) $ -- ----------- ---------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 8,460,112 $1,646,040 Reinvestment of distributions 4,364 -- Cost of shares repurchased (154,122) (88,440) ----------- ---------- Net increase in net assets resulting from Fund share transactions $ 8,310,354 $1,557,600 ----------- ---------- Net increase in net assets $ 9,183,527 $1,695,458 NET ASSETS: Beginning of year 1,695,458 -- ----------- ---------- End of year $10,878,985 $1,695,458 =========== ========== Undistributed net investment income (loss), end of year $ 12,435 $ 1,075 =========== ==========
The accompanying notes are an integral part of these financial statements. 11 PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST NOTES TO FINANCIAL STATEMENTS 12/31/04 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Value VCT Portfolio (the Portfolio), a Portfolio of Pioneer Variable Contracts Trust (the Trust), which is a Delaware statutory trust registered under the Investment Company Act of 1940 as an open-end management investment diversified company. The Trust consists of twenty two separate portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio) (Class I shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) The Value VCT Portfolio commenced operations on May 1, 2003. Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of Value Portfolio is to seek capital appreciation. The financial statements and financial highlights of all other portfolios are presented in separate books. The Trust's financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, in the preparation of its financial statements which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolio are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on 12 PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST income bearing cash accounts, is recorded on the accrual basis. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. B. FOREIGN CURRENCY TRANSLATION The books and records of the Portfolio are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent, the net realized gains and losses on foreign currency contracts, disposition of foreign currencies, and the difference between the amount of income accrued and the U.S. dollar actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. C. FORWARD FOREIGN CURRENCY CONTRACTS The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. At December 31, 2004, there were no open forward foreign currency contracts. D. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis.
UNDISTRIBUTED ACCUMULATED NET INVESTMENT REALIZED GAIN PAID-IN PORTFOLIO INCOME (LOSS) (LOSS) CAPITAL - --------- -------------- ------------- ------- Pioneer Value VCT Portfolio $ (634) $634 $ (0) ------ ---- ----
13 PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued) The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004, and the distributions paid during the year ended December 31, 2004 and the period ended December 31, 2003 on a tax basis.
2004 2003 ---------- -------- DISTRIBUTIONS PAID FROM: Ordinary Income $ 4,654 $ -- Long-Term capital gain -- -- Return of Capital -- -- ---------- -------- Total distributions $ 4,654 $ -- ========== ======== DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed ordinary income $ 20,095 Undistributed long-term gain/ (capital loss carryforward) 87,163 Unrealized appreciation (depreciation) 903,928 ---------- Total $1,011,186 ==========
The difference between book-basis and tax-basis unrealized appreciation is primarily attributable to the tax deferral of losses on wash sales. E. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. F. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. G. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the portfolio. Management fees are calculated daily at the following annual rate of 0.75% of the Portfolio's average daily net assets. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $1,542 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. Through December 31, 2004, PIM has agreed not to impose all or a portion of its management fee and, if necessary, to limit other ordinary operating expenses to the extent required to reduce Class II expenses to 1.50% of the average daily net assets attributable to class II shares. As of December 31, 2004, there were no Class I shares outstanding. 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $135 in transfer agent fees payable to PIMSS at December 31, 2004. 4. DISTRIBUTION PLANS The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares. Included in due to affiliates is $2,274 payable to PFD at December 31, 2004. 14 PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST 5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) -------- ------------ ------------ --------------- Value Portfolio $9,757,010 $987,539 $ (83,658) $903,881 ---------- -------- --------- --------
6. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $10,917,619 and $2,766,134, respectively. 7. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
VALUE PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - --------------- ---------- ---------- ---------- ---------- CLASS II: Shares sold 683,440 $8,460,112 148,910 $ 1,646,041 Reinvestment of distributions 353 4,364 -- -- Shares repurchased (12,576) (154,122) (8,066) (88,440) ------- ---------- ------- ----------- Net increase 671,217 $8,310,354 140,844 $ 1,557,601 ======= ========== ======= ===========
15 PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS II SHAREOWNERS OF PIONEER VALUE VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Value VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust") as of December 31, 2004, and the related statement of operations for the year then ended and the statements of changes in net assets, and the financial highlights, for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Value VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, and the changes in its net assets, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 16 PIONEER VALUE VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS INVESTMENT ADVISER Pioneer Investment Management, Inc. CUSTODIAN Brown Brothers Harriman & Co. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP PRINCIPAL UNDERWRITER Pioneer Funds Distributor, Inc. LEGAL COUNSEL Wilmer Cutler Pickering Hale and Dorr LLP SHAREOWNER SERVICES AND TRANSFER Pioneer Investment Management Shareholder Services, Inc. TRUSTEES AND OFFICERS The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the Trust's operations. The Trust's Trustees and officers are listed below, together with their principal occupations during the past five years. Trustees who are interested persons of the Portfolio within the meaning of the Investment Company Act of 1940 are referred to as Interested Trustees. Trustees who are not interested persons of the Trust are referred to as Independent Trustees. Each of the Trustees serves as a trustee of each of the 73 U.S. registered investment portfolios for which Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address for all Interested Trustees and all officers of the Portfolio is 60 State Street, Boston, Massachusetts 02109. The Trust's statement of additional information provides more detailed informations regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-255-62927 Proxy Voting Policies and Procedures of the Trust are available without charge, upon Agent request, by calling our toll free number (1-800-225-6292). This information is also available online at pioneerfunds.com. INTERESTED TRUSTEES
POSITIONS HELD NAME AND AGE WITH THE TRUST TERM OF OFFICE John F. Cogan, Jr. (78)* Chairman of the Serves until successor trustee Board, Trustee and is elected or earlier retirement President or removal Osbert M. Hood (52)** Trustee and Executive Serves until successor trustee Vice President is elected or earlier retirement or removal NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS TRUSTEE John F. Cogan, Jr. (78)* Trustee and President Serves until retirement or removal; Director of Harbor Global Company, Ltd. Deputy Chairman and a Director of Pioneer Global Asset Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). Osbert M. Hood (52)** President and Chief Executive Officer, PIM-USA since May None 2003 (Director since January 2001); President and Director of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999.
* Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. ** Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. 17 PIONEER VALUE VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) INDEPENDENT TRUSTEES
POSITIONS HELD NAME AND AGE WITH THE TRUST TERM OF OFFICE David R. Bock** (61) Trustee since 2005. Serves until a successor 3050 K. Street NW, trustee is elected or earlier Washington, DC 20007 retirement or removal. Mary K. Bush (56) Trustee since 2000. Serves until successor trustee 3509 Woodbine Street, is elected or earlier retirement Chevy Chase, MD 20815 or removal Margaret B.W. Graham (57) Trustee since 2000. Serves until successor trustee 1001 Sherbrooke Street is elected or earlier retirement West, Montreal, Quebec, or removal Canada H3A 1G5 Marguerite A. Piret (56) Trustee since 1995. Serves until successor trustee One Boston Place, is elected or earlier retirement 28th Floor, or removal Boston, MA 02108 Stephen K. West (76) Trustee since 1995. Serves until successor trustee 125 Broad Street, is elected or earlier retirement New York, NY 10004 or removal John Winthrop (68) Trustee since Serves until successor trustee One North Adgers Wharf, September, 2000. is elected or earlier retirement Charleston, SC 29401 or removal NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS David R. Bock** (61) Senior Vice President and Chief Financial Officer, I-trax, 3050 K. Street NW, Inc. (publicly traded health care services company) Washington, DC 20007 (2001-present); Managing Partner, Federal City Capital Advisors (boutique merchant bank) (1995-2000; 2002 to 2004); Executive Vice President and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) Mary K. Bush (56) President, Bush International (international financial 3509 Woodbine Street, advisory firm) Chevy Chase, MD 20815 Margaret B.W. Graham (57) Founding Director, The Winthrop Group, Inc. 1001 Sherbrooke Street (consulting firm); Professor of Management, Faculty of West, Montreal, Quebec, Management, McGill University Canada H3A 1G5 Marguerite A. Piret (56) President and Chief Executive Officer, Newbury, Piret One Boston Place, & Company, Inc. (investment banking firm) 28th Floor, Boston, MA 02108 Stephen K. West (76) Senior Counsel, Sullivan & Cromwell (law firm) 125 Broad Street, New York, NY 10004 John Winthrop (68) President, John Winthrop & Co., Inc. (private One North Adgers Wharf, investment firm) Charleston, SC 29401 NAME AND AGE OTHER DIRECTORSHIPS HELD BY THIS TRUSTEE David R. Bock** (61) Director of The Enterprise Social Investment Company 3050 K. Street NW, (privately-held affordable housing finance company); Director Washington, DC 20007 of New York Mortgage Trust (publicly traded mortgage REIT) Mary K. Bush (56) Director of Brady Corporation (industrial identification and 3509 Woodbine Street, specialty coated material products manufacturer), Millennium Chevy Chase, MD 20815 Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) Margaret B.W. Graham (57) None 1001 Sherbrooke Street West, Montreal, Quebec, Canada H3A 1G5 Marguerite A. Piret (56) Director of New America High Income Fund, Inc. One Boston Place, (closed-end investment company) 28th Floor, Boston, MA 02108 Stephen K. West (76) Director, The Swiss Helvetia Fund, Inc. 125 Broad Street, (closed-end investment company) and AMVESCAP PLC (investment New York, NY 10004 managers) John Winthrop (68) None One North Adgers Wharf, Charleston, SC 29401
** Mr. Bock became a Trustee of the Trust on January 1, 2005. 18 PIONEER VALUE VCT PORTFOLIO TRUST OFFICERS
POSITIONS HELD NAME AND AGE WITH THE TRUST TERM OF OFFICE Dorothy E. Bourassa (57) Secretary Serves at the discretion of the Board Christopher J. Kelley (40) Assistant Secretary Serves at the discretion of the Board David C. Phelan (47) Assistant Secretary Serves at the discretion of the Board Vincent Nave (59) Treasurer Serves at the discretion of the Board Mark E. Bradley (45) Assistant Treasurer Serves at the discretion of the Board Luis I. Presutti (39) Assistant Treasurer Serves at the discretion of the Board Gary Sullivan (46) Assistant Treasurer Serves at the discretion of the Board OTHER DIRECTORSHIPS HELD NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS BY THIS OFFICER Dorothy E. Bourassa (57) Secretary of PIM-USA; Senior Vice President - Legal of None Pioneer; and Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 Christopher J. Kelley (40) Assistant Vice President and Senior Counsel of Pioneer since None July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 David C. Phelan (47) Partner, Wilmer Cutler Pickering Hale and Dorr LLP; Assistant None Secretary of all Pioneer Funds since September 2003 Vincent Nave (59) Vice President - Fund Accounting, Administration and None Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) Mark E. Bradley (45) Deputy Treasurer of Pioneer since 2004; Treasurer and Senior None Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 Luis I. Presutti (39) Assistant Vice President - Fund Accounting, Administration None and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 Gary Sullivan (46) Fund Accounting Manager - Fund Accounting, Administration None and Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002
19 PIONEER VALUE VCT PORTFOLIO TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued) TRUST OFFICERS
POSITIONS HELD NAME AND AGE WITH THE TRUST TERM OF OFFICE Katharine Kim Sullivan (31) Assistant Treasurer Serves at the discretion of the Board Martin J. Wolin (37) Chief Compliance Serves at the discretion Officer of the Board OTHER DIRECTORSHIPS HELD NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS BY THIS OFFICER Katharine Kim Sullivan (31) Fund Administration Manager - Fund Accounting, None Administration and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 Martin J. Wolin (37) Chief Compliance Officer of Pioneer (Director of Compliance None and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds.
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 20 THIS PAGE FOR YOUR NOTES. 21 [PIONEER INVESTMENTS(R) LOGO] [LOGO] PIONEER INVESTMENTS(R) PIONEER VARIABLE CONTRACTS TRUST PIONEER REAL ESTATE SHARES VCT PORTFOLIO -- CLASS II SHARES ANNUAL REPORT DECEMBER 31, 2004 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Pioneer Real Estate Shares VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 6 Notes to Financial Statements 10 Report of Independent Registered Public Accounting Firm 15 Trustees, Officers and Service Providers 16 PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT www.pioneerfunds.com. THE TRUST FILES A COMPLETE STATEMENT OF INVESTMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FIRST AND THE THIRD QUARTERS FOR EACH FISCAL YEAR ON FORM N-Q. SHAREOWNERS MAY VIEW THE FILED FORM N-Q BY VISITING THE COMMISSION'S WEB SITE AT http://www.sec.gov. THE FILED FORM MAY ALSO BE VIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. INFORMATION REGARDING THE OPERATIONS OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 12/31/04 - -------------------------------------------------------------------------------- PORTFOLIO DIVERSIFICATION (As a percentage of total investment portfolio) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] U.S. Common Stocks 92.1% Temporary Cash Investment 7.9% SECTOR DISTRIBUTION (As a percentage of equity holdings) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Office 20.3% Apartment 18.6% Regional Mall 13.4% Industrials 13.1% Shopping Center 12.0% Hotel 10.1% Diversified 7.7% Self Storage 4.0% Manufactured Homes 0.4% Health Care 0.4% FIVE LARGEST HOLDINGS (As a percentage of equity holdings) 1. Simon DeBartolo Group, Inc. 6.58% 2. Boston Properties, Inc. 5.08% 3. AvalonBay Communities, Inc. 4.82% 4. Equity Residential Property Trust 4.37% 5. Catellus Development Corp. 4.19% The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/04 - -------------------------------------------------------------------------------- PRICES AND DISTRIBUTIONS 12/31/04 12/31/03 Net Asset Value per Share $ 24.26 $ 18.55 DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM (1/1/04 - 6/30/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS $ 0.4032 $ 0.2128 $ 0.1166 - -------------------------------------------------------------------------------- PERFORMANCE OF A $10,000 INVESTMENT The following chart shows the change in value of an investment made in PIONEER REAL ESTATE SHARES VCT PORTFOLIO at net asset value, compared to that of the Wilshire Real Estate Securities Index. Portfolio returns are based on net asset value and do not reflect applicable insurance fees and surrender charges. [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Wilshire Real Estate Securities Index Pioneer Real Estate Shares VCT Portfolio Mar-95 10000 10000 11322 11674 Dec-96 15497 15680 18565 18919 Dec-98 15330 15258 14841 14460 Dec-00 19403 18904 21431 20326 2-Dec 21983 20788 30133 27951 4-Dec 40622 37844
Index comparison begins on 2/28/95. The Wilshire Real Estate Securities Index is a market-capitalization weighted measure of the performance of real estate investment trusts (equity and hybrid) and real estate operating companies. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (As of December 31, 2004) - -------------------------------------------------------------------------------- NET ASSET VALUE - -------------------------------------------------------------------------------- Life of Class 14.48% (3/1/95) 5 Years 21.22% 1 Year 35.39% All total returns shown assume reinvestment of distributions at net asset value. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.pioneerfunds.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The returns for the Portfolio do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges. These expenses would reduce the overall returns shown. Please refer to variable product's annual report for performance that reflects the deduction of the variable products fees and charges. Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers performance would be lower. Waivers may not be in effect for all portfolios. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information. 2 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. USING THE TABLES ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER REAL ESTATE SHARES VCT PORTFOLIO Based on actual returns from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,263.87 $ 1,262.50 Expenses Paid During Period* $ 5.77 $ 7.18 * Expenses are equal to the Portfolio's annualized expense ratio of 1.01% and 1.26% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. EXPENSES PAID ON A $1,000 INVESTMENT IN PIONEER REAL ESTATE SHARES VCT PORTFOLIO Based on a hypothetical 5% return per year before expenses, reflecting the period from July 1, 2004 through December 31, 2004. SHARE CLASS I II --------------------------------- ---------- ---------- Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00 Ending Account Value on 12/31/04 $ 1,020.21 $ 1,018.95 Expenses Paid During Period* $ 5.15 $ 6.41 * Expenses are equal to the Portfolio's annualized expense ratio of 1.01% and 1.26% for Class I and Class II shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 3 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/04 - -------------------------------------------------------------------------------- A WORD ABOUT RISK: THE PORTFOLIO INVESTS IN REIT SECURITIES, THE VALUE OF WHICH CAN FALL FOR A VARIETY OF REASONS, SUCH AS DECLINES IN RENTAL INCOME, POOR PROPERTY MANAGEMENT, ENVIRONMENTAL LIABILITIES, UNINSURED DAMAGE, INCREASED COMPETITION, OR CHANGES IN REAL ESTATE TAX LAWS. CALL 800-688-9915 OR VISIT www.pioneer funds.com FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. CURRENT PER FORMANCE MAY BE LOWER OR HIGHER THAN THE PER FORMANCE DATA QUOTED. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE RETURNS FOR THE PORTFOLIO DO NOT REFLECT THE DEDUCTION OF EXPENSES ASSOCIATED WITH VARIABLE PRODUCTS, SUCH AS MORTALITY AND EXPENSE RISK CHARGES, SEPARATE ACCOUNT CHARGES, AND SALES CHARGES. THESE EXPENSES WOULD REDUCE THE OVERALL RETURNS SHOWN. PERFORMANCE RESULTS REFLECT ANY APPLICABLE EXPENSE WAIVERS IN EFFECT DURING THE PERIODS SHOWN. WITHOUT SUCH WAIVERS PER FORMANCE WOULD BE LOWER. WAIVERS MAY NOT BE IN EFFECT FOR ALL PORTFOLIOS. CERTAIN FEE WAIVERS ARE CONTRACTUAL THROUGH A SPECIFIED PERIOD. OTHERWISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION. For the fifth year in a row, real estate stocks achieved positive returns and outperformed the broader market indices. As Matthew Troxell of AEW Capital Management, L.P. explains in the following interview, it will fall to astute stock selection to identify the real estate investments most likely to continue this momentum into the New Year after such a rewarding multi-year rally. Q: HOW DID THE PORTFOLIO PERFORM DURING FISCAL 2004? A: Performance by property type was universally strong. For the 12 months ended December 31, 2004, Class II shares generated a return of 35.39% at net asset value. This performance slightly outperformed the 34.81% return for the Wilshire Real Estate Securities Index for the same period. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: WHAT INVESTMENTS CONTRIBUTED TO PERFORMANCE? A: Strong operating fundamentals at the property level and solid consumer spending patterns boosted returns of regional mall real estate investment trusts (REITs). One of the Portfolio's largest holdings, Simon Property Group, performed strongly in the last quarter of the fiscal year. This REIT announced the acquisition of Chelsea Property Group (also held by the Portfolio) during the first half of the fiscal year. Initially, investors reacted negatively. But we viewed the proposed merger very positively, because Chelsea Property Group, which owns factory outlet shopping centers in Japan as well as in the United States, would add international diversity and a new retail avenue of growth to Simon's current portfolio. Each company's board of directors and Chelsea's shareholders unanimously approved the definitive merger agreement, and the company's stock rallied nicely. While the outlook for the office sector is improving as a result of positive job growth, it takes longer for the improvements to manifest themselves at the property owner level. (Tenants must first use their existing empty space before seeking new office space.) Boston Properties, Inc., which holds a portfolio of high-quality buildings in markets with high barriers to entry, exemplifies the kind of resilient, well-managed company that has weathered the office downturn better than many of its counterparts. This office REIT returned 42.5% for 2004. A sector of the real estate market that recovered well in 2004 was apartments. AvalonBay Communities, Inc. was one of the Portfolio's best performing stocks for the reporting period. Like the office sector, multi-family housing is benefiting from positive job growth, which helps increase demand for apartments. In addition, we're seeing tremendous demand for the conversion of apartments to condominiums in a number of markets, including southeast Florida and southern California, where the price of owning a home is prohibitive for many people. This increased demand is improving fundamentals while condo conversion demand provides support for asset prices -- a scenario that creates a natural price support. In the lodging sector, our selection of hotels did well, but it was the presence of Starwood Hotels and Resorts that dramatically impacted performance with its 64.7% return for 2004. This hotel, like many in its universe, saw great improvement in occupancy rates -- resulting in a greater number of rooms being rented in 2004 than 2003. Much of the improvement was due to the ability of management to increase room rates, which is a more powerful driver of profitability than occupancy rates. Q: ANY STOCKS PROVE TO BE DISAPPOINTING? A: Despite the positive performance of industrial stocks, the sector detracted from performance relatively speaking, since the group underperformed the index. The Portfolio's investments in Liberty Property Trust, an office and industrial REIT, lagged the market due to investor concerns about management's decision to delay construction of a new office building in downtown Philadelphia until an anchor tenant was found. When Comcast signed on as a tenant, the stock recovered. We remain confident that management at Liberty has a good understanding of their business and holds strong assets. Q: WHAT IS YOUR OUTLOOK? A: With the underlying fundamentals improving, real estate stocks appear poised to continue strengthening. However, after such impressive performance during the past five years, we would not be surprised to see a moderating of performance returns in 2005. As the proverbial tide lifts all boats, we expect to take a more cautious approach, knowing that astute stock picking will be challenging but all the more important in the upcoming months. ANY INFORMATION IN THIS SHAREHOLDER REPORT REGARDING MARKET OR ECONOMIC TRENDS OR THE FACTORS INFLUENCING THE PORTFOLIO'S HISTORICAL OR FUTURE PERFORMANCE ARE STATEMENTS OF THE OPINION OF PORTFOLIO MANAGEMENT AS OF THE DATE OF THIS REPORT. THESE STATEMENTS SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS DISCUSSED WILL BE REALIZED. 4 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/04 - -------------------------------------------------------------------------------- SHARES VALUE COMMON STOCKS - 97.7% HOTELS, RESTAURANTS & LEISURE - 5.4% HOTELS, RESORTS & CRUISE LINES - 5.4% 93,500 Hilton Hotels Corp. $ 2,126,190 54,000 Starwood Hotels & Resorts 3,153,600 ------------- $ 5,279,790 ------------- TOTAL HOTELS, RESTAURANTS & LEISURE $ 5,279,790 ------------- DIVERSIFIED FINANCIALS - 3.3% DIVERSIFIED FINANCIAL SERVICES - 3.3% 86,000 Brookfield Properties Corp. (a) $ 3,216,400 ------------- TOTAL DIVERSIFIED FINANCIALS $ 3,216,400 ------------- REAL ESTATE - 89.1% REAL ESTATE MANAGEMENT & DEVELOPMENT - 4.5% 131,500 Catellus Development Corp. $ 4,023,900 27,500 Kite Realty Group Trust 420,200 ------------- $ 4,444,100 ------------- REAL ESTATE INVESTMENT TRUSTS - 84.6% 38,000 Apartment Investment & Management Co. $ 1,464,520 46,200 AMB Property Corp. 1,866,018 40,000 Arden Realty Group, Inc. 1,508,800 102,000 Archstone Communities Trust 3,906,600 61,500 AvalonBay Communities, Inc. 4,630,950 20,500 BioMed Property Trust, Inc. 455,305 75,500 Boston Properties, Inc. 4,882,585 6,200 Capital Automotive 220,255 44,600 Camden Property Trust 2,274,600 19,000 Carramerica Realty Corp. 627,000 21,000 Corporate Office Properties 616,350 74,000 Developers Diversifies Realty Corp. 3,283,380 53,000 Duke Realty Investments, Inc. 1,809,420 11,300 Equity Lifestyle Properties, Inc. 403,975 86,000 Equity Office Properties Trust 2,504,320 116,000 Equity Residential Property Trust (a) 4,196,880 12,100 First Potomac Realty Trust 275,880 38,000 Federal Realty Investment Trust 1,962,700 74,500 General Growth Properties, Inc. 2,693,920 51,000 Highwoods Properties, Inc. 1,412,700 196,800 Host Marriott Corp. 3,404,640 14,500 Hospitality Properties Trust 667,000 9,000 Healthcare Realty Trust, Inc. 366,300 24,500 iStar Financial, Inc. 1,108,870 16,500 Kimco Realty Corp. 956,835 12,000 Kilroy Realty Corp. $ 513,000 82,000 Liberty Property Trust 3,542,400 30,900 The Macerich Co. 1,940,520 90,900 ProLogis Trust 3,938,697 30,800 Pan Pacific Retail Properties, Inc. 1,931,160 41,000 Prentiss Properties Trust 1,566,200 44,000 Public Storage, Inc. 2,453,000 25,000 PS Business Parks, Inc. 1,127,500 53,600 Regency Centers Corp. 2,969,440 10,800 Spirit Finance Corp.* (a) 136,620 30,500 Shurgard Storage Centers, Inc. 1,342,305 24,700 Strategic Hotel Capital, Inc. 407,550 97,800 Simon DeBartolo Group, Inc. 6,324,726 63,400 Taubman Centers, Inc. 1,898,830 70,400 Trizec Properties Inc. 1,331,968 57,000 United Dominion Realty Trust 1,413,600 36,500 Vornado Realty Trust (a) 2,778,745 ------------- $ 83,116,064 ------------- TOTAL REAL ESTATE $ 87,560,164 ------------- TOTAL COMMON STOCKS (Cost $63,722,198) $ 96,056,354 ------------- TEMPORARY CASH INVESTMENT - 8.4% SECURITY LENDING COLLATERAL - 8.4% 8,225,580 Securities Lending Investment Fund, 2.18% $ 8,225,580 ------------- TOTAL TEMPORARY CASH INVESTMENT (Cost $8,225,580) $ 8,225,580 ------------- TOTAL INVESTMENTS IN SECURITIES - 106.1% (Cost $71,947,778) $ 104,281,934 ------------- OTHER ASSETS AND LIABILITIES - (6.1)% $ (6,035,766) ------------- TOTAL NET ASSETS - 100.0% $ 98,246,168 ============= * Non-income producing security (a) At December 31, 2004, the following securities were out on loan: SHARES SECURITY MARKET VALUE 81,700 Brookfield Properties Corp. $ 3,055,580 58,700 Equity Residential Property Trust 2,123,766 10,260 Spirit Finance Corp.* 129,789 34,675 Vornado Realty Trust 2,639,808 ----------- TOTAL $ 7,948,943 =========== The accompanying notes are an integral part of these financial statements. 5 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED CLASS II (a) 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 18.55 $ 14.45 $ 14.75 $ 14.40 $ 14.55 -------- -------- -------- -------- ------- Increase from investment operations: Net investment income $ 0.44 $ 0.68 $ 0.55 $ 0.41 $ 0.32 Net realized and unrealized gain (loss) on investments and foreign currency transactions 6.00 4.18 (0.20) 0.63 (0.28) -------- -------- -------- -------- ------- Net increase from investment operations $ 6.44 $ 4.86 $ 0.35 $ 1.04 $ 0.04 Distributions to shareowners: Net investment income (0.40) (0.56) (0.65) (0.52) (0.09) Net realized gain (0.33) -- -- -- -- Net tax return of capital -- (0.20) -- (0.17) (0.10) -------- -------- -------- -------- ------- Net increase (decrease) in net asset value $ 5.71 $ 4.10 $ (0.30) $ 0.35 $ (0.15) -------- -------- -------- -------- ------- Net asset value, end of period $ 24.26 $ 18.55 $ 14.45 $ 14.75 $ 14.40 ======== ======== ======== ======== ======= Total return* 35.39% 34.45% 2.28% 7.52% 1.32% Ratio of net expenses to average net assets+ 1.23% 1.28% 1.32% 1.52% 1.63%** Ratio of net investment income to average net assets+ 2.20% 4.26% 4.21% 4.36% 7.54%** Portfolio turnover rate 35% 20% 29% 34% 31%** Net assets, end of period (in thousands) $ 61,799 $ 39,892 $ 31,985 $ 11,972 $ 1,770 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.23% 1.28% 1.32% 1.52% 1.63%** Net investment income 2.20% 4.26% 4.21% 4.36% 7.54%**
(a) Class 2 shares were first publicly offered on August 1, 2000. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of each period.) ** Annualized. + Ratios with no reduction for fees paid indirectly. 6 The accompanying notes are an integral part of these financial statements. PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/04 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $7,948,943) (Cost $71,947,778) $ 104,281,934 Cash 2,220,578 Receivables - Fund shares sold 15,950 Dividends, interest and foreign taxes withheld 561,625 Other 3,635 ------------- Total assets $ 107,083,722 ------------- LIABILITIES: Payables - Investment securities purchased $ 404,407 Fund shares repurchased 60,248 Upon return for securities loaned 8,225,580 Due to affiliates 82,031 Accrued expenses 65,288 ------------- Total liabilities $ 8,837,554 ------------- NET ASSETS: Paid-in capital $ 62,351,060 Undistributed net investment income (loss) 286,854 Accumulated undistributed net realized gain (loss) 3,274,098 Net unrealized gain (loss) on: Investments 32,334,156 ------------- Total net assets $ 98,246,168 ------------- NET ASSET VALUE PER SHARE: CLASS I: No par value (unlimited number of shares authorized) Net assets $ 36,447,028 Shares outstanding 1,499,747 ------------- Net asset value per share $ 24.30 CLASS II: No par value (unlimited number of shares authorized) Net assets $ 61,799,140 Shares outstanding 2,547,790 ------------- Net asset value per share $ 24.26
The accompanying notes are an integral part of these financial statements. 7 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- YEAR ENDED 12/31/04 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $3,560) $ 2,668,265 Interest 28,012 Income on securities loaned, net 1,856 ------------ Total investment income $ 2,698,133 ------------ EXPENSES: Management fees $ 632,167 Transfer agent fees and expenses 3,007 Distribution fees (Class II) 117,814 Administrative reimbursements 18,500 Custodian fees 34,727 Professional fees 46,225 Printing expense 37,031 Miscellaneous 2,572 ------------ Total expenses $ 892,043 ------------ Net expenses $ 892,043 ------------ Net investment income (loss) $ 1,806,090 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 7,508,438 ------------ $ 7,508,438 ------------ Change in net unrealized gain or loss from: Investments $ 15,633,552 ------------ $ 15,633,552 ------------ Net gain (loss) on investments, futures contracts and foreign currency transactions $ 23,141,990 ============ Net increase (decrease) in net assets resulting from operations $ 24,948,080 ============ 8 The accompanying notes are an integral part of these financial statements. PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED 12/31/04 12/31/03 FROM OPERATIONS: Net investment income (loss) $ 1,806,090 $ 2,666,503 Net realized gain (loss) on investments 7,508,438 (441,521) Change in net unrealized gain or loss on investments, futures contracts and foreign currency transactions 15,633,552 15,916,594 ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 24,948,080 $ 18,141,576 ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (707,216) $ (1,049,939) Class II (916,414) (1,121,546) Net Realized Gains Class I (493,376) -- Class II (803,210) -- ------------- ------------- Tax return of capital Class I -- (372,973) Class II -- (398,048) Total distributions to shareowners $ (2,920,216) $ (2,942,506) ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 20,027,996 $ 9,753,610 Reinvestment of distributions 2,920,216 2,942,506 Cost of shares repurchased (18,513,875) (17,969,003) ------------- ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ 4,434,337 $ (5,272,887) ------------- ------------- Net increase (decrease) in net assets $ 26,462,201 $ 9,926,183 ------------- ------------- NET ASSETS: Beginning of year $ 71,783,967 $ 61,857,784 ------------- ------------- End of year $ 98,246,168 $ 71,783,967 ============= ============= Undistributed net investment income (loss), end of year $ 286,854 $ 153,315 ============= =============
The accompanying notes are an integral part of these financial statements. 9 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The Pioneer Real Estate Shares VCT Portfolio (the Portfolio) a Portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty two separate portfolios, fourteen of which issue both Class I and Class II shares (collectively, the Portfolios, individually the Portfolio) as follows: PORTFOLIOS: Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio) Pioneer Europe VCT Portfolio (Europe Portfolio) Pioneer International Value VCT Portfolio (International Value Portfolio) Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio) Pioneer Small Company VCT Portfolio (Small Company Portfolio) Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio) Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio) Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio) Pioneer Fund VCT Portfolio (Fund Portfolio) Pioneer Equity Income VCT Portfolio (Equity- Income Portfolio) Pioneer Balanced VCT Portfolio (Balanced Portfolio) Pioneer High Yield VCT Portfolio (High Yield Portfolio) Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio) Pioneer America Income VCT Portfolio (America Income Portfolio) Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares only) Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only) Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim Portfolio) (Class II shares only) Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap Growth Portfolio) (Class II shares only) Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth Portfolio) (Class II shares only) Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio) (Class I shares only) Pioneer Small Cap Value II VCT Portfolio (Small Cap Value I Portfolio) (Class II shares only) Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only) Portfolio shares may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts, and may also be purchased by qualified pension and retirement plans. The investment objective of Real Estate Shares Portfolio pursues long-term capital growth, with current income as a secondary objective. The financial highlights for the Portfolio's Class I shares are presented in a separate book. The Trust's financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America that require the management of the Trust to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, gains and losses during the reporting periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements, which are consistent with those generally accepted in the investment company industry: A. SECURITY VALUATION Security transactions are recorded as of trade date. Net asset values for the portfolio are computed once daily, on each day the New York Stock Exchange ("NYSE") is open, as of the close of regular trading on the Exchange. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. The Portfolio also may use the fair value of a security, including a non-U.S. security, when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security as of the close of the NYSE. At December 31, 2004, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on 10 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- income bearing cash accounts, is recorded on the accrual basis. Gains and losses from sales on investments are calculated on the identified cost method for both financial reporting and federal income tax purposes, and, if applicable, are reported net of foreign taxes on capital gains at the applicable country rates. Because Real Estate Shares Portfolio invests a substantial portion of its assets in real estate investment trusts (REITs), the Portfolio may be subject to certain risks associated with direct investments in REITs. REITs may be affected by changes in the value of their underlying properties and by defaults by borrowers or tenants. REITs depend generally on their ability to generate cash flow to make distributions to shareowners, and certain REITs have self-liquidation provisions by which mortgages held may be paid in full and return of capital distributions may be made at any time. In addition, the performance of a REIT may be affected by its failure to qualify for tax-free pass-through of income under the Internal Revenue Code or its failure to maintain exemption from registration under the Investment Company Act of 1940. B. FUTURES CONTRACTS The Portfolio may enter into futures transactions to hedge against changes in interest rates, securities prices, and currency rates or to seek to increase total return. Upon entering into a futures contract, the Portfolio is required to deposit with a broker an amount of cash or securities equal to the minimum "initial margin" requirements of the associated futures exchange. Subsequent payments for futures contracts ("variation margin") are paid or received by the Portfolio, depending on the daily fluctuation in the value of the contracts, and are recorded by the Portfolio as unrealized gains or losses. When the contract is closed, the Portfolio realize a gain or loss equal to the difference between the opening and closing value of the contract. The use of futures contracts involves, to varying degrees, elements of market risk which may exceed the amounts recognized by the Portfolio. Changes in the value of the contracts may not directly correlate to the changes in the value of the underlying securities. These risks may decrease the effectiveness of the Portfolio's hedging and trading strategies and potentially result in a loss. As of December 31, 2004, Real Estate Shares had no open contracts. C. FOREIGN CURRENCY TRANSLATION The books and records of the Portfolio are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent, the net realized gains and losses on foreign currency contracts, disposition of foreign currencies, and the difference between the amount of income accrued and the U.S. dollar actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. D. FORWARD FOREIGN CURRENCY CONTRACTS The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. E. TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the source of each Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. A portion of the dividend income recorded by Real Estate Shares Portfolio is from distributions by 11 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- publicly traded REITs, and such distributions for tax purposes may also consist of capital gains and return of capital. The actual return of capital and capital gains portions of such distributions will be determined by formal notifications from the REITs subsequent to the calendar year-end. Distributions received from the REITs that are determined to be a return of capital are recorded by the Trust as a reduction of the cost basis of the securities held and those determined to be capital gain are reflected as such on the statement of operations. Capital loss carryforwards are available to offset future realized capital gains. At December 31, 2004, the portfolio made reclassifications as described below. These reclassifications have no impact on the net asset value of the portfolio and are designed to present the portfolio's capital accounts on a tax basis.
UNDISTRIBUTED NET ACCUMULATED INVESTMENT REALIZED GAIN PAID-IN PORTFOLIO INCOME (LOSS) (LOSS) CAPITAL - ---------------------------------------- ----------------- ------------- -------- Pioneer Real Estate Shares VCT Portfolio $ (48,921) $ 19,456 $ 29,465 ========== ======== ========
The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004 and the distributions paid during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003* ------------ ----------- DISTRIBUTIONS PAID FROM: Ordinary Income $ 2,449,917 $ 2,171,485 Long-Term capital gain 470,299 -- ------------ ----------- 2,920,216 2,171,485 Return of Capital -- 771,021 ------------ ----------- Total distributions $ 2,920,216 $ 2,942,506 ============ =========== DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES): Undistributed long-term gain/(capital loss carryforward) $ 3,564,562 REIT Dividend Payable 286,584 Unrealized appreciation (depreciation) 32,043,692 ------------ Total $ 35,895,108 ============
The difference between book-basis and tax-basis unrealized appreciation is primarily attributable to the tax deferral of losses on wash sales. * Included in the Portfolio's distributions from 2003 ordinary income is $192,564 in excess of investment company taxable income, which, in accordance with U.S. tax law, is taxable to shareowners as ordinary income distributions. The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily attributable to the tax deferral of losses on wash sales, returns of capital on REITs, and the recognition of unrealized gains or losses on certain futures contracts, and the tax treatment of premium amortization. F. PORTFOLIO SHARES The Portfolio records sales and repurchases of its portfolio shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $1,231,475 in commissions on the sale of Trust shares for the year ended December 31, 2004. Distribution fees for Class II Shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio, Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), 12 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 3). Income, common expenses (excluding transfer agent and distribution fees) and realized and unrealized gains and losses are calculated at the Portfolio level and allocated daily to each class of shares based on the respective percentage of the adjusted net assets at the beginning of the day. Distributions paid by a Portfolio with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class I and Class II shares can bear different transfer agent and distribution fees. G. SECURITIES LENDING The Portfolio lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Portfolio's custodian acting as the lending agent. When entering into a loan, the Portfolio receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Portfolio also continues to receive payments in lieu of interest or dividends on the securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan, will be for account of the Trust. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The fair value of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Trust has the right under the lending agreement to recover the securities on loan from the borrower on demand. The Trust invests cash collateral in the Securities Lending Investment Fund which is managed by Brown Brothers Harriman & Co., the Trust's custodian. H. REPURCHASE AGREEMENTS With respect to repurchase agreements entered into by the Portfolio, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolio's custodian, or subcustodian. The Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 2. MANAGEMENT AGREEMENT PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the portfolio. Management fees are calculated daily at the following annual rate of 0.80% of the Portfolio's average daily net assets. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At December 31, 2004, $68,694 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 3. TRANSFER AGENT PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides substantially all transfer agent and shareowner services to the Trust at negotiated rates. Included in due to affiliates is $270 in transfer agent fees payable to PIMSS at December 31, 2004. 4. DISTRIBUTION PLANS The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily net assets attributable to Class II shares. Included in due to affiliates is $13,097 payable to PFD at December 31, 2004. 5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At December 31, 2004, the Portfolios' aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes was as follows:
NET GROSS GROSS APPRECIATION/ TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------ ------------ ------------ -------------- Real Estate Shares Portfolio $ 72,238,242 $ 32,121,655 $ (77,963) $ 32,043,692 ============ ============ ========= ============
13 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED) - -------------------------------------------------------------------------------- 6. PORTFOLIO TRANSACTIONS The cost of purchases and the proceeds from sales of investments other than U.S. Government obligations and temporary cash investments for the year ended December 31, 2004, were $33,759,977 and $26,732,885, respectively. 7. CAPITAL SHARES At December 31, 2004, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
REAL ESTATE SHARES PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT - ----------------------------- ---------- ------------- ---------- ------------ CLASS I: Shares sold 151,466 $ 3,192,487 153,884 $ 2,545,266 Reinvestment of distributions 56,986 1,200,592 87,137 1,422,912 Shares repurchased (425,846) (8,497,885) (588,199) (9,201,017) -------- ------------- -------- ------------ Net increase (217,394) $ (4,104,806) (347,178) $ (5,232,839) ======== ============= ======== ============ CLASS II: Shares sold 820,863 $ 16,835,509 424,038 $ 7,208,344 Reinvestment of distributions 81,377 1,719,624 92,474 1,519,594 Shares repurchased (505,041) (10,015,990) (578,790) (8,767,986) ======== ============= ======== ============ Net increase 397,199 $ 8,539,143 (62,278) $ (40,048) ======== ============= ======== ============
14 PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES OF PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS II SHAREOWNERS OF PIONEER REAL ESTATE SHARES VCT PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Pioneer Real Estate Shares VCT Portfolio, one of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the two years in the period ended December 31, 2001 were audited by other auditors who have ceased operations and whose report, dated February 8, 2002, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Real Estate Shares VCT Portfolio of the Pioneer Variable Contracts Trust at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2005 15 PIONEER REAL ESTATE SHARES VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - -------------------------------------------------------------------------------- INVESTMENT ADVISER TRUSTEES AND OFFICERS Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs of the Trust. The officers of the Trust are responsible for the Trust's CUSTODIAN operations. The Trust's Trustees and officers are listed below, together Brown Brothers Harriman & Co. with their principal occupations during the past five years. Trustees who are interested persons of the Portfolio within the meaning of the INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Investment Company Act of 1940 are referred to as Interested Trustees. Ernst & Young LLP Trustees who are not interested persons of the Trust are referred to as Independent Trustees. Each of the Trustees serves as a trustee of each PRINCIPAL UNDERWRITER of the 73 U.S. registered investment portfolios for which Pioneer Pioneer Funds Distributor, Inc. Investment Management, Inc. ("Pioneer") serves as investment adviser (the "Pioneer Funds"). The address for all Interested Trustees and all officers of the Portfolio is 60 State Street, Boston, Massachusetts 02109. LEGAL COUNSEL The Trust's statement of additional information provides more detailed Wilmer Cutler Pickering Hale and Dorr LLP information regarding the Trust's Trustees and is available upon request, without charge, by calling 1-800-225-6292. SHAREOWNER SERVICES AND TRANSFER Proxy Voting Policies and Procedures of the Trust are available without Pioneer Investment Management Shareholder Services, Inc. charge, upon Agent request, by calling our toll free number (1-800-225-6292). This information is also available online at pioneerfunds.com.
- -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE John F. Cogan, Jr. (78)* Chairman of the Serves until successor Trustee and President Serves Director of Harbor Board, Trustee and trustee is elected or until retirement or removal; Global Company, Ltd. President earlier retirement Deputy Chairman and a Director or removal of Pioneer Global Asset Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; President and Director of Pioneer Funds Distributor, Inc. ("PFD"); President of all of the Pioneer Funds; and Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler Pickering Hale and Dorr LLP (counsel to PIM-USA and the Pioneer Funds). *Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------ Osbert M. Hood (52)** Trustee and Serves until successor President and Chief Executive None Executive Vice trustee is elected or Officer, PIM-USA since May 2003 President earlier retirement or (Director since January 2001); removal President and Director of Pioneer since May 2003; Chairman and Director of Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") since May 2003; Executive Vice President of all of the Pioneer Funds since June 2003; Executive Vice President and Chief Operating Officer of PIM-USA, November 2000 to May 2003; Executive Vice President, Chief Financial Officer and Treasurer, John Hancock Advisers, L.L.C., Boston, MA, November 1999 to November 2000; Senior Vice President and Chief Financial Officer, John Hancock Advisers, L.L.C., April 1997 to November 1999. **Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------
16 PIONEER REAL ESTATE SHARES VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE David R. Bock **(61) Trustee since Serves until a Senior Vice President and Chief Director of The 3050 K. Street NW, 2005. successor trustee is Financial Officer, I-trax, Inc. Enterprise Social Washington, DC 20007 elected or earlier (publicly traded health care Investment Company retirement or removal. services company) (privately-held (2001-present); Managing affordable housing Partner, Federal City Capital finance company); Advisors (boutique merchant Director of New York bank) (1995-2000; 2002 to 2004); Mortgage Trust Executive Vice President and (publicly traded Chief Financial Officer, mortgage REIT) Pedestal Inc. (internet-based mortgage trading company) (2000-2002) ** Mr. Bock became a Trustee of the Trust on January 1, 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Mary K. Bush (56) Trustee since Serves until successor President, Bush International Director of Brady 3509 Woodbine Street, 2000. trustee is elected or (international financial Corporation Chevy Chase, MD 20815 earlier retirement or advisory firm) (industrial removal identification and specialty coated material products manufacturer), Millennium Chemicals, Inc. (commodity chemicals), Mortgage Guaranty Insurance Corporation, and R.J. Reynolds Tobacco Holdings, Inc. (tobacco) - ------------------------------------------------------------------------------------------------------------------------------------ Margaret B.W. Graham (57) Trustee since Serves until successor Founding Director, The Winthrop None 1001 Sherbrooke Street 2000. trustee is elected or Group, Inc. (consulting firm); West, Montreal, Quebec, earlier retirement or Professor of Management, Faculty Canada H3A 1G5 removal of Management, McGill University - ------------------------------------------------------------------------------------------------------------------------------------ Marguerite A. Piret (56) Trustee since Serves until successor President and Chief Executive Director of New One Boston Place, 1995. trustee is elected or Officer, Newbury, Piret & America High Income 28th Floor, earlier retirement or Company, Inc. (investment Fund, Inc. Boston, MA 02108 removal banking firm) (closed-end investment company) - ------------------------------------------------------------------------------------------------------------------------------------ Stephen K. West (76) Trustee since Serves until successor Senior Counsel, Sullivan & Director, The Swiss 125 Broad Street, 1995. trustee is elected or Cromwell (law firm) Helvetia Fund, Inc. New York, NY 10004 earlier retirement or (closed-end removal investment company) and AMVESCAP PLC (investment managers) - ------------------------------------------------------------------------------------------------------------------------------------ John Winthrop (68) Trustee since Serves until successor President, John Winthrop & Co., None One North Adgers Wharf, September, 2000. trustee is elected or Inc. (private investment firm) Charleston, SC 29401 earlier retirement or removal - ------------------------------------------------------------------------------------------------------------------------------------
17 PIONEER REAL ESTATE SHARES VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS OFFICER Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior None discretion of the Vice President - Legal of Board Pioneer; and Secretary/Clerk of most of PIM-USA's subsidiaries since October 2000; Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003); and Senior Counsel, Assistant Vice President and Director of Compliance of PIM-USA from April 1998 through October 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Christopher J. Kelley (40) Assistant Serves at the Assistant Vice President and None Secretary discretion of the Senior Counsel of Pioneer since Board July 2002; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001; Vice President and Associate General Counsel from July 1996 to July 2000); Assistant Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering None Secretary discretion of the Hale and Dorr LLP; Assistant Board Secretary of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Vincent Nave (59) Treasurer Serves at the Vice President - Fund None discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Treasurer of all of the Pioneer Funds (Assistant Treasurer from June 1999 to November 2000) - ------------------------------------------------------------------------------------------------------------------------------------ Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer None Treasurer discretion of the since 2004; Treasurer and Senior Board Vice President, CDC IXIS Asset Management Services from 2002 to 2003; Assistant Treasurer and Vice President, MFS Investment Management from 1997 to 2002; and Assistant Treasurer of all of the Pioneer Funds since November 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None Treasurer discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since November 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None Treasurer discretion of the Accounting, Administration and Board Custody Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds since May 2002 - ------------------------------------------------------------------------------------------------------------------------------------
18 PIONEER REAL ESTATE SHARES VCT PORTFOLIO - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUST OFFICERS - --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS OFFICER Katharine Kim Sullivan (31) Assistant Serves at the Fund Administration Manager - None Treasurer discretion of the Fund Accounting, Administration Board and Custody Services since June 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management); Pioneer Fund Accounting, Administration and Custody Services (Fund Accounting Manager from August 1999 to May 2002, Fund Accounting Services Supervisor from 1997 to July 1999); Assistant Treasurer of all Pioneer Funds since September 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of None Officer discretion of the Pioneer (Director of Compliance Board and Senior Counsel from November 2000 to September 2004); Vice President and Associate General Counsel of UAM Fund Services, Inc. (mutual fund administration company) from February 1998 to November 2000; and Chief Compliance Officer of all of the Pioneer Funds. - ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 19 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. 20 - -------------------------------------------------------------------------------- THIS PAGE FOR YOUR NOTES. 21 [LOGO] PIONEER INVESTMENTS(R) ITEM 2. CODE OF ETHICS. (a) Disclose whether, as of the end of the period covered by the report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. If the registrant has not adopted such a code of ethics, explain why it has not done so. The registrant has adopted, as of the end of the period covered by this report, a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer and controller. (b) For purposes of this Item, the term "code of ethics" means written standards that are reasonably designed to deter wrongdoing and to promote: (1) Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (2) Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Commission and in other public communications made by the registrant; (3) Compliance with applicable governmental laws, rules, and regulations; (4) The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and (5) Accountability for adherence to the code. (c) The registrant must briefly describe the nature of any amendment, during the period covered by the report, to a provision of its code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item. The registrant must file a copy of any such amendment as an exhibit pursuant to Item 10(a), unless the registrant has elected to satisfy paragraph (f) of this Item by posting its code of ethics on its website pursuant to paragraph (f)(2) of this Item, or by undertaking to provide its code of ethics to any person without charge, upon request, pursuant to paragraph (f)(3) of this Item. The registrant has made no amendments to the code of ethics during the period covered by this report. (d) If the registrant has, during the period covered by the report, granted a waiver, including an implicit waiver, from a provision of the code of ethics to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this Item, the registrant must briefly describe the nature of the waiver, the name of the person to whom the waiver was granted, and the date of the waiver. Not applicable. (e) If the registrant intends to satisfy the disclosure requirement under paragraph (c) or (d) of this Item regarding an amendment to, or a waiver from, a provision of its code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item by posting such information on its Internet website, disclose the registrant's Internet address and such intention. Not applicable. (f) The registrant must: (1) File with the Commission, pursuant to Item 10(a), a copy of its code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, as an exhibit to its annual report on this Form N-CSR; (2) Post the text of such code of ethics on its Internet website and disclose, in its most recent report on this Form N-CSR, its Internet address and the fact that it has posted such code of ethics on its Internet website; or (3) Undertake in its most recent report on this Form N-CSR to provide to any person without charge, upon request, a copy of such code of ethics and explain the manner in which such request may be made. See Item 10(2) ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a) (1) Disclose that the registrant's board of trustees has determined that the registrant either: (i) Has at least one audit committee financial expert serving on its audit committee; or (ii) Does not have an audit committee financial expert serving on its audit committee. The registrant's Board of Trustees has determined that the registrant has at least one audit committee financial expert. (2) If the registrant provides the disclosure required by paragraph (a)(1)(i) of this Item, it must disclose the name of the audit committee financial expert and whether that person is "independent." In order to be considered "independent" for purposes of this Item, a member of an audit committee may not, other than in his or her capacity as a member of the audit committee, the board of trustees, or any other board committee: (i) Accept directly or indirectly any consulting, advisory, or other compensatory fee from the issuer; or (ii) Be an "interested person" of the investment company as defined in Section 2(a)(19) of the Act (15 U.S.C. 80a-2(a)(19)). Ms. Marguerite A. Piret, an independent trustee, is such an audit committee financial expert. (3) If the registrant provides the disclosure required by paragraph (a)(1) (ii) of this Item, it must explain why it does not have an audit committee financial expert. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Disclose, under the caption AUDIT FEES, the aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. Audit Fees Fees for audit services provided to the Trust, including fees associated with routine and non routine filings of its Form N-1A, totaled approximately $521,000 in 2004 and $525,600 in 2003 for the Trusts 22 portfolios and 19 of the 22 portfolios at that time, respectively. Included in the 2003 fees is an additional billing related to that audit, which was billed after the Trusts filing of its N-CSR for the year ended December 31, 2003. (b) Disclose, under the caption AUDIT-RELATED FEES, the aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. Audit-Related Fees There were no other audit related services provided to the Trust during the fiscal year ended December 31, 2004. Fees for the Trusts audit-related services, which were for reviews of the semi annual financial statements for some of the Trusts 16 portfolios, totaled approximately $50,000 in 2003. (c) Disclose, under the caption TAX FEES, the aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. Registrants shall describe the nature of the services comprising the fees disclosed under this category. Tax Fees Fees for tax compliance services, primarily for tax returns, totaled $161,525 in 2004 and $81,050 in 2003. (d) Disclose, under the caption ALL OTHER FEES, the aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. Other Fees There were no other services provided to the Trust during the fiscal years ended December 31, 2004 and 2003. (e) (1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. PIONEER FUNDS APPROVAL OF AUDIT, AUDIT-RELATED, TAX AND OTHER SERVICES PROVIDED BY THE INDEPENDENT AUDITOR SECTION I - POLICY PURPOSE AND APPLICABILITY The Pioneer Funds recognizes the importance of maintaining the independence of their outside auditors. Maintaining independence is a shared responsibility involving Pioneer Investment Management, Inc ("PIM"), the audit committee and the independent auditors. The Funds recognizes that a Fund's independent auditors: 1) possess knowledge of the Funds, 2) are able to incorporate certain services into the scope of the audit, thereby avoiding redundant work, cost and disruption of Fund personnel and processes, and 3) have expertise that has value to the Funds. As a result, there are situations where it is desirable to use the Fund's independent auditors for services in addition to the annual audit and where the potential for conflicts of interests are minimal. Consequently, this policy, which is intended to comply with Rule 210.2-01(C)(7), sets forth guidelines and procedures to be followed by the Funds when retaining the independent audit firm to perform audit, audit-related tax and other services under those circumstances, while also maintaining independence. Approval of a service in accordance with this policy for a Fund shall also constitute approval for any other Fund whose pre-approval is required pursuant to Rule 210.2-01(c)(7)(ii). In addition to the procedures set forth in this policy, any non-audit services that may be provided consistently with Rule 210.2-01 may be approved by the Audit Committee itself and any pre-approval that may be waived in accordance with Rule 210.2-01(c)(7)(i)(C) is hereby waived. Selection of a Fund's independent auditors and their compensation shall be determined by the Audit Committee and shall not be subject to this policy.
SECTION II - POLICY - ---------------- -------------------------------- ------------------------------------------------- SERVICE SERVICE CATEGORY DESCRIPTION SPECIFIC PRE-APPROVED SERVICE SUBCATEGORIES CATEGORY - ---------------- -------------------------------- ------------------------------------------------- I. AUDIT Services that are directly o Accounting research assistance SERVICES related to performing the o SEC consultation, registration independent audit of the Funds statements, and reporting o Tax accrual related matters o Implementation of new accounting standards o Compliance letters (e.g. rating agency letters) o Regulatory reviews and assistance regarding financial matters o Semi-annual reviews (if requested) o Comfort letters for closed end offerings - ---------------- -------------------------------- ------------------------------------------------- II. Services which are not o AICPA attest and agreed-upon procedures AUDIT-RELATED prohibited under Rule o Technology control assessments SERVICES 210.2-01(C)(4) (the "Rule") o Financial reporting control assessments and are related extensions of o Enterprise security architecture the audit services support the assessment audit, or use the knowledge/expertise gained from the audit procedures as a foundation to complete the project. In most cases, if the Audit-Related Services are not performed by the Audit firm, the scope of the Audit Services would likely increase. The Services are typically well-defined and governed by accounting professional standards (AICPA, SEC, etc.) - ---------------- -------------------------------- ------------------------------------------------- ------------------------------------- ------------------------------------ AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE REPORTING POLICY ------------------------------------- ------------------------------------ o "One-time" pre-approval o A summary of all such for the audit period for all services and related fees pre-approved specific service reported at each regularly subcategories. Approval of the scheduled Audit Committee independent auditors as meeting. auditors for a Fund shall constitute pre approval for these services. ------------------------------------- ------------------------------------ o "One-time" pre-approval o A summary of all such for the fund fiscal year within services and related fees a specified dollar limit (including comparison to for all pre-approved specified dollar limits) specific service subcategories reported quarterly. o Specific approval is needed to exceed the pre-approved dollar limit for these services (see general Audit Committee approval policy below for details on obtaining specific approvals) o Specific approval is needed to use the Fund's auditors for Audit-Related Services not denoted as "pre-approved", or to add a specific service subcategory as "pre-approved" ------------------------------------- ------------------------------------
SECTION III - POLICY DETAIL, CONTINUED - ----------------------- --------------------------- ----------------------------------------------- SERVICE CATEGORY SERVICE CATEGORY SPECIFIC PRE-APPROVED SERVICE SUBCATEGORIES DESCRIPTION - ----------------------- --------------------------- ----------------------------------------------- III. TAX SERVICES Services which are not o Tax planning and support prohibited by the Rule, o Tax controversy assistance if an officer of the Fund o Tax compliance, tax returns, excise determines that using the tax returns and support Fund's auditor to provide o Tax opinions these services creates significant synergy in the form of efficiency, minimized disruption, or the ability to maintain a desired level of confidentiality. - ----------------------- --------------------------- ----------------------------------------------- - ------------------------------------- ------------------------- AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE REPORTING POLICY - ------------------------------------- ------------------------- - ------------------------------------- ------------------------- o "One-time" pre-approval o A summary of for the fund fiscal year all such services and within a specified dollar limit related fees (including comparison to specified dollar limits) reported quarterly. o Specific approval is needed to exceed the pre-approved dollar limits for these services (see general Audit Committee approval policy below for details on obtaining specific approvals) o Specific approval is needed to use the Fund's auditors for tax services not denoted as pre-approved, or to add a specific service subcategory as "pre-approved" - ------------------------------------- -------------------------
SECTION III - POLICY DETAIL, CONTINUED - ----------------------- --------------------------- ----------------------------------------------- SERVICE CATEGORY SERVICE CATEGORY SPECIFIC PRE-APPROVED SERVICE SUBCATEGORIES DESCRIPTION - ----------------------- --------------------------- ----------------------------------------------- IV. OTHER SERVICES Services which are not o Business Risk Management support prohibited by the Rule, o Other control and regulatory A. SYNERGISTIC, if an officer of the Fund compliance projects UNIQUE QUALIFICATIONS determines that using the Fund's auditor to provide these services creates significant synergy in the form of efficiency, minimized disruption, the ability to maintain a desired level of confidentiality, or where the Fund's auditors posses unique or superior qualifications to provide these services, resulting in superior value and results for the Fund. - ----------------------- --------------------------- ----------------------------------------------- - --------------------------------------- ------------------------ AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE REPORTING POLICY - ------------------------------------- -------------------------- o "One-time" pre-approval o A summary of for the fund fiscal year within all such services and a specified dollar limit related fees (including comparison to specified dollar limits) reported quarterly. o Specific approval is needed to exceed the pre-approved dollar limits for these services (see general Audit Committee approval policy below for details on obtaining specific approvals) o Specific approval is needed to use the Fund's auditors for "Synergistic" or "Unique Qualifications" Other Services not denoted as pre-approved to the left, or to add a specific service subcategory as "pre-approved" - ------------------------------------- --------------------------
SECTION III - POLICY DETAIL, CONTINUED - ----------------------- ------------------------- ----------------------------------------------- SERVICE CATEGORY SERVICE CATEGORY SPECIFIC PROHIBITED SERVICE SUBCATEGORIES DESCRIPTION - ----------------------- ------------------------- ----------------------------------------------- PROHIBITED SERVICES Services which result 1. Bookkeeping or other services in the auditors losing related to the accounting records or independence status financial statements of the audit under the Rule. client* 2. Financial information systems design and implementation* 3. Appraisal or valuation services, fairness* opinions, or contribution-in-kind reports 4. Actuarial services (i.e., setting actuarial reserves versus actuarial audit work)* 5. Internal audit outsourcing services* 6. Management functions or human resources 7. Broker or dealer, investment advisor, or investment banking services 8. Legal services and expert services unrelated to the audit 9. Any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible - ----------------------- ------------------------- ----------------------------------------------- - ------------------------------------------- ------------------------------ AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE REPORTING POLICY - ------------------------------------------- ------------------------------ o These services are not to be o A summary of all performed with the exception of the(*) services and related services that may be permitted fees reported at each if they would not be subject to audit regularly scheduled procedures at the audit client (as Audit Committee meeting defined in rule 2-01(f)(4)) level will serve as continual the firm providing the service. confirmation that has not provided any restricted services. - ------------------------------------------- ------------------------------
- -------------------------------------------------------------------------------- GENERAL AUDIT COMMITTEE APPROVAL POLICY: o For all projects, the officers of the Funds and the Fund's auditors will each make an assessment to determine that any proposed projects will not impair independence. o Potential services will be classified into the four non-restricted service categories and the "Approval of Audit, Audit-Related, Tax and Other Services" Policy above will be applied. Any services outside the specific pre-approved service subcategories set forth above must be specifically approved by the Audit Committee. o At least quarterly, the Audit Committee shall review a report summarizing the services by service category, including fees, provided by the Audit firm as set forth in the above policy. - -------------------------------------------------------------------------------- (2) Disclose the percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. N/A (f) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. N/A (g) Disclose the aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant. The Fund's independent auditor, Ernst & Young LLP ("E&Y"), recently has advised the Securities and Exchange Commission, the Public Company Accounting Oversight Board, and the Audit Committee of the Fund's Board of Trustees that certain non-audit work performed by E&Y's China affiliate has raised questions regarding E&Y's independence with respect to its performance of audit services for the Fund. In July 2004, E&Y became aware that member firms in China ("E&Y China") provided certain tax services to offices of UniCredito Italiano, S.p.A. ("UCI"), a member of the Fund's Investment Company Complex. The services included receipt and disbursement of monies transferred to E&Y China by UCI in payment of individual expatriate income taxes due on returns prepared by E&Y China for certain UCI employees located in China from October 1998 to May 2003. E&Y became auditors of the Fund in May 2002. These expatriate tax services were discontinued in May 2003. The fees received by E&Y China for all such services totaled $3,685. The Fund's Audit Committee and E&Y have discussed the matter, including the nature of the services provided, the personnel involved in providing the services and the fees received by E&Y for performing the services. The Committee continues to review the facts and circumstances surrounding the matter, including the issue of whether the monies transferred for employees' taxes were de facto monies due the employees for tax payments rather than monies belonging to UCI. E&Y has informed the Audit Committee that based on its internal reviews and the de minimis nature of the services provided and fees received, it does not believe its independence with respect to the Fund has been impaired. Aggregate Non-Audit Fees The aggregate non-audit fees for the Trust and affiliates, as previously defined, totaled $139,525 in 2004 and $154,350 in 2003. The Trust's audit committee of the Board of Trustees has considered whether the provision of non-audit services that were rendered to the Affiliates (as defined) that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. (h) Disclose whether the registrant's audit committee of the board of trustees has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. Non-Audit Services Beginning with non-audit service contracts entered into on or after May 6, 2003, the effective date of the new SEC pre-approval rules, the Trusts audit committee is required to pre-approve services to affiliates defined by SEC rules to the extent that the services are determined to have a direct impact on the operations or financial reporting of the Trust. For the years ended December 31, 2004 and 2003, there were no services provided to an affiliate that required the Trusts audit committee pre-approval. ITEMS 5-6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. A closed-end management investment company that is filing an annual report on this Form N-CSR must, unless it invests exclusively in non-voting securities, describe the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities, including the procedures that the company uses when a vote presents a conflict between the interests of its shareholders, on the one hand, and those of the company's investment adviser; principal underwriter; or any affiliated person (as defined in Section 2(a)(3) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules thereunder) of the company, its investment adviser, or its principal underwriter, on the other. Include any policies and procedures of the company's investment adviser, or any other third party, that the company uses, or that are used on the company's behalf, to determine how to vote proxies relating to portfolio securities. Not applicable to open-end management investment companies. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) Disclose the conclusions of the registrant's principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, about the effectiveness of the registrant's disclosure controls and procedures (as defined in Rule 30a-2(c) under the Act (17 CFR 270.30a-2(c))) based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph. The registrant's principal executive officer and principal financial officer have concluded, that the registrant's disclosure controls and procedures are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report. (b) Disclose whether or not there were significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. There were no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 10. EXHIBITS. File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (a) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit. (b) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2). Filed herewith. SIGNATURES [See General Instruction F] Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Pioneer Variable Contracts Trust By (Signature and Title)* /s/ John F. Cogan, Jr. John F. Cogan, Jr, President Date March 9, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ John F. Cogan, Jr. John F. Cogan, Jr., President Date March 9, 2005 By (Signature and Title)* /s/ Vincent Nave Vincent Nave, Treasurer Date March 9, 2005 * Print the name and title of each signing officer under his or her signature. EX-99 2 cert.txt CERTIFICATIONS -------------- I, John F. Cogan, Jr., certify that: 1. I have reviewed this report on Form N-CSR of Pioneer Variable Contracts; Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 9, 2005 /s/ John F. Cogan, Jr. John F. Cogan, Jr. President CERTIFICATIONS -------------- I, Vincent Nave, certify that: 1. I have reviewed this report on Form N-CSR of Pioneer Variable Contracts Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 9, 2005 /s/ Vincent Nave Vincent Nave Treasurer SECTION 906 CERTIFICATION Pursuant to 18 U.S.C. ss. 1350, the undersigned officer of Variable Contracts Trust;(the "Trust"), hereby certifies, to the best of his knowledge,that the Fund's Report on Form N-CSR for the period ended December 31, 2004 (the "Report") fully complies with the requirements of Section 13 (a) or 15 (d),as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust. Dated: March 9, 2005 /s/ John F. Cogan, Jr. John F. Cogan, Jr. President This certification is being furnished solely pursuant to 18 U.S.C. ss. 1350 andis not being filed as part of the Report or a separate disclosure document. A signed original of this written statement required by section 906 has been provided to the Trust and will be retained by the Trust and furnished to the SEC or its staff upon request. SECTION 906 CERTIFICATION Pursuant to 18 U.S.C. ss. 1350, the undersigned officer of Variable Contracts Trust;(the "Trust"), hereby certifies, to the best of his knowledge, that the Trust's Report on Form N-CSR for the period ended December 31, 2004 (the "Report") fully complies with the requirements of Section 13 (a) or 15 (d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust. Dated: March 9, 2005 /s/ Vincent Nave Vincent Nave Treasurer This certification is being furnished solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Report or a separate disclosure document. A signed original of this written statement required by section 906 has been provided to the Trust and will be retained by the Trust and furnished to the SEC or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----