-----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, ACTZgX5A97kmoElQ710VGoDo6ecr+lh5uvu54do0WafDlU1S6FDUM+SJioGLE8oZ KxO1pJshQbn3EiMoTCyLFA== 0000930709-05-000021.txt : 20050829 0000930709-05-000021.hdr.sgml : 20050829 20050829145501 ACCESSION NUMBER: 0000930709-05-000021 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050829 DATE AS OF CHANGE: 20050829 EFFECTIVENESS DATE: 20050829 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: 051055014 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: November 30, 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, 2005 through June 30, 2005 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO SHAREOWNERS. [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Bond VCT Portfolio -- Class I Shares SEMIANNUAL REPORT June 30, 2005 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
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 6/30/05 - -------------------------------------------------------------------------------- [The following data was represented as pie charts in the printed material]
Portfolio Diversification Quality Distribution (As a percentage of total investment portfolio) (As a percentage of total investment in securities) U.S. Government Securities 62.4% Treasury/Agency 64.2% U.S. Corporate Bonds 32.5% AA 0.6% Asset Backed Securities 2.0% A 5.2% Temporary Cash Investment 2.0% BBB 20.6% Collateralized Mortgage BB 5.8% Obligations 1.1% B & Lower 3.0% Commercial Paper 0.6%
Five Largest Holdings (As a percentage of long-term holdings) 1. Government National Mortgage Association, 6.0%, 9/15/34 5.83% 2. Government National Mortgage Association, 5.5%, 10/15/33 4.69 3. Federal National Mortgage Association, 4.816%, 12/1/12 4.28 4. Federal National Mortgage Association, 5.0%, 12/1/17 3.88 5. US Treasury Notes, 5.5%, 8/15/28 3.77
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $11.08 $11.61
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $0.8442 $ - $ -
- -------------------------------------------------------------------------------- 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 data was represented as a line chart in the printed material]
Pioneer Lehman Bros. Bond VCT Aggregate Portfolio Bond Index 6/30/95 $10,000 $10,000 $10,488 $10,501 6/30/1997 $11,004 $11,358 $12,209 $12,554 6/30/1999 $12,262 $12,947 $12,720 $13,536 6/30/2001 $14,115 $15,057 $15,015 $16,357 6/30/2003 $16,384 $18,058 $16,333 $18,118 6/30/2005 $17,372 $19,353
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 (as of June 30, 2005) - -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- 10 Years 5.68% 5 Years 6.43% 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 semiannual 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 variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Bond VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005
Share Class I ----------------------------------------------------------- Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $1,027.50 Expenses Paid During Period* $ 3.12
* Expenses are equal to the Portfolio's annualized expense ratio of 0.62% for Class I shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Bond VCT Portfolio Based on a hypothetical 5% per year return before expenses, reflecting the period from January 1, 2005 through June 30, 2005
Share Class I ----------------------------------------------------------- Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $1,021.72 Expenses Paid During Period* $ 3.11
* Expenses are equal to the Portfolio's annualized expense ratio of 0.62% for Class I shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- The domestic economy, despite periodic short-term worries about its strength, rose throughout the 12-month period ending June 30, 2005. While the U.S. Federal Reserve raised short-term interest rates nine different times, between June 29, 2004, and June 30, 2005, the yields of most long-term securities actually declined, contributing to a continued easing of financial conditions. In this environment, Treasury securities, corporate bonds and mortgages all produced positive results, and longer-maturity securities outperformed short-term. In the following interview, 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 the daily management of the Portfolio. Q: How did the Portfolio perform during the six months ended June 30, 2005? A: Performance was fairly good. For the six-month period, the Portfolio's Class I shares had a total return of 2.75% at net asset value. During the same six months, the benchmark Lehman Brothers Aggregate Bond Index returned 2.51%. On June 30, 2005, the standardized 30-day SEC yield on Class I shares was 4.88%. The performance data quoted represents past performance, which is no guarantee 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 factors that influenced Portfolio performance? A: Following a strong rally in corporate securities over the previous two years, the fixed-income markets began to stabilize in late winter and early spring of 2005. The Federal Reserve Board, which had been raising short-term interest rates gradually since the previous June, continued its policy during the six months, and the Fed funds rate rose during the six months from 2.25% to 3.25%. During this time, high-yield corporate bonds, as reflected by the Merrill Lynch High Yield Master II Index, produced a total return of just 1.13%, underperforming most higher-quality securities as yield spreads - the difference between yields of different quality bonds - widened. While the economy continued to expand at healthy rates, Treasuries, investment-grade corporates and mortgages outperformed lower-quality corporate bonds. The U.S. dollar, which had been declining in value in international currency markets, began to strengthen somewhat. While we continued to focus on corporate securities, we upgraded overall credit quality and reduced credit risk as the yield advantages of lower-rated bonds receded. Average credit quality of the Portfolio at the end of the period was AA-. Throughout the period, we emphasized mortgage pass-through securities - which constituted more than 50% of Portfolio assets on June 30, 2005. We lowered the Portfolio's sensitivity to interest rates during the six months as the risks of rising interest rates grew. On June 30, 2005, duration - a measure of interest-rate sensitivity - was approximately 4.2 years. Q: What types of investments had the greatest impact on performance? A: Our investments in mortgage and corporate bonds helped Portfolio results substantially. Among individual corporate investments, securities issued by several insurance companies performed very well, including bonds of Allmerica Financial, Odyssey Re-Insurance, and Kingsway, a Canadian-based automobile insurer. As the price of oil and natural gas rose during the period, the bonds of Russian oil company Gazprom appreciated in value. Detracting from results, however, was our investment in bonds issued by Toys 'R Us, which fell in value after a private equity firm bought out the company under terms that disadvantaged bondholders. While we generally avoided automotive industry bonds, we did hold some securities issued by Ford that underperformed. Q: What is your investment outlook? A: While we think general monetary conditions finally have moved close to being neutral, we expect that the Federal Reserve Board may continue to raise short-term rates more, perhaps to 3.75% or 4.00%. How far the rate hikes go will depend upon the strength of the economy. However, we are seeing more stability in the bond market in recent weeks, and we have adopted a more conservative asset allocation policy in recognition of the relatively narrow spreads in yields between securities of different credit risks. In this environment, we expect to maintain a relatively short duration - to control against the risk of a rise in interest rates - and we anticipate continuing to emphasize mortgage securities. 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. 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. 4 Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings (unaudited) Value ASSET BACKED SECURITIES - 2.0% Diversified Financials - 1.1% Specialized Finance - 1.1% $ 420,000 AAA/Aaa MBNA Credit Card Master Note, Floating Rate Note, 12/15/08 $ 420,410 ----------- Total Diversified Financials $ 420,410 ----------- Utilities - 0.9% Electric Utilities - 0.9% 135,000 BB-/Ba2 FPL Energy National Wind, 6.125%, 3/25/19 (144A) $ 131,020 204,685 BB-/Ba2 FPL Energy Wind Funding, 6.876%, 6/27/17 (144A) 206,988 ----------- Total Utilities $ 338,008 ----------- TOTAL ASSET BACKED SECURITIES (Cost $766,560) $ 758,418 ----------- COLLATERALIZED MORTGAGE OBLIGATIONS - 1.2% Diversified Financials - 1.2% Diversified Financial Services - 1.2% 450,000 NR/Ba2 Tower 2004-2A F, 6.376%, 12/15/14 $ 451,306 ----------- Total Diversified Financials $ 451,306 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $450,000) $ 451,306 ----------- CORPORATE BONDS - 32.8% Energy - 4.1% Integrated Oil & Gas - 0.9% 215,000 BBB/Baa2 Petro-Canada, 4.0%, 7/15/13 $ 203,461 140,000 BBB+/Baa1 USX Corp., 6.85%, 3/1/08 148,763 ----------- $ 352,224 ----------- Oil & Gas Equipment And Services - 0.3% 125,000 B+/Ba3 Holly Energy Partners LP, 6.25%, 3/1/15 (144A) $ 121,875 ----------- Oil & Gas Exploration & Production - 1.2% 370,000 BBB/Baa1 Pemex Project Funding Master, 9.125%, 10/13/10 $ 433,270 ----------- Oil & Gas Refining & Marketing - 0.2% 50,000 BBB/Baa2 TGT Pipeline LLC, 5.5%, 2/1/17 (144A) $ 51,951 ----------- Oil & Gas Storage & Transportation - 1.5% 255,000 B-/B1 Colorado Interstate Gas, 5.95%, 3/15/15 (144A) $ 251,400 295,000 BBB+/Baa1 Kinder Morgan Energy Partners, 6.75%, 3/15/11 324,432 ----------- $ 575,832 ----------- Total Energy $ 1,535,152 ----------- Materials - 2.6% Aluminum - 0.8% 285,000 B/B1 Novelis, Inc., 7.25%, 2/15/15 (144A) $ 286,069 ----------- Commodity Chemicals - 0.7% 80,000 B+/B1 Invista, 9.25%, 5/1/12 (144A) $ 87,500 200,000 BB+/Ba2 Nova Chemicals, Ltd., 6.5%, 1/15/12 194,000 ----------- $ 281,500 ----------- Fertilizers & Agricultural Chemicals - 0.6% 220,000 BBB+/Baa1 Potash Corp. Saskatchewan, 4.875%, 3/1/13 $ 222,240 -----------
The accompanying notes are an integral part of these financial statements. 5 Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings (unaudited) Value Paper Products - 0.5% $ 225,000 BB-/Ba3 Abitibi-Consolidated, Inc., 6.0%, 6/20/13 $ 207,000 ----------- Total Materials $ 996,809 ----------- Capital Goods - 0.9% Aerospace & Defense - 0.5% 190,000 A/A3 Boeing Co, 5.125%, 2/15/13 $ 198,838 ----------- Trading Companies & Distributors - 0.4% 145,000 BB+/Ba1 Noble Group, Ltd., 6.625%, 3/17/15 (144A) $ 133,869 ----------- Total Capital Goods $ 332,707 ----------- Automobiles & Components - 2.3% Auto Parts & Equipment - 0.6% 250,000 B-/B3 Delphi Corp., 6.55%, 6/15/06 (a) $ 243,125 ----------- Automobile Manufacturers - 1.7% 635,000 BBB-/Baa1 Ford Motor Co, 7.25%, 10/1/08 (a) $ 628,963 ----------- Total Automobiles & Components $ 872,088 ----------- Consumer Durables & Apparel - 0.7% Housewares & Specialties - 0.7% 275,000 BBB+/Baa2 Newell Rubbermaid, Inc., 4.625%, 12/15/09 $ 275,595 ----------- Total Consumer Durables & Apparel $ 275,595 ----------- Media - 1.5% Broadcasting & Cable Television - 0.9% 335,000 BBB+/Baa2 Comcast Corp., 5.3%, 1/15/14 $ 344,383 ----------- Movies & Entertainment - 0.6% 215,000 BBB+/Baa1 Time Warner, Inc. 6.75%, 4/15/11 $ 238,260 ----------- Total Media $ 582,643 ----------- Food, Beverage & Tobacco - 2.4% Brewers - 0.8% 280,000 BBB+/Baa1 Miller Brewing Co., 5.5%, 8/15/13 (144A) $ 290,167 ----------- Packaged Foods & Meats - 0.8% 280,000 A+/A1 Unilever Capital Corp., 7.125%, 11/1/10 $ 316,536 ----------- Soft Drinks - 0.8% 280,000 A/A3 Bottling Group LLC, 5.0%, 11/15/13 $ 289,648 ----------- Total Food, Beverage & Tobacco $ 896,351 ----------- Health Care Equipment & Services - 1.9% Health Care Distributors - 1.0% 360,000 BBB/Baa3 Cardinal Health, Inc., 6.0%, 1/15/06 $ 363,090 ----------- Health Care Facilities - 0.9% 350,000 BB+/Ba2 HCA, Inc., 6.3%, 10/1/12 $ 359,269 ----------- Total Health Care Equipment & Services $ 722,359 ----------- Banks - 1.3% Diversified Banks - 0.6% 225,000 A+/Aa2 US Bancorp, 3.125%, 3/15/08 $ 219,040 ----------- Regional Banks - 0.7% 280,000 A-/A2 Keycorp, 2.75%, 2/27/07 $ 273,516 ----------- Total Banks $ 492,556 -----------
6 The accompanying notes are an integral part of these financial statements. Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings (unaudited) Value Diversified Financials - 3.4% Consumer Finance - 1.1% $ 415,000 A/A2 SLM Corp., Floating Rate Note, 7/25/14 $ 411,111 ----------- Diversified Financial Services - 2.3% 500,000 BBB-/Baa3 Bombardier Capital, Inc., 7.09%, 3/30/07 $ 505,625 400,000 BBB-/Baa3 Glencore Funding LLC, 6.0%, 4/15/14 (144A) 383,559 ----------- $ 889,184 ----------- Total Diversified Financials $ 1,300,295 ----------- Insurance - 3.9% Life & Health Insurance - 1.8% 450,000 A-/A3 Lincoln National Corp., 5.25%, 6/15/07 $ 458,984 225,000 B-/B2 Presidential Life Corp., 7.875%, 2/15/09 229,500 ----------- $ 688,484 ----------- Property & Casualty Insurance - 1.4% 250,000 BBB-/NR Kingsway America, Inc., 7.5%, 2/1/14 $ 265,370 250,000 BB/Baa3 Ohio Casualty Corp., 7.3%, 6/15/14 274,949 ----------- $ 540,319 ----------- Reinsurance - 0.7% 255,000 BBB/Baa2 Platinum Underwritters Financial, 7.5% 6/1/17 (144A) $ 258,571 ----------- Total Insurance $ 1,487,374 ----------- Real Estate - 2.8% Real Estate Investment Trusts - 2.8% 350,000 BBB-/Baa3 Health Care, 6.0%, 11/15/13 $ 360,270 350,000 BBB-/Baa3 Hospitality Properties Trust, 5.125%, 2/15/15 344,793 225,000 B+/Ba3 Host Marriot LP, 6.375%, 3/15/15 (144A) 222,750 130,000 BB/Ba3 Ventas Realty LP, 7.125%, 6/1/15 (144A) 135,200 ----------- Total Real Estate $ 1,063,013 ----------- Technology Hardware & Equipment - 1.0% Communications Equipment - 1.0% 350,000 BBB-/Baa3 Corning, Inc., 5.9%, 3/15/14 $ 359,683 ----------- Total Technology Hardware & Equipment $ 359,683 ----------- Utilities - 4.0% Electric Utilities - 2.3% 115,000 BBB-/Baa3 Crocket Cogeneration, 5.869%, 3/30/25 (144A) $ 119,928 85,000 BBB+/Baa3 Entergy Gulf States, 5.7%, 6/1/15 86,961 260,000 BBB-/Baa3 Kiowa Power Partners LLC, 5.737%, 3/30/21 (144A) 265,476 305,000 BBB/Baa1 PSE&G Power, 6.95%, 6/1/12 342,859 60,000 B+/B1 Tenaska Alabama II Part, 7.0%, 6/30/21 (144A) 60,750 ----------- $ 875,974 ----------- Multi-Utilities - 1.7% 470,000 BBB-/Baa3 Avista Corp., 7.75%, 1/1/07 $ 492,511 140,000 BBB+/Baa1 Dominion Resources, 6.25%, 6/30/12 151,975 ----------- $ 644,486 ----------- Total Utilities $ 1,520,460 ----------- TOTAL CORPORATE BONDS (Cost $12,199,717) $12,437,085 -----------
The accompanying notes are an integral part of these financial statements. 7 Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings (unaudited) Value U.S. GOVERNMENT AGENCY OBLIGATIONS - 62.0% Government - 62.0% $ 730,000 AAA/Aaa Fannie Mae, 5.24%, 8/7/18 $ 765,075 25,779 AAA/Aaa Federal Home Loan Mortgage Corp., 3.5%, 9/15/10 25,745 287,799 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 9/1/33 292,076 137,287 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/34 140,864 955,000 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 4/15/32 992,740 36,255 AAA/Aaa Federal Home Loan Mortgage Corp., 8.0%, 4/1/8 37,368 1,568,280 AAA/Aaa Federal National Mortgage Association, 4.816%, 12/1/12 1,606,745 1,439,522 AAA/Aaa Federal National Mortgage Association, 5.0%, 12/1/17 1,457,347 1,323,541 AAA/Aaa Federal National Mortgage Association, 5.0%, 3/1/33 1,325,398 711,199 AAA/Aaa Federal National Mortgage Association, 5.0%, 5/1/34 711,966 1,190,971 AAA/Aaa Federal National Mortgage Association, 5.5%, 2/1/18 1,225,251 566,511 AAA/Aaa Federal National Mortgage Association, 5.5%, 7/1/23 578,303 87,325 AAA/Aaa Federal National Mortgage Association, 6.0%, 6/1/15 90,364 931,233 AAA/Aaa Federal National Mortgage Association, 5.5%, 9/1/17 956,597 38,397 AAA/Aaa Federal National Mortgage Association, 6.0%, 1/1/29 39,464 133,922 AAA/Aaa Federal National Mortgage Association, 6.0%, 9/1/29 137,616 49,503 AAA/Aaa Federal National Mortgage Association, 6.5%, 1/1/15 51,556 78,143 AAA/Aaa Federal National Mortgage Association, 7.0%, 3/1/12 81,918 28,778 AAA/Aaa Federal National Mortgage Association, 8.0%, 1/1/31 30,951 65,337 AAA/Aaa Federal National Mortgage Association, 8.0%, 2/1/29 70,429 9,519 AAA/Aaa Federal National Mortgage Association, 8.0%, 2/1/30 10,243 5,998 AAA/Aaa Federal National Mortgage Association, 8.0%, 2/1/30 6,454 9,404 AAA/Aaa Federal National Mortgage Association, 8.0%, 4/1/30 10,114 28,100 AAA/Aaa Federal National Mortgage Association, 8.0%, 7/1/30 30,222 61,080 AAA/Aaa Federal National Mortgage Association, 8.0%, 10/1/30 65,691 313,095 AAA/Aaa Federal National Mortgage Association, 8.0%, 3/1/31 336,903 15,729 AAA/Aaa Federal National Mortgage Association, 8.0%, 5/1/31 16,916 26,171 AAA/Aaa Federal National Mortgage Association, 9.5%, 2/1/21 29,074 740,680 AAA/Aaa Government National Mortgage Association, 4.5%, 12/15/18 742,945 584,405 AAA/Aaa Government National Mortgage Association, 4.5%, 8/15/33 578,212 146,075 AAA/Aaa Government National Mortgage Association, 4.5%, 12/15/34 144,482 231,984 AAA/Aaa Government National Mortgage Association, 5.0%, 7/15/19 236,201 423,702 AAA/Aaa Government National Mortgage Association, 5.5%, 8/15/33 433,174 1,720,745 AAA/Aaa Government National Mortgage Association, 5.5%, 10/15/33 1,759,214 1,036,989 AAA/Aaa Government National Mortgage Association, 5.5%, 11/20/34 1,057,764 432,115 AAA/Aaa Government National Mortgage Association, 5.5%, 12/15/34 441,718 11,731 AAA/Aaa Government National Mortgage Association, 6.0%, 4/15/14 12,184 72,665 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/13 75,469 429,574 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/34 443,394 1,316,930 AAA/Aaa Government National Mortgage Association, 6.0%, 9/15/34 1,359,298 2,118,091 AAA/Aaa Government National Mortgage Association, 6.0%, 9/15/34 2,186,233 53,414 AAA/Aaa Government National Mortgage Association, 7.0%, 4/15/28 56,633 20,637 AAA/Aaa Government National Mortgage Association, 7.75%, 11/15/29 22,178 685,000 AAA/Aaa U.S. Treasury Bonds, 7.125%, 2/15/23 925,713 420,000 AAA/Aaa U.S. Treasury Notes, 5.25%, 2/15/29 480,359 1,200,000 AAA/Aaa U.S. Treasury Notes, 5.5%, 8/15/28 1,413,140 ----------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $23,113,286) $23,491,701 -----------
8 The accompanying notes are an integral part of these financial statements. Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings (unaudited) Value U.S. GOVERNMENT OBLIGATIONS - 1.0% Government - 1.0% $ 475,000 AAA/Aaa U.S. Treasury Strip, 0.0%, 2/15/11 $ 385,034 ----------- Total Government $ 385,034 ----------- TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost $384,528) $ 385,034 -----------
Shares TEMPORARY CASH INVESTMENTS - 2.0% Security Lending Collateral - 2.0% 751,107 Securities Lending Investment Fund, 3.29% $ 751,107 ----------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $751,107) $ 751,107 ----------- TOTAL INVESTMENT IN SECURITIES - 101.0% (Cost $37,665,198) $38,274,651 ----------- OTHER ASSETS AND LIABILITIES - (1.0)% $ (365,136) ----------- TOTAL NET ASSETS - 100.0% $37,909,515 ===========
144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At June 30, 2005, the value of these securities amounted to $3,007,073 or 7.9% of net assets. (a) At June 30, 2005, the following securities were out on loan:
Principal Amount Security Market Value 237,500 Delphi Corp., 6.55%, 6/15/06 (a) $230,969 500,000 Ford Motor Co, 7.25%, 10/1/08 (a) 495,245 -------- Total $726,214 ========
The accompanying notes are an integral part of these financial statements. 9 Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year Year Year Year Year 6/30/05 Ended Ended Ended Ended Ended Class I (unaudited) 12/31/04(a) 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 11.61 $ 11.24 $ 11.39 $ 11.12 $ 10.92 $ 10.33 ---------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) from investment operations: Net investment income $ 0.34 $ 0.44 $ 0.46 $ 0.52 $ 0.59 $ 0.63 Net realized and unrealized gain (loss) on investments (0.03) (0.04) (0.09) 0.35 0.20 0.59 ---------- ---------- ---------- ---------- ---------- ---------- Net increase from investment operations $ 0.31 $ 0.40 $ 0.37 $ 0.87 $ 0.79 $ 1.22 Distributions to shareowners: Net investment income (0.84) (0.03) (0.52) (0.60) (0.59) (0.63) ---------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net asset value $ (0.53) $ 0.37 $ (0.15) $ 0.27 $ 0.20 $ 0.59 ---------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 11.08 $ 11.61 $ 11.24 $ 11.39 $ 11.12 $ 10.92 ========== ========== ========== ========== ========== ========== Total return* 2.75% 3.56% 3.28% 7.79% 7.28% 11.79% Ratio of net expenses to average net assets+ 0.62%** 0.89% 0.86% 0.84% 0.82% 0.90% Ratio of net investment income to average net assets+ 4.35%** 3.61% 3.79% 4.87% 5.56% 6.03% Portfolio turnover rate 40%** 57% 56% 87% 133% 104% Net assets, end of period (in thousands) $ 37,910 $ 45,793 $ 51,565 $ 51,201 $ 44,847 $ 36,743 Ratios with no waiver of management fees by PIM and no reduction for fees paid indirectly: Net expenses 0.77%** 0.89% 0.86% 0.84% 0.82% 0.90% Net investment income 4.20%** 3.61% 3.79% 4.87% 5.56% 6.03% Ratios with waiver of management fees by PIM and reduction for fees paid indirectly: Net expenses 0.62%** 0.89% 0.86% 0.84% 0.82% 0.90% Net investment income 4.35%** 3.61% 3.79% 4.87% 5.56% 6.03%
(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. ** Annualized 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 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $726,214) (cost $37,665,198) respectively $38,274,651 Cash 195,752 Receivables -- Dividends, interest and foreign taxes withheld 349,840 Other 22 ----------- Total assets $38,820,265 ----------- LIABILITIES: Payables -- Fund shares repurchased $ 150,266 Dividends 539 Upon return of securities loaned 751,108 Due to affiliates 643 Accrued expenses 8,194 ----------- Total liabilities $ 910,750 ----------- NET ASSETS: Paid-in capital $37,940,743 Distribution in excess of net investment income (184,980) Accumulated undistributed net realized loss (455,701) Net unrealized gain on investments 609,453 ----------- Total net assets $37,909,515 ----------- NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $37,909,515 Shares outstanding 3,420,058 ----------- Net asset value per share $ 11.08
The accompanying notes are an integral part of these financial statements. 11 Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 INVESTMENT INCOME: Interest $1,010,006 Income on securities loaned, net 1,716 ---------- Total investment income $1,011,722 ---------- EXPENSES: Management fees $ 101,822 Transfer agent fees 802 Administrative fees 10,340 Custodian fees 8,785 Professional fees 25,136 Printing 7,265 Fees and expenses of nonaffiliated trustees 1,951 ---------- Total expenses $ 156,101 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (30,353) ---------- Net expenses $ 125,748 ---------- Net investment income (loss) $ 885,974 ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from investments $ 278,536 ---------- Change in net unrealized loss from investments $ (81,042) ---------- Net gain on investments, $ 197,494 ---------- Net increase (decrease) in net assets resulting from operations $1,083,468 ==========
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 - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended (unaudited) 12/31/04 FROM OPERATIONS: Net investment income $ 885,974 $ 1,751,711 Net realized gain (loss) on investments 278,536 270,731 Change in net unrealized gain (loss) on investments (81,042) (328,382) ------------ ------------- Net increase (decrease) in net assets resulting from operations $ 1,083,468 $ 1,694,060 ------------ ------------- DISTRIBUTIONS TO SHAREOWNERS Net investment income: Class I $ (2,830,731) $ (118,093) ------------ ------------- Total distributions to shareowners $ (2,830,731) $ (118,093) ------------ ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 260,491 $ 8,055,931 Reinvestment of distributions 2,829,995 118,093 Cost of shares repurchased (9,227,080) (15,521,812) ------------ ------------- Net increase in net assets resulting from fund share transactions $ (6,136,594) $ (7,347,788) ------------ ------------- Net increase in net assets $ (7,883,857) $ (5,771,821) NET ASSETS: Beginning of period 45,793,372 51,565,193 ------------ ------------- End of period $ 37,909,515 $ 45,793,372 ============ ============= Accumulated net investment income (loss), end of period $ (184,980) $ 1,759,777 ============ =============
The accompanying notes are an integral part of these financial statements. 13 Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 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-eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Moderate Allocation VCT Portfolio (Ibbotson Moderate Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts, or by qualified pension and retirement plans. The investment objective of Bond Portfolio is to seek current income as consistent with preservation of capital. As of June 30, 2005, 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: 14 Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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. 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, 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. The tax character of the current year distributions paid will be determined at the end of the fiscal year. 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.
- -------------------------------------------------------------------------------- 2004 - -------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 118,093 Long-Term capital gain -- ---------- $ 118,093 Return of Capital -- ---------- Total distributions $ 118,093 ========== 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 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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 15 Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 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 June 30, 2005, $341 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 $302 in transfer agent fees payable to PIMSS at June 30, 2005. Prior to the reorganization Safeco services corporation was the transfer and shareholder servicing agent. 4. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $38,025,006 $407,967 $ (158,322) $249,645 =========== ======== ========== ======== - --------------------------------------------------------------------------------------
16 Pioneer Bond 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 six months ended June 30, 2005, were $3,860,837 and $4,254,715, respectively. The cost of purchases and the proceeds from sales of investments in U.S. Government obligations for the six months ended June 30, 2005, were $4,264,908 and $11,250,331, respectively. 6. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows for the six months ended June 30, 2005 and the fiscal year ended December 31, 2004:
- -------------------------------------------------------------------------------------------------------- Bond Portfolio '05 Shares '05 Amount '04 Shares '04 Amount - -------------------------------------------------------------------------------------------------------- Shares sold 698,811 $ 7,985,736 Reinvestment of distributions - - Shares repurchased (1,359,793) (15,521,812) Shares transferred in reorganization (3,993,012) (46,518,595) CLASS I: Shares sold 22,545 $ 260,491 8,248 $ 95,681 Reinvestment of distributions 252,302 2,829,995 10,191 118,316 Shares issued in reorganization (799,236) (9,227,080) 3,993,012 46,518,595 -------------------------------------------------------------------- Net increase (decrease) (524,389) $ (6,136,594) (642,543) $ (7,322,079) ==================================================================== - --------------------------------------------------------------------------------------------------------
17 [LOGO] PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the fund and should be read carefully before you invest. To obtain a prospectus and for other information on any Pioneer fund, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17862-00-0805 [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Opportunities VCT Portfolio -- Class I Shares SEMIANNUAL REPORT June 30, 2005 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 9 Notes to Financial Statements 13
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 6/30/05 - -------------------------------------------------------------------------------- [The following data was represented as pie charts in the printed material]
Portfolio Diversification Sector Distribution (As a percentage of total investment portfolio) (As a percentage of equity holdings) U.S. Common Stocks 76.5% Information Technology 25.8% Temporary Cash Investment 18.3% Health Care 19.5% Exchange Traded Fund 3.6% Consumer Discretionary 16.0% Depositary Receipts for Industrials 13.1% International Stocks 1.4% Financials 12.4% Warrants 0.2% Energy 5.6% Materials 4.5% Consumer Staples 2.7% Utilities 0.4%
Five Largest Holdings (As a percentage of equity holdings) 1. Scientific Games Corp. 2.19% 2. American Healthways, Inc. 2.08 3. Serologicals Corp. 2.05 4. Matria Healthcare, Inc. 1.93 5. Micros Systems, Inc. 1.91
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $23.62 $23.78
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) 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 data was represented as a line chart in the printed material]
Pioneer Growth Opportunities Russell 2000 VCT Portfolio Index 6/95 $10,000 $10,000 $13,882 $12,390 6/97 $18,478 $14,415 $26,925 $16,792 6/99 $22,154 $17,043 $24,988 $19,485 6/01 $28,453 $19,596 $22,688 $17,912 6/03 $19,975 $17,619 $26,739 $23,495 6/05 $29,805 $25,714
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 June 30, 2005) - -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- 10 Year 11.54% 5 Year 3.59% 1 Year 11.47%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Growth Opportunities VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005
Share Class I --------------------------------------------------------- Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $ 993.30 Expenses Paid During Period* $ 3.90
* Expenses are equal to the Portfolio's annualized expense ratio of 0.79% for Class I shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Growth Opportunities VCT Portfolio Based on a hypothetical 5% per year return before expenses, reflecting the period from January 1, 2005 through June 30, 2005.
Share Class I --------------------------------------------------------- Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $1,020.88 Expenses Paid During Period* $ 3.96
* Expenses are equal to the Portfolio's annualized expense ratio of 0.79% for Class I shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- In the following interview, Michael Rega and Diego Franzin, members of Pioneer Growth Opportunities VCT Portfolio's management team, discuss the factors that influenced performance for the six-month period ended June 30, 2005. Q: How did the market and the Portfolio perform during the semiannual period? A: The investment environment for small-cap growth stocks proved challenging during the first half of the year. Small-caps posted a slightly negative absolute return and underperformed both large- and mid-caps, at the same time as growth underperformed value. Class I shares of the Portfolio produced a total return of -0.67% at net asset value during the six-month period ended June 30, 2005, compared to a return of -1.25% 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: In the December report to shareholders, you discussed some changes your team had been making since taking over the Portfolio's management duties. How is this process progressing? A: We have made substantial progress in bringing the Portfolio's holdings more closely in line with our investment style. To review, we employ an approach that uses a quantitative model to identify reasonably valued, fast-growing small-cap stocks. We then use fundamental research to narrow further the field of candidates to what we believe are the best individual companies in each industry sector. Our goal is to keep the Portfolio's sector weightings within plus or minus about 3.5% of the benchmark weighting, so that individual stock selection will be the most important driver of performance. Additionally, we have been striving to increase diversification by boosting the number of individual companies we hold in the Portfolio and by reducing the maximum size of its individual positions. We are well on the way to completing this process, but we are not there yet since the less liquid nature of many small-cap stocks means that such moves need to be executed gradually. Q: What elements of the Portfolio's positioning helped and hurt performance? A: Our stock selection in the consumer discretionary sector was beneficial to performance. A top contributor was the teen retailer Aeropostale, a stock that we had owned for less than two months as of June 30, 2005 but that gained almost 30% in that interval. Performance also was helped by our positions in Guess Inc., which has capitalized on the current popularity of denim products, and Stage Stores, a retailer of national brand apparel that is growing both through strong same-store sales and the addition of new stores throughout the South and Mid-Atlantic states. Outside of retail, two other notable positive contributors were Station Casinos and American Healthways. The Portfolio also benefited from its holding in Forest Oil, a stock that our quantitative model showed to be undervalued in relation to its robust cash flows. Subsequent fundamental analysis revealed that the company, which in the past took a speculative approach to discovering oil, has upgraded the quality of its properties since a new management team came to the helm. This serves as an excellent example of our investment process at work: our quantitative screens identified Forest Oil as having a positive reward/risk profile, and our fundamental analysis verified the stock as an attractive buy - an assessment that has since proven correct. The largest individual detractors from performance were the Portfolio's positions in the Puerto Rican banks Doral Financial and W. Holding. Doral's stock price fell sharply in March when questions arose about the way it was valuing the financial instruments it was using to manage its interest-rate risk, a problem that later forced the company to restate its earnings results. Though W. Holding was not hurt by the company-specific issues that affected Doral, the negative sentiment that resulted from Doral's problems caused its stock price to decline in sympathy. Also detracting from performance was Kinetics, which experienced delayed approval by the Food and Drug Administration for one of its products. Q: Do you have any final thoughts for investors? A: We do not foresee any long-trending themes emerging in the U.S. small-cap stock market during the second half of the year. With no clear investment "story" to move specific sectors or the market as a whole, we anticipate that individual stock selection will be critical to outperformance. We believe this works to our advantage, given our multifaceted, research-driven approach. 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: By focusing 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. 4 Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCK - 93.7% Energy - 5.5% Oil & Gas Drilling - 1.7% 220,900 Pride International, Inc.* $ 5,677,130 ------------ Oil & Gas Equipment & Services - 1.0% 103,600 FMC Technologies, Inc.* $ 3,312,092 ------------ Oil & Gas Exploration & Production - 2.8% 109,700 Forest Oil Corp.* $ 4,607,400 118,400 Newfield Exploration Co.* 4,722,976 ------------ $ 9,330,376 ------------ Total Energy $ 18,319,598 ------------ Materials - 4.4% Construction Materials - 2.2% 68,700 Florida Rock Industries, Inc. $ 5,039,145 40,000 Texas Industries, Inc. 2,249,200 ------------ $ 7,288,345 ------------ Fertilizers & Agricultural Chemicals - 1.3% 61,800 The Scotts Miracle-Gro Co.* $ 4,400,778 ------------ Specialty Chemicals - 0.4% 273,200 Omnova Solutions, Inc.* $ 1,273,112 ------------ Steel - 0.5% 129,400 Ryerson Tull, Inc. (a) $ 1,846,538 ------------ Total Materials $ 14,808,773 ------------ Capital Goods - 7.8% Aerospace & Defense - 3.1% 62,900 Alliant Techsystems, Inc.* $ 4,440,740 94,300 DRS Technologies, Inc.* 4,835,704 66,300 Hexcel Corp.* 1,121,796 ------------ $ 10,398,240 ------------ Construction & Farm Machinery & Heavy Trucks - 2.4% 152,800 AGCO Corp.* $ 2,921,536 39,900 Terex Corp.* 1,572,060 160,100 Wabtec Corp. 3,438,948 ------------ $ 7,932,544 ------------ Industrial Conglomerates - 0.6% 137,300 Tredegar Corp. $ 2,141,880 ------------ Industrial Machinery - 1.7% 77,200 Pentair Inc. $ 3,304,932 100,700 Stewart & Stevenson Services, Inc. 2,281,862 ------------ $ 5,586,794 ------------ Total Capital Goods $ 26,059,458 ------------ Commercial Services & Supplies - 2.6% Commercial Printing - 0.6% 56,637 R.R. Donnelly & Sons Co. $ 1,954,543 ------------ Diversified Commercial Services - 0.9% 139,061 NCO Group, Inc.* $ 3,007,889 ------------
Shares Value Human Resource & Employment Services - 1.1% 133,600 Monster Worldwide, Inc.* $ 3,831,648 ------------ Total Commercial Services & Supplies $ 8,794,080 ------------ Transportation - 2.5% Trucking - 2.5% 176,500 Heartland Express, Inc. $ 3,429,395 180,500 Old Dominion Freight Line, Inc.* 4,842,815 ------------ $ 8,272,210 ------------ Total Transportation $ 8,272,210 ------------ Consumer Durables & Apparel - 5.6% Footwear - 2.2% 211,500 Skechers U.S.A.* $ 3,015,990 182,200 Wolverine World Wide, Inc. 4,374,622 ------------ $ 7,390,612 ------------ Homebuilding - 3.4% 321,868 Champion Enterprises, Inc.* $ 3,199,368 40,600 Meritage Corp.* 3,227,700 56,000 Standard-Pacific Corp. 4,925,200 ------------ $ 11,352,268 ------------ Total Consumer Durables & Apparel $ 18,742,880 ------------ Consumer Services - 5.7% Casinos & Gaming - 3.6% 267,800 Scientific Games Corp.* $ 7,211,854 73,300 Station Casinos, Inc. 4,867,120 ------------ $ 12,078,974 ------------ Restaurants - 1.2% 80,100 Rare Hospitality International, Inc.* $ 2,440,647 63,300 Ruby Tuesday, Inc. 1,639,470 ------------ $ 4,080,117 ------------ Specialized Consumer Services - 0.9% 128,300 Jackson Hewitt Tax Service, Inc. $ 3,033,012 ------------ Total Consumer Services $ 19,192,103 ------------ Retailing - 4.4% Apparel Retail - 4.4% 169,000 Aeropostale, Inc.* $ 5,678,400 116,100 Guess?, Inc.* 1,924,938 124,500 Stage Stores, Inc.* 5,428,200 ------------ 73,600 Stein Mart, Inc. 1,619,200 $ 14,650,738 ------------ Total Retailing $ 14,650,738 ------------ Food & Drug Retailing - 0.8% Food Retail - 0.8% 129,400 Casey's General Stores, Inc. $ 2,564,708 ------------ Total Food & Drug Retailing $ 2,564,708 ------------
The accompanying notes are an integral part of these financial statements. 5 Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Food, Beverage & Tobacco - 0.3% Soft Drinks - 0.3% 17,100 Coca-Cola Bottling Co. $ 864,234 ------------ Total Food, Beverage & Tobacco $ 864,234 ------------ Household & Personal Products - 1.6% Personal Products - 1.6% 235,900 Nu Skin Enterprises, Inc. $ 5,496,470 ------------ Total Household & Personal Products $ 5,496,470 ------------ Health Care Equipment & Services - 13.3% Health Care Distributors - 0.0% 8,200 American Medical Alert Corp.* $ 50,512 ------------ Health Care Equipment - 1.9% 116,200 Palomar Medical Technologies*(a) $ 2,779,504 132,000 Steris Corp. 3,401,640 ------------ $ 6,181,144 ------------ Health Care Facilities - 0.8% 70,300 Kindred Healthcare, Inc.*(a) $ 2,784,583 ------------ Health Care Services - 7.8% 162,000 American Healthways, Inc.* $ 6,847,740 46,800 Cerner Corp.*(a) 3,180,996 413,600 eResearch Technology, Inc.*(a) 5,538,104 197,125 Matria Healthcare, Inc.*(a) 6,353,339 201,500 Pre-Se Technologies, Inc.* 4,235,530 ------------ $ 26,155,709 ------------ Health Care Supplies - 2.8% 78,500 Haemonetics Corp.* $ 3,190,240 172,500 PolyMedica Corp. (a) 6,151,350 ------------ $ 9,341,590 ------------ Total Health Care Equipment & Services $ 44,513,538 ------------ Pharmaceuticals & Biotechnology - 5.6% Biotechnology - 4.0% 426,700 Cubist Pharmaceuticals, Inc.* $ 5,619,639 145,500 Enzon, Inc.* 942,840 317,500 Serologicals Corp. (a)* 6,746,875 ------------ $ 13,309,354 ------------ Pharmaceuticals - 1.6% 183,400 Connetics Corp.* $ 3,235,176 66,500 Medicis Pharmaceutical Corp. (a) 2,110,045 ------------ $ 5,345,221 ------------ Total Pharmaceuticals & Biotechnology $ 18,654,575 ------------ Banks - 5.4% Regional Banks - 4.2% 15,900 City National Corp. $ 1,140,189 189,091 Fulton Financial Corp. (a) 3,403,638 99,900 Irwin Financial Corp. 2,216,781
Shares Value 104,800 United Bankshares, Inc. $ 3,731,928 64,700 Westamerica Bancorporation 3,416,807 ------------ $ 13,909,343 ------------ Thrifts & Mortgage Finance - 1.2% 397,352 W Holding Co., Inc. $ 4,060,937 ------------ Total Banks $ 17,970,280 ------------ Diversified Financials - 1.5% Asset Management & Custody Banks - 1.5% 73,800 Affiliated Managers Group, Inc.*(a) $ 5,042,754 ------------ Total Diversified Financials $ 5,042,754 ------------ Insurance - 3.1% Life & Health Insurance - 1.0% 43,900 Stancorp Financial Group, Inc. $ 3,361,862 ------------ Property & Casualty Insurance - 0.4% 39,400 Infinity Property & Casualty Corp. $ 1,374,272 ------------ Reinsurance - 1.7% 29,100 Arch Capital Group, Ltd.* $ 1,310,955 180,200 Scottish RE Group, Ltd. 4,368,048 ------------ $ 5,679,003 ------------ Total Insurance $ 10,415,137 ------------ Real Estate - 2.2% Real Estate Investment Trusts - 2.2% 68,600 Alexandria Real Estate Equities, Inc. $ 5,038,670 46,000 New Century Financial Corp. (a) 2,366,700 ------------ $ 7,405,370 ------------ Total Real Estate $ 7,405,370 ------------ Software & Services - 10.8% Application Software - 2.0% 583,600 Parametric Technology Co.* $ 3,723,368 412,600 Plato Learning, Inc.* 3,044,988 ------------ $ 6,768,356 ------------ Data Processing & Outsourced Services - 0.3% 66,900 The BISYS Group, Inc.* $ 999,486 ------------ Home Entertainment Software - 1.2% 132,500 THQ, Inc.*(a) $ 3,878,275 ------------ Internet Software & Services - 3.6% 139,500 Digital Insight Corp.* $ 3,336,840 238,300 HouseValues, Inc.*(a) 4,308,464 89,700 Websense, Inc.*(a) 4,310,085 ------------ $ 11,955,389 ------------ IT Consulting & Other Services - 1.3% 542,900 Ciber, Inc.* $ 4,332,342 ------------ Systems Software - 2.4% 85,700 Macrovision Corp.* $ 1,931,678 140,300 Micros Systems, Inc.* 6,278,425 ------------ $ 8,210,103 ------------ Total Software & Services $ 36,143,951 ------------
6 The accompanying notes are an integral part of these financial statements. Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Technology, Hardware & Equipment - 6.8% Communications Equipment - 2.3% 391,400 Arris Group, Inc.* $ 3,409,094 182,300 Extreme Networks, Inc.* 747,430 137,300 Netgear, Inc.*(a) 2,553,780 94,700 Symmetricom, Inc.* 982,039 ------------ $ 7,692,343 ------------ Computer Hardware - 0.4% 35,000 Intergraph Corp.* $ 1,206,100 ------------ Computer Storage & Peripherals - 0.9% 330,800 Brocade Communications Systems, Inc.* $ 1,283,504 80,400 Sandisk Corp.* 1,907,892 ------------ $ 3,191,396 ------------ Electronic Equipment & Instruments - 2.0% 403,000 Aeroflex, Inc.* $ 3,385,200 145,200 Tektronix, Inc. 3,378,804 ------------ $ 6,764,004 ------------ Electronic Manufacturing Services - 0.2% 102,200 TTM Technologies, Inc.* $ 777,742 ------------ Technology Distributors - 1.0% 204,700 Agilysys, Inc. $ 3,213,790 ------------ Total Technology, Hardware & Equipment $ 22,845,375 ------------ Semiconductors - 3.4% Semiconductor Equipment - 2.7% 331,300 Axcelis Technologies, Inc.* $ 2,272,718 242,700 Entegris, Inc.* 2,402,730 135,400 MKS Instruments, Inc.* 2,286,906 94,300 Photronics, Inc.* 2,200,962 ------------ $ 9,163,316 ------------ Semiconductors - 0.7% 96,300 DSP Group, Inc.* $ 2,298,681 ------------ Total Semiconductors $ 11,461,997 ------------ Telecommunication Services - 0.4% Wireless Telecommunication Services - 0.4% 148,800 UBIQUETEL, Inc.* $ 1,214,208 ------------ Total Telecommunication Services $ 1,214,208 ------------ TOTAL COMMON STOCKS (Cost $238,514,766) $313,432,437 ------------ RIGHTS/WARRANTS - 0.3% Health Care Equipment & Services - 0.0% Health Care Equipment - 0.0% 49,880 Endocare, Inc., Exp. 11/23/05* $ - ------------ 37,165 NCO Group, Exp. 9/28/06* $ - ------------
Shares Value Health Care Facilities - 0.0% 140,000 Lifepoint Warrants, Exp. 4/1/07* $ - ------------ 84,000 Lifepoint Warrants, Exp. 7/21/07* $ - ------------ Health Care Supplies - 0.0% 92,800 SpectRx, Inc., Exp. 6/4/06* $ - ------------ Total Health Care Equipment & Services $ - ------------ Pharmaceuticals & Biotechnology - 0.2% Biotechnology - 0.0% 250,000 Photomedex, Exp. 6/13/07* $ 92,500 ------------ Pharmaceuticals - 0.2% 105,000 Nastech, Exp. 3/22/06* $ 828,713 ------------ Total Pharmaceuticals & Biotechnology $ 921,213 ------------ TOTAL RIGHTS/WARRANTS (Cost $21,608) $ 921,213 ------------ EXCHANGE TRADED FUNDS - 4.3% 56,100 iShares Russell 2000 Value (a) $ 3,598,815 73,700 iShares Russell 2000 Growth (a) 4,775,760 54,700 S & P Small Cap 600/BARRA Growth Index (a) 5,962,300 ------------ $ 14,336,875 ------------ TOTAL EXCHANGE TRADED FUNDS (Cost $11,528,730) $ 14,336,875 ------------
Principal Amount Value TEMPORARY CASH INVESTMENTS - 22.1% Repurchase Agreement - 2.0% $ 6,600,000 UBS Warburg, Inc., 2.75%, dated 6/30/05, repurchase price of $6,600,000 plus accrued interest on 7/1/05 collateralized by $6,740,000 U.S. Treasury Note, 1.875%, 1/31/06. $ 6,600,000 ------------
Shares Security Lending Collateral - 20.1% 67,238,596 Securities Lending Investment Fund, 3.29% $ 67,238,596 ------------ TOTAL TEMPORARY CASH INVESTMENTS (Cost $73,838,596) $ 73,838,596 ------------ TOTAL INVESTMENT IN SECURITIES - 120.4% (Cost $323,903,700) (a) $402,529,121 ------------ OTHER ASSETS AND LIABILITIES - (20.4)% $(68,206,522) ------------ TOTAL NET ASSETS - 100.0% $334,322,599 ============
The accompanying notes are an integral part of these financial statements. 7 Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- * Non-income producing security (a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 70,525 Affiliated Managers Group, Inc.* $ 4,818,973 40,660 Cerner Corp.* 2,763,660 8,900 Concord Career Colleges, Inc.+ 121,485 135,000 eResearch Technology, Inc.* 1,807,650 185,926 Fulton Financial Corp. 3,346,668 226,362 HouseValues, Inc.* 4,092,625 53,124 iShares Russell 2000 Value 3,407,905 69,960 iShares Russell 2000 Growth 4,535,507 51,880 S & P Small Cap 600/BARRA Growth Index (a) 5,654,920 66,785 Kindred Healthcare, Inc.* 2,645,354 170,909 Matria Healthcare, Inc.* 5,508,397 63,175 Medicis Pharmaceutical Corp. 2,004,543 100,795 Netgear, Inc.* 1,874,787 3,700 New Century Financial Corp. 190,365 110,390 Palomar Medical Technologies* 2,640,529 97,200 PolyMedica Corp. 3,466,152 122,930 Ryerson Tull, Inc. 1,754,211 309,590 Serologicals Corp.* 6,578,788 125,875 THQ, Inc.* 3,684,361 85,002 Websense, Inc.* 4,084,346 ----------- Total $64,981,226 ===========
+ Pending sale for security Concord Career Colleges, Inc. as of 6/30/05 8 The accompanying notes are an integral part of these financial statements. Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Year Year Year Year Year Ended 6/30/05 Ended Ended Ended Ended Ended Class I (unaudited) 12/31/04 (b) 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 23.78 $ 19.44 $ 13.60 $ 21.89 $ 18.81 $ 22.50 -------- -------- -------- -------- -------- -------- Increase (decrease) from investment operations: Net investment income $ 0.02 $ (0.01) $ (0.02) $ (0.10) $ (0.10) $ (0.12) Net realized and unrealized gain (loss) on investments (0.18) 4.35 5.86 (8.12)(a) 3.67 (1.27) -------- -------- -------- -------- -------- -------- Net increase (decrease) from investment operations $ (0.16) $ 4.34 $ 5.84 $ (8.22) $ 3.57 $ (1.39) -------- -------- -------- -------- -------- -------- Distributions to sharewoners: Net realized gain - - - (0.07) (0.49) (2.30) -------- -------- -------- -------- -------- -------- Net increase (decrease) in net asset value $ (0.16) $ 4.34 $ 5.84 $ (8.29) $ 3.08 $ (3.69) -------- -------- -------- -------- -------- -------- Net asset value, end of period $ 23.62 $ 23.78 $ 19.44 $ 13.60 $ 21.89 $ 18.81 ======== ======== ======== ======== ======== ======== Total return* (0.67)% 22.33% 42.94% (37.67)% 19.14% (6.16)% Ratio of net expenses to average net assets+ 0.79%** 0.81% 0.80% 0.79% 0.78% 0.77% Ratio of net investment loss to average net assets+ 0.14%** (0.06)% (0.16)% (0.58)% (0.53)% (0.57)% Portfolio turnover rate 84%** 19% 54% 38% 47% 66% Net assets, end of period (in thousands) $334,323 $383,468 $337,573 $245,954 $428,013 $354,932 Ratios assuming no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.80%** 0.81% 0.80% 0.79% 0.78% 0.77% Net investment income (loss) 0.13%** (0.06)% (0.16)% (0.58)% (0.53)% (0.57)%
* 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. ** Annualized. (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 The accompanying notes are an integral part of these financial statements. 9 Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $64,981,226) (cost $323,903,700) $402,529,121 Receivables - Investment securities sold 648,218 Fund shares sold 50,778 Dividends, interest and foreign taxes withheld 159,782 Other 126 ------------ Total assets $403,388,025 ------------ LIABILITIES: Payables - Investment securities purchased $ 525,347 Fund shares repurchased 1,068,262 Upon return of securities loaned 67,238,596 Due to bank 206,180 Due to affiliates 7,032 Accrued expenses 20,009 ------------ Total liabilities $ 69,065,426 ------------ NET ASSETS: Paid-in capital $310,779,658 Undistributed net investment income 236,264 Accumulated undistributed net realized gain (55,318,744) Net unrealized gain on investments 78,625,421 ------------ Total net assets $334,322,599 ------------ NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $334,322,599 Shares outstanding 14,153,609 ------------ Net asset value per share $ 23.62
10 The accompanying notes are an integral part of these financial statements. Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 (unaudited) INVESTMENT INCOME: Dividends $ 1,227,758 Interest 350,860 Income on securities loaned, net 10,156 ------------ Total investment income $ 1,588,774 ------------ EXPENSES: Management fees $ 1,271,445 Transfer agent fees 802 Administrative fees 39,192 Custodian fees 18,036 Professional fees 17,882 Printing 15,892 Fees and expenses of nonaffiliated trustees 1,060 Miscellaneous 3,169 ------------ Total expenses $ 1,367,478 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (14,968) ------------ Net expenses $ 1,352,510 ------------ Net investment income (loss) $ 236,264 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from investments $ 34,128,221 ------------ Change in net unrealized loss from investments $(38,534,531) ------------ Net gain (loss) on investments $ (4,406,310) ============ Net increase (decrease) in net assets resulting from operations $ (4,170,046) ============
The accompanying notes are an integral part of these financial statements. 11 Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended (unaudited) 12/31/04 FROM OPERATIONS: Net investment income $ 236,264 $ (191,294) Net realized gain on investments 34,128,221 579,315 Change in net unrealized gain (loss) on investments (38,534,531) 71,554,233 ------------- ------------- Net increase (decrease) in net assets resulting from operations $ (4,170,046) $ 71,942,254 ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 4,886,050 $ 48,727,340 Reinvestment of distributions - - Cost of shares repurchased (49,861,800) (74,774,095) ------------- ------------- Net decrease in net assets resulting from fund share transactions $ (44,975,750) $ (26,046,755) ------------- ------------- Net decrease in net assets $ (49,145,796) $ 45,895,499 NET ASSETS: Beginning of period $ 383,468,395 $ 337,572,896 ------------- ------------- End of period $ 334,322,599 $ 383,468,395 ------------- ------------- Accumulated net investment income, end of period $ 236,264 $ - ============= =============
12 The accompanying notes are an integral part of these financial statements. Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Growth Opportunities VCT Portfolio (the Portfolio) (formerly SAFECO RST Growth Opportunities Portfolio) is a Portfolio of Pioneer Variable Contracts Trust (the Trust), a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty-eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Moderate Allocation VCT Portfolio (Ibbotson Moderate Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts, or by qualified pension and retirement plans. The Portfolio, organized on December 10, 2004, is the successor to the Safeco RST Growth Opportunities Portfolio. Safeco RST Growth Opportunities Portfolio, one of six portfolios that comprised Safeco Resource Series Trust, transferred all of the net assets to the portfolio in exchange for its 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. 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 13 Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- consistent with those generally accepted in the investment company industry: A. Security Valuation Security transactions are recorded as of trade date. Net asset values for the Portfolio are computed once daily, on each day the New York Stock Exchange (NYSE) is open, as of the close of regular trading on the NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. 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 June 30, 2005, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 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 the Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. The tax character of the current year distributions paid will be determined at the end of the fiscal year. The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004. There were no distributions paid during the fiscal year ended December 31, 2004.
- -------------------------------------------------------------------------------- Pioneer Growth Opportunities VCT Portfolio 2004 - -------------------------------------------------------------------------------- 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 ============= - --------------------------------------------------------------------------------
14 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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 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 June 30, 2005, $6,730 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 $302 in transfer agent fees payable to PIMSS at June 30, 2005. Prior to the reorganization Safeco Services Corporation was the Transfer and Shareholder Servicing agent. 4. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $323,915,450 $88,249,353 $ (9,635,682) $78,613,671 ============ =========== ============ =========== - ---------------------------------------------------------------------------------------------------------
15 Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (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 six months ended June 30, 2005, were $134,333,958 and $139,523,870, respectively. 6. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows for the six months ended June 30, 2005 and the fiscal year ended December 31, 2004:
- ----------------------------------------------------------------------------------------------------------------- Growth Opportunities Portfolio '05 Shares '05 Amount '04 Shares '04 Amount - ----------------------------------------------------------------------------------------------------------------- Safeco Trust Shares: Shares sold -- Safeco 2,250,905 $ 46,344,245 Shares repurchased-Safeco (3,399,953) (70,300,296) Shares transferred in reorganization (16,214,763) (374,885,314) Class I: Shares Sold 212,687 $ 4,886,050 101,479 $ 2,383,096 Reinvestment of distributions Shares repurchased (2,185,537) (49,861,800) (189,783) (4,473,799) Shares issued in reorganization 16,214,763 374,885,312 ------------------------------------------------------------------------- Net increase (decrease) (1,972,850) $ (44,975,750) (1,237,352) $ (26,046,756) ========================================================================= - -----------------------------------------------------------------------------------------------------------------
16 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 17 [LOGO] PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17865-00-0805 [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Small Cap Value II VCT Portfolio -- Class I Shares SEMIANNUAL REPORT June 30, 2005 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
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 6/30/05 - -------------------------------------------------------------------------------- [THE DATA IS A REPRESENTATION OF THE PIE CHARTS IN THE PRINTED MATERIAL]
Portfolio Diversification Sector Distribution (As a percentage of total investment portfolio) (As a percentage of equity holdings) U.S. Common Stocks 93.4% Financials 35.0% Temporary Cash Investment 4.5% Consumer Discretionary 23.8% Exchange Traded Fund 2.1% Industrials 14.5% Information Technology 11.8% Energy 6.2% Materials 5.0% Utilities 1.7% Consumer Staples 1.3% Health Care 0.7%
Five Largest Holdings (As a percentage of equity holdings) 1. Building Materials Holding Corp. 5.57% 2. Line Star Technologies, Inc. 4.47 3. Ameristar Casinos, Inc. 3.55 4. Precision Castparts Corp. 3.37 5. AmeriCredit Corp. 3.16
Holdings will vary for other periods. This list excludes temporary cash and derivative investments. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 21.13 $ 20.44
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.1300 $ - $ 0.0178
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Small Cap Value II VCT Portfolio at net asset value, compared to that of the Russell 2000 Value Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [THE DATA IS A REPRESENTATION OF THE LINE CHARTS IN THE PRINTED MATERIAL]
Pioneer Small Cap Value II Russell 2000 VCT Portfolio Value Index 4/97 $10000 $10000 11230 11342 15100 13600 6/99 9622 12824 11726 12703 6/01 13192 16613 14253 18024 6/03 15114 17339 19863 23439 6/05 23431 25714
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 10.99% (4/30/97) 5 Years 14.85% 1 Year 17.96%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value [divided by] $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Small Cap Value II VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005.
Share Class I --------------------------------------------------------------- Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $1,041.00 Expenses Paid During Period* $ 4.81
* Expenses are equal to the Portfolio's annualized expense ratio of 0.95% for Class I shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Small Cap Value II VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from January 1, 2005 through June 30, 2005.
Share Class I --------------------------------------------------------------- Beginning Account Value on 7/1/04 $1,000.00 Ending Account Value on 12/31/04 $1,020.08 Expenses Paid During Period* $ 4.76
* Expenses are equal to the Portfolio's annualized expense ratio of 0.95% for Class I shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- David Adams, portfolio manager, and Jack McPherson, assistant portfolio manager, have managed Pioneer Small Cap Value VCT Portfolio II since Pioneer became the investment manager of the former Safeco Funds last year. Q. How did the Portfolio perform over this period? A. For the six months ended June 30, 2005, Pioneer's Small Cap Value II VCT Portfolio returned 4.10% at net asset value. The results were well ahead of the 0.90% return on the Russell 2000 Value Index, the Portfolio's benchmark, 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. Please describe the investment environment for small-cap value stocks during the first half of 2005. A. For most of the period, the market lacked clear direction as it grappled with record high energy prices and rising interest rates. As they pondered the economic outlook, investors were inclined to favor large-capitalization stocks for much of the six months, although small-caps had regained the upper hand by the end of the period. Value issues once again outdistanced growth, as measured by the Russell 2000 Value and Growth indices, respectively. Q. What stocks or sectors contributed to performance? A. Our substantial overweight stance among consumer discretionary stocks led to significant outperformance of the benchmark in that sector. Building Materials Holding rose sharply thanks to the ongoing boom in housing; Beazer Homes also rode the favorable building cycle. Las Vegas-based Ameristar Casinos rebounded from last summer's lows. Stock selection brought favorable results among industrial companies. United Defense Industries, which makes combat vehicles and other munitions, was acquired at a substantial premium by BAE Systems (not in the portfolio). Construction activity benefited Astec Industries, a manufacturer of road-building equipment. And Precision Castparts, a fabricator of metal engine castings, rose amid strength in the aerospace industry. Good selection among energy stocks also boosted returns. Oil-well component maker Lone Star Technologies saw earnings rise as high prices stimulated drilling activity. Expanding world trade drove up shares of World Fuel Services, enabling us to take profits in that marketer of marine fuel services. Q. Which areas of the portfolio disappointed? A. Results were unsatisfactory in the financial sector, which weighs heavily in our benchmark. Southwest Securities, a regional firm based in Dallas, was down in a weak environment for brokerage companies. But the larger loss occurred in pawnshop operator Cash America, which also writes high-interest, high-risk "payday" loans. Companies in that sub-sector fell after the Texas legislature let die a bill that would have expanded lending flexibility. Hanger Orthopedic Group, which owns and operates orthotic and prosthetic care centers, fell, amid weakening industry conditions. Landstar Systems of Jacksonville, which brokers transport between truckers and shippers, retraced some earlier gains as conditions slowed in the trucking industry. Arkansas Best, a conventional trucker, fell back for similar reasons. After rising early in the year, steel prices sagged, driving down shares of Schnitzer Steel, a mini-mill engaged in metal reprocessing and recycling. Q. What is your outlook for the economy and the markets? A. Higher interest rates and costly energy may already be reining in the pace of economic growth. Against that scenario, we are focusing on companies that can thrive without the stimulus of a rapidly growing economy. We continue to see positive long-term prospects for the health-care and energy sectors, but approach both cautiously due to rising valuations. Technology is another area where we are finding companies with the potential to grow independent of the rate of expansion. All of our decisions are being made in the context of the Portfolio's transition from the operating style of its previous managers to Pioneer's more diversified approach. We anticipate that the transition will be completed in the second half of the year. 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 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 98.2% Energy - 6.1% Oil & Gas Equipment & Services - 6.1% 57,900 Key Energy Services, Inc.* $ 700,590 39,450 Lone Star Technologies, Inc.* 1,794,974 ---------- $2,495,564 ---------- Total Energy $2,495,564 ---------- Materials - 5.0% Construction Materials - 2.3% 12,575 Florida Rock Industries, Inc. $ 922,375 ---------- Specialty Chemicals - 1.7% 33,150 Sensient Technologies Corp. $ 683,222 ---------- Steel - 1.0% 17,900 Schnitzer Steel Industries, Inc. $ 424,230 ---------- Total Materials $2,029,827 ---------- Capital Goods - 8.3% Aerospace & Defense - 3.3% 17,375 Precision Castparts Corp. $1,353,513 ---------- Construction & Farm Machinery & Heavy Trucks - 2.3% 40,850 Astec Industries, Inc.* $ 947,311 ---------- Construction & Engineering - 2.7% 29,900 URS Corp.* $1,116,765 ---------- Total Capital Goods $3,417,589 ---------- Transportation - 5.9% Air Freight & Couriers - 2.2% 41,675 Pacer International, Inc.* $ 908,098 ---------- Trucking - 3.7% 14,675 Arkansas Best Corp. $ 466,812 34,650 Landstar System, Inc.* 1,043,657 ---------- $1,510,469 ---------- Total Transportation $2,418,567 ---------- Consumer Durables & Apparel - 6.2% Home Furnishings - 0.4% 7,925 Furniture Brands International, Inc. $ 171,259 ---------- Homebuilding - 5.5% 18,025 Beazer Homes USA, Inc. (a) $1,030,128 123,375 Champion Enterprises, Inc.* 1,226,348 ---------- $2,256,476 ---------- Photographic Products - 0.3% 75,100 Concord Camera Corp.* $ 93,875 ---------- Total Consumer Durables & Apparel $2,521,610 ---------- Shares Value Consumer Services - 6.3% Casinos & Gaming - 3.5% 54,600 Ameristar Casinos, Inc. $1,424,514 ---------- Restaurants - 1.2% 13,125 Jack In The Box, Inc.* $ 497,700 ---------- Specialized Consumer Services - 1.6% 16,350 Regis Corp. $ 638,958 ---------- Total Consumer Services $2,561,172 ---------- Retailing - 10.9% Apparel Retail - 2.8% 41,675 Foot Locker, Inc. $1,134,394 ---------- Catalog Retail - 2.7% 54,200 Insight Enterprises, Inc.* $1,093,756 ---------- Distributors - 5.4% 32,275 Building Materials Holding Corp. $2,236,335 ---------- Total Retailing $4,464,485 ---------- Food, Beverage & Tobacco - 1.2% Tobacco - 1.2% 11,650 Universal Corp. $ 510,037 ---------- Total Food, Beverage & Tobacco $ 510,037 ---------- Health Care Equipment & Services - 0.7% Health Care Facilities - 0.7% 55,175 Hanger Orthopedic Group, Inc.* $ 278,082 ---------- Total Health Care Equipment & Services $ 278,082 ---------- Banks - 9.6% Regional Banks - 6.6% 31,750 Central Pacific Financial Corp. $1,130,300 25,400 Greater Bay Bancorp 669,798 41,320 Hanmi Financial Corp. 690,044 6,968 Provident Bankshares Corp. 222,349 ---------- $2,712,491 ---------- Thrifts & Mortgage Finance - 3.0% 16,575 BankUnited Financial Corp. (a) $ 448,188 25,285 PFF Bancorp, Inc. 765,883 ---------- $1,214,071 ---------- Total Banks $3,926,562 ---------- Diversified Financials - 9.4% Asset Management & Custody Banks - 2.2% 47,791 Apollo Investment Corp. $ 880,788 ---------- Consumer Finance - 5.4% 49,750 AmeriCredit Corp.* $1,268,625 46,125 Cash America International, Inc. 928,035 ---------- $2,196,660 ----------
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 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Investment Banking & Brokerage - 1.8% 43,625 SWS Group, Inc. $ 749,478 ----------- Total Diversified Financials $ 3,826,926 ----------- Insurance - 7.8% Life & Health Insurance - 1.9% 10,375 Stancorp Financial Group, Inc. $ 794,518 ----------- Property & Casualty Insurance - 5.9% 12,200 First American Corp. $ 489,708 40,075 Ohio Casualty Corp. 969,014 21,800 RLI Corp. 972,280 ----------- $ 2,431,002 ----------- Total Insurance $ 3,225,520 ----------- Real Estate - 7.5% Real Estate Investment Trusts - 7.5% 12,800 Alexandria Real Estate Equities, Inc. $ 940,160 12,600 Camden Property Trust 677,250 25,125 First Potomac Realty Trust 623,100 40,400 Hanover Capital Mortgage Holdings, Inc. 426,220 22,225 Impac Mortgage Holdings, Inc. (a) 414,496 ----------- $ 3,081,226 ----------- Total Real Estate $ 3,081,226 ----------- Technology, Hardware & Equipment - 10.6% Communications Equipment - 2.5% 15,425 Black Box Corp. $ 546,045 12,800 Plantronics, Inc. 465,408 ----------- $ 1,011,453 ----------- Computer Storage & Peripherals - 3.3% 62,125 Hypercom Corp.* $ 401,949 24,200 Imation Corp. 938,718 ----------- $ 1,340,667 ----------- Electronic Equipment & Instruments - 0.8% 6,400 Landauer, Inc. $ 332,224 ----------- Electronic Manufacturing Services - 1.9% 26,300 Benchmark Electronics, Inc.* $ 800,046 ----------- Technology Distributors - 2.1% 22,700 Anixter International, Inc.* $ 843,759 ----------- Total Technology, Hardware & Equipment $ 4,328,149 ----------- Semiconductors - 1.0% 91,725 Lattice Semiconductor Corp.* $ 407,259 ----------- Total Semiconductors $ 407,259 ----------- Utilities - 1.7% Electric Utilities - 1.7% 22,550 IDACORP, Inc. $ 690,707 ----------- Total Utilities $ 690,707 ----------- Shares Value TOTAL COMMON STOCKS (Cost $25,136,159) $40,183,282 =========== TEMPORARY CASH INVESTMENTS - 4.7% Security Lending Collateral - 4.7% 1,902,815 Securities Lending Investment Fund, 3.29% $ 1,902,815 ----------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $1,902,815) $ 1,902,815 ----------- TOTAL INVESTMENT IN SECURITIES - 102.9% (Cost $27,038,974) (a) $42,086,097 ----------- OTHER ASSETS AND LIABILITIES - (2.9)% $(1,181,270) ----------- TOTAL NET ASSETS - 100.0% $40,904,827 ===========
* Non-income producing security (a) At June 30, 2005, the following securities were out on loan:
Market Shares Security Value ------ -------- ------ 16,031 BankUnited Financial Corp. $ 433,478 17,425 Beazer Homes USA, Inc. 995,839 21,494 Impac Mortgage Holdings, Inc. 400,863 ---------- Total $1,830,180 ==========
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 - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 Year Ended Year Ended Year Ended Year Ended Year Ended Class I (unaudited) 12/31/04 (a) 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 20.44 $ 17.00 $ 12.16 $ 12.81 $ 10.68 $ 11.39 ------- ------- ------- ------- ------- ------- Increase (decrease) from investment operations: Net investment income $ 0.07 $ 0.10 $ 0.09 $ 0.07 $ 0.13 $ 0.02 Net realized and unrealized gain (loss) on investments and foreign currency transactions 0.77 3.68 5.10 (0.65) 2.13 (0.71) ------- ------- ------- ------- ------- ------- Net increase (decrease) from investment operations $ 0.84 $ 3.78 $ 5.19 $ (0.58) $ 2.26 $ (0.69) Distributions to shareowners: Net investment income (0.13) - (0.09) (0.07) (0.13) (0.02) Net realized gain (0.02) (0.34) (0.26) - - - ------- ------- ------- ------- ------- ------- Net increase (decrease) in net asset value $ 0.69 $ 3.44 $ 4.84 $ (0.65) $ 2.13 $ (0.71) ------- ------- ------- ------- ------- ------- Net asset value, end of period $ 21.13 $ 20.44 $ 17.00 $ 12.16 $ 12.81 $ 10.68 ======= ======= ======= ======= ======= ======= Total return* 4.10% 21.33% 42.78% (4.56)% 21.15%+ (6.02)%+ Ratio of net expenses to average net assets 0.95%** 1.01% 1.05% 1.03% 0.96% 0.95% Ratio of net investment income to average net assets 0.25%** 0.57% 0.71% 0.54% 1.26% 0.22% Portfolio turnover rate 0.10%** 27% 50% 56% 97% 116% Net assets, end of period (in thousands) $40,905 $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. ** Annualized + 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 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $1,830,180) (cost $27,038,974) $42,086,097 Cash 961,798 Receivables - Dividends, interest and foreign taxes withheld 54,103 ----------- Total assets $43,101,998 ----------- LIABILITIES: Payables -- Fund shares repurchased 279,060 Upon return of securities loaned 1,902,815 Due to affiliates 2,770 Accrued expenses 12,526 ----------- Total liabilities $ 2,197,171 ----------- NET ASSETS: Paid-in capital $20,199,473 Undistributed net investment income 71,230 Accumulated undistributed net realized gain 5,587,001 Net unrealized gain on investments 15,047,123 ----------- Total net assets $40,904,827 ----------- NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $40,904,827 Shares outstanding 1,936,132 ----------- Net asset value per share $ 21.13
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 (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 INVESTMENT INCOME: Dividends $ 278,266 Interest 7,317 Income on securities loaned, net 601 ----------- Total investment income $ 286,184 ----------- EXPENSES: Management fees $ 179,139 Transfer agent fees 802 Administrative fees 9,326 Custodian fees 11,052 Professional fees 17,988 Printing 7,173 Fees and expenses of nonaffiliated trustees 944 Miscellaneous 1,106 ----------- Total expenses $ 227,530 ----------- Net expenses $ 227,530 ----------- Net investment income $ 58,654 =========== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from investments $ 5,683,303 ----------- Change in net unrealized loss from investments $(4,496,268) ----------- Net gain on investments $ 1,187,035 ----------- Net increase in net assets resulting from operations $ 1,245,689 ===========
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 - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 Year Ended (unaudited) 12/31/04 FROM OPERATIONS: Net investment income $ 58,654 $ 271,055 Net realized gain on investments 5,683,303 1,150,972 Change in net unrealized gain or loss on investments (4,496,268) 8,540,937 ------------ ------------ Net increase (decrease) in net assets resulting from operations $ 1,245,689 $ 9,962,964 ------------ ------------ DISTRIBUTIONS TO SHAREOWNERS Net investment income: Class I $ (258,431) $ - Net realized gain Class I (35,385) (928,706) ------------ ------------ Total distributions to shareholders $ (293,816) $ (928,706) ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 2,631,416 $ 19,072,784 Reinvestment of distributions 293,741 928,706 Cost of shares repurchased (20,435,379) (11,977,166) ------------ ------------ Net increase (decrease) in net assets resulting from fund share transactions $(17,510,222) $ 8,024,324 ------------ ------------ Net increase (decrease) in net assets $(16,558,349) $ 17,058,582 NET ASSETS: Beginning of period 57,463,176 40,404,594 ------------ ------------ End of period $ 40,904,827 $ 57,463,176 ------------ ------------ Accumulated net investment income (loss), end of period $ 71,230 $ 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 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Small Cap Value II VCT Portfolio (the Portfolio) (formerly Safeco Small-Cap Value Portfolio) is a Portfolio of Pioneer Variable Contracts Trust (the Trust), a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty-eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Moderate Allocation VCT Portfolio (Ibbotson Moderate Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts, or by qualified pension and retirement plans. As of June 30, 2005, 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 Small Cap Value Portfolio, one of six portfolios that comprised Safeco Resource Series Trust, transferred all of its net assets to the Portfolio 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 11 Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- preparation of its financial statements, which are consistent with those generally accepted in the investment company industry: A. Security Valuation Security transactions are recorded as of trade date. Net asset values for the Portfolio are computed once daily, on each day the New York Stock Exchange (NYSE) is open, as of the close of regular trading on the NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. 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 June 30, 2005, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 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 held by the 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 the Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. The tax character of the current year distributions paid will be determined at the end of the fiscal year. The following chart shows the components of distributable earnings as of December 31, 2004, and the distributions paid during the year ended December 31, 2004 on a tax basis.
- ------------------------------------------------------------------------------ 2004 - ------------------------------------------------------------------------------ Distributions paid from: Ordinary Income $ 213,236 Long- Term capital gain 715,470 ----------- $ 928,706 Return of Capital -- ----------- Total distributions $ 928,706 ----------- Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ 271,007 Undistributed long-term gain 34,830 Unrealized appreciation 19,447,644 ----------- Total $19,753,481 =========== - ------------------------------------------------------------------------------
12 Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily attributable to the tax deferral of losses on wash sales. C. Portfolio Shares The Portfolio records sales and repurchases of its shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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 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 June 30, 2005, $2,468 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 $302 in transfer agent fees payable to PIMSS at June 30, 2005. Prior to the reorganization Safeco Services Corporation was the transfer and shareholder services agency. 4. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $27,134,448 $16,035,892 $(1,084,243) $14,951,649 ----------- ----------- ----------- ----------- - ------------------------------------------------------------------------------------------------------
13 Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (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 six months ended June 30, 2005, were $23,415 and $16,539,547, respectively. 6. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows for the six months ended June 30, 2005 and the fiscal year ended December 31, 2004:
- ------------------------------------------------------------------------------------------------------------- Small Cap Value II Portfolio '05 Shares 05 Amount '04 Shares '04 Amount - ------------------------------------------------------------------------------------------------------------- Safeco Trust Shares: Shares sold -- Safeco 1,011,658 $ 18,295,281 Reinvestment of Distributions 47,480 928,706 Shares repurchased -- Safeco (637,527) (11,437,564) Shares transferred in reorganization (2,800,798) (55,427,794) Class I: Shares Sold 128,361 $ 2,631,416 38,614 777,503 Reinvestment of distributions 14,007 293,741 -- -- Shares repurchased (1,016,986) (20,435,379) (26,593) (539,602) Shares issued in reorganization -- -- 2,800,798 55,427,794 ---------------------------------------------------------------- Net increase (decrease) (874,618) $(17,510,222) 433,632 $ 8,024,324 ---------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------
14 [LOGO] PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17866-00-0805 [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer America Income VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- T a b l e o f C o n t e n t s - -------------------------------------------------------------------------------- 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 Factors Considered by the Independent Trustees in Approving the Management Contract 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 America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- [The following data was represented as a pie chart in the printed material]
Portfolio Diversification Maturity Distribution Five Largest Holdings (As a percentage of total investment portfolio) (As a percentage of total investment portfolio) (As a percentage of equity holdings) U.S. Government Securities 92.3% 0-1 year 3.5% 1. U.S. Treasury Notes, U.S. Government Agency 1-3 years 64.1% 6.5%, 2/15/10 11.40% Obligations 5.5% 3-4 years 16.2% 2. U.S. Treasury Notes, Temporary Cash Investment 1.7% 4-6 years 2.6% 6.25%, 8/15/23 5.25 U.S. Corporate Bonds 0.5% 6-8 years 5.8% 3. U.S. Treasury Notes, 8+ years 7.8% 6.375%, 8/15/27 2.59 4. Federal Home Loan Mortgage Corp., 6.0%, 3/1/33 2.24 5. Federal Home Loan Bank, 5.875%, 11/15/07 1.94
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 10.09 $ 10.12
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.2200 $ - $ -
- -------------------------------------------------------------------------------- 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 line chart in the printed material]
Pioneer Lehman Lehman America Brothers Brothers Income VCT Government Fixed Rate Portfolio Bond Index Mortgage Index 6/95 $10,000 $10,000 $10,000 $10,202 $10,450 $10,586 6/97 $10,794 $11,222 $11,549 $11,773 $12,486 $12,579 6/99 $11,978 $12,865 $13,084 $12,445 $13,507 $13,743 6/01 $13,657 $14,905 $15,293 $14,754 $16,217 $16,667 6/03 $16,204 $18,057 $17,618 $16,161 $17,815 $18,009 6/05 $16,983 $19,000 $19,117
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 June 30, 2005) - -------------------------------------------------------------------------------- Net Asset Value - --------------------------------------------------------------------------------
10 Years 5.44% 5 Years 6.42 1 Year 5.09
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 semiannual 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 variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer America Income VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005.
Share Class II - ---------------------------------------------------------- Beginning Account Value on 1/1/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,019.00 Expenses Paid During Period* $ 5.36
* Expenses are equal to the Portfolio's annualized expense ratio of 1.07% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer America Income VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from January 1, 2005 through June 30, 2005.
Share Class II - ---------------------------------------------------------- Beginning Account Value on 1/1/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,019.49 Expenses Paid During Period* $ 5.36
* Expenses are equal to the Portfolio's annualized expense ratio of 1.07% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 Pioneer America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- Despite rising interest-rates, investors in U.S. Government and agency securities were rewarded with positive total returns during the first half of 2005. In the interview below, Richard Schlanger, a member of the Pioneer fixed-income team, discusses the factors that affected the fixed-income market and Pioneer American Income VCT Portfolio over the past six months. Q. How did the Portfolio perform during the period? A. For the six-month period ended June 30, 2005, Class II shares of the Portfolio produced a total return of 1.90% at net asset value. The Portfolio underperformed its benchmark, the Lehman Brothers Government Bond Index, which returned 2.93% for the same period. The Portfolio also fell short of the Lehman Brothers Fixed-Rate Mortgage-Backed Index, which returned 2.15%. At the end of the period, the 30-day SEC yield for Class II shares was 3.35%. The performance data quoted represents past performance, which is no guarantee 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. Despite rising oil prices, the economy continued to grow at a steady pace, buoyed by job creation, a high level of consumer spending and escalating real estate prices. Along with this positive economic backdrop, the Federal Reserve continued to reverse its accommodative monetary policy by boosting the Federal funds rate four times during the six-month period, each time by one-quarter percentage point. The Federal funds rate, which is the rate that banks charge for overnight loans, moved from 2.25% to 3.25%. The Fed's actions resulted in rising yields and falling prices on short-term securities; however, yields on longer-term securities declined and prices rose. For example, the yield on the 10-year Treasury bond declined 0.31% and the yield on the 30-year Treasury bond went down 0.64%. Despite the general decline in long-term yields, long-term U.S. Treasury yields were among the highest of the developed economies, making the securities attractive to foreign investors. U.S. Treasuries were favored by overseas investors for another reason. In order to keep their currency values relatively low, overseas market participants invested substantial assets in Treasury securities. During the period, General Motors and Ford reported disappointing earnings, and credit agencies downgraded the companies' debt. As a result, we saw a flight to quality in the fixed-income markets, with investors moving assets into Treasury securities because they had no credit risk and the full faith and credit backing of the U.S. Government. All of these factors benefited government bonds. Q. What were the principal strategies used in managing the Portfolio in this environment? A. The Portfolio was divided among mortgage-backed, Treasury, agency securities and cash. While we trimmed exposure to mortgage securities, we continued to emphasize the sector relative to the benchmark. All of the mortgages in the Portfolio were issued by government sponsored enterprises, including the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and 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, not to Portfolio shares. In selecting mortgages, we emphasized those with coupons in the 4.5% to 5.0% range, which carried less prepayment risk. When interest rates rose and yields on Treasuries moved higher, we opportunistically purchased longer-duration Treasury securities in the 7-to-15-year maturity range. At the end of the six-month period, the Portfolio's assets were allocated as follows: U.S. Treasury/agency securities, 33.2%; pass-through securities, 65.0%; cash, 1.8%. Q. What detracted from performance? A. We attribute the Portfolio's performance shortfall relative to the Lehman Brothers Fixed-Rate Mortgage Index to the defensive nature of our duration strategy. To limit the price volatility that usually accompanies rising interest rates, we kept the Portfolio's duration shorter than the index. (Stated in years, duration measures a bond's price sensitivity to interest-rate changes. A shorter duration can protect the Portfolio from price declines as yields rise.) Performance also suffered because of our relatively small exposure to long-term Treasury bonds, as we were skeptical that prices would continue to rise as the Fed continued to raise interest rates. Even Federal Reserve Chairman Alan Greenspan called the rally in long-term Treasuries a "conundrum." Ginnie Maes also had a negative impact on performance because the decline in long-term Treasury yields raised concerns about the potential for refinance risk that is associated with mortgages. Q. What contributed most to performance? A. Although we had less exposure (relative to the Portfolio's benchmark) in long-term Treasury securities, our position in the sector contributed to results. Conventional mortgages - those issued by Freddie Mac and Fannie Mae - also enhanced performance, as they outperformed Ginnie Maes. Minimizing prepayment risk by selecting specific mortgage pools was also helpful. Q. What is your outlook for the rest of 2005? A. Data associated with the economy continues to indicate that economic growth will keep improving at a steady rate, despite the fact that oil has now passed the $60-a-barrel level. Although inflation remains in check, there are indications that it is beginning to pick up. For example, rising global demand for commodities and industrial products has resulted in higher prices. We have also begun to see an upturn in airline, railroad and trucking prices, as companies pass along the cost of energy to consumers and businesses. Escalating real estate values are also a source of concern. Given these factors, the Fed has stated that it will continue raising interest rates in the near term in an effort to keep inflation from accelerating. As the Fed hikes rates, we expect to see longer-term yields drift higher. As we move into the second half of 2005, the Portfolio should continue to provide a relatively safe haven for investors who want to avoid the risk associated with the more volatile areas of the fixed-income market and with equities. 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 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 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 America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Principal Amount Value COLLATERALIZED MORTGAGE OBLIGATIONS - 1.1% Government - 1.1% $ 154,082 Freddie Mac, 5.0%, 1/15/16 $ 155,829 350,000 Freddie Mac, 5.5%, 7/15/28 358,230 ----------- $ 514,059 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $517,620) $ 514,059 ----------- CORPORATE BONDS - 0.5% Diversified Financials - 0.5% 250,000 Private Export Funding, 3.375%, 2/15/09 $ 245,760 ----------- TOTAL CORPORATE BONDS (Cost $250,000) $ 245,760 ----------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 95.9% 247,526 Fannie Mae, 5.5%, 6/1/23 $ 252,679 250,000 Fannie Mae, Floating Rate Note, 3/1/19 248,410 250,000 Federal Farm Credit Bank, 3.25%, 6/15/07 247,209 250,000 Federal Farm Credit Bank, 4.45%, 6/1/15 252,487 400,000 Federal Farm Credit Bank, 4.9%, 3/17/14 394,894 100,000 Federal Farm Credit Bank, 5.88%, 9/8/08 105,837 200,000 Federal Farm Credit Bank, Medium Term Note, 6.38%, 11/27/06 206,953 250,000 Federal Home Loan Bank, 4.25%, 2/16/10 250,252 400,000 Federal Home Loan Bank, 4.53%, 10/30/06 403,700 850,000 Federal Home Loan Bank, 5.875%, 11/15/07 888,524 300,000 Federal Home Loan Bank, 5.89%, 6/30/08 317,255 264,936 Federal Home Loan Mortgage Corp., 5.5%, 9/1/34 268,811 238,298 Federal Home Loan Mortgage Corp., 5.5%, 12/1/34 241,783 89,892 Federal Home Loan Mortgage Corp., 6.0% 10/1/32 92,265 592,118 Federal Home Loan Mortgage Corp., 6.0%, 11/1/32 607,746 189,091 Federal Home Loan Mortgage Corp., 6.0%, 12/1/32 194,082 218,379 Federal Home Loan Mortgage Corp., 6.0%, 2/1/33 224,143 1,000,581 Federal Home Loan Mortgage Corp., 6.0%, 3/1/33 1,026,662 685,632 Federal Home Loan Mortgage Corp., 6.0%, 5/1/34 703,495 89,290 Federal Home Loan Mortgage Corp., 6.5%, 3/1/11 92,873 262,050 Federal Home Loan Mortgage Corp., 6.5%, 7/1/16 272,696 63,770 Federal Home Loan Mortgage Corp., 6.5%, 1/1/29 66,262 38,467 Federal Home Loan Mortgage Corp., 6.5%, 3/1/29 39,956 40,225 Federal Home Loan Mortgage Corp., 6.5%, 4/1/31 41,730 86,048 Federal Home Loan Mortgage Corp., 6.5%, 10/1/31 89,266 49,706 Federal Home Loan Mortgage Corp., 6.5%, 2/1/32 51,565 248,946 Federal Home Loan Mortgage Corp., 6.5% 4/1/32 258,101 84,468 Federal Home Loan Mortgage Corp., 6.5%, 7/1/32 87,575 140,000 Federal Home Loan Mortgage Corp., 6.7%, 1/5/07 145,907 2,718 Federal Home Loan Mortgage Corp., 7.0%, 4/1/30 2,862 22,837 Federal Home Loan Mortgage Corp., 7.0%, 2/1/31 24,047 9,080 Federal Home Loan Mortgage Corp., 7.0%, 6/1/31 9,578 4,598 Federal Home Loan Mortgage Corp., 7.0%, 7/1/31 4,850 5,159 Federal Home Loan Mortgage Corp., 7.0%, 9/1/31 5,432 31,395 Federal Home Loan Mortgage Corp., 7.0%, 3/1/32 33,235 43,996 Federal Home Loan Mortgage Corp., 7.0%, 4/1/32 46,328
The accompanying notes are an integral part of these financial statements. 5 Pioneer America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal Amount Value U.S. Government and Agency Obligations - (Cont.) $ 41,635 Federal Home Loan Mortgage Corp., 7.5%, 8/1/31 $ 44,580 257,833 Federal National Mortgage Association, 4.5%, 4/1/19 256,861 92,123 Federal National Mortgage Association, 5.0%, 3/1/09 93,087 233,603 Federal National Mortgage Association, 5.0%, 7/1/19 236,345 333,818 Federal National Mortgage Association, 5.5%, 3/1/18 342,911 363,461 Federal National Mortgage Association, 5.5%, 4/1/18 373,920 403,026 Federal National Mortgage Association, 5.5%, 4/1/19 414,003 362,504 Federal National Mortgage Association, 5.5%, 11/1/23 370,049 242,140 Federal National Mortgage Association, 5.5%, 3/1/24 247,104 201,378 Federal National Mortgage Association, 5.5%, 2/1/33 204,192 346,858 Federal National Mortgage Association, 5.5%, 9/1/33 351,921 408,288 Federal National Mortgage Association, 5.5%, 11/1/33 414,248 274,616 Federal National Mortgage Association, 5.5%, 3/1/34 278,533 193,969 Federal National Mortgage Association, 5.5%, 12/1/34 196,736 221,641 Federal National Mortgage Association, 6.0%, 12/1/11 229,255 65,501 Federal National Mortgage Association, 6.0%, 12/1/31 67,238 49,003 Federal National Mortgage Association, 6.0%, 10/1/32 50,271 458,576 Federal National Mortgage Association, 6.0%, 11/1/32 470,445 585,585 Federal National Mortgage Association, 6.0%, 3/1/33 600,740 140,920 Federal National Mortgage Association, 6.0%, 4/1/33 144,568 195,885 Federal National Mortgage Association, 6.0%, 5/1/33 200,901 157,810 Federal National Mortgage Association, 6.0%, 6/1/33 161,851 178,136 Federal National Mortgage Association, 6.0%, 7/1/34 182,691 183,793 Federal National Mortgage Association, 6.0%, 9/1/34 188,493 48,215 Federal National Mortgage Association, 6.5%, 7/1/21 50,140 93,127 Federal National Mortgage Association, 6.5%, 11/1/28 96,709 57,076 Federal National Mortgage Association, 6.5%, 1/1/29 59,275 86,400 Federal National Mortgage Association, 6.5%, 10/1/31 89,622 87,425 Federal National Mortgage Association, 6.5%, 1/1/32 90,685 37,670 Federal National Mortgage Association, 6.5%, 2/1/32 39,075 194,017 Federal National Mortgage Association, 6.5%, 3/1/32 201,184 106,710 Federal National Mortgage Association, 6.5%, 4/1/32 110,620 87,262 Federal National Mortgage Association, 6.5%, 7/1/32 90,459 294,885 Federal National Mortgage Association, 6.5% 8/1/32 305,743 42,886 Federal National Mortgage Association, 6.5%, 9/1/32 44,458 446,686 Federal National Mortgage Association, 6.5%, 7/1/34 462,434 53,230 Federal National Mortgage Association, 7.0%, 9/1/18 56,344 32,109 Federal National Mortgage Association, 7.0%, 8/1/19 33,955 13,141 Federal National Mortgage Association, 7.0%, 1/1/29 13,869 146,868 Federal National Mortgage Association, 7.0%, 9/1/30 155,003 3,984 Federal National Mortgage Association, 7.0%, 5/1/31 4,202 24,473 Federal National Mortgage Association, 7.0%, 7/1/31 25,813 30,689 Federal National Mortgage Association, 7.0%, 1/1/32 32,371 20,536 Federal National Mortgage Association, 7.5%, 2/1/31 21,944 54,476 Federal National Mortgage Association, 9.0%, 4/1/33 57,865 300,000 Freddie Mac, 5.25%, 11/15/12 302,936 297,531 Government National Mortgage Association, 4.5%, 4/15/20 298,303 403,362 Government National Mortgage Association, 4.5%, 8/15/33 399,087 708,863 Government National Mortgage Association, 4.5%, 6/15/34 701,133
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.) $ 291,890 Government National Mortgage Association, 5.0%, 7/15/17 $ 298,380 343,306 Government National Mortgage Association, 5.0%, 12/20/18 348,526 184,364 Government National Mortgage Association, 5.0%, 7/15/19 187,715 224,542 Government National Mortgage Association, 5.0%, 11/20/19 227,847 196,668 Government National Mortgage Association, 5.0%, 1/20/20 199,571 195,611 Government National Mortgage Association, 5.0%, 2/15/20 199,184 230,552 Government National Mortgage Association, 5.0%, 9/15/33 232,669 594,144 Government National Mortgage Association, 5.0%, 4/15/35 599,481 376,290 Government National Mortgage Association, 5.5%, 6/15/17 388,639 177,367 Government National Mortgage Association, 5.5%, 2/15/19 183,192 229,938 Government National Mortgage Association, 5.5%, 7/15/19 237,470 414,829 Government National Mortgage Association, 5.5%, 7/20/19 427,123 162,627 Government National Mortgage Association, 5.5%, 4/15/31 166,440 226,931 Government National Mortgage Association, 5.5%, 3/15/33 232,004 267,824 Government National Mortgage Association, 5.5%, 4/15/33 273,812 280,790 Government National Mortgage Association, 5.5%, 7/15/33 287,068 403,535 Government National Mortgage Association, 5.5%, 2/20/34 411,619 234,144 Government National Mortgage Association, 5.5%, 10/15/34 239,348 188,543 Government National Mortgage Association, 5.5%, 11/20/34 192,321 248,435 Government National Mortgage Association, 5.5%, 1/15/35 250,666 133,248 Government National Mortgage Association, 6.0%, 6/20/16 137,963 110,509 Government National Mortgage Association, 6.0%, 5/15/17 114,766 218,475 Government National Mortgage Association, 6.0%, 2/15/18 226,887 78,787 Government National Mortgage Association, 6.0%, 12/20/18 81,575 182,009 Government National Mortgage Association, 6.0%, 7/20/19 188,453 170,399 Government National Mortgage Association, 6.0%, 8/15/19 176,964 395,325 Government National Mortgage Association, 6.0%, 7/15/23 409,362 190,469 Government National Mortgage Association, 6.0%, 4/15/28 197,028 140,221 Government National Mortgage Association, 6.0%, 9/15/32 144,793 415,634 Government National Mortgage Association, 6.0%, 10/15/32 429,185 408,789 Government National Mortgage Association, 6.0%, 11/15/32 422,806 266,989 Government National Mortgage Association, 6.0%, 12/15/32 276,465 395,533 Government National Mortgage Association, 6.0% 1/15/33 408,336 499,286 Government National Mortgage Association, 6.0%, 2/15/33 515,398 299,320 Government National Mortgage Association, 6.0%, 9/15/33 308,979 235,284 Government National Mortgage Association, 6.0%, 11/20/33 242,362 644,853 Government National Mortgage Association, 6.0%, 3/15/34 665,598 322,062 Government National Mortgage Association, 6.0%, 6/20/34 331,718 352,084 Government National Mortgage Association, 6.0%, 8/15/34 363,575 132,381 Government National Mortgage Association, 6.0%, 9/15/34 136,639 743,266 Government National Mortgage Association, 6.0%, 10/15/34 767,178 153,745 Government National Mortgage Association, 6.5%, 4/15/17 160,829 27,867 Government National Mortgage Association, 6.5%, 6/15/17 29,151 20,233 Government National Mortgage Association, 6.5%, 3/15/26 21,201 108,603 Government National Mortgage Association, 6.5%, 6/15/28 113,701 33,881 Government National Mortgage Association, 6.5%, 2/15/29 35,442 402,745 Government National Mortgage Association, 6.5%, 5/15/29 421,435 9,016 Government National Mortgage Association, 6.5%, 6/15/29 9,431 61,016 Government National Mortgage Association, 6.5%, 5/15/31 63,799 323,505 Government National Mortgage Association, 6.5%, 6/15/31 338,264
The accompanying notes are an integral part of these financial statements. 7 Pioneer America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal Amount Value U.S. Government and Agency Obligations - (Cont.) $ 86,440 Government National Mortgage Association, 6.5%, 7/15/31 $ 90,384 89,354 Government National Mortgage Association, 6.5%, 9/15/31 93,430 36,211 Government National Mortgage Association, 6.5%, 9/20/31 37,704 90,553 Government National Mortgage Association, 6.5%, 10/15/31 94,684 102,541 Government National Mortgage Association, 6.5%, 12/15/31 107,219 17,054 Government National Mortgage Association, 6.5%, 2/15/32 18,063 73,161 Government National Mortgage Association, 6.5%, 4/15/32 76,490 108,170 Government National Mortgage Association, 6.5%, 6/15/32 113,093 96,084 Government National Mortgage Association, 6.5%, 7/15/32 100,456 181,031 Government National Mortgage Association, 6.5%, 1/15/34 189,213 15,747 Government National Mortgage Association, 7.0%, 1/15/26 16,722 47,128 Government National Mortgage Association, 7.0%, 5/20/26 49,811 45,094 Government National Mortgage Association, 7.0%, 7/15/26 47,887 17,658 Government National Mortgage Association, 7.0%, 9/15/27 18,735 59,743 Government National Mortgage Association, 7.0%, 2/15/28 63,342 29,883 Government National Mortgage Association, 7.0%, 3/15/28 31,684 25,877 Government National Mortgage Association, 7.0%, 4/15/28 27,436 55,985 Government National Mortgage Association, 7.0%, 11/15/28 59,358 33,619 Government National Mortgage Association, 7.0%, 1/15/29 35,623 95,259 Government National Mortgage Association, 7.0%, 2/20/29 100,460 34,984 Government National Mortgage Association, 7.0%, 6/15/29 37,070 50,897 Government National Mortgage Association, 7.0%, 7/15/29 53,930 4,877 Government National Mortgage Association, 7.0%, 12/15/30 5,166 37,495 Government National Mortgage Association, 7.0%, 2/15/31 39,715 26,801 Government National Mortgage Association, 7.0%, 5/15/31 28,389 29,782 Government National Mortgage Association, 7.0%, 8/15/31 31,545 127,412 Government National Mortgage Association, 7.0%, 5/15/32 134,951 7,969 Government National Mortgage Association, 7.5%, 10/15/22 8,596 1,829 Government National Mortgage Association, 7.5%, 6/15/23 1,972 1,874 Government National Mortgage Association, 7.5%, 8/15/23 2,021 1,786 Government National Mortgage Association, 7.5%, 8/15/29 1,914 27,944 Government National Mortgage Association, 7.5%, 10/15/29 29,959 38,846 Government National Mortgage Association, 7.5%, 11/15/29 41,646 15,810 Government National Mortgage Association, 7.5%, 1/15/31 16,943 19,796 Government National Mortgage Association, 7.5%, 1/15/32 21,214 117,410 Government National Mortgage Association I, 6.0%, 2/15/29 121,339 64,717 Government National Mortgage Association I, 7.0%, 1/15/30 68,551 39,469 Government National Mortgage Association I, 7.0%, 12/15/30 41,807 35,894 Government National Mortgage Association II, 6.5%, 8/20/28 37,424 48,697 Government National Mortgage Association II, 6.5%, 12/20/28 50,765 18,077 Government National Mortgage Association II, 7.0%, 1/20/31 19,057 7,903 Government National Mortgage Association II, 7.5%, 8/20/27 8,443 2,990 Government National Mortgage Association II, 8.0%, 8/20/25 3,220 12,000 Tennessee Valley Authority, Variable Rate Note, 6/1/28 306,000 1,950,000 U.S. Treasury Bonds, 6.25%, 8/15/23 2,430,111 925,000 U.S. Treasury Bonds, 6.375%, 8/15/27 1,199,284 400,000 U.S. Treasury Bonds, 7.25%, 5/15/16 512,203 500,000 U.S. Treasury Notes, 4.0%, 11/15/12 505,606 650,000 U.S. Treasury Notes, 4.0%, 2/15/14 653,910 370,000 U.S. Treasury Notes, 4.25%, 11/15/14 378,686
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.) $ 375,000 U.S. Treasury Notes, 4.75%, 5/15/14 $ 397,910 4,700,000 U.S. Treasury Notes, 6.5%, 2/15/10 5,245,092 ----------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $44,276,509) $45,192,213 ----------- TOTAL INVESTMENTS IN SECURITIES - 97.5% (Cost $45,044,129) $45,952,032 ----------- OTHER ASSETS AND LIABILITIES - 2.5% $ 1,173,415 ----------- TOTAL NET ASSETS - 100.0% $47,125,447 ===========
The accompanying notes are an integral part of these financial statements. 9 Pioneer America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended 5/1/03 (a) 6/30/05 Year Ended to (unaudited) 12/31/04 12/31/03 Class II Net asset value, beginning of period $ 10.12 $ 10.37 $ 10.57 ---------- ---------- --------- Increase from investment operations: Net investment income $ 0.19 $ 0.41 $ 0.21 Net realized and unrealized loss on investments -- (0.11) (0.15) ---------- ---------- --------- Net increase from investment operations $ 0.19 $ 0.30 $ 0.06 Distributions to shareowners: Net investment income (0.22) (0.55) (0.26) ---------- ---------- --------- Net decrease in net asset value $ (0.03) $ (0.25) $ (0.20) ---------- ---------- --------- Net asset value, end of period $ 10.09 $ 10.12 $ 10.37 ========== ========== ======= Total return* 1.90% 3.04% 2.60% Ratio of net expenses to average net assets+ 1.07%** 1.06% 1.01% Ratio of net investment income to average net assets+ 3.59%** 3.29% 2.42% Portfolio turnover rate 18%** 37% 34% Net assets, end of period (in thousands) $ 17,199 $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 1.07%** 1.06% 1.01% Net investment income 3.59%** 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 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (Cost $45,044,129) $45,952,032 Cash 821,885 Receivables -- Fund shares sold 29,506 Dividends, interest and foreign taxes withheld 383,611 Other 823 ----------- Total assets $47,187,857 ----------- LIABILITIES: Payables -- Fund shares repurchased $ 6,385 Due to affiliates 1,407 Accrued expenses 54,618 ----------- Total liabilities $ 62,410 ----------- NET ASSETS: Paid-in capital $47,701,359 Undistributed net investment income (loss) (442,685) Accumulated net realized gain (loss) (1,041,130) Net unrealized gain (loss) on: Investments 907,903 ----------- Total net assets $47,125,447 ----------- NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $29,926,222 Shares outstanding 2,971,384 ----------- Net asset value per share $ 10.07 Class II: (No par value, unlimited number of shares authorized) Net assets $17,199,225 Shares outstanding 1,704,851 ----------- Net asset value per share $ 10.09
The accompanying notes are an integral part of these financial statements. 11 Pioneer America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 INVESTMENT INCOME: Interest $1,092,755 ---------- Total investment income $1,092,755 ---------- EXPENSES: Management fees $ 127,417 Transfer agent fees and expenses 1,488 Distribution fees (Class II) 19,431 Administrative reimbursements 9,326 Custodian fees 10,533 Professional fees 24,876 Printing expense 9,955 Fees and expenses of nonaffiliated trustees 885 Miscellaneous 3,808 ---------- Total expenses $ 207,719 ---------- Net expenses $ 207,719 ---------- Net investment income (loss) $ 885,036 ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Change in net unrealized gain or loss from: Investments $ 15,014 ---------- Net gain (loss) on investments $ 15,014 ========== Net increase (decrease) in net assets resulting from operations $ 900,050 ==========
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 - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended (unaudited) 12/31/04 FROM OPERATIONS: Net investment income (loss) $ 885,036 $ 1,625,595 Net realized gain (loss) on investments -- 206,989 Change in net unrealized gain or loss on investments 15,014 (352,583) ------------ ------------ Net increase (decrease) in net assets resulting from operations $ 900,050 $ 1,480,001 ------------ ------------ DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (719,999) $(2,102,796) Class II (342,895) (401,489) ------------ ------------ Total distributions to shareowners $(1,062,894) $(2,504,285) ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 4,308,873 $15,160,465 Reinvestment of distributions 1,062,884 2,504,258 Cost of shares repurchased (4,216,563) ( 17,669,980) ------------ ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ 1,155,194 $ (5,257) ------------ ------------ Net increase (decrease) in net assets $ 992,350 $(1,029,541) ------------ ------------ NET ASSETS: Beginning of period $43,133,097 $47,162,638 ------------ ------------ End of period $44,125,447 $46,133,097 ============ ============ Undistributed net investment income (loss), end of period $ (442,685) $ (264,827) ============ ============
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 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer America Income VCT Portfolio (The Portfolio) is a portfolio of Pioneer Variable Contracts Trust (the Trust), a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Conservative Allocation VCT Portfolio (Ibbotson Conservative Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) The Portfolio commenced operations on May 1, 2003. Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts or by qualified pension and retirement plans. The 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 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 portfolios are computed once daily, on each day the New York Stock Exchange (NYSE) is open, as of the close of regular trading on the NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Trading in foreign equity 14 Pioneer America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 June 30, 2005, 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 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, 2004, 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. 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. The tax character of current year distributions will be determined at the end of the current fiscal year.
- -------------------------------------------------------------------------------- 2004 - -------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $2,504,285 Long-Term capital gain/capital loss carryforward -- ---------- $2,504,285 Return of Capital -- ---------- Total distributions $2,504,285 ========== 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 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 15 Pioneer America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- Italiano), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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. 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 the 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 portfolios. Management fees are calculated daily at the 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 June 30, 2005, $781 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 $509 in transfer agent fees payable to PIMSS at June 30, 2005. 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 $117 payable to PFD at June 30, 2005. 16 Pioneer America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $45,312,931 $771,671 $(132,570) $639,101 ----------- -------- --------- -------- - ------------------------------------------------------------------------------------------------
6. Portfolio Transactions The cost of purchases and the proceeds from sales of U.S. Government obligations for the six months ended June 30, 2005, were $5,599,098 and $4,126,863, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
- ------------------------------------------------------------------------------------------------ '05 Shares '05 Amount America Income Portfolio (unaudited) (unaudited) '04 Shares '04 Amount - ------------------------------------------------------------------------------------------------ CLASS I: Shares sold 47,672 $ 480,069 245,204 $ 2,472,061 Reinvestment of distributions 71,646 719,999 206,467 2,102,795 Shares repurchased (347,892) (3,497,649) (1,551,998) (15,847,044) ------------------------------------------------------------ Net decrease (228,574) $ (2,297,581) (1,100,327) $ (11,272,188) ============================================================ CLASS II: Shares sold 379,967 $ 3,828,804 1,247,751 $ 12,688,404 Reinvestment of distributions 34,065 342,885 39,513 401,463 Shares repurchased (71,554) (718,914) (179,116) (1,822,936) ------------------------------------------------------------ Net increase 342,478 $ 3,452,775 1,108,148 $ 11,266,931 ============================================================ - ------------------------------------------------------------------------------------------------
17 Pioneer America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return and yield, as well as 18 Pioneer America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- the Fund's performance compared to both the performance of a peer group and an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the second quintile of the peer group for the 12 months ended June 30, 2004, the second quintile for the three years ended June 30, 2004, and the second quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's fixed income group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the second quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio for the 12 months ended June 30, 2004 was in the fourth quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio was acceptable relative to comparable Funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there was potential for realization of any further economies of scale. The Trustees concluded, given current and anticipated asset levels, that break points in the management fee are not necessary at this time. The Trustees will continue to evaluate annually the appropriateness of break points. 19 Pioneer America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund). The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 20 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 21 [LOGO] PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17869-00-0805 [logo] PIONEER Investments (R) PIONEER VARIABLE CONTRACTS TRUST Pioneer AmPac Growth VCT Portfolio -- Class II Shares (Formerly Pioneer Papp America-Pacific Rim VCT Portfolio. Name change effective May 1, 2005.) SEMIANNUAL REPORT June 30, 2005 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- Table of Contents - -------------------------------------------------------------------------------- Pioneer AmPac Growth 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
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 AmPac Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 [THE FOLLOWING DATA WAS REPRESENTED AS PIE CHARTS IN THE PRINTED MATERIAL.] Portfolio Diversification (As a percentage of total investment portfolio) U.S. Common Stocks 92.4% Depositary Receipts for International Stocks 4.5% Temporary Cash Investments 3.1%
Sector Distribution (As a percentage of equity holdings) Information Technology 32.2% Health Care 18.6% Industrials 17.0% Consumer Staples 13.0% Financials 11.8% Consumer Discretionary 4.7% Energy 2.7%
Five Largest Holdings (As a percentage of equity holdings) 1. Intel Corp. 4.86% 2. Wm. Wrigley Jr. Co. 4.81 3. State Street Corp. 4.78 4. Stryker Corp. 4.71 5. Medtronic, Inc. 4.68
The Portfolio is actively managed and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $9.75 $10.14
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $0.0395 $ - $ -
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer AmPac 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 data represents a line chart from the printed material.
Russell Pioneer AMPac 1000 Growth Growth VCT Portfolio* March, 2004 10,000 10,000 June, 2004 10,194 10,109 June, 2005 10,365 9,673
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 June 30, 2005)
Net Asset Value Life-of-Fund -1.64% (3/15/04) 1 Year -4.31%
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 semiannual 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 AmPac Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value [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 AmPac Growth VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005.
Share Class II - ------------------------------------------ -------------- Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $ 965.40 Expenses Paid During Period* $ 4.63
* Expenses are equal to the Portfolio's annualized expense ratio of 0.95% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer AmPac Growth VCT Portfolio Based on a hypothetical 5% per year return before expenses, reflecting the period from January 1, 2005 through June 30, 2005.
Share Class II - ------------------------------------------ -------------- Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $1,020.08 Expenses Paid During Period* $ 4.76
* Expenses are equal to the Portfolio's annualized expense ratio of 0.95% for Class II, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 Pioneer AmPac Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 With crude oil prices topping $60 a barrel and the Federal Reserve maintaining its campaign of raising short-term interest rates, U.S. stocks produced mixed results for the six months ended June 30, 2005. Cyclical, interest-rate sensitive and value companies - particularly oil companies - prospered in this environment while growth companies struggled. In the following interview, Rosellen Papp, a member of the Portfolio's management team, discusses performance in light of these developments and her outlook for the months ahead. Q: How did the Portfolio perform during the first half of fiscal 2005? A: The Portfolio held some strong performers, but the overall trend was negative. For the six months ended June 30, 2005, Class II shares returned -3.46% at net asset value. In comparison, the Standard & Poor's 500 Index and the Russell 1000 Growth Index posted returns of -0.81% and -1.72%, respectively, 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. Within its large-company growth focus, the Portfolio's assets are concentrated in three broad business segments - technology, financial services and health care. Technology holdings, which are classic growth stocks, lagged in the wake of the weak economic data this spring and the perception that businesses are not upgrading into new technologies. With the Fed all but guaranteeing future interest rate hikes, albeit at a measured pace, many financial services stocks struggled. Furthermore, given the Fed's efforts to raise short-term interest rates, long-term interest rates have not increased as expected. These low rates are keeping consumers spending, which is helping more interest-rate sensitive and cyclical stocks, which the portfolio does not own. Health care holdings, the third rail of the Portfolio, performed relatively well, particularly companies offering innovative ways to keep costs under control. Q: Could you talk more specifically about the companies that had an impact on performance? A: Certainly. One of the best performing stocks in the technology sector was Intel, a sizable holding in the Portfolio. Intel is benefiting form the popularity of lap top computers and the fact that 70% of its business comes from outside the United States. American Power Conversion, which manufactures battery packs for computers, also performed well. IBM was a disappointment, because management has been less than forthcoming about earnings expectations for the balance of 2005. Health care stocks were generally positive for the six months. As a diversified health care company, Johnson & Johnson is capitalizing on its exposure to both the pharmaceutical market as well as the device business, for which it sells knee and hip replacements. Similarly, Medtronic, Inc., another device maker, is enjoying strong sales from its pace maker and defibulator businesses. IMS Health, which sells marketing data to pharmaceutical companies, also was a strong performer. By surveying pharmacies for data by geographic and product markets, this research company is providing a valuable service to the industry and offers a unique way to invest in the burgeoning health care market. Finally, Pfizer, Inc. benefited from an announcement that it was buying Vicuron Pharmaceuticals Inc., a biotechnology company. In the financial sector, investments did not have a significant influence on performance one way or the other, with the exception of American International Group (AIG), which suffered in the wake of allegations of improper earnings reporting. New management was brought in to put AIG back on sound financial footing and ensure more accurate reporting. We are reassured by these developments and feel confident that the company should maintain its dominance in the insurance industry. Q: Any notable purchases or sales? A: We bought 3M Company, which we viewed as a buying opportunity when the stock experienced temporary weakness this spring. 3M has a strong medical and flat panel business in addition to its more widely known office supplies division. We sold investments in Hewlett-Packard Co. during a period of strength this spring, when management changes were announced. We had concerns about its printer business and took this timely opportunity to liquidate the holding from the Portfolio. Q: What is your outlook for 2005? A: Although analysts generally agree that the Fed will continue to increase short-term interest rates, the pace of economic growth will determine how high they will go. With oil prices per barrel at such historic highs and no real fundamental change in supply/demand dynamics, we think the cost of oil is Likely to fall at some point. Furthermore, a consensus is building among economists, with which we concur, that economic growth should remain relatively strong into 2006 - most likely in the 3% to 4% range. With our outlook for relatively tame inflation and strong corporate earnings, we think growth stocks appear undervalued, especially vis-a-vis bond, commodity and real estate investments. 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 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. 4 Pioneer AmPac Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED)
Shares Value COMMON STOCKS - 98.8% Energy - 2.7% Integrated Oil & Gas - 2.7% 840 Chevron Corp. $ 46,973 ---------- Total Energy $ 46,973 ---------- Capital Goods - 12.8% Electrical Component & Equipment - 4.5% 1,250 Emerson Electric Co. $ 78,288 ---------- Industrial Conglomerates - 8.3% 2,300 General Electric Co. $ 79,695 900 3M Co. 65,070 ---------- $ 144,765 ---------- Total Capital Goods $ 223,053 ---------- Transportation - 3.9% Air Freight & Couriers - 3.9% 1,365 Expeditors International of Washington, Inc. $ 67,991 ---------- Total Transportation $ 67,991 ---------- Media - 4.6% Advertising - 4.6% 1,570 WPP Group Plc (A.D.R.) $ 80,149 ---------- Total Media $ 80,149 ---------- Food, Beverage & Tobacco - 4.8% Packaged Foods & Meats - 4.8% 1,200 Wm. Wrigley Jr. Co. $ 82,608 ---------- Total Food, Beverage & Tobacco $ 82,608 ---------- Household & Personal Products - 8.1% Household Products - 4.2% 1,470 Colgate-Palmolive Co. $ 73,367 ---------- Personal Products - 3.9% 1,700 Estee Lauder Co. $ 66,521 ---------- Total Household & Personal Products $ 139,888 ---------- Health Care Equipment & Services - 12.4% Health Care Equipment - 9.3% 1,550 Medtronic, Inc. $ 80,275 1,700 Stryker Corp. 80,852 ---------- $ 161,127 ---------- Health Care Services - 3.1% 2,200 IMS Health, Inc. (a) $ 54,494 ---------- Total Health Care Equipment & Services $ 215,621 ---------- Pharmaceuticals & Biotechnology - 6.0% Pharmaceuticals - 6.0% 1,050 Johnson & Johnson $ 68,250 1,300 Pfizer, Inc. 35,854 ---------- $ 104,104 ---------- Total Pharmaceuticals & Biotechnology $ 104,104 ---------- Diversified Financials - 9.1% Asset Management & Custody Banks - 9.1% 1,700 State Street Corp. $ 82,024 1,200 T. Rowe Price Associates, Inc. 75,120 ---------- $ 157,144 ---------- Total Diversified Financials $ 157,144 ----------
Shares Value Insurance - 2.6% Multi-Line Insurance - 2.6% 770 American International Group, Inc. $ 44,737 ---------- Total Insurance $ 44,737 ---------- Software & Services - 3.6% Systems Software - 3.6% 2,500 Microsoft Corp. $ 62,100 ---------- Total Software & Services $ 62,100 ---------- Technology, Hardware & Equipment - 14.1% Communications Equipment - 3.2% 2,900 Cisco Systems, Inc.* $ 55,419 ---------- Computer Hardware - 3.8% 900 IBM Corp. $ 66,780 ---------- Computer Storage & Peripherals - 3.0% 3,800 EMC Corp.* $ 52,098 ---------- Electronic Equipment & Instruments - 0.9% 729 National Instruments Corp. $ 15,455 ---------- Electronic Manufacturing Services - 3.2% 2,400 Molex, Inc. $ 56,352 ---------- Total Technology, Hardware & Equipment $ 246,104 ---------- Semiconductors - 14.1% Semiconductor Equipment - 0.9% 1,000 Applied Materials, Inc. $ 16,180 ---------- Semiconductors - 13.2% 3,200 Intel Corp. $ 83,391 1,800 Linear Technology Corp. 66,042 2,700 Microchip Technology 79,974 ---------- $ 229,407 ---------- Total Semiconductors $ 245,587 ---------- TOTAL COMMON STOCKS (Cost $1,711,343) $1,716,059 ---------- TEMPORARY CASH INVESTMENTS - 3.1% Security Lending Collateral - 3.1% 54,340 Securities Lending Investment Fund, 3.29% $ 54,340 ---------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $54,340) $ 54,340 ---------- TOTAL INVESTMENT IN SECURITIES - 102.0% (Cost $1,765,683) (a) $1,770,399 ---------- OTHER ASSETS AND LIABILITIES - (2.0)% $ (34,231) ---------- TOTAL NET ASSETS - 100.0% $1,736,168 ==========
* Non-income producing security (A.D.R.) American Depositary Receipt (a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 2,090 IMS Health, Inc. $51,769 ------- Total $51,769 =======
The accompanying notes are an integral part of these financial statements. 5 Pioneer AmPac Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS
Six Months Ended 6/30/05 3/15/04(a) to Class II (unaudited) 12/31/04 Net asset value, beginning of period $ 10.14 $ 10.00 ------- ------- Increase (decrease) from investment operations: Net investment income $ 0.01 $ 0.05 Net realized and unrealized gain (loss) on investments (0.36) 0.09 -------- ------- Net increase (decrease) from investment operations $ (0.35) $ 0.14 Distributions to shareowners: Net investment income (0.04) -- -------- -------- Net increase (decrease) in net asset value $ (0.39) $ 0.14 -------- -------- Net asset value, end of period $ 9.75 $ 10.14 ======== ======== Total return* (3.46)% 1.40% Ratio of net expenses to average net assets+ 0.95%** 0.95%** Ratio of net investment income to average net assets+ 0.38%** 1.40%** Portfolio turnover rate 10.00%** 7.00%** Net assets, end of period (in thousands) $ 1,736 $ 1,424 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 6.68%** 15.01%** Net investment income (loss) (5.35)%** (12.68)%** Ratios with waivers of management fees and assumptions of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.95%** 0.95%** Net investment income 0.38%** 1.40%**
(a) Class II shares were first publicly offered on March 15, 2004. * 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. ** Annualized. + Ratios with no reduction for fees paid indirectly. 6 The accompanying notes are an integral part of these financial statements. Pioneer AmPac Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 6/30/05 (UNAUDITED) ASSETS: Investment in securities, at value (including securities loaned of $51,769) (cost $1,770,399 $1,765,683) Cash 43,425 Receivables -- Dividends, interest and foreign taxes withheld 1,950 Due from Pioneer Investment Management, Inc. 8,209 Other 536 ---------- Total assets $1,824,519 ---------- LIABILITIES: Payables -- Upon return of securities loaned $ 54,340 Due to affiliates 342 Accrued expenses 33,669 ---------- Total liabilities $ 88,351 ---------- NET ASSETS: Paid-in capital $1,740,182 Undistributed net investment income 3,068 Accumulated undistributed net realized loss (11,798) Net unrealized gain on investments 4,716 ---------- Total net assets $1,736,168 ---------- NET ASSET VALUE PER SHARE: Class II: (No par value, unlimited number of shares authorized) Net assets $1,736,168 Shares outstanding 178,057 ---------- Net asset value per share $ 9.75
The accompanying notes are an integral part of these financial statements. 7 Pioneer AmPac Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (UNAUDITED)
Six Months Ended 6/30/05 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $69) $ 10,046 Interest 683 --------- Total investment income $ 10,729 --------- EXPENSES: Management fees $ 6,044 Transfer agent fees 744 Distribution fees (Class II) 2,015 Administrative fees 9,326 Custodian fees 5,832 Professional fees 24,435 Printing 4,093 Fees and expenses of nonaffiliated trustees 62 Miscellaneous 1,282 --------- Total expenses $ 53,833 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (46,177) --------- Net expenses $ 7,656 --------- Net investment income (loss) $ 3,073 --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss from investments $ (3,810) --------- Change in net unrealized loss from investments $ (57,244) --------- Net gain (loss) on investments $ (61,054) ========= Net increase (decrease) in net assets resulting from operations $ (57,981) =========
8 The accompanying notes are an integral part of these financial statements. Pioneer AmPac Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Six Months 3/15/04 Ended (Commencement 6/30/05 of Operations) (unaudited) to 12/31/04 FROM OPERATIONS: Net investment income $ 3,073 $ 6,910 Net realized gain (loss) on investments (3,810) (7,988) Change in net unrealized gain or loss on investments (57,244) 61,960 ---------- ---------- Net increase (decrease) in net assets resulting from operations $ (57,981) $ 60,882 ---------- ---------- DISTRIBUTIONS TO SHAREOWNERS Net investment income: Class I $ (7,005) $ -- ---------- ---------- Total distributions to shareowners $ (7,005) $ -- ---------- ---------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 455,849 $1,395,044 Reinvestment of distributions 6,611 -- Cost of shares repurchased (85,762) (31,470) ---------- ---------- Net increase in net assets resulting from fund share transactions $ 376,698 $1,363,574 ---------- ---------- Net increase in net assets $ 311,712 $1,424,456 NET ASSETS: Beginning of period $1,424,456 $ -- ---------- ---------- End of period $1,736,168 $1,424,456 ========== ========== Accumulated net investment income (loss), end of period $ 3,068 $ 7,000 ========== ==========
The accompanying notes are an integral part of these financial statements. 9 Pioneer AmPac Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) 1. Organization and Significant Accounting Policies The Pioneer Papp America-Pacific Rim VCT Portfolio (the Portfolio), is a Portfolio of Pioneer Variable Contracts Trust (the Trust), a Delaware statutory trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty-eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Moderate Allocation VCT Portfolio (Ibbotson Moderate Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) The Papp America-Pacific Rim VCT Portfolio commenced operations on March 15, 2004. Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts or by qualified pension and retirement plans. The 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 NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. The 10 Pioneer AmPac Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- 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 June 30, 2005, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 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 tax character of the current year distributions paid will be determined at the end of the fiscal year. 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 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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 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 June 30, 2005, $76 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. 11 Pioneer AmPac Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (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 $254 in transfer agent fees payable to PIMSS at June 30, 2005. 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 $12 payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $1,765,683 $69,001 $(64,285) $4,716 ========== ======= ======== ====== - ---------------------------------------------------------------------------------------------------------
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 six months ended June 30, 2005, were $455,927 and $77,552, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows for the six months ended June 30, 2005 and the fiscal year ended December 31, 2004:
- ------------------------------------------------------------------------------------------------- Papp America-Pacific Rim Portfolio '05 Shares '05 Amount '04 Shares '04 Amount - ------------------------------------------------------------------------------------------------- CLASS II: Shares sold 45,635 $ 455,849 143,712 $1,395,044 Reinvestment of distributions 668 6,611 -- -- Shares repurchased (8,678) (85,762) (3,280) (31,470) ------------------------------------------------------- Net increase 37,625 $ 376,698 140,432 $1,363,574 ======================================================= - -------------------------------------------------------------------------------------------------
12 - -------------------------------------------------------------------------------- This page for your notes. 13 [logo]PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17868-00-0805 [Logo] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 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 5 Financial Statements 13 Notes to Financial Statements 17 Factors Considered by the Independent Trustees in Approving the Management Contract 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 VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- Portfolio Diversification (As a percentage of total investment portfolio) [THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
U.S Common Stocks 61.7% Collateralized Mortgage Obligations 0.3% U.S Government Agency Obligations 0.4% Asset Backed Securities 0.5% Temporary Cash Investments 1.0% Depositary Receipts for International Stocks 1.8% U.S Corporate Bonds 10.9% U.S Government Securities 23.4%
Sector Distribution (As a percentage of long-term holdings) [THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Government Obligations 24.0% Utilities 0.5% Telecommunication Services 2.2% Industrials 5.7% Materials 5.9% Energy 6.6% Consumer Discretionary 9.7% Health Care 10.8% Information Technology 10.9% Financials 11.2% Consumer Staples 12.5%
Five Largest Holdings (As a percentage of long-term holdings)
1. Berkshire Hathaway, Inc. (Class B) 3.24% 2. Northrop Grumman Corp. 3.12 3. Microsoft Corp. 3.01 4. PepsiCo, Inc. 2.86 5. CVS Corp. 2.80
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 14.26 $ 14.38
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.1100 $ - $ -
- -------------------------------------------------------------------------------- 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 PIE CHART IN THE PRINTED MATERIAL]
Pioneer Lehman Balanced Aggregate VCT Bond S&P Portfolio Index 500 Jun-95 10000 10000 10000 11707 10501 12596 Jun-97 13784 11358 16962 15148 12554 22075 Jun-99 15002 12947 27103 15320 13536 29070 Jun-01 15800 15057 24764 14244 16357 20317 Jun-03 15249 18058 20367 16587 18118 24255 Jun-05 17031 19353 25787
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 June 30, 2005)
Net Asset Value 10 Years 5.47% 5 Years 2.14 1 Year 2.68
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges.The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Balanced VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005.
Share Class II - ----------------------------------------------------------- Beginning Account Value on 1/1/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,017.90 Expenses Paid During Period* $ 6.00
* Expenses are equal to the Portfolio's annualized expense ratio of 1.20% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Balanced VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from January 1, 2005 through June 30, 2005.
Share Class II - ----------------------------------------------------------- Beginning Account Value on 1/1/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,018.84 Expenses Paid During Period* $ 6.01
* Expenses are equal to the Portfolio's annualized expense ratio of 1.20% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- 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 fixed-income component of the Portfolio, discuss the markets and the factors that affected performance. Throughout the six months, the Portfolio retained stable allocations to equities and bonds, with about 64% of assets in stocks and 36% in fixed-income securities. Q: How did the Portfolio perform? A. Class II shares of Pioneer Balanced VCT Portfolio had a total return of -0.07% at net asset value during the six months ended June 30, 2005. The performance data quoted represents past performance, which is no guarantee 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 general factors affected fixed income performance during the six months? A. Over the period, as the economy expanded and new jobs were created, the Federal Reserve Board raised the short-term Federal Funds rate from 2.25% to 3.25%. However, in a phenomenon that Fed Chairman Alan Greenspan referred to as a "conundrum," the yields of longer-maturity bonds resisted the upward pressure and actually declined, and the yield curve - which reflects the difference in yields of short- and long-term investments - flattened. During the six months, for example, the difference between the yields of two-year and 10-year Treasuries narrowed from 116 basis points (a basis point is one-hundredth of one percentage point) to 28 basis points. This led to additional stimulus in some parts of the economy, notably housing, where mortgage rates are highly influenced by 10-year Treasuries. There was considerable volatility in the corporate bond market, however, especially in the early spring when major credit agencies announced they were downgrading the debt of automotive giants General Motors and Ford from investment grade to below-investment grade. While we held some General Motors and Ford debt, the Fund was not significantly affected by the downgrade. It was an environment in which longer-maturity investments had a performance advantage over shorter-term securities, especially among high-quality securities. Treasuries outperformed mortgages, and investment-grade corporates outperformed high-yield corporates. The performance of the fixed-income portfolio, while consistent with that of the Lehman Brothers Aggregate Bond Index, was held back somewhat by our de-emphasis of long-term Treasuries. We also had cut our exposure to mortgage-backed securities, although we subsequently increased it again by investing in bonds with less prepayment risk. At the end of the six-month period, mortgages accounted for slightly less than 50% of fixed- income assets. Industrial and utility bonds represented the next largest sector weighting. Average credit quality was AA - on June 30, while duration - a measure of sensitivity to changes in interest rates - was 4.13 years. Q: What factors affected equity performance during the period? A. Equity investors struggled to detect an underlying trend for the six months, and most equity indexes ended the period close to where they started. The lackluster results came despite a healthy corporate profit picture. Investors were concerned about a variety of issues, including the effects of rising oil prices, higher short-term interest rates and even the possibility of a steep correction in real estate prices. Because of these factors influencing sentiment, stock prices did not keep pace with corporate earnings growth. In the overall stock market, small- and mid-cap stocks outdistanced large-company stocks, and value stocks performed better than growth stocks. Within the large-cap S&P 500 universe of stocks, only three of 10 sectors had positive performance - energy, utilities and health care. The portfolio's investments in the consumer staples sector helped performance. Two stocks from that sector did particularly well: Gillette, which announced it is being acquired by Proctor & Gamble at a 15% premium to its stock price; and CVS, the pharmacy chain which has successfully integrated the acquisition of the former Eckerd's stores. Within the energy sector, investments in EnCana, a Canadian oil and natural gas producer, and National Oil Well Barco, a leading provider of oil-field equipment and services, both benefited from rising commodity prices. In the health-care area, one of the top performers was the pharmaceutical company IVAX, which appreciated both because of the excellent prospects for generic drug products, and because of opportunities for some of its branded pharmaceuticals. Holding back results, however, was the portfolio's investment in Avaya, which provides telecommunications systems for large organizations. Its sales of traditional telephone equipment slumped, while newer equipment designed for the Internet did not meet growth expectations. UPS declined because of disappointing earnings linked to heightened competition in the domestic ground business, while Newmont Mining, a gold mining company, underperformed as the price of gold stopped rising. Not owning any utilities stocks also held back results. We avoided the sector because of the poor growth prospects of utilities companies, but their stock valuations rose as longer-term interest rates declined. Q: What is your outlook for equities? A. We think that equity prices in 2005 should rise consistent with corporate earnings growth. Even though profit growth may continue to decelerate, that should imply moderate positive performance from equity investments, especially as the Federal Reserve Board nears the end of its round of short-term interest-rate hikes. Although value stocks have outperformed growth stocks recently, we think the performance of growth stocks should be close to that of value issues in the coming months. We also think the performance of large-company stocks should improve relative to smaller company equities. This should be an environment that favors our strategy of emphasizing higher- quality, large-company growth stocks. Q: What is your outlook for bonds? A. At least in the near term, we anticipate that the Federal Reserve will keep raising short-term interest rates, while the economy should continue to grow at an annual rate in the range of 3% to 3.5%. Overall, we anticipate moderate, positive returns from fixed- income investments. 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. 4 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 63.3% Energy - 5.9% Integrated Oil & Gas - 0.6% 3,900 Exxon Mobil Corp. $ 224,133 ----------- Oil & Gas Drilling - 1.9% 23,800 ENSCO International, Inc. $ 850,850 ----------- Oil & Gas Equipment & Services - 1.7% 16,798 National-Oilwell Varco, Inc.* $ 798,577 ----------- Oil & Gas Exploration & Production - 1.7% 17,400 Encana Corp. $ 688,865 1,900 Pioneer Natural Resources Co. 79,952 ----------- $ 768,817 ----------- Total Energy $ 2,642,377 ----------- Materials - 4.2% Gold - 2.0% 23,000 Newmont Mining Corp. $ 897,690 ----------- Industrial Gases - 2.2% 21,600 Praxair, Inc. $ 1,006,560 ----------- Total Materials $ 1,904,250 ----------- Capital Goods - 3.1% Aerospace & Defense - 3.1% 25,000 Northrop Grumman Corp. $ 1,381,250 ----------- Total Capital Goods $ 1,381,250 ----------- Commercial Services & Supplies - 0.4% Diversified Commercial Services - 0.4% 4,600 Cintas Corp. $ 177,560 ----------- Total Commercial Services & Supplies $ 177,560 ----------- Transportation - 1.7% Air Freight & Couriers - 1.7% 11,200 United Parcel Service $ 774,592 ----------- Total Transportation $ 774,592 ----------- Consumer Durables & Apparel - 1.7% Apparel, Accessories & Luxury Goods - 1.7% 19,300 Liz Claiborne, Inc. $ 767,368 ----------- Total Consumer Durables & Apparel $ 767,368 ----------- Media - 2.9% Broadcasting & Cable TV - 0.9% 12,400 Comcast Corp.* $ 371,380 ----------- Movies & Entertainment - 2.0% 29,319 Viacom, Inc. (Class B) $ 938,794 ----------- Total Media $ 1,310,174 -----------
Shares Value Retailing - 2.6% Apparel Retail - 1.1% 17,400 Ross Stores, Inc. $ 503,034 ----------- General Merchandise Stores - 1.5% 25,500 Family Dollar Stores, Inc. $ 665,550 ----------- Total Retailing $ 1,168,584 ----------- Food & Drug Retailing - 3.2% Drug Retail - 2.8% 42,600 CVS Corp. $ 1,238,382 ----------- Hypermarkets & Supercenters - 0.4% 4,000 Wal-Mart Stores, Inc. $ 192,800 ----------- Total Food & Drug Retailing $ 1,431,182 ----------- Food, Beverage & Tobacco - 6.5% Brewers - 1.0% 9,600 Anheuser-Busch Companies, Inc. $ 439,200 ----------- Packaged Foods & Meats - 2.0% 13,000 Wm. Wrigley Jr. Co. $ 894,920 ----------- Soft Drinks - 3.5% 7,900 The Coca-Cola Co. $ 329,825 23,500 PepsiCo, Inc. 1,267,355 ----------- $ 1,597,180 ----------- Total Food, Beverage & Tobacco $ 2,931,300 ----------- Household & Personal Products - 2.2% Personal Products - 2.2% 17,000 von Products, Inc. $ 643,450 9,300 Estee Lauder Co. 363,909 ----------- $ 1,007,359 ----------- Total Household & Personal Products $ 1,007,359 ----------- Health Care Equipment & Services - 3.0% Health Care Distributors - 0.8% 6,400 Cardinal Health, Inc. $ 368,512 ----------- Health Care Equipment - 1.7% 7,000 Biomet, Inc. $ 242,480 7,700 Guidant Corp. 518,210 ----------- $ 760,690 ----------- Health Care Services - 0.5% 8,200 IMS Health, Inc. (a) $ 203,114 ----------- Total Health Care Equipment & Services $ 1,332,316 ----------- Pharmaceuticals & Biotechnology - 7.0% Biotechnology - 1.5% 11,616 Amgen, Inc.* $ 702,303 -----------
The accompanying notes are an integral part of these financial statements. 5 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Pharmaceuticals - 5.5% 4,000 Eli Lilly & Co. $ 222,840 30,700 IVAX Corp.* 660,050 28,288 Pfizer, Inc. 780,183 17,800 Wyeth 792,100 ------------ $ 2,455,173 ------------ Total Pharmaceuticals & Biotechnology $ 3,157,476 ------------ Diversified Financials - 2.8% Asset Management & Custody Banks - 1.0% 15,700 The Bank of New York Co., Inc. $ 451,846 ------------ Consumer Finance - 1.4% 12,300 American Express Co. $ 654,729 ------------ Investment Banking & Brokerage - 0.4% 2,900 Merrill Lynch & Co., Inc. $ 159,529 ------------ Total Diversified Financials $ 1,266,104 ------------ Insurance - 4.3% Property & Casualty Insurance - 4.3% 515 Berkshire Hathaway, Inc. (Class B)* $ 1,433,503 4,800 Progressive Corp.* 474,288 ------------ $ 1,907,791 ------------ Total Insurance $ 1,907,791 ------------ Software & Services - 7.4% Data Processing & Outsourced Services - 2.7% 30,500 First Data Corp. $ 1,224,270 ------------
Shares Value Systems Software - 4.7% 53,700 Microsoft Corp. $ 1,333,908 35,600 Symantec Corp.* 773,944 ------------ $ 2,107,852 ------------ Total Software & Services $ 3,332,122 ------------ Technology Hardware & Equipment - 2.0% Communications Equipment - 0.5% 27,100 Avaya, Inc.* $ 225,472 ------------ Computer Hardware - 1.3% 25,622 Hewlett-Packard Co. $ 602,373 ------------ Electronic Manufacturing Services - 0.2% 3,400 Molex, Inc. $ 79,832 ------------ Total Technology Hardware & Equipment $ 907,677 ------------ Semiconductors - 0.6% Semiconductors - 0.6% 7,800 Intel Corp. $ 203,268 ------------ Total Semiconductors $ 203,268 ------------ Telecommunication Services - 1.8% Wireless Telecommunication Services - 1.8% 32,300 Vodafone Group Plc (A.D.R.) $ 785,536 ------------ Total Telecommunication Services $ 785,536 ------------ TOTAL COMMON STOCKS (Cost $25,202,462) $ 28,388,286 ------------
The accompanying notes are an integral part of these financial statements. 6 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value ASSET BACKED SECURITIES - 0.5% Diversified Financials - 0.2% Diversified Financial Services - 0.2% 80,693 BBB-/Baa2 PF Export Receivable Master Trust, 6.436%, 6/1/15 (144A) $ 82,745 ----------- Total Diversified Financials $ 82,745 ----------- Utilities - 0.3% Electric Utilities - 0.3% 89,110 BBB-/Baa3 FPL Energy America Wind LLC, 6.639%, 6/20/23 (144A) $ 96,209 65,325 BB-/Ba2 FPL Energy Wind Funding, 6.876%, 6/27/17 (144A) 66,060 ----------- Total Utilities $ 162,269 ----------- TOTAL ASSET BACKED SECURITIES (Cost $240,084) $ 245,014 ----------- 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 $ 98,294 50,000 BBB-/Baa3 Tower 2004-2A F, 6.376%, 12/15/14 50,145 ----------- Total Diversified Financials $ 148,439 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $150,000) $ 148,439 ----------- CORPORATE BONDS - 10.9% Energy - 0.6% Integrated Oil & Gas - 0.1% 40,000 A-/A3 Occidental Petroleum, 6.75%, 1/15/12 $ 45,272 ----------- Oil & Gas Exploration & Production - 0.5% 100,000 BBB-/Baa3 Gazprom International SA, 7.201%, 2/1/20 (144A) $ 107,750 100,000 BBB-/Baa3 Tengizchevroil LLP, 6.124%, 11/15/14 (144A) 102,250 ----------- $ 210,000 ----------- Oil & Gas Refining & Marketing - 0.0% 25,000 BBB/Baa2 TGT Pipeline LLC, 5.5%, 2/1/17 (144A) $ 25,975 ----------- Total Energy $ 281,247 ----------- Materials - 1.6% Aluminum - 0.2% 50,000 B/B1 Novelis, Inc., 7.25%, 2/15/15 (144A) $ 50,188 ----------- Commodity Chemicals - 0.2% 100,000 BB+/Ba2 Nova Chemicals, Ltd., 6.5%, 1/15/12 $ 97,000 ----------- Diversified Metals & Mining - 0.3% 125,000 BBB-/Baa3 Inco, Ltd., 7.2%, 9/15/32 $ 148,783 ----------- Metal & Glass Containers - 0.1% 40,000 BBB/Baa2 Tenneco Packaging, 8.125%, 6/15/17 $ 49,916 ----------- Paper Packaging - 0.3% 150,000 A-/Baa1 Bemis Co., Inc., 6.7%, 7/1/05 $ 150,000 -----------
The accompanying notes are an integral part of these financial statements. 7 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Paper Products - 0.5% 100,000 B/B2 MDP Acquisitions, 9.625%, 10/1/12 $ 100,000 100,000 BB-/Ba3 Abitibi-Consolidated, Inc., 6.95%, 4/1/08 100,500 ----------- $ 200,500 ----------- Total Materials $ 696,387 ----------- Capital Goods - 0.4% Electrical Component & Equipment - 0.2% 75,000 BBB-/Ba1 Thomas & Betts Corp., 7.25%, 6/1/13 $ 82,238 ----------- Industrial Conglomerates - 0.2% 55,000 AAA/Aaa General Electric Capital Corp., 6.125%, 2/22/11 $ 59,755 30,000 AAA/Aaa General Electric Capital Corp., 6.75%, 3/15/32 37,020 ----------- $ 96,775 ----------- Total Capital Goods $ 179,013 ----------- Commercial Services & Supplies - 0.1% Diversified Commercial Services - 0.1% 25,000 BBB+/Baa1 Deluxe Corp., 3.5%, 10/1/07 $ 24,434 ----------- Total Commercial Services & Supplies $ 24,434 ----------- Automobiles & Components - 0.8% Auto Parts & Equipment - 0.4% 75,000 B-/B3 Delphi Corp., 6.55%, 6/15/06 (a) $ 72,938 100,000 B+/Ba2 Sun Sage BV, 8.25%, 3/26/09 (144A) 106,250 ----------- $ 179,188 ----------- Automobile Manufacturers - 0.4% 200,000 BB/Baa3 General Motors, 7.2%, 1/15/11 (a) $ 185,000 ----------- Total Automobiles & Components $ 364,188 ----------- Media - 1.3% Broadcasting & Cable TV - 0.9% 250,000 BBB+/Baa2 Comcast Cable Corp., 7.125%, 6/15/13 $ 286,505 100,000 BBB-/Baa3 Cox Communications, 7.125%, 10/1/12 112,142 ----------- $ 398,647 ----------- Publishing - 0.4% 170,000 BBB-/Baa3 News America, Inc., 7.3%, 4/30/28 $ 197,840 ----------- Total Media $ 596,487 ----------- Retailing - 0.2% Specialty Stores - 0.2% 100,000 B-/Ba2 Toys "R" Us, 7.875%, 4/15/13 $ 89,500 ----------- Total Retailing $ 89,500 ----------- Food, Beverage & Tobacco - 0.4% Tobacco - 0.4% 150,000 BBB/Baa2 Altria Group, Inc., 7.0%, 11/4/13 $ 167,865 ----------- Total Food, Beverage & Tobacco $ 167,865 ----------- Health Care Equipment & Services - 0.7% Health Care Facilities - 0.5% 200,000 BB+/Ba2 HCA, Inc., 6.3%, 10/1/12 $ 205,296 -----------
The accompanying notes are an integral part of these financial statements. 8 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Health Care Supplies - 0.2% 100,000 BBB/Baa3 Bausch & Lomb, 7.125%, 8/1/28 $ 112,328 ----------- Total Health Care Equipment & Services $ 317,624 ----------- Banks - 0.3% Diversified Banks - 0.3% 50,000 NR/Aaa KFW-Kredit Wiederaufbau, 2.75%, 5/8/07 $ 49,068 75,000 AA-/Aa2 National Westminster, 7.375%, 10/1/09 84,191 ----------- $ 133,259 ----------- Total Banks $ 133,259 ----------- Diversified Financials - 0.8% Consumer Finance - 0.2% 100,000 A/A2 SLM Corp., Floating Rate Note, 7/25/14 $ 99,063 ----------- Investment Banking & Brokerage - 0.2% 75,000 B+/B1 E*Trade Financial Corp., 8.0%, 6/15/11 $ 78,938 ----------- Diversified Financial Services - 0.4% 100,000 A-/Baa3 Brascan Corp., 5.75%, 3/1/10 $ 104,149 100,000 BBB-/Baa3 Glencore Funding LLC, 6.0%, 4/15/14 (144A) 95,890 ----------- $ 200,039 ----------- Total Diversified Financials $ 378,040 ----------- Insurance - 1.3% Life & Health Insurance - 0.2% 100,000 BB+/Ba1 Provident Co., Inc., 7.0%, 7/15/18 $ 100,899 ----------- Multi-Line Insurance - 0.1% 50,000 A/Baa1 Loew Corp., 5.25%, 3/15/16 $ 50,362 ----------- Property & Casualty Insurance - 0.6% 85,000 BBB-/NR Kingsway America, Inc., 7.5%, 2/1/14 $ 90,226 150,000 BB/Baa3 Ohio Casualty Corp., 7.3%, 6/15/14 164,970 ----------- $ 255,196 ----------- Reinsurance - 0.4% 100,000 BBB-/Baa3 Odyssey Re Holdings, 7.65%, 11/1/13 $ 107,953 50,000 BBB/Baa3 Platinum Underwritters Financial, 7.5%, 6/1/17 (144A) 50,700 ----------- $ 158,653 ----------- Total Insurance $ 565,110 ----------- Real Estate - 1.1% Real Estate Investment Trusts - 1.1% 100,000 BBB-/Baa3 Colonial Reality LP, 6.15%, 4/15/13 $ 105,635 150,000 BBB-/Baa3 Hospitality Properties Trust, 6.75%, 2/15/13 164,744 107,000 B+/Ba3 Host Marriot LP, 6.375%, 3/15/15 (144A) 105,930 75,000 B+/B1 Trustreet Properties, Inc., 7.5%, 4/1/15 (144A) 76,688 50,000 BB/Ba3 Ventas Realty LP, 7.125%, 6/1/15 (144A) 52,000 ----------- $ 504,997 ----------- Total Real Estate $ 504,997 ----------
The accompanying notes are an integral part of these financial statements. 9 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Software & Services - 0.2% IT Consulting & Other Services - 0.2% 100,000 BB+/Ba1 Unisys Corp., 6.875%, 3/15/10 $ 98,250 ----------- Total Software & Services $ 98,250 ----------- Technology Hardware & Equipment - 0.6% Computer Hardware - 0.6% 250,000 BBB-/Baa3 NCR Corp., 7.125%, 6/15/09 $ 270,468 ----------- Total Technology Hardware & Equipment $ 270,468 ----------- Telecommunication Services - 0.4% Integrated Telecommunication Services - 0.4% 100,000 B/Caa1 Intelsat, Ltd., 6.5%, 11/1/13 $ 81,000 100,000 BBB+/Baa2 Telecom Italia Capital, 5.25%, 11/15/13 101,521 ----------- $ 182,521 ----------- Total Telecommunication Services $ 182,521 ----------- Utilities - 0.1% Electric Utilities - 0.1% 50,000 BBB+/Baa2 Entergy Gulf States, 5.7%, 6/1/15 $ 51,153 ----------- Total Utilities $ 51,153 ----------- TOTAL CORPORATE BONDS (Cost $4,689,691) $ 4,900,543 ----------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 23.7% Government - 23.7% 372,477 Federal Home Loan Mortgage Corp., 5.0%, 4/1/34 $ 372,949 228,337 Federal Home Loan Mortgage Corp., 5.0%, 5/1/34 228,626 127,708 Federal Home Loan Mortgage Corp., 5.5%, 10/1/16 131,150 164,063 Federal Home Loan Mortgage Corp., 5.5%, 9/1/17 168,445 399,434 Federal Home Loan Mortgage Corp., 5.5%, 1/1/34 405,275 188,837 Federal Home Loan Mortgage Corp., 5.5%, 1/1/35 191,593 91,346 Federal Home Loan Mortgage Corp., 6.0%, 1/1/32 93,820 1,053,440 Federal Home Loan Mortgage Corp., 6.0%, 1/1/33 1,081,244 233,641 Federal Home Loan Mortgage Corp., 6.0%, 11/1/33 239,731 40,009 Federal Home Loan Mortgage Corp., 6.0%, 6/1/34 41,051 28,450 Federal Home Loan Mortgage Corp., 6.5%, 5/1/09 29,444 15,295 Federal Home Loan Mortgage Corp., 6.5%, 7/1/33 15,902 1,838 Federal Home Loan Mortgage Corp., 6.5%, 11/1/33 1,903 138,047 Federal National Mortgage Association, 5.0%, 6/1/34 138,196 184,815 Federal National Mortgage Association, 5.5%, 2/1/17 189,860 213,157 Federal National Mortgage Association, 5.5%, 11/1/33 216,268 115,158 Federal National Mortgage Association, 5.5%, 3/1/34 116,800 196,288 Federal National Mortgage Association, 5.5%, 4/1/34 199,088 246,291 Federal National Mortgage Association, 5.5%, 9/1/34 249,805 279,957 Federal National Mortgage Association, 5.5%, 10/1/34 283,951 96,984 Federal National Mortgage Association, 5.5%, 12/1/34 98,368 117,449 Federal National Mortgage Association, 6.0%, 12/1/33 120,457 110,000 Federal National Mortgage Association, 6.125%, 3/15/12 123,016 17,843 Federal National Mortgage Association, 6.5%, 8/1/13 18,582 15,857 Federal National Mortgage Association, 6.5%, 8/1/14 16,515 56,344 Federal National Mortgage Association, 6.5%, 12/1/21 58,593 59,085 Federal National Mortgage Association, 6.5%, 4/1/29 61,806
The accompanying notes are an integral part of these financial statements. 10 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value (U.S. Government and Agency Obligations Cont.) 194,053 Federal National Mortgage Association, 6.5%, 7/1/32 $ 201,213 56,325 Federal National Mortgage Association, 6.5%, 9/1/32 58,785 57,096 Federal National Mortgage Association, 6.5%, 10/1/32 59,188 10,000 Federal National Mortgage Association, 7.125%, 6/15/10 11,389 26,937 Federal National Mortgage Association, 9.0%, 4/1/33 28,612 150,000 Freddie Mac 5.75% 1/15/12 164,101 44,655 Government National Mortgage Association, 4.5%, 1/15/35 44,168 99,753 Government National Mortgage Association, 4.5%, 4/15/35 98,664 105,184 Government National Mortgage Association, 5.0%, 4/15/34 106,127 354,621 Government National Mortgage Association, 5.0%, 10/15/34 357,766 207,544 Government National Mortgage Association, 5.5%, 8/15/19 214,341 75,713 Government National Mortgage Association, 5.5%, 4/15/33 77,406 223,462 Government National Mortgage Association, 5.5%, 6/15/33 228,458 154,936 Government National Mortgage Association, 5.5%, 7/15/33 158,400 165,461 Government National Mortgage Association, 5.5%, 8/15/33 169,160 42,738 Government National Mortgage Association, 5.5%, 9/15/33 43,723 300,796 Government National Mortgage Association, 6.0%, 8/15/32 310,756 127,190 Government National Mortgage Association, 6.0%, 9/15/32 131,337 401,578 Government National Mortgage Association, 6.0%, 9/15/33 414,537 61,347 Government National Mortgage Association, 6.0%, 10/20/33 63,402 48,678 Government National Mortgage Association, 6.5%, 10/15/28 50,960 91,106 Government National Mortgage Association, 6.5%, 5/15/33 95,226 161,414 Government National Mortgage Association II, 5.50%, 2/20/34 164,648 20,471 Government National Mortgage Association II, 7.5%, 9/20/29 21,845 175,000 U.S. Treasury Bonds, 5.25%, 11/15/28 199,876 470,000 U.S. Treasury Notes, 4.0%, 11/15/12 475,269 500,000 U.S. Treasury Notes, 4.25%, 11/15/14 511,738 300,000 U.S. Treasury Notes, 4.75%, 11/15/08 309,938 200,000 U.S. Treasury Notes, 4.75%, 5/15/14 212,219 130,000 U.S. Treasury Notes, 5.375%, 2/15/31 153,400 500,000 U.S. Treasury Notes, 5.625%, 5/15/08 526,367 100,000 U.S. Treasury Strip, 0.0%, 11/15/15 65,508 ----------- Total Government $10,620,965 ----------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $10,504,524) $10,620,965 ----------- Shares TEMPORARY CASH INVESTMENTS - 1.0% Security Lending Collateral - 1.0% 459,990 Securities Lending Investment Fund, 3.29% $ 459,990 ----------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $459,990) $ 459,990 ----------- TOTAL INVESTMENTS IN SECURITIES - 99.7% (Cost $41,246,751) $44,763,237 ----------- OTHER ASSETS AND LIABILITIES - 0.3% $ 115,275 ----------- TOTAL NET ASSETS - 100.0% $44,878,512 -----------
The accompanying notes are an integral part of these financial statements. 11 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- (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 June 30, 2005, the value of these securities amounted to $1,018,635 or 2.3% of net assets. (a) At June 30, 2005, the following securities were out on loan:
Principal Amount Security Market Value $ 71,250 Delphi Corp., 6.55%, 6/15/06 $ 69,291 190,000 General Motors, 7.2%, 1/15/11 175,750 Shares 7,790 IMS Health, Inc. 192,958 -------- Total $437,999 --------
The accompanying notes are an integral part of these financial statements. 12 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended 5/1/03(a) 6/30/05 Year Ended to Class II (unaudited) 12/31/04 12/31/03 Net asset value, beginning of period $ 14.38 $ 14.02 $12.67 ------- ------- ------ Increase (decrease) from investment operations: Net investment income $ 0.10 $ 0.22 $ 0.14 Net realized and unrealized gain (loss) on investments (0.11) 0.42 1.40 -------- ------- ------ Net increase (decrease) from investment operations $ (0.01) $ 0.64 $ 1.54 Distributions to shareowners: Net investment income (0.11) (0.28) (0.19) ------- ------- ------- Net increase (decrease) in net asset value $ (0.12) $ 0.36 $ 1.35 ------- ------- ------- Net asset value, end of period $ 14.26 $ 14.38 $14.02 ------- ------- ------- Total return* (0.07)% 4.59% 12.17% Ratio of net expenses to average net assets+ 1.20%** 1.19% 1.11%** Ratio of net investment income to average net assets+ 1.40%** 1.81% 1.12%** Portfolio turnover rate 31%** 30% 37%** Net assets, end of period (in thousands) $12,807 $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 1.20%** 1.19% 1.11%** Net investment income 1.40%** 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 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $437,999) (Cost $44,763,237 $41,246,751) Cash 299,931 Receivables -- Fund shares sold 189,816 Dividends, interest and foreign taxes withheld 160,884 Other 553 ----------- Total assets $45,414,421 ----------- LIABILITIES: Payables -- Fund shares repurchased $ 17,416 Upon return for securities loaned 459,990 Due to affiliates 1,472 Accrued expenses 57,031 ----------- Total liabilities $ 535,909 ----------- NET ASSETS: Paid-in capital $45,883,485 Undistributed net investment income (loss) 5,299 Accumulated net realized gain (loss) (4,526,758) Net unrealized gain (loss) on: Investments 3,516,486 ----------- Total net assets $44,878,512 ----------- NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $32,071,136 Shares outstanding 2,244,010 ----------- Net asset value per share $ 14.29 Class II: (No par value, unlimited number of shares authorized) Net assets $12,807,376 Shares outstanding 898,357 ----------- Net asset value per share $ 14.26
The accompanying notes are an integral part of these financial statements. 14 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $457) $ 162,430 Interest 422,917 Income on securities loaned, net 469 ----------- Total investment income $ 585,816 ----------- EXPENSES: Management fees $ 145,895 Transfer agent fees and expenses 1,488 Distribution fees (Class II) 14,385 Administrative reimbursements 9,326 Custodian fees 9,032 Professional fees 25,085 Printing expense 16,402 Fees and expenses of nonaffiliated trustees 1,018 Miscellaneous 3,482 ----------- Total expenses $ 226,113 ----------- Net expenses $ 226,113 ----------- Net investment income (loss) $ 359,703 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from: Investments $ 815,556 ----------- Change in net unrealized gain or loss from: Investments $(1,174,355) ----------- Net gain (loss) on investments $ (358,799) ----------- Net increase (decrease) in net assets resulting from operations $ 904 -----------
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 - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended (unaudited) 12/31/04 FROM OPERATIONS: Net investment income (loss) $ 359,703 $ 857,444 Net realized gain (loss) on investments 815,556 1,099,149 Change in net unrealized gain or loss on investments (1,174,355) 127,896 ------------ ------------ Net increase (decrease) in net assets resulting from operations $ 904 $ 2,084,489 ------------ ------------ DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (275,659) $ (789,468) Class II (93,154) (155,092) ------------ ------------ Total distributions to shareowners $ (368,813) $ (944,560) ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 3,105,397 $ 8,978,890 Reinvestment of distributions 368,809 944,549 Cost of shares repurchased (3,991,995) (9,461,531) ------------ ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ (517,789) $ 461,908 ------------ ------------ Net increase (decrease) in net assets $ (885,698) $ 1,601,837 ------------ ------------ NET ASSETS: Beginning of period $ 45,764,210 44,162,373 ------------ ------------ End of period $ 44,878,512 $ 45,764,210 ------------ ------------ Undistributed net investment income (loss), end of period $ 5,299 $ 14,409 ------------ ------------
The accompanying notes are an integral part of these financial statements. 16 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Balanced VCT Portfolio is a portfolio of the Pioneer Variable Contracts Trust (the Trust), a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Conservative Allocation VCT Portfolio (Ibbotson Conservative Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) The Portfolio commenced operations on May 1, 2003. Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts or by qualified pension and retirement plans. The 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 periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust, which are in conformity with those generally accepted in the investment company industry: A. Security Valuation Security transactions are recorded as of trade date. Net asset values for the portfolios are computed once daily, on each day the New York Stock Exchange (NYSE) is open, as of the close of regular trading on the NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Trading in foreign equity securities is substantially completed each day at various times prior to the close of the 17 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 NYSE. At June 30, 2005, 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 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 June 30, 2005, 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 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. The tax character of current year distributions will be determined at the end of the current fiscal year. 18 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
2004 ------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 944,560 Long-Term capital gain -- ------------ $ 944,560 Return of Capital -- ------------ Total distributions $ 944,560 ------------ 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, 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 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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. 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 the 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 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 2. Management Agreement PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the portfolios. Management fees are calculated daily at the annual rate of 0.65% of the Portfolio's average daily net assets. In addition, under the management and administration agreement, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At June 30, 2005, $875 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 $510 in transfer agent fees payable to PIMSS at June 30, 2005. 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 $87 payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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) - -------------------------------------------------------------------------------------------------- Balanced Portfolio $41,335,531 $4,602,009 $ (1,174,303) $3,427,706 ----------- ---------- ------------ ---------- - --------------------------------------------------------------------------------------------------
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 six months ended June 30, 2005, were $5,278,367 and $5,839,212, respectively. The cost of purchase and the proceeds from sales in U.S. Government obligations were $1,561,668 and $1,207,323, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
- -------------------------------------------------------------------------------------------------- '05 Shares '05 Amount Balanced Portfolio (unaudited) (unaudited) '04 Shares '04 Amount - -------------------------------------------------------------------------------------------------- CLASS I: Shares sold 28,236 $ 403,907 78,321 $ 1,113,192 Reinvestment of distributions 19,335 275,659 55,609 789,468 Shares repurchased (254,960) (3,646,322) (586,843) (8,291,593) ------------------------------------------------------- Net increase (decrease) (207,389) $ (2,966,756) (452,913) $ (6,388,933) ------------------------------------------------------- CLASS II: Shares sold 189,135 $ 2,701,490 557,386 $ 7,865,698 Reinvestment of distributions 6,548 93,150 10,920 155,081 Shares repurchased (24,254) (345,673) (83,119) (1,169,938) ------------------------------------------------------- Net increase 171,429 $ 2,448,967 485,187 $ 6,850,841 - --------------------------------------------------------------------------------------------------
20 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 21 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and two relevant indices, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the third quintile of the peer group for the 12 months ended June 30, 2004, the fourth quintile of the peer group for the three years ended June 30, 2004, and the second quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's fixed income and equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the third quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio for the 12 months ended June 30, 2004 was in the fourth quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio was reasonable compared to that of peer funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, a break point in management fees was not necessary. The Trustees will continue to evaluate annually the appropriateness of break points. 22 PIONEER VARIABLE CONTRACTS TRUST Pioneer Balanced VCT Portfolio - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 23 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 24 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 25 [Logo]PIONEER Investments Pioneer Variable Contracts Trust Of f icers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17867-00-0805 [logo]PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Cullen Value VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Table of Contents - -------------------------------------------------------------------------------- Pioneer Cullen Value VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 7 Notes to Financial Statements 11
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 Cullen Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- Portfolio Diversification (As a percentage of total investment portfolio) [The following data was represented as a pie chart in the printed material] U.S. Common Stocks 81.8% Depositary Receipts for International Stocks 18.2%
Sector Distribution (As a percentage of equity holdings) [The following data was represented as a pie chart in the printed material] Financials 27.4% Consumer Staples 14.6% Health Care 13.0% Industrials 12.2% Energy 8.9% Materials 8.4% Consumer Discretionary 7.2% Information Technology 7.0% Telecommunication Services 1.3%
Five Largest Holdings (As a percentage of equity holdings) 1. J.P. Morgan Chase & Co. 3.77% 2. Diageo Plc. (A.D.R.) 3.76 3. Bristol-Myers Squibb Co. 3.75 4. GlaxoSmithKline 3.75 5. Chubb Corp. 3.72
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 3/18/05 Net Asset Value per Share $ 10.07 $ 10.00
Distributions per Share Short-Term Long-Term (3/18/05 - 6/30/05) 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 Cullen Value 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 line chart in the printed material]
Pioneer Cullen Value VCT Portfolio S&P 500 3/05 10000 10000 6/05 10131 10137
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. - -------------------------------------------------------------------------------- Cumulative Total Returns (As of June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 0.70% (3/18/05)
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 Cullen Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value [divided by] $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Cullen Value VCT Portfolio Based on actual returns from March 18, 2005 through June 30, 2005.
Share Class II ------------------------------------------------------------ Beginning Account Value on 3/18/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,007.00 Expenses Paid During Period* $ 2.89
* Expenses are equal to the Portfolio's annualized expense ratio of 1.00% for Class II shares, multiplied by the average account value over the period, multiplied by 105/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Cullen Value VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from March 18, 2005 through June 30, 2005.
Share Class II ------------------------------------------------------------ Beginning Account Value on 3/18/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,011.51 Expenses Paid During Period* $ 2.89
* Expenses are equal to the Portfolio's annualized expense ratio of 1.00% for Class II shares, multiplied by the average account value over the period, multiplied by 105/365 (to reflect the one-half year period). 3 Pioneer Cullen Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- In the following interview, James P. Cullen, head of Cullen Capital Management and the leader of the management team for Pioneer Cullen Value VCT Portfolio, discusses the factors that influenced performance during the period since the Portfolio's inception on March 18, 2005, through June 30, 2005. Q: How is Pioneer Cullen Value VCT Portfolio managed? A: We maintained our established investment discipline, focusing on the stocks of companies with lower-than average price to earnings (p/e) and price to book (p/b) ratios, high dividend yields and strong balance sheets. Following the value-based strategy that we have used since 1982, we maintained a concentrated portfolio of about 34 companies, with a typical position in each holding of approximately 3% of assets. Our portfolio is based on our intensive fundamental analysis of the strengths and potential of each company. This concentrated portfolio allows our analysts to understand each company and has led to consistently attractive returns on a risk-adjusted basis over the long term. (Of course, past performance is no guarantee of future results.) While the number of holdings is relatively low, we keep the Portfolio well diversified across a broad range of industries. Q: How did the Portfolio perform? A: The U.S. stock market continued to trade in a narrow range in the second quarter, with the broad-market Russell 3000 Index returning 2.2% for the quarter, as investors digested the mixed signals of solid profit growth, a slowing economy, falling bond yields, and higher short-term interest rates. The Russell 1000 Value Index returned 1.7% for the quarter, boosted by strong returns from the financials sector and restrained by weak materials and consumer discretionary sector returns. For the period from March 21, 2005, through June 30, 2005, the Portfolio returned 0.70% at net asset value. In comparison, the Standard & Poor's 500 Index had a return of 1.37% over the second quarter of 2005. Q: What helped and hurt performance? A: Returns benefited most from stock selection in the materials sector. Cement company Cemex benefited from an acquisition, which increased the company's global participation. We think near-term earnings should be strong due to the continued strength of the U.S. and Mexican housing market. Also cement prices seem to be less volatile than the price of other commodities. Selection in the consumer discretionary and energy sectors also contributed materially, while selection in information technology and telecom services contributed more modestly. Our position in auto parts supplier BorgWarner was a notable positive. BWA has been able to leverage its technology in turbo and drive systems to dramatically increase business in spite of a difficult environment for the auto parts industry. In the energy sector, Anadarko Petroleum and ConocoPhillips posted solid gains, while ExxonMobil and Chevron, the largest companies in the industry declined in price. Anadarko and ConocoPhillips results are more affected by the price of oil. Returns were held back by stock selection in consumer staples, health care and industrials. We had mixed results in the consumer staples sector, as Bunge, a global agribusiness and food company, posted a double-digit gain, but Archer-Daniels Midland, one of the world's largest agricultural processors of soybeans, corn, wheat and cocoa, and food and beverage company Nestle, posted double-digit price declines. Our health care positions, all in the pharmaceuticals group, outperformed their peer group, but the portfolio had no exposure to the better-performing equipment & services group. Similarly, performance in the industrials sector was held back by our railroad names. Canadian National Railway and Canadian Pacific Railway, each outperformed their peer group, but the railroad group was weak in the quarter. CNI remains the most efficient rail operator. The stock has had a big run yet still sells at a reasonable price/earnings multiple. CP is more economically sensitive due to its core business of commodity hauling. The stock is still attractively valued. Q: What is your outlook? A: We believe the earnings recovery is still underway, though the rate of growth is slowing. Benefits should be seen from cost cutting and international exposure. However, with the market still trading at a multiple of earnings around 18x, it will be important to be price sensitive and maintain a price discipline. 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: At times, the Portfolio may focus its investments in one industry or on a group of related industries. To the extent the Portfolio emphasizes investments in a market segment, the Portfolio will be more susceptible to adverse economic, political or regulatory developments affecting those industries than a portfolio that invests more broadly and as a result may experience greater market fluctuation than a Portfolio without the same focus. Investing in foreign and/or emerging markets securities involves risks relating to interest rates, currency exchange rates, economic, and political conditions. Investments 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. 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. 4 Pioneer Cullen Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 92.7% Energy - 8.2% Coal & Consumable Fuels - 0.9% 250 Cameco Corp. $ 11,188 ---------- Integrated Oil & Gas - 3.2% 700 ConocoPhillips $ 40,243 ---------- Oil & Gas Exploration & Production - 4.1% 450 Anadarko Petroleum Corp. $ 36,967 180 Kerr-McGee Corp. 13,735 ---------- $ 50,702 ---------- Total Energy $ 102,133 ---------- Materials - 7.8% Construction Materials - 3.4% 1,006 Cemex SA (A.D.R.) $ 42,675 ---------- Diversified Metals & Mining - 3.4% 1,780 Anglo American Plc $ 41,830 ---------- Forest Products - 1.0% 200 Weyerhaeuser Co. $ 12,730 ---------- Total Materials $ 97,235 ---------- Capital Goods - 5.2% Aerospace & Defense - 3.3% 1,060 Raytheon Co. $ 41,467 ---------- Industrial Conglomerates - 1.9% 680 General Electric Co. $ 23,562 ---------- Total Capital Goods $ 65,029 ---------- Transportation - 6.0% Railroads - 6.0% 720 Canadian National Railway Co. $ 41,508 970 Canadian Pacific Railway, Ltd. 33,475 ---------- $ 74,983 ---------- Total Transportation $ 74,983 ---------- Automobiles & Components - 3.3% Auto Parts & Equipment - 3.3% 760 Borg-Warner Automotive, Inc. $ 40,789 ---------- Total Automobiles & Components $ 40,789 ---------- Retailing - 3.4% Home Improvement Retail - 3.4% 1,080 Home Depot, Inc. $ 42,012 ---------- Total Retailing $ 42,012 ---------- Food, Beverage & Tobacco - 13.6% Agricultural Products - 4.5% 850 Archer Daniels Midland Co. $ 18,172 600 Bunge, Ltd. 38,040 ---------- $ 56,212 ---------- Distillers & Vintners - 3.5% 730 Diageo Plc (A.D.R.) $ 43,289 ----------
Shares Value Packaged Foods & Meats - 5.6% 650 General Mills, Inc. $ 30,414 600 Nestle SA (A.D.R.) 38,390 ---------- $ 68,804 ---------- Total Food, Beverage & Tobacco $ 168,305 ---------- Pharmaceuticals & Biotechnology - 12.1% Pharmaceuticals - 12.1% 1,730 Bristol-Myers Squibb Co. $ 43,215 890 GlaxoSmithKline 43,174 350 Johnson & Johnson 22,750 1,480 Pfizer, Inc. 40,818 ---------- $ 149,957 ---------- Total Pharmaceuticals & Biotechnology $ 149,957 ---------- Banks - 7.7% Diversified Banks - 6.5% 900 Bank of America Corp. $ 41,049 800 Wachovia Corp. 39,680 ---------- $ 80,729 ---------- Regional Banks - 1.2% 320 Compass Bancshares, Inc. $ 14,400 ---------- Total Banks $ 95,129 ---------- Diversified Financials - 7.5% Investment Banking & Brokerage - 3.1% 700 Merrill Lynch & Co., Inc. $ 38,507 ---------- Diversified Financial Services - 4.4% 250 Citigroup, Inc. $ 11,558 1,230 J.P. Morgan Chase & Co. 43,444 ---------- $ 55,002 ---------- Total Diversified Financials $ 93,509 ---------- Insurance - 10.2% Life & Health Insurance - 3.3% 920 MetLife, Inc. $ 41,345 ---------- Property & Casualty Insurance - 6.9% 710 Allstate Corp. $ 42,422 500 Chubb Corp. 42,805 ---------- $ 85,227 ---------- Total Insurance $ 126,572 ---------- Technology Hardware & Equipment - 6.5% Computer Hardware - 3.3% 1,730 Hewlett-Packard Co. $ 40,672 ---------- Technology Distributors - 3.2% 1,480 Arrow Electronics, Inc.* $ 40,197 ---------- Total Technology Hardware & Equipment $ 80,869 ----------
The accompanying notes are an integral part of these financial statements. 5 Pioneer Cullen Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Telecommunication Services - 1.2% Wireless Telecommunication Services - 1.2% 250 Alumax, Inc. $ 14,903 ---------- Total Telecommunication Services $ 14,903 ---------- TOTAL COMMON STOCKS (Cost $1,140,312) $1,151,425 ---------- TOTAL INVESTMENT IN SECURITIES - 92.7% (Cost $1,140,312) $1,151,425 ---------- OTHER ASSETS AND LIABILITIES - 7.3% $ 90,264 ---------- TOTAL NET ASSETS - 100.0% $1,241,689 ==========
* Non-income producing security (A.D.R.) American Depositary Receipt 6 The accompanying notes are an integral part of these financial statements. Pioneer Cullen Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
3/18/05 (a) to 6/30/05 Class II (unaudited) Net asset value, beginning of period $ 10.00 ------- Increase from investment operations: Net investment income $ 0.02 Net realized and unrealized gain on investments 0.05 ------- Net increase from investment operations $ 0.07 ------- Net increase in net asset value $ 0.07 ------- Net asset value, end of period $ 10.07 ======= Total return* 0.70% Ratio of net expenses to average net assets+ 1.00%** Ratio of net investment income to average net assets+ 1.52%** Portfolio turnover rate 28%** Net assets, end of period (in thousands) $ 1,242 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 15.22%** Net investment loss (12.69)%** Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.00%** Net investment income 1.52%**
(a) Class II shares were first publicly offered on March 18, 2005. * 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. 7 Pioneer Cullen Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (cost $1,140,312) $ 1,151,425 Cash 160,372 Receivables - Dividends, interest and foreign taxes withheld 1,600 Due from Pioneer Investment Management, Inc. 7,522 ----------- Total assets $ 1,320,919 ----------- LIABILITIES: Payables - Investment securities purchased $ 61,471 Due to affiliates 338 Accrued expenses 17,421 ----------- Total liabilities $ 79,230 ----------- NET ASSETS: Paid-in capital $ 1,227,243 Undistributed net investment income 2,689 Accumulated net realized gain 644 Net unrealized gain on: Investments 11,113 ----------- Total net assets $ 1,241,689 ----------- NET ASSET VALUE PER SHARE: Class II: (No par value, unlimited number of shares authorized) Net assets $ 1,241,689 Shares outstanding 123,260 ----------- Net asset value per share $ 10.07
8 The accompanying notes are an integral part of these financial statements. Pioneer Cullen Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
3/18/05 (Commencement of Operations) to 6/30/05 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $58) $ 3,729 Interest 722 --------- Total investment income $ 4,451 --------- EXPENSES: Management fees $ 1,222 Transfer agent fees and expenses 451 Distribution fees 295 Administrative reimbursements 4,761 Custodian fees 4,692 Professional fees 9,969 Printing expense 4,970 Fees and expenses of nonaffiliated trustees 108 Miscellaneous 361 --------- Total expenses $ 26,829 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (25,067) --------- Net expenses $ 1,762 --------- Net investment income $ 2,689 --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from: Investments $ 644 --------- Change in net unrealized gain or loss from: Investments $ 11,113 --------- Net gain on investments $ 11,757 --------- Net increase in net assets resulting from operations $ 14,446 =========
The accompanying notes are an integral part of these financial statements. 9 PIONEER VARIABLE CONTRACTS TRUST Pioneer Cullen Value VCT Portfolio - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
3/18/05 (Commencement of Operations) to 6/30/05 (unaudited) FROM OPERATIONS: Net investment income $ 2,689 Net realized gain on investments 644 Change in net unrealized gain or loss on investments 11,113 ---------- Net increase in net assets resulting from operations $ 14,446 ---------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $1,231,263 Cost of shares repurchased (4,020) ---------- Net increase in net assets resulting from Fund share transactions $1,227,243 ---------- Net increase in net assets $1,241,689 NET ASSETS: Beginning of period $ -- ---------- End of period $1,241,689 ========== Undistributed net investment income, end of period $ 2,689 ==========
10 The accompanying notes are an integral part of these financial statements. Pioneer Cullen Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Cullen Value VCT Portfolio (the Portfolio) is a portfolio of Pioneer Variable Contracts Trust (the Trust), a Delaware statutory business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Moderate Allocation VCT Portfolio (Ibbotson Moderate Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) The Cullen Value Portfolio commenced operations on March 18, 2005. Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts or by qualified pension and retirement plans. The investment objective of Cullen Value VCT 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 NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. The Portfolio also may use the fair value of a security, 11 Pioneer Cullen Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 June 30, 2005, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 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. C. Portfolio Shares The Portfolio records sales and repurchases of its shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $525,089 in commissions on the sale of Trust shares for the period ended June 30, 2005. 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 the 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 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 June 30, 2005, $136 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. Through May 1, 2006, PIM has agreed not to impose all or a portion of its management fee and, if necessary, to limit other ordinary operating expenses to the extent required to reduce Class II expenses to 1.00% of the average daily net assets attributable to class II shares. As of June 30, 2005, 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 12 Pioneer Cullen Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- shareowner services to the Trust at negotiated rates. Included in due to affiliates is $201 in transfer agent fees payable to PIMSS at June 30, 2005. 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 payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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) - --------------------------------------------------------------------------------------------- Cullen Value Portfolio $1,140,312 $27,588 $ (16,475) $11,113 ========== ======= ========= ======= - ---------------------------------------------------------------------------------------------
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 June 30, 2005, were $1,190,650 and $50,982, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows for the period ended June 30, 2005:
- -------------------------------------------------------------------------------- Fund Portfolio '05 Shares '05 Amount - -------------------------------------------------------------------------------- CLASS II: Shares sold 123,663 $1,231,263 Reinvestment of distributions -- -- Shares repurchased (403) (4,020) -------------------------------- Net increase 123,260 $1,227,243 ================================ - --------------------------------------------------------------------------------
13 [logo]PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17885-00-0805 [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Emerging Markets VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 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 9 Notes to Financial Statements 13 Factors Considered by the Independent Trustees in Approving the Management Contract 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 Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- [The following data was represented as a pie chart in the printed material] Portfolio Diversification (As a percentage of total investment portfolio) 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%
[The following data was represented as a pie chart in the printed material] Geographical Distribution (As a percentage of equity holdings) 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. Petrobras Brasileiro (A.D.R.) 5.37% 2. Samsung Electronics 4.12 3. Fomento Economico Mexicano SA de CV 1.73 4. Anglogold Ashanti, Ltd. (A.D.R.) 1.72 5. Anglo American Platinum Corp., Ltd. 1.57
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $21.30 $20.33
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $0.1038 $ - $ -
- -------------------------------------------------------------------------------- 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 MSCI Markets VCT Emerging Portfolio Markets 10/98 $10,000 $10,000 $14,097 $14,931 $17,303 $16,347 6/01 $11,746 $12,127 $12,128 $12,287 6/03 $12,965 $13,141 $16,862 $17,540 6/05 $22,075 $23,659
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 June 30, 2005) - -------------------------------------------------------------------------------- Net Asset Value - --------------------------------------------------------------------------------
Life-of-Fund 12.69% (10/30/98) 5 Years 5.09 1 Year 31.55
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 semiannual 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 variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Emerging Markets VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005.
Share Class II - --------------------------------------------------------- Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $1,052.80 Expenses Paid During Period* $10.08
* Expenses are equal to the Portfolio's annualized expense ratio of 1.98% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Emerging Markets VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from January 1, 2005 through June 30, 2005.
Share Class II - --------------------------------------------------------- Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $0.00 Expenses Paid During Period* $9.89
* Expenses are equal to the Portfolio's annualized expense ratio of 1.98% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- In the following interview, Christopher Smart and Sam Polyak, Pioneer Emerging Market VCT Portfolio's portfolio managers, discuss the factors that influenced performance during the six months ended June 30, 2005. Q. How did emerging markets equities perform during the Portfolio's semiannual reporting period? A. The asset class outpaced the developed markets amid an environment of steady worldwide growth, falling long-term interest rates, and strong commodity prices. Emerging markets equities performed very well in the first two months of the reporting period, but the investment environment turned more challenging in March. As continued high oil prices triggered fears of rising inflation and more aggressive interest rate hikes by the U.S. Federal Reserve, heightened risk aversion among investors led to a decline in most global equities markets. Emerging markets stocks quickly recovered, however, posting a strong return in the April through June period. Q. How did the Portfolio perform? A. For the six months ended June 30, 2005, Class II shares returned 5.28% at net asset value. We are pleased to report that the Portfolio outpaced the 4.24% return of the Morgan Stanley Capital International (MSCI) Emerging Markets Index during the 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. Did this shifting environment affect the way you managed the Portfolio? A. On the margin, yes. Although we generally buy stocks with a 12-18 month time horizon, we will sell them if we think that market excesses have driven them much above their intrinsic values. We therefore established a more conservative positioning in late February following several months of strong performance for emerging markets stocks. We reduced exposure to more volatile markets, such as India and Brazil, which helped performance when the global stock markets weakened during March and April. When the sell-off caused many of our favored companies to fall back into more attractive valuation ranges, we took advantage of the situation by adding them to the Portfolio. Specifically, we increased exposure to stocks that can benefit from the recovery of domestic consumption in countries such as Korea. We also increased our holdings in select technology stocks that were showing signs of improving sales growth. Q. What elements of the Portfolio's positioning affected performance? A. Our stock selection in Korea and Brazil, which are among the Portfolio's top country weightings, was helpful to performance. In Brazil, we benefited from positions in Natura Comesticos, which sells cosmetics door-to-door, and the retail banking concern Unibanco, which enjoyed a strong resurgence in lending. Our holdings in Korean shipbuilding stocks such as Daewoo Shipbuilding and Samsung Heavy were helpful as the demand for new ships continued to grow. Two utilities also contributed to performance: Samchully, which distributes natural gas to a growing number of households in Korea, and Korean Electric Power, which benefited as a recovery in the Korean currency helped reduce its foreign debt burden. Our position in Russian oil stocks was the largest detractor from performance. While the Russian economy continues to grow rapidly and benefit from high global oil prices, the government's aggressive efforts to dismantle the oil giant Yukos dealt a severe blow to investor sentiment. This led to a drop in Russian stocks, and the Portfolio's positions in Gazprom, Lukoil, and Surgutneftegaz underperformed. Performance also was hurt by our holdings in Thailand, which suffered from rising interest rates and a subsequent slowdown in the economy, affecting holdings such as Siam Cement and Siam Commercial Bank. Q. What is your overall view of the asset class, and where are you finding the most compelling opportunities? A. We retain a positive view on emerging markets. We believe the U.S. Federal Reserve will continue to raise interest rates, but not fast enough to significantly dampen growth in our markets. We also believe growth in China, while likely to slow somewhat, will not suffer the collapse that some investors fear. Additionally, the price-to-earnings (p/e) ratio of the MSCI Emerging Markets Index is about 60% of the developed markets p/e ratio, despite the fact that earnings growth is actually stronger in many emerging markets. These factors, in combination, should provide a positive underpinning for the asset class. Overall, we remain confident that our disciplined investment approach, which incorporates the analysis of both countries and individual companies, will help the Portfolio to take advantage of the positive long-term trends unfolding in many emerging markets. 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 Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value PREFERRED STOCKS - 2.8% Capital Goods - 0.1% Industrial Conglomerates - 0.1% 3,445 LG Corp. $ 52,236 ----------- Total Capital Goods $ 52,236 ----------- Media - 0.8% Broadcasting & Cable Television - 0.8% 1,283,300 Net Servicos de Comunicacao SA* $ 351,513 ----------- Total Media $ 351,513 ----------- Banks - 1.1% Diversified Banks - 1.1% 2,393 Banco Itau Holding Financeira $ 444,751 ----------- Total Banks $ 444,751 ----------- Telecommunication Services - 0.8% Integrated Telecommunication Services - 0.8% 19,601 Tele Norte Leste Participacoes (A.D.R.) $ 326,357 ----------- Total Telecommunication Services $ 326,357 ----------- TOTAL PREFERRED STOCKS (Cost $958,020) $ 1,174,857 ----------- COMMON STOCKS - 93.4% Energy - 13.4% Coal & Consumable Fuels - 0.4% 235,200 Yanzhou Coal Mining $ 183,474 ----------- Integrated Oil & Gas - 10.4% 485,600 Chine Petroleum & Chemical $ 189,909 11,700 Gazprom (A.D.R.) 423,657 3,100 Mol Magyar Olaj 259,701 47,400 Petrobras Brasileiro (A.D.R.) 2,182,296 540,000 PetroChina Co., Ltd. 397,621 48,500 PTT Public Co., Ltd. 255,850 7,800 Repsol SA (A.D.R.) 196,014 12,800 Surgutneftegaz (A.D.R.)*(b) 478,080 ----------- $ 4,383,128 ----------- Oil & Gas Exploration & Production - 0.8% 14,600 Oil & Natural Gas Commission, Ltd.* $ 342,553 ----------- Oil & Gas Refining & Marketing - 1.2% 2,066,400 Petron Corp. $ 108,666 14,300 Reliance Industries, Ltd. (144A) 416,273 ----------- $ 524,939 ----------- Oil & Gas Storage & Transportation - 0.6% 13,811,500 Ultrapar Participacoes SA $ 242,536 ----------- Total Energy $ 5,676,630 ----------- Materials - 11.0% Commodity Chemicals - 0.5% 128,076 CA Formosa Plastic Corp.* $ 208,703 -----------
Shares Value Construction Materials - 2.5% 6,450 Asia Cement Co., Ltd. $ 216,080 28,000 CA Siam Cement Co., Ltd.* 163,686 2,530 Hanil Cement Co., Ltd. 150,126 721,100 Lafarge Malayan Cement Bhd 114,886 460,000 PT Indocement Tunggal Prakarsa TBK* 161,764 31,500 Ultra Tech Cement, Ltd. 255,464 ----------- $ 1,062,006 ----------- Diversified Metals & Mining - 1.0% 6,000 Freeport-McMoRan Copper & Gold, Inc. (Class B) $ 224,640 899,000 PT Aneka Tambang TBK 219,886 ----------- $ 444,526 ----------- Fertilizers & Agricultural Chemicals - 0.6% 44,000 Makhteshim-Agan Industries, Ltd. $ 240,527 ----------- Gold - 2.7% 19,500 Anglogold Ashanti, Ltd. (A.D.R.) (b) $ 696,735 36,100 IAMGOLD Corp. 246,202 952,000 Zijin Mining Group Co., Ltd. 208,228 ----------- $ 1,151,165 ----------- Paper Products - 0.4% 5,270 Aracruz Cellulose SA (A.D.R.) (b) $ 183,133 ----------- Precious Metals & Minerals - 2.8% 14,200 Anglo American Platinum Corp., Ltd. $ 638,758 23,200 Compania de Minas Buenaventura SA 533,368 ----------- $ 1,172,126 ----------- Steel - 0.5% 7,900 Companhia Vale do Rio Doce (A.D.R.) $ 200,660 ----------- Total Materials $ 4,662,846 ----------- Capital Goods - 12.7% Aerospace & Defense - 0.5% 9,100 Elbit Systems, Ltd.* $ 202,075 ----------- Building Products - 0.5% 59,500 Trakya Cam Sanayii $ 201,062 ----------- Construction, Farm Machinery & Heavy Trucks - 3.3% 21,400 Daewoo Heavy Industries & Machinery, Ltd. $ 408,228 8,030 Hyundai Heavy Industries 401,233 46,200 Samsung Heavy Industries Co., Ltd. 415,922 17,499 Tata Motors 170,869 ----------- $ 1,396,252 -----------
The accompanying notes are an integral part of these financial statements. 5 PIONEER VARIABLE CONTRACTS TRUST Pioneer Emerging Markets VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Construction & Engineering - 4.8% 116,200 Aveng, Ltd. $ 217,072 442,435 CTCI Corp. 242,383 3,869 Daelim Industrial Co. 206,490 543,400 Empressa ICA Sociedad Controladora SA de CV* 220,827 11,900 GS Engineering & Construction Corp. 391,185 12,840 Kyeryong Construction Industrial Co., Ltd. 294,347 16,800 Larsen & Toubro, Ltd. 437,901 ----------- $ 2,010,205 ----------- Heavy Electrical Equipment - 0.7% 14,900 Bharat Heavy Electricals (Demat Shares)* $ 296,173 ----------- Industrial Conglomerates - 2.0% 20,956 Bidvest Group, Ltd. $ 226,136 29,000 Copec-Compania Petroleos 233,405 45,075 KOC Holding AS 198,182 6,825 LG Corp. 171,984 ----------- $ 829,707 ----------- Industrial Machinery - 0.9% 336,000 Yungtay Engineering Co., Ltd. $ 186,962 23,300 Doosan Heavy Industries & Construction Co. 203,393 ----------- $ 390,355 ----------- Total Capital Goods $ 5,325,829 ----------- Transportation - 1.0% Marine - 1.0% 256,000 China Shipping Development Co., Ltd.* $ 193,000 45,300 Malaysia International Shipping Bhd 213,240 ----------- $ 406,240 ----------- Total Transportation $ 406,240 ----------- Automobiles & Components - 2.0% Automobile Manufacturers - 1.4% 11,100 Hyundai Motor Co., Ltd. $ 613,115 ----------- Motorcycle Manufacturers - 0.6% 7,900 Bajaj Auto, Ltd. (Demat Shares) $ 249,071 ----------- Total Automobiles & Components $ 862,186 ----------- Consumer Durables & Apparel - 0.6% Household Appliances - 0.6% 44,940 Arcelik AS $ 267,388 ----------- Total Consumer Durables & Apparel $ 267,388 ----------- Consumer Services - 0.7% Hotels, Resorts & Cruise Lines - 0.7% 21,300 Indian Hotels Co., Ltd. $ 305,026 ----------- Total Consumer Services $ 305,026 -----------
Shares Value Media - 4.9% Advertising - 0.4% 9,200 G II R, Inc. $ 161,430 ----------- Broadcasting & Cable Television - 3.4% 459,000 Bec World Public Co., Ltd. $ 128,842 6,947 Grupo Televisa SA (A.D.R.) 431,339 890,200 Media Prima Bhd* 385,807 39,000 Television Broadcasts, Ltd. 220,237 79,000 Zee Telefilms, Ltd. 282,660 ----------- $ 1,448,885 ----------- Movies & Entertainment - 0.1% 97,300 Grammy Entertainment Plc $ 29,667 ----------- Publishing - 1.0% 173,916 Hurriyet Gazetecilik ve Matbaacilik AS $ 412,770 ----------- Total Media $ 2,052,752 ----------- Retailing - 0.7% Department Stores - 0.7% 6,300 Hyundai Department Store Co., Ltd. $ 289,643 ----------- Total Retailing $ 289,643 ----------- Food & Drug Retailing - 2.5% Food Retail - 0.7% 143,000 President Chain Store Corp. $ 281,045 ----------- Hypermarkets & Supercenters - 1.8% 13,300 Brasil Distr Pao Acu (A.D.R.)*(b) $ 264,537 29,700 Massmart Holdings, Ltd. 199,407 900 Shinsegae Co., Ltd.* 283,393 ----------- $ 747,337 ----------- Total Food & Drug Retailing $ 1,028,382 ----------- Food, Beverage & Tobacco - 4.0% Brewers - 1.1% 6,850 Efes Breweries International (G.D.R.) (144A)* $ 231,119 68,500 Grupo Modelo SA de CV 214,033 ----------- $ 445,152 ----------- Packaged Foods & Meats - 0.9% 5,380 CJ Corp. $ 398,616 ----------- Soft Drinks - 1.7% 11,800 Fomento Economico Mexicano SA de CV $ 702,926 61,900 Sermsuk Public Co., Ltd. 30,246 ----------- $ 733,172 ----------- Tobacco - 0.3% 97,200 PT Gudang Garam Public Co., Ltd. $ 125,857 ----------- Total Food, Beverage & Tobacco $ 1,702,797 -----------
6 The accompanying notes are an integral part of these financial statements. Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Household & Personal Products - 0.6% Personal Products - 0.6% 7,650 Natura Cosmeticos SA $ 243,562 ----------- Total Household & Personal Products $ 243,562 ----------- Pharmaceuticals & Biotechnology - 0.3% Pharmaceuticals - 0.3% 175,800 PT Tempo Scan Pacific $ 127,895 ----------- Total Pharmaceuticals & Biotechnology $ 127,895 ----------- Banks - 15.0% Diversified Banks - 15.0% 11,966 Banco Bradesco SA (b) $ 423,477 25,000 Banco do Brasil SA* 337,043 53,500 Bangkok Bank, Ltd. (Foreign Shares) 139,221 61,200 Bank Hapoalim, Ltd.* 191,745 1,017,200 Bank Mandiri 155,868 18,563 Bank of Baroda* 83,910 808,344 China Development Financial* 321,828 264,950 Chinatrust Financial Holding Co., Ltd. 288,213 163,800 Commerce Asset Holdings Bhd 217,525 263,000 E.Sun Financial Holding Co., Ltd. 210,660 218,000 First Financial Holding* 180,117 144,606 FirstRand, Ltd. 301,185 26,000 Grupo Financiero Galicia (A.D.R.)* 209,820 10,700 Hana Bank 285,475 131,600 Kasikornbank 181,036 1,900 Kookmin Bank 86,477 12,000 Kookmin Bank (A.D.R.) 546,960 221,500 Metropolitan Bank & Trust Co. 114,697 407,500 PT Bank Central Asia TBK 150,130 2,514,576 PT Lippo Bank* 303,696 331,500 RHB Capital Bhd* 183,057 123,700 Siam Commercial Bank Plc 139,191 353,234 Sinopac Holdings Co. 176,842 25,549 Standard Bank Group, Ltd. 246,479 13,600 State Bank of India 213,349 35,354 Turkiye Is Bankasi (Isbank) 205,631 11,762 Uniao de Bancos Brasileiros SA (Unibanco) (G.D.R.) (144A) 454,248 ----------- $ 6,347,880 ----------- Total Banks $ 6,347,880 ----------- Diversified Financials - 1.6% Investment Banking & Brokerage - 0.6% 8,800 Samsung Securities Co., Ltd. $ 233,799 ----------- Multi-Sector Holding - 0.6% 16,800 Remgro, Ltd. $ 265,974 -----------
Shares Value Diversified Financial Services - 0.4% 184,000 Fubon Group $ 178,839 ----------- Total Diversified Financials $ 678,612 ----------- Insurance - 4.0% Life & Health Insurance - 2.5% 11,900 Cathay Financial Holding Co., Ltd., (G.D.R.) (144A) $ 239,547 334,000 China Life Insurance Co., Ltd.* 227,368 130,500 Ping An Insurance (Group) Co. of China, Ltd.* 209,197 208,500 Sanlam, Ltd. 364,722 ----------- $ 1,040,834 ----------- Property & Casualty Insurance - 1.5% 4,100 Samsung Fire & Marine Insurance $ 331,423 76,267 Aksigorta AS 319,187 ----------- $ 650,610 ----------- Total Insurance $ 1,691,444 ----------- Real Estate - 0.9% Real Estate Management & Development - 0.9% 103,200 MCL Ladn, Ltd. $ 81,113 1,095,400 SM Prime Holdings 146,582 98,200 Wheelock Properties (Singapore), Ltd. 163,028 ----------- $ 390,723 ----------- Total Real Estate $ 390,723 ----------- Software & Services - 0.6% It Consulting & Other Services - 0.6% 4,732 Infosys Technologies, Ltd. $ 256,024 ----------- Total Software & Services $ 256,024 ----------- Technology, Hardware & Equipment - 2.5% Computer Hardware - 1.5% 104,000 ACER Sertek, Inc. $ 204,292 218,000 Quanta Computer, Inc. 413,988 ----------- $ 618,280 ----------- Electronic Manufacturing Services - 1.0% 80,269 Hon Hai Precision Industry $ 415,461 ----------- Total Technology, Hardware & Equipment $ 1,033,741 ----------- Semiconductors - 6.6% Semiconductors - 6.6% 3,530 Samsung Electronics $ 1,672,488 235,205 Taiwan Semiconductor Manufacturing Co. 406,421 31,500 Taiwan Semiconductor Manufacturing Co. (A.D.R.) 287,279 554,870 United Microelectronics Corp., Ltd. 401,113 ----------- $ 2,767,301 ----------- Total Semiconductors $ 2,767,301 -----------
The accompanying notes are an integral part of these financial statements. 7 Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Telecommunication Services - 6.6% Integrated Telecommunication Services - 2.5% 8,900 Brasil Telecom Participacoes SA* $ 321,290 49,287 Mahanagar Telephone Nigam, Ltd. 311,987 17,400 Telecom Argentina Stet-France Telecom SA (A.D.R.) 207,756 36,100 Telekomunikacja Polska SA 221,952 ----------- $ 1,062,985 ----------- Wireless Telecommunication Services - 4.1% 10,800 Korea Telecom Freetel Co. $ 249,575 7,500 Mobile Telesystems (A.D.R.)* 252,374 29,700 MTN Group, Ltd. 197,253 207,100 Shinawatra Computer Co., Plc 187,931 10,037 SK Telecom Co., Ltd.*(b) 204,755 146,000 Taiwan Mobile Co., Ltd. 150,285 65,400 Venfin, Ltd. 281,234 6,200 Vimpel-Communications (A.D.R.)* 210,986 ----------- $ 1,734,393 ----------- Total Telecommunication Services $ 2,797,378 ----------- Utilities - 1.2% Gas Utilities - 1.2% 3,600 Samchully Co., Ltd. $ 293,892 514,000 Panva Gas Holdings, Ltd.* 215,332 ----------- $ 509,224 ----------- Total Utilities $ 509,224 ----------- TOTAL COMMON STOCKS (Cost $31,297,972) $39,423,503 ----------- WARRANTS - 0.0% Commercial Services & Supplies - 0.0% Diversified Commercial Services - 0.0% 1,580 Bidvest Group, Ltd. 12/8/06* $ 3,584 ----------- TOTAL WARRANTS (Cost $0) $ 3,584 ----------- TEMPORARY CASH INVESTMENT - 5.2% Security Lending Collateral - 5.2% 2,191,114 Securities Lending Investment Fund, 3.29% $ 2,191,114 ----------- TOTAL TEMPORARY CASH INVESTMENT (Cost $2,191,114) $ 2,191,114 ----------- TOTAL INVESTMENT IN SECURITIES - 101.4% (Cost $34,447,106) (a) $42,793,058 ----------- OTHER ASSETS AND LIABILITIES - (1.4)% $ (574,444) ----------- TOTAL NET ASSETS - 100.0% $42,218,614 -----------
* Non-income producing security (A.D.R.) American Depositary Receipt (G.D.R.) Global Depositary Receipt 144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At June 30, 2005, the value of these securities amounted to $1,341,187 or 3.18% of net assets. (a) Distributions of investments by country of issue, as percentage of total equity holdings (excluding temporary cash investments) is as follows: South Korea 21.1% Brazil 14.7 Taiwan 12.3 India 8.9 South Africa 8.9 People's Republic of China 4.0 Turkey 3.9 Mexico 3.8 Russia 3.4 Thailand 3.1 Indonesia 3.0 Malaysia 2.7 Israel 1.5 Peru 1.3 Hong Kong 1.1 Argentina 1.0 Other (Individually less than 1%) 5.3 ----- 100.0% =====
(b) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 18,500 Anglogold Ashanti, Ltd. (A.D.R.) $ 661,005 4,985 Aracruz Cellulose SA (A.D.R.) 173,229 11,323 Banco Bradesco SA 400,721 1,400 Centrais Eletricas Bra (A.D.R.)+ 8,922 12,635 Brasil Distr Pao Acu (A.D.R.)* 251,310 9,500 SK Telecom Co., Ltd. * 193,800 10,640 Surgutneftegaz (A.D.R.)* 397,404 ----------- Total $ 2,086,391 ===========
+ Pending sale for security Centrais Eletricas Bra (A.D.R.) as of 6/30/05 8 The accompanying notes are an integral part of these financial statements. Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year Year Year Year 5/1/00 6/30/05 Ended Ended Ended Ended to Class II (a) (unaudited) 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 20.33 $ 17.26 $ 10.98 $ 11.19 $ 12.08 $ 18.02 --------- --------- --------- --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.15 $ 0.16 $ 0.12 $ 0.02 $ 0.09 $ (0.02) Net realized and unrealized gain (loss) on investments and foreign currency transactions 0.92 3.04 6.21 (0.17) (0.98) (5.59) --------- --------- --------- --------- --------- --------- Net increase (decrease) from investment operations $ 1.08 $ 3.20 $ 6.33 $ (0.15) $ (0.89) $ (5.61) Distributions to shareowners: Net investment income (0.10) (0.13) (0.05) (0.06) - - Net realized gain - - - - - (0.33) --------- --------- --------- --------- --------- --------- Net increase (decrease) in net asset value $ 0.97 $ 3.07 $ 6.28 $ (0.21) $ (0.89) $ (5.94) --------- --------- --------- --------- --------- --------- Net asset value, end of period $ 21.30 $ 20.33 $ 17.26 $ 10.98 $ 11.19 $ 12.08 ========= ========= ========= ========= ========= ========= Total return* 5.28% 18.73% 57.87% (1.42)% (7.37)% (31.65)% Ratio of net expenses to average net assets+ 1.98%** 1.99% 1.99% 1.99% 1.90% 2.11%** Ratio of net investment income (loss) to average net assets+ 1.54%** 0.88% 1.04% 0.28% 1.05% (0.73)%** Portfolio turnover rate 95%** 66% 79% 124% 175% 156% Net assets, end of period (in thousands) $ 33,445 $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 1.98%** 2.11% 2.65% 3.11% 4.12% 4.47%** Net investment income (loss) 1.54%** 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 1.98%** 1.99% 1.99% 1.99% 1.90% 2.09%** Net investment income (loss) 1.54%** 0.88% 1.04% 0.28% 1.05% (0.71)%**
(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 assuming no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 9 Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $2,086,391) (Cost $34,447,106) $ 42,793,058 Cash 924,068 Foreign currencies, at value (Cost $220,067) 221,081 Receivables -- Investment securities sold 215,309 Fund shares sold 266,051 Dividends, interest and foreign taxes withheld 134,951 Forward foreign currency settlement contracts, net 2 Other 3,277 ------------ Total assets $ 44,557,797 ------------ LIABILITIES: Payables -- Investment securities purchased $ 35,720 Fund shares repurchased 57 Upon return of securities loaned 2,191,114 Reserve for repatriation taxes 41,230 Due to affiliates 2,134 Accrued expenses 68,928 ------------ Total liabilities $ 2,339,183 ------------ NET ASSETS: Paid-in capital $ 32,011,634 Undistributed net investment income 149,710 Accumulated net realized gain 1,752,164 Net unrealized gain on: Investments 8,304,722 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies 384 ------------ Total net assets $ 42,218,614 ------------ NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $ 8,773,194 Shares outstanding 408,653 ------------ Net asset value per share $ 21.47 Class II: (No par value, unlimited number of shares authorized) Net assets $ 33,445,420 Shares outstanding 1,570,031 ------------ Net asset value per share $ 21.30
10 The accompanying notes are an integral part of these financial statements. Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $94,687) $ 688,302 Interest 9,907 Income on securities loaned, net 3,634 ------------ Total investment income $ 701,843 ------------ EXPENSES: Management fees $ 229,762 Transfer agent fees and expenses 1,488 Distribution fees (Class II) 39,196 Administrative reimbursements 9,326 Custodian fees 65,342 Professional fees 20,835 Printing expense 8,278 Fees and expenses of nonaffiliated trustees 987 Miscellaneous 9,785 ------------ Total expenses $ 384,999 Net expenses $ 384,999 ------------ Net investment income $ 316,844 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments (net of foreign capital gain taxes of $2,682) $ 4,124,651 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (40,575) ------------ $ 4,084,076 ------------ Change in net unrealized gain or loss from: Investments (the change in reserve for repatriation taxes of $5,740) $ (2,352,670) Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (7,363) ------------ $ (2,360,033) ------------ Net gain (loss) on investments, futures contracts and foreign currency transactions $ 1,724,043 ============ Net increase (decrease) in net assets resulting from operations $ 2,040,887 ============
The accompanying notes are an integral part of these financial statements. 11 Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended (unaudited) 12/31/04 FROM OPERATIONS: Net investment income (loss) $ 316,844 $ 322,489 Net realized gain (loss) on investments 4,084,076 5,573,183 Change in net unrealized gain or loss on investments, futures contracts and foreign currency transactions (2,360,033) 22,693 ------------ ------------- Net increase (decrease) in net assets resulting from operations $ 2,040,887 $ 5,918,365 ------------ ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (50,778) $ (65,091) Class II (161,235) (196,317) ------------ ------------- Total distributions to shareowners $ (212,013) $ (261,408) ------------ ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 6,887,498 $ 9,587,268 Reinvestment of distributions 210,764 259,912 Cost of shares repurchased (5,688,727) (11,459,650) ------------ ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ 1,409,535 $ (1,612,470) ------------ ------------- Net increase in net assets $ 3,238,409 $ 4,044,487 ------------ ------------- NET ASSETS: Beginning of period $ 38,980,205 $ 34,935,718 ------------ ------------- End of period $ 42,218,614 $ 38,980,205 ============ ============= Undistributed net investment income, end of period $ 149,711 $ 44,879 ============ =============
12 The accompanying notes are an integral part of these financial statements. Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Emerging Markets Portfolio (the Portfolio) is a Portfolio of the Pioneer Variable Contracts Trust (the Trust), a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty-eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Moderate Allocation VCT Portfolio (Ibbotson Moderate Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts, or by qualified pension and retirement plans. The 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 13 Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 June 30, 2005 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 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 June 30, 2005, 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 14 Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 June 30, 2005, the Portfolio had $41,230 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 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 tax character of the current year distributions paid will be determined at the end of the fiscal year. 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 - -------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 261,408 Long-Term capital gain - ----------- $ 261,408 Return of Capital - ----------- Total distributions $ 261,408 =========== 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 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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. 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 15 Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 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 June 30, 2005, $1,398 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 $509 in transfer agent fees payable to PIMSS at June 30, 2005. 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 $227 payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $34,905,128 $8,456,339 $ (568,409) $7,887,930 =========== ========== ========== ========== - --------------------------------------------------------------------------------------------------
16 Pioneer Emerging Markets 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 six months ended June 30, 2005, were $19,783,177 and $18,359,069, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows for the six months ended June 30, 2005 and the fiscal year ended December 31, 2004:
- ------------------------------------------------------------------------------------------------- Emerging Markets Portfolio '05 Shares '05 Amount '04 Shares '04 Amount - ------------------------------------------------------------------------------------------------- CLASS I: Shares sold 21,854 $ 459,899 72,945 $ 1,305,983 Reinvestment of distributions 2,300 49,529 3,952 63,595 Shares repurchased (37,031) (774,914) (138,809) (2,377,707) ---------------------------------------------------------------- Net increase (decrease) (12,877) $ (265,486) (61,912) $ (1,008,129) ================================================================ CLASS II: Shares sold 305,893 $ 6,427,599 468,119 $ 8,281,285 Reinvestment of distributions 7,548 161,235 12,278 196,317 Shares repurchased (236,423) (4,913,813) (524,708) (9,081,943) ---------------------------------------------------------------- Net increase (decrease) 77,018 $ 1,675,021 (44,311) $ (604,341) ================================================================ - -------------------------------------------------------------------------------------------------
8. Forward Foreign Currency Contracts During the six months ended June 30, 2005, 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 June 30, 2005, the Portfolio had no outstanding portfolio hedges. Outstanding forward currency settlement contracts were as follows:
- ------------------------------------------------------------------------------------------------- Net Gross Settlement Gross Receivable/ Receivable Date Payable (Payable) - ------------------------------------------------------------------------------------------------- Emerging Markets Portfolio $4,476 7/1/05 $ (4,474) $2 ====== ====== ======== == - -------------------------------------------------------------------------------------------------
17 Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objective and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 18 Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and the results of an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the fourth quintile of the peer group for the 12 months ended June 30, 2004, the second quintile for the three years ended June 30, 2004, and the second quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the second quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio (before and after giving effect to the expense limitation) for the 12 months ended June 30, 2004 and expense ratios for the comparable period of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio (after giving effect to the expense limitation) was in the fourth quintile of this peer group for the most recent fiscal year. The Trustees concluded that the Fund's overall expense ratio was reasonable compared to that of most of the comparably sized funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there is potential for 19 Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, a break point in management fee was not necessary. The Trustees will continue to evaluate annually the appropriateness of break points. H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 20 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. [LOGO] PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17883-00-0805 [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Equity Income VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 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 Factors Considered by the Independent Trustees in Approving the Management Contract 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 Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- Portfolio Diversification (As a percentage of total investment portfolio) [THE FOLLOWING DATA IS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.] U.S. Common Stocks 94.1% Temporary Cash Investments 5.1% Convertible Preferred Stocks 0.8%
Sector Distribution (As a percentage of equity holdings) [THE FOLLOWING DATA IS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.] Financials 20.5% Utilities 18.3% Consumer Discretionary 10.3% Industrials 9.5% Health Care 9.0% Telecommunication Services 9.0% Energy 8.5% Consumer Staples 7.0% Materials 5.9% Information Technology 2.0%
Five Largest Holdings (As a percentage of equity holdings) 1. PACCAR, Inc. 3.64% 2. Exxon Mobil Corp. 3.15 3. ConocoPhillips 2.95 4. Questar Corp. 2.94 5. Washington Mutual, Inc. 2.94
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 20.87 $ 20.68
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.2000 $ - $ -
- -------------------------------------------------------------------------------- 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 IS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
Russell 1000 Pioneer Equity Income Value Index VCT Portfolio Jun-95 10,000 10,000 12,462 11,691 Jun-97 16,599 15,260 21,385 19,325 Jun-99 24,887 21,897 22,669 20,748 Jun-01 25,012 22,879 22,772 20,893 Jun-03 22,541 20,075 27,303 23,597 Jun-05 31,138 26,749
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 June 30, 2005) - -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- 10 Years 10.39% 5 Years 5.31% 1 Year 13.90%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value [divided by] $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Equity Income VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005
Share Class II - --------------------------------------------------------- Beginning Account Value On 1/1/05 $ 1,000.00 Ending Account Value On 6/30/05 $ 1,019.00 Expenses Paid During Period* $ 4.91
* Expenses are equal to the Portfolio's annualized expense ratio of 0.98% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Equity Income VCT Portfolio Based on a hypothetical 5% per year return before expenses, reflecting the period from January 1, 2005 through June 30, 2005
Share Class II - --------------------------------------------------------- Beginning Account Value On 1/1/05 $ 1,000.00 Ending Account Value On 6/30/05 $ 1,019.93 Expenses Paid During Period* $ 4.91
* Expenses are equal to the Portfolio's annualized expense ratio of 0.98% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- In the following discussion, John Carey, portfolio manager of Pioneer Equity Income VCT Portfolio, reviews the past six months of 2005 and gives an overview of the Portfolio's performance over that period. Q: How did the Portfolio perform versus its benchmark, the Russell 1000 Value Index? To what do you attribute the Portfolio's relative performance? A. For the six months ended June 30, 2005, Class II shares of Pioneer Equity Income VCT Portfolio rose in value by 1.90% at net asset value, versus 1.76% for the Russell 1000 Value Index. Overall, it was a quarter of modest gains for both the Portfolio and the market. Investors were troubled by high oil prices, rising short-term interest rates, and the continued violence in the Middle East. At the same time, corporate earnings were generally good, and companies continued to boost their dividends. Overseas investors also seemed more comfortable with the outlook for the United States economy, judging from the significant strengthening of the U.S. dollar versus the Euro. On balance, then, it was a positive period, though a period characterized by alternating bouts of optimism and pessimism. The performance data quoted represents past performance, which is no guarantee 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 relative outperformance of the Portfolio versus its benchmark was attributable principally to our overweighting of the utilities sector, which was one of the three top-performing sectors in our benchmark during the period. That overweighting, plus the good performance of the utility stocks we chose, particularly Questar, Constellation Energy, and Ameren, more than made up for our underweighting in energy and our weak stock selection in health care, the other two strong sectors in the first half of the year. Merger-and-acquisition activity continued at a brisk pace, as companies with large cash reserves and rich share prices used the opportunity to buy competitors and expand their market share. Our May Department Stores received a premium take-over bid from retailing rival Federated Department Stores. In this case, the projected deal is to include a combination of cash and Federated shares. Other notable performers in the portfolio were ConocoPhillips, beneficiary of the robust energy market, and Chubb, participant in the strong property-and-casualty insurance industry. Weak performers in the first half included some of our industrial, materials, and consumer-discretionary names. PACCAR, builder of heavy trucks, saw some profit taking in its shares. Roanoke Electric Steel saw its shares rise and fall with the volatile price of steel. Finally, Ford Motor and Johnson Controls both suffered with the soft market for domestic automobiles. Q: What changes did you make to the Portfolio? A. We bought six new stocks and liquidated about the same number of positions. Among the depressed financials, we added Citigroup and Bank of America. The two "mega banks" appeared to us to be priced at levels adequately reflecting the risks in their operations, and both sported attractive dividend yields of about 4%. Citizens Communications, based in Connecticut, provides telephone service throughout the U.S. and pays a very generous dividend of about 7%. Deere, the premier name in agricultural equipment, is doing particularly well as farm incomes rise and farmers buy bright, spanking new tractors. We also purchased shares of Coca-Cola, which we thought was quite reasonably priced, and Genuine Parts, leading distributor of auto parts, which does well whether people are buying new cars or not. Eliminated during the period were several stocks we judged had reached full value, including Occidental Petroleum, Boeing, General Dynamics, and Simon Property Group. We also sold General Motors, Microsoft, and International Business Machines, in each case concluding that we had found preferable alternatives. Q: What is your outlook? A. While we certainly share other investors' concerns about the spike in oil prices and the "tightening" by the Federal Reserve, we remain generally optimistic about the economy and the market. For sure, earnings growth will continue slowing as the economic cycle moves along, and we also tend to think that intermediate and long interest rates will sooner or later match part of the rise in short-term rates. As always, however, there are stocks that are relatively reasonably priced, and if one remembers to invest on the basis of the fundamental values there should still be plenty of good opportunities, we think, to make money over the long term. Thank you for your continued support. 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 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value CONVERTIBLE PREFERRED STOCKS - 0.8% Automobiles & Components - 0.7% Automobile Manufacturers - 0.7% 58,815 Ford Cap Trust, 6.5%, 1/15/32 $ 2,370,245 ------------ Total Automobiles & Components $ 2,370,245 ------------ Pharmaceuticals & Biotechnology - 0.1% Pharmaceuticals - 0.1% 4,255 Schering-Plough Corp., 6.0%, 9/14/07 $ 215,941 ------------ Total Pharmaceuticals & Biotechnology $ 215,941 ------------ TOTAL PREFERRED STOCKS (Cost $2,996,506) $ 2,586,186 ------------ COMMON STOCKS - 95.7% Energy - 8.2% Integrated Oil & Gas - 8.2% 136,116 Chevron Corp. $ 7,611,606 162,043 ConocoPhillips 9,315,852 173,197 Exxon Mobil Corp. 9,953,632 ------------ $ 26,881,090 ------------ Total Energy $ 26,881,090 ------------ Materials - 5.7% Construction Materials - 0.7% 37,024 Vulcan Materials Co. $ 2,406,190 ------------ Diversified Chemical - 1.2% 31,853 E.I. du Pont de Nemours & Co. $ 1,369,997 42,789 PPG Industries, Inc. 2,685,438 ------------ $ 4,055,435 ------------ Diversified Metals & Mining - 0.3% 39,319 Compass Minerals International, Inc. $ 920,065 ------------ Industrial Gases - 1.2% 64,826 Air Products & Chemicals, Inc. $ 3,909,008 ------------ Paper Products - 0.6% 72,699 Meadwestvaco Corp. $ 2,038,480 ------------ Specialty Chemicals - 0.7% 48,271 Valspar Corp. $ 2,331,007 ------------ Steel - 0.9% 57,554 Nucor Corp. $ 2,625,613 22,668 Roanoke Electric Steel Corp. 374,475 ------------ $ 3,000,088 ------------ Total Materials $ 18,660,273 ------------ Capital Goods - 8.2% Aerospace & Defense - 1.5% 94,712 United Technologies Corp. $ 4,863,461 ------------ Shares Value Construction, Farm Machinery & Heavy Trucks - 4.2% 35,067 Deere & Co. $ 2,296,538 169,137 PACCAR, Inc. 11,501,316 ------------ $ 13,797,854 ------------ Electrical Component & Equipment - 1.6% 83,366 Emerson Electric Co. $ 5,221,213 ------------ Industrial Machinery - 0.9% 30,350 Gorman-Rupp Co. $ 649,793 107,418 The Timken Co. 2,481,356 ------------ $ 3,131,149 ------------ Total Capital Goods $ 27,013,677 ------------ Transportation - 0.9% Railroads - 0.9% 66,411 Burlington Northern, Inc. $ 3,126,630 ------------ Total Transportation $ 3,126,630 ------------ Automobiles & Components - 2.2% Auto Parts & Equipment - 1.4% 85,242 Johnson Controls, Inc. $ 4,801,682 ------------ Automobile Manufacturers - 0.8% 249,843 Ford Motor Corp. $ 2,558,392 ------------ Total Automobiles & Components $ 7,360,074 ------------ Consumer Durables & Apparel - 0.8% Housewares & Specialties - 0.8% 112,409 Tupperware Corp. $ 2,626,998 ------------ Total Consumer Durables & Apparel $ 2,626,998 ------------ Consumer Services - 2.2% Leisure Facilities - 1.7% 168,393 Cedar Fair, L.P. $ 5,420,571 ------------ Specialized Consumer Services - 0.5% 131,488 Servicemaster Co. $ 1,761,939 ------------ Total Consumer Services $ 7,182,510 ------------ Media - 1.4% Publishing - 1.4% 103,523 McGraw-Hill Co., Inc. $ 4,580,892 ------------ Total Media $ 4,580,892 ------------ Retailing - 2.5% Department Stores - 2.1% 173,212 May Department Stores Co. $ 6,956,194 ------------ Distributors - 0.4% 32,918 Genuine Parts Co. $ 1,352,601 ------------ Total Retailing $ 8,308,795 ------------
The accompanying notes are an integral part of these financial statements. 5 Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Food, Beverage & Tobacco - 5.5% Packaged Foods & Meats - 3.9% 171,844 Campbell Soup Co. $ 5,287,640 70,338 General Mills, Inc. 3,291,115 85,864 H.J. Heinz Co., Inc. 3,041,303 54,641 Sara Lee Corp. 1,082,438 ------------ $ 12,702,496 ------------ Soft Drinks - 1.6% 84,326 The Coca-Cola Co. $ 3,520,611 33,321 PepsiCo, Inc. 1,797,002 ------------ $ 5,317,613 ------------ Total Food, Beverage & Tobacco $ 18,020,109 ------------ Household & Personal Products - 1.2% Household Products - 1.2% 34,245 Clorox Co. $ 1,908,131 41,467 Colgate-Palmolive Co. 2,069,618 ------------ $ 3,977,749 ------------ Total Household & Personal Products $ 3,977,749 ------------ Health Care Equipment & Services - 0.7% Health Care Equipment - 0.7% 40,409 Becton, Dickinson & Co. $ 2,120,260 ------------ Total Health Care Equipment & Services $ 2,120,260 ------------ Pharmaceuticals & Biotechnology - 8.0% Pharmaceuticals - 8.0% 112,580 Abbott Laboratories $ 5,517,546 207,279 Bristol-Myers Squibb Co. 5,177,828 67,456 Eli Lilly & Co. 3,757,974 66,750 Johnson & Johnson 4,338,750 237,732 Merck & Co., Inc. 7,322,146 ------------ $ 26,114,244 ------------ Total Pharmaceuticals & Biotechnology $ 26,114,244 ------------ Banks - 11.3% Diversified Banks - 4.4% 16,994 Bank of America Corp. $ 775,096 28,656 Comerica, Inc. 1,656,317 100,311 U.S. Bancorp 2,929,081 93,864 Wachovia Corp. 4,655,654 68,274 Wells Fargo & Co. 4,204,313 ------------ $ 14,220,461 ------------ Regional Banks - 4.1% 80,601 First Horizon National Corp. $ 3,401,362 112,894 National City Corp. 3,851,943 86,260 SunTrust Banks, Inc. 6,231,422 ------------ $ 13,484,727 ------------ Shares Value Thrifts & Mortgage Finance - 2.8% 228,189 Washington Mutual, Inc. $ 9,285,010 ------------ Total Banks $ 36,990,198 ------------ Diversified Financials - 5.1% Asset Management & Custody Banks - 3.9% 139,304 Eaton Vance Corp. $ 3,330,759 31,364 State Street Corp. 1,513,313 127,500 T. Rowe Price Associates, Inc. 7,981,500 ------------ $ 12,825,572 ------------ Investment Banking & Brokerage - 0.7% 50,213 A.G. Edwards, Inc. $ 2,267,117 ------------ Diversified Financial Services - 0.5% 34,521 Citigroup, Inc. $ 1,595,906 ------------ Total Diversified Financials $ 16,688,595 ------------ Insurance - 3.4% Property & Casualty Insurance - 3.4% 64,911 Chubb Corp. $ 5,557,030 101,125 Safeco Corp. 5,495,133 ------------ $ 11,052,163 ------------ Total Insurance $ 11,052,163 ------------ Software & Services - 0.6% Data Processing & Outsourced Services - 0.6% 45,824 Automatic Data Processing, Inc. $ 1,923,233 ------------ Total Software & Services $ 1,923,233 ------------ Technology Hardware & Equipment - 1.4% Communications Equipment - 0.6% 103,347 Motorola, Inc. $ 1,887,116 ------------ Computer Hardware - 0.8% 58,880 Diebold, Inc. $ 2,656,077 ------------ Total Technology Hardware & Equipment $ 4,543,193 ------------ Telecommunication Services - 8.7% Integrated Telecommunication Services - 8.7% 60,408 Alltel Corp. $ 3,762,210 102,825 AT&T Corp. 1,957,788 229,318 BellSouth Corp. 6,092,979 282,236 Citizens Utilities Co. (Class B) (a) 3,793,252 197,826 SBC Communications, Inc. 4,698,368 232,145 Verizon Communications, Inc. 8,020,610 ------------ $ 28,325,207 ------------ Total Telecommunication Services $ 28,325,207 ------------
6 The accompanying notes are an integral part of these financial statements. Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Utilities - 17.7% Electric Utilities - 8.6% 89,534 Ameren Corp. $ 4,951,230 75,249 American Electric Power Co., Inc. 2,774,431 86,352 Consolidated Edison, Inc. 4,044,728 76,895 FPL Group, Inc. 3,234,204 122,368 Great Plains Energy, Inc. (a) 3,902,316 135,402 NSTAR 4,174,444 143,822 Southern Co. 4,986,309 ------------ $ 28,067,662 ------------ Gas Utilities - 6.0% 17,375 Atmos Energy Corp. $ 500,400 56,505 Equitable Resources, Inc. 3,842,340 144,595 KeySpan Energy Corp. 5,885,017 141,019 Questar Corp. 9,293,152 ------------ $ 19,520,909 ------------ Independent Power Producer & Energy Traders - 2.4% 137,203 Constellation Energy Group $ 7,915,241 ------------ Water Utilities - 0.7% 82,718 Aqua America, Inc. $ 2,460,033 ------------ Total Utilities $ 57,963,845 ------------ TOTAL COMMON STOCKS (Cost $251,069,104) $313,459,735 ------------ Principal Amount TEMPORARY CASH INVESTMENTS - 5.2% Repurchase Agreement - 3.0% $9,800,000 UBS Warburg, Inc., 2.75%, dated 6/30/05, repurchase price of $9,800,000 plus accrued interest on 7/1/05 collateralized by $9,959,000 U.S. Treasury Note, 2.0%, 8/31/05 $ 9,800,000 ------------ Shares Value Security Lending Collateral - 2.2% 7,334,929 Securities Lending Investment Fund, 3.29% $ 7,334,929 ------------ TOTAL TEMPORARY CASH INVESTMENTS (Cost $17,134,929) $ 17,134,929 ------------ TOTAL INVESTMENT IN SECURITIES - 101.7% (Cost $271,200,539) $333,180,850 ------------ OTHER ASSETS AND LIABILITIES - (1.7)% $ (5,628,884) ------------ TOTAL NET ASSETS - 100.0% $327,551,966 ============
(a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 255,378 Citizens Utilities Co. (Class B) $3,432,280 116,250 Great Plains Energy, Inc. 3,707,213 ---------- Total $7,139,493 ==========
The accompanying notes are an integral part of these financial statements. 7 Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended Class II (unaudited) 12/31/04 Net asset value, beginning of period $ 20.68 $ 18.19 ------- ------- Increase (decrease) from investment operations: Net investment income $ 0.19 $ 0.36 Net realized and unrealized gain (loss) on investments 0.20 2.53 ------- ------- Net increase (decrease) from investment operations $ 0.39 $ 2.89 Distributions to shareowners: Net investment income (0.20) (0.40) Net realized gain -- -- -------- ------- Net increase (decrease) in net asset value $ 0.19 $ 2.49 -------- ------- Net asset value, end of period $ 20.87 $ 20.68 ======= ======= Total return* 1.90% 16.04% Ratio of net expenses to average net assets+ 0.98%** 0.98% Ratio of net investment income to average net assets+ 2.10%** 2.16% Portfolio turnover rate 17%** 19% Net assets, end of period (in thousands) $114,814 $93,691 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.98%** 0.98% Net investment income 2.10%** 2.16% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.98%** 0.98% Net investment income 2.10%** 2.16% Year Year Year Year Ended Ended Ended Ended Class II 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 15.18 $ 18.49 $ 21.37 $ 20.82 ------- --------- ------- ------- Increase (decrease) from investment operations: Net investment income $ 0.32 $ 0.31 $ 0.34 $ 0.29 Net realized and unrealized gain (loss) on investments 3.02 (3.25) (1.84) 2.45 ------- --------- ------- ------- Net increase (decrease) from investment operations $ 3.34 $ (2.94) $ (1.50) $ 2.74 Distributions to shareowners: Net investment income (0.33) (0.37) (0.32) (0.45) Net realized gain -- -- (1.06) (1.74) ------- --------- ------- -------- Net increase (decrease) in net asset value $ 3.01 $ (3.31) $ (2.88) $ 0.55 ------- --------- ------- -------- Net asset value, end of period $ 18.19 $ 15.18 $ 18.49 $ 21.37 ======= ========= ======= ======= Total return* 22.27% (16.05)% (7.15)% 14.49% Ratio of net expenses to average net assets+ 1.02% 1.07% 1.02% 0.96% Ratio of net investment income to average net assets+ 2.29% 2.25% 1.77% 1.99% Portfolio turnover rate 12% 12% 13% 13% Net assets, end of period (in thousands) $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 1.02% 1.07% 1.02% 0.96% Net investment income 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 1.02% 1.07% 1.02% 0.96% Net investment income 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. ** Annualized. + 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 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $7,139,493) (Cost $271,200,539) $333,180,850 Receivables -- Fund shares sold 1,644,772 Dividends, interest and foreign taxes withheld 594,447 Other 848 ------------ Total assets $335,420,917 ------------ LIABILITIES: Payables -- Fund shares repurchased $ 201,742 Upon return for securities loaned 7,334,929 Due to bank 217,611 Due to affiliates 7,526 Accrued expenses 107,143 ------------ Total liabilities $ 7,868,951 ------------ NET ASSETS: Paid-in capital $271,604,704 Undistributed net investment income (loss) 1,399,456 Accumulated net realized gain (loss) (7,432,505) Net unrealized gain (loss) on: Investments 61,980,311 ------------ Total net assets $327,551,966 ------------ NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $212,737,473 Shares outstanding 10,248,184 ------------ Net asset value per share $ 20.76 Class II: (No par value, unlimited number of shares authorized) Net assets $114,814,493 Shares outstanding 5,502,731 ------------ Net asset value per share $ 20.87
The accompanying notes are an integral part of these financial statements. 9 Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 INVESTMENT INCOME: Dividends $ 4,400,669 Interest 161,165 Income on securities loaned, net 386 ------------ Total investment income $ 4,562,220 ------------ EXPENSES: Management fees $ 964,185 Transfer agent fees and expenses 1,488 Distribution fees (Class II) 128,140 Administrative reimbursements 28,591 Custodian fees 20,598 Professional fees 20,550 Printing expense 40,238 Fees and expenses of nonaffiliated trustees 115 Miscellaneous 8,196 ------------ Total expenses $ 1,212,101 ------------ Net expenses $ 1,212,101 ------------ Net investment income (loss) $ 3,350,119 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from: Investments $ 5,965,404 ------------ Change in net unrealized gain or loss from: Investments $ (3,267,633) ------------ Net gain (loss) on investments $ 2,697,771 ============ Net increase (decrease) in net assets resulting from operations $ 6,047,890 ============
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 - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended (unaudited) 12/31/04 FROM OPERATIONS: Net investment income (loss) $ 3,350,119 $ 5,474,342 Net realized gain (loss) on investments 5,965,404 2,001,864 Change in net unrealized gain or loss on investments (3,267,633) 29,937,321 ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 6,047,890 $ 37,413,527 ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (2,137,713) $ (3,809,792) Class II (1,040,999) (1,595,526) ------------- ------------- Total distributions to shareowners $ (3,178,712) $ (5,405,318) ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 55,925,809 $ 63,295,941 Reinvestment of distributions 3,178,712 5,405,317 Cost of shares repurchased (16,347,511) (34,772,572) ------------- ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ 42,757,010 $ 33,928,686 ------------- ------------- Net increase (decrease) in net assets $ 45,626,188 $ 65,936,895 ------------- ------------- NET ASSETS: Beginning of period $ 281,925,778 $ 215,988,883 ------------- ------------- End of period $ 327,551,966 $ 281,925,778 ============= ============= Undistributed net investment income (loss), end of period $ 1,399,456 $ 1,228,049 ============= =============
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 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Equity Income VCT Portfolio is a portfolio of the Pioneer Variable Contracts Trust (the Trust), a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Conservative Allocation VCT Portfolio (Ibbotson Conservative Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts or by qualified pension and retirement plans. The 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. 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 portfolios are computed once daily, on each day the New York Stock Exchange (NYSE) is open, as of the close of regular trading on the NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. 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 12 Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 NYSE. At June 30, 2005, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis, 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 June 30, 2005, 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 net capital loss carryforward of $13,046,273, of which the following amounts will expire between 2009 and 2011 if not utilized: $3,961,413 in 2009, $6,407,206 in 2010 and $2,677,654 in 2011. 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. The tax character of current year distributions will be determined at the end of the current fiscal year.
- --------------------------------------------------- 2004 - --------------------------------------------------- Distributions paid from: Ordinary Income $ 5,405,318 Long-Term capital gain -- ------------- $ 5,405,318 ------------- Return of Capital -- ------------- Total distributions $ 5,405,318 ============= Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ -- Undistributed long-term gain/ (capital loss carryforward) (13,046,273) Post-October loss deferred (229,369) Unrealized appreciation (depreciation) 66,353,726 ------------- Total $ 53,078,084 ============= - ---------------------------------------------------
13 Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (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 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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 the 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 portfolios. Management fees are calculated daily at the annual rate of 0.65% of the Portfolio's average daily net assets. In addition, under the management and administration agreement, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Portfolio. At June 30, 2005, $6,229 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 $509 in transfer agent fees payable to PIMSS at June 30, 2005. 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 $788 payable to PFD at June 30, 2005. 14 Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $270,094,757 $68,821,554 $ (5,735,461) $63,086,093 ============ =========== ============ =========== - ---------------------------------------------------------------------------------------------------
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 six months ended June 30, 2005, were $68,917,854 and $24,677,663, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
- ------------------------------------------------------------------------------------------------- '05 Shares '05 Amount Equity Income Portfolio (unaudited) (unaudited) '04 Shares '04 Amount - ------------------------------------------------------------------------------------------------- CLASS I: Shares sold 1,632,023 $ 33,558,634 1,757,096 $ 33,474,454 Reinvestment of distributions 103,814 2,137,713 198,654 3,809,791 Shares repurchased (635,606) (13,043,210) (1,411,407) (26,451,072) -------------------------------------------------------------- Net increase (decrease) 1,100,231 $ 22,653,137 544,343 $ 10,833,173 ============================================================== CLASS II: Shares sold 1,081,873 $ 22,367,175 1,571,139 $ 29,821,487 Reinvestment of distributions 50,295 1,040,999 82,473 1,595,526 Shares repurchased (158,972) (3,304,301) (442,520) (8,231,500) -------------------------------------------------------------- Net increase 973,196 $ 20,103,873 1,211,092 $ 23,095,513 ============================================================== - -------------------------------------------------------------------------------------------------
15 Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return and yield, as well as 16 Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- the Fund's performance compared to both the performance of a peer group and an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the first quintile of the peer group for the 12 months ended June 30, 2004, the second quintile of the peer group for the three years ended June 30, 2004, and was in the second quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees also considered that the yield to Fund Class I shareholders exceeded the yield of the Standard & Poor's 500 Index. The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the third quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio for the 12 months ended June 30, 2004 was in the second quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio was lower than that of most of the comparable. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there was potential for realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, 17 Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- break points in the management fee are not necessary at this time. The Trustees will continue to evaluate annually the appropriateness of break points. H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 18 [LOGO] PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17875-00-0805 [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Equity Opportunity VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Table of Contents - -------------------------------------------------------------------------------- Pioneer Equity Opportunity 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
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 Opportunity VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- [The following data was represented as pie charts in the printed material]
Portfolio Diversification Sector Distribution (As a percentage of total investment portfolio) (As a percentage of equity holdings) U.S. Common Stocks 89.2% Materials 25.1% Temporary Cash Investments 10.8% Financials 23.7% Health Care 19.0% Utilities 14.4% Industrials 10.0% Consumer Staples 2.9% Energy 2.5% Consumer Discretionary 2.4%
Five Largest Holdings (As a percentage of equity holdings) 1. Equity Office Properties Trust 4.96% 2. Atmos Energy Corp. 4.39 3. The Scotts Miracle-Gro Co. 4.19 4. Hartford Financial Services Group, Inc. 4.02 5. National Fuel Gas Co. 3.69
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 3/18/05 Net Asset Value per Share $ 10.23 $ 10.00
Distributions per Share Short-Term Long-Term (3/18/05 - 6/30/05) 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 Equity Opportunity VCT Portfolio at net asset value, compared to that of the Russell 2500 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 Equity Opportunity Russell VCT Portfolio 2500 Index 3/05 $10,000 $10,000 6/05 $10,396 $10,452
The Russell 2500 Index measures the performance of U.S. small- and mid-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. - -------------------------------------------------------------------------------- Cumulative Total Returns (As of June 30, 2005) - -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 2.30% (3/18/05)
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 Opportunity VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Equity Opportunity VCT Portfolio Based on actual returns from March 18, 2005 through June 30, 2005.
Share Class II - ---------------------------------------------------------- Beginning Account Value on 3/18/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,023.00 Expenses Paid During Period* $ 3.64
* Expenses are equal to the Portfolio's annualized expense ratio of 1.25% for Class II shares multiplied by the average account value over the period, multiplied by 105/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Equity Opportunity VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from March 18, 2005 through June 30, 2005.
Share Class II - ---------------------------------------------------------- Beginning Account Value on 3/18/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,010.79 Expenses Paid During Period* $ 3.62
* Expenses are equal to the Portfolio's annualized expense ratio of 1.25% for Class II shares multiplied by the average account value over the period, multiplied by 105/365 (to reflect the one-half year period). 3 Pioneer Equity Opportunity VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- Markets were volatile over the first six months of the year as investors came to grips with rising energy costs and higher short-term interest rates. In the following discussion, portfolio manager Margie Patel explains the thinking behind her investment choices and gives her assessment of the period ahead. For the abbreviated period from the Portfolio's inception on March 18, 2005 through June 30, 2005, Class II shares of the Portfolio returned 2.30% at net asset value. In comparison, the Portfolio's benchmark, the Russell 2500 Index, returned 4.52% for the three months ended June 30, 2005. The performance data quoted represent past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q. Please describe the investment background and how you built the initial portfolio. A. Stocks declined in January when the year-end rally sputtered, then moved higher in March. Following another slump in April, a brisk rebound was underway as the period ended. Behind the volatility was investor anxiety over rising energy costs and hikes in short-term interest rates. With all this as background, we maintained our focus on identifying industries that we think can participate fully in the continued economic expansion that we believe is in place. As a result of that process, the Portfolio's largest sector allocations at the end of the period were in basic materials, financial services, health care and utilities. Stock selections in each sector reflect our analysis of which companies we believe are most attractively valued relative to their growth potential. We think there is currently a good balance between supply and demand in the basic materials industry. Also, years of under-investment have meant that little new capacity has come on-line, so many companies should be positioned to enjoy better operating results and have some ability to raise prices. In chemicals, Olin Corporation, which manufactures caustic soda and chlorine, is experiencing solid demand as business improves for its metals-producing customers. Some specialty chemical companies also appear well situated: Scott's Miracle-Gro holds a unique position in lawn and garden care products. Scott's, which is also restructuring to improve cash flow, is a conservatively run company with well-known brands, but we think it is still small enough to grow. Financial services holdings are chiefly in real estate. We believe well-diversified companies like Equity Office Properties and General Growth Properties will use the current expansion to work down vacancy rates, thus increasing income, while enhancing property values. Attractive long-term interest rates could also provide a boost, although there is some uncertainty as leases come up for renewal while vacancies persist. About half of our health-care holdings are companies that make equipment and supplies, with the balance in the biotech and pharmaceutical sectors. We think supply companies, especially those with good client relationships and unique products, stand to outpace the economy, thanks to favorable demographic trends. Demand for health care is also less economically sensitive than that for many other types of goods and services. We are avoiding industrial areas that are globally hyper-competitive and instead emphasizing companies with established and relatively secure niches. We also favor businesses that can benefit from the pick-up in capital spending that has accompanied economic growth. Q. Which areas had the most favorable impact on Portfolio results? A. The Portfolio benefited from holdings in a variety of sectors. Results got a boost from the Portfolio's position in General Growth Properties (GGP), a real estate investment trust (REIT). GGP continued to perform well due to strong retail sales and the operating results of its mall properties. Two health-care equipment and services holdings also helped. Mentor's products are used in a range of medical and surgical specialties, as well as in consumer health-care applications. Bio-Rad Laboratories is a multinational manufacturer and distributor of life-science research products, clinical diagnostics, and analytical instrumentation. We think Bio-Rad's sales should continue to benefit with increased spending from health-research institutions. In energy, Kinder Morgan, one of America's largest energy transportation and storage companies contributed to the Portfolio's performance due to continued and historically strong operating results. A Word About Risk: At times, the Portfolio may focus its investments in one industry or on a group of related industries. To the extent the Portfolio emphasizes investments in a market segment, the Portfolio will be more susceptible to adverse economic, political or regulatory developments affecting those industries than a portfolio that invests more broadly and as a result may experience greater market fluctuation than a portfolio without the same focus. Investments in high yield or lower-rated securities are subject to greater-than-average risk. When interest rates rise, the prices of fixed income securities in the Portfolio will generally fall. Conversely, when interest rates fall, the prices of fixed income securities in the Portfolio will generally rise. Investing in small and mid-sized companies may offer the potential for higher returns, but are also subject to greater short-term price fluctuations than larger, more established companies. 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. 4 Pioneer Equity Opportunity VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Q. What were some of the period's disappointments? A. Valeant Pharmaceuticals, a specialty pharmaceutical company, declined due to competitive concerns over the timing of new product launches. Other holdings that detracted from performance were Donaldson and Kaydon. Donaldson, a manufacturer of filtration systems, declined due to short-term concerns over decreased demand in some of their end markets (e.g., automotive sector). Kaydon, a manufacturer of custom-engineered products, also detracted from performance over concerns about slower end markets. Q. What is your outlook for the economy and how does the portfolio reflect that outlook? A. We believe the U.S. economy will continue to expand in line with its long-term growth rate of three to three-and-a-half percent. Supporting that thesis are factors such as the nation's continuing population growth and the dynamic nature of our economy. A Federal Reserve Board policy that favors gradual and incremental changes in short-term rates also provides what we think is a fairly stable environment for business planning. We are comfortable with the current positioning of the portfolio against that backdrop. Our focus remains on industries with prospects to grow faster than the economy, while we are avoiding sectors that are unlikely to participate in the expansion or those that are burdened by excessive competition. Equity holdings are a mix of value and growth companies, with an average market capitalization between the small- and mid-cap ranges. We think that our companies are large enough to have defensible business positions and small enough to grow within their competitive universes. Some may also expand through acquisition or be potential targets of acquirers. In selecting stocks, we emphasize industry positions and the potential value of business franchises, not short-term earnings trends. 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 Equity Opportunity VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 98.5% Energy - 2.5% Oil & Gas Storage & Transportation - 2.5% 65 Kinder Morgan, Inc. $ 5,409 -------- Total Energy $ 5,409 -------- Materials - 24.7% Aluminum - 2.1% 182 Novelis, Inc. $ 4,674 -------- Commodity Chemicals - 3.7% 201 Lyondell Petrochemicals Co. $ 5,310 91 NOVA Chemicals Corp. 2,781 -------- $ 8,091 -------- Diversified Chemical - 2.2% 259 Olin Corp. $ 4,724 -------- Fertilizers & Agricultural Chemicals - 4.1% 127 The Scotts Miracle-Gro Co.* $ 9,044 -------- Metal & Glass Containers - 4.3% 239 Crown Cork & Seal Co., Inc.* $ 3,401 244 Owens-Illinois, Inc.* 6,112 -------- $ 9,513 -------- Paper Products - 2.4% 1,181 Abitibi-Consolidated, Inc. $ 5,291 -------- Specialty Chemicals - 5.9% 39 Cytec Industries, Inc. $ 1,552 322 RPM, Inc. 5,880 96 Sigma-Aldrich Corp. 5,380 -------- $ 12,812 -------- Total Materials $ 54,149 -------- Capital Goods - 9.8% Building Products - 2.6% 267 Lennox International, Inc. $ 5,652 -------- Electrical Component & Equipment - 2.9% 89 Roper Industries, Inc. $ 6,352 -------- Industrial Machinery - 3.3% 187 Donaldson Co., Inc. $ 5,672 62 Kaydon Corp. 1,727 -------- $ 7,399 -------- Trading Companies & Distributors - 1.0% 69 Wesco International, Inc.* $ 2,165 -------- Total Capital Goods $ 21,568 --------
Shares Value Media - 2.4% Advertising - 2.4% 426 The Interpublic Group of Companies, Inc.* $ 5,189 -------- Total Media $ 5,189 -------- Household & Personal Products - 2.8% Personal Products - 2.8% 140 Alberto-Culver Co. (Class B) $ 6,066 -------- Total Household & Personal Products $ 6,066 -------- Health Care Equipment & Services - 13.2% Health Care Equipment - 13.2% 125 Bio-Rad Laboratories, Inc.* $ 7,401 101 Fisher Scientific International, Inc.* 6,556 62 Mentor Corp. 2,572 242 Steris Corp. 6,236 231 Thermo Electron Corp.* 6,207 -------- $ 28,972 -------- Total Health Care Equipment & Services $ 28,972 -------- Pharmaceuticals & Biotechnology - 5.5% Biotechnology - 3.4% 364 Protein Design Labs, Inc.* $ 7,356 -------- Pharmaceuticals - 2.1% 262 Valeant Pharmaceuticals International $ 4,619 -------- Total Pharmaceuticals & Biotechnology $ 11,975 -------- Banks - 2.7% Thrifts & Mortgage Finance - 2.7% 267 Sovereign Bancorp, Inc. $ 5,965 -------- Total Banks $ 5,965 -------- Insurance - 4.0% Multi-Line Insurance - 4.0% 116 Hartford Financial Services Group, Inc. (a) $ 8,674 -------- Total Insurance $ 8,674 -------- Real Estate - 16.7% Real Estate Management & Development - 1.5% 46 Forest City Enterprises, Inc. $ 3,266 -------- Real Estate Investment Trusts - 15.2% 323 Equity Office Properties Trust (a) $ 10,691 177 General Growth Properties, Inc. (a) 7,273 137 Mack-Cali Realty Corp. 6,206 271 MeriStar Hospitality Corp.* 2,331 187 Saul Centers, Inc. 6,797 -------- $ 33,298 -------- Total Real Estate $ 36,564 --------
6 The accompanying notes are an integral part of these financial statements. Pioneer Equity Opportunity VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Utilities - 14.2% Gas Utilities - 11.1% 329 Atmos Energy Corp. $ 9,475 275 National Fuel Gas Co. 7,950 1,167 SEMCO Energy, Inc.* 6,990 -------- $ 24,415 -------- Independent Power Producer & Energy Traders - 3.1% 178 NRG Energy, Inc.* $ 6,693 -------- Total Utilities $ 31,108 -------- TOTAL COMMON STOCKS (Cost $211,563) $215,639 -------- TEMPORARY CASH INVESTMENTS - 11.9% Security Lending Collateral - 11.9% 26,074 Securities Lending Investment Fund, 3.29% $ 26,074 -------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $26,074) $ 26,074 -------- TOTAL INVESTMENT IN SECURITIES - 110.4% (Cost $237,637) $241,713 -------- OTHER ASSETS AND LIABILITIES - (10.4)% $(22,831) -------- TOTAL NET ASSETS - 100.0% $218,882 ========
* Non-income producing security (a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 307 Equity Office Properties Trust $10,162 168 General Growth Properties, Inc. 6,903 110 Hartford Financial Services Group, Inc. 8,226 ------- Total $25,291 =======
The accompanying notes are an integral part of these financial statements. 7 Pioneer Equity Opportunity VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
3/18/05 (a) to 6/30/05 Class II (unaudited) Net asset value, beginning of period $ 10.00 ------- Increase from investment operations: Net investment income $ 0.03 Net realized and unrealized gain on investments 0.20 ------- Net increase from investment operations $ 0.23 ------- Net increase in net asset value $ 0.23 ------- Net asset value, end of period $ 10.23 ======= Total return* 2.30% Ratio of net expenses to average net assets+ 1.25%** Ratio of net investment income to average net assets+ 1.13%** Portfolio turnover rate 0%** Net assets, end of period (in thousands) $ 219 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 46.54%** Net investment loss (44.16)%** Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.25%** Net investment income 1.13%**
(a) Class II shares were first publicly offered on March 18, 2005. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions, the complete redemption of the investment at net asset value at the end of each period. ** Annualized + Ratios with no reduction for fees paid indirectly. 8 The accompanying notes are an integral part of these financial statements. Pioneer Equity Opportunity VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $25,291) (cost $237,637) $ 241,713 Cash 419 Receivables - Fund shares sold 11,459 Dividends, interest and foreign taxes withheld 293 Due from Pioneer Investment Management, Inc. 8,655 --------- Total assets $ 262,539 --------- LIABILITIES: Payables - Upon return of securities loaned $ 26,074 Due to affiliates 337 Accrued expenses 17,246 --------- Total liabilities $ 43,657 --------- NET ASSETS: Paid-in capital $ 214,157 Undistributed net investment income 649 Net unrealized gain on: Investments 4,076 --------- Total net assets $ 218,882 --------- NET ASSET VALUE PER SHARE: Class II: (No par value, unlimited number of shares authorized) Net assets $ 218,882 Shares outstanding 21,404 --------- Net asset value per share $ 10.23
The accompanying notes are an integral part of these financial statements. 9 Pioneer Equity Opportunity VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
3/18/05 (Commencement of Operations) to 6/30/05 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $6) $ 1,213 Interest 148 --------- Total investment income $ 1,361 --------- EXPENSES: Management fees $ 417 Transfer agent fees and expenses 451 Distribution fees 113 Administrative reimbursements 4,761 Custodian fees 4,541 Professional fees 11,374 Printing expense 4,718 Fees and expenses of nonaffiliated trustees 101 Miscellaneous 125 --------- Total expenses $ 26,601 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (25,889) --------- Net expenses $ 712 --------- Net investment income $ 649 --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from: Investments $ - --------- Change in net unrealized gain or loss from: Investments $ 4,076 --------- Net gain on investments $ 4,076 --------- Net increase in net assets resulting from operations $ 4,725 =========
10 The accompanying notes are an integral part of these financial statements. Pioneer Equity Opportunity VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
3/18/05 (Commencement of Operations) to 6/30/05 (unaudited) FROM OPERATIONS: Net investment income $ 649 Net realized gain (loss) on investments - Change in net unrealized gain or loss on investments 4,076 -------- Net increase in net assets resulting from operations $ 4,725 -------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $218,837 Reinvestment of distributions - Cost of shares repurchased (4,680) -------- Net increase in net assets resulting from Fund share transactions $214,157 -------- Net increase in net assets $218,882 -------- NET ASSETS: Beginning of period - -------- End of period $218,882 ======== Undistributed net investment income, end of period $ 649 ========
The accompanying notes are an integral part of these financial statements. 11 Pioneer Equity Opportunity VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Equity Opportunity VCT Portfolio (the Portfolio) is a portfolio of Pioneer Variable Contracts Trust (the Trust), a Delaware statutory business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty-eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Moderate Allocation VCT Portfolio (Ibbotson Moderate Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) The Equity Opportunity Portfolio commenced operations on March 18, 2005. Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts or by qualified pension and retirement plans. The investment objective of Equity Opportunity Portfolio is to seek 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 NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. The 12 Pioneer Equity Opportunity VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 June 30, 2005, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 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. C. Portfolio Shares The Portfolio records sales and repurchases of its shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $525,089 in commissions on the sale of Trust shares for the period ended June 30, 2005. 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. 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 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 June 30, 2005, $136 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. Through May 1, 2006, 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 1.25% of the average daily net assets attributable to class II shares. As of June 30, 2005, 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. 13 Pioneer Equity Opportunity VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- Included in due to affiliates is $201 in transfer agent fees payable to PIMSS at June 30, 2005. 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. There were no fees payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, the Portfolio's 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) - ------------------------------------------------------------------------------------------------ Equity Opportunity Portfolio $237,637 $12,151 $(8,075) $4,076 ======== ======= ======= ====== - ------------------------------------------------------------------------------------------------
6. Portfolio Transactions The cost of purchases of investments other than U.S. Government obligations and temporary cash investments for the period ended June 30, 2005, was $211,563. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows for the period ended June 30, 2005:
- -------------------------------------------------------------------------------- Equity Opportunity Portfolio '05 Shares '05 Amount - -------------------------------------------------------------------------------- CLASS II: Shares sold 21,868 $218,837 Reinvestment of distributions -- -- Shares repurchased (464) (4,680) -------------------------------------- Net increase 21,404 $214,157 ====================================== - --------------------------------------------------------------------------------
14 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 15 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 16 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 17 [LOGO] PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolios investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17886-00-0805 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- Table of Contents - -------------------------------------------------------------------------------- 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 11 Factors Considered by the Trustees in Approving the Management Contract 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 Fund 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 6/30/05 - -------------------------------------------------------------------------------- Sector Distribution (As a percentage of total investment portfolio) (THE FOLLOWING DATA WAS REPRESENTED BY A PIE CHART IN THE PRINTED DOCUMENT.) International Common Stocks 98.5% International Preferred Stocks 1.5%
Geographical Distribution (As a percentage of equity holdings) (THE FOLLOWING DATA WAS REPRESENTED BY A PIE CHART IN THE PRINTED DOCUMENT.) United Kingdom 25.2% Austria 0.8% Finland 0.8% United States 1.0% Ireland 2.0% Italy 2.5% Sweden 2.5% Netherlands 6.0% Spain 6.3% Germany 13.0% Switzerland 14.8% France 25.1%
Five Largest Holdings (As a percentage of equity holdings) 1. Vodafone Group Plc 4.74% 2. Total SA 4.20 3. Royal Bank of Scotland Group Plc 4.03 4. BNP Paribas SA 3.80 5. Societe Generale 3.54
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $10.23 $10.44
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.0511 $ - $ -
- -------------------------------------------------------------------------------- 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 BY A LINE CHART IN THE PRINTED DOCUMENT.)
Pioneer Europe VCT Portfolio MSCI Europe Index 10/98 10,000 10,000 10,403 10,728 13,269 12,348 6/01 8,852 9,663 8,017 8,918 6/03 7,460 8,452 9,196 10,891 6/05 10,523 12,730
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 0.84% (10/30/98) 5 Years -4.44 1 Year 15.00
All total returns shown assume reinvestment of distributions at net asset value. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.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 semiannual 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 variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Europe VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005.
Share Class II -------------------------------------------------- Beginning Account Value on 1/1/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 984.80 Expenses Paid During Period* $ 8.61
* Expenses are equal to the Portfolio's annualized expense ratio of 1.75% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Europe VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from January 1, 2005 through June 30, 2005.
Share Class II -------------------------------------------------- Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $1,016.12 Expenses Paid During Period* $ 8.75
* Expenses are equal to the Portfolio's annualized expense ratio of 1.75% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- European stocks achieved solid gains early in 2005, but investors' concerns about high oil prices and corporate profitability this spring contributed to mixed performance results for the first half of the Europe VCT Portfolio's fiscal year. In the discussion below, Stan Pearson, who is responsible for the day-to-day management of the Portfolio, highlights these and other factors that influenced performance. Q. How did the Portfolio perform? A. For the six months ended June 30, 2005, Class II shares returned -1.52% at net asset value. In comparison, the Morgan Stanley Capital International (MSCI) Europe Index, the Portfolio's benchmark, posted a return of -0.38%. Bank holdings, particularly Royal Bank of Scotland, were a major factor in the Portfolio's underperformance relative to its benchmark. Investments in Royal Bank of Scotland underperformed during the first quarter of the year as a result of investor concerns about a potential slowdown in consumer spending and the housing market in the United Kingdom. We continue to hold this stock, because we believe the company still offers strong growth potential, is benefiting from its diversified business and has attractive valuations supported by high dividend yield. Royal Bank of Scotland gained during the second quarter, erasing some of its first quarter losses. The performance data quoted represents past performance, which is no guarantee 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. Did currency fluctuations have a material effect on performance? A. Yes. The euro weakened versus the U.S. dollar over the six-month period. In the first quarter, the stronger dollar was supported by expectations that its decline in recent years would help reduce the U.S. current account deficit. The dollar also gained as investors began to price in a faster-than-expected pace of monetary tightening by the Federal Reserve to ward off inflationary pressures. In the second quarter, the rejection of the proposed European Union constitution by French and Dutch voters sparked uncertainty among market participants about future economic integration in Europe and put downward pressure on the euro versus the dollar. For U.S. investors investing in euro-denominated investments, the decline in the euro's value hurt Portfolio performance when returns were translated back into dollar-denominated terms. Q. Which stocks positively influenced the Portfolio's performance? A. An overweight position and effective stock selection in the diversified financials sector proved positive. Deutsche Boerse (Germany) was a positive contributor. During the first quarter of 2005, the stock recovered strongly after withdrawing its bid for the London Stock Exchange. We sold the entire position in the company in March to profit from the price appreciation. Successful stock selection in the technology hardware sector also was a positive contributor. We added Ericsson (Sweden) to the Portfolio, which outperformed for the six months, and decided against owning the French stock Alcatel, which was favorable, since the stock lost ground for the six-month period. Ericsson, which is undervalued in our opinion, is the top telecommunications equipment producer for mobile phones and should benefit with the transition from second to third generation mobile telephony in Europe. Our positions in pharmaceutical companies Astrazeneca and Sanofi-Aventis outperformed thanks to some positive news on potential earnings growth. The energy sector was supported by high oil prices, which climbed to over $60 per barrel. Q. Did you add any new holdings? A. We found several new investment opportunities. In the automobile sector, we added Continental (Germany) based on its compelling price valuation and our expectation that the company will increase earnings as its new car safety system, the Electronic Stability Program, penetrates the U.S. market. Synthes (Switzerland), which develops and produces medical products for orthopedic surgery, is well positioned to benefit from a growing market. We think Swiss Re (Switzerland), a reinsurance company, offers an attractive growth opportunity. The outlook for the stock is supported by our view that the reinsurance cycle appears relatively stable at this time. We also added Telekom Austria, as the company is creating attractive growth opportunities in Eastern Europe. Among the Portfolio's holdings sold were Allied Irish Banks and Depfa Bank (Germany), HSBC Holding (U.K.), Fortis (Benelux) and Assicurazioni Generali (Italy), because the stocks had reached the price targets set by the portfolio management team. In the telecoms sector, we sold Belgacom, which had been a good performer since its initial offering in March 2004. Q. What is your outlook? A. Despite a challenging macroeconomic growth outlook, we remain upbeat about the European investment environment. Price valuations are quite reasonable and are already discounting the moderate economic outlook. Dividend yields are high and some have the potential to increase thanks to strong cash generation. We also think the supportive stance by the European Central Bank, which held interest rates at 2% during the period, is beneficial for equities and economic growth. 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 6/30/05 (UNAUDITED)
Shares Value PREFERRED STOCKS - 1.5% Automobiles & Components - 1.5% Automobile Manufacturers - 1.5% 353 Porsche AG $ 264,596 ----------- Total Automobiles & Components $ 264,596 ----------- TOTAL PREFERRED STOCKS (Cost $159,038) $ 264,596 ----------- COMMON STOCKS - 96.0% Energy - 12.2% Integrated Oil & Gas - 12.2% 45,606 BP Amoco Plc $ 474,755 16,656 Eni S.p.A. 426,766 21,227 Repsol SA 538,462 3,114 Total SA 729,153 ----------- $ 2,169,136 ----------- Total Energy $ 2,169,136 ----------- Materials - 8.7% Construction Materials - 5.5% 13,391 CRH Plc $ 353,559 4,347 Holcim, Ltd. 263,743 3,932 Lafarge Br 356,769 ----------- $ 974,071 ----------- Diversified Chemical - 1.9% 5,031 BASF India, Ltd. $ 333,413 ----------- Diversified Metals & Mining - 1.3% 7,996 Rio Tinto Plc $ 243,007 ----------- Total Materials $ 1,550,491 ----------- Capital Goods - 9.0% Building Products - 1.9% 6,078 Compagnie de Saint Gobain $ 335,842 ----------- Construction & Engineering - 2.8% 11,478 ACS, Actividades de Construccion y Servicios, SA $ 319,945 2,240 VINCI SA 186,315 ----------- $ 506,260 ----------- Electrical Component & Equipment - 1.0% 2,344 Schneider Electric SA $ 176,159 ----------- Industrial Conglomerates - 2.6% 6,284 Siemens $ 456,775 ----------- Industrial Machinery - 0.7% 12,288 AB SKF $ 125,272 ----------- Total Capital Goods $ 1,600,308 -----------
Shares Value Commercial Services & Supplies - 1.0% Office Services & Supplies - 1.0% 17,713 Buhrmann NV $ 174,772 ----------- Total Commercial Services & Supplies $ 174,772 ----------- Transportation - 1.7% Air Freight & Couriers - 1.7% 12,170 TNT Post Group NV $ 308,117 ----------- Total Transportation $ 308,117 ----------- Automobiles & Components - 3.1% Tires & Rubber - 3.1% 3,898 Compagnie Generale des Etablissements Michelin $ 236,582 4,318 Continental AG 310,377 ----------- $ 546,959 ----------- Total Automobiles & Components $ 546,959 ----------- Consumer Durables & Apparel - 2.8% Apparel, Accessories & Luxury Goods - 1.5% 1,599 Adidas-Salomon AG $ 266,712 ----------- Consumer Electronics - 1.3% 9,053 Philips Electronics NV $ 227,621 ----------- Total Consumer Durables & Apparel $ 494,333 ----------- Consumer Services - 0.9% Restaurants - 0.9% 38,560 Compass Group Plc $ 161,681 ----------- Total Consumer Services $ 161,681 ----------- Media - 1.1% Advertising - 0.5% 2,942 Publicis SA $ 86,548 ----------- Movies & Entertainment - 0.6% 3,223 Vivendi Universal $ 100,920 ----------- Total Media $ 187,468 ----------- Retailing - 1.4% Computer & Electronics Retail - 0.6% 34,273 Dixons Group Plc $ 95,921 ----------- Specialty Stores - 0.8% 34,285 HMV Group Plc $ 145,217 ----------- Total Retailing $ 241,138 ----------- Food, Beverage & Tobacco - 1.8% Packaged Foods & Meats - 1.8% 1,229 Nestle SA (Registered Shares) $ 314,110 ----------- Total Food, Beverage & Tobacco $ 314,110 -----------
The accompanying notes are an integral part of these financial statements. 5 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued)
Shares Value Health Care Equipment & Services - 0.9% Health Care Equipment - 0.9% 1,511 Synthes, Inc. $ 165,596 ----------- Total Health Care Equipment & Services $ 165,596 ----------- Pharmaceuticals & Biotechnology - 8.9% Biotechnology - 0.7% 1,230 Actelion, Ltd.* $ 127,690 ----------- Pharmaceuticals - 8.2% 12,656 Astrazeneca Plc $ 522,651 14,214 GlaxoSmithKline Plc 342,477 1,628 Roche Holdings AG 205,322 3,172 Schering AG 194,235 17,765 Shire Pharmaceuticals Group Plc 194,225 ----------- $ 1,458,910 ----------- Total Pharmaceuticals & Biotechnology $ 1,586,600 ----------- Banks - 13.7% Diversified Banks - 13.7% 46,711 Barclays Plc $ 464,021 9,640 BNP Paribas SA 658,996 23,171 Royal Bank of Scotland Group Plc 699,804 6,064 Societe Generale 614,167 ----------- $ 2,436,988 ----------- Total Banks $ 2,436,988 ----------- Diversified Financials - 7.0% Diversified Capital Markets - 6.0% 12,076 CS Group* $ 473,815 7,739 UBS AG 602,322 ----------- $ 1,076,137 ----------- Diversified Financial Services - 1.0% 6,106 ING Groep NV $ 171,762 ----------- Total Diversified Financials $ 1,247,899 ----------- Insurance - 5.2% Multi-Line Insurance - 3.9% 13,601 AXA $ 338,208 2,029 Zurich Financial Services* 348,492 ----------- $ 686,700 ----------- Reinsurance - 1.3% 3,860 Swiss Re $ 236,596 ----------- Total Insurance $ 923,296 -----------
Shares Value Technology Hardware & Equipment - 2.5% Communications Equipment - 2.5% 95,769 Telefonaktiebolaget LM Ericsson $ 305,958 8,468 Nokia Oyj 141,618 ----------- $ 447,576 ----------- Total Technology Hardware & Equipment $ 447,576 ----------- Semiconductors - 0.9% Semiconductor Equipment - 0.9% 10,703 ASM Lithography Holding NV* $ 167,291 ----------- Total Semiconductors $ 167,291 ----------- Telecommunication Services - 9.7% Integrated Telecommunciation Services - 5.1% 18,818 France Telecom SA $ 546,630 14,162 Telefonica SA 231,887 6,902 Telekom Austria AG 134,144 ----------- $ 912,661 ----------- Wireless Telecommunication Services - 4.6% 336,929 Vodafone Group Plc $ 822,692 ----------- Total Telecommunication Services $ 1,735,353 ----------- Utilities - 3.5% Electric Utilities - 2.4% 4,834 E.On AG $ 429,110 ----------- Gas Utilities - 1.1% 48,966 Centrica Plc $ 202,852 ----------- Total Utilities $ 631,962 ----------- TOTAL COMMON STOCKS (Cost $14,518,458) $17,091,074 ----------- TOTAL INVESTMENT IN SECURITIES - 97.5% (Cost $14,677,496)(a) $17,355,670 ----------- OTHER ASSETS AND LIABILITIES - 2.5% $ 452,121 ----------- TOTAL NET ASSETS - 100.0% $17,807,791 -----------
* 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 25.2% France 25.1 Switzerland 14.8 Germany 13.0 Spain 6.3 Netherlands 6.0 Sweden 2.5 Italy 2.5 Ireland 2.0 United States 1.0 Finland 0.8 Austria 0.8 ----- 100.0% -----
6 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS
Six Months Ended 6/30/05 Year Ended Class II (unaudited) 12/31/04 Net asset value, beginning of period $ 10.44 $ 8.89 ---------- --------- Increase (decrease) from investment operations: Net investment income $ 0.09 $ 0.04 Net realized and unrealized gain (loss) on investments and foreign currency transactions (0.25) 1.57 ---------- --------- Net increase (decrease) from investment operations $ (0.16) $ 1.61 Distributions to shareowners: Net investment income (0.05) (0.06) ---------- --------- Net increase (decrease) in net asset value $ (0.21) $ 1.55 ---------- --------- Net asset value, end of period $ 10.23 $ 10.44 ---------- --------- Total return* (1.52)% 18.20% Ratio of net expenses to average net assets+ 1.75%** 1.75% Ratio of net investment income (loss) to average net assets+ 1.99%** 0.61% Portfolio turnover rate 70%** 55% Net assets, end of period (in thousands) $ 9,080 $ 8,252 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.94%** 2.20% Net investment income (loss) 1.80%** 0.17% 1/2/01 (a) Year Ended Year Ended to Class II 12/31/03 12/31/02 12/31/01 Net asset value, beginning of period $ 6.71 $ 8.29 $ 11.07 ------- -------- -------- Increase (decrease) from investment operations: Net investment income $ 0.03 $ 0.01 $ 0.08 Net realized and unrealized gain (loss) on investments and foreign currency transactions 2.17 (1.59) (2.71) ------- -------- ---------- Net increase (decrease) from investment operations $ 2.20 $ (1.58) $ (2.63) Distributions to shareowners: Net investment income (0.02) -- (0.15) ------- -------- ---------- Net increase (decrease) in net asset value $ 2.18 $ (1.58) $ (2.78) ------- -------- ---------- Net asset value, end of period $ 8.89 $ 6.71 $ 8.29 ------- -------- ---------- Total return* 32.92% (19.06)% (23.44)% Ratio of net expenses to average net assets+ 1.79% 1.86% 3.22%** Ratio of net investment income (loss) to average net assets+ 0.56% 0.25% (2.56)%** Portfolio turnover rate 52% 95% 73% Net assets, end of period (in thousands) $ 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 2.75% 2.66% 4.57%** Net investment income (loss) (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. ** Annualized. + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 7 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 6/30/05 (UNAUDITED) ASSETS: Investment in securities, at value (Cost $14,677,496) $ 17,355,670 Cash 392,620 Receivables -- Fund shares sold 50,910 Dividends, interest and foreign taxes withheld 50,605 Other 510 ------------ Total assets $ 17,850,315 ------------ LIABILITIES: Payables -- Fund shares repurchased $ 13,672 Due to affiliates 995 Accrued expenses 27,857 ------------ Total liabilities $ 42,524 ------------ NET ASSETS: Paid-in capital $ 21,500,002 Undistributed net investment income (loss) 183,525 Accumulated net realized gain (loss) (6,552,609) Net unrealized gain (loss) on: Investments 2,678,174 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (1,301) ------------ Total net assets $ 17,807,791 ------------ NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $ 8,728,103 Shares outstanding 837,800 ------------ Net asset value per share $ 10.42 Class II: (No par value, unlimited number of shares authorized) Net assets $ 9,079,688 Shares outstanding 887,595 ------------ Net asset value per share $ 10.23
8 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (UNAUDITED)
Six Months Ended 6/30/05 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $52,941) $ 323,716 Interest 3,017 ------------ Total investment income $ 326,733 ------------ EXPENSES: Management fees $ 88,245 Transfer agent fees and expenses 1,488 Distribution fees (Class II) 10,757 Administrative reimbursements 9,326 Custodian fees 22,885 Professional fees 12,098 Printing expense 6,180 Fees and expenses of nonaffiliated trustees 94 Miscellaneous 8,906 ------------ Total expenses $ 159,979 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (16,838) ------------ Net expenses $ 143,141 ------------ Net investment income (loss) $ 183,592 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 1,310,078 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (17,290) ------------ $ 1,292,788 ------------ Change in net unrealized gain or loss from: Investments $ (1,734,631) Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (3,887) ------------ $ (1,738,518) ------------ Net gain (loss) on investments and foreign currency transactions $ (445,730) ------------ Net increase (decrease) in net assets resulting from operations $ (262,138) ------------
The accompanying notes are an integral part of these financial statements. 9 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS 6/30/05 - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended (unaudited) 12/31/04 FROM OPERATIONS: Net investment income (loss) $ 183,592 $ 118,530 Net realized gain (loss) on investments 1,292,788 1,154,559 Change in net unrealized gain or loss on investments and foreign currency transactions (1,738,518) 1,402,807 ------------ ------------ Net increase (decrease) in net assets resulting from operations $ (262,138) $ 2,675,896 ------------ ------------ DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (58,420) $ (65,951) Class II (44,828) (38,910) ------------ ------------ Total distributions to shareowners $ (103,248) $ (104,861) ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 2,080,270 $ 3,890,105 Reinvestment of distributions 103,248 104,862 Cost of shares repurchased (1,735,979) (3,175,336) ------------ ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ 447,539 $ 819,631 ------------ ------------ Net increase (decrease) in net assets $ 82,153 $ 3,390,666 ------------ ------------ NET ASSETS: Beginning of period $ 17,725,638 $ 14,334,972 ------------ ------------ End of period $ 17,807,791 $ 17,725,638 ------------ ------------ Undistributed net investment income (loss), end of period $ 183,525 $ 103,181 ------------ ------------
10 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Europe Portfolio (the Portfolio) is a Portfolio of the Pioneer Variable Contracts Trust (the Trust), a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Conservative Allocation VCT Portfolio (Ibbotson Conservative Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts or by qualified pension and retirement plans. The 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 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 is computed once daily, on each day the New York Stock Exchange (NYSE) is open, as of the close of regular trading on the NYSE. In computing the net asset 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 11 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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. At June 30, 2005, 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. dollars actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. C. Forward Foreign Currency Contracts The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar (see Note 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 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, 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. 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. The tax character of current year distributions will be determined at the end of the current fiscal year. 12 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
2004 - -------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 104,861 Long-Term capital gain -- ----------- $ 104,861 ----------- Return of Capital -- Total distributions $ 104,861 ----------- 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 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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 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 the 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. 13 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 2. Management Agreement PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the portfolio. Management fees are calculated daily at the annual rate of 1.00% of the Portfolio's average daily net assets. Through May 1, 2006, PIM has agreed not to impose a portion of its management fees and to limit other operating expenses to the extent required to limit expenses of Class I shares to 1.50% of the average daily net assets attributable to Class I shares; the portion of portfolio expenses attributable to Class II shares will be reduced only to the extent such expenses are reduced for Class I 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 June 30, 2005, $425 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 $508 in transfer agent fees payable to PIMSS at June 30, 2005. 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 $62 payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $15,546,999 $1,939,775 $ (131,104) $1,808,671 - ----------------------------------------------------------------------------------------
14 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe 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 six months ended June 30, 2005, were $6,338,998 and $6,088,568, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
'05 Shares '05 Amount Europe Portfolio (unaudited) (unaudited) '04 Shares '04 Amount - ------------------------------------------------------------------------------------------ CLASS I: Shares sold 18,811 $ 199,671 43,531 $ 395,370 Reinvestment of distributions 5,590 58,420 7,232 65,952 Shares repurchased (77,964) (833,429) (190,688) (1,758,638) ------- ---------- -------- ----------- Net increase (decrease) (53,563) $ (575,338) (139,925) $(1,297,316) ------- ---------- -------- ----------- CLASS II: Shares sold 179,362 $1,880,599 374,441 $ 3,494,736 Reinvestment of distributions 4,369 44,828 4,343 38,910 Shares repurchased (86,536) (902,550) (151,264) (1,416,699) ------- ---------- -------- ----------- Net increase (decrease) 97,195 $1,022,877 227,520 $ 2,116,947 ------- ---------- -------- ----------- - ------------------------------------------------------------------------------------------
8. Forward Foreign Currency Contracts During the six months ended June 30, 2005, 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 June 30, 2005, the Portfolio had no outstanding portfolio or settlement hedges. 15 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objective and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 16 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and the results of an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the second quintile of the peer group for the 12 months ended June 30, 2004, the second quintile for the three years ended June 30, 2004, and the second quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the fourth quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio (before and after giving effect to the expense limitation) for the 12 months ended June 30, 2004 and expense ratios for the comparable period of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio (after giving effect to the expense limitation) was in the fifth quintile of this peer group for the most recent fiscal year. The Trustees concluded that the Fund's overall expense ratio, although higher, was reasonable compared to that of most of the comparably sized funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, a 17 PIONEER VARIABLE CONTRACTS TRUST Pioneer Europe VCT Portfolio - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) break point in the management fee was not necessary. The Trustees will continue to evaluate annually the appropriateness of break points. H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 18 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 19 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 20 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 21 Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17882-00-0805 [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Fund VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 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 5 Financial Statements 9 Notes to Financial Statements 13 Factors Considered by the Independent Trustees in Approving the Management Contract 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 Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- [The following data was represented as pie charts in the printed material]
Portfolio Diversification Sector Distribution (As a percentage of total investment portfolio) (As a percentage of equity holdings) U.S. Common Stocks 95.2% Financials 17.0% Depositary Receipts for Information Technology 15.1% International Stocks 3.2% Consumer Discretionary 14.1% International Common Stocks 1.4% Health Care 12.5% Temporary Cash Investments 0.2% Industrials 11.0% Energy 9.1% Consumer Staples 9.0% Materials 6.3% Telecommunication Services 3.9% Utilities 2.0%
Five Largest Holdings (As a percentage of equity holdings) 1. Exxon Mobil Corp. 2.45% 2. Target Corp. 2.34 3. Chevron Corp. 2.25 4. United Technologies Corp. 2.10 5. Johnson & Johnson 2.00
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $20.24 $20.51
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $0.1100 $ - $ -
- -------------------------------------------------------------------------------- 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 line chart in the printed material]
Pioneer Fund VCT S&P Portfolio 500 10/97 $10,000 $10,000 $11,945 $12,527 6/99 $14,652 $15,380 $15,994 $16,497 6/01 $14,709 $14,053 $12,606 $11,529 6/03 $11,958 $11,558 $14,056 $13,764 6/05 $15,133 $14,627
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 June 30, 2005) - -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 5.59% (10/31/97) 5 Years -1.04% 1 Year 7.97%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value [divided by] $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Fund VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005
Share Class II --------------------------------------------------------- Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $ 992.20 Expenses Paid During Period* $ 4.69
* Expenses are equal to the Portfolio's annualized expense ratio of 0.95% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Fund VCT Portfolio Based on a hypothetical 5% per year return before expenses, reflecting the period from January 1, 2005 through June 30, 2005
Share Class II --------------------------------------------------------- Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $1,020.08 Expenses Paid During Period* $ 4.76
* Expenses are equal to the Portfolio's annualized expense ratio of 0.95% for Class II shares multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- In the following discussion, John Carey, portfolio manager of Pioneer Fund VCT Portfolio, reviews the past six months and gives an overview of the Portfolio's performance over that period. Q: Please discuss the performance of Pioneer Fund VCT Portfolio versus its stock-market benchmark. A. The first six months of 2005 were lack-luster ones for the blue-chip U.S. stock market. While many foreign markets did well, and in the U.S. even the small and mid-cap sectors generally produced modest gains, the large-cap market here was largely dead in the water. Through June 30, Class II shares of Pioneer Fund VCT Portfolio returned -0.78% at net asset value, versus a decline of 0.81% for the benchmark Standard & Poor's 500 Index. Hence we finished a hair ahead of the S&P, in a period characterized mainly by backing and filling, spurting, then sputtering, of performance. Given a result approximately the same as that of the market, there were no particular problems in the portfolio, nor any investments in particular stocks, industries, or sectors that did so well or so poorly as to throw the contest decisively one way or the other. On the whole, it would appear to have been a rather forgettable time. However, beneath the surface, changes were brewing and valuation trends were shifting. The performance data quoted represents past performance, which is no guarantee 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 most striking sector performance came from energy and utilities. The high oil price spurred investors to load up on everything related to energy. The utilities undoubtedly benefited from some of that indiscriminate buying and also from investors' avid interest in higher dividend-paying stocks. Otherwise, though, health care and consumer staples, sectors usually considered more "growth" in nature than "value," outperformed financials, industrials, and materials, value-oriented groups that had done very well earlier in the cycle and right down through the end of last year. While information technology, another growth sector, was weak overall, there were signs of life in some industries within it, most notably semiconductors. We suspect that investors were re-allocating assets in their portfolios, taking profits in stocks that had done well and purchasing shares that appeared undervalued. We shall see in the upcoming months whether the trends continue. Q: Which sectors and stocks most affected investment results over the past six months? A. Our stock selections in consumer discretionary, information technology, and consumer staples were the biggest positive contributors to relative performance, while our selections in health care and industrials, as well as our overweight in materials, proved the largest negative contributors to performance. Greatly assisting in consumer discretionary were our holdings in May Department Stores, recipient of a premium take-over bid from competitor Federated Department Stores, and John Wiley & Sons, successful publisher of scientific, technical, and medical books and journals as well as various consumer, or "trade," books. Steering clear of the troubled stock eBay also helped. In information technology, it was similarly what we did not own that helped, namely the weak performers QUALCOMM and International Business Machines; in the case of I.B.M. we sold our underweight position during the period. With respect to consumer staples, we had a large overweight position in top performer Walgreen and no shares of laggard Wal-Mart. On the negative side, we were unrepresented in the health-care providers and services industry within health care, one of the bright spots for that sector, and in industrials, several of our names "corrected" after having previously enjoyed very good performance. Norfolk Southern, PACCAR, Deere, and Johnson Controls, the culprits, all seemed, however, like good long-term investments, and so we held onto them despite the recent share-price disappointments. Finally, we maintained an overweight in the difficult materials sector because we thought that, too, would justify our confidence longer term. Q: What changes did you make to the Portfolio? A. On the purchase side of the ledger, Weatherford International is an expert in oil services, particularly noted for its well-completion and "artificial lift" systems. CVS, a nationwide drugstore chain, Staples, the office-supply retailer, and Costco Wholesale, the operator of wholesale membership warehouses, extended the diversification of our portfolio in the consumer staples and consumer discretionary sectors. In finance, we invested in Bank of America and Citigroup, both of which were priced at levels we thought reflected the risks in their operations, and also in several new insurance names, including Hartford Financial Services and Montpelier Re Holdings. We enlarged our health-care investment with Bristol-Myers Squibb, a beleaguered pharmaceutical company, but one with recovery prospects, and Biomet, which we had earlier owned and sold profitably and now found selling again at a reasonable price. Among the liquidations were Illinois Tool Works, United Parcel Service, United Health Group, and American Electric Power, all of which we judged to be selling at fair values. We sold long-term holdings American International Group, Procter & Gamble, and International Business Machines at very significant profits, deciding in each case that we had attractive alternatives. Q: What is your outlook for the rest of the year? A. While we certainly share other investors' concerns about the spike in oil prices and the "tightening" by the Federal Reserve, we remain generally optimistic about the economy and the stock market. For sure, earnings growth will continue slowing as the economic cycle moves along, and we also tend to think that intermediate and long interest rates will eventually match some of the rise in short-term rates. As always, however, there are stocks that are relatively reasonably priced, and if one remembers to invest on the basis of the fundamental values there should still be plenty of good opportunities to make money over the long term. Thank you for your continued support. 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 Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 99.6% Energy - 9.1% Integrated Oil & Gas - 6.2% 213,764 Chevron Corp. $ 11,953,682 72,566 ConocoPhillips 4,171,819 226,314 Exxon Mobil Corp. 13,006,265 50,756 Occidental Petroleum Corp. 3,904,659 ------------ $ 33,036,425 ------------ Oil & Gas Equipment & Services - 1.1% 57,405 Schlumberger, Ltd. $ 4,359,336 25,100 Weatherford International, Inc.* 1,455,298 ------------ $ 5,814,634 ------------ Oil & Gas Exploration & Production - 1.8% 96,121 Apache Corp. $ 6,209,417 80,387 Pioneer Natural Resources Co. 3,382,685 ------------ $ 9,592,102 ------------ Total Energy $ 48,443,161 ------------ Materials - 6.3% Aluminum - 0.4% 86,600 Alcoa, Inc. $ 2,262,858 ------------ Diversified Chemical - 0.7% 52,896 E.I. du Pont de Nemours & Co. $ 2,275,057 23,887 PPG Industries, Inc. 1,499,148 ------------ $ 3,774,205 ------------ Diversified Metals & Mining - 3.3% 107,769 BHP Billiton, Ltd. (A.D.R.) $ 2,942,094 101,586 Inco, Ltd. 3,834,872 45,369 Phelps Dodge Corp. 4,196,633 224,013 Rio Tinto Plc 6,842,884 ------------ $ 17,816,483 ------------ Gold - 0.2% 26,147 Newmont Mining Corp. $ 1,020,517 ------------ Industrial Gases - 1.1% 30,163 Air Products & Chemicals, Inc. $ 1,818,829 82,709 Praxair, Inc. 3,854,239 ------------ $ 5,673,068 ------------ Paper Products - 0.3% 60,721 Meadwestvaco Corp. $ 1,702,617 ------------ Specialty Chemicals - 0.3% 44,629 Ecolab, Inc. $ 1,444,193 ------------ Total Materials $ 33,693,941 ------------ Shares Value Capital Goods - 8.8% Aerospace & Defense - 3.2% 51,214 General Dynamics Corp. $ 5,609,982 216,651 United Technologies Corp. 11,125,029 ------------ $ 16,735,011 ------------ Construction, Farm Machinery & Heavy Trucks - 3.3% 43,924 Caterpillar, Inc. $ 4,186,396 90,182 Deere & Co. 5,906,019 108,616 PACCAR, Inc. 7,385,888 ------------ $ 17,478,303 ------------ Electrical Components & Equipment - 1.0% 65,964 Emerson Electric Co. $ 4,131,325 27,500 Rockwell International Corp. 1,339,525 ------------ $ 5,470,850 ------------ Industrial Conglomerates - 1.3% 201,363 General Electric Co. $ 6,977,228 ------------ Total Capital Goods $ 46,661,392 ------------ Transportation - 2.2% Airlines - 0.5% 180,270 Southwest Airlines Co. $ 2,511,161 ------------ Railroads - 1.7% 57,842 Burlington Northern, Inc. $ 2,723,201 208,346 Norfolk Southern Corp. 6,450,392 ------------ $ 9,173,593 ------------ Total Transportation $ 11,684,754 ------------ Automobiles & Components - 2.2% Auto Parts & Equipment - 1.3% 120,984 Johnson Controls, Inc. $ 6,815,029 ------------ Automobile Manufacturers - 0.9% 477,615 Ford Motor Corp. $ 4,890,778 ------------ Total Automobiles & Components $ 11,705,807 ------------ Consumer Durables & Apparel - 0.2% Apparel, Accessories & Luxury Goods - 0.2% 28,441 Liz Claiborne, Inc. $ 1,130,813 ------------ Total Consumer Durables & Apparel $ 1,130,813 ------------ Media - 4.9% Advertising - 0.8% 50,119 Omnicom Group $ 4,002,503 ------------ Movies & Entertainment - 0.3% 59,556 The Walt Disney Co. $ 1,499,620 ------------
The accompanying notes are an integral part of these financial statements. 5 Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Publishing - 3.8% 48,893 Elsevier NV $ 681,530 81,911 Gannett Co. 5,826,329 149,146 John Wiley & Sons, Inc. 5,925,571 179,964 McGraw-Hill Co., Inc. 7,963,407 ------------ $ 20,396,837 ------------ Total Media $ 25,898,960 ------------ Retailing - 6.8% Apparel Retail - 0.3% 72,178 Gap, Inc. $ 1,425,516 ------------ Computer & Electronics Retail - 0.1% 11,064 GameStop Corp.* $ 330,814 ------------ Department Stores - 2.7% 161,232 May Department Stores Co. $ 6,475,077 118,523 Nordstrom, Inc. 8,056,008 ------------ $ 14,531,085 ------------ General Merchandise Stores - 2.5% 38,426 Family Dollar Stores, Inc. $ 1,002,918 228,656 Target Corp. 12,441,173 ------------ $ 13,444,091 ------------ Home Improvement Retail - 0.8% 27,800 Home Depot, Inc. $ 1,081,420 55,862 Lowe's Companies, Inc. 3,252,286 ------------ $ 4,333,706 ------------ Specialty Stores - 0.4% 34,554 Barnes & Noble, Inc.* $ 1,340,695 47,400 Staples, Inc. 1,010,568 ------------ $ 2,351,263 ------------ Total Retailing $ 36,416,475 ------------ Food & Drug Retailing - 2.6% Drug Retail - 1.8% 71,400 CVS Corp. $ 2,075,597 159,643 Walgreen Co. 7,341,982 ------------ $ 9,417,579 ------------ Food Distributors - 0.6% 97,240 Sysco Corp. $ 3,519,116 ------------ Hypermarkets & Supercenters - 0.2% 23,400 Costco Wholesale Corp. $ 1,048,788 ------------ Total Food & Drug Retailing $ 13,985,483 ------------ Shares Value Food, Beverage & Tobacco - 4.6% Packaged Foods & Meats - 2.9% 99,139 Campbell Soup Co. $ 3,050,507 51,516 General Mills, Inc. 2,410,434 62,650 Hershey Foods Corp. 3,890,564 84,513 H.J. Heinz Co., Inc. 2,993,450 28,200 Kellogg Co. 1,253,208 87,480 Sara Lee Corp. 1,732,979 ------------ $ 15,331,142 ------------ Soft Drinks - 1.7% 174,649 PepsiCo, Inc. $ 9,418,821 ------------ Total Food, Beverage & Tobacco $ 24,749,963 ------------ Household & Personal Products - 1.6% Household Products - 1.0% 16,975 Clorox Co. $ 945,847 94,894 Colgate-Palmolive Co. 4,736,160 ------------ $ 5,682,007 ------------ Personal Products - 0.6% 80,030 Estee Lauder Co. $ 3,131,574 ------------ Total Household & Personal Products $ 8,813,581 ------------ Health Care Equipment & Services - 3.5% Health Care Equipment - 3.5% 84,671 Becton, Dickinson & Co. $ 4,442,686 64,700 Biomet, Inc. 2,241,208 36,349 Guidant Corp. 2,446,288 81,252 Medtronic, Inc. 4,208,041 116,180 Stryker Corp. 5,525,521 ------------ $ 18,863,744 ------------ Total Health Care Equipment & Services $ 18,863,744 ------------ Pharmaceuticals & Biotechnology - 8.9% Biotechnology - 0.7% 64,036 Amgen, Inc.* $ 3,871,617 ------------
6 The accompanying notes are an integral part of these financial statements. Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Pharmaceuticals - 8.2% 122,299 Abbott Laboratories $ 5,993,874 63,128 Barr Laboratorie, Inc.* 3,076,859 95,600 Bristol-Myers Squibb Co. 2,388,088 95,302 Eli Lilly & Co. 5,309,274 163,188 Johnson & Johnson 10,607,220 114,026 Merck & Co., Inc. 3,512,001 112,881 Mylan Laboratories, Inc. 2,171,830 66,289 Novartis AG (A.D.R.) 3,144,750 43,308 Roche Holdings AG (A.D.R.) 2,740,530 209,465 Schering-Plough Corp. 3,992,403 20,700 Teva Pharmaceutical Industries, Ltd. 644,598 ------------ $ 43,581,427 ------------ Total Pharmaceuticals & Biotechnology $ 47,453,044 ------------ Banks - 9.0% Diversified Banks - 4.6% 79,100 Bank of America Corp. $ 3,607,751 280,577 U.S. Bancorp 8,192,848 47,123 Wachovia Corp. 2,337,301 167,860 Wells Fargo & Co. 10,336,819 ------------ $ 24,474,719 ------------ Regional Banks - 3.1% 98,868 First Horizon National Corp. $ 4,172,230 160,746 National City Corp. 5,484,654 65,614 SunTrust Banks, Inc. 4,739,955 25,979 Zions Bancorporation 1,910,236 ------------ $ 16,307,075 ------------ Thrifts & Mortgage Finance - 1.3% 174,198 Washington Mutual, Inc. $ 7,088,117 ------------ Total Banks $ 47,869,911 ------------ Diversified Financials - 5.6% Asset Management & Custody Banks - 2.8% 61,775 The Bank of New York Co., Inc. $ 1,777,885 52,351 Federated Investors, Inc. 1,571,054 89,314 State Street Corp. 4,309,401 116,947 T. Rowe Price Associates, Inc. 7,320,882 ------------ $ 14,979,222 ------------ Consumer Finance - 1.4% 134,224 American Express Co. $ 7,144,744 ------------ Investment Banking & Brokerage - 0.7% 69,596 Merrill Lynch & Co., Inc. $ 3,828,476 ------------ Diversified Financial Services - 0.7% 79,601 Citigroup, Inc. $ 3,679,954 ------------ Total Diversified Financials $ 29,632,396 ------------ Shares Value Insurance - 2.4% Multi-Line Insurance - 0.2% 16,100 Hartford Financial Services Group, Inc. (a) $ 1,203,958 ------------ Property & Casualty Insurance - 2.0% 24,800 ACE, Ltd. $ 1,112,280 48,600 Axis Capital Holdings, Ltd. 1,375,380 65,620 Chubb Corp. 5,617,728 40,581 Safeco Corp. 2,205,172 ------------ $ 10,310,560 ------------ Reinsurance - 0.2% 33,136 Montpelier RE Holdings, Ltd. $ 1,145,843 ------------ Total Insurance $ 12,660,361 ------------ Software & Services - 5.3% Data Processing & Outsourced Services - 2.7% 107,497 Automatic Data Processing, Inc. $ 4,511,649 43,129 Computer Sciences Corp.* 1,884,737 30,767 DST Systems, Inc.* 1,439,896 33,477 Fiserv, Inc.* 1,437,837 152,686 SunGard Data Systems, Inc.* 5,369,967 ------------ $ 14,644,086 ------------ Systems Software - 2.6% 102,630 Adobe Systems, Inc. $ 2,937,271 259,781 Microsoft Corp. 6,452,960 112,323 Symantec Corp.* 2,441,902 82,800 Veritas Software Corp.* 2,020,320 ------------ $ 13,852,453 ------------ Total Software & Services $ 28,496,539 ------------ Technology Hardware & Equipment - 5.9% Communications Equipment - 1.8% 252,407 Motorola, Inc. $ 4,608,952 326,377 Nokia Corp. (A.D.R.) 5,430,913 ------------ $ 10,039,865 ------------ Computer Hardware - 3.0% 198,996 Dell, Inc.* $ 7,862,332 31,284 Diebold, Inc. 1,411,221 210,170 Hewlett-Packard Co. 4,941,097 455,771 Sun Microsystems, Inc.* 1,700,026 ------------ $ 15,914,676 ------------ Computer Storage & Peripherals - 0.4% 160,000 EMC Corp.* $ 2,193,600 ------------ Office Electronics - 0.7% 68,162 Canon, Inc. (A.D.R.)* $ 3,587,366 ------------ Total Technology Hardware & Equipment $ 31,735,507 ------------
The accompanying notes are an integral part of these financial statements. 7 Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Semiconductors - 3.8% Semiconductor Equipment - 0.4% 137,606 Applied Materials, Inc. $ 2,226,465 ------------ Semiconductors - 3.4% 24,815 Freescale Semico, Inc.* $ 525,582 344,010 Intel Corp. 8,964,901 294,793 Texas Instruments, Inc. 8,274,840 ------------ $ 17,765,323 ------------ Total Semiconductors $ 19,991,788 ------------ Telecommunication Services - 3.9% Integrated Telecommunication Services - 3.9% 27,644 Alltel Corp. $ 1,721,668 168,960 BellSouth Corp. 4,489,267 88,606 Century Telephone Enterprises, Inc. 3,068,426 251,746 SBC Communications, Inc. 5,978,968 153,759 Verizon Communications, Inc. 5,312,373 ------------ $ 20,570,702 ------------ Total Telecommunication Services $ 20,570,702 ------------ Utilities - 2.0% Electric Utilities - 1.6% 41,563 Consolidated Edison, Inc. $ 1,946,811 83,985 Exelon Corp. 4,310,950 66,886 Southern Co. 2,318,938 ------------ $ 8,576,699 ------------ Gas Utilities - 0.3% 31,560 KeySpan Energy Corp. $ 1,284,492 ------------ Water Utilities - 0.1% 21,833 Aqua America, Inc. $ 649,313 ------------ Total Utilities $ 10,510,504 ------------ TOTAL COMMON STOCKS (Cost $430,468,642) $530,968,826 ------------ Shares Value TEMPORARY CASH INVESTMENT - 0.2% Security Lending Collateral - 0.2% 1,193,010 Securities Lending Investment Fund, 3.29% $ 1,193,010 ------------ TOTAL TEMPORARY CASH INVESTMENT (Cost $1,193,010) $ 1,193,010 ------------ TOTAL INVESTMENT IN SECURITIES - 99.8% (Cost $431,661,652) $532,161,836 ------------ OTHER ASSETS AND LIABILITIES - 0.2% $ 829,120 ------------ TOTAL NET ASSETS - 100.0% $532,990,956 ============
(A.D.R.) American Depositary Receipt * Non-income producing security (a) At June 30, 2005, the following security was out on loan:
Shares Security Market Value 15,295 Hartford Financial Services Group, Inc. $1,143,760
8 The accompanying notes are an integral part of these financial statements. Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 Year Ended Year Ended Year Ended Year Ended 5/1/00 to Class II (unaudited) 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 (a) Net asset value, beginning of period $ 20.51 $ 18.66 $ 15.25 $ 19.05 $ 22.65 $23.28 -------- -------- ------- ------- ------- ------ Increase (decrease) from investment operations: Net investment income $ 0.10 $ 0.18 $ 0.14 $ 0.13 $ 0.14 $ 0.12 Net realized and unrealized gain (loss) on investments and foreign currency transactions (0.26) 1.85 3.42 (3.78) (2.59) (0.45) -------- -------- ------- ------- ------- ------ Net increase (decrease) from investment operations $ (0.16) $ 2.03 $ 3.56 $ (3.65) $ (2.45) $(0.33) Distributions to shareowners: Net investment income (0.11) (0.18) (0.15) (0.15) (0.13) (0.17) Net realized gain - - - - (1.02) (0.13) -------- -------- ------- ------- ------- ------ Net increase (decrease) in net asset value $ (0.27) $ 1.85 $ 3.41 $ (3.80) $ (3.60) $(0.63) -------- -------- ------- ------- ------- ------ Net asset value, end of period $ 20.24 $ 20.51 $ 18.66 $ 15.25 $ 19.05 $22.65 ======== ======== ======= ======= ======= ====== Total return* (0.78)% 10.93% 23.44% (19.25)% (11.09)% (1.61)% Ratio of net expenses to average net assets+ 0.95%** 0.96% 1.00% 1.06% 1.04% 0.93%** Ratio of net investment income to average net assets+ 1.03%** 1.00% 0.87% 0.84% 0.49% 0.47%** Portfolio turnover rate 22%** 17% 11% 11% 7% 19%** Net assets, end of period (in thousands) $132,519 $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 0.95%** 0.96% 1.00% 1.06% 1.04% 0.93%** Net investment income 1.03%** 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. The accompanying notes are an integral part of these financial statements. 9 Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $1,143,760) $ 532,161,836 (cost $431,661,652) Receivables -- Investment securities sold 4,778,241 Fund shares sold 492,046 Dividends, interest and foreign taxes withheld 663,377 Other 548 ------------- Total assets $ 538,096,048 ------------- LIABILITIES: Payables -- Investment securities purchased $ 1,181,829 Upon return for securities loaned 1,193,010 Due to bank 2,644,982 Due to affiliates 11,166 Accrued expenses 74,105 ------------- Total liabilities $ 5,105,092 ------------- NET ASSETS: Paid-in capital $ 488,926,764 Undistributed net investment income (loss) 397,459 Accumulated net realized gain (loss) (56,833,451) Net unrealized gain (loss) on: Investments 100,500,184 ------------- Total net assets $ 532,990,956 ------------- NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $ 400,471,866 Shares outstanding 19,728,266 ------------- Net asset value per share $ 20.30 Class II: (No par value, unlimited number of shares authorized) Net assets $ 132,519,090 Shares outstanding 6,546,928 ------------- Net asset value per share $ 20.24
10 The accompanying notes are an integral part of these financial statements. Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $50,822) $ 5,372,334 Interest 63,949 Income on securities loaned, net 20,681 ------------ Total investment income $ 5,456,964 ------------ EXPENSES: Management fees $ 1,796,836 Transfer agent fees and expenses 1,488 Distribution fees (Class II) 162,601 Administrative reimbursements 55,890 Custodian fees 23,121 Professional fees 25,741 Printing expense 37,460 Fees and expenses of nonaffiliated trustees 2,122 Miscellaneous 11,216 ------------ Total expenses $ 2,116,475 ------------ Net expenses $ 2,116,475 ------------ Net investment income $ 3,340,489 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 13,226,255 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (4,974) ------------ $ 13,221,281 ------------ Change in net unrealized gain or loss from: Investments $(21,031,810) ------------ Net loss on investments and foreign currency transactions $ (7,810,529) ============ Net decrease in net assets resulting from operations $ (4,470,040) ============
The accompanying notes are an integral part of these financial statements. 11 Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS 6/30/05 - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended (unaudited) 12/31/04 FROM OPERATIONS: Net investment income (loss) $ 3,340,489 $ 3,200,048 Net realized gain (loss) on investments 13,221,281 1,084,379 Change in net unrealized gain or loss on investments and foreign currency transactions (21,031,810) 30,978,376 ------------- ------------- Net increase (decrease) in net assets resulting from operations $ (4,470,040) $ 35,262,803 ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (2,640,280) $ (1,685,576) Class II (736,503) (1,069,680) ------------- ------------- Total distributions to shareowners $ (3,376,783) $ (2,755,256) ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 23,980,979 $ 60,072,885 Class I shares issued in reorganization -- 298,220,832 Reinvestment of distributions 3,376,534 2,755,256 Cost of shares repurchased (74,283,563) (48,119,744) ------------- ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ (46,926,050) $ 312,929,229 ------------- ------------- Net increase (decrease) in net assets $ (54,772,873) $ 345,436,776 ------------- ------------- NET ASSETS: Beginning of period $ 587,763,829 $ 242,327,053 ------------- ------------- End of period $ 532,990,956 $ 587,763,829 ============= ============= Undistributed net investment income (loss), end of period $ 397,459 $ 433,753 ============= =============
12 The accompanying notes are an integral part of these financial statements. Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Fund VCT Portfolio (the Portfolio) is a Portfolio of Pioneer Variable Contracts Trust (the Trust), a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Conservative Allocation VCT Portfolio (Ibbotson Conservative Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts or by qualified pension and retirement plans. The 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 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 NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. 13 Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 June 30, 2005, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 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 At June 30, 2005, 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. dollars actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. D. Forward Foreign Currency Contracts The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. 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. 14 Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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. 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. The tax character of current year distributions will be determined at the end of the current fiscal year.
- -------------------------------------------------------------------------------- 2004 - -------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 2,755,256 Long-Term capital gain - ----------- $ 2,755,256 Return of Capital - ----------- Total distributions $ 2,755,256 =========== Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ 433,753 Undistributed long-term gain/ (capital loss carryforward) (69,351,655) Post-October loss deferred (23,515) Unrealized appreciation (depreciation) 120,852,432 ----------- 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 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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 the 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 15 Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 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 June 30, 2005, $9,744 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 $507 in transfer agent fees payable to PIMSS at June 30, 2005. 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 $915 payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $432,338,214 $120,160,272 $ (20,336,650) $99,823,622 ============ ============ ============= =========== - ------------------------------------------------------------------------------------------
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 six months ended June 30, 2005, were $60,619,869 and $103,002,160, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
- -------------------------------------------------------------------------------------------------------------- '05 Shares '05 Amount Fund Portfolio (unaudited) (unaudited) '04 Shares '04 Amount - -------------------------------------------------------------------------------------------------------------- CLASS I: Shares sold 334,546 $ 6,811,410 451,723 $ 8,690,214 Class I shares issued in reorganization -- -- 14,822,109 298,220,832 Reinvestment of distributions 130,147 2,640,280 87,609 1,685,576 Shares repurchased (2,818,386) (57,044,186) (1,561,121) (29,970,569) ------------------------------------------------------------------------- Net increase (decrease) (2,353,693 $ (47,592,496) 13,800,320 $ 278,626,053 ========================================================================= CLASS II: Shares sold 851,031 $ 17,169,569 2,721,468 $ 51,382,671 Reinvestment of distribution 36,380 736,254 55,486 1,069,680 Shares repurchased (854,451) (17,239,377) (952,397) (18,149,175) ------------------------------------------------------------------------- Net increase 32,960 $ 666,446 1,824,557 $ 34,303,176 ========================================================================= - --------------------------------------------------------------------------------------------------------------
16 Pioneer Fund 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:
- --------------------------------------------------------------------------------------------------- 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 Realized Appreciation on Gain/(Loss) Closing Date on Closing Date - -------------------------------------------------------------------------------- Safeco RST Core Equity Portfolio $68,714,366 $20,662,968 - --------------------------------------------------------------------------------
17 Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 18 Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the first quintile of the peer group for the 12 months ended June 30, 2004, the first quintile of the peer group for the three years ended June 30, 2004, and the first quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the third quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio for the 12 months ended June 30, 2004 was in the second quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio was lower than that of comparable funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there was potential for realization of any further economies of scale. The Trustees concluded that, given current or anticipated asset levels, break points in the management fees were not necessary. As the assets increase, the Trustees will continue to evaluate annually the appropriateness of break points. 19 Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 20 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 21 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 22 [LOGO] PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17880-00-0805 [logo]PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Global High Yield VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Table of Contents - -------------------------------------------------------------------------------- Pioneer Global High Yield VCT Portfolio Portfolio and Performance Update 2 Comparing Ongoing Portfolio Expenses 3 Portfolio Management Discussion 4 Schedule of Investments 5 Financial Statements 10 Notes to Financial Statements 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 Global High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- Portfolio Diversification (As a percentage of total investment in securities) [The following data was represented as a pie chart in the printed material] U.S. Corporate Bonds 93.9% Asset Backed Securities 3.1% Foreign Government Bonds 3.0%
Maturity Distribution (As a percentage of total investment in securities) [The following data was represented as a pie chart in the printed material] 10-19 years 2.96% 7-9 years 40.36% 5-6 years 29.43% 2-4 years 21.61% 0-1 year 5.64%
Five Largest Holdings (As a percentage of long-term holdings) 1. Vedenta Resources Plc, 6.625%, 2/22/10 (144A) 3.01% 2. Republic of Panama, 7.25%, 3/15/2015 2.49 3. Turanalem Finance BV, 8.5%, 2/10/15 (144A) 2.36 4. Sino Forest Corp., 9.125%, 8/17/11 (144A) 2.08 5. Tele Norte Leste Participacoes, 8.0%, 12/18/13 1.96
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 3/18/05 Net Asset Value per Share $ 10.02 $ 10.00
Distributions per Share Short-Term Long-Term (3/18/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.16421 $ - $ -
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Global High Yield VCT Portfolio at net asset value, compared to that of Merrill Lynch (ML) Global High Yield and Emerging Markets Plus Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [The following data was represented as a line chart in the printed material]
Pioneer Global ML Global High Yield High Yield and Emerging Markets VCT Portfolio Plus Index 3/05 10000 10000 6/05 10238 10280
Index comparisons begin on 4/30/00. The ML Global High Yield & Emerging Markets Plus Index tracks the performance of the below- and border-line investment-grade global debt markets denominated in the major developed market currencies. Index returns assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in any Index. - -------------------------------------------------------------------------------- Cumulative Total Returns (As of June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Fund (3/18/05) 1.87%
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 semiannual 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 Global High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Global High Yield VCT Portfolio Based on actual returns from March 18, 2005 through June 30, 2005.
Share Class II ------------------------------------------------------------ Beginning Account Value on 3/18/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,018.70 Expenses Paid During Period* $ 2.90
* Expenses are equal to the Portfolio's annualized expense ratio of 1.00% for Class II shares, multiplied by the average account value over the period, multiplied by 105/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Global High Yield VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from March 18, 2005 through June 30, 2005.
Share Class II ------------------------------------------------------------ Beginning Account Value on 3/18/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,011.51 Expenses Paid During Period* $ 2.89
* Expenses are equal to the Portfolio's annualized expense ratio of 1.00% for Class II shares, multiplied by the average account value over the period, multiplied by 105/365 (to reflect the one-half year period). 3 Pioneer Global High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- Global High-yield investments experienced considerable volatility during the initial months of the Portfolio's operations, which began on March 18, 2005. Domestic high-yield bonds slumped during the period, especially in April and May, as investors were worried about relatively tight yield advantages of high-yield securities in the context of uncertainty about the durability of the economic recovery. At the same time, the downgrading of credit ratings of automotive giants General Motors and Ford added to the volatility in the high yield market. In contrast, emerging markets performed well. On international currency exchanges, the euro fell against the U.S. dollar, limiting the performance of European-based, high-grade investments. In the following discussion, Andrew D. Feltus, a member of the team managing Global High Yield VCT Portfolio, provides an update on the Portfolio and its operations from the Portfolio's inception on March 18, 2005 through June 30, 2005. Q: How did the Portfolio perform? A. The Portfolio outperformed our benchmark during the challenging period for high-yield investing. From the Portfolio's inception on March 18, 2005 through the end of the fiscal period on June 30, 2005 the Portfolio's Class II shares produced a total return of 1.87%. During the same period, the benchmark Merrill Lynch Global High Yield and Emerging Markets Plus Index returned 1.53%. The performance data quoted represents past performance, which is no guarantee 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 factors that most influenced performance? A. Against a volatile investment backdrop, we made two major decisions that helped performance. The first was to start out with a 50% cash position and then invest those assets gradually as valuations seemed reasonable and opportunities presented themselves. The second decision was to invest only 7% of Portfolio assets in euro-linked holdings. And, of that, about 2% of Portfolio assets were allocated to Norway, one of the better performing foreign markets. On the negative side, we underweighted emerging markets during the Portfolio's initial operations. Despite the good short-term performance in those markets, we were concerned about potential increased volatility in those markets, especially in those Latin American countries that were preparing for major national elections. Q: What were some of the investments that most directly affected results? A. Among our U.S. high-yield holdings, a stand-out performer was Intelsat, the satellite communications corporation whose bonds we were able to purchase at attractive prices after a correction in the high-yield market. Several emerging market investments also added to results. One was the new bond issue of ATF Bank, the fourth largest bank in Kazakhstan, which became available at an attractive price. Another was the Russian energy company Gazprom, which benefited from the sharp increases in oil prices. We were able to invest in a bond issued by the Republic of Panama at par value during the period and witnessed the price rise to a healthy premium. The most noteworthy disappointment for the quarter was the investment in Anchor Glass, a bottle maker whose bonds fell in a general draft in the high-yield market. Q: What is your investment outlook? A. We anticipate continued healthy growth in the global economy, although the U.S. high-yield bond market may be held back as the U.S. Federal Reserve Board maintains its policy of tightening money supply by raising short-term interest rates. Despite that concern, we think the economic and corporate fundamentals are positive, and overall bond valuations are reasonable - neither very high nor very low. In this environment, we expect to continue to seek to identify securities with attractive valuations issued by companies with good prospects. We intend to maintain a well diversified strategy going forward. Diversification is important in controlling risk. Our policy is to invest a minimum of one-third of Portfolio assets in the United States and a minimum of one-third of assets in international bonds. We have no minimum in the emerging markets, where we intend to invest as we find compelling values. While our process emphasizes fundamental research of securities, we also are very conscious of the macroeconomic and political factors that can influence the performance of individual securities independently of the strength of a company's underlying fundamentals. 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. Because the Portfolio invests in a limited number of companies, a change in one security's value may have a more significant effect on the Portfolio's value. 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. 4 Pioneer Global High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Principal Amount Value CORPORATE BONDS - 88.9% Energy - 8.5% Coal & Consumable Fuels - 1.4% $ 20,000 Indocoal Exports Cayman, 7.134%, 7/6/12 (144A) $ 19,926 ---------- Oil & Gas Drilling - 1.8% 25,000 Ocean Rig Norway AS, 8.375%, 7/1/13 (144A) $ 25,313 ---------- Oil & Gas Equipment & Services - 1.6% 20,000 J Ray McDermott SA, 11.0%, 12/15/13 (144A) $ 22,400 ---------- Oil & Gas Exploration & Production - 3.7% 15,000 Delta Petroleum Corp., 7.0%, 4/1/15 (144A) $ 14,100 20,000 Gazprom International SA, 7.201%, 2/1/20 (144A) 21,550 15,000 Petroquest Energy, Inc., 10.375%, 5/15/12 (144A) 14,812 ---------- $ 50,462 ---------- Total Energy $ 118,101 ---------- Materials - 21.9% Aluminum - 1.8% 25,000 Asia Aluminum Holdings, 8.0%, 12/23/11 (144A) $ 24,563 ---------- Commodity Chemicals - 3.0% 20,000 Aventine Renewable Energy, Floating Rate Note, 12/15/11 (144A) $ 19,200 20,000 Invista, 9.25%, 5/1/12 (144A) 21,875 ---------- $ 41,075 ---------- Diversified Metals & Mining - 2.9% 40,000 Vedenta Resources Plc, 6.625%, 2/22/10 (144A) $ 39,470 ---------- Forest Products - 2.3% 5,000 Mandra Foresty, 12.0%, 5/15/13 (144A) $ 5,000 25,000 Sino Forest Corp., 9.125%, 8/17/11 (144A) 27,312 ---------- $ 32,312 ---------- Metal & Glass Containers - 0.8% 15,000 Anchor Glass Container, 11.0%, 2/15/13 $ 11,700 ---------- Paper Packaging - 3.6% 25,000 AEP Industries, Inc., 7.875%, 3/15/13 (144A) $ 25,055 25,000 Graham Packaging Co., 9.875%, 10/15/14 (144A) 25,063 ---------- $ 50,118 ---------- Specialty Chemicals - 4.5% 20,000 Braskem SA, 11.75%, 1/22/14 $ 24,200 30,000 Crystal US Holdings, Inc., Floating Rate Note, 10/1/14 20,850 15,000 Rhodia SA, 9.25%, 6/1/11 17,923 ---------- $ 62,973 ---------- Steel - 2.9% 20,000 CSN Islands IX Corp., 10.0%, 1/15/15 (144A) $ 21,600 20,000 International Steel Group, 6.5%, 4/15/14 19,200 ---------- $ 40,800 ---------- Total Materials $ 303,011 ----------
The accompanying notes are an integral part of these financial statements. 5 Pioneer Global High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal Amount Value Capital Goods - 3.7% Building Products - 1.1% $ 15,000 Builders Firstsource, Inc., Floating Rate Note, 2/15/12 $ 14,925 ---------- Construction & Farm Machinery & Heavy Trucks - 2.6% 10,000 American Rock Salt Co., LLC, 9.5%, 3/15/14 $ 10,150 25,000 Navistar International, 7.5%, 6/15/11 25,500 ---------- $ 35,650 ---------- Total Capital Goods $ 50,575 ---------- Commercial Services & Supplies - 6.0% Diversified Commercial Services - 3.4% 15,000 Hydrochem Industrial Service, 9.25%, 2/15/13 (144A) $ 13,875 20,000 Park-Ohio Industries, Inc., 8.375%, 11/15/14 (144A) 17,850 15,000 United Rentals NA, Inc., 7.75%, 11/15/13 14,738 ---------- $ 46,463 ---------- Environmental & Facilities Services - 1.6% 20,000 Clean Harbors, Inc., 11.25%, 7/15/12 (144A) $ 22,200 ---------- Human Resource & Employment Services - 1.0% 15,000 Knowlege Learning Center, 7.25%, 2/1/15 (144A) $ 14,325 ---------- Total Commercial Services & Supplies $ 82,988 ---------- Transportation - 6.3% Airlines - 1.2% 20,000 Continental Air, Inc., 7.568%, 12/1/06 $ 17,221 ---------- Marine - 1.6% 25,000 Stena AB, 7.0%, 12/1/16 $ 23,188 ---------- Railroads - 1.5% 20,000 TFM SA DE CV, 9.375%, 5/1/12 (144A) $ 20,800 ---------- Trucking - 1.8% 25,000 Greenbrier Co., Inc., 8.375%, 5/15/15 (144A) $ 25,438 ---------- Total Transportation $ 86,647 Automobiles & Components - 8.5% Auto Parts & Equipment - 4.9% 5,000 Commercial Vehicle Group, 8.0%, 7/1/13 $ 5,100 20,000 Delphi Corp., 6.55%, 6/15/06 19,450 25,000 Stanadyne Corp., 10.0%, 8/15/14 23,374 20,000 Tenneco Automotive, Inc., 8.625%, 11/15/14 20,100 ---------- $ 68,024 ---------- Automobile Manufacturers - 0.7% 10,000 Ford Motor Credit Corp., 7.375%, 10/28/09 $ 9,772 ---------- Tires & Rubber - 2.9% 20,000 Cooper Standard Auto, 8.375%, 12/15/14 $ 15,800 25,000 Goodyear Tire & Rubber, 9.0%, 7/1/15 (144A) 24,812 ---------- $ 40,612 ---------- Total Automobiles & Components $ 118,408 ----------
6 The accompanying notes are an integral part of these financial statements. Pioneer Global High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal Amount Value Consumer Durables & Apparel - 3.0% Homebuilding - 3.0% $ 25,000 WCI Communities, Inc., 6.625%, 3/15/15 $ 22,875 20,000 William Lyon Homes, 7.625%, 12/15/12 19,100 ---------- $ 41,975 ---------- Total Consumer Durables & Apparel $ 41,975 ---------- Media - 3.6% Broadcasting & Cable Television - 2.5% 15,000 Kabel Deutschland GMBH, 10.625%, 7/1/14 $ 16,275 15,000 NTL Cable PLC, 8.75%, 4/15/14 19,148 ---------- $ 35,423 ---------- Movies & Entertainment - 1.1% 15,000 Corp Interamer De Entret, 8.875%, 6/14/15 (144A) $ 14,813 ---------- Total Media $ 50,236 ---------- Food, Beverage & Tobacco - 1.8% Brewers - 1.8% 25,000 Argentine Beverages, 7.375%, 3/22/12 (144A) $ 25,438 ---------- Total Food, Beverage & Tobacco $ 25,438 ---------- Health Care Equipment & Services - 3.5% Health Care Equipment - 2.4% 15,000 Hanger Orthpedic Group, 10.375% 2/15/09 $ 13,838 20,000 Medical Services Co., Floating Rate Note, 10/15/11 (144A) 19,900 ---------- $ 33,738 ---------- Health Care Facilities - 1.1% 15,000 Psychiatric Solutions, 7.75%, 7/15/15 (144A) $ 15,000 ---------- Total Health Care Equipment & Services $ 48,738 ---------- Pharmaceuticals & Biotechnology - 1.4% Pharmaceuticals -- 1.4% 20,000 Warner Chilcott Corp., 8.75%, 2/1/15 (144A) $ 19,450 ---------- Total Pharmaceuticals & Biotechnology $ 19,450 ---------- Banks - 4.1% Diversified Banks - 4.1% 25,000 ATF Bank JSC, 9.25%, 4/12/12 (144A) $ 25,624 30,000 Turanalem Finance BV, 8.5%, 2/10/15 (144A) 30,900 ---------- $ 56,524 ---------- Total Banks $ 56,524 ---------- Diversified Financials - 3.2% Diversified Financial Services - 3.2% 20,000 Dollar Financial Group, 9.75%, 11/15/11 $ 20,625 25,000 Glencore Funding LLC, 6.0%, 4/15/14 (144A) 23,972 ---------- $ 44,597 ---------- Total Diversified Financials $ 44,597 ----------
The accompanying notes are an integral part of these financial statements. 7 Pioneer Global High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal Amount Value Insurance - 3.3% Life & Health Insurance - 1.8% $ 25,000 Presidential Life Corp., 7.875%, 2/15/09 $ 25,500 ---------- Reinsurance - 1.5% 20,000 Platinum Underwriters Financial, 7.5%, 6/1/17 (144A) $ 20,280 ---------- Total Insurance $ 45,780 ---------- Telecommunication Services - 8.2% Integrated Telecommunication Services - 3.5% 20,000 Eschelon Operating Co., 8.375%, 3/15/10 $ 17,400 15,000 Telecom Argent Stet Fran., 7.25%, 7/1/12 18,421 20,000 Zeus Special Sub, Ltd., Floating Rate Note, 2/1/15 (144A) 13,350 ---------- $ 49,171 ---------- Wireless Telecommunication Services - 4.7% 15,000 Cell C Pty Ltd., 8.625%, 7/1/12 (144A) $ 18,581 25,000 Tele Norte Leste Participacoes, 8.0%, 12/18/13 25,750 20,000 UBS (Vimpelcom), 8.0%, 2/11/10 (144A) 20,100 ---------- $ 64,431 ---------- Total Telecommunication Services $ 113,602 ---------- Utilities - 1.9% Electric Utilities - 1.5% 20,000 Tenaska Alabama II Part, 7.0%, 6/30/21 (144A) $ 20,250 ---------- Multi-Utilities - 0.4% 5,000 Reliant Energy, Inc., 6.75%, 12/15/14 $ 4,888 ---------- Total Utilities $ 25,138 ---------- TOTAL CORPORATE BONDS (Cost $1,261,026) $1,231,208 ---------- ASSET BACKED SECURITIES - 2.9% Transportation - 1.5% Airlines - 1.5% 28,756 American Airline, 7.377%, 5/23/19 $ 20,575 ---------- Total Transportation $ 20,575 ---------- Utilities - 1.4% Electric Utilities - 1.4% 19,632 Ormat Funding Corp., 8.25%, 12/30/20 $ 19,829 ---------- Total Utilities $ 19,829 ---------- TOTAL ASSET BACKED SECURITIES (Cost $39,044) $ 40,404 ---------- FOREIGN GOVERNMENT BONDS - 2.9% Government - 2.9% 15,000,000 Euro Republic of Columbia, 11.75%, 3/1/10 $ 6,865 30,000 Republic of Panama, 7.25%, 3/15/15 32,610 ---------- $ 39,475 ---------- Total Government $ 39,475 ---------- TOTAL FOREIGN GOVERNMENT BONDS (Cost $36,680) $ 39,475 ----------
8 The accompanying notes are an integral part of these financial statements. Pioneer Global High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value RIGHTS/WARRANTS - 0.0% Materials - 0.0% Forest Products - 0.0% 5 Mandra Forestry-CW13, Exp. 5/15/13* $ - ---------- Total Materials $ - ---------- TOTAL RIGHTS/WARRANTS (Cost $0) $ - ---------- TOTAL INVESTMENT IN SECURITIES - 94.7% $1,311,087 ---------- (Cost $1,297,405) OTHER ASSETS AND LIABILITIES - 5.3% $ 74,061 ---------- TOTAL NET ASSETS - 100.0% $1,385,148 ==========
* 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 June 30, 2005, the value of these securities amounted to $734,197 or 53.0% of net assets. Note: Principal amounts are denominated in US dollars unless otherwise denoted. EURO Euro dollar. The accompanying notes are an integral part of these financial statements. 9 Pioneer Global High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
3/18/05(a) to 6/30/05 Class II (unaudited) Net asset value, beginning of period $ 10.00 ------- Increase from investment operations: Net investment income $ 0.17 Net realized and unrealized gain on investments 0.01 ------- Net increase from investment operations $ 0.19 Distributions to shareowners: Net investment income (0.16) Net realized gain - ------- Net increase in net asset value $ 0.02 ------- Net asset value, end of period $ 10.02 ======= Total return* 1.87% Ratio of net expenses to average net assets+ 1.00%** Ratio of net investment income to average net assets+ 6.18%** Portfolio turnover rate 59%** Net assets, end of period (in thousands) $ 1,385 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 18.77%** Net investment loss (11.60)%** Ratios assuming waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.00%** Net investment income 6.18%**
(a) Class II Shares were first publicly offered on March 18, 2005. * Assumes initial investment at net asset value at the beginning of the period, reinvestment of all distributions and the complete redemption of the investment at net asset value at the end of the period. ** Annualized. + Ratios with no reduction for fees paid indirectly. 10 The accompanying notes are an integral part of these financial statemnts. Pioneer Global High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (cost $1,297,405) $1,311,087 Cash 110,156 Foreign currencies, at value (cost $63,431) 60,413 Receivables -- Interest 23,388 Due from Pioneer Investment Management, Inc. 30,330 ---------- Total assets $1,535,374 ---------- LIABILITIES: Payables -- Investment securities purchased $ 133,066 Dividends 3,952 Due to affiliates 588 Accrued expenses 12,620 ---------- Total liabilities $ 150,226 ---------- NET ASSETS: Paid-in capital $1,371,724 Undistributed net investment income 277 Accumulated undistributed net realized gain 2,609 Net unrealized gain (loss) on: Investments 13,682 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (3,144) ---------- Total net assets $1,385,148 ---------- NET ASSET VALUE PER SHARE: Class II: (No par value, unlimited number of shares authorized) Net assets $1,385,148 Shares outstanding 138,183 ---------- Net asset value per share $ 10.02
The accompanying notes are an integral part of these financial statements. 11 Pioneer Global High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
For the period from 3/18/05 (Commencement of Operations) to 6/30/05 INVESTMENT INCOME: Interest $ 18,956 --------- Total investment income $ 18,956 --------- EXPENSES: Management fees $ 1,680 Transfer agent fees 451 Distribution fees (Class II) 476 Administrative fees 4,761 Custodian fees 4,629 Professional fees 9,408 Printing 27,718 Fees and expenses of nonaffiliated trustees 108 Miscellaneous 361 --------- Total expenses $ 49,592 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (46,950) --------- Net expenses $ 2,642 --------- Net investment income $ 16,314 --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain from: Investments $ 2,017 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies $ 592 --------- $ 2,609 --------- Change in net unrealized gain (loss) from: Investments $ 13,682 Forward foreign currency contracts and other assets and liabilities denominated in $ (3,144) foreign currencies --------- $ 10,538 --------- Net gain (loss) on investments and foreign currency transactions $ 13,147 --------- Net increase (decrease) in net assets resulting from operations $ 29,461 =========
12 The accompanying notes are an integral part of these financial statements. Pioneer Global High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
For the period from 3/18/05 (Commencement of Operations) to 6/30/05 (unaudited) FROM OPERATIONS: Net investment income $ 16,314 Net realized gain on investments 2,609 Change in net unrealized gain on investments and foreign currency transactions 10,538 ---------- Net increase in net assets resulting from operations $ 29,461 ---------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income: Class II $ (16,037) ---------- Total distributions to shareholders $ (16,037) ---------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $1,368,757 Reinvestment of distributions 4,542 Cost of shares repurchased (1,575) ---------- Net increase in net assets resulting from fund share transactions $1,371,724 ---------- Net increase in net assets $1,385,148 NET ASSETS: Beginning of period -- ---------- End of period $1,385,148 ========== Accumulated net investment income, end of period $ 277 ==========
The accompanying notes are an integral part of these financial statements. 13 Pioneer Global High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Global High Yield VCT Portfolio (the Portfolio) is a Portfolio of the Pioneer Variable Contracts Trust (the Trust), a Delaware statutory trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty-eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Moderate Allocation VCT Portfolio (Ibbotson Moderate Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) The Global High Yield Portfolio commenced operations on March 18, 2005. Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts, or by qualified pension and retirement plans. The investment objective of Global High Yield Portfolio seeks to maximize total return through a combination of income and 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 NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally 14 Pioneer Global High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 NYSE. At June 30, 2005, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 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. 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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. 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 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 June 30, 2005, $136 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 $451 in transfer agent fees payable to PIMSS at June 30, 2005. 4. Distribution Plans The Portfolio has adopted a plan of distribution for Class II shares in accordance with Rule 12b-1 under the Investment 15 Pioneer Global High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, the Portfolio's 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) - -------------------------------------------------------------------------------------------------- Global High Yield Portfolio $1,297,405 $25,652 $11,970 $13,682 ========== ======= ======= ======= - --------------------------------------------------------------------------------------------------
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 six months ended June 30, 2005, were $1,424,027 and $129,906, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows for the six month ended June 30, 2005:
- -------------------------------------------------------------------------------- Global High Yield Portfolio '05 Shares '05 Amount - -------------------------------------------------------------------------------- CLASS II: Shares sold 137,869 $1,368,757 Reinvestment of distributions 455 4,542 Shares repurchased (141) (1,575) ------------------------------------------- Net increase 138,183 $1,371,724 =========================================== - --------------------------------------------------------------------------------
16 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 17 [logo]PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17887-00-0805 [logo]PIONEER Investments(R) [Logo] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 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 7 Notes to Financial Statements 11 Factors Considered by the Independent Trustees in Approving the Management Contract 15
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 Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- Portfolio Diversification (As a percentage of total investment portfolio) U.S. Common Stocks 87.6% Temporary Cash Investment 5.3% Depositary Receipts for International Stocks 7.1%
Sector Distribution (As a percentage of equity holdings) Energy 1.6% Telecommunication Services 1.7% Financials 6.7% Industrials 7.8% Consumer Staples 12.9% Consumer Discretionary 15.2% Health Care 21.0% Information Technology 33.1%
Five Largest Holdings (As a percentage of equity holdings) 1. Microsoft Corp. 5.34% 2. Cisco Systems, Inc. 4.05 3. Symantec Corp. 3.70 4. PepsiCo, Inc. 3.31 5. Procter & Gamble Co. 3.15
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 12.50 $ 12.87
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.0772 $ - $ -
- -------------------------------------------------------------------------------- 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.
- ---------------------------------------------------------- Growth of $10,000 - ---------------------------------------------------------- Date Value S&P 500 Russell 1000 Index 10/31/1997 $10,000 $10,000 $10,000 $12,553 $12,527 $12,371 6/30/1999 $14,890 $15,380 $15,084 $14,651 $16,497 $16,479 6/30/2001 $12,310 $14,053 $14,016 $8,109 $11,529 $11,510 6/30/2003 $7,999 $11,558 $11,620 $8,753 $13,764 $13,883 6/30/2005 $9,148 $14,627 $14,980 - ----------------------------------------------------------
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 June 30, 2005) - -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class -1.08% (10/31/97) 5 Years -8.88% 1 Year 5.15%
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 semiannual 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 Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Growth Shares VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005
Share Class II -------------------------------------------------------------------- Beginning Account Value on 1/1/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 977.20 Expenses Paid During Period* $ 5.98
* Expenses are equal to the Portfolio's annualized expense ratio of 1.22% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Growth 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 II -------------------------------------------------------------------- Beginning Account Value on 1/1/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,018.74 Expenses Paid During Period* $ 6.11
* Expenses are equal to the Portfolio's annualized expense ratio of 1.22% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 Large company growth stocks slumped early in 2005 before staging a comeback in May and June. However, the comeback was not sufficient to avoid negative results for growth stocks for the six months ended June 30, 2005. In the following interview, Christopher Galizio discusses the factors that affected the performance of Pioneer Growth Shares VCT Portfolio during the six months ended June 30, 2005. Mr. Galizio is one of the co-managers responsible for day-to-day management of the Portfolio. Q. How did the Portfolio perform during the six months ended June 30, 2005? A. Performance slightly lagged that of the large-cap growth universe, principally because of poor results from a few holdings. For the first six months of 2005, the Portfolio's Class II shares had a total return of -2.28%, while Russell 1000 Growth Index returned -1.72%, and the average return of the 670 funds in Lipper's Large Cap Growth Fund category was -1.72%. The performance data quoted represents past performance, which is no guarantee 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 affecting the Portfolio's results for the period? A. We made good sector allocations during the six months, helping to support Portfolio performance. We began 2005 with an emphasis on the cyclical sectors, notably the materials, industrials and energy areas. We saw that the economy was continuing to recover, and a number of shortages were occurring in commodity markets, including copper. After these stocks rallied in the early months of the year, we took profits and reduced our positions substantially, even eliminating the Portfolio's materials investments. We believe the share prices of many of these companies had gone higher than we thought the corporations' values merited, and we decided to sell into strong demand. We were concerned that market interest rates - which had been declining despite the tightening policies of the U.S. Federal Reserve Board - finally would begin to rise, adversely affecting cyclical stocks. Our worry about the risk of higher interest rates also prompted us to reduce our investments in consumer discretionary stocks, especially retailers. As we did this, we moved from cyclical stocks into less cyclical growth stocks, including information technology and health care. Both those sectors went from being underweighted to being emphasized over the course of the six months. In general, we believed it was time to move into companies with long-term growth prospects not dependent on cyclical movements. Q. What were some of the individual investments that helped support performance? A. Our investment in Texas Instruments was a major help to performance as it appreciated significantly, with improved earnings prospects of its semiconductors and wireless phones and the introduction of a new generation of wireless telecommunications technology. Two of our best decisions were to avoid or de-emphasize major companies that were significant parts of the Russell 1000 Growth Index. We completely avoided IBM stock, which declined by 20% during the six months. We also limited exposure to Internet auction company eBay, whose stock declined 41% over the period. Two generic drug manufacturers turned in stellar performance for the period. Both IVAX and Endo Pharmaceutical rose with the improving outlook for generic manufacturers as several major drugs were scheduled to lose their patent protection in the near future. Both firms also had company-specific issues that gave their share prices extra support. IVAX received FDA approval of a new technology for inhalers for asthma patients, while Endo won a court case challenging another company's claimed patent for the pain reliever oxycontin. Other strong performers included copper miners Phelps Dodge and Freeport-McMoRan, both of which we sold before the period ended, Altria Group, which won a court fight in a tobacco liability suit in which it was a defendant, and Hewlett-Packard, which gained on news of the appointment of a new chief executive. Q. What were some of the investments that held back performance? A. The biggest disappointment was Avaya, the producer of enterprise telephone systems for large corporations and other major institutions, whose stock price declined by 50%. Avaya offers large enterprises both traditional phone equipment as well as a newer technology that helps institutions transition to Internet-based phone systems. However, sales of the traditional equipment lagged, while the new technology failed to meet expectations. Despite the disappointment, we have retained the position. We also continue to own another notable detractor, information technology consulting company Accenture. The company reported disappointing earnings, but we believe it has the potential to recover. Another disappointment was American International Group, the giant insurer, whose stock price plummeted in the midst of an SEC investigation into its finances that resulted in the forced resignation of its long-time chief executive. Q. What is your outlook for the coming months? A. We believe the best opportunities will come from investments in secular, or long-term, growth companies, that are less sensitive to interest rates and the business cycle than are cyclical companies. We think interest rates are very low and are due to start rising, while oil and basic materials prices may be vulnerable to price corrections. We have seen particular value in the information technology and health care companies, which have the potential to produce more consistent earnings. 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: 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 Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 98.2% Energy - 1.6% Integrated Oil & Gas - 1.6% 4,300 Occidental Petroleum Corp. $ 330,799 9,900 Repsol SA (A.D.R.) 248,787 ----------- $ 579,586 ----------- Total Energy $ 579,586 ----------- Capital Goods - 7.0% Aerospace & Defense - 1.7% 3,400 L-3 Communications Holdings, Inc. $ 260,372 7,000 United Technologies Corp. 359,450 ----------- $ 619,822 ----------- Building Products - 1.1% 10,000 American Standard Co., Inc. $ 419,200 ----------- Construction, Farm Machinery & Heavy Trucks - 1.7% 9,300 Deere & Co. $ 609,057 ----------- Industrial Conglomerates - 1.3% 16,500 Tyco International, Ltd. $ 481,800 ----------- Industrial Machinery - 1.2% 5,300 Illinois Tool Works, Inc. $ 422,304 ----------- Total Capital Goods $ 2,552,183 ----------- Commercial Services & Supplies - 0.7% Diversified Commercial Services - 0.7% 4,200 The Dun & Bradstreet Corp.* $ 258,930 ----------- Total Commercial Services & Supplies $ 258,930 ----------- Consumer Durables & Apparel - 0.8% Apparel, Accessories & Luxury Goods - 0.8% 7,100 Liz Claiborne, Inc. $ 282,296 ----------- Total Consumer Durables & Apparel $ 282,296 ----------- Consumer Services - 1.8% Education Services - 1.0% 4,700 Apollo Group, Inc.* $ 367,634 ----------- Hotels, Resorts & Cruise Lines - 0.8% 5,100 Carnival Corp. $ 278,205 ----------- Total Consumer Services $ 645,839 ----------- Media - 4.7% Advertising - 0.9% 4,200 Omnicom Group $ 335,412 ----------- Broadcasting & Cable Television - 2.1% 76,100 Liberty Media Corp.* $ 775,459 ----------- Movies & Entertainment - 1.7% 24,400 The Walt Disney Co. $ 614,392 ----------- Total Media $ 1,725,263 -----------
Shares Value Retailing - 7.6% Apparel Retail - 1.8% 27,400 TJX Co., Inc. $ 667,190 ----------- Computer & Electronics Retail - 1.2% 6,400 Best Buy Co., Inc. $ 438,720 ----------- Home Improvement Retail - 4.6% 17,700 Home Depot, Inc. $ 688,530 17,300 Lowe's Co., Inc. 1,007,206 ----------- $ 1,695,736 ----------- Total Retailing $ 2,801,646 ----------- Food, Beverage & Tobacco - 7.4% Soft Drinks - 4.8% 9,700 Fomento Economico Mexicano SA de CV $ 577,829 22,000 PepsiCo, Inc. 1,186,460 ----------- $ 1,764,289 ----------- Tobacco - 2.6% 14,700 Altria Group, Inc. $ 950,502 ----------- Total Food, Beverage & Tobacco $ 2,714,791 ----------- Household & Personal Products - 5.2% Household Products - 3.1% 21,400 Procter & Gamble Co. $ 1,128,850 ----------- Personal Products - 2.1% 20,400 Avon Products, Inc. $ 772,140 ----------- Total Household & Personal Products $ 1,900,990 ----------- Health Care Equipment & Services - 8.2% Health Care Distributors - 2.5% 16,000 Cardinal Health, Inc. $ 921,280 ----------- Health Care Equipment - 4.8% 14,500 Biomet, Inc. $ 502,280 24,700 Boston Scientific Corp.* 666,900 8,600 Guidant Corp. 578,780 ----------- $ 1,747,960 ----------- Health Care Services - 0.9% 13,400 IMS Health, Inc. $ 331,918 ----------- Total Health Care Equipment & Services $ 3,001,158 ----------- Pharmaceuticals & Biotechnology - 12.4% Biotechnology - 4.7% 17,558 Amgen, Inc.* $ 1,061,557 6,500 Biogen Idec, Inc.* 223,925 9,600 Gilead Sciences, Inc.* 422,304 ----------- $ 1,707,786 -----------
The accompanying notes are an integral part of these financial statements. 5 PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Pharmaceuticals - 7.7% 12,300 Astrazeneca Plc (A.D.R.) $ 507,498 14,000 Bristol-Myers Squibb Co. 349,720 22,511 Endo Pharmaceuticals Holdings, Inc.* 591,589 32,300 IVAX Corp.* 694,450 7,000 Merck & Co., Inc. 215,600 15,092 Par Pharmaceutical Co., Inc.* 480,077 ----------- $ 2,838,934 ----------- Total Pharmaceuticals & Biotechnology $ 4,546,720 ----------- Banks - 1.3% Diversified Banks - 1.3% 9,500 Wachovia Corp. $ 471,200 ----------- Total Banks $ 471,200 ----------- Diversified Financials - 3.1% Consumer Finance - 0.8% 3,500 Capital One Financial Corp. $ 280,035 ----------- Diversified Financial Services - 2.3% 18,300 Citigroup, Inc. $ 846,009 ----------- Total Diversified Financials $ 1,126,044 ----------- Insurance - 2.2% Multi-Line Insurance - 2.2% 13,600 American International Group, Inc. $ 790,160 ----------- Total Insurance $ 790,160 ----------- Software & Services - 12.4% It Consulting & Other Services - 1.9% 31,300 Accenture, Ltd.* $ 709,571 ----------- Systems Software - 10.5% 26,600 Macrovision Corp.* $ 599,564 77,100 Microsoft Corp. 1,915,164 61,000 Symantec Corp.* 1,326,140 ----------- $ 3,840,868 ----------- Total Software & Services $ 4,550,439 ----------- Technology, Hardware & Equipment - 17.2% Communications Equipment - 8.7% 78,300 Avaya, Inc.* $ 651,456 76,000 Cisco Systems, Inc.* 1,452,360 32,500 Qualcomm, Inc. 1,072,825 ----------- $ 3,176,641 ----------- Computer Hardware - 4.8% 21,800 Dell, Inc.* $ 861,318 37,500 Hewlett-Packard Co. 881,625 ----------- $ 1,742,943 ----------- Computer Storage & Peripherals - 1.7% 25,900 Sandisk Corp.* $ 614,607 -----------
Shares Value Electronic Equipment & Instruments - 2.0% 3,100 Samsung Electronics $ 743,225 ----------- Total Technology, Hardware & Equipment $ 6,277,416 ----------- Semiconductors - 2.9% 5,300 Linear Technology Corp. $ 194,457 30,200 Texas Instruments, Inc. 847,714 ----------- $ 1,042,171 ----------- Total Semiconductors $ 1,042,171 ----------- Telecommunication Services - 1.7% Wireless Telecommunication Services - 1.7% 25,100 Vodafone Group Plc (A.D.R.) $ 610,432 ----------- Total Telecommunication Services $ 610,432 ----------- TOTAL COMMON STOCKS (Cost $35,042,319) $35,877,264 ----------- TEMPORARY CASH INVESTMENTS - 5.5% Security Lending Collateral - 5.5% 1,999,381 Securities Lending Investment Fund, 3.29% $ 1,999,381 ----------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $1,999,381) $ 1,999,381 ----------- TOTAL INVESTMENT IN SECURITIES - 103.7% (Cost $37,041,700) (a) $37,876,645 ----------- OTHER ASSETS AND LIABILITIES - (3.7)% $(1,335,377) ----------- TOTAL NET ASSETS - 100.0% $36,541,268 -----------
* Non-income producing security (A.D.R.) American Depositary Receipt (a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 5,600 Biogen Idec, Inc.* $ 192,920 3,325 Capital One Financial Corp. 266,033 12,730 IMS Health, Inc. 315,322 17,765 Procter & Gamble Co. 937,104 9,405 Repsol SA (A.D.R.) 236,348 ---------- Total $1,947,727 ----------
6 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year Year 6/30/05 Ended Ended Class II (unaudited) 12/31/04 12/31/03 Net asset value, beginning of period $ 12.87 $ 12.10 $ 9.70 ------- ------- ------- Increase (decrease) from investment operations: Net investment income (loss) $ -- $ 0.06 $ (0.02) Net realized and unrealized gain (loss) on investments (0.29) 0.71 2.42 ------- ------- ------- Net increase (decrease) from investment operations $ (0.29) $ 0.77 $ 2.40 Distributions to shareowners: Net investment income (0.08) -- -- Net realized gain -- -- -- ------- -------- ------- Net increase (decrease) in net asset value $ (0.37) $ 0.77 $ 2.40 ------- -------- ------- Net asset value, end of period $ 12.50 $ 12.87 $ 12.10 ------- -------- ------- Total return* (2.28)% 6.36% 24.74% Ratio of net expenses to average net assets+ 1.22% 1.25% 1.44% Ratio of net investment income (loss) to average net assets+ 0.01% 0.74% (0.40)% Portfolio turnover rate 87% 206% 58% Net assets, end of period (in thousands) $ 8,148 $ 7,749 $ 3,049 Ratios assuming no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.22% 1.26% 1.44% Net investment income (loss) 0.01% 0.73% (0.40)% Year Year 5/1/00(a) Ended Ended To Class II 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 14.94 $ 18.50 $ 21.68 --------- --------- ------- Increase (decrease) from investment operations: Net investment income (loss) $ (0.13) $ (0.05) $ (0.03) Net realized and unrealized gain (loss) on investments (5.11) (3.51) (1.23) --------- --------- ------- Net increase (decrease) from investment operations $ (5.24) $ (3.56) $ (1.26) Distributions to shareowners: Net investment income -- -- -- Net realized gain -- -- (1.92) --------- --------- ------- Net increase (decrease) in net asset value $ (5.24) $ (3.56) $ (3.18) --------- --------- ------- Net asset value, end of period $ 9.70 $ 14.94 $ 18.50 --------- --------- ------- Total return* (35.07)% (19.24)% (6.36)% Ratio of net expenses to average net assets+ 1.63% 1.58% 1.03% Ratio of net investment income (loss) to average net assets+ (0.64)% (0.61)% (0.33)% Portfolio turnover rate 86% 111% 95% Net assets, end of period (in thousands) $ 263 $ 658 $ 203 Ratios assuming no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.63% 1.58% 0.73% Net investment income (loss) (0.64)% (0.61)% (0.11)%
(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. + Ratios assuming no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 7 PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
ASSETS: Investment in securities, at value (including securities loaned of $1,947,727) (Cost $37,041,700) $ 37,876,645 Cash 478,279 Receivables -- Investment securities sold 417,574 Fund shares sold 10,477 Dividends, interest and foreign taxes withheld 39,031 Other 968 ------------- Total assets $ 38,822,974 ------------- LIABILITIES: Payables -- Investment securities purchased $ 225,834 Fund shares repurchased 5,784 Upon return of securities loaned 1,999,381 Due to affiliates 1,345 Accrued expenses 49,362 ------------- Total liabilities $ 2,281,706 ------------- NET ASSETS: Paid-in capital $ 74,300,109 Undistributed net investment income 40,173 Accumulated net realized gain (loss) on investments (38,633,959) Net unrealized gain on investments 834,945 ------------- Total net assets $ 36,541,268 ------------- NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $ 28,393,264 Shares outstanding 2,243,980 ------------- Net asset value per share $ 12.65 Class II: (No par value, unlimited number of shares authorized) Net assets $ 8,148,004 Shares outstanding 652,020 ------------- Net asset value per share $ 12.50
8 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $2,900) $ 225,810 Interest 2,335 Income on securities loaned, net 1,897 ------------ Total investment income $ 230,042 ------------ EXPENSES: Management fees $ 131,298 Transfer agent fees and expenses 1,488 Distribution fees (Class II) 9,823 Administrative reimbursements 9,326 Custodian fees 15,753 Professional fees 16,938 Printing expense 983 Fees and expenses of nonaffiliated trustees 237 Miscellaneous 3,836 ------------ Total expenses $ 189,682 ------------ Net expenses $ 189,682 ------------ Net investment income $ 40,360 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from investments $ 1,202,364 ------------ Change in net unrealized loss from investments $ (2,141,818) ------------ Net gain (loss) on investments $ (939,454) ------------ Net increase (decrease) in net assets resulting from operations $ (899,094) ------------
The accompanying notes are an integral part of these financial statements. 9 PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended (unaudited) 12/31/04 FROM OPERATIONS: Net investment income (loss) $ 40,360 $ 271,723 Net realized gain (loss) on investments 1,202,364 1,562,700 Change in net unrealized gain or loss on investments (2,141,818) 618,844 ------------ ------------ Net increase (decrease) in net assets resulting from operations $ (899,094) $ 2,453,267 ------------ ------------ DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (221,887) $ -- Class II (50,023) -- ------------ ------------ Total distributions to shareowners $ (271,910) $ -- ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 1,335,660 $ 5,638,676 Reinvestment of distributions 271,910 -- Cost of shares repurchased (3,944,651) (6,840,932) ------------ ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ (2,337,081) $ (1,202,256) ------------ ------------ Net increase (decrease) in net assets $ (3,508,085) $ 1,251,011 ------------ ------------ NET ASSETS: Beginning of period $ 40,049,353 $ 38,798,342 ------------ ------------ End of period $ 36,541,268 $ 40,049,353 ------------ ------------ Undistributed net investment income (loss), end of period $ 40,173 $ 271,723 ------------ ------------
10 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Growth Shares VCT Portfolio (the Portfolio) is a Portfolio of Pioneer Variable Contracts Trust (the Trust), a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty-eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Moderate Allocation VCT Portfolio (Ibbotson Moderate Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts, or by qualified pension and retirement plans. The 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 NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. 11 PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 June 30, 2005, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 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 tax character of the current year distributions paid will be determined at the end of the fiscal year. 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.
2004 - -------------------------------------------------------------------------------- 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 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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 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 12 PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 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 June 30, 2005, $781 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 $509 in transfer agent fees payable to PIMSS at June 30, 2005. 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 $56 payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $37,699,522 $1,665,116 $ (1,487,993) $177,123 ----------- ---------- ------------ -------- - ------------------------------------------------------------------------------------------------------
13 PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (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 six months ended June 30, 2005, were $16,141,361 and $19,103,736, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows for the six months ended June 30, 2005 and the fiscal year ended December 31, 2004:
Growth Shares Portfolio '05 Shares '05 Amount '04 Shares '04 Amount - ------------------------------------------------------------------------------------------- CLASS II: Shares sold 21,290 $ 269,594 66,360 $ 806,587 Reinvestment of distributions 17,362 221,887 -- -- Shares repurchased (271,806) (3,456,905) (515,053) (6,176,527) -------- ------------ -------- ------------ Net increase (233,154) $ (2,965,424) (448,693) $ (5,369,940) -------- ------------ -------- ------------ CLASS II: Shares sold 84,954 1,066,066 406,516 $ 4,832,089 Reinvestment of distributions 3,964 50,023 -- -- Shares repurchased (38,869) (487,746) (56,565) (664,405) -------- ------------ -------- ------------ Net increase 50,049 $ 628,343 349,951 $ 4,167,684 -------- ------------ -------- ------------ - -------------------------------------------------------------------------------------------
14 PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 15 PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the fifth quintile of the peer group for the 12 months ended June 30, 2004, the fifth quintile of the peer group for the three years ended June 30, 2004, and the fifth quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees noted that recently the Investment Adviser had changed the portfolio manager for the Fund. The Trustees concluded that the actions of the Investment Adviser in appointing a new portfolio manager with the objective of enhancing performance supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the second quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio for the 12 months ended June 30, 2004 was in the fifth quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio, although higher than its peer group, was reasonable compared to that of comparably sized funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there was potential for realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, 16 PIONEER VARIABLE CONTRACTS TRUST Pioneer Growth Shares VCT Portfolio - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- break points in the management fees were not necessary. As assets increase, the Trustees will continue to evaluate annually the appropriateness of break points. H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 17 Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the fund's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the fund and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer fund, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17878-00-0805 [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer High Yield VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 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 Factors Considered by the Independent Trustees in Approving the Management Contract 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 High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- [The following data was represented as pie charts in the printed material]
Portfolio Diversification Maturity Distribution (As a percentage of total investment portfolio) (As a percentage of total investment in securities) U.S. Corporate Bonds 67.9% 0-1 year 0.2% Convertible Corporate Bonds 16.8% 1-3 years 9.4% Temporary Cash Investments 6.1% 3-4 years 20.8% U.S. Common Stocks 4.7% 4-6 years 47.4% Convertible Preferred Stocks 2.9% 6-8 years 11.7% Preferred Stocks 1.6% 8+ years 10.5%
Five Largest Holdings (As a percentage of long-term holdings) 1. Mueller Industries, Inc., 6.0%, 11/1/14 4.70% 2. DRS Technologies, Inc., 6.875%, 11/1/13 3.08 3. Allegheny Energy Supply, 7.8%, 3/15/11 3.04 4. Novelis, Inc., 7.25%, 2/15/15, (144A) 3.02 5. Valeant Pharmaceuticals, 7.0%, 12/15/11 3.01
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $10.89 $11.67
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $0.3000 $0.0579 $0.3211
- -------------------------------------------------------------------------------- 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 line chart in the printed material]
ML Convertible Pioneer ML Bonds High High Yield (Speculative Yield VCT Master II Quality) Portfolio Index Index 5/00 $10,000 $10,000 $10,000 $10,691 $10,193 $10,511 6/01 $11,851 $10,101 $8,074 $12,403 $9,658 $7,377 6/03 $14,659 $11,804 $9,197 $16,042 $13,006 $11,090 6/05 $17,120 $14,387 $11,243
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 June 30, 2005) - -------------------------------------------------------------------------------- Net Asset Value Life-of-Class 10.53% (5/1/00) 5 Years 9.88% 1 Year 6.73%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value [divided by] $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer High Yield VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005.
Share Class II ------------------------------------------------------ Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $ 991.70 Expenses Paid During Period* $ 5.19
* Expenses are equal to the Portfolio's annualized expense ratio of 1.05% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer High Yield VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from January 1, 2005 through June 30, 2005.
Share Class II ------------------------------------------------------ Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $1,019.59 Expenses Paid During Period* $ 5.26
* Expenses are equal to the Portfolio's annualized expense ratio of 1.05% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- The high-yield market posted a slightly positive return during the six months ended June 30, 2005, as the income provided by high-yield bonds offset their price depreciation. Portfolio manager Margaret Patel, in the interview that follows, explains the factors that influenced the high-yield market and the reasons behind the Portfolio's underperformance of its benchmark. Q. How did the Portfolio perform? A. During the six months ended June 30, 2005, the Portfolio's Class II shares had a total return based on net asset value of -0.83%. By comparison, the Merrill Lynch High Yield Master II Index returned 1.13%. The performance data quoted represents past performance, which is no guarantee 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. The high-yield market was relatively stable, in spite of rising short-term interest rates. The yield spread, or advantage, offered by high-yield bonds relative to comparable U.S. Treasuries widened somewhat, indicating the slight underperformance of non-investment-grade issues. High-yield bond prices declined modestly during the period, but the higher income the securities provide offset their capital depreciation. The price declines resulted from outflows from high-yield bond mutual funds and because of concerns about credit quality. Investors sought a slightly lower risk profile due to the downgrades of General Motors' and Ford's debt, and because they thought the U.S. economy might slow in the aftermath of continued hikes in short-term interest rates by the Federal Reserve Board. The market efficiently absorbed the automakers' debt - which currently constitutes more than 10% of the Merrill Lynch index - but the activity created some momentary volatility. Q. Why did the Portfolio's performance lag that of the Merrill Lynch High Yield Master II Index? A. While the Portfolio's investments in convertible securities historically have helped its relative performance, that was not the case during the period. Convertibles underperformed conventional high-yield bonds because they, by their nature, were more sensitive than comparable high-yield issues to the short-term interest rate hikes implemented by the Fed. Lower-than-normal volatility in the equity markets also contributed to the underperformance of convertible securities, and hence the Portfolio. At the same time, Portfolio performance was bolstered by our moves to raise its average credit quality, as lower-quality issues underperformed during the period. Q. Which investments proved to be some of the top performers during the fiscal year? Which disappointed? A. LNR Properties went private by making a tender offer for its bonds at a substantial premium to its face value. We took advantage of this offer. The Portfolio's investments in convertible securities issued by industrial equipment manufacturer Roper Industries rose in concert with its stock price, because the company enjoyed better markets for its products. Mueller Industries, which offers metals products, also benefited from improving demand. On the down side, Lyondell Chemical declined due to soft prices for and excess inventories of its products. Advertising agency Interpublic Group fell as its turnaround stalled and because of the firm's delay in submitting its compliance reporting. Finally, newsprint company Bowater dipped in response to overcapacity and softening prices for pulp and paper products. Q. What is your outlook? A. We are optimistic about the economy and the high-yield market, looking out over the balance of the Portfolio's fiscal year. After seeing their yield spreads widen during the period, high-yield issues should be more attractively valued relative to Treasuries at a time when the economy continues to grow. The default rate also remains well below its historical average. Therefore, prices for high-yield bonds - particularly those of higher credit quality - should offer attractive relative value if Treasury yields remain at current levels or move moderately higher as the Fed pursues its measured approach of raising short-term interest rates. 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. 4 Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
S&P/Moody's Ratings Shares (unaudited) Value CONVERTIBLE PREFERRED STOCKS - 2.9% Materials - 2.5% Construction Materials - 0.1% 1,750 B-/B3 TXI Capital Trust I, 5.5%, 6/30/28 $ 84,000 ------------ Diversified Metals & Mining - 2.4% 3,000 B+/B1 Freeport-McCorp., 5.5%, 12/31/49 (144A) $ 2,770,125 ------------ Total Materials $ 2,854,125 ------------ Banks - 0.4% Thrifts & Mortgage Finance - 0.4% 10,000 BB-/Ba1 Sovereign Cap Trust IV, 4.375%, 3/1/34 $ 440,000 ------------ Total Banks $ 440,000 ------------ TOTAL CONVERTIBLE PREFERRED STOCK (Cost $3,526,088) $ 3,294,125 ------------
Principal Amount USD ($) CONVERTIBLE CORPORATE BONDS - 17.2% Materials - 2.9% Commodity Chemicals - 0.4% 200,000 B+/B1 Millennium Chemicals, Inc. 4.0%, 11/15/23 $ 401,500 ------------ Gold - 0.7% 1,000,000 B-/NR Coeur D'Alene Mines Corp., 1.25%, 1/15/24 $ 747,500 ------------ Steel - 1.8% 3,000,000 CCC+/B2 Graftech International, 1.625%, 1/15/24 (144A) $ 1,987,500 ------------ Total Materials $ 3,136,500 ------------ Capital Goods - 3.3% Aerospace & Defense - 1.4% 1,500,000 B/B2 Alliant Techsystems, 2.75%, 2/15/24 $ 1,565,624 ------------ Construction & Engineering - 0.7% 875,000 NR/NR Quanta Services, Inc., 4.0%, 7/1/07 $ 832,344 ------------ Electrical Component & Equipment - 1.2% 2,595,000 NR/B1 Roper Industries, Inc., 1.4813%, 1/15/34 $ 1,339,669 ------------ Total Capital Goods $ 3,737,637 ------------ Consumer Services - 1.9% Specialized Consumer Services - 1.9% 2,200,000 B+/Ba3 SCI Systems, Inc., 3.0%, 3/15/07 $ 2,068,000 ------------ Total Consumer Services $ 2,068,000 ------------ Media - 1.9% Advertising - 1.9% 1,800,000 BB+/Baa3 Interpublic Group Co., 4.5%, 3/15/23 $ 2,139,750 ------------ Total Media $ 2,139,750 ------------ Retailing - 1.3% Automotive Retail - 1.3% 1,500,000 B+/B3 Sonic Automotive, Inc., 5.25%, 5/7/09 $ 1,455,000 ------------ Total Retailing $ 1,455,000 ------------
The accompanying notes are an integral part of these financial statements. 5 Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Health Care Equipment & Services - 0.7% Health Care Equipment - 0.7% 375,000 NR/NR Epix Medical, 3.0%, 6/15/24 (144A) $ 293,438 600,000 NR/NR Wilson Greatbatch Technology, 2.25%, 6/15/13 516,000 ------------ $ 809,438 ------------ Total Health Care Equipment & Services $ 809,438 ------------ Pharmaceuticals & Biotechnology - 1.4% Biotechnology - 1.0% 300,000 NR/NR Cubist Pharmaceuticals, 5.5%, 11/1/08 $ 280,500 850,000 NR/NR CV Therapeutics, 4.75%, 3/7/07 841,500 ------------ $ 1,122,000 ------------ Pharmaceuticals - 0.4% 400,000 NR/NR Vertex Pharmaceuticals, Inc., 5.75%, 2/15/11 (144A) $ 471,000 ------------ Total Pharmaceuticals & Biotechnology $ 1,593,000 ------------ Software & Services - 0.4% Application Software - 0.2% 200,000 NR/NR Mentor Graphics, 6.875%, 6/15/07 $ 198,000 ------------ IT Consulting & Other Services - 0.2% 400,000 NR/NR Safeguard Scientifics, 2.625%, 3/15/24 $ 259,000 ------------ Total Software & Services $ 457,000 ------------ Technology Hardware & Equipment - 2.5% Communications Equipment - 0.9% 1,200,000 B-/NR Adaptec, Inc., 0.75%, 12/22/23 $ 973,500 ------------ Electronic Equipment & Instruments - 1.2% 300,000 B+/NR Flir Systems, Inc., 3.0%, 6/1/23 $ 446,250 1,000,000 NR/NR Veeco Instruments, 4.125%, 12/21/08 893,750 ------------ $ 1,340,000 ------------ Technology Distributors - 0.4% 400,000 NR/NR Bell Microproducts, Inc., 3.75%, 3/5/24 $ 421,000 ------------ Total Technology, Hardware & Equipment $ 2,734,500 ------------ Semiconductors - 0.9% Semiconductor Equipment - 0.9% 600,000 B-/NR Advanced Energy Industries, Inc., 5.25%, 11/15/06 $ 586,500 500,000 B-/NR Cymer, Inc., 3.5%, 2/15/09 473,125 ------------ Total Semiconductors $ 1,059,625 ------------ TOTAL CONVERTIBLE CORPORATE BONDS (Cost $20,740,597) $ 19,190,450 ------------
6 The accompanying notes are an integral part of these financial statements. Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
S&P/Moody's Ratings Shares (unaudited) Value PREFERRED STOCKS - 1.7% Real Estate - 1.7% Real Estate Management & Development - 1.7% 75,000 BB-/Ba3 Forest City Enterprises, 7.375%, 2/1/34 $ 1,916,250 ------------ Total Real Estate $ 1,916,250 ------------ TOTAL PREFERRED STOCKS (Cost $1,917,000) $ 1,916,250 ------------ COMMON STOCKS - 4.8% Materials - 1.0% Specialty Chemicals - 1.0% 63,100 RPM, Inc. $ 1,152,206 ------------ Total Materials $ 1,152,206 ------------ Household & Personal Products - 1.0% Personal Products - 1.0% 24,600 Alberto-Culver Co. (Class B) $ 1,065,918 ------------ Total Household & Personal Products $ 1,065,918 ------------ Health Care Equipment & Services - 0.5% Health Care Equipment - 0.5% 8,100 Bio-Rad Laboratories, Inc.* $ 479,601 ------------ Total Health Care Equipment & Services $ 479,601 ------------ Pharmaceuticals & Biotechnology - 1.3% Biotechnology - 0.2% 11,900 Protein Design Labs, Inc.* $ 240,499 ------------ Pharmaceuticals - 1.1% 43,900 Bristol-Myers Squibb Co. $ 1,096,622 4,500 Merck & Co., Inc. 138,600 ------------ $ 1,235,222 ------------ Total Pharmaceuticals & Biotechnology $ 1,475,721 ------------ Utilities - 1.0% Independent Power Producer & Energy Traders - 1.0% 31,100 NRG Energy, Inc.* $ 1,169,360 ------------ Total Utilities $ 1,169,360 ------------ TOTAL COMMON STOCK (Cost $5,303,635) $ 5,342,806 ------------
The accompanying notes are an integral part of these financial statements. 7 Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value CORPORATE BONDS - 69.5% Energy - 1.9% Oil & Gas Equipment & Services - 0.9% 1,000,000 B+/Ba3 Holly Energy Partners LP, 6.25%, 3/1/15 (144A) $ 975,000 ------------ Oil & Gas Refining & Marketing - 1.0% 1,000,000 BB-/B2 Tesoro Petroleum Corp., 9.625%, 4/1/12 $ 1,106,250 ------------ Total Energy $ 2,081,250 ------------ Materials - 21.4% Aluminum - 2.9% 3,235,000 B/B1 Novelis, Inc., 7.25%, 2/15/15 (144A) $ 3,247,131 ------------ Commodity Chemicals - 6.1% 1,550,000 BB-/B1 Arco Chemical Co., 9.8%, 2/1/20 $ 1,736,000 2,650,000 BB+/Ba2 Nova Chemicals Corp., 7.4%, 4/1/09 2,683,125 2,500,000 BB+/Ba2 Nova Chemicals Corp., 7.875%, 9/15/25 2,500,000 ------------ $ 6,919,125 ------------ Construction Materials - 1.0% 1,104,000 BB-/Ba3 Texas Industries, Inc., 7.25% 7/15/13 (144A) $ 1,131,600 ------------ Diversified Metals & Mining - 1.2% 1,375,000 Freeport-McMoran Copper & Gold, 6.875%, 2/1/09 $ 1,340,625 ------------ Fertilizers & Agricultural Chemicals - 0.5% 500,000 B+/Ba2 Scotts Co., 6.625%, 11/15/13 $ 516,250 ------------ Metal & Glass Containers - 1.2% 1,500,000 B/B3 Crown Cork & Seal Co., Inc., 7.375%, 12/15/26 $ 1,376,250 ------------ Paper Products - 5.8% 200,000 BB-/Ba3 Abitibi-Consolidated, Inc., 6.0%, 6/20/13 $ 184,000 2,250,000 BB-/Ba3 Abitibi-Consolidated, Inc., 8.55%, 8/1/10 2,345,625 3,100,000 BB/Ba3 Bowater, Inc., 6.5%, 6/15/13 3,061,250 885,000 BB/Ba3 Bowater Canada Finance, 7.95%, 11/15/11 936,994 ------------ $ 6,527,869 ------------ Specialty Chemicals - 2.7% 1,950,000 BB-/B1 Millenium America, Inc., 7.625%, 11/15/26 $ 1,818,375 1,000,000 BB-/B1 Millenium America, Inc., 9.25%, 6/15/08 1,082,500 ------------ $ 2,900,875 ------------ Total Materials $ 23,959,725 ------------ Capital Goods - 14.1% Aerospace & Defense - 5.7% 3,200,000 B/B2 DRS Technologies, Inc., 6.875%, 11/1/13 $ 3,312,000 1,525,000 B+/B1 Esterline Technology, 7.75%, 6/15/13 1,616,500 600,000 BB+/Ba3 L-3 Communications Corp., 6.125%, 1/15/14 600,000 850,000 BB+/Ba3 L-3 Communications Corp., 5.875%, 1/15/15 824,500 ------------ $ 6,353,000 ------------
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 Industrial Machinery - 8.4% 3,000,000 B/B2 Gardner Denver, Inc. 8.0%, 5/1/13 (144A) $ 3,034,980 517,000 B/B3 JLG Industries, Inc., 8.375%, 6/15/12 538,973 800,000 B+/B1 Manitowoc Co., Inc., 7.125%, 11/1/13 836,000 5,100,000 Mueller Industries, Inc., 6.0%, 11/1/14 5,049,000 ------------ $ 9,458,953 ------------ Total Capital Goods $ 15,811,953 ------------ Automobiles & Components - 0.3% Tires & Rubber - 0.3% 300,000 B-/B3 Goodyear Tire & Rubber, 7.857%, 8/15/11 (a) $ 292,500 ------------ Total Automobiles & Components $ 292,500 ------------ Consumer Durables & Apparel - 0.2% Homebuilding - 0.2% 185,000 BB-/Ba3 Meritage Homes Corp., 6.25%, 3/15/15 $ 172,050 ------------ Total Consumer Durables & Apparel $ 172,050 ------------ Consumer Services - 1.9% Hotels, Resorts & Cruise Lines - 1.9% 2,000,000 CCC+/B2 Meristar Hospitality Corp., 9.125%, 1/15/11 $ 2,100,000 ------------ Total Consumer Services $ 2,100,000 ------------ Media - 2.3% Advertising - 2.3% 2,550,000 BB-/Baa3 Interpublic Group, Inc., 7.25%, 8/15/11 $ 2,570,423 ------------ Total Media $ 2,570,423 ------------ Retailing - 2.7% Automotive Retail - 1.8% 2,290,000 B/B1 Pep Boys-Manny Moe Jack, 7.5%, 12/15/14 $ 2,049,550 ------------ Department Stores - 0.9% 1,000,000 BB+/Ba1 J.C. Penney Co., Inc., 7.625%, 3/1/97 $ 995,000 ------------ Total Retailing $ 3,044,550 ------------ Health Care Equipment & Services - 2.0% Health Care Facilities - 0.5% 500,000 BB+/Ba2 HCA, Inc., 6.25%, 2/15/13 $ 511,057 ------------ Health Care Supplies - 1.5% 1,700,000 CCC+/Caa1 Inverness Medical Innovation, 8.75%, 2/15/12 $ 1,687,250 ------------ Total Health Care Equipment & Services $ 2,198,307 ------------ Pharmaceuticals & Biotechnology - 2.9% Pharmaceuticals - 2.9% 3,300,000 BB-/B1 Valeant Pharmaceuticals, 7.0%, 12/15/11 $ 3,234,000 ------------ Total Pharmaceuticals & Biotechnology $ 3,234,000 ------------ Real Estate - 6.2% Real Estate Management & Development - 2.6% 2,735,000 BB-/Ba3 Forest City Enterprises, 7.625%, 6/1/15 $ 2,926,450 ------------
The accompanying notes are an integral part of these financial statements. 9 Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Real Estate Investment Trusts - 3.6% 1,500,000 B+/B3 BF Saul Real Estate Investment Trust, 7.5%, 3/1/14 $ 1,552,500 2,300,000 B+/B1 Crescent Real Estate, 9.25%, 4/15/09 2,449,500 ------------ $ 4,002,000 ------------ Total Real Estate $ 6,928,450 ------------ Technology Hardware & Equipment - 5.1% Electronic Equipment & Instruments - 1.7% 1,835,000 B/B2 General Cable Corp, 9.5%, 11/15/10 $ 1,963,450 ------------ Technology Distributors - 3.4% 1,000,000 BB+/Ba1 Anixter International Corp., 5.95%, 3/1/15 $ 990,948 2,550,000 BBB-/Baa3 Arrow Electronic, Inc., 6.875%, 6/1/18 2,796,418 ------------ $ 3,787,366 ------------ Total Technology Hardware & Equipment $ 5,750,816 ------------ Utilities - 8.5% Electric Utilities - 5.6% 3,000,000 B/Ba3 Allegheny Energy Supply, 7.8%, 3/15/11 (a) $ 3,270,000 1,750,000 B/Ba3 Allegheny Energy Supply, 8.25%, 4/15/12 (144A) 1,960,000 1,000,000 B+/B1 CMS Energy Corp., 7.5%, 1/15/09 1,052,500 ------------ $ 6,282,500 ------------ Multi-Utilities - 2.9% 3,000,000 B+/B1 CMS Energy Corp., 7.75%, 8/1/10 $ 3,225,000 ------------ Total Utilities $ 9,507,500 ------------ TOTAL CORPORATE BONDS (Cost $76,226,505) $ 77,651,524 ------------ TEMPORARY CASH INVESTMENTS - 6.2% Repurchase Agreement - 5.0% 5,600,000 UBS Warburg, Inc., 2.75%, dated 6/30/05, repurchase price of $5,600,000 plus accrued interest on 7/1/05 collateralized by $5,719,000 U.S. Treasury Bill, 1.875%, 1/31/06 $ 5,600,000 ------------
Shares Security Lending Collateral - 1.2% 1,316,415 Securities Lending Investment Fund, 3.29% $ 1,316,415 ------------ TOTAL TEMPORARY CASH INVESTMENT (Cost $6,916,415) $ 6,916,415 ------------ TOTAL INVESTMENTS IN SECURITIES - 102.3% (Cost $114,630,240) $114,311,570 ------------ OTHER ASSETS AND LIABILITIES - (2.3)% $ (2,553,165) ------------ TOTAL NET ASSETS - 100.0% $111,758,405 ============
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 June 30, 2005, the value of these securities amounted to $15,870,774 or 14.2% of net assets. (a) At June 30, 2005, the following securities were out on loan:
Principal Amount Security Market Value $899,750 Allegheny Energy Supply, 7.8%, 3/15/11 $ 980,728 285,000 Goodyear Tire & Rubber, 7.857%, 8/15/11 277,875 ---------- Total $1,258,603 ==========
10 The accompanying notes are an integral part of these financial statements. Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year Year Year 5/1/01 (a) 6/30/05 Ended Ended Ended to Class II (unaudited) 12/31/04 12/31/03 12/31/02 12/31/01 Net asset value, beginning of period $ 11.67 $ 11.46 $ 9.28 $ 10.33 $ 10.51 ---------- ---------- ---------- ---------- ---------- Increase (decrease) from investment operations: Net investment income $ 0.30 $ 0.58 $ 0.76 $ 0.80 $ 0.60 Net realized and unrealized gain (loss) on investments (0.40) 0.27 2.17 (1.05) (0.07) ---------- ---------- ---------- ---------- ---------- Net increase (decrease) from investment operations $ (0.10) $ 0.85 $ 2.93 $ (0.25) $ 0.53 Distributions to shareowners: Net investment income (0.30) (0.59) (0.75) (0.80) (0.60) Net realized gain (0.38) (0.05) - - (0.11) ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net asset value $ (0.78) $ 0.21 $ 2.18 $ (1.05) $ (0.18) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 10.89 $ 11.67 $ 11.46 $ 9.28 $ 10.33 ========== ========== ========== ========== ========== Total return* (0.83)% 7.76% 32.64% (2.42)% 5.39% Ratio of net expenses to average net assets+ 1.05%** 1.04% 1.09% 1.82% 1.39%** Ratio of net investment income to average net assets+ 5.33%** 5.12% 6.33% 8.67% 8.94%** Portfolio turnover rate 43%** 42% 48% 42% 36% Net assets, end of period (in thousands) $ 47,709 $ 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 1.05%** 1.04% 1.09% 1.82% 1.50%** Net investment income 5.33%** 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 1.05%** 1.04% 1.09% 0.97% 0.85%** Net investment income 5.33%** 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 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $1,258,603) (Cost $114,630,240) $114,311,570 Receivables -- Fund shares sold 155,374 Dividends, interest and foreign taxes withheld 1,529,652 Other 2,018 ------------ Total assets $115,998,614 ------------ LIABILITIES: Payables -- Investment securities purchased $ 2,645,042 Fund shares repurchased 132,792 Upon return for securities loaned 1,316,415 Due to bank 70,275 Due to affiliates 2,912 Accrued expenses 72,773 ------------ Total liabilities $ 4,240,209 ------------ NET ASSETS: Paid-in capital $110,259,417 Undistributed net investment income (loss) 42,581 Accumulated net realized gain (loss) 1,775,077 Net unrealized gain (loss) on: Investments (318,670) ------------ Total net assets $111,758,405 ------------ NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $ 64,049,589 Shares outstanding 5,879,994 ------------ Net asset value per share $ 10.89 Class II: (No par value, unlimited number of shares authorized) Net assets $ 47,708,816 Shares outstanding 4,380,321 ------------ Net asset value per share $ 10.89
12 The accompanying notes are an integral part of these financial statements. Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 INVESTMENT INCOME: Dividends $ 49,269 Interest 3,537,094 Income on securities loaned, net 10,009 ----------- Total investment income $ 3,596,372 ----------- EXPENSES: Management fees $ 366,819 Transfer agent fees and expenses 1,488 Distribution fees (Class II) 58,997 Administrative reimbursements 11,597 Custodian fees 10,907 Professional fees 23,945 Printing expense 29,617 Fees and expenses of nonaffiliated trustees 841 Miscellaneous 6,168 ----------- Total expenses $ 510,379 ----------- Net expenses $ 510,379 ----------- Net investment income (loss) $ 3,085,993 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from: Investments $ 1,775,706 ----------- Change in net unrealized gain or loss from: Investments $(5,649,019) ----------- Net gain (loss) on investments $(3,873,313) =========== Net increase (decrease) in net assets resulting from operations $ (787,320) ===========
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 - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended (unaudited) 12/31/04 FROM OPERATIONS: Net investment income (loss) $ 3,085,993 $ 5,467,810 Net realized gain (loss) on investments 1,775,706 3,746,873 Change in net unrealized gain or loss on investments (5,649,019) (1,480,061) ------------- ------------- Net increase (decrease) in net assets resulting from operations $ (787,320) $ 7,734,622 ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (1,828,371) $ (3,715,003) Class II (1,257,947) (1,764,209) Net realized gain Class I (2,147,727) (265,040) Class II (1,587,624) (135,300) ------------- ------------- Total distributions to shareowners $ (6,821,669) $ (5,879,552) ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 23,842,024 $ 75,619,514 Reinvestment of distributions 6,787,550 5,846,576 Cost of shares repurchased (34,063,642) (44,707,455) ------------- ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ (3,434,068) $ 36,758,635 ------------- ------------- Net increase (decrease) in net assets $ (11,043,057) $ 38,613,705 ------------- ------------- NET ASSETS: Beginning of period $ 122,801,462 $ 84,187,757 ------------- ------------- End of period $ 111,758,405 $ 122,801,462 ============= ============= Undistributed net investment income (loss), end of period $ 42,581 $ 42,906 ============= =============
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 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer High Yield VCT Portfolio (The Portfolio) is a portfolio of Pioneer Variable Contracts Trust (the Trust), a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Conservative Allocation VCT Portfolio (Ibbotson Conservative Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts or by qualified pension and retirement plans. The 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 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 portfolios are computed once daily, on each day the New York Stock Exchange (NYSE) is open, as of the close of regular trading on the NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Trading in foreign equity securities is substantially completed each day at various times prior to the close of the NYSE. The value of such 15 Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 NYSE. At June 30, 2005, 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 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. dollars actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. C. Forward Foreign Currency Contracts The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. 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 16 Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 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. The tax character of current year distributions will be determined at the end of the current fiscal year.
- -------------------------------------------------------------------------------- 2004 - -------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $5,479,212 Long-Term capital gain 400,340 ---------- $5,879,552 Return of Capital -- ---------- Total distributions $5,879,552 ---------- 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 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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. 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 the 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 17 Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 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 June 30, 2005, $2,084 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 $505 in transfer agent fees payable to PIMSS at June 30, 2005. 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 $323 payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $114,630,279 $3,111,086 $ (3,429,795) $ (318,709) ============ ========== ============ ========== - -----------------------------------------------------------------------------------------------
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 six months ended June 30, 2005, were $23,783,023 and $38,454,884, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
- -------------------------------------------------------------------------------------------------- '05 Shares '05 Amount High Yield Portfolio (unaudited) (unaudited) '04 Shares '04 Amount - -------------------------------------------------------------------------------------------------- CLASS I: Shares sold 1,068,551 $ 12,094,305 2,699,382 $ 30,852,667 Reinvestment of distributions 356,883 3,942,019 346,267 3,947,046 Shares repurchased (1,619,249) (18,400,833) (2,787,689) (31,727,505) ------------------------------------------------------------------- Net increase (decrease) (193,815) $ (2,364,509) 257,960 $ 3,072,208 =================================================================== CLASS II: Shares sold 1,044,029 $ 11,747,719 3,916,481 $ 44,766,847 Reinvestment of distributions 257,681 2,845,531 166,648 1,899,530 Shares repurchased (1,369,303) (15,662,809) (1,171,662) (12,979,950) ------------------------------------------------------------------- Net increase (decrease) (67,593) $ (1,069,559) 2,911,467 $ 33,686,427 =================================================================== - --------------------------------------------------------------------------------------------------
18 Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory require- 19 Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- ments. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's performance compared to both the performance of a peer group and an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the fourth quintile of the peer group for the 12 months ended June 30, 2004 and the first quintile for the three years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that the performance of the Fund, particularly the Fund's longer-term performance, supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's fixed income group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the second quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio for the 12 months ended June 30, 2004 was in the third quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio was reasonable compared to that of comparable funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there was potential for realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, 20 Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- break points in the management fee are not necessary at this time. The Trustees will continue to evaluate annually the appropriateness of break points. H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund). The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 21 [LOGO] PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17881-00-0805 [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Ibbotson Asset Allocation Series VCT Portfolios -- Class II Shares SEMIANNUAL REPORT June 30, 2005 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Table of Contents - -------------------------------------------------------------------------------- Pioneer Ibbotson Asset Allocation Series VCT Portfolios Moderate Allocation Portfolio -- Portfolio and Performance Update 2 Growth Allocation Portfolio -- Portfolio and Performance Update 3 Aggressive Allocation Portfolio -- Portfolio and Performance Update 4 Comparing Ongoing Portfolio Expenses 5 Market Overview and Strategy 8 Portfolio Reviews 9 Schedule of Investments 10 Financial Statements 13 Notes to Financial Statements 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 Ibbotson Moderate Allocation VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- [The following data was represented as a pie chart in the printed material]
Target Asset Allocations Equity 60% Fixed Income 40%
Large Cap Growth Stocks 14.5% - -------------------------------------------------------------------------------- Large Cap Value Stocks 16.5 - -------------------------------------------------------------------------------- Mid/Small Cap Growth Stocks 5.0 - -------------------------------------------------------------------------------- Mid/Small Cap Value Stocks 7.0 - -------------------------------------------------------------------------------- International Stocks 12.0 - -------------------------------------------------------------------------------- Emerging Markets 2.0 - -------------------------------------------------------------------------------- Real Estate (REITs) 3.0 - -------------------------------------------------------------------------------- High Yield Bonds 8.0 - -------------------------------------------------------------------------------- Bonds 11.0 - -------------------------------------------------------------------------------- Short Term Bonds 15.0 - -------------------------------------------------------------------------------- Cash Equivalents 6.0 - --------------------------------------------------------------------------------
Actual Portfolio Holdings (Based on total portfolio)
U.S. Stocks International Stocks - -------------------------------------------------------------------------------- Pioneer Fund 11.56% Pioneer International Equity 10.55% - -------------------------------------------------------------------------------- Pioneer Research 7.33 Pioneer Emerging Markets 2.73 - -------------------------------------------------------------------------------- Pioneer Oak Ridge Large Cap Growth 8.44 Pioneer Real Estate 3.29 ------------------------------------ Bonds - -------------------------------------------------------------------------------- Pioneer Value 8.39 Pioneer High Yield 6.59% - -------------------------------------------------------------------------------- Pioneer Cullen Value Fund 3.25 Pioneer Bond 14.33 - -------------------------------------------------------------------------------- Pioneer Mid Cap Value 5.46 Pioneer ST Income 15.90 - -------------------------------------------------------------------------------- Pioneer Small Cap Value 2.18 - --------------------------------------------------------------------------------
This list excludes temporary cash and derivative instruments. Portfolio holdings will vary for other periods. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 3/18/05 Net Asset Value per Share $10.06 $10.00
Distributions per Share Short-Term Long-Term (3/18/05 - 6/30/05) 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 Ibbotson Moderate Allocation VCT Portfolio at net asset value, compared to that of the Standard & Poor's 500 Stock 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 Ibbotson Moderate Allocation VCT Portfolio S&P 500 3/05 $10,000 $10,000 6/05 $10,111 $10,137
The Standard & Poor's Stock Index (the S&P 500) is a commonly used measure of the broad U.S. stock market. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of June 30, 2005) - -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 0.60% (3/18/05)
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 semiannual 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 Ibbotson Growth Allocation VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- [The following data was represented as a pie chart in the printed material]
Target Asset Allocations Equity 75% Fixed Income 25%
Large Cap Growth Stocks 15.0% - -------------------------------------------------------------------------------- Large Cap Value Stocks 19.0 - -------------------------------------------------------------------------------- Mid/Small Cap Growth Stocks 7.0 - -------------------------------------------------------------------------------- Mid/Small Cap Value Stocks 10.0 - -------------------------------------------------------------------------------- International Stocks 16.0 - -------------------------------------------------------------------------------- Emerging Markets 4.0 - -------------------------------------------------------------------------------- Real Estate (REITs) 4.0 - -------------------------------------------------------------------------------- High Yield Bonds 5.0 - -------------------------------------------------------------------------------- Bonds 9.5 - -------------------------------------------------------------------------------- Short Term Bonds 10.5 - -------------------------------------------------------------------------------- Cash Equivalents 0.0 - --------------------------------------------------------------------------------
Actual Portfolio Holdings (Based on total portfolio)
U.S. Stocks International Stocks - -------------------------------------------------------------------------------- Pioneer Fund 11.94% Pioneer International Equity 13.99% - -------------------------------------------------------------------------------- Pioneer Research 6.97 Pioneer Emerging Markets 5.01 - -------------------------------------------------------------------------------- Pioneer Oak Ridge Large Pioneer Real Estate 4.00 Cap Growth 7.97 ------------------------------------ Bonds - -------------------------------------------------------------------------------- Pioneer Value 8.96 Pioneer High Yield 3.02% - -------------------------------------------------------------------------------- Pioneer Cullen Value Fund 3.99 Pioneer Bond 11.08 - -------------------------------------------------------------------------------- Pioneer Mid Cap Value 10.01 Pioneer ST Income 10.06 - -------------------------------------------------------------------------------- Pioneer Small Cap Value 3.00 - --------------------------------------------------------------------------------
This list excludes temporary cash and derivative instruments. Portfolio holdings will vary for other periods. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 3/18/05 Net Asset Value per Share $10.07 $10.00
Distributions per Share Short-Term Long-Term (3/18/05 - 6/30/05) 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 Ibbotson Growth Allocation VCT Portfolio at net asset value, compared to that of the Standard & Peer's 500 Stock 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 Ibbotson Growth Allocation VCT Portfolio S&P 500 3/05 $10,000 $10,000 6/05 $10,181 $10,137
The Standard & Poor's Stock Index (the S&P 500) is a commonly used measure of the broad U.S. stock market. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of June 30, 2005) - -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 0.70% (3/18/05)
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 semiannual 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. 3 Pioneer Ibbotson Aggressive Allocation VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- [The following data was represented as a pie chart in the printed material]
Target Asset Allocations Equity 90% Fixed Income 10%
Large Cap Growth Stocks 17.0% - -------------------------------------------------------------------------------- Large Cap Value Stocks 21.0 - -------------------------------------------------------------------------------- Mid/Small Cap Growth Stocks 8.5 - -------------------------------------------------------------------------------- Mid/Small Cap Value Stocks 12.5 - -------------------------------------------------------------------------------- International Stocks 21.0 - -------------------------------------------------------------------------------- Emerging Markets 5.0 - -------------------------------------------------------------------------------- Real Estate (REITs) 5.0 - -------------------------------------------------------------------------------- High Yield Bonds 2.0 - -------------------------------------------------------------------------------- Bonds 8.0 - -------------------------------------------------------------------------------- Short Term Bonds 0.0 - -------------------------------------------------------------------------------- Cash Equivalents 0.0 - --------------------------------------------------------------------------------
Actual Portfolio Holdings (Based on total portfolio)
U.S. Stocks International Stocks - -------------------------------------------------------------------------------- Pioneer Fund 11.95% Pioneer International Equity 18.01% - -------------------------------------------------------------------------------- Pioneer Research 8.97 Pioneer Emerging Markets 6.02 - -------------------------------------------------------------------------------- Pioneer Oak Ridge Large Pioneer Real Estate 5.01 Cap Growth 7.98 ------------------------------------ Bonds - -------------------------------------------------------------------------------- Pioneer Value 11.96 Pioneer High Yield 0.00% - -------------------------------------------------------------------------------- Pioneer Cullen Value Fund 4.99 Pioneer Bond 10.08 - -------------------------------------------------------------------------------- Pioneer Mid Cap Value 12.03 Pioneer ST Income 0.00 - -------------------------------------------------------------------------------- Pioneer Small Cap Value 3.00 - --------------------------------------------------------------------------------
This list excludes temporary cash and derivative instruments. Portfolio holdings will vary for other periods. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 3/18/05 Net Asset Value per Share $10.11 $10.00
Distributions per Share Short-Term Long-Term (3/18/05 - 6/30/05) 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 Ibbotson Aggressive Allocation VCT Portfolio at net asset value, compared to that of the Standard & Poor's 500 Stock Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges.
Pioneer Ibbotson Aggressive Allocation VCT Portfolio S&P 500 3/05 $10,000 $10,000 6/05 $10,151 $10,137
The Standard & Poor's Stock Index (the S&P 500) is a commonly used measure of the broad U.S. stock market. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of June 30, 2005) - -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 1.10% (3/18/05)
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 semiannual 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. 4 Pioneer Ibbotson Moderate Allocation VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Ibbotson Moderate Allocation VCT Portfolio Based on actual returns from March 18, 2005 through June 30, 2005.
Share Class II - ------------------------------------------------------------ Beginning Account Value on 3/18/05 $1,000.00 Ending Account Value on 6/30/05 $1,006.00 Expenses Paid During Period* $ 2.14
* Expenses are equal to the Portfolio's annualized expense ratio of 0.74% multiplied by the average account value over the period, multiplied by 105/366 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Ibbotson Moderate Allocation VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from March 18, 2005 through June 30, 2005.
Share Class II - ------------------------------------------------------------ Beginning Account Value on 3/18/05 $1,000.00 Ending Account Value on 6/30/05 $1,002.25 Expenses Paid During Period* $ 2.14
* Expenses are equal to the Portfolio's annualized expense ratio of 0.74% multiplied by the average account value over the period, multiplied by 105/366 (to reflect the one-half year period). 5 Pioneer Ibbotson Growth Allocation VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Ibbotson Growth Allocation VCT Portfolio Based on actual returns from March 18, 2005 through June 30, 2005.
Share Class II - ------------------------------------------------------------ Beginning Account Value on 3/18/05 $1,000.00 Ending Account Value on 6/30/05 $1,007.00 Expenses Paid During Period* $ 2.14
* Expenses are equal to the Portfolio's annualized expense ratio of 0.74% multiplied by the average account value over the period, multiplied by 105/366 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Ibbotson Growth Allocation VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from March 18, 2005 through June 30, 2005.
Share Class II - ------------------------------------------------------------ Beginning Account Value on 3/18/05 $1,000.00 Ending Account Value on 6/30/05 $1,012.25 Expenses Paid During Period* $ 2.08
* Expenses are equal to the Portfolio's annualized expense ratio of 0.74% multiplied by the average account value over the period, multiplied by 105/366 (to reflect the one-half year period). 6 Pioneer Ibbotson Aggressive Allocation VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Ibbotson Aggressive Allocation VCT Portfolio Based on actual returns from March 18, 2005 through June 30, 2005.
Share Class II - ------------------------------------------------------------ Beginning Account Value on 3/18/05 $1,000.00 Ending Account Value on 6/30/05 $1,011.00 Expenses Paid During Period* $ 2.14
* Expenses are equal to the Portfolio's annualized expense ratio of 0.74% multiplied by the average account value over the period, multiplied by 105/366 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Ibbotson Aggressive Allocation VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from March 18, 2005 through June 30, 2005.
Share Class II - ------------------------------------------------------------ Beginning Account Value on 3/18/05 $1,000.00 Ending Account Value on 6/30/05 $1,012.25 Expenses Paid During Period* $ 2.14
* Expenses are equal to the Portfolio's annualized expense ratio of 0.74% multiplied by the average account value over the period, multiplied by 105/366 (to reflect the one-half year period). 7 Pioneer Ibbotson Asset Allocation Series VCT Portfolios PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- MARKET OVERVIEW AND STRATEGY 6/30/05 - -------------------------------------------------------------------------------- In the following interview, portfolio manager Peng Chang, Chief Investment Officer for Ibbotson Associates, discusses the market environment and investment strategies that applied to the three portfolios in the Pioneer Ibbotson Asset Allocation Series VCT Portfolios since they began operations on March 18, 2005. Q. Could you characterize the economic backdrop against which the three Portfolios began investment operations? A. The U.S. economy continued to grow at a healthy pace, if somewhat more slowly than in 2004. Inflation has picked up to a modest degree, driven primarily by high energy prices. On the interest rate front, the Federal Reserve began to raise short-term rates in 2004 and has maintained a policy of gradual tightening to keep economic growth in check. Surprisingly, long-term interest rates have been relatively stable throughout the cycle of Fed tightening, and even declined over the first half of 2005. In this environment, equity markets overall have basically fluctuated within a range, while long-term bonds and credit sensitive sectors of the bond market generally showed strength. Q. What were the strategic considerations that you applied to the three Portfolios in allocating assets? A. As the three Portfolios in the series were launched, assets were invested in keeping with the respective broad asset allocation and specific mutual fund targets established prior to the launch of the Portfolios. In addition, we implemented three strategies across all the Portfolios. First, within the U.S. stock portion of the Portfolios, we implemented a moderate emphasis on value stocks and a corresponding underweighting of more growth-oriented investments. We took these steps believing that the U.S. economy had entered into a decelerating growth cycle that would favor value equities with relatively stable earnings prospects. We also believed that the potential for higher inflation and interest rates favored the value investment style over growth. Our equity valuation and momentum models further supported this assessment, indicating an overweighting of value and an underweighting of growth equities. That said, value stocks have now outperformed growth over a period of approximately five years. If the economy starts to show signs of more rapid growth, an overweighting of more growth-oriented investments will be warranted. With respect to the other equity asset classes, the Portfolios' targeted exposure across large-, mid-, and small-cap equities remained unchanged. We have also maintained neutral target weightings in the non-U.S. equity market alternatives, both developed and emerging. The second emphasis has been within the bond portion of the Portfolios, where we implemented an underweighting of the long-term bond vehicle, with the difference allocated to the shorter-term fixed-income alternative. We believe that given the prospect of higher interest rates, shorter duration fixed-income investments are more attractive. (Duration is a measure of a bond's price sensitivity to changes in interest rates.) While this positioning has not helped our performance over the short term, we continue to believe that long-term rates will come under pressure and we are maintaining this allocation. Elsewhere within fixed-income, we have maintained neutral positions in the high-yield bond offering, as well as in the non-U.S. fixed-income option. Finally, we are underweighting REITs (real estate investment trusts) in view of their extended run of outperformance and the prospect of higher market interest rate levels. REITs have provided annualized returns in the 20% range over the past several years and are now fully valued in our view. In addition, REITs are traditionally most attractive to investors seeking income and have benefited from low interest rates. As rates eventually move up, that supporting factor will no longer be in place. Going forward, we will closely monitor economic indicators and interest rate movements to evaluate whether we need to make any adjustments to the views underlying these allocations. Given the significant level of uncertainty that continues to impact the financial markets, we believe that maintaining appropriate diversification across asset classes will be especially important in the months ahead. Please see Portfolio Reviews beginning on page 9 for information on specific weightings and performance for each of the three portfolios in the Pioneer Ibbotson Asset Allocation Series VCT Portfolios. 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's performance depends on the adviser's skill in determining the strategic asset class allocations, the mix of underlying Pioneer funds, as well as the performance of those underlying funds. The underlying funds' performance may be lower than the performance of the asset class that they were selected to represent. Stocks and bonds can decline due to adverse issuer, market, regulatory, or economic developments. International markets may be less liquid and can be more volatile than U.S. markets. These risk factors, including those associated with currency exchange rates, also apply to investments in international markets, all of which make international markets more volatile and less liquid than investments in domestic markets. Some of the underlying portfolios can invest in either high-yield securities or small/emerging growth companies. Investments in these types of securities generally are subject to greater volatility than either higher-grade securities or more-established companies, respectively. Before making an investment in the portfolio, you should consider all the risks associated with it. 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 Ibbotson Asset Allocation Series VCT Portfolios PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS 6/30/05 - -------------------------------------------------------------------------------- Moderate Allocation The Portfolio's total return for the abbreviated fiscal period beginning March 18, 2005 and ending June 30, 2005 was 0.60% for Class II shares. The Portfolio targeted an asset allocation of 60% equities, 40% fixed-income during the period. Within the equity portion of the Portfolio, Pioneer Fund was the largest holding at 11.6% of assets on June 30, 2005. Pioneer International Equity Fund was the next largest equity holding at 10.6% of assets. Within the fixed-income portion of the Portfolio, the largest holding at the end of the period was in a shorter duration bond fund, Pioneer Short Term Income Fund, at 15.9%. Growth Allocation The Portfolio's total return for the abbreviated fiscal period beginning March 18, 2005 and ending June 30, 2005 was 0.70% for Class II shares. The Portfolio targeted an asset allocation of 75% equities, 25% fixed-income during the period. Within the equity portion of the Portfolio, Pioneer International Equity Fund was the largest holding at 14.0% of assets on June 30, 2005. The largest domestic equity allocation was to Pioneer Fund (11.9%) followed by Pioneer Mid Cap Value Fund (10.0%) and Pioneer Value Fund (9.0%). Overall, value holdings were weighted slightly above target as of the end of the period, reflecting management's view that value stocks were more attractive than their growth counterparts. Within the fixed-income portion of the Portfolio, the largest holding at the end of the period was in a long-term bond fund, Pioneer Bond Fund, at 11.1% of assets, while a shorter duration bond fund, Pioneer Short Term Income Fund represented 10.1% of assets. Aggressive Allocation The Portfolio's total return for the abbreviated fiscal period beginning March 18, 2005 and ending June 30, 2005 was 1.10% for Class II shares. The Portfolio targeted an asset allocation of 90% equities, 10% fixed-income during the period. Within the equity portion of the Portfolio, Pioneer International Equity Fund was the largest holding at 18.0% of assets on June 30, 2005. On the domestic side, two value-oriented funds, Pioneer Value Fund (12.0%) and Pioneer Mid-Cap Value Fund (12.0%) were the largest holdings. Overall, the Portfolio's value exposure was slightly above target as of the end of the period, reflecting management's view that value stocks were more attractive than their growth counterparts. The fixed-income portion of the Portfolio was invested in a long-term bond fund, Pioneer Bond Fund, at 10.1% of assets. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. 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's performance depends on the adviser's skill in determining the strategic asset class allocations, the mix of underlying Pioneer funds, as well as the performance of those underlying funds. The underlying funds' performance may be lower than the performance of the asset class that they were selected to represent. Stocks and bonds can decline due to adverse issuer, market, regulatory, or economic developments. International markets may be less liquid and can be more volatile than U.S. markets. These risk factors, including those associated with currency exchange rates, also apply to investments in international markets, all of which make international markets more volatile and less liquid than investments in domestic markets. Some of the underlying portfolios can invest in either high-yield securities or small/emerging growth companies. Investments in these types of securities generally are subject to greater volatility than either higher-grade securities or more-established companies, respectively. Before making an investment in the portfolio, you should consider all the risks associated with it. 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 Ibbotson Moderate Allocation VCT Portfolios PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (unaudited) - --------------------------------------------------------------------------------
Shares Value MUTUAL FUNDS - 92.1% PIONEER FUNDS - 92.1% 40,011 Pioneer Bond Fund Class Y $ 373,306 ----------- 5,234 Pioneer Cullen Value Fund Class Y 84,798 ----------- 3,407 Pioneer Emerging Markets Fund Class Y 71,139 ----------- 7,240 Pioneer Fund Class Y 300,973 ----------- 15,309 Pioneer High Yield Fund Class Y 171,462 ----------- 13,404 Pioneer International Equity Fund Class Y 274,648 ----------- 5,316 Pioneer Mid-Cap Value Fund Class Y 142,035 ----------- 17,264 Pioneer Oak Ridge Large Cap Growth Fund Class Y 219,771 ----------- 3,323 Pioneer Real Estate Shares Fund Class Y 85,632 ----------- 20,703 Pioneer Research Fund Class Y 190,880 ----------- 41,936 Pioneer Short Term Income Fund Class Y 413,913 ----------- 1,735 Pioneer Small Cap Value Fund Class Y 56,750 ----------- 12,277 Pioneer Value Fund Class Y 218,154 ----------- TOTAL INVESTMENTS IN SECURITIES - 92.1% (Cost $2,568,727)(a) $ 2,603,461 OTHER ASSETS AND LIABILITIES - 7.9% 224,400 ----------- TOTAL NET ASSETS - 100.0% $ 2,827,861 ===========
(a) At June 30, 2005, the net unrealized gain on investments based on cost for federal tax purposes of $2,568,727 was as follows: Aggregate gross unrealized gain for all investments in which there is an excess of value over tax cost $34,734 Aggregate gross unrealized loss for all investments in which there is an excess of tax cost over value - ------- Net unrealized gain $34,734 =======
Purchases and sales of securities (excluding temporary cash investments) for the period ended June 30, 2005 aggregated $2,583,321 and $14,483, respectively. 10 The accompanying notes are an integral part of these financial statements. Pioneer Ibbotson Growth Allocation VCT Portfolios PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (unaudited) - --------------------------------------------------------------------------------
Shares Value MUTUAL FUNDS - 100.4% PIONEER FUNDS - 100.4% 27,456 Pioneer Bond Fund Class Y $ 256,162 ----------- 5,686 Pioneer Cullen Value Fund Class Y 92,113 ----------- 5,550 Pioneer Emerging Markets Fund Class Y 115,883 ----------- 6,637 Pioneer Fund Class Y 275,893 ----------- 6,233 Pioneer High Yield Fund Class Y 69,813 ----------- 15,785 Pioneer International Equity Fund Class Y 323,442 ----------- 8,660 Pioneer Mid-Cap Value Fund Class Y 231,386 ----------- 14,476 Pioneer Oak Ridge Large Cap Growth Fund Class Y 184,279 ----------- 3,608 Pioneer Real Estate Shares Fund Class Y 92,983 ----------- 17,463 Pioneer Research Fund Class Y 161,012 ----------- 23,546 Pioneer Short Term Income Fund Class Y 232,402 ----------- 2,120 Pioneer Small Cap Value Fund Class Y 69,340 ----------- 11,658 Pioneer Value Fund Class Y 207,169 ----------- TOTAL INVESTMENTS IN SECURITIES - 100.4% (Cost $2,279,933)(a) $ 2,311,877 OTHER ASSETS AND LIABILITIES - (0.4%) (9,534) ----------- TOTAL NET ASSETS - 100.0% $ 2,302,343 ===========
(a) At June 30, 2005, the net unrealized gain on investments based on cost for federal tax purposes of $2,279,933 was as follows: Aggregate gross unrealized gain for all investments in which there is an excess of value over tax cost $32,499 Aggregate gross unrealized loss for all investments in which there is an excess of tax cost over value (555) ------- Net unrealized gain $31,944 =======
Purchases and sales of securities (excluding temporary cash investments) for the period ended June 30, 2005 aggregated $2,281,165 and $1,213 respectively. The accompanying notes are an integral part of these financial statements. 11 Pioneer Ibbotson Aggressive Allocation VCT Portfolios PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (unaudited) - --------------------------------------------------------------------------------
Shares Value MUTUAL FUNDS - 101.3% PIONEER FUNDS - 101.3% 6,619 Pioneer Bond Fund Class Y $ 61,753 --------- 1,884 Pioneer Cullen Value Fund Class Y 30,526 --------- 1,766 Pioneer Emerging Markets Fund Class Y 36,874 --------- 1,759 Pioneer Fund Class Y 73,141 --------- 5,381 Pioneer International Equity Fund Class Y 110,261 --------- 2,755 Pioneer Mid-Cap Value Fund Class Y 73,624 --------- 3,838 Pioneer Oak Ridge Large Cap Growth Fund Class Y 48,856 --------- 1,196 Pioneer Real Estate Shares Fund Class Y 30,823 --------- 5,952 Pioneer Research Fund Class Y 54,882 --------- 562 Pioneer Small Cap Value Fund Class Y 18,385 --------- 4,121 Pioneer Value Fund Class Y 73,231 --------- TOTAL INVESTMENTS IN SECURITIES - 101.3% (Cost $604,286)(a) $ 612,356 OTHER ASSETS AND LIABILITIES - (1.3%) (8,022) --------- TOTAL NET ASSETS - 100.0% $ 604,334 =========
(a) At June 30, 2005, the net unrealized gain on investments based on cost for federal tax purposes of $604,286 was as follows: Aggregate gross unrealized gain for all investments in which there is an excess of value over tax cost $8,659 Aggregate gross unrealized loss for all investments in which there is an excess of tax cost over value (589) ------ Net unrealized gain $8,070 ======
Purchases and sales of securities (excluding temporary cash investments) for the period ended June 30, 2005 aggregated $608,542 and $4,324, respectively. 12 The accompanying notes are an integral part of these financial statements. Pioneer Ibbotson Asset Allocation Series VCT Portfolios PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
For the period 3/18/05(a) to 6/30/05 (unaudited) ---------- Moderate Allocation VCT Portfolio Class II Net asset value, beginning of period $10.00 ------ Increase from investment operations: Net investment income (b) $ 0.05 Net realized and unrealized gain on investments 0.01 ------ Net increase from investment operations $ 0.06 ------ Distributions to shareowners: Net investment income - Net realized gain - ------ Net increase in net asset value $ 0.06 ------ Net asset value, end of period $10.06 ====== Total return* 0.60% Ratio of net expenses to average net assets**++ 0.74% Ratio of net investment income to average net assets ** 1.61% Portfolio turnover rate 1.00% Net assets, end of period (in thousands) $2,828
(a) Commencement of operations. (b) Calculated using average shares outstanding for the period. * 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. ** Annualized. ++ In the absence of expense reimbursement, expenses on an annualized basis would have been 7.04% of average net assets for Class II shares. The accompanying notes are an integral part of these financial statements. 13 Pioneer Ibbotson Asset Allocation Series VCT Portfolios PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
For the period 3/18/05(a) to 6/30/05 (unaudited) ---------- Growth Allocation VCT Portfolio Class II Net asset value, beginning of period $10.00 ------ Increase from investment operations: Net investment income (b) $ 0.03 Net realized and unrealized gain on investments 0.04 ------ Net increase from investment operations $ 0.07 ------ Distributions to shareowners: Net investment income - Net realized gain - ------ Net increase in net asset value $ 0.07 ------ Net asset value, end of period $10.07 ====== Total return* 0.70% Ratio of net expenses to average net assets**++ 0.74% Ratio of net investment income to average net assets** 1.11% Portfolio turnover rate 0.00% Net assets, end of period (in thousands) $2,302
(a) Commencement of operations. (b) Calculated using average shares outstanding for the period. * 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. ** Annualized. ++ In the absence of expense reimbursement, expenses on an annualized basis would have been 8.51% of average net assets for Class II shares. 14 The accompanying notes are an integral part of these financial statements. Pioneer Ibbotson Asset Allocation Series VCT Portfolios PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
For the period 3/18/05(a) to 6/30/05 (unaudited) ----------- Aggressive Allocation VCT Portfolio Class II Net asset value, beginning of period $10.00 ------ Increase from investment operations: Net investment income (b) $ 0.02 Net realized and unrealized gain on investments 0.09 ------ Net increase from investment operations $ 0.11 ------ Distributions to shareowners: Net investment income - Net realized gain - ------ Net increase in net asset value $ 0.11 ------ Net asset value, end of period $10.11 ====== Total return* 1.10% Ratio of net expenses to average net assets**++ 0.74% Ratio of net investment income to average net assets** 0.77% Portfolio turnover rate 1.00% Net assets, end of period (in thousands) $ 604
(a) Commencement of operations. (b) Calculated using average shares outstanding for the period. * 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. ** Annualized. ++ In the absence of expense reimbursement, expenses on an annualized basis would have been 28.96% of average net assets for Class II shares. The accompanying notes are an integral part of these financial statements. 15 Pioneer Ibbotson Asset Allocation Series VCT Portfolios PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 6/30/05 (unaudited) - --------------------------------------------------------------------------------
Moderate Growth Aggressive Allocation Allocation Allocation VCT Portfolio VCT Portfolio VCT Portfolio ------------- ------------- ------------- ASSETS: Investments in securities of affiliated issuers, at value (at cost $2,568,727, $2,279,933 and $604,286 respectively) $2,603,461 $2,311,877 $612,356 Cash 257,897 164,929 31,708 Receivable -- Reimbursement from Adviser 7,802 8,092 8,237 ---------- ---------- -------- Total assets $2,869,160 $2,484,898 $652,301 ---------- ---------- -------- LIABILITIES: Payables -- Securities purchased $ 17,979 $ 159,094 $ 25,963 Due to affiliates 1,087 900 383 Accrued expenses and other liabilities 22,233 22,561 21,621 ---------- ---------- -------- Total liabilities $ 41,299 $ 182,555 $ 47,967 ---------- ---------- -------- NET ASSETS: Paid-in capital $2,787,074 $2,266,896 $595,528 Accumulated net investment income 6,165 3,522 668 Accumulated net realized gain (loss) on investments (112) (19) 68 Net unrealized gain on investments 34,734 31,944 8,070 ---------- ---------- -------- Total net assets $2,827,861 $2,302,343 $604,334 ========== ========== ======== NET ASSET VALUE PER SHARE: (No par value, unlimited number of shares authorized) Net Assets of Class II Shares $2,827,861 $2,302,343 $604,334 Class II Shares outstanding 281,222 228,577 59,763 ---------- ---------- -------- Net Asset Value--Class II Shares $ 10.06 $ 10.07 $ 10.11
16 The accompanying notes are an integral part of these financial statements. Pioneer Ibbotson Asset Allocation Series VCT Portfolios PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (unaudited) - -------------------------------------------------------------------------------- For the Period 3/18/05* to 6/30/05
Moderate Growth Aggressive Allocation Allocation Allocation VCT Portfolio VCT Portfolio VCT Portfolio ------------- ------------- ------------- INVESTMENT INCOME: Dividends $ 7,555 $ 5,160 $ 1,122 Interest 1,443 711 190 -------- -------- -------- Total investment income $ 8,998 $ 5,871 $ 1,312 -------- -------- -------- EXPENSES: Management fees $ 498 $ 413 $ 113 Transfer agent fees 451 451 451 Distribution fees 957 793 218 Custodian fees 9,952 10,259 9,340 Professional fees 9,064 9,064 9,064 Printing fees 5,416 5,416 5,416 Fees and expenses of nonaffiliated trustees 72 72 72 Miscellaneous 543 543 543 -------- -------- -------- Total expenses $ 26,953 $ 27,011 $ 25,217 -------- -------- -------- Less fees paid indirectly and reimbursed by Pioneer Investment Management, Inc. (24,120) (24,662) (24,573) -------- -------- -------- Net expenses $ 2,833 $ 2,349 $ 644 -------- -------- -------- Net investment income $ 6,165 $ 3,522 $ 668 -------- -------- -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) on investments $ (112) $ (19) $ 68 Change in net unrealized gain on investments 34,734 31,944 8,070 -------- -------- -------- Net gain on investments $ 34,622 $ 31,925 $ 8,138 -------- -------- -------- Net increase in net assets resulting from operations $ 40,787 $ 35,447 $ 8,806 ======== ======== ========
* Commencement of operations. The accompanying notes are an integral part of these financial statements. 17 Pioneer Ibbotson Asset Allocation Series VCT Portfolios PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS (unaudited) - -------------------------------------------------------------------------------- For the Period 3/18/05* to 6/30/05
Moderate Growth Aggressive Allocation Allocation Allocation VCT Portfolio VCT Portfolio VCT Portfolio ------------- ------------- ------------- FROM OPERATIONS: Net investment income $ 6,165 $ 3,522 $ 668 Net realized gain (loss) on investments (112) (19) 68 Change in net unrealized gain on investments 34,734 31,944 8,070 ---------- ---------- -------- Net increase in net assets resulting from operations $ 40,787 $ 35,447 $ 8,806 ---------- ---------- -------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $2,712,362 $2,169,472 $496,061 Cost of shares repurchased (25,288) (2,576) (533) ---------- ---------- -------- Net increase in net assets resulting from fund share transactions $2,687,074 $2,166,896 $495,528 ---------- ---------- -------- Net increase in net assets $2,727,861 $2,202,343 $504,334 NET ASSETS: Beginning of period (Initial capitalization - 10,000 shares per fund) $ 100,000 $ 100,000 $100,000 ---------- ---------- -------- End of period (including accumulated net investment income of $6,165, $3,522 and $668, respectively) $2,827,861 $2,302,343 $604,334 ========== ========== ========
* Commencement of operations. 18 The accompanying notes are an integral part of these financial statements. Pioneer Ibbotson Asset Allocation Series VCT Portfolios PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS (unaudited) - --------------------------------------------------------------------------------
Moderate Allocation Growth Allocation Aggressive Allocation VCT Portfolio VCT Portfolio VCT Portfolio ---------------------------- ---------------------------- ---------------------------- Shares Amount Shares Amount Shares Amount Class II Shares sold 273,747 $2,712,362 218,836 $2,169,472 49,816 $496,061 Less shares repurchased (2,525) (25,288) (259) (2,576) (53) (533) ------- ---------- ------- ---------- ------ -------- Net increase 271,222 $2,687,074 218,577 $2,166,896 49,763 $495,528 ======= ========== ======= ========== ====== ========
The accompanying notes are an integral part of these financial statements. 19 Pioneer Ibbotson Asset Allocation Series VCT Portfolios PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (unaudited) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Ibbotson Moderate Allocation VCT Portfolio, Ibbotson Growth Allocation VCT Portfolio and Ibbotson Aggressive Allocation VCT Portfolio (the Portfolios) are Portfolios 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. Each of these Portfolios is a "fund of funds," which means that it seeks to achieve its investment objective by investing in other funds ("underlying funds") rather than direct investment in securities. The Portfolios indirectly pay a portion of the expenses incurred by the underlying funds. Consequently, an investment in the Portfolios entails more direct and indirect expenses than direct investment in the underlying funds. The Trust consists of twenty eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Moderate Allocation VCT Portfolio (Ibbotson Moderate Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts or by qualified pension and retirement plans. The investment objective of the Moderate VCT Portfolio is to seek a balance between long-term capital growth and current income. The Growth VCT Portfolio seeks a balance between long-term capital growth and current income. The Aggressive VCT Portfolio seeks long-term capital growth. The financial statements and financial highlights of all other Portfolios are presented in separate books. The financial statements have been prepared in accordance with United States generally accepted accounting principles that require the management of the Portfolios to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from these estimates. The following is a summary of significant accounting policies consistently followed by the Portfolios in the preparation of their financial statements, which are in conformity with those generally accepted in the investment company industry. 20 Pioneer Ibbotson Asset Allocation Series VCT Portfolios PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A. Security Valuation Purchases and sales of mutual fund shares are recorded as of the trade date. The net asset value is computed once daily, on each day the New York Stock Exchange is open, as of the close of regular trading on the NYSE. In computing the net asset value, holdings of mutual fund shares are valued at the net asset value of each Fund. Dividend income is recorded on the ex-dividend date. Temporary cash investments are valued at amortized cost. Gains and losses on sales of investments are calculated on the identified cost method for both financial reporting and federal income tax purposes. B. Federal Income Taxes It is the Portfolios' policy to comply with the requirements of the Internal Revenue Service Code applicable to regulated investment companies and to distribute all taxable income and net realized capital gains, if any, to its shareholders. Therefore, no Federal income tax provisions are 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 the Portfolios' distributions may be shown in the accompanying financial statements as either from or in excess of net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. The tax character of current year distributions paid will be determined at the end of the current fiscal year. C. 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. Distribution fees for Class II shares are calculated based on the average daily net asset values attributable to Class II shares of each 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 Portfolios 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. 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 agreement at the time of the purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Portfolios' custodian, or subcustodians. The Portfolios' 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, is the Portfolios' investment adviser, and manages the Portfolios. Management fees are calculated daily at the following annual rates on Pioneer managed assets:
- -------------------------------------------------------------------------------- Management Fee as a Percentage of each Fund's Average Fund Daily Net Assets - -------------------------------------------------------------------------------- Moderate VCT Portfolio 0.13% Growth VCT Portfolio 0.13% Aggressive VCT Portfolio 0.13% - --------------------------------------------------------------------------------
21 Pioneer Ibbotson Asset Allocation Series VCT Portfolios PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (unaudited) (continued) - -------------------------------------------------------------------------------- For each Portfolio, management fees will be calculated daily at a 0.17% annual rate on Third Party managed assets. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, will be paid by the Portfolios. At June 30, 2005, the following fees were payable to PIM relating to management fees and certain other services and are included in due to affiliates:
- -------------------------------------------------------------------------------- Fund Amount - -------------------------------------------------------------------------------- Moderate VCT Portfolio $303 Growth VCT Portfolio $239 Aggressive VCT Portfolio $ 62 - --------------------------------------------------------------------------------
From March 18, 2005 through June 30, 2005, PIM did not impose all or a portion of its management fees and assumed other operating expenses of the Portfolios to the extent necessary to limit Class II expenses to the following annual expense limitations:
- -------------------------------------------------------------------------------- Fund Class II - -------------------------------------------------------------------------------- Moderate VCT Portfolio .74% Growth VCT Portfolio .74% Aggressive VCT Portfolio .74% - --------------------------------------------------------------------------------
3. Transfer Agent PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides substantially all transfer agent and shareowner services to the Portfolios at negotiated rates. Included in due to affiliates are the following amounts of transfer agent fees payable to PIMSS at June 30, 2005:
- -------------------------------------------------------------------------------- Fund Amount - -------------------------------------------------------------------------------- Moderate VCT Portfolio $201 Growth VCT Portfolio $201 Aggressive VCT Portfolio $201 - --------------------------------------------------------------------------------
4. Distribution Plans The Portfolios have adopted a Plan of Distribution with respect to Class II shares (Class II Plan) in accordance with Rule 12b-1 of the Investment Company Act of 1940. Pursuant to the Class II Plan, the Portfolios will pay PFD a service fee of up to 0.25% of the Fund's average daily net assets attributable to Class II shares in reimbursement of its actual expenditures to finance activities primarily intended to result in the sale of Class II shares. At June 30, 2005, the following fees were payable to PFD relating to service fees and are included in due to affiliates:
- -------------------------------------------------------------------------------- Fund Amount - -------------------------------------------------------------------------------- Moderate VCT Portfolio $583 Growth VCT Portfolio $460 Aggressive VCT Portfolio $120 - --------------------------------------------------------------------------------
22 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 23 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 24 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 25 [LOGO] PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the fund and should be read carefully before you invest. To obtain a prospectus and for other information on any Pioneer fund, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17936-00-0805 [logo]PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Table of Contents - -------------------------------------------------------------------------------- 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 Factors Considered by the Independent Trustees in Approving the Management Contract 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 International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- Sector Distribution (As a percentage of total investment portfolio) [The following data was represented as a pie chart in the original document.] International Common Stocks 88.6% Temporary Cash Investment 4.9% Depositary Receipts for International Stocks 3.3% U.S. Common Stocks 2.7% International Preferred Stocks 0.5%
Geographical Distribution (As a percentage of equity holdings) [The following data was represented as a pie chart in the original document.] Japan 24.6% France 17.5% United Kingdom 16.5% Switzerland 10.4% Germany 6.3% Spain 5.5% Italy 3.7% Netherlands 3.4% South Korea 3.1% Brazil 1.2% Mexico 1.2% United States 1.1% Ireland 1.0% Singapore 1.0% Other (individually less than 1%) 3.5%
Five Largest Holdings (As a percentage of equity holdings) 1. Total SA 2.82% 2. Vodafone Group Plc 2.57 3. Toyota Motor Co. 2.28 4. UBS AG 2.13 5. France Telecom SA 2.05
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 11.36 $ 11.84
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.0074 $ - $ -
- -------------------------------------------------------------------------------- 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 original document.]
Pioneer International MSCI AC Wld Fr Value VCT Portfolio USA Index Jun-95 10000 10000 11285 11317 Jun-97 13052 12917 11281 13096 Jun-99 11338 14343 14331 16941 Jun-01 9850 12905 9059 11852 Jun-03 8431 11354 10652 15044 Jun-05 11722 17598
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- 10 Years 1.60% 5 Years -3.94% 1 Year 10.04%
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 semiannual 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 International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value / $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 January 1, 2005 through June 30, 2005.
Share Class II -------------------------------------------------------- Beginning Account Value on 1/1/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 960.10 Expenses Paid During Period* $ 8.99
* Expenses are equal to the Portfolio's annualized expense ratio of 1.85% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer International Value VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from January 1, 2005 through June 30, 2005.
Share Class II -------------------------------------------------------- Beginning Account Value on 1/1/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,015.62 Expenses Paid During Period* $ 9.25
* Expenses are equal to the Portfolio's annualized expense ratio of 1.85% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- During the six months ended June 30, 2005, international stocks produced mixed results. Fears of higher interest rates sparked inflation worries and tempered investors' appetite for risk. In the following interview, Portfolio Manager Christopher Smart discusses the changing sentiment and other factors that influenced the Portfolio's performance. Q. How did the Portfolio perform? A. For the six months ended June 30, 2005, Class II shares returned -3.99%, at net asset value. Investments in Japan proved to be the biggest disappointment and contributed to the Portfolio's underperformance relative to the Morgan Stanley Capital International (MSCI) All Country World Free Index, which rose 0.32%. Not only did the Japanese market underperform other global markets, but our stock selection in Japan also detracted from the Portfolio's absolute return. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Economic data released this spring suggested that Japanese economic growth had slowed slightly, which prompted economists to postpone their outlook for a broader recovery to the second half of 2005. In addition, rising interest rates in the United States helped trigger an 8.1% weakening in the yen during the six-month period, which dealt a further blow to the value of some of our stocks in dollar terms. Holdings in banking groups Sumitomo Trust and Banking and UFJ Holdings suffered as a result, although we remain confident about their prospects, because we anticipate loan growth will climb as demand picks up again. Another investment, Kajima, which makes prefabricated homes, also lagged during the period, but we still think its exposure to the housing industry should improve as consumers start to spend again. Finally, a mixed picture for technology exporters hurt our holding in Konica Minolta, which sells cameras and other photography equipment worldwide. Their global sales prospects in addition to our growing concerns about the company's restructuring efforts led us to sell the stock. While several Japanese holdings lagged, some stocks proved quite rewarding. For instance, the Portfolio's investments in OSG, which sells drilling and machine tools to the automobile industry, did very well. OSG's future looks strong in our estimation, especially given its sales to Toyota, which is one of the fastest growing automobile manufacturers in the world. Q. Has your view of investing in Europe changed in response to the French and Dutch rejection of the proposed European Union constitution? A. No. It is true that the No vote in France and the Netherlands may well cause concern for the pace of European integration and the overall management of the European economy. However, we have always taken a company-by company approach to investing in the European continent. Political and economic issues play into our analysis on some level, but they generally take a back seat to a company's fundamentals and its strategy against its competition. ACS Actividades (Spain), Vinci (France) and Deutsche Boerse, (Germany) performed well during the six-month period. Q. Did investments in emerging markets contribute positively to performance? A. Yes. Three holdings were particularly noteworthy. Grupo Televisa is the dominant Mexican broadcaster and has successfully increased its advertising rates and sales volume amidst the Mexican economic recovery. Unibanco, Brazil's third largest bank, has one of the largest retail networks in the country and has experienced significant loan growth with the domestic economic recovery. Finally, Kookmin Bank is one of the largest banks in South Korea and has recovered nicely from the high default rate of credit card holders in 2003. While emerging market holdings proved to be a plus overall, they did encounter some headwind in March, when inflationary fears shook investors' confidence. In anticipation of some uncertainty ahead, we scaled back some of the Portfolio's emerging market holdings, which had appreciated considerably. Our outlook for Turkey was also affected by the voting on the European constitution, which raised doubts about its candidacy to join the European Union. We sold four holdings - Norilsk Nickel (Russia), Turkcell Iletism Hizmet (Turkey), Brazil Telecom and Unibanco - to lock in their strong price gains and reduce the Portfolio's risk exposure. While we limited investments in those more volatile markets, we continue to believe their low valuations and strong growth potential provide important opportunities. During the decline, many emerging market stocks became attractively priced relative to their long-term earnings potential. As a result, we added Petrobras, the Brazilian oil giant. Q. What is your outlook? A. We became somewhat more defensive earlier this year, most notably in emerging markets. While the current market sentiment remains nervous, we believe that inflationary fears are probably excessive, given the prospects this year of a muted growth outlook in the United States. While foreign stocks may face temporary headwinds in the face of a recovering U.S. dollar, the long-term outlook for international markets remains attractive, especially given their relatively low stock prices. 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 International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value PREFERRED STOCKS - 0.4% Health Care Equipment & Services - 0.4% Health Care Equipment - 0.4% 1,050 Fresenius AG $ 120,204 ----------- Total Health Care Equipment & Services $ 120,204 ----------- TOTAL PREFERRED STOCKS (Cost $112,283) $ 120,204 ----------- COMMON STOCKS - 98.0% Energy - 8.8% Integrated Oil & Gas - 8.1% 31,810 BP Amoco Plc $ 331,140 16,300 Eni S.p.A. (a) 417,644 3,400 Petrobras Brasileiro (A.D.R.) 156,536 16,500 Repsol SA (a) 418,553 2,930 Total SA 686,068 ----------- $ 2,009,941 ----------- Oil & Gas Equipment & Services - 0.4% 1,760 Technip* $ 81,824 ----------- Oil & Gas Refining & Marketing - 0.3% 12,000 Nippon Mitsubishi* $ 81,552 ----------- Total Energy $ 2,173,317 ----------- Materials - 8.5% Construction Materials - 2.6% 9,600 CRH Plc $ 253,319 1,600 Holcim, Ltd. 97,076 1,600 Lafarge Br (a) 145,176 16,900 Ultra Tech Cement, Ltd. 137,058 ----------- $ 632,629 ----------- Diversified Chemical - 1.5% 4,600 BASF India, Ltd. $ 304,850 2,400 Bayer AG 79,812 ----------- $ 384,662 ----------- Diversified Metals & Mining - 3.4% 11,102 Broken Hill Proprietary Co., Ltd. $ 151,594 36,800 Dowa Mining Co., Ltd.* 243,562 7,350 Freeport-McMoRan Copper & Gold, Inc. (Class B) 275,184 5,390 Rio Tinto Plc 163,808 ----------- $ 834,148 ----------- Industrial Gases - 1.0% 49,500 Taiyo Nippon Sanso Corp. $ 251,413 ----------- Total Materials $ 2,102,852 ----------- Capital Goods - 12.0% Building Products - 1.3% 5,900 Compagnie de Saint Gobain $ 326,007 -----------
Shares Value Construction, Farm Machinery & Heavy Trucks - 2.0% 13,700 Daewoo Heavy Industries & Machinery, Ltd. $ 261,342 4,700 Hyundai Heavy Industries 234,844 ----------- $ 496,186 ----------- Construction & Engineering - 4.3% 9,249 ACS, Actividades de Construccion y Servicios, SA $ 257,813 65,600 Kajima Corp.* 241,449 52,800 Shimizu Corp.* 244,825 3,960 VINCI SA 329,378 ----------- $ 1,073,465 ----------- Electrical Component & Equipment - 0.7% 2,400 Schneider Electric SA $ 180,367 ----------- Industrial Conglomerates - 1.4% 5,562 KOC Holding AS $ 24,454 4,390 Siemens 319,103 ----------- $ 343,557 ----------- Industrial Machinery - 1.5% 11,400 Atlas Copco AB $ 180,245 13,600 Koyo Seiko Co., Ltd.* 181,647 ----------- $ 361,892 ----------- Trading Companies & Distributors - 0.8% 20,000 Mitsui & Co. Ltd.* $ 189,531 ----------- Total Capital Goods $ 2,971,005 ----------- Commercial Services & Supplies - 0.4% Data Processing Services - 0.4% 2,700 Trans Cosmos, Inc.* $ 106,977 ----------- Total Commercial Services & Supplies $ 106,977 ----------- Transportation - 2.4% Air Freight & Couriers - 0.9% 8,100 TNT Post Group NV $ 205,074 ----------- Airport Services - 0.6% 14,400 BAA Plc $ 159,699 ----------- Railroads - 0.9% 28 Central Japan Railway Co. $ 216,032 ----------- Total Transportation $ 580,805 ----------- Automobiles & Components - 3.5% Automobile Manufacturers - 2.3% 15,500 Toyota Motor Co. $ 554,712 -----------
The accompanying notes are an integral part of these financial statements. 5 Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Tires & Rubber - 1.2% 3,500 Compagnie Generale des Etablissements Michelin $ 212,426 1,300 Continental AG 93,444 ----------- $ 305,870 ----------- Total Automobiles & Components $ 860,582 ----------- Consumer Durables & Apparel - 3.2% Apparel, Accessories & Luxury Goods - 1.0% 1,500 Adidas-Salomon AG $ 250,199 ----------- Consumer Electronics - 2.2% 9,500 Philips Electronics NV $ 238,860 20,000 Sharp Corp.* 312,996 ----------- $ 551,856 ----------- Total Consumer Durables & Apparel $ 802,055 ----------- Consumer Services - 1.5% Casinos & Gaming - 0.9% 3,500 Sega Sammy Holdings, Inc. $ 214,801 ----------- Restaurants - 0.6% 37,200 Compass Group Plc $ 155,979 ----------- Total Consumer Services $ 370,780 ----------- Media - 4.6% Broadcasting & Cable TV - 3.4% 16,200 British Sky Broadcasting Plc $ 152,428 4,600 Grupo Televisa SA (A.D.R.) 285,614 280 Jupiter Telecommunications Co., Ltd.* 235,472 14,100 Mediaset S.p.A 165,740 ----------- $ 839,254 ----------- Movies & Entertainment - 0.6% 4,900 Vivendi Universal $ 153,430 ----------- Publishing - 0.6% 1,800 Lagardere SCA $ 132,747 ----------- Total Media $ 1,125,431 ----------- Retailing - 0.8% Catalog Retail - 0.8% 12,000 GUS Plc $ 189,385 ----------- Total Retailing $ 189,385 ----------- Food & Drug Retailing - 2.2% Drug Retail - 0.3% 6,500 Boots Company Plc $ 70,699 ----------- Food Retail - 1.9% 5,400 Lawson, Inc. $ 188,361 51,400 Tesco Plc 292,813 ----------- $ 481,174 ----------- Total Food & Drug Retailing $ 551,873 -----------
Shares Value Food, Beverage & Tobacco - 2.4% Packaged Foods & Meats - 1.8% 1,700 Nestle SA (Registered Shares) $ 434,489 ----------- Tobacco - 0.6% 7,720 British American Tobacco Plc $ 149,300 ----------- Total Food, Beverage & Tobacco $ 583,789 ----------- Health Care Equipment & Services - 0.3% Health Care Equipment - 0.3% 400 Nobel Biocare Holding AG $ 80,960 ----------- Total Health Care Equipment & Services $ 80,960 ----------- Pharmaceuticals & Biotechnology - 8.1% Biotechnology - 0.3% 800 Actelion, Ltd.* $ 83,050 ----------- Pharmaceuticals - 7.8% 6,400 Astellas Pharma, Inc. $ 218,625 9,832 Astrazeneca Plc 406,029 12,100 Chugai Pharmaceutical Co.* 186,867 8,590 GlaxoSmithKline Plc 206,970 3,800 Novartis 180,502 3,538 Roche Holdings AG 446,210 1,380 Sanofi-Aventis (a) 112,965 4,900 Shire Pharmaceuticals Group Plc (A.D.R.) 160,720 ----------- $ 1,918,888 ----------- Total Pharmaceuticals & Biotechnology $ 2,001,938 ----------- Banks - 12.7% Diversified Banks - 12.7% 16,200 Banco Bilbao Vizcaya Argentaria, SA $ 249,816 32,825 Barclays Plc 326,079 5,200 BNP Paribas SA 355,475 8,145 Credit Agricole SA 205,771 28,900 Development Bank of Singapore, Ltd. 244,621 2,800 Kookmin Bank (A.D.R.) 127,624 13,520 Royal Bank of Scotland Group Plc 408,327 4,119 Societe Generale 417,175 45,500 Sumitomo Trust Bank* 276,006 22,700 Turkiye Is Bankasi 132,031 75 UFJ Holdings, Inc.* 389,233 ----------- $ 3,132,158 ----------- Total Banks $ 3,132,158 ----------- Diversified Financials - 4.9% Diversified Capital Markets - 3.4% 7,930 CS Group* $ 311,142 6,650 UBS AG 517,566 ----------- $ 828,708 -----------
6 The accompanying notes are an integral part of these financial statements. Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Diversified Financial Services - 1.5% 13,400 ING Groep NV $ 376,943 ----------- Total Diversified Financials $ 1,205,651 ----------- Insurance - 4.5% Life & Health Insurance - 0.5% 4,900 China Life Insurance Co. (A.D.R.)*(a) $ 133,770 ----------- Multi-Line Insurance - 2.7% 5,300 Assicurazioni Generali $ 164,860 10,900 AXA 271,043 1,380 Zurich Financial Services* 237,023 ----------- $ 672,926 ----------- Property & Casualty Insurance - 0.7% 20,000 Mitsui Sumitomo Insurance Co.* $ 179,459 ----------- Reinsurance - 0.6% 2,200 Swiss Re $ 134,847 ----------- Total Insurance $ 1,121,002 ----------- Real Estate - 1.1% Real Estate Management & Development - 1.1% 25,000 Mitsui Fudosan Co. $ 280,178 ----------- Total Real Estate $ 280,178 ----------- Software & Services - 0.7% IT Consulting & Other Services - 0.7% 2,100 Atos Origin* $ 132,776 300 OBIC Co., Ltd. 50,813 ----------- $ 183,589 ----------- Total Software & Services $ 183,589 ----------- Technology Hardware & Equipment - 2.2% Electronic Equipment & Instruments - 2.2% 600 Keyence Corp. $ 133,705 3,300 Kyocera Corp.* 251,695 10,000 Ricoh Co.* 156,408 ----------- $ 541,808 ----------- Total Technology Hardware & Equipment $ 541,808 ----------- Semiconductors - 0.7% Semiconductor Equipment - 0.7% 3,100 Tokyo Electron, Ltd. $ 162,695 ----------- Total Semiconductors $ 162,695 -----------
Shares Value Telecommunication Services - 9.0% Integrated Telecommunication Services - 5.4% 4,000 Brasil Telecom Participacoes SA* $ 144,400 17,200 France Telecom SA 499,630 30 Nippon Telegraph & Telephone Corp.* 128,709 46,486 Telecom Italia S.p.A. 144,833 25,823 Telefonica SA 422,824 ----------- $ 1,340,396 ----------- Wireless Telecommunication Services - 3.6% 4,000 Mobile Telesystems (A.D.R.)* $ 134,600 6,500 SK Telecom Co., Ltd.*(a) 132,600 256,211 Vodafone Group Plc 625,600 ----------- $ 892,800 ----------- Total Telecommunication Services $ 2,233,196 ----------- Utilities - 3.5% Electric Utilities - 2.6% 4,033 E.On AG $ 358,006 11,700 Tokyo Electric Power Co.* 279,554 ----------- $ 637,560 ----------- Multi-Utilities - 0.9% 23,300 National Grid Transco Plc $ 225,583 ----------- Total Utilities $ 863,143 ----------- TOTAL COMMON STOCKS (Cost $20,926,646) $24,225,169 ----------- TEMPORARY CASH INVESTMENT - 5.1% Security Lending Collateral - 5.1% 1,252,555 Securities Lending Investment Fund, 3.29% $ 1,252,555 ----------- TOTAL TEMPORARY CASH INVESTMENT (Cost $1,252,555) $ 1,252,555 ----------- TOTAL INVESTMENT IN SECURITIES - 103.5% (Cost $22,291,484)(b) $25,597,928 ----------- OTHER ASSETS AND LIABILITIES - (3.5)% $ (869,961) ----------- TOTAL NET ASSETS - 100.0% $24,727,967 ===========
The accompanying notes are an integral part of these financial statements. 7 PIONEER VARIABLE CONTRACTS TRUST Pioneer International Value VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- (A.D.R.) American Depositary Receipt * Non-income producing security (a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 4,580 China Life Insurance Co. (A.D.R.)* $ 125,034 15,400 Eni S.p.A. 394,583 1,500 Lafarge Br 136,102 12,300 Repsol SA 312,012 1,200 Sanofi-Aventis 98,230 6,175 SK Telecom Co., Ltd.* 125,970 ---------- Total $1,191,931 ==========
(b) Distributions of investments by country of issue, as a percentage of total equity holdings (excluding temporary cash investments) is as follows: Japan 24.6% France 17.5 United Kingdom 16.5 Switzerland 10.4 Germany 6.3 Spain 5.5 Italy 3.7 Netherlands 3.4 South Korea 3.1 Brazil 1.2 Mexico 1.2 United States 1.1 Ireland 1.0 Singapore 1.0 Other (individually less than 1%) 3.5 ----- 100.0% =====
8 The accompanying notes are an integral part of these financial statements. Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended 5/1/03 (a) 6/30/05 Year Ended to Class II (unaudited) 12/31/04 12/31/03 Net asset value, beginning of period $ 11.84 $ 10.04 $ 7.76 ------- ------- ------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.08 $ (0.02) $ 0.05 Net realized and unrealized gain (loss) on investments and foreign currency transactions ( 0.55) 1.86 2.29 -------- ------- ------- Net increase (decrease) from investment operations $ (0.47) $ 1.84 $ 2.34 Distributions to shareowners: Net investment income ( 0.01) ( 0.04) (0.06) -------- ------- -------- Net increase (decrease) in net asset value $ (0.48) $ 1.80 $ 2.28 -------- ------- -------- Net asset value, end of period $ 11.36 $ 11.84 $ 10.04 ======== ======= ======== Total return* ( 3.99)% 18.42% 30.31%** Ratio of net expenses to average net assets+ 1.85%** 2.13% 2.02%** Ratio of net investment income (loss) to average net assets+ 1.48%** (0.11)% (0.81)%** Portfolio turnover rate 103%** 129% 99% Net assets, end of period (in thousands) $ 4,778 $ 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 1.85%** 2.13% 2.02%** Net investment income (loss) 1.48%** (0.11)% ( 0.81)%**
(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. 9 Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $1,191,931) (Cost $22,291,484) $ 25,597,928 Cash 334,085 Foreign currencies, at value (Cost $31,958) 31,536 Receivables -- Investment securities sold 2,496,521 Fund shares sold 2,647 Dividends, interest and foreign taxes withheld 66,026 Other 402 ------------- Total assets $ 28,529,145 ------------- LIABILITIES: Payables -- Investment securities purchased $ 2,476,021 Fund shares repurchased 464 Upon return of securities loaned 1,252,555 Forward foreign currency portfolio hedge contracts, net 1,276 Due to affiliates 1,299 Accrued expenses 69,563 ------------- Total liabilities $ 3,801,178 ------------- NET ASSETS: Paid-in capital $ 33,699,659 Undistributed net investment income (loss) 201,860 Accumulated net realized gain (loss) (12,474,265) Net unrealized gain (loss) on: Investments 3,306,444 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (5,731) ------------- Total net assets $ 24,727,967 ------------- NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $ 19,950,192 Shares outstanding 1,748,351 ------------- Net asset value per share $ 11.41 Class II: (No par value, unlimited number of shares authorized) Net assets $ 4,777,775 Shares outstanding 420,460 ------------- Net asset value per share $ 11.36
10 The accompanying notes are an integral part of these financial statements. Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $53,476) $ 397,070 Interest 3,370 Income on securities loaned, net 14,342 Other 70 ------------ Total investment income $ 414,852 ------------ EXPENSES: Management fees $ 128,119 Transfer agent fees and expenses 1,488 Distribution fees (Class II) 5,603 Administrative reimbursements 9,326 Custodian fees 23,087 Professional fees 25,084 Printing expense 8,002 Fees and expenses of nonaffiliated trustees 181 Miscellaneous 7,944 ------------ Total expenses $ 208,834 ------------ Net expenses $ 208,834 ------------ Net investment income (loss) $ 206,018 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $ 1,647,560 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (13,839) ------------ $ 1,633,721 ------------ Change in net unrealized gain or loss from: Investments $ (2,844,618) Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (4,396) ------------ $ (2,849,014) ------------ Net gain (loss) on investments and foreign currency transactions $ (1,215,293) ============ Net increase (decrease) in net assets resulting from operations $ (1,009,275) ============
The accompanying notes are an integral part of these financial statements. 11 Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended (unaudited) 12/31/04 FROM OPERATIONS: Net investment income (loss) $ 206,018 $ 93,454 Net realized gain (loss) on investments 1,633,721 2,810,326 Change in net unrealized gain or loss on investments and foreign currency transactions (2,849,014) 1,310,186 ------------ ------------ Net increase (decrease) in net assets resulting from operations $ (1,009,275) $ 4,213,966 ------------ ------------ DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (31,154) $ (113,573) Class II (3,084) (8,890) ------------ ------------ Total distributions to shareowners $ (34,238) $ (122,463) ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 1,350,733 $ 4,380,480 Reinvestment of distributions 34,238 122,460 Cost of shares repurchased (2,605,824) (5,189,620) ------------ ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ (1,220,853) $ (686,680) ------------ ------------ Net increase (decrease) in net assets $ (2,264,366) $ 3,404,823 ------------ ------------ NET ASSETS: Beginning of period $ 26,992,333 $ 23,587,510 ------------ ------------ End of period $ 24,727,967 $ 26,992,333 ============ ============ Undistributed net investment income (loss), end of period $ 201,860 $ 30,080 ============ ============
12 The accompanying notes are an integral part of thesefinancial statements. Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer International Value Portfolio (the Portfolio) is a Portfolio of the Pioneer Variable Contracts Trust (the Trust), a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Conservative Allocation VCT Portfolio (Ibbotson Conservative Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) The Portfolio commenced operations on May 1, 2003. Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts or by qualified pension and retirement plans. The 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 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 portfolios are computed once daily, on each day the New York Stock Exchange (NYSE) is open, as of the close of regular trading on the NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Trading in foreign equity securities is substantially completed each day at various times prior to the close of the NYSE. The value of such 13 Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 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 June 30, 2005, 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. dollars actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. C. Forward Foreign Currency Contracts The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. (see Note 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 14 Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 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. 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. The tax character of current year distributions will be determined at the end of the current fiscal year.
- -------------------------------------------------------------------------------- 2004 - -------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 122,463 Long-Term capital gain -- ----------- $ 122,463 Return of Capital -- ----------- Total distributions $ 122,463 =========== 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 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), $525,089 in commissions on the sale of Trust shares for the six months ended June, 30, 2005. 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 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 15 Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 the 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 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 June 30, 2005, $757 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 $509 in transfer agent fees payable to PIMSS at June 30, 2005. 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 $33 payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $22,305,068 $3,629,029 $ (336,169) $3,292,860 =========== ========== ========== ========== - ------------------------------------------------------------------------------------------------------
16 Pioneer International Value 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 six months ended June 30, 2005, were $13,030,416 and $14,299,558, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
- -------------------------------------------------------------------------------------------- '05 Shares '05 Amount International Value Portfolio (unaudited) (unaudited) '04 Shares '04 Amount - -------------------------------------------------------------------------------------------- CLASS I: Shares sold 30,107 $ 350,932 125,954 $ 1,319,269 Reinvestment of distributions 2,721 31,154 10,994 113,572 Shares repurchased (208,221) (2,433,250) (449,994) (4,643,483) ------------------------------------------------------ Net increase (decrease) (175,393) $ (2,051,164) (313,046) $ (3,210,642) ====================================================== CLASS II: Shares sold 85,781 $ 999,801 294,244 $ 3,061,211 Reinvestment of distributions 270 3,804 862 8,888 Shares repurchased (14,702) (172,574) (53,626) (546,137) ------------------------------------------------------ Net increase (decrease) 71,349 $ 830,311 241,480 $ 2,523,962 ====================================================== - --------------------------------------------------------------------------------------------
8. Forward Foreign Currency Contracts During the six months ended June 30, 2005, 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 June 30, 2005, 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 $25,351 7/1/05 $ (26,627) $ (1,276) - ---------------------------------------------------------------------------------------------
17 Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objective and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 18 Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and the results of an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the second quintile of the peer group for the 12 months ended June 30, 2004, the second quintile for the three years ended June 30, 2004, and the second quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the fourth quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio for the 12 months ended June 30, 2004 and expense ratios for the comparable period of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio was in the fifth quintile of this peer group for the most recent fiscal year. The Trustees concluded that the Fund's overall expense ratio, although higher than its peer group, was reasonable compared to that of most of the comparably sized funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, break points in the management fee are not necessary. As assets increase, the Trustees will continue to evaluate annually the appropriateness of the break points. 19 Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 20 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. [logo]PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17872-00-0805 [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Mid Cap Value VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 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 Factors Considered by the Independent Trustees in Approving the Management Contract 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 Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- Portfolio Diversification (As a percentage of total investment portfolio) [THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL] U.S. Common Stocks 84.7% Temporary Cash Investment 14.7% Depositary Receipts for International Stocks 0.6%
Sector Distribution (As a percentage of equity holdings) [THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL] Consumer Discretionary 20.7% Financials 19.3% Health Care 10.3% Industrials 9.9% Utilities 8.6% Information Technology 8.4% Materials 8.1% Consumer Staples 6.9% Energy 6.0% Telecommunication Services 1.8%
Five Largest Holdings (As a percentage of equity holdings) 1. Foot Locker, Inc. 2.35% 2. BJ's Wholesale Club, Inc. 1.94 3. Safeway, Inc. 1.92 4. Republic Services, Inc. 1.89 5. The PMI Group, Inc. 1.88
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 23.93 $ 24.44
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.0519 $ 0.1221 $ 1.3647
- -------------------------------------------------------------------------------- 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 MOUNTAIN CHART IN THE PRINTED MATERIAL]
Pioneer Mid Cap Russell Midcap Value VCT Portfolio Value Index ------------------- ----------- "6/95" 10000 10000 12487 12144 "6/97" 14052 15537 15517 19536 "6/99" 15975 20637 15964 19006 "6/01" 19934 23557 19235 24009 "6/03" 19611 23853 25864 31202 "6/05" 28365 38006
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- 10 Years 11.68% 5 Years 13.59% 1 Year 16.71%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value [divided by] $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Mid Cap Value VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005
Share Class II ------------------------------------------------------------- Beginning Account Value on 1/1/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,042.00 Expenses Paid During Period* $ 4.80
* Expenses are equal to the Portfolio's annualized expense ratio of 0.95% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Mid Cap Value VCT Portfolio Based on a hypothetical 5% per year return before expenses, reflecting the period from January 1, 2005 through June 30, 2005
Share Class II ------------------------------------------------------------- Beginning Account Value on 1/1/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,020.03 Expenses Paid During Period* $ 4.75
* Expenses are equal to the Portfolio's annualized expense ratio of 0.95% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 Pioneer Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- While stocks prices showed significant short-term volatility during the first six months of 2005, mid-cap value stocks tended to outperform the overall market and value stocks outpaced the performance of growth-oriented styles. In the following discussion, Rod Wright, leader of the team that manages Pioneer Mid Cap Value VCT Portfolio, discusses the factors that affected performance over the past six months. Q: How did the Portfolio perform? A. Pioneer Mid Cap Value VCT Portfolio had reasonably good performance, despite trailing its benchmark index. During the six months ended June 30, 2005, the Portfolio's Class II shares had a total return of 4.20% at net asset value, while the Russell Midcap Value Index returned 5.51%. The performance data quoted represents past performance, which is no guarantee 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 affecting Portfolio performance? A. In a generally positive period for mid-cap value stocks, performance was helped substantially by several holdings which were the subjects of merger or buyout proposals at premiums to their stock prices. Our stocks selections within the consumer staples were particularly successful, followed by our holdings in information technology, industrials and the health-care sectors. Among our consumer staples holding, retail pharmaceutical company CVS performed especially well as it surpassed earnings forecasts and successfully integrated the operations of stores acquired from the former Eckerd chain. In information technology, SunGard Data Systems was acquired by private equity investors, adding to Portfolio results. Imation, which produces data storage tapes, also contributed to performance. Avoiding any investment in Xerox turned out to be a good decision as its stock price fell. In health care, the top contributors included Triad Hospitals, whose stock appreciated from a low valuation after it showed evidence that it had strengthened its management controls, and IVAX, a generic pharmaceutical manufacturer. Although we overweighted energy stocks, which were the best-performing part of the market, performance was held back because we no longer had a position in Valero Energy, an independent oil refiner that continued to appreciate in a strong rally for the sector. We had sold our position and taken profits in Valero in 2004, but the stock continued to rise in the new year. Energy stocks that helped performance included Occidental Petroleum and Devon Energy. Among Portfolio holdings that disappointed was Symbol Technologies, which produces bar code scanners and hand-held devices used in inventory controls. Although its earnings failed to meet expectations, a new management team has taken over and we continued to hold the company because of its long-term prospects. Ball, which produces packaging such as aluminum cans for the beverage industry, was another holding that detracted from results. The biggest drags on performance, however, were our underweighting in utilities and our lack of investments in real estate investment trusts (REITs.). Both industries performed very well, benefiting from the decline in long-term interest rates. We de-emphasized utilities because we thought they were overvalued, had few growth prospects, and offered low dividend yields compared to their long-term averages. We generally avoid the REIT industry. Q: What is your investment outlook? A. We think mid-cap value companies continue to be a very attractive part of the market in which to be invested. Many of these corporations have big-company strengths with the dynamic growth of smaller firms. We make our investment decisions based on our analysis of individual companies, rather than focusing on sector and industry allocations. We expect to continue to follow our long-term discipline and emphasize strong companies with attractive stock valuations, and we will maintain our focus on managing for both capital preservation and price appreciation. 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. 4 Pioneer Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 99.4% Energy - 6.0% Integrated Oil & Gas - 1.4% 164,840 Occidental Petroleum Corp. $ 12,681,141 -------------- Oil & Gas Drilling - 1.8% 158,615 ENSCO International, Inc. $ 5,670,486 89,630 Nabors Industries, Inc.*(a) 5,433,371 100,830 Transocean Offshore, Inc.* 5,441,795 -------------- $ 16,545,652 -------------- Oil & Gas Equipment & Services - 0.6% 88,435 Weatherford International, Inc.* $ 5,127,461 -------------- Oil & Gas Exploration & Production - 2.2% 191,522 Devon Energy Corp. 232,885 Pioneer Natural Resources Co. $ 9,706,335 9,799,801 -------------- $ 19,506,136 Total Energy -------------- $ 53,860,390 Materials - 8.0% -------------- Diversified Chemical - 2.4% 106,000 Ashland, Inc. (a) 228,620 PPG Industries, Inc. $ 7,618,220 14,348,191 -------------- $ 21,966,411 Diversified Metals & Mining - 1.3% -------------- 190,900 Freeport-McMoRan Copper & Gold, Inc. (Class B) $ 7,147,296 46,485 Phelps Dodge Corp. 4,299,863 -------------- $ 11,447,159 -------------- Industrial Gases - 1.6% 233,445 Air Products & Chemicals, Inc. $ 14,076,734 -------------- Metal & Glass Containers - 1.5% 388,420 Ball Corp. $ 13,967,583 -------------- Paper Products - 1.2% 387,300 Meadwestvaco Corp. $ 10,859,892 -------------- Total Materials $ 72,317,779 -------------- Capital Goods - 4.2% Building Products - 1.1% 239,580 American Standard Companies, Inc. $ 10,043,194 -------------- Industrial Machinery - 2.0% 285,867 Flowserve Corp.* $ 8,650,335 98,520 ITT Industries, Inc. 9,618,508 -------------- $ 18,268,843 -------------- Trading Companies & Distributors - 1.1% 168,580 W.W. Grainger, Inc. $ 9,236,498 -------------- Total Capital Goods $ 37,548,535 -------------- Shares Value Commercial Services & Supplies - 4.4% Commercial Printing - 1.6% 405,140 R.R. Donnelly & Sons Co. $ 13,981,381 -------------- Diversified Commercial Services - 0.9% 137,200 The Dun & Bradstreet Corp.* $ 8,458,380 -------------- Environmental & Facilities Services - 1.9% 472,435 Republic Services, Inc. $ 17,012,384 -------------- Total Commercial Services & Supplies $ 39,452,145 -------------- Transportation - 1.3% Airlines - 0.5% 326,110 Southwest Airlines Co. $ 4,542,712 -------------- Railroads - 0.8% 120,620 Canadian National Railway Co. $ 6,953,743 -------------- Total Transportation $ 11,496,455 -------------- Consumer Durables & Apparel - 6.2% Apparel, Accessories & Luxury Goods - 1.0% 215,300 Liz Claiborne, Inc. $ 8,560,328 -------------- Household Appliances - 1.1% 146,800 Whirlpool Corp. (a) $ 10,292,148 -------------- Housewares & Specialties - 1.2% 212,700 American Greetings Corp. $ 5,636,550 169,400 Yankee Candle Co. 5,437,740 -------------- $ 11,074,290 -------------- Leisure Products - 1.7% 861,230 Mattel, Inc. $ 15,760,509 -------------- Photographic Products - 1.2% 402,600 Eastman Kodak Co. (a) $ 10,809,810 -------------- Total Consumer Durables & Apparel $ 56,497,085 -------------- Consumer Services - 2.3% Restaurants - 1.0% 348,600 Ruby Tuesday, Inc. (a) $ 9,028,740 -------------- Specialized Consumer Services - 1.3% 194,510 H & R Block, Inc. $ 11,349,659 -------------- Total Consumer Services $ 20,378,399 -------------- Media - 4.2% Advertising - 1.2% 897,800 The Interpublic Group of Companies, Inc.*(a) $ 10,935,204 -------------- Broadcasting & Cable Television - 1.3% 363,300 Entercom Communications Corp.* $ 12,094,257 -------------- Movies & Entertainment - 0.8% 386,560 Regal Entertainment Group (a) $ 7,298,253 --------------
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 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Publishing - 0.9% 219,800 Tribune Co. $ 7,732,564 -------------- Total Media $ 38,060,278 -------------- Retailing - 7.8% Apparel Retail - 2.3% 774,930 Foot Locker, Inc. (a) $ 21,093,595 -------------- Department Stores - 1.8% 220,700 Federated Department Stores, Inc. (a) $ 16,172,896 -------------- Internet Retail - 1.7% 625,300 InterActiveCorp.*(a) $ 15,038,465 -------------- Specialty Stores - 2.0% 1,059,600 Blockbuster, Inc. (a) $ 9,663,552 271,300 Tiffany & Co. (a) 8,887,788 -------------- $ 18,551,340 -------------- Total Retailing $ 70,856,296 -------------- Food & Drug Retailing - 5.3% Drug Retail - 1.4% 442,740 CVS Corp. (a) $ 12,870,452 -------------- Food Retail - 1.9% 764,000 Safeway, Inc. $ 17,258,760 -------------- Hypermarkets & Supercenters - 2.0% 537,470 BJ'S Wholesale Club, Inc.*(a) $ 17,462,400 -------------- Total Food & Drug Retailing $ 47,591,612 -------------- Food, Beverage & Tobacco - 1.6% Brewers - 0.6% 89,000 Molson Coors Brewing Co. (Class B)* $ 5,518,000 -------------- Packaged Foods & Meats - 1.0% 19,190 ConAgra, Inc. $ 444,440 248,818 Dean Foods Co.* 8,768,346 1 TreeHouse Foods, Inc.* 17 -------------- $ 9,212,803 -------------- Total Food, Beverage & Tobacco $ 14,730,803 -------------- Health Care Equipment & Services - 6.7% Health Care Distributors - 0.7% 140,300 McKesson Corp. $ 6,284,037 -------------- Health Care Equipment - 1.0% 335,200 Boston Scientific Corp.* $ 9,050,400 -------------- Health Care Facilities - 3.1% 1,167,800 Tenet Healthcare Corp.*(a) $ 14,293,872 246,260 Triad Hospitals, Inc.* 13,455,646 -------------- $ 27,749,518 -------------- Health Care Services - 0.6% 120,230 Laboratory Corporation of America Holdings* $ 5,999,477 -------------- Shares Value Managed Health Care - 1.3% 109,300 CIGNA Corp. $ 11,698,379 -------------- Total Health Care Equipment & Services $ 60,781,811 -------------- Pharmaceuticals & Biotechnology - 3.5% Pharmaceuticals - 3.5% 712,100 IVAX Corp.*(a) $ 15,310,150 299,900 Mylan Laboratories, Inc. 5,770,076 178,300 Par Pharmaceutical Co., Inc.* 5,671,723 347,400 Perrigo Co. 4,842,756 -------------- $ 31,594,705 -------------- Total Pharmaceuticals & Biotechnology $ 31,594,705 -------------- Banks - 7.1% Regional Banks - 4.2% 117,000 City National Corp. $ 8,390,070 220,330 KeyCorp 7,303,940 179,465 Marshall & Ilsley Corp. 7,977,219 196,056 North Fork Bancorporation, Inc. 5,507,213 739 Washington Banking Co. 11,196 116,600 Zions Bancorporation 8,573,598 -------------- $ 37,763,236 -------------- Thrifts & Mortgage Finance - 2.9% 459,200 Hudson City Bancorp, Inc.* $ 5,239,472 433,660 The PMI Group, Inc. 16,904,067 201,700 Sovereign Bancorp, Inc. 4,505,978 -------------- $ 26,649,517 -------------- Total Banks $ 64,412,753 -------------- Diversified Financials - 5.5% Asset Management & Custody Banks - 1.6% 486,690 Federated Investors, Inc. $ 14,605,567 -------------- Consumer Finance - 1.7% 851,100 Providian Financial Corp.*(a) $ 15,004,893 -------------- Investment Banking & Brokerage - 2.2% 302,800 A.G. Edwards, Inc. $ 13,671,420 308,650 Investment Technology Group, Inc.* 6,487,823 -------------- $ 20,159,243 -------------- Total Diversified Financials $ 49,769,703 -------------- Insurance - 6.5% Insurance Brokers - 1.0% 282,340 Willis Group Holdings, Ltd. $ 9,238,165 -------------- Life & Health Insurance - 1.4% 675,900 UNUM Corp. (a) $ 12,382,488 -------------- Multi-Line Insurance - 0.7% 186,450 Assurant, Inc. $ 6,730,845 --------------
6 The accompanying notes are an integral part of these financial statements. Pioneer Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Property & Casualty Insurance - 2.4% 168,100 Safeco Corp. $ 9,134,554 19,814 White Mountains Insurance Group, Ltd. 12,500,653 -------------- $ 21,635,207 -------------- Reinsurance - 1.0% 287,710 Platinum Underwriter Holdings, Ltd. $ 9,154,932 -------------- Total Insurance $ 59,141,637 -------------- Software & Services - 3.5% Data Processing & Outsourced Services - 1.5% 928,930 The BISYS Group, Inc.* $ 13,878,214 -------------- IT Consulting & Other Services - 0.5% 677,000 Unisys Corp.* $ 4,285,410 -------------- Systems Software - 1.5% 255,800 Symantec Corp.* $ 5,561,092 314,500 Veritas Software Corp.* 7,673,800 -------------- $ 13,234,892 -------------- Total Software & Services $ 31,398,516 -------------- Technology Hardware & Equipment - 5.0% Communications Equipment - 1.4% 203,900 Scientific-Atlanta, Inc. $ 6,783,753 678,121 Tellabs, Inc.* 5,899,653 -------------- $ 12,683,406 -------------- Computer Storage & Peripherals - 2.6% 327,200 Imation Corp. $ 12,692,088 300,600 Storage Technology Corp.* 10,908,774 -------------- $ 23,600,862 -------------- Electronic Equipment & Instruments - 1.0% 878,890 Symbol Technologies, Inc. $ 8,674,644 -------------- Total Technology Hardware & Equipment $ 44,958,912 -------------- Telecommunication Services - 1.8% Integrated Telecommunication Services - 1.8% 715,800 Cincinnati Bell, Inc.* $ 3,077,940 370,800 Century Telephone Enterprises, Inc. 12,840,804 -------------- $ 15,918,744 -------------- Total Telecommunication Services $ 15,918,744 -------------- Utilities - 8.5% Electric Utilities - 5.9% 177,100 Edison International $ 7,181,405 128,015 Entergy Corp. 9,671,533 342,600 NSTAR 10,562,358 326,500 PG&E Corp. 12,256,810 1,110,100 Reliant Energy*(a) 13,743,038 -------------- $ 53,415,144 -------------- Shares Value Gas Utilities - 0.4% 133,900 Atmos Energy Corp. (a) $ 3,856,320 -------------- Independent Power Producer & Energy Traders - 2.2% 176,775 Constellation Energy Group $ 10,198,151 120,054 NRG Energy, Inc.* 4,514,030 61,600 TXU Corp. 5,118,344 -------------- $ 19,830,525 -------------- Total Utilities $ 77,101,989 -------------- TOTAL COMMON STOCKS (Cost $764,234,576) $ 897,868,547 -------------- Principal Amount TEMPORARY CASH INVESTMENTS - 17.1% Repurchase Agreement - 0.7% $ 6,400,000 UBS Warburg, Inc., 2.75%, dated 6/30/05, repurchase price of $6,400,000 plus accrued interest on 7/1/05 collateralized by $6,536,000 U.S. Treasury Bill, 1.875%, 1/31/06 $ 6,400,000 -------------- Shares Security Lending Collateral - 16.4% 148,443,233 Securities Lending Investment Fund, 3.29% $ 148,443,233 -------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $154,843,233) $ 154,843,233 -------------- TOTAL INVESTMENT IN SECURITIES - 116.5% (Cost $919,077,809) $1,052,711,780 -------------- OTHER ASSETS AND LIABILITIES - (16.5)% $ (149,226,586) -------------- TOTAL NET ASSETS - 100.0% $ 903,485,194 ==============
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 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- * Non-income producing security (a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 23,400 Ashland, Inc. $ 1,681,758 106,875 Atmos Energy Corp. 3,078,000 86,005 BJ'S Wholesale Club, Inc. * 2,794,302 1,049,465 Blockbuster, Inc. 9,571,121 223,600 CVS Corp. 6,500,052 277,730 Eastman Kodak Co. 7,457,051 174,000 Federated Department Stores, Inc. 12,750,720 310,700 Foot Locker, Inc. 8,457,254 599,280 InterActiveCorp. * 14,412,684 788,400 The Interpublic Group of Companies, Inc. * 9,602,712 227,800 IVAX Corp. * 4,897,700 49,400 Nabors Industries, Inc. * 2,994,628 332,100 Providian Financial Corp. * 5,854,923 356,972 Regal Entertainment Group 6,739,631 221,100 Reliant Energy * 2,737,218 331,170 Ruby Tuesday, Inc. 8,577,303 817,200 Tenet Healthcare Corp. * 10,002,528 257,735 Tiffany & Co. 8,443,399 370,840 UNUM Corp. 6,793,789 139,460 Whirlpool Corp. 9,777,541 ------------ Total $143,124,314 ============
8 The accompanying notes are an integral part of these financial statements. Pioneer Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended Class II (a) (unaudited) 12/31/04 Net asset value, beginning of period $ 24.44 $ 20.32 -------- -------- Increase (decrease) from investment operations: Net investment income $ 0.03 $ 0.01 Net realized and unrealized gain (loss) on investments 1.00 4.38 -------- -------- Net increase (decrease) from investment operations $ 1.03 $ 4.39 Distributions to shareowners: Net investment income (0.05) (0.06) Net realized gain (1.49) (0.21) -------- -------- Net increase (decrease) in net asset value $ (0.51) $ 4.12 -------- -------- Net asset value, end of period $ 23.93 $ 24.44 ======== ======== Total return* 4.20% 21.77% Ratio of net expenses to average net assets+ 0.95%** 0.97% Ratio of net investment income to average net assets+ 0.26%** 0.29% Portfolio turnover rate 58%** 55% Net assets, end of period (in thousands) $576,573 $536,837 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.95%** 0.97% Net investment income 0.26%** 0.29% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.95%** 0.97% Net investment income 0.26%** 0.29% Year Year Year 5/1/00(b) Ended Ended Ended to Class II (a) 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 14.86 $ 17.28 $ 17.75 $16.89 -------- ------- ------- ------ Increase (decrease) from investment operations: Net investment income $ 0.06 $ 0.04 $ 0.14 $ 0.07 Net realized and unrealized gain (loss) on investments 5.44 (1.96) 0.94 2.01 -------- ------- ------- ------ Net increase (decrease) from investment operations $ 5.50 $ (1.92) $ 1.08 $ 2.08 Distributions to shareowners: Net investment income (0.04) (0.04) (0.08) (0.13) Net realized gain - (0.46) (1.47) (1.09) -------- ------- ------- ------ Net increase (decrease) in net asset value $ 5.46 $ (2.42) $ (0.47) $ 0.86 -------- ------- ------- ------ Net asset value, end of period $ 20.32 $ 14.86 $ 17.28 $17.75 ======== ======= ======= ====== Total return* 37.09% (11.38)% 6.22% 13.35% Ratio of net expenses to average net assets+ 1.00% 1.07% 1.11% 1.01%** Ratio of net investment income to average net assets+ 0.60% 0.24% 0.10% 0.37%** Portfolio turnover rate 52% 68% 95% 85%** Net assets, end of period (in thousands) $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 1.00% 1.07% 1.11% 1.01%** Net investment income 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 1.00% 1.07% 1.11% 1.01%** Net investment income 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. (b) 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. 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 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $143,124,314) (Cost $919,077,809) $ 1,052,711,780 Receivables -- Investment securities sold 21,282,802 Fund shares sold 439,445 Dividends, interest and foreign taxes withheld 847,621 Other 613 --------------- Total assets $ 1,075,282,261 --------------- LIABILITIES: Payables -- Investment securities purchased $ 17,077,745 Fund shares repurchased 5,535,046 Upon return of securities loaned 148,443,233 Due to bank 622,722 Due to affiliates 21,805 Accrued expenses 96,516 --------------- Total liabilities $ 171,797,067 --------------- NET ASSETS: Paid-in capital $ 729,691,981 Undistributed net investment income (loss) 1,516,021 Accumulated net realized gain (loss) 38,643,221 Net unrealized gain (loss) on: Investments 133,633,971 --------------- Total net assets $ 903,485,194 --------------- NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $ 326,912,435 Shares outstanding 13,525,350 --------------- Net asset value per share $ 24.17 Class II: (No par value, unlimited number of shares authorized) Net assets $ 576,572,759 Shares outstanding 24,097,349 --------------- Net asset value per share $ 23.93
10 The accompanying notes are an integral part of these financial statements. Pioneer Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $7,200) $ 4,982,762 Interest 211,841 Income on securities loaned, net 49,491 ------------- Total investment income $ 5,244,094 ------------- EXPENSES: Management fees $ 2,803,181 Transfer agent fees and expenses 1,488 Distribution fees (Class II) 697,649 Administrative reimbursements 83,917 Custodian fees 39,877 Professional fees 37,475 Printing expense 39,309 Fees and expenses of nonaffiliated trustees 5,899 Miscellaneous 17,420 ------------- Total expenses $ 3,726,215 ------------- Net expenses $ 3,726,215 ------------- Net investment income (loss) $ 1,517,879 ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from: Investments $ 45,761,817 ------------- Change in net unrealized gain or loss from: Investments $ (10,521,594) ------------- Net gain (loss) on investments $ 35,240,223 ============= Net increase (decrease) in net assets resulting from operations $ 36,758,102 =============
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 - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended (unaudited) 12/31/04 FROM OPERATIONS: Net investment income (loss) $ 1,517,879 $ 2,164,987 Net realized gain (loss) on investments 45,761,817 53,898,712 Change in net unrealized gain or loss on investments (10,521,594) 70,310,429 ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 36,758,102 $ 126,374,128 ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (980,182) $ (711,725) Class II (1,186,576) (1,067,643) Net realized gain Class I (18,901,870) (1,863,831) Class II (33,992,323) (3,740,321) ------------- ------------- Total distributions to shareowners $ (55,060,951) $ (7,383,520) ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 106,359,054 $ 331,791,818 Class I shares issued in reorganization -- 49,670,328 Reinvestment of distributions 55,060,951 7,383,520 Cost of shares repurchased (79,607,898) (49,217,509) ------------- ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ 81,812,107 $ 339,628,157 ------------- ------------- Net increase (decrease) in net assets $ 63,509,258 $ 458,618,765 ------------- ------------- NET ASSETS: Beginning of period $ 839,975,936 $ 381,357,171 ------------- ------------- End of period $ 903,485,194 $ 839,975,936 ============= ============= Undistributed net investment income (loss), end of period $ 1,516,021 $ 2,164,900 ============= =============
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 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Mid Cap Value VCT Portfolio (the Portfolio) is a Portfolio of Pioneer Variable Contracts Trust (the Trust), a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Conservative Allocation VCT Portfolio (Ibbotson Conservative Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts or by qualified pension and retirement plans. The 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 NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. The 13 Pioneer Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 June 30, 2005, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 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 June 30, 2005, 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. dollars actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. D. Forward Foreign Currency Contracts The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. 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. The following chart shows the components of distributable earnings (accumulated losses) as of 14 Pioneer Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- December 31, 2004 and the distributions paid during the year ended December 31, 2004 on a tax basis. The tax character of current year distributions will be determined at the end of the current fiscal year.
- -------------------------------------------------------------------------------- 2004 - -------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 3,095,474 Long-Term capital gain 4,288,046 ------------ $ 7,383,520 -- Return of Capital ------------- Total distributions $ 7,383,520 ------------- 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 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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 the 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 6/30/05 (UNAUDITED) (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 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 June 30, 2005, $17,057 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 $758 in transfer agent fees payable to PIMSS at June 30, 2005. 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 $3,990 payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $920,210,828 $143,180,509 $ (10,679,557) $132,500,952 ============ ============ ============= ============ - ---------------------------------------------------------------------------------------------------
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 six months ended June 30, 2005, were $268,454,902 and $244,131,823, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
- ----------------------------------------------------------------------------------------------------------- '05 Shares '05 Amount Mid Cap Value Portfolio (unaudited) (unaudited) '04 Shares '04 Amount - ----------------------------------------------------------------------------------------------------------- CLASS I: Shares sold 1,471,944 $ 36,359,356 3,133,632 $ 68,612,090 Class I shares issued in reorganization -- -- 2,087,866 49,670,328 Reinvestment of distributions 821,233 19,882,052 117,982 2,575,556 Shares repurchased (1,057,623) (26,040,234) (1,365,569) (29,591,496) ------------------------------------------------------------- Net increase 1,235,554 $ 32,201,174 3,973,911 $ 91,266,478 ============================================================= CLASS II: Shares sold 2,866,070 $ 69,999,698 12,236,512 $ 263,179,728 Reinvestment of distributions 1,468,234 35,178,899 221,974 4,807,964 Shares repurchased (2,203,219) (53,567,664) (881,455) (19,626,013) ------------------------------------------------------------- Net increase 2,131,085 $ 51,610,933 11,577,031 $ 248,361,679 ============================================================= - -----------------------------------------------------------------------------------------------------------
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: 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 - ---------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------- Unrealized Appreciation Realized Gain (Loss) 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 - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 18 Pioneer Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the first quintile of the peer group for the 12 months ended June 30, 2004, the first quintile of the peer group for the three years ended June 30, 2004, and the first quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that the consistent out performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the second quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio for the 12 months ended June 30, 2004 was in the first quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio was lower than that of comparable funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there was potential for realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, break points in the management fee were not necessary at this time. The Trustees will continue to evaluate annually the appropriateness of break points. 19 Pioneer Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 20 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 21 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 22 [LOGO]PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17870-00-0805 [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Oak Ridge Large Cap Growth VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 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
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 Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- [The following data was represented as pie charts in the printed material]
Portfolio Diversification Sector Distribution Five Largest Holdings (As a percentage of total investment portfolio) (As a percentage of equity holdings) (As a percentage of equity holdings) U.S. Common Stocks 92.3% Health Care 27.3% 1. XTO Energy, Inc. 4.61% Temporary Cash Investments 5.3% Information Technology 21.7% 2. Genentech, Inc. 4.44 Depositary Receipts for Industrials 14.1% 3. Apache Corp. 3.38 International Stocks 2.4% Consumer Discretionary 13.9% 4. Alcon, Inc. 3.29 Financials 10.4% 5. Staples, Inc. 3.01 Energy 8.0% Consumer Staples 4.6%
The Portfolio is actively managed and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $10.98 $11.09
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $0.0156 $ - $ -
- -------------------------------------------------------------------------------- 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 data was represented as a line chart in the printed material]
Pioneer Oak Ridge Large Cap Growth VCT Russell 1000 Portfolio* Growth Index 3/04 $10,000 $10,000 6/04 $10,147 $10,194 6/05 $10,759 $10,365
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 June 30, 2005) - -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 7.62% (3/15/04) 1 Year 6.03%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Oak Ridge Large Cap Growth VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005
Share Class II - ---------------------------------------------------------- Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $ 991.50 Expenses Paid During Period* $ 4.69
* Expenses are equal to the Portfolio's annualized expense ratio of 0.95% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Oak Ridge Large Cap Growth VCT Portfolio Based on a hypothetical 5% per year return before expenses, reflecting the period from January 1, 2005 through June 30, 2005
Share Class II - ---------------------------------------------------------- Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $1,020.08 Expenses Paid During Period* $ 4.76
* Expenses are equal to the Portfolio's annualized expense ratio of 0.95% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 Pioneer Oak Ridge Large Cap Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- In the following interview, David Klaskin, Pioneer Oak Ridge Large Cap Growth VCT Portfolio's Lead Portfolio Manager, discusses the factors that influenced performance during the six months ended June 30, 2005. Q: How did the market and the Portfolio perform during the past six months? A: After posting robust returns in December, stocks took a breather in the first six months of 2005. While the global economy and corporate earnings growth both remained steady, investors grew concerned about the potential emergence of headwinds such as rising inflation, slowing growth or a longer than expected series of interest rate increases by the U.S. Federal Reserve. The result was that areas of the market perceived to be higher-risk - such as growth stocks and stocks in the technology sector - underperformed. Conversely, value stocks and the more defensive areas of the market did well as investors looked for potential "safe havens." Given our emphasis on individual stock selection, we ordinarily would welcome a potentially challenging environment such as this. However, the Portfolio finished slightly behind its benchmark for the period. Class II shares of the Portfolio produced a total return of -0.85% at net asset value for the six-month period ended June 30, 2005, underperforming the 3.65% return of the Russell 1000 Growth Index. Q: Health care is the Portfolio's largest sector weighting. How did your positioning within this industry affect performance? A: Our positioning in the health-care sector was the largest positive contributor to performance. Health-care stocks represent over 27% of the Portfolio's assets - substantially more than the benchmark - and this overweight was beneficial to performance given the sector's strong returns relative to the broader market. Performance also was helped by our strong stock selection in health care. One of our top contributors was Genentech, which is a somewhat atypical investment for us since it has a high valuation compared with the sector as a whole. However, we believed the stock was worth its relatively high price due to its strong earnings prospects. Earnings came in above expectations, due in part to the strong sales of the firm's cancer drug Avastin, and the stock price rose correspondingly. We also generated strong gains within health care through holdings in Teva Pharmaceuticals, Alcon, and Caremark Rx. Overall, we continue to hold a positive view on the health-care sector, which we believe is home to a large number of companies with good earnings visibility and attractive valuations. Q: What other elements of the Portfolio's positioning helped and hurt its return? A: Performance was boosted by both an overweight in the energy sector as well as our strong stock selection in the group. The Portfolio is invested not in the most well-known large-caps, but in companies that our research indicates have the ability to outperform even if the price of oil weakens. The Portfolio's two holdings within energy, Apache and XTO Energy, both have an impressive history of earnings and reserve growth. Although short-term "momentum players" have contributed to the strong performance of energy stocks, our view is that the sector's earnings growth is poised to remain strong for at least the next several years. We believe Apache and XTO are well positioned to benefit from this trend. The outperformance we generated in health care, energy, and technology was offset by underperformance in three other sectors: financials, industrials, and consumer stocks. In financials, we were negatively impacted by a position in Banco Popular, which serves Hispanic customers both in the United States and throughout Latin America. Within industrials, we were hurt by a position in Tyco, which dropped sharply in early May after the company stated that rising cost pressures are likely to weigh on its bottom line over the remainder of this year. And in the consumer area, positions in eBay and International Game Technology detracted from performance. Both have been sold out of the Portfolio. Fortunately, we made up for some of the resulting performance shortfall within the consumer sector through our ownership of the retailers Lowe's, Staples, and Target. Q: What is your outlook for the stock market? A: In the past three years, the stock market has risen at a much faster pace than the underlying economy and in the process has reached what we believe to be a fair valuation level. This means future gains are likely to be attained by a narrower group of stocks. As a result, we expect that the return of individual stocks will be more closely correlated with their own specific fundamental trends. We therefore believe investors will have to be especially selective when it comes to both sector allocation and individual stock picking. Specifically, it will be necessary to analyze the quality of each company's earnings in order to determine how much of its growth is the result of cost cutting, currency gains, or one-time factors, and how much comes from underlying sales growth. Companies that are unable to generate growth organically may be vulnerable to underperformance. With this as a backdrop, we believe our focus on using fundamental research to find companies with strong growth trends and reasonable valuations will help the Portfolio pursue strong performance relative to both its peers and the market as a whole. 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 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. 4 Pioneer Oak Ridge Large Cap Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 94.9% Energy - 7.6% Oil & Gas Exploration & Production - 7.6% 3,775 Apache Corp. $ 243,865 9,775 XTO Energy, Inc. 332,252 ---------- $ 576,117 ---------- Total Energy $ 576,117 ---------- Capital Goods - 10.9% Aerospace & Defense - 2.2% 2,210 L-3 Communications Holdings, Inc. $ 169,242 ---------- Industrial Conglomerates - 4.9% 6,190 General Electric Co. $ 214,484 5,410 Tyco International, Ltd. 157,971 ---------- $ 372,455 ---------- Industrial Machinery - 3.8% 2,700 Danaher Corp. $ 141,318 1,990 Ingersoll-Rand Co. 141,987 ---------- $ 283,305 ---------- Total Capital Goods $ 825,002 ---------- Transportation - 2.5% Air Freight & Couriers - 2.5% 2,375 FedEx Corp. $ 192,399 ---------- Total Transportation $ 192,399 ---------- Consumer Durables & Apparel - 2.3% Apparel, Accessories & Luxury Goods - 2.3% 5,140 Coach, Inc.* $ 172,550 ---------- Total Consumer Durables & Apparel $ 172,550 ---------- Consumer Services - 2.1% Hotels, Resorts & Cruise Lines - 2.1% 2,980 Carnival Corp. $ 162,559 ---------- Total Consumer Services $ 162,559 ---------- Media - 1.7% Broadcasting & Cable Television - 1.7% 4,720 Univision Communications, Inc.*(a) $ 130,036 ---------- Total Media $ 130,036 ---------- Retailing - 7.0% General Merchandise Stores - 2.1% 2,905 Target Corp. $ 158,061 ---------- Home Improvement Retail - 2.1% 2,750 Lowe's Co., Inc. $ 160,105 ---------- Specialty Stores - 2.8% 10,172 Staples, Inc. $ 216,867 ---------- Total Retailing $ 535,033 ---------- Food, Beverage & Tobacco - 2.0% Soft Drinks - 2.0% 2,845 PepsiCo, Inc. $ 153,431 ---------- Total Food, Beverage & Tobacco $ 153,431 ----------
Shares Value Household & Personal Products - 2.4% Household Products - 2.4% 3,425 Procter & Gamble Co. (a) $ 180,669 ---------- Total Household & Personal Products $ 180,669 ---------- Health Care Equipment & Services - 12.7% Health Care Equipment - 2.1% 2,130 Zimmer Holdings, Inc.* $ 162,242 ---------- Health Care Services - 5.0% 4,635 Caremark Rx, Inc.* $ 206,350 3,305 Quest Diagnostics, Inc. 176,057 ---------- $ 382,407 ---------- Health Care Supplies - 3.1% 2,170 Alcon, Inc. $ 237,290 ---------- Managed Health Care - 2.5% 3,570 United Healthcare Group, Inc. $ 186,140 ---------- Total Health Care Equipment & Services $ 968,079 ---------- Pharmaceuticals & Biotechnology - 13.2% Biotechnology - 6.2% 2,445 Amgen, Inc.* $ 147,824 3,985 Genentech, Inc.* 319,916 ---------- $ 467,740 ---------- Pharmaceuticals - 7.0% 3,400 Abbott Laboratories $ 166,634 2,830 Johnson & Johnson 183,950 5,830 Teva Pharmaceutical Industries, Ltd. 181,546 ---------- $ 532,130 ---------- Total Pharmaceuticals & Biotechnology $ 999,870 ---------- Banks - 2.3% Diversified Banks - 2.3% 6,105 U.S. Bancorp $ 178,266 ---------- Total Banks $ 178,266 ---------- Diversified Financials - 5.5% Consumer Financials - 4.0% 2,750 American Express Co. $ 146,382 3,045 SLM Corp. 154,686 ---------- $ 301,068 ---------- Diversified Financial Services - 1.5% 2,500 Citigroup, Inc. $ 115,575 ---------- Total Diversified Financials $ 416,643 ---------- Insurance - 2.1% Life & Health Insurance - 2.1% 3,610 Aflac, Inc. $ 156,241 ---------- Total Insurance $ 156,241 ----------
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 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Software & Services - 6.0% Internet Software & Services - 1.4% 364 Google, Inc.*(a) $ 107,071 ---------- Systems Software - 4.6% 7,470 Microsoft Corp. $ 185,555 12,395 Oracle Corp.* 163,614 ---------- $ 349,169 ---------- Total Software & Services $ 456,240 ---------- Technology, Hardware & Equipment - 10.0% Communications Equipment - 4.4% 6,265 Comverse Technology, Inc.* $ 148,166 5,730 Qualcomm, Inc. 189,147 ---------- $ 337,313 ---------- Computer Hardware - 2.9% 5,460 Dell, Inc.* $ 215,725 ---------- Technology Distributors - 2.7% 3,115 Fisher Scientific International, Inc.* $ 202,164 ---------- Total Technology, Hardware & Equipment $ 755,202 ---------- Semiconductors - 4.6% 5,025 Marvell Technology Group, Ltd.* $ 191,151 5,650 Texas Instruments, Inc. 158,596 ---------- $ 349,747 ---------- Total Semiconductors $ 349,747 ---------- TOTAL COMMON STOCKS (Cost $6,726,478) $7,208,084 ----------
Shares Value TEMPORARY CASH INVESTMENTS - 5.3% Security Lending Collateral - 5.3% 404,261 Securities Lending Investment Fund - 3.29% $ 404,261 ---------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $404,261) $ 404,261 ---------- TOTAL INVESTMENT IN SECURITIES - 100.2% $7,612,345 ---------- (Cost $7,130,739) (a) OTHER ASSETS AND LIABILITIES - (0.2)% $ (12,690) ---------- TOTAL NET ASSETS - 100.0% $7,599,655 ==========
* Non-income producing security (a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 341 Google, Inc.* $100,305 3,211 Procter & Gamble Co. 169,380 4,365 Univision Communications, Inc.* 120,256 -------- Total $389,941 ========
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 - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 3/15/04(a) Class II (unaudited) to 12/31/04 Net asset value, beginning of period $11.09 $10.00 ------ ------ Increase (decrease) from investment operations: Net investment income (loss) $(0.01) $ 0.03 Net realized and unrealized gain (loss) on investments (0.08) 1.06 ------ ------ Net increase (decrease) from investment operations $(0.10) $ 1.09 ------ ------ Distributions to shareowners: Net investment income (0.02) - ------ ------ Net increase (decrease) in net asset value $(0.11) $ 1.09 ------ ------ Net asset value, end of period $10.98 $11.09 ====== ====== Total return* (0.85)% 10.90% Ratio of net expenses to average net assets+ 0.95%** 0.95%** Ratio of net investment income to average net assets+ 0.11%** 0.79%** Portfolio turnover rate 42%** 21%** Net assets, end of period (in thousands) $7,600 $4,397 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 2.54%** 6.22%** Net investment loss (1.48)%** (4.48)%**
(a) Class II shares were first publicly offered on March 15, 2004 * 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. 7 Pioneer Oak Ridge Large Cap Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $389,941) (cost $7,130,739) $7,612,345 Cash 518,503 Receivables - Dividends, interest and foreign taxes withheld 4,708 Due from Pioneer Investment Management, Inc. 3,392 Other 501 ---------- Total assets $8,139,449 ---------- LIABILITIES: Payables - Investment securities purchased $ 109,535 Upon return of securities loaned 404,261 Due to affiliates 382 Accrued expenses 25,616 ---------- Total liabilities $ 539,794 ---------- NET ASSETS: Paid-in capital $7,270,640 Undistributed net investment income 3,135 Accumulated undistributed net realized loss (155,726) Net unrealized gain on investments 481,606 ---------- Total net assets $7,599,655 ---------- NET ASSET VALUE PER SHARE: Class II: (No par value, unlimited number of shares authorized) Net assets $7,599,655 Shares outstanding 692,400 ---------- Net asset value per share $ 10.98
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 (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 (unaudited) INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $535) $ 26,405 Interest 5,446 Income on securities loaned, net 48 ---------- Total investment income $ 31,899 ---------- EXPENSES: Management fees $ 22,699 Transfer agent fees 744 Distribution fees (Class II) 7,566 Administrative fees 9,326 Custodian fees 15,205 Professional fees 15,551 Printing 4,168 Fees and expenses of nonaffiliated trustees 62 Miscellaneous 1,418 ---------- Total expenses $ 76,739 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (48,010) ---------- Net expenses $ 28,729 ---------- Net investment income (loss) $ 3,170 ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss from investments $ (106,457) ---------- Change in net unrealized gain from investments $ 134,190 ---------- Net gain on investments $ 27,733 ========== Net increase in net assets resulting from operations $ 30,903 ==========
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 CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Six Months 3/15/04 Ended (Commencement 6/30/05 of Operations) (unaudited) to 12/31/04 FROM OPERATIONS: Net investment income $ 3,170 $ 10,490 Net realized gain (loss) on investments (106,457) (49,269) Change in net unrealized gain (loss) on investments 134,190 347,416 ---------- ---------- Net increase (decrease) in net assets resulting from operations $ 30,903 $ 308,637 ---------- ---------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income: Class II $ (10,689) $ - ---------- ---------- Total distributions to shareholders $ (10,689) $ - ---------- ---------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $3,358,414 $4,148,102 Reinvestment of distributions 10,533 - Cost of shares repurchased (186,181) (60,064) ---------- ---------- Net increase in net assets resulting from fund share transactions $3,182,766 $4,088,038 ---------- ---------- Net increase in net assets $3,202,980 $4,396,675 NET ASSETS: Beginning of period 4,396,675 - ---------- ---------- End of period $7,599,655 $4,396,675 ========== ========== Accumulated net investment income (loss), end of period $ 3,135 $ 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 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Oak Ridge Large Cap Growth VCT Portfolio (the Portfolio) is a Portfolio of Pioneer Variable Contracts Trust (the Trust), a Delaware statutory trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty-eight 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 (Md 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Moderate Allocation VCT Portfolio (Ibbotson Moderate Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) The Oak Ridge Large Cap Growth VCT Portfolio commenced operations on March 15, 2004. Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts, or by qualified pension and retirement plans. The 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 NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. The 11 Pioneer Oak Ridge Large Cap Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 June 30, 2005, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 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 tax character of the current year distributions paid will be determined at the end of the fiscal year. 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 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. Distribution fees for Class II shares are calculated based on the average daily net asset values attributable to Class II shares of the Portfolio. 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 12 Pioneer Oak Ridge Large Cap Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 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 June 30, 2005, $76 as 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 $254 in transfer agent fees payable to PIMSS at June 30, 2005. 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 $52 payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $7,135,387 $603,532 $(126,574) $476,958 ========== ======== ========= ======== - -----------------------------------------------------------------------------------------------------------
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 six months ended June 30, 2005, were $4,201,625 and $1,173,771, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows for the six months ended June 30, 2005 and the fiscal year ended December 31, 2004:
- ----------------------------------------------------------------------------------------------------------- Oak Ridge Large Cap Growth Portfolio '05 Shares '05 Amount '04 Shares '04 Amount - ----------------------------------------------------------------------------------------------------------- CLASS II: Shares sold 312,576 $3,358,414 402,048 $4,148,102 Reinvestment of distributions 957 10,533 - - Shares repurchased (17,427) (186,181) (5,754) (60,064) ------- ---------- ------- ---------- Net increase 296,106 $3,182,766 396,294 $4,088,038 ======= ========== ======= ========== - -----------------------------------------------------------------------------------------------------------
13 [LOGO] PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17873-00-0805 [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- T a b l e o f C o n t e n t s - -------------------------------------------------------------------------------- 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 Factors Considered by the Independent Trustees in Approving the Management Contract 15
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 Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- Portfolio Diversification (As a percentage of total investment portfolio) U.S. Common Stocks 82.0% Temporary Cash Investment 18.0%
Sector Distribution (As a percentage of equity holdings) Office 19.0% Apartment 18.1% Regional Mall 13.6% Shopping Center 12.1% Industrial 11.5% Hotel 9.7% Diversified 7.5% Self Storage 4.0% Cash & Cash Equivalents 1.9% Triple-Net 1.8% Manufactured Homes 0.4% Health Care 0.4%
Five Largest Holdings (As a percentage of equity holdings) 1. Simon DeBartolo Group, Inc. 7.11% 2. Boston Properties, Inc. 5.41 3. AvalonBay Communities, Inc. 4.85 4. Equity Residential Property Trust 4.24 5. Catellus Development Corp. 4.00
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 24.65 $ 24.26
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.3200 $ - $ 0.886
- -------------------------------------------------------------------------------- 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.
Pioneer Real Wilshire Real Estate Shares Estate Securities VCT Portfolio S&P 500 Index "6/95" 10000 10000 10000 11459 12596 11845 "6/97" 15511 16962 15818 16514 22075 16846 "6/99" 14809 27103 15687 15458 29070 16386 "6/01" 18660 24764 20410 21313 20317 23219 "6/03" 21758 20367 23905 27978 24255 30882 "6/05" 36130 25787 41593
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- 10 Years 14.19% 5 Years 19.51% 1 Year 34.70%
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 semiannual report for performance that reflects the deduction of the variable product's 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 Real Estate Shares 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 Real Estate Shares VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005.
Share Class II ------------------------------------------------------ Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $1,066.90 Expenses Paid During Period* $ 6.30
* Expenses are equal to the Portfolio's annualized expense ratio of 1.23% for Class II shares, multiplied by the average account value over the period, multiplied by 181/366 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Real Estate Shares VCT Portfolio Based on a hypothetical 5% return per year return before expenses, reflecting the period from January 1, 2005 through June 30, 2005.
Share Class II -------------------------------------------------- Beginning Account Value on 1/1/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,018.70 Expenses Paid During Period* $ 6.16
* Expenses are equal to the Portfolio's annualized expense ratio of 1.23% for Class II shares, multiplied by the average account value over the period, multiplied by 181/366 (to reflect the one-half year period). 3 PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- Despite a sharp but brief pullback in prices during the first quarter, real estate stocks delivered positive results for the six months ended June 30, 2005. As Matthew Troxell of AEW Capital Management, L.P., explains in the following interview, investors may be concerned about higher interest rates and the pace of economic growth, but real estate investments continue to offer an attractive mix of income, growth and diversification benefits. Q: The rally in real estate stocks has entered its sixth year. Was the momentum evenly spread across the sector's different property types? A: During the first half of 2005, we began to see some differentiation among the sub sectors as investors began to discern relative value and absorb concerns about higher interest rates, the strength of the economy and, quite frankly, the fact that real estate stocks have delivered five years of outperformance relative to the broader stock market. We continue to see improvement in the underlying fundamentals across the real estate sector and will rely on our bottom-up, company-focused strategy of selecting stocks in an effort to avoid overvalued or troubled companies. Q: How did the Portfolio perform in this environment? A: For the six months ended June 30, 2005, the Portfolio's Class II shares increased 6.69% at net asset value. This performance was slightly ahead of the Wilshire Real Estate Securities Index, which rose 6.79% 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 had the most impact on performance? A: The office sector was a major contributor to performance. Despite an underweight position in office holdings relative to the benchmark, the Portfolio's selection of office investments outperformed both the office sub sector within the Wilshire Real Estate Securities Index as well as the index as a whole. In effect, our stock selection more than made up for the Portfolio's smaller exposure to office investments relative to this benchmark. Brookfield Properties was a standout performer. This Canadian operating company owns high-quality office buildings in New York City and other major markets. Our decision to overweight the position was significant, because the stock outperformed--making its impact on the Portfolio even more significant. In the lodging sector, hotel investments delivered mixed results. Although performance was positive overall, this sector of the real estate market lagged the benchmark. Starwood Hotels and Resorts, a sizable holding (but not to the degree that it is in the benchmark), was a disappointment. Several factors may have contributed to the stock's weakness, including profit taking after strong performance in 2004 or investor concerns that a slowing economy might dampen the lodging recovery that had been priced into the stock. On the other hand, Strategic Hotel Capital proved rewarding. This relatively young company, which acquired two hotels during the period, is gaining wider appeal among investors. A significant management change also may have acted as a catalyst for the company's appreciating stock price. Finally, the mall sector contributed positively to performance. Strong operating fundamentals at the property level and healthy consumer spending patterns continue to favorably impact the returns of the mall REITs. Q: Any notable sales or additions in the Portfolio? A: During the six months, we continued to reduce the Portfolio's exposure to Equity Office Properties because we have concerns about the price of its stock relative to its future earnings prospects. Our decision to limit the Portfolio's exposure to that REIT was a drawback, since it performed well. However, we were able to sell into that strength as we pared back the position. We initiated a new position in Brandywine Realty Trust, an office REIT focused on properties in the Mid-Atlantic States. In addition to its attractive valuation, this REIT is developing a large office tower in Philadelphia, which we think will be a catalyst for continued growth and value over time. Q: What is your outlook? A: With the real estate market posting total returns in excess of 30% in 2003 and 2004, finding bargain investment opportunities has become more challenging. However, paying close attention to our valuation metrics, we think our investment process, which relies more heavily on stock selection rather than sector allocation strategies, will help discern the most attractive companies, which might be overlooked or undervalued by the market. We think our analysis will help ensure that we are not paying too much for future income and growth opportunities. 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. 4 PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 98.1% Consumer Services - 5.3% Hotels, Resorts & Cruise Lines - 5.3% 96,300 Hilton Hotels Corp.* $ 2,296,755 53,000 Starwood Hotels & Resorts 3,104,210 ------------ $ 5,400,965 ------------ Total Consumer Services $ 5,400,965 ------------ Real Estate - 92.8% Real Estate Management & Development - 3.6% 127,500 Brookfield Properties Corp. $ 3,672,000 ------------ Real Estate Investment Trusts - 89.3% 47,000 AMB Property Corp. (a) $ 2,041,210 38,000 Apartment Investment & Management Co. 1,554,960 102,000 Archstone Communities Trust 3,939,240 24,000 Arden Realty Group, Inc. 863,520 60,000 AvalonBay Communities, Inc. 4,848,000 34,100 BioMed Property Trust, Inc. 813,285 77,200 Boston Properties, Inc. 5,404,000 38,500 Brandywine Realty Trust 1,180,025 46,000 Camden Property Trust 2,472,500 14,100 Capital Automotive (a) 538,197 16,000 Carramerica Realty Corp. 578,880 122,000 Catellus Development Corp. 4,001,600 21,000 Corporate Office Properties 618,450 73,000 Developers Diversifies Realty Corp. 3,355,080 36,500 Duke Realty Investments, Inc. 1,155,590 11,300 Equity Lifestyle Properties, Inc. 449,288 53,500 Equity Office Properties Trust (a) 1,770,850 115,000 Equity Residential Property Trust 4,234,300 38,500 Federal Realty Investment Trust 2,271,500 12,100 First Potomac Realty Trust 300,080 72,000 General Growth Properties (a) 2,958,480 10,000 Healthcare Realty Trust, Inc. 386,100 52,600 Highwoods Properties, Inc. 1,565,376 14,500 Hospitality Properties Trust 639,015 196,800 Host Marriott Corp. (a) 3,444,000 24,100 iStar Financial, Inc. 1,002,319 12,000 Kilroy Realty Corp. 569,880 29,700 Kimco Realty Corp. (a) 1,749,627 28,700 Kite Realty Group Trust 430,500 86,500 Liberty Property Trust 3,832,815 23,300 Pan Pacific Retail Properties, Inc. 1,546,654
Shares Value 45,500 Prentiss Properties Trust $ 1,658,020 81,500 ProLogis Trust 3,279,560 25,000 PS Business Parks, Inc.* 1,111,250 43,000 Public Storage, Inc. 2,719,750 51,400 Regency Centers Corp. (a) 2,940,080 30,500 Shurgard Storage Centers, Inc. 1,401,780 98,000 Simon DeBartolo Group, Inc. (a) 7,104,020 27,000 Spirit Finance Corp. 317,250 22,700 Strategic Hotel Capital, Inc. 408,600 68,000 Taubman Centers, Inc. 2,318,120 21,500 The Macerich Co. 1,441,575 71,500 Trizec Properties, Inc. 1,470,755 57,000 United Dominion Realty Trust 1,370,850 35,000 Vornado Realty Trust 2,814,000 ------------ Total Real Estate $ 90,870,931 ------------ TOTAL COMMON STOCKS (Cost $64,521,886) $ 99,943,896 ------------ TEMPORARY CASH INVESTMENT - 21.5% Security Lending Collateral - 21.5% 21,916,656 Securities Lending Investment Fund, 3.29% $ 21,916,656 ------------ TOTAL TEMPORARY CASH INVESTMENT (Cost $21,916,656) $ 21,916,656 ------------ TOTAL INVESTMENT IN SECURITIES - 119.6% (Cost $86,438,542) (a) $121,860,552 ------------ OTHER ASSETS AND LIABILITIES - (19.6)% $(19,994,964) ------------ TOTAL NET ASSETS - 100.0% $101,865,588 ============
* Non-income producing security (a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 44,650 AMB Property Corp. $ 1,939,150 13,395 Capital Automotive 511,287 50,825 Equity Office Properties Trust 1,682,308 68,400 General Growth Properties 2,810,556 186,960 Host Marriott Corp. 3,271,800 25,175 Kimco Realty Corp. 1,483,059 52,150 Regency Centers Corp. 2,982,980 93,100 Simon DeBartolo Group, Inc. 6,748,819 ----------- Total $21,429,959 ===========
The accompanying notes are an integral part of these financial statements. 5 PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended Class II (unaudited) 12/31/04 Net asset value, beginning of period $ 24.26 $ 18.55 -------- -------- Increase from investment operations: Net investment income $ 0.33 $ 0.44 Net realized and unrealized gain (loss) on investments and foreign currency transactions 1.27 6.00 -------- -------- Net increase from investment operations $ 1.60 $ 6.44 Distributions to shareholders: Net income (0.32) (0.40) Net realized gain (0.89) (0.33) Tax Return of Capital -- -- -------- -------- Net increase (decrease) in net asset value $ 0.39 $ 5.71 -------- -------- Net asset value, end of period $ 24.65 $ 24.26 ======== ======== Total return* 6.69% 35.39% Ratio of net expenses to average net assets+ 1.23%** 1.23% Ratio of net investment income to average net assets+ 2.88%** 2.20% Portfolio turnover rate 12%** 35% Net assets, end of period (in thousands) $ 68,081 $ 61,799 Ratios assuming no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.23%** 1.23% Net investment income 2.88%** 2.20% Year Year Year Year Ended Ended Ended Ended Class II 12/31/03 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 14.45 $ 14.75 $ 14.40 $ 14.55 -------- -------- -------- -------- Increase from investment operations: Net investment income $ 0.68 $ 0.55 $ 0.41 $ 0.32 Net realized and unrealized gain (loss) on investments and foreign currency transactions 4.18 (0.20) 0.63 (0.28) -------- -------- -------- -------- Net increase from investment operations $ 4.86 $ 0.35 $ 1.04 $ 0.04 Distributions to shareholders: Net income (0.56) (0.65) (0.52) (0.09) Net realized gain Tax Return of Capital (0.20) -- (0.17) (0.10) -------- -------- -------- -------- Net increase (decrease) in net asset value $ 4.10 $ (0.30) $ 0.35 $ (0.15) -------- --------- -------- -------- Net asset value, end of period $ 18.55 $ 14.45 $ 14.75 $ 14.40 ======== ========= ======== ======== Total return* 34.45% 2.28% 7.52% 1.32% Ratio of net expenses to average net assets+ 1.28% 1.32% 1.52% 1.63%** Ratio of net investment income to average net assets+ 4.26% 4.21% 4.36% 7.54%** Portfolio turnover rate 20% 29% 34% 31%** Net assets, end of period (in thousands) $ 39,892 $ 31,985 $ 11,972 $ 1,770 Ratios assuming no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.28% 1.32% 1.52% 1.63%** Net investment income 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 assuming no reduction for fees paid indirectly. 6 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $21,429,959) (Cost $ 121,860,552 $86,438,542) Cash 1,592,680 Receivables -- Investment securities sold 192,656 Fund shares sold 71,379 Dividends, interest and foreign taxes withheld 466,997 Other 485 ------------- Total assets $ 124,184,749 ------------- LIABILITIES: Payables -- Investment securities purchased $ 280,721 Fund shares repurchased 36,891 Upon return for securities loaned 21,916,656 Due to affiliates 3,274 Accrued expenses 81,619 ------------- Total liabilities $ 22,319,161 ------------- NET ASSETS: Paid-in capital $ 64,521,827 Undistributed net investment income 279,770 Accumulated net realized gain 1,641,981 Net unrealized gain on investments 35,422,010 ------------- Total net assets $ 101,865,588 ------------- NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $ 33,784,790 Shares outstanding 1,368,635 ------------- Net asset value per share $ 24.69 Class II: (No par value, unlimited number of shares authorized) Net assets $ 68,080,799 Shares outstanding 2,762,191 ------------- Net asset value per share $ 24.65
The accompanying notes are an integral part of these financial statements. 7 PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $3,443) $1,898,904 Interest 11,247 Income on securities loaned, net 7,675 ---------- Total investment income $1,917,826 ---------- EXPENSES: Management fees $ 375,728 Transfer agent fees and expenses 1,488 Distribution fees (Class II) 76,650 Administrative reimbursements 9,326 Custodian fees 15,905 Professional fees 22,831 Printing expense 32,568 Fees and expenses of nonaffiliated trustees 358 Miscellaneous 4,297 ---------- Total expenses $ 539,151 ---------- Net expenses $ 539,151 ---------- Net investment income $1,378,675 ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain from investments $1,885,132 ---------- Change in net unrealized gain from investments $3,040,365 ---------- Net gain (loss) on investments, futures contracts and foreign currency transactions $4,925,497 ========== Net increase (decrease) in net assets resulting from operations $6,304,172 ==========
8 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended (unaudited) 12/31/04 FROM OPERATIONS: Net investment income (loss) $ 1,378,675 $ 1,806,090 Net realized gain (loss) on investments 1,885,132 7,508,438 Change in net unrealized gain or loss on investments, futures contracts and foreign currency transactions 3,040,365 15,633,552 ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 6,304,172 $ 24,948,080 ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (488,135) $ (707,216) Class II (850,075) (916,414) Net realized gain Class I (1,168,583) (493,376) Class II (2,348,726) (803,210) ------------- ------------- Total distributions to shareowners $ (4,855,519) $ (2,920,216) ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 9,387,520 $ 20,027,996 Reinvestment of distributions 4,855,519 2,920,216 Cost of shares repurchased (12,072,272) (18,513,875) ------------- ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ 2,170,767 $ 4,434,337 ------------- ------------- Net increase (decrease) in net assets $ 3,619,420 $ 26,462,201 ------------- ------------- NET ASSETS: Beginning of period $ 98,246,168 $ 71,783,967 ------------- ------------- End of period $ 101,865,588 $ 98,246,168 ============= ============= Undistributed net investment income (loss), end of period $ 279,770 $ 286,854 ============= =============
The accompanying notes are an integral part of these financial statements. 9 PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Real Estate Shares VCT Portfolio (the Portfolio) is a Portfolio of Pioneer Variable Contracts Trust (the Trust), a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty-eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Moderate Allocation VCT Portfolio (Ibbotson Moderate Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts, or by qualified pension and retirement plans. The 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 NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Securities for which market quotations are not readily 10 PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 June 30, 2005, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 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 June 30, 2005, 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 11 PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 the Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. 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 gain are reflected as such on the statement of operations. 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. The tax character of current year distributions paid will be determined at the end of the current fiscal year.
- -------------------------------------------------------------------------------- 2004 - -------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 2,449,917 Long-Term capital gain 470,299 ----------- Return of Capital 2,920,216 Total distributions -- ----------- $ 2,920,216 =========== 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 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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 12 PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- 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 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 June 30, 2005, $2,301 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 $508 in transfer agent fees payable to PIMSS at June 30, 2005. 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 $465 payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $86,729,006 $35,131,546 $ -- $35,131,546 ----------- ----------- ------- ----------- - -----------------------------------------------------------------------------------------------------
13 PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (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 six months ended June 30, 2005, were $5,564,970 and $6,602,925, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows for the six months ended June 30, 2005 and the fiscal year ended December 31, 2004.
- ------------------------------------------------------------------------------------------- Real Estate Shares Portfolio '05 Shares '05 Amount '04 Shares '04 Amount - ------------------------------------------------------------------------------------------- CLASS I: Shares sold 31,427 $ 750,133 151,466 $ 3,192,487 Reinvestment of distributions 68,403 1,656,718 56,986 1,200,592 Shares repurchased (230,942) (5,395,622) (425,846) (8,497,885) -------------------------------------------------------- Net increase (131,112) $ (2,988,771) (217,394) $ (4,104,806) ======================================================== CLASS II: Shares sold 369,033 $ 8,637,387 820,863 $ 16,835,509 Reinvestment of distributions 132,001 3,198,801 81,377 1,719,624 Shares repurchased (286,633) (6,676,650) (505,041) (10,015,990) -------------------------------------------------------- Net increase 214,401 $ 5,159,538 397,199 $ 8,539,143 ======================================================== - -------------------------------------------------------------------------------------------
14 PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 15 PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the second quintile of the peer group for the 12 months ended June 30, 2004, the first quintile of the peer group for the three years ended June 30, 2004 and the second quintile of the peer group for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline, including members of the sub-adviser's team. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group, as well as senior management of the sub-adviser. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's and sub-adviser's investment staffs, their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser as well as the sub-adviser have the quality and depth of personnel and the well-developed methods essential to performing their duties under the Management Contract and the Sub-Advisory Agreement. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the third quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio for the 12 months ended June 30, 2004 was in the second quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio was lower than that of most of the comparable funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there was potential for realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, 16 PIONEER VARIABLE CONTRACTS TRUST Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- break points in the management fee are not necessary at this time. The Trustees will continue to evaluate annually the appropriateness of break points. H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 17 [LOGO] PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17877-00-0805 [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Small and Mid Cap Growth VCT Portfolio -- Class II Shares (Formerly Pioneer Papp Small and Mid Cap Growth VCT Portfolio. Name change effective May 1, 2005.) SEMIANNUAL REPORT June 30, 2005 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- T a b l e o f C o n t e n t s - -------------------------------------------------------------------------------- Pioneer 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
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 and Mid Cap Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- [The following data was represented as a pie chart in the printed material]
Portfolio Diversification Sector Distribution Five Largest Holdings (As a percentage of total investment portfolio) (As a percentage of equity holdings) (As a percentage of equity holdings) U.S. Common Stocks 94.6% Health Care 29.3% 1. Techne Corp. 3.54% Depositary Receipts for Information Technology 24.9% 2. Harte-Hanks, Inc. 3.19 International Stocks 2.9% Consumer Discretionary 19.8% 3. Express Scripts, Inc. 3.03 Temporary Cash Investment 2.5% Financials 10.1% 4. Federated Investors, Inc. 2.97 Industrials 9.2% 5. O'Reilly Automotive, Inc. 2.95 Consumer Staples 5.3% Materials 1.4%
The Portfolio is actively managed and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 10.62 $ 10.87
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) 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 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 line chart in the printed material]
Pioneer Pioneer Small and Mid Cap Growth VCT Russell 2500 Portfolio Growth 3/04 $10,000 $10,000 6/04 $10,742 $10,014 6/05 $10,504 $10,761
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 June 30, 2005) - -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 4.76% (3/15/04) 1 Year -2.21%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 Small and Mid Cap Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Small and Mid Cap Growth VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005
Share Class II - ---------------------------------------------------------- Beginning Account Value on 1/1/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 977.00 Expenses Paid During Period* $ 4.90
* Expenses are equal to the Portfolio's annualized expense ratio of 1.00% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Small and Mid Cap Growth VCT Portfolio Based on a hypothetical 5% per year return before expenses, reflecting the period from January 1, 2005 through June 30, 2005
Share Class II - ---------------------------------------------------------- Beginning Account Value on 1/1/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,019.84 Expenses Paid During Period* $ 5.01
* Expenses are equal to the Portfolio's annualized expense ratio of 1.00% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 Pioneer Small and Mid Cap Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- Equity markets exhibited considerable volatility during the first six months of 2005, generally declining in the first three months of the year before recovering somewhat during the second quarter. The volatility was exacerbated by rising energy costs, which affected energy-related stocks positively, while other industries were hurt. Despite numerous increases in short-term interest rates, the yields of longer-maturity bonds declined, helping many interest-rate sensitive stocks outperform stable growth stocks. In the following interview, Rose Papp of L. Roy Papp & Associates, which is responsible for the Portfolio's management, discusses the factors that influenced the performance of Pioneer Small and Mid Cap Growth VCT Portfolio during the six-month period ended June 30, 2005. Q: How did the Portfolio perform? A. In a challenging environment, Pioneer Small and Mid Cap Growth VCT Portfolio (formerly Pioneer Papp Small and Mid Cap Growth VCT Portfolio) underperformed its benchmark, primarily because of its de-emphasis of oil and interest-rate sensitive stocks, which tended to do well. For the six months ended June 30, 2005, the Portfolio returned -2.30% at net asset value. During the same six months, the benchmark Russell 2500 Growth Index returned -0.92%. Q: What factors affected performance? A. We maintained our emphasis on what we believe are industry-leading, stable growth companies with superior long-term earnings prospects. That focus held back results for the six months because we de-emphasized two areas that performed particularly well. The first group was composed of oil stocks, whose valuations soared as the price of oil rose above $60 per barrel. The second group was in interest-rate sensitive industries such as utilities, home builders and real estate investment trusts. They gained in an unusual environment in which long-term yields fell even as short-term interest rates rose. We normally avoid these sectors because we can't predict commodity price movements or interest rate changes in the short-term. Q: What were some of the individual holdings that contributed to performance? A. One of our persistent themes has been to emphasize companies that have the potential to benefit from new demands for products and services, especially in the health-care sector, that the aging baby boomer generation will create. During the six months, two companies that reflect that theme and specialize in managing pharmacy benefit plans - Medco and Express Scripts - appreciated substantially. A third health care position that performed very well was Techne, which produces proteins and laboratory instruments used by the biotechnology industry. SunGard, an information technology position that provides specialized information systems for financial institutions, was acquired during the period at a substantial premium to its stock price, adding to results. While information technology in general was weak during the six months, Microchip Technology did well as demand grew for its semiconductors, which are used in a variety of consumer products, from automobiles to digital cameras. Also contributing positively was a relatively new holding, O'Reilly Auto Parts, which operates a chain of retail auto parts stores concentrating in the Southeastern states. With a strong management team and excellent cost controls, it was able to flourish in a growing market. Among our consumer discretionary positions, Brinker International, which operates several casual dining chains, performed very well as restaurant traffic increased. 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 Small and Mid Cap Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Q: What were some of the investments that had disappointing results for the six months? A. The information technology industry tended to slump, with a few notable exceptions, especially in the first three months of 2005, amid concerns that rising energy costs would cut into economic growth. Among our tech holdings that fell, several were tied to the semiconductor industry, including KLA-Tencor, National Instruments and Linear Technology. Rising oil prices also took their toll on Family Dollar, a retail chain whose lower-income customers saw their family budgets restricted by the cost of fuel oil and gasoline. Polaris, the manufacturer of all-terrain recreational vehicles and snow mobiles, struggled during the period because of rising oil and steel prices. Q: What is your investment outlook? A. In the coming months, we think technology stocks should do well, as should consistent growth companies. We also continue to favor the health-care sector, which we believe should benefit from the inevitably greater demand for health care products and services as the baby boomer generation ages. We think our portfolio, with its focus on stable growth companies, is very well positioned. We believe the outlook is improving for the stable growth companies in which we invest. Two of the trends that heavily influenced market trends over the past six months are, in our opinion, likely to change. We think oil prices have reached unsustainably high levels and that long-term interest rates eventually will begin to rise. At the same time, the economy continues to show strength, and we think growth in gross domestic product (GDP) should persist at the recent annualized rate of about 3.5%. In this environment, corporate profitability also should improve. Meanwhile, interest rates and inflationary pressures remain relatively low by historical standards. In this environment, we think stocks - trading at about 18 times 2005 estimated earnings - are undervalued, especially in relation to other assets, including bonds and real estate. 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 Small and Mid Cap Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 97.4% Materials - 1.4% Specialty Chemicals - 1.4% 900 Sigma-Aldrich Corp. $ 50,436 ---------- Total Materials $ 50,436 ---------- Capital Goods - 2.4% Building Products - 2.4% 2,900 Simpson Manufacturing Co., Inc. $ 88,595 ---------- Total Capital Goods $ 88,595 ---------- Commercial Services & Supplies - 3.9% Diversified Commercial Services - 3.9% 1,250 ChoicePoint, Inc.* $ 50,063 2,498 Cintas Corp. 96,423 ---------- $ 146,486 ---------- Total Commercial Services & Supplies $ 146,486 ---------- Transportation - 2.7% Air Freight & Couriers - 2.7% 2,000 Expeditors International of Washington, Inc. $ 99,620 ---------- Total Transportation $ 99,620 ---------- Consumer Durables & Apparel - 2.3% Leisure Products - 2.3% 1,600 Polaris Industries, Inc. $ 86,400 ---------- Total Consumer Durables & Apparel $ 86,400 ---------- Consumer Services - 5.6% Education Services - 3.6% 1,050 Apollo Group, Inc.* $ 82,131 2,700 DeVry, Inc.* 53,730 ---------- $ 135,861 ---------- Restaurants - 2.0% 1,900 Brinker International, Inc.* $ 76,095 ---------- Total Consumer Services $ 211,956 ---------- Media - 6.7% Advertising - 6.0% 3,900 Harte-Hanks, Inc. $ 115,947 2,100 WPP Group Plc (A.D.R.) 107,205 ---------- $ 223,152 ---------- Broadcasting & Cable Television - 0.7% 1,800 Saga Communications, Inc.* $ 25,200 ---------- Total Media $ 248,352 ---------- Retailing - 4.6% Automotive Retail - 2.9% 3,600 O'Reilly Automotive, Inc.* $ 107,316 ---------- General Merchandise Stores - 1.7% 2,500 Family Dollar Stores, Inc. $ 65,250 ---------- Total Retailing $ 172,566 ----------
Shares Value Household & Personal Products - 5.2% Household Products - 2.4% 1,600 Clorox Co. $ 89,152 ---------- Personal Products - 2.8% 2,400 Alberto-Culver Co. (Class B) $ 103,992 ---------- Total Household & Personal Products $ 193,144 ---------- Health Care Equipment & Services - 25.1% Health Care Distributors - 2.4% 2,000 Patterson Co.* $ 90,160 ---------- Health Care Equipment - 12.3% 1,550 C. R. Bard, Inc. $ 103,091 4,200 Molecular Devices Corp.* 90,846 1,600 ResMed, Inc.* 105,584 2,000 Stryker Corp. 95,120 1,700 Waters Corp.* 63,189 ---------- $ 457,830 ---------- Health Care Services - 7.8% 2,200 Express Scripts, Inc.* $ 109,956 1,600 Medco Health Solutions, Inc.* 85,376 3,790 IMS Health, Inc. (a) 93,878 ---------- $ 289,210 ---------- Health Care Supplies - 2.6% 1,800 Dentsply International, Inc. $ 97,200 ---------- Total Health Care Equipment & Services $ 934,400 ---------- Pharmaceuticals & Biotechnology - 3.4% Biotechnology - 3.4% 2,800 Techne Corp.* $ 128,548 ---------- Total Pharmaceuticals & Biotechnology $ 128,548 ---------- Banks - 2.5% Regional Banks - 2.5% 5,700 UCBH Holdings, Inc. $ 92,568 ---------- Total Banks $ 92,568 ---------- Diversified Financials - 7.4% Asset Management & Custody Banks - 7.4% 3,600 Federated Investors, Inc. $ 108,036 1,800 Investors Financial Services Corp. 68,076 1,600 T. Rowe Price Associates, Inc. 100,160 ---------- $ 276,272 ---------- Total Diversified Financials $ 276,272 ---------- Software & Services - 8.0% Data Processing & Outsourced Services - 7.2% 1,800 DST Systems, Inc.* $ 84,240 2,400 Fiserv, Inc.* 103,080 2,300 SunGard Data Systems, Inc.* 80,891 ---------- $ 268,211 ----------
6 The accompanying notes are an integral part of these financial statements. Pioneer Small and Mid Cap Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - --------------------------------------------------------------------------------
Shares Value IT Consulting & Other Services - 0.8% 1,700 Forrester Research, Inc.* $ 30,311 ---------- Total Software & Services $ 298,522 ---------- Technology, Hardware & Equipment - 6.4% Communications Equipment - 2.1% 2,200 Plantronics, Inc. $ 79,992 ---------- Electronic Equipment & Instruments - 2.7% 1,650 Mettler-Toledo International, Inc.* $ 76,857 1,100 National Instruments Corp. 23,320 ---------- $ 100,177 ---------- Electronic Manufacturing Services - 1.6% 2,600 Molex, Inc. $ 61,048 ---------- Total Technology, Hardware & Equipment $ 241,217 ---------- Semiconductors - 9.8% Semiconductor Equipment - 3.5% 1,900 KLA-Tencor Corp. $ 83,030 1,900 Novellus Systems, Inc.* 46,949 ---------- $ 129,979 ---------- Semiconductors - 6.3% 2,600 Linear Technology Corp. $ 95,394 3,600 Microchip Technology 106,631 2,000 Semtech Corp.* 33,300 ---------- $ 235,325 ---------- Total Semiconductors $ 365,304 ----------
Shares Value TOTAL COMMON STOCKS (Cost $3,528,198) $3,634,386 ---------- TEMPORARY CASH INVESTMENTS - 2.5% Security Lending Collateral - 2.5% 93,600 Securities Lending Investment Fund - 3.29% $ 93,600 ---------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $93,600) $ 93,600 ---------- TOTAL INVESTMENT IN SECURITIES - 99.9% (Cost $3,621,798) (a) $3,727,986 ---------- OTHER ASSETS AND LIABILITIES - 0.1% $ 2,005 ---------- TOTAL NET ASSETS - 100.0% $3,729,991 ==========
* Non-income producing security (A.D.R.) American Depositary Receipt (a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 3,600 IMS Health, Inc. $89,172 ------- Total $89,172 =======
The accompanying notes are an integral part of these financial statements. 7 Pioneer Small and Mid Cap Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 3/15/04 to Class II (a) (unaudited) 12/31/04 (a) Net asset value, beginning of period $ 10.87 $ 10.00 --------- --------- Increase from investment operations: Net investment loss $ (0.02) $ (0.02) Net realized and unrealized gain (loss) on investments (0.23) 0.89 --------- --------- Net increase (decrease) from investment operations $ (0.25) $ 0.87 --------- --------- Net increase (decrease) in net asset value $ (0.25) $ 0.87 --------- --------- Net asset value, end of period $ 10.62 $ 10.87 --------- --------- Total return* (2.30)% 8.70% Ratio of net expenses to average net assets+ 1.00%** 1.00%** Ratio of net investment loss to average net assets+ (0.39)%** (0.51)%** Portfolio turnover rate 10%** 44% Net assets, end of period (in thousands) $ 3,730 $ 2,579 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 3.60%** 7.50%** Net investment loss (2.99)%** (7.01)%** Ratios assuming waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.00%** 1.00%** Net investment loss (0.39)%** (0.51)%**
(a) Class II shares were fist publicly offered on March 15, 2004. * 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. 8 The accompanying notes are an integral part of these financial statements. Pioneer Small and Mid Cap Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $89,172) (cost $3,621,798) $3,727,986 Cash 159,276 Receivables - Dividends, interest and foreign taxes withheld 1,790 Due from Pioneer Investment Management, Inc. 4,876 Other 477 ---------- Total assets $3,894,405 ---------- LIABILITIES: Payables - Investment securities purchased $ 42,231 Upon return of securities loaned 93,600 Due to affiliates 355 Accrued expenses 28,228 ---------- Total liabilities $ 164,414 ---------- NET ASSETS: Paid-in capital $3,715,540 Undistributed net investment loss (6,392) Accumulated undistributed net realized loss (85,345) Net unrealized gain on investments 106,188 ---------- Total net assets $3,729,991 ---------- NET ASSET VALUE PER SHARE: Class II: (No par value, unlimited number of shares authorized) Net assets $3,729,991 Shares outstanding 351,179 ---------- Net asset value per share $ 10.62
The accompanying notes are an integral part of these financial statements. 9 Pioneer Small and Mid Cap Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $93) $ 8,626 Interest 1,186 --------- Total investment income $ 9,812 --------- EXPENSES: Management fees $ 12,165 Transfer agent fees 744 Distribution fees (Class II) 4,055 Administrative fees 9,326 Custodian fees 6,262 Professional fees 17,390 Printing 6,819 Fees and expenses of nonaffiliated trustees 61 Miscellaneous 1,613 --------- Total expenses $ 58,435 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (42,231) --------- Net expenses $ 16,204 --------- Net investment income (loss) $ (6,392) --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss from investments $ (32,609) --------- Change in net unrealized loss from investments $ (38,934) --------- Net gain (loss) on investments $ (71,543) --------- Net increase (decrease) in net assets resulting from operations $ (77,935) =========
10 The accompanying notes are an integral part of these financial statements. Pioneer Small and Mid Cap Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
For the period Six Months 3/15/04 Ended (Commencement 6/30/05 of operations) (unaudited) to 12/31/04 FROM OPERATIONS: Net investment loss $ (6,392) $ (5,372) Net realized gain (loss) on investments (32,609) (52,736) Change in net unrealized gain or loss on investments (38,934) 145,122 ----------- ----------- Net increase (decrease) in net assets resulting from operations $ (77,935) $ 87,014 ----------- ----------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 1,419,209 $ 3,211,433 Cost of shares repurchased (189,807) (719,923) ----------- ----------- Net increase in net assets resulting from fund share transactions $ 1,229,402 $ 2,491,510 ----------- ----------- Net increase in net assets $ 1,151,467 $ 2,578,524 NET ASSETS: Beginning of period $ 2,578,524 $ -- ----------- ----------- End of period $ 3,729,991 $ 2,578,524 =========== =========== Accumulated net investment income (loss), end of period $ (6,392) $ -- =========== ===========
The accompanying notes are an integral part of these financial statements. 11 Pioneer Small and Mid Cap Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Papp Small and Mid Cap Growth VCT Portfolio (the Portfolio) is a Portfolio of Pioneer Variable Contracts Trust (the Trust), a Delaware statutory trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty-eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Moderate Allocation VCT Portfolio (Ibbotson Moderate Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) The Papp Small and Mid Cap Growth VCT Portfolio commenced operations on March 15, 2004. Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts, or by qualified pension and retirement plans. The 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 NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. The 12 Pioneer Small and Mid Cap Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- 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 June 30, 2005, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 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 tax character of the current year distributions paid will be determined at the end of the fiscal year. 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 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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 Small and Mid Cap Growth VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (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 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 June 30, 2005, $76 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 $254 in transfer agent fees payable to PIMSS at June 30, 2005. 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 $26 payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $3,640,115 $246,907 $ (159,036) $87,871 ========== ======== ========== ======= - ---------------------------------------------------------------------------------------------------------------
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 six months ended June 30, 2005, were $1,326,952 and $155,925, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows for the six months ended June 30, 2005 and the fiscal year ended December 31, 2004:
- --------------------------------------------------------------------------------------------------------------- Papp Small & Mid Cap Growth Portfolio '05 Shares '05 Amount '04 Shares '04 Amount - --------------------------------------------------------------------------------------------------------------- CLASS II: Shares sold 131,626 $1,419,209 308,301 $3,211,433 Shares repurchased (17,704) (189,807) (71,044) (719,923) ------- ---------- ------- ---------- Net increase 113,922 $1,229,402 237,257 $2,491,510 ======= ========== ======= ========== - ---------------------------------------------------------------------------------------------------------------
14 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 15 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 16 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 17 [LOGO] PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17874-00-0805 [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Small Cap Value VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 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 Factors Considered by the Independent Trustees in Approving the Management Contract 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 web site 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 6/30/05 - -------------------------------------------------------------------------------- [The data is a representation of 2 pie charts in the printed material]
Portfolio Diversification Sector Distribution Five Largest Holdings (As a percentage of total investment portfolio) (As a percentage of equity holdings) (As a percentage of equity holdings) U.S. Common Stocks 75.7% Financials 28.8% 1. Insight Enterprises, Inc. 2.11% Temporary Cash Investment 19.2% Industrials 18.7% 2. Sterling Bancshares, Inc. 1.84 Depositary Receipts for Energy 13.8% 3. Southwestern Energy Co. 1.83 International Stocks 2.6% Consumer Discretionary 10.3% 4. Nu Skin Enterprises, Inc. 1.82 International Common Stocks 1.9% Health Care 10.0% 5. Texas Capital Bancshares, Inc. 1.79 Exchange Traded Fund 0.6% Information Technology 8.4% Consumer Staples 3.8% The Portfolio is actively managed, and Materials 3.3% current holdings may be different. Utilities 2.7% Telecommunication Services 0.2%
- -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $14.69 $14.95
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ - $ - $ 0.4861
- -------------------------------------------------------------------------------- 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.
Pioneer Russell Small Cap Value 2000 VCT Portfolio Value Index 11/01 $10,000 $10,000 $11,062 $11,383 6/03 $10,070 $10,950 $13,086 $14,802 6/05 $14,292 $16,930
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 12.16% (11/8/01) 1 Year 12.88%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value (divided by) $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Small Cap Value VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005.
Share Class II ----------------------------------------------------------------- Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $1,015.60 Expenses Paid During Period* $ 7.35
* Expenses are equal to the Portfolio's annualized expense ratio of 1.47% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Small Cap Value VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from January 1, 2005 through June 30, 2005.
Share Class II ------------------------------------------------------------------ Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $1,017.50 Expenses Paid During Period* $ 7.35
* Expenses are equal to the Portfolio's annualized expense ratio of 1.47% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 Pioneer Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- In the following discussion, portfolio manager David Adams and assistant portfolio manager Jack McPherson review the economic background and describe some of the factors that influenced Pioneer Small Cap Value VCT Portfolio's performance. Q. How did the Portfolio perform over this period? A. For the six months ended June 30, 2005, Class II shares of the Portfolio returned 1.56% at net asset value. In comparison, the Russell 2000 Value Index, the Portfolio's benchmark returned 0.90%. The performance data quoted represents past performance, which is no guarantee 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 market conditions for the period and how they affected small-company stocks. A. After a strong rally in last year's fourth quarter, U.S. equity markets ran into stiff headwinds during the first weeks of 2005. Trends were erratic for the rest of the period, with declines in January and April offsetting upswings in March and May. The changing environment for equities, with interest rates rising and oil prices setting records, led investors to favor larger-cap issues. That more cautious approach interrupted a long stretch of small-cap outperformance. Within the small-cap universe, value issues continued to prevail over growth. Q. Which areas of the Portfolio had a favorable impact on results? A. As has been true for some time, holdings in the health care, energy and financial services sectors contributed positively to Fund returns. Chemed, best-known for its Roto-Rooter business, rose sharply, thanks to strong results at its Vitas division, the nation's largest hospice care company; new regulations favor home-based hospice treatment for terminally ill patients. PacifiCare also played a big role in performance, as the government moved more Medicare beneficiaries to managed care plans. We trimmed holdings of Chemed and PacifiCare as valuations rose. The June acquisition of Provident Senior Living by Ventas, another senior living real estate investment trust, also boosted results. Pediatrix, which specializes in care for premature and very ill newborns, continued to perform well. Shares of the NASDAQ Stock Market rose in anticipation of its purchase of Instinet, an electronic exchange serving institutional investors. NASDAQ, led by an effective new CEO, continues to trim costs and take market share from competitors, including the New York Stock Exchange. Apollo Investment also added to returns. Apollo offers specialized financing for small- to mid-sized businesses that face difficulty in raising capital from traditional sources during periods of higher interest rates. Rising energy prices and favorable drilling developments extended the run of good results at Southwestern Energy. Gulfmark Offshore, which runs supply vessels for drillers in the North Sea, also benefited from increased energy demand. TODCO, whose contract rigs operate in the Gulf of Mexico, took advantage of higher oil prices to raise fees. We sold out of our position in Joy Global Equipment, which manufactures machinery and equipment for coal mining and other extractive industries. Jarden, a niche consumer products company, also delivered solid returns. Jarden acquires and refurbishes consumer brands - examples include First Alert, Coleman Outdoor and Mr. Coffee - that have been poorly managed or marketed, then distributes them through its well-established network. Q. What areas held back performance? A. Reluctance by corporations to invest in technology pressured Borland Software, as disappointing earnings brought a sharp decline in the company's shares. Borland, which designs enterprise software applications, enjoys strong brand recognition and continues to generate cash. Any recovery in tech spending would present an opportunity for Borland to implement its new business strategies. Hancock Fabrics has suffered from slow sales of sewing and home decor products as well as from unsuccessful merchandising strategies. A dividend reduction and poor year-over-year sales comparisons also drove down shares. We are awaiting evidence of a possible turnaround as a new management team works to address shortcomings. Two financial companies also disappointed. Quanta Capital, a start-up property and casualty insurance company, was hit by exceptionally large claims during last year's Florida hurricanes. The cost of building corporate infrastructure was another negative. Shares recently traded below book value, and we believe valuation will improve as the business matures and Quanta puts early losses behind it. Minneapolis-based brokerage Piper Jaffray's shares fell when first quarter earnings showed the impact of sluggishness in capital markets. Piper is working to bring costs in line and may restructure by consolidating divisions or selling business units. Slowing demand and weak pricing for newsprint drove down shares of Domtar, a Canadian paper company. In addition, the strong Canadian dollar hurt sales to the United States. Shares of GrafTech International were negatively impacted when the company increased prices for their graphite electrodes and volumes fell, disappointing investors. Q. What is your outlook for the economy and the markets, and how have you positioned the Portfolio? A. Although we anticipate continued economic expansion, repeated hikes in interest rates and mounting energy costs may be slowing the rate of U.S. economic growth. For that reason, we remain focused on companies that we think can do well without the impetus of a rapidly growing economy. We continue to see positive long-term prospects for the health care and energy sectors, but are attuned to expanded valuations in both areas. A moderating economy is not ideal for technology, but we are emphasizing solidly grounded companies in that sector that can perform well under a slower-growth scenario. Among financial issues, we favor diversified financial companies as well as commercial banks that stand to benefit from increased business activity. Our selection process often leads us to good companies that the market has ignored. The process also allows us to be patient in challenging times and to take advantage of undervalued equities when we find them. 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 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 81.2% Energy - 11.3% Coal & Consumable Fuels - 1.4% 4,900 Alpha Natural Resources, Inc.* $ 117,012 10,814 Massey Energy Co. 407,904 ----------- $ 524,916 ----------- Oil & Gas Drilling - 2.4% 1,625 Atwood Oceanics, Inc.* $ 100,035 15,800 Todco* 405,586 8,469 Unit Corp.* 372,721 ----------- $ 878,342 ----------- Oil & Gas Equipment & Services - 3.0% 15,400 Gulfmark Offshore, Inc.* $ 420,574 29,036 Key Energy Services, Inc.* 351,336 11,140 Maverick Tube Corp.* 331,972 ----------- $ 1,103,882 ----------- Oil & Gas Exploration & Production - 4.3% 3,300 Forest Oil Corp.* $ 138,600 14,600 Parallel Petroleum Corp.* 129,210 6,400 Penn Virginia Corp. 285,888 16,900 Rosetta Resources, Inc., (144A)* 270,062 5,895 Swift Energy Co.* 211,159 11,698 Southwestern Energy Co.* 549,572 ----------- $ 1,584,491 ----------- Oil & Gas Storage & Transportation - 0.2% 2,700 Arlington Tankers, Ltd. $ 58,833 ----------- Total Energy $ 4,150,464 ----------- Materials - 2.7% Gold - 1.0% 30,625 Cambior, Inc.* $ 66,763 7,950 Glamis Gold, Ltd.*(a) 136,820 26,400 IAMGOLD Corp. 180,048 ----------- $ 383,631 ----------- Paper Products - 0.5% 24,693 Domtar, Inc. $ 182,481 ----------- Specialty Chemicals - 0.4% 4,175 Great Lakes Chemical Corp. $ 131,387 ----------- Steel - 0.8% 3,875 Carpenter Technology $ 200,725 8,496 NN, Inc. 107,729 ----------- $ 308,454 ----------- Total Materials $ 1,005,953 ----------- Shares Value Capital Goods - 7.3% Construction & Farm Machinery & Heavy Trucks - 2.9% 11,295 Federal Signal Corp. $ 176,202 5,130 Joy Global, Inc. 172,317 2,094 Nacco Industries, Inc. 224,519 23,475 Wabtec Corp. 504,243 ----------- $ 1,077,281 ----------- Construction & Engineering - 1.2% 9,100 Dycom Industries, Inc.* $ 180,271 16,625 Insituform Technologies, Inc.* 266,499 ----------- $ 446,770 ----------- Electrical Component & Equipment - 1.3% 50,193 Graftech International, Ltd.*(a) $ 215,830 42,279 Power-One, Inc.* 266,780 ----------- $ 482,610 ----------- Industrial Machinery - 1.4% 14,200 Flowserve Corp.* $ 429,692 3,425 Kaydon Corp. 95,386 ----------- $ 525,078 ----------- Trading Companies & Distributors - 0.5% 5,229 Applied Industrial Technologies, Inc. $ 168,844 ----------- Total Capital Goods $ 2,700,583 ----------- Commercial Services & Supplies - 5.3% Diversified Commercial Services - 2.9% 22,560 Cornell Co., Inc.* $ 303,658 4,175 Corrections Corp. of America* 163,869 35 Profit Recovery Group International* 99 10,975 Providence Service Corp.* 272,509 6,948 School Specialty, Inc.* 323,082 ----------- $ 1,063,217 ----------- Environmental & Facilities Services - 0.7% 20,000 Central Parking Corp. $ 275,000 ----------- Human Resource & Employment Services - 1.7% 48,600 On Assignment, Inc.* $ 242,028 6,170 Korn/Ferry International* 109,518 10,400 Watson Wyatt & Co., Holdings 266,552 ----------- $ 618,098 ----------- Total Commercial Services & Supplies $ 1,956,315 ----------- Transportation - 2.6% Air Freight & Couriers - 0.4% 4,600 Forward Air Corp. $ 130,042 -----------
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 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Marine - 0.6% 5,800 Dryships, Inc. $ 95,758 7,600 Excel Maritime Carriers, Ltd.* 113,620 ----------- $ 209,378 ----------- Railroads - 1.0% 14,143 Genesee & Wyoming, Inc.* $ 383,982 ----------- Trucking - 0.6% 4,268 Dollar Thrifty Automotive Group* $ 162,099 3,800 Universal Truckload Services, Inc.* 64,182 ----------- $ 226,281 ----------- Total Transportation $ 949,683 ----------- Automobiles & Components - 0.6% Auto Parts & Equipment - 0.6% 11,900 Commercial Vehicle Group, Inc.* $ 211,225 ----------- Total Automobiles & Components $ 211,225 ----------- Consumer Durables & Apparel - 0.8% Apparel, Accessories & Luxury Goods - 0.3% 4,650 Kellwood Co. $ 125,084 ----------- Housewares & Specialties - 0.5% 3,137 Jarden Corp.* $ 169,147 ----------- Total Consumer Durables & Apparel $ 294,231 ----------- Consumer Services - 0.8% Casinos & Gaming - 0.3% 8,600 Alliance Gaming Corp.*(a) $ 120,572 ----------- Restaurants - 0.5% 10,419 O'Charley's, Inc.* $ 184,000 ----------- Total Consumer Services $ 304,572 ----------- Media - 0.0% Advertising - 0.0% 7,166 EMAK Worldwide, Inc.* $ 77,321 ----------- Total Media $ 77,321 ----------- Retailing - 6.0% Apparel Retail - 1.2% 18,968 Charming Shoppes, Inc.* $ 176,971 5,795 Stage Stores, Inc.* 252,662 ----------- $ 429,633 ----------- Catalog Retail - 1.7% 31,475 Insight Enterprises, Inc.* $ 635,166 ----------- Computer & Electronics Retail - 0.1% 19,250 Tweeter Home Entertainment Group, Inc.*(a) $ 48,125 ----------- Distributors - 0.1% 7,940 Advanced Marketing Services, Inc.* $ 39,700 ----------- Shares Value General Merchandise Stores - 0.6% 13,800 Fred's, Inc. (a) $ 228,804 ----------- Homefurnishing Retail - 0.3% 4,300 Cost Plus, Inc.* $ 107,242 ----------- Specialty Stores - 2.0% 7,675 Claire's Stores, Inc. $ 184,584 25,407 Hancock Fabrics, Inc. 168,702 36,755 Rent-Way, Inc.* 361,669 ----------- $ 714,955 ----------- Total Retailing $ 2,203,625 ----------- Food, Beverage & Tobacco - 1.3% Agricultural Products - 0.8% 10,008 Fresh Del Monte Produce, Inc. (a) $ 269,415 ----------- Packaged Foods & Meats - 0.5% 13,050 B & G Foods, Inc. $ 191,052 ----------- Total Food, Beverage & Tobacco $ 460,467 ----------- Household & Personal Products - 1.9% Personal Products - 1.9% 5,225 NBTY, Inc.* $ 135,537 23,479 Nu Skin Enterprises, Inc. 547,061 ----------- $ 682,598 ----------- Total Household & Personal Products $ 682,598 ----------- Health Care Equipment & Services - 7.7% Health Care Equipment - 1.1% 7,900 Analogic Corp. $ 397,528 ----------- Health Care Facilities - 1.0% 3,650 Sunrise Senior Living, Inc.*(a) $ 197,027 2,983 Triad Hospitals, Inc.* 162,991 ----------- $ 360,018 ----------- Health Care Services - 3.6% 21,525 Cross Country Healthcares, Inc.* $ 365,925 11,556 Chemed Corp. 472,409 6,427 Pediatrix Medical Group, Inc.* 472,642 ----------- $ 1,310,976 ----------- Health Care Supplies - 0.0% 700 Merit Medical Systems, Inc.* $ 10,787 ----------- Managed Health Care - 2.0% 9,970 Amerigroup Corp.* $ 400,794 4,730 PacifiCare Health Systems* 337,959 ----------- $ 738,753 ----------- Total Health Care Equipment & Services $ 2,818,062 -----------
6 The accompanying notes are an integral part of these financial statements. Pioneer Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Pharmaceuticals & Biotechnology - 0.5% Biotechnology - 0.5% 11,055 Kendle International, Inc.* $ 167,483 ----------- Total Pharmaceuticals & Biotechnology $ 167,483 ----------- Banks - 8.7% Regional Banks - 6.5% 7,000 Alliance Bankshares Corp.* $ 106,750 4,531 Banner Corp. 126,913 29,825 Cardinal Financial Corp.* 280,057 4,175 City National Corp. 299,389 6,375 Irwin Financial Corp. 141,461 35,650 Sterling Bancshares, Inc. 554,714 3,500 Signature Bank* 85,400 27,225 Texas Capital Bancshares, Inc.* 537,422 2,400 Trustmark Corp. 70,224 5,707 Whitney Holding Corp. 186,219 ----------- $ 2,388,549 ----------- Thrifts & Mortgage Finance - 2.2% 16,530 BankAtlantic Bancorp, Inc. $ 313,244 4,575 BankUnited Financial Corp. (a) 123,708 10,275 First Niagara Financial Group, Inc. 149,810 12,050 Provident Financial Services, Inc. 211,719 ----------- $ 798,481 ----------- Total Banks $ 3,187,030 ----------- Diversified Financials - 6.2% Asset Management & Custody Banks - 1.2% 24,329 Apollo Investment Corp. $ 448,383 ----------- Consumer Finance - 1.7% 7,625 Advanta Corp. $ 196,115 8,178 Advanta Corp. (Class B) 230,292 7,100 Cash America International, Inc. 142,852 9,200 Rewards Network, Inc.* 49,680 ----------- $ 618,939 ----------- Investment Banking & Brokerage - 1.8% 6,700 A.G. Edwards, Inc. $ 302,505 10,100 OptionsXpress Holdings, Inc.*(a) 153,520 6,550 Piper Jaffray Co.* 199,317 ----------- $ 655,342 ----------- Specialized Finance - 1.5% 6,343 Financial Federal Corp. $ 245,094 15,700 Nasdaq Stock Market, Inc.* 296,102 ----------- $ 541,196 ----------- Total Diversified Financials $ 2,263,860 ----------- Shares Value Insurance - 4.5% Multi-Line Insurance - 0.7% 40,675 Quanta Capital Holdings (144A)* $ 253,405 ----------- Property & Casualty Insurance - 2.1% 19,175 Assured Guaranty, Ltd. $ 447,928 3,800 American Safety Insurance Group, Ltd.* 57,836 4,200 National Interstate Corp.* 84,294 1,300 RLI Corp. 57,980 2,725 Selective Insurance Group, Inc. 135,024 ----------- $ 783,062 ----------- Reinsurance - 1.7% 8,826 IPC Holdings, Ltd. $ 349,686 7,550 Odyssey Re Holdings, Corp. (a) 186,334 2,075 Platinum Underwriter Holdings, Ltd. 66,027 ----------- $ 602,047 ----------- Total Insurance $ 1,638,514 ----------- Real Estate - 3.7% Real Estate Investment Trusts - 3.7% 12,813 BioMed Property Trust, Inc. $ 305,590 11,550 Capital Trust, Inc. 385,886 2,128 Entertainment Properties Trust 97,887 23,425 Feldman Mall Properties, Inc. 326,779 11,450 Saxon Capital, Inc. 195,452 1,536 Universal Health Realty, Inc. 58,537 ----------- $ 1,370,131 ----------- Total Real Estate $ 1,370,131 ----------- Software & Services - 3.8% Application Software - 1.1% 14,979 SPSS, Inc.* $ 287,747 16,800 TIBCO Software, Inc.* 109,872 ----------- $ 397,619 ----------- Data Processing & Outsourced Services - 0.7% 17,542 Pegusus Systems, Inc.*(a) $ 195,593 5,275 Intrado, Inc.* 78,913 ----------- $ 274,506 ----------- IT Consulting & Other Services - 0.3% 10,900 Gartner Group, Inc.*(a) $ 115,758 ----------- Systems Software - 1.7% 39,250 Borland Software Corp.* $ 269,255 10,425 Internet Security Systems, Inc.* 211,523 7,625 Sybase, Inc.* 139,919 ----------- $ 620,697 ----------- Total Software & Services $ 1,408,580 -----------
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 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Technology, Hardware & Equipment - 2.3% Communications Equipment - 1.3% 9,275 Black Box Corp. $ 328,335 22,929 Remec, Inc.*(a) 146,746 ----------- $ 475,081 ----------- Computer Storage & Peripherals - 0.3% 4,985 Electronics for Imagine, Inc.* $ 104,884 ----------- Electronic Equipment & Instruments - 0.7% 15,025 Planar Systems, Inc.*(a) $ 110,433 11,000 Technitrol, Inc.* 155,430 ----------- $ 265,863 ----------- Total Technology, Hardware & Equipment $ 845,828 ----------- Semiconductors - 0.8% Semiconductor Equipment - 0.2% 3,893 Advanced Energy Industries, Inc.* $ 30,599 3,037 Brooks Automation, Inc.* 45,099 ----------- $ 75,698 ----------- Semiconductors - 0.6% 10,170 HI/FN, Inc.* $ 61,122 33,100 Lattice Semiconductor Corp.* 146,964 ----------- $ 208,086 ----------- Total Semiconductors $ 283,784 ----------- Telecommunication Services - 0.2% Integrated Telecommunication Services - 0.2% 1,300 Neustar, Inc.* $ 33,280 ----------- Wireless Telecommunication Services - 0.0% 8,003 Boston Communications Group, Inc.* $ 16,486 ----------- Total Telecommunication Services $ 49,766 ----------- Utilities - 2.2% Gas Utilities - 2.2% 6,100 AGL Resources, Inc. $ 235,765 5,100 Energen Corp. 178,754 7,105 People's Energy Corp. 308,783 3,550 UGI Corp. 99,045 ----------- $ 822,347 ----------- Total Utilities $ 822,347 ----------- TOTAL COMMON STOCKS (Cost $25,276,347) $29,852,422 ----------- EXCHANGE TRADED FUND - 0.6% 3,450 iShares Russell 2000 Value (a) $ 221,318 ----------- TOTAL EXCHANGE TRADED FUND (Cost $162,579) $ 221,318 ----------- Principal Amount Value TEMPORARY CASH INVESTMENTS - 19.4% Repurchase Agreement - 13.9% $ 5,100,000 UBS Warburg, Inc., 2.75%, dated 6/30/05, repurchase price of $5,100,000 plus accrued interest on 7/1/05 collateralized by $5,261,000 U.S. Treasury Bill, 2.0%, 5/15/06. $ 5,100,000 ----------- Shares Security Lending Collateral - 5.5% 2,023,358 Securities Lending Investment Fund, 3.29% $ 2,023,358 ----------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $7,123,358) $ 7,123,358 ----------- TOTAL INVESTMENT IN SECURITIES - 101.2% (Cost $32,562,284) (a) $37,197,098 ----------- OTHER ASSETS AND LIABILITIES - (1.2)% $ (418,286) ----------- TOTAL NET ASSETS - 100.0% $36,778,812 ===========
* 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 June 30, 2005, the value of these securities amounted to $523,467 or 1.42% of net assets. (a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 8,170 Alliance Gaming Corp. * $ 114,543 4,346 BankUnited Financial Corp. 117,516 9,975 Fred's, Inc. 165,385 10,355 Gartner Group, Inc. * 109,970 6,895 Glamis Gold, Ltd. * 118,663 25,380 Graftech International, Ltd. * 109,134 3,276 isharesRussell 2000 Value 210,156 7,172 Odyssey Re Holdings, Corp. 177,005 4,728 OptionsXpress Holdings, Inc. * 71,866 14,301 Pegusus Systems, Inc. * 159,456 10,830 Planar Systems, Inc. * 79,601 16,250 Remec, Inc. * 104,000 3,465 Sunrise Senior Living, Inc. * 187,041 690 Tweeter Home Entertainment Group, Inc. * 1,725 8,260 Fresh Del Monte Produce, Inc. 222,359 ---------- Total $1,948,420 ==========
8 The accompanying notes are an integral part of these financial statements. Pioneer Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended 5/1/03(a) to Class II (unaudited) 12/31/04 12/31/03 Net asset value, beginning of period $ 14.95 $ 12.47 $ 9.11 ------- -------- ------ Increase (decrease) from investment operations: Net investment loss $ (0.00)(b) $ (0.03) $(0.00)(b) Net realized and unrealized gain on investments and foreign currency transactions 0.23 2.51 3.37 ------- ------- ------ Net increase from investment operations $ 0.23 $ 2.48 $ 3.36 Distributions to shareowners: Net realized gain (0.49) -- -- ------- ------- ------ Net increase (decrease) in net asset value $ (0.26) $ 2.48 $ 3.36 ------- ------- ------ Net asset value, end of period $ 14.69 $ 14.95 $12.47 ======= ======= ====== Total return* 1.56% 19.89% 36.88% Ratio of net expenses to average net assets+ 1.47%** 1.54% 1.58%** Ratio of net investment income (loss) to average net assets+ 0.01%** (0.41)% (0.15)%** Portfolio turnover rate 34%** 36% 74% Net assets, end of period (in thousands) $15,762 $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 1.47%** 1.59% 2.65%** Net investment income (loss) 0.01%** (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 1.47%** 1.54% 1.58%** Net investment income (loss) 0.01%** (0.41)% (0.15)%**
(a) Class II shares were first publicly offered May 1, 2003. (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 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 - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including $1,948,420) (Cost $32,562,284) $37,197,098 Cash 16,556 Receivables -- Investment securities sold 465,149 Fund shares sold 1,972,705 Dividends, interest and foreign taxes withheld 46,043 Other 864 ----------- Total assets $39,698,415 ----------- LIABILITIES: Payables -- Investment securities purchased $ 824,422 Fund shares repurchased 10,063 Upon return of securities loaned 2,023,358 Variation Margin 2,875 Due to affiliates 1,400 Accrued expenses 57,485 ----------- Total liabilities $ 2,919,603 ----------- NET ASSETS: Paid-in capital $31,368,860 Undistributed net investment income 19,527 Accumulated net realized gain 700,521 Net unrealized gain on: Investments 4,634,814 Futures contracts 55,090 ----------- Total net assets $36,778,812 ----------- NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $21,017,142 Shares outstanding 1,421,949 ----------- Net asset value per share $ 14.78 Class II: (No par value, unlimited number of shares authorized) Net assets $15,761,670 Shares outstanding 1,072,898 ----------- Net asset value per share $ 14.69
10 The accompanying notes are an integral part of these financial statements. Pioneer Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $194) $ 165,732 Interest 54,429 Income on securities loaned, net 2,211 ---------- Total investment income $ 222,372 ---------- EXPENSES: Management fees $ 115,053 Transfer agent fees and expenses 1,488 Distribution fees (Class II) 16,377 Administrative reimbursements 9,326 Custodian fees 18,311 Professional fees 22,509 Printing expense 17,079 Fees and expenses of nonaffiliated trustees 243 Miscellaneous 2,719 ---------- Total expenses $ 203,105 ---------- Net expenses $ 203,105 ---------- Net investment income (loss) $ 19,267 ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $1,137,201 Futures contracts (58,940) ---------- $1,078,261 ---------- Change in net unrealized gain or loss from: Investments $ (466,213) Futures contracts 21,925 ---------- $ (444,288) ---------- Net gain (loss) on investments, futures contracts and foreign currency transactions $ 633,973 ========== Net increase (decrease) in net assets resulting from operations $ 653,240 ==========
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 - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended (unaudited) 12/31/04 FROM OPERATIONS: Net investment income (loss) $ 19,267 $ (55,495) Net realized gain (loss) on investments 1,078,261 1,744,190 Change in net unrealized gain or loss on investments, futures contracts and foreign currency transactions (444,288) 2,532,121 ----------- ----------- Net increase (decrease) in net assets resulting from operations $ 653,240 $ 4,220,816 ----------- ----------- DISTRIBUTIONS TO SHAREOWNERS: Net realized gain Class I $ (593,880) $ -- Class II (497,417) -- ----------- ----------- Total distributions to shareowners $(1,091,297) $ -- ----------- ----------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $10,551,393 $14,302,057 Reinvestment of distributions 1,086,410 -- Cost of shares repurchased (3,258,953) (4,493,153) ----------- ----------- Net increase (decrease) in net assets resulting from Fund share transactions $ 8,378,850 $ 9,808,904 ----------- ----------- Net increase (decrease) in net assets $ 7,940,793 $14,029,720 ----------- ----------- NET ASSETS: Beginning of period $28,838,019 $14,808,299 ----------- ----------- End of period $36,778,812 $28,838,019 =========== =========== Undistributed net investment income (loss), end of period $ 19,527 $ 260 =========== ===========
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 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Small Cap Value VCT Portfolio (the Portfolio) is a Portfolio of Pioneer Variable Contracts Trust (the Trust), a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty-eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Moderate Allocation VCT Portfolio (Ibbotson Moderate Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation 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 NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, 13 Pioneer Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 June 30, 2005, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 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 held by 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 June 30, 2005, Small Cap Value 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 September 2005 $1,607,750 $55,090 - ----------------------------------------------------------------------------------------------------------------
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. 14 Pioneer Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 the Portfolio's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. The following chart shows the components of distributable earnings (accumulated losses) as of December 31, 2004. There were no distributions paid during the year ended December 31, 2004. The tax character of current year distributions paid will be determined at the end of the current fiscal year.
- -------------------------------------------------------------------------------- 2004 - -------------------------------------------------------------------------------- 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 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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 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 15 Pioneer Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 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 June 30, 2005, $787 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 $505 in transfer agent fees payable to PIMSS at June 30, 2005. 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 $108 payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $32,902,031 $5,703,044 $(1,407,977) $4,295,067 =========== ========== =========== ========== - -------------------------------------------------------------------------------------------------
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 six months ended June 30, 2005, were $7,751,722 and $4,593,649, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows for the six months ended June 30, 2005 and the fiscal year ended December 31, 2004.
- ------------------------------------------------------------------------------------------------- Small Cap Value Portfolio '05 Shares '05 Amount '04 Shares '04 Amount - ------------------------------------------------------------------------------------------------- CLASS I: Shares sold 361,402 $ 5,301,386 510,952 $ 6,774,823 Reinvestment of distributions 40,427 589,019 -- -- Shares repurchased (177,578) (2,570,590) (277,189) (3,672,701) ------------------------------------------------------------ Net increase 224,251 $ 3,319,815 233,763 $ 3,102,122 ============================================================ CLASS II: Shares sold 360,679 $ 5,250,007 566,136 $ 7,527,234 Reinvestment of distributions 34,350 497,391 -- -- Shares repurchased (47,609) (688,363) (61,897) (820,452) ------------------------------------------------------------ Net increase 347,420 $ 5,059,035 504,239 $ 6,706,782 ============================================================ - -------------------------------------------------------------------------------------------------
16 Pioneer Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 17 Pioneer Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the fourth quintile of the peer group for the 12 months ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that, given the absolute performance record of the Fund (30.31%), the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the first quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio (after giving effect to the expense limitation) for the 12 months ended June 30, 2004 was in the fourth quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio was reasonable compared to that of comparably sized funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there was potential for realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, a break point in the management fee was not necessary. As assets increase, the Trustees will continue to evaluate annually the appropriateness of break points. 18 Pioneer Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 19 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 20 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 21 [LOGO] PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17879-00-0805 [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Small Company VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- T a b l e o f C o n t e n t s - -------------------------------------------------------------------------------- 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 Factors Considered by the Independent Trustees in Approving the Management Contract 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 Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- [The following data was represented as a pie chart in the printed material]
Portfolio Diversification Sector Distribution Five Largest Holdings (As a percentage of total investment portfolio) (As a percentage of equity holdings) (As a percentage of equity holdings) U.S. Common Stocks 89.2% Financials 21.0% 1. Swift Transportation Co., Inc. 1.63% Temporary Cash Investment 10.3% Information Technology 16.1% 2. Forest Oil Corp. 1.47 International Common Stocks 0.5% Industrials 14.8% 3. Ruby Tuesday, Inc. 1.36 Health Care 14.2% 4. Stage Stores, Inc. 1.31 Consumer Discretionary 14.1% 5. Arris Group, Inc. 1.18 Energy 7.0% Materials 5.9% Staples 3.1% Utilities Consumer 3.0% Telecommunication Services 0.8%
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 11.15 $ 12.85
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ - $ - $ 1.2777
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Small Company VCT Portfolio at net asset value, compared to that of the Russell 2000 Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [The following data was represented as a line chart in the printed material]
Pioneer Small Company VCT Russell Portfolio 2000 Index 1/01 $10,000 $10,000 $11,204 $10,156 $10,540 $9,283 6/03 $9,295 $9,132 $11,526 $12,177 6/05 $10,674 $13,328
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 June 30, 2005) - -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 5.03% (1/19/01) 1 Year 3.30%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's 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 variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Small Company VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005.
Share Class II - ---------------------------------------------------------- Beginning Account Value on 1/1/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,032.20 Expenses Paid During Period* $ 7.51
* 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 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Small Company VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from January 1, 2005 through June 30, 2005.
Share Class II - ---------------------------------------------------------- Beginning Account Value on 1/1/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,017.41 Expenses Paid During Period* $ 7.45
* Expenses are equal to the Portfolio's annualized expense ratio of 1.49% for Class II shares, respectively, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 Pioneer Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 Co-managers Diego Franzin and Michael Rega describe conditions in the small-company universe for the first half of the year, and the stocks that affected the Portfolio's performance. Q. How did Pioneer Small Company VCT Portfolio perform over this period? A. For the six months ended June 30, 2005, Class II shares of the Portfolio returned -3.22% at net asset value. The result trailed the Portfolio's benchmark, the Russell 2000 Index, which returned -3.22% 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. Small-capitalization issues, after a long climb during which they outperformed large-cap issues, reached valuation levels that many found uncomfortable at a time of moderating economic growth. As a result, small caps took a breather during the first half of the year, with growth issues declining more than value, based on the performance of Russell 2000 Value and Growth indices, respectively. Q. What stocks or sectors contributed to performance? A. Our style is to keep sector allocations closely aligned with those of our benchmark. For that reason, sector over- and underweightings play little role in the Portfolio's relative performance. In energy, the market's strongest sector, Forest Oil is restructuring successfully as new leadership moves to dispose of high risk/high reward properties and replace them with properties where risk is more favorably balanced with potential rewards. Benefits of the new strategy are evident in strong operating results. Administaff provides human-resources software to small and medium-sized businesses, relieving managers of burdensome administrative and regulatory paperwork. We had acquired shares at favorable valuations and took profits when our goals for the holding were largely realized. We also took profits in Netflix, an online DVD rental service. In our opinion, the entry of Blockbuster into the market, with its ability to integrate video stores and mail-in service, poses a serious competitive threat to Netflix. A rise in shares of Aeropostale also contributed to results. The retailer provides branded merchandise to fashion-conscious 11-18 year olds. We expect continued favorable earnings in upcoming quarters. In addition, the company is testing a new store concept, targeting customers as they move into their early twenties. Stage Stores continues to rebound after emerging from bankruptcy and rehiring a former CEO. The company, which operates Bealls, Peebles and other retail chains, sells quality, nationally branded goods in smaller cities where Wal-Mart (not in the portfolio) has not succeeded with its lower-tier offerings. Growth is now proceeding at a controlled pace. Q. Which of the Portfolio's holdings hurt results? A. Boston Communications Group fell dramatically when a court ordered it to pay sizeable damages to a competitor. At issue was an allegation of patent infringement in BCGI's online service for adding minutes to pay-as-you-go mobile phones. We exited the stock, a long-time holding, at a loss, and shares have declined substantially since. We also took a loss in Able Laboratories, which fell sharply when the company found deviations from standardized procedures in the manufacture of its products. Able has recalled all outstanding inventory and ceased manufacturing operations pending review. And we eliminated Rewards Network, a marketer of discount dining and hotel programs and another long-standing holding. Subscriber losses continue, and investor confidence in the company has waned. Q. What is your outlook for the rest of 2005? A. While higher interest rates and energy prices may eventually press harder on the economic brakes, for now the U.S. economy is expanding, albeit at a moderating pace. A slow-growth economy poses challenges to small-cap investors because small stocks have historically thrived when the economy is coming out of recession or growing rapidly. Nevertheless, as we move out of stocks that have reached our targets, we are still finding attractively valued companies with growth prospects offering above-market appreciation potential. 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 Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 96.5% Energy - 6.6% Oil & Gas Equipment & Services - 2.5% 3,500 Maverick Tube Corp.* $ 104,300 4,200 NS Group, Inc.* 136,542 3,100 Offshore Logistics, Inc.* 101,804 ----------- $ 342,646 ----------- Oil & Gas Exploration & Production - 3.5% 4,525 Forest Oil Corp.* $ 190,050 2,000 Houston Exploration Co.* 106,100 2,103 Spinnaker Exploration Co.* 74,635 2,100 Stone Energy Corp.* 102,690 ----------- $ 473,475 ----------- Oil & Gas Storage & Transportation - 0.6% 1,300 Overseas Shipholding Group, Inc. $ 77,545 ----------- Total Energy $ 893,666 ----------- Materials - 5.7% Aluminum - 0.7% 4,500 Century Aluminum Co.* $ 91,800 ----------- Construction Materials - 0.9% 2,950 Mega Bloks Inc. (144A)* $ 57,716 1,200 Texas Industries, Inc. 67,476 ----------- $ 125,192 ----------- Diversified Chemical - 0.9% 2,100 FMC Corp.* $ 117,894 ----------- Diversified Metals & Mining - 0.5% 4,900 Brush Engineered Materials, Inc.* $ 69,874 ----------- Specialty Chemicals - 1.3% 3,300 H.B. Fuller Co. $ 112,398 9,700 PolyOne Corp.* 64,214 ----------- $ 176,612 ----------- Steel - 1.4% 1,600 Carpenter Technology $ 82,880 7,300 Ryerson Tull, Inc. (a) 104,171 ----------- $ 187,051 ----------- Total Materials $ 768,423 ----------- Capital Goods - 7.4% Aerospace & Defense - 1.3% 5,600 Hexcel Corp.* $ 94,752 7,300 Orbital Sciences Corp.* (a) 72,270 ----------- $ 167,022 -----------
Shares Value Construction, Farm Machinery & Heavy Trucks - 2.6% 4,500 AGCO Corp.* $ 86,040 2,000 Terex Corp.* 78,800 2,400 The Toro Co. 92,664 4,400 Wabtec Corp. 94,512 ----------- $ 352,016 ----------- Construction & Engineering - 0.8% 6,400 Perini Corp.* $ 105,088 ----------- Electrical Component & Equipment - 0.5% 2,500 Thomas & Betts Corp.* $ 70,600 ----------- Industrial Machinery - 2.2% 3,200 Albany International Corp. $ 102,752 3,100 Flowserve Corp.* 93,806 2,175 Kennametal, Inc. 99,724 ----------- $ 296,282 ----------- Total Capital Goods $ 991,008 ----------- Commercial Services & Supplies - 3.5% Commercial Printing - 1.3% 1,800 Consolidated Graphics, Inc.* $ 73,386 2,575 John H. Harland Co. 97,850 ----------- $ 171,236 ----------- Diversified Commercial Services - 0.6% 2,301 The Brinks Co. $ 82,836 ----------- Human Resource & Employment Services - 1.6% 5,800 Administaff, Inc. $ 137,808 4,400 Korn/Ferry International* 78,100 ----------- $ 215,908 ----------- Total Commercial Services & Supplies $ 469,980 ----------- Transportation - 3.4% Railroads - 1.3% 3,400 Genesee & Wyoming, Inc.* $ 92,310 6,900 RailAmerica, Inc.* 82,110 ----------- $ 174,420 ----------- Trucking - 2.1% 2,300 Arkansas Best Corp. $ 73,163 9,100 Swift Transportation Co., Inc.* 211,939 ----------- $ 285,102 ----------- Total Transportation $ 459,522 ----------- Automobiles & Components - 1.3% Auto Parts & Equipment - 0.7% 5,400 Aftermarket Technology Corp.* $ 94,122 -----------
The accompanying notes are an integral part of these financial statements. 5 Pioneer Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Automobile Manufacturers - 0.6% 2,300 Winnebago Industries, Inc. (a) $ 75,325 ----------- Total Automobiles & Components $ 169,447 ----------- Consumer Durables & Apparel - 3.3% Footwear - 1.8% 7,500 Skechers U.S.A.* $ 106,950 5,450 Wolverine World Wide, Inc. 130,855 ----------- $ 237,805 ----------- Housewares & Specialties - 1.4% 3,000 American Greetings Corp. $ 79,500 3,375 Yankee Candle Co. 108,338 ----------- $ 187,838 ----------- Leisure Products - 0.1% 625 Mega Blocks* $ 12,228 ----------- Total Consumer Durables & Apparel $ 437,871 ----------- Consumer Services - 3.5% Casinos & Gaming - 0.8% 3,900 Scientific Games Corp.* $ 105,027 ----------- Restaurants - 2.7% 5,000 O'Charley's, Inc.* $ 88,300 3,400 Rare Hospitality International, Inc.* 103,598 6,800 Ruby Tuesday, Inc. (a) 176,120 ----------- $ 368,018 ----------- Total Consumer Services $ 473,045 ----------- Media - 1.0% Advertising - 0.8% 1,800 R.H. Donnelley Corp.* $ 111,564 ----------- Broadcasting & Cable TV - 0.2% 1,198 Alliance Atlantis Communications, Inc.* $ 28,213 ----------- Total Media $ 139,777 ----------- Retailing - 4.5% Apparel Retail - 3.8% 4,500 Aeropostale, Inc.* $ 151,200 5,400 Charming Shoppes, Inc.* 50,382 8,600 Guess?, Inc.* 142,588 3,900 Stage Stores, Inc.* 170,040 ----------- $ 514,210 ----------- Specialty Stores - 0.7% 1,500 Guitar Center, Inc.* $ 87,555 ----------- Total Retailing $ 601,765 -----------
Shares Value Food, Beverage & Tobacco - 2.1% Packaged Foods & Meats - 2.1% 2,400 Lancaster Colony Corp. $ 103,008 1,900 Ralcorp Holdings, Inc. 78,185 2,139 The J.M. Smucker Co. 100,405 ----------- $ 281,598 ----------- Total Food, Beverage & Tobacco $ 281,598 ----------- Household & Personal Products - 0.9% Personal Products - 0.9% 5,050 Nu Skin Enterprises, Inc. $ 117,665 ----------- Total Household & Personal Products $ 117,665 ----------- Health Care Equipment & Services - 10.2% Health Care Equipment - 0.8% 4,300 Steris Corp. $ 110,811 ----------- Health Care Facilities - 3.4% 2,500 Kindred Healthcare, Inc.*(a) $ 99,025 2,500 Lifepoint Hospitals, Inc.* 126,300 1,902 Sunrise Senior Living, Inc.*(a) 102,670 2,100 Universal Health Services, Inc. (Class B) 130,578 ----------- $ 458,573 ----------- Health Care Services - 3.6% 2,000 Cerner Corp.*(a) $ 135,940 9,000 eResearch Technology, Inc.* 120,510 3,900 Lifeline Systems, Inc.* 125,268 1,325 Pediatrix Medical Group, Inc.* 97,441 ----------- $ 479,159 ----------- Health Care Supplies - 1.9% 1,975 Haemonetics Corp.* $ 80,263 5,800 Merit Medical Systems, Inc.* 89,378 2,575 PolyMedica Corp. 91,825 ----------- $ 261,466 ----------- Managed Health Care - 0.5% 904 Coventry Health Care, Inc* $ 63,958 ----------- Total Health Care Equipment & Services $ 1,373,967 ----------- Pharmaceuticals & Biotechnology - 3.5% Biotechnology - 2.8% 9,825 Cubist Pharmaceuticals, Inc.* $ 129,395 7,300 InterMune, Inc.*(a) 95,192 7,100 Serologicals Corp.*(a) 150,875 ----------- $ 375,462 ----------- Pharmaceuticals - 0.7% 5,100 Connetics Corp.* $ 89,964 ----------- Total Pharmaceuticals & Biotechnology $ 465,426 -----------
6 The accompanying notes are an integral part of these financial statements. Pioneer Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Banks - 9.0% Regional Banks - 4.1% 3,700 BancorpSouth, Inc. $ 87,320 3,400 Banner Corp. 95,234 4,100 Community Bank System, Inc. 99,999 4,400 Irwin Financial Corp. 97,636 2,600 Provident Bankshares Corp. 82,966 3,600 Susquehanna Bancshares, Inc. 88,524 ----------- $ 551,679 ----------- Thrifts & Mortgage Finance - 4.9% 3,100 BankUnited Financial Corp. (a) $ 83,824 4,500 Charter Municipal Mortgage Acceptance Co. 98,820 5,000 Commercial Capital Bankcorp, Inc. 83,550 3,025 Commercial Federal Corp. 101,882 6,800 First Niagara Financial Group, Inc. 99,144 4,800 Provident Financial Services, Inc. 84,336 2,125 Webster Financial Corp. 99,216 ----------- $ 650,772 ----------- Total Banks $ 1,202,451 ----------- Diversified Financials - 1.7% Asset Management & Custody Banks - 0.8% 6,078 Apollo Investment Corp. $ 112,017 ----------- Consumer Finance - 0.9% 4,078 Advanta Corp. (Class B) $ 114,836 ----------- Total Diversified Financials $ 226,853 ----------- Insurance - 2.8% Life & Health Insurance - 0.7% 2,100 AmerUs Group Co. (a) $ 100,905 ----------- Property & Casualty Insurance - 1.4% 4,600 Bristol West Holdings, Inc. $ 84,180 2,900 Infinity Property & Casualty Corp. 101,152 ----------- $ 185,332 ----------- Reinsurance - 0.7% 3,000 Platinum Underwriter Holdings, Ltd. $ 95,460 ----------- Total Insurance $ 381,697 -----------
Shares Value Real Estate - 6.8% Real Estate Investment Trusts - 6.8% 8,500 Anworth Mortgage Asset Corp. $ 83,640 4,577 BioMed Property Trust, Inc. 109,161 2,800 Brandywine Realty Trust 85,820 2,550 Capital Trust, Inc. 85,196 2,900 Cousins Properties, Inc. 85,782 2,800 Heritage Property Investment Trust (a) 98,056 10,000 MFA Mortgage Investments, Inc. 74,500 2,800 Newcastle Investment Corp. 84,420 1,600 Redwood Trust, Inc. (a) 82,560 4,057 Ventas, Inc.* 122,521 ----------- $ 911,656 ----------- Total Real Estate $ 911,656 ----------- Software & Services - 6.2% Application Software - 2.9% 4,300 Advent Software, Inc.* $ 87,118 16,600 Parametric Technology Co.* 105,908 12,375 Plato Learning, Inc.* 91,328 5,000 SPSS, Inc.* 96,050 ----------- $ 380,404 ----------- Data Processing & Outsourced Services - 0.6% 5,700 The BISYS Group, Inc.* $ 85,158 ----------- Internet Software & Services - 1.1% 7,000 Earthlink, Inc.* $ 60,620 7,100 Valueclick, Inc.* 87,543 ----------- $ 148,163 ----------- Systems Software - 1.6% 3,500 Macrovision Corp.* $ 78,890 8,900 Wind River Systems* 139,552 ----------- $ 218,442 ----------- Total Software & Services $ 832,167 ----------- Technology Hardware & Equipment - 7.0% Communications Equipment - 3.0% 17,600 Arris Group, Inc.* $ 153,296 4,800 CommScope, Inc.*(a) 83,568 13,900 Extreme Networks, Inc.* 56,990 10,200 Symmetricom, Inc.* 105,774 ----------- $ 399,628 ----------- Computer Hardware - 1.1% 4,100 Intergraph Corp.* $ 141,286 ----------- Computer Storage & Peripherals - 1.1% 14,700 Brocade Communications Systems, Inc.* $ 57,036 28,500 Quantum Corp.* 84,645 ----------- $ 141,681 -----------
The accompanying notes are an integral part of these financial statements. 7 Pioneer Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Electronic Equipment & Instruments - 0.9% 7,575 Aeroflex, Inc.* $ 63,630 12,400 Identix, Inc.* 62,371 ----------- $ 126,001 ----------- Electronic Manufacturing Services - 0.4% 7,800 TTM Technologies, Inc.* $ 59,358 ----------- Technology Distributors - 0.5% 4,400 Agilysys, Inc. $ 69,080 ----------- Total Technology Hardware & Equipment $ 937,034 ----------- Semiconductors - 2.4% Semiconductor Equipment - 2.3% 14,000 Axcelis Technologies, Inc.* $ 96,040 9,300 Entegris, Inc.* 92,070 5,246 Photronics, Inc.* 122,442 ----------- $ 310,552 ----------- Semiconductors - 0.1% 500 PortalPlayer, Inc.*(a) $ 10,410 ----------- Total Semiconductors $ 320,962 ----------- Telecommunication Services - 0.8% Integrated Telecommunication Services - 0.8% 8,059 CT Communications, Inc. $ 105,170 ----------- Total Telecommunication Services $ 105,170 ----------- Utilities - 2.9% Electric Utilities - 1.4% 2,100 CH Energy Group, Inc. (a) $ 102,123 3,100 IDACORP, Inc. 94,953 ----------- $ 197,076 ----------- Gas Utilities - 1.5% 4,600 Atmos Energy Corp. $ 132,480 1,500 People's Energy Corp. 65,190 ----------- $ 197,670 ----------- Total Utilities $ 394,746 ----------- TOTAL COMMON STOCKS (Cost $12,375,468) $12,955,896 ----------- WARRANTS - 0.1% Energy - 0.1% Oil & Gas Exploration & Production - 0.1% 1,850 Arena Resources Warrants EXP 8/9/08* $ 9,343 ----------- TOTAL WARRANTS (Cost $1,885) $ 9,343 -----------
Shares Value TEMPORARY CASH INVESTMENT - 11.1% Security Lending Collateral - 11.1% 1,485,682 Securities Lending Investment Fund, 3.29% $ 1,485,682 ----------- TOTAL TEMPORARY CASH INVESTMENT (Cost $1,485,682) $ 1,485,682 ----------- TOTAL INVESTMENT IN SECURITIES - 107.7% (Cost $13,863,035) $14,450,921 ----------- OTHER ASSETS AND LIABILITIES - (7.7)% $(1,030,944) ----------- TOTAL NET ASSETS - 100.0% $13,419,977 ===========
* 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 June 30, 2005, the value of these securities amounted to $57,716 or 0.4% of net assets. (a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 1,995 AmerUs Group Co. $ 95,860 2,945 BankUnited Financial Corp. 79,633 1,900 Cerner Corp. * 129,143 4,560 CommScope, Inc. * 79,390 1,995 CH Energy Group, Inc. 97,017 2,660 Heritage Property Investment Trust 93,153 6,935 InterMune, Inc. * 90,432 2,375 Kindred Healthcare, Inc. * 94,074 6,935 Orbital Sciences Corp. * 68,657 475 PortalPlayer, Inc. * 9,890 1,520 Redwood Trust, Inc. 78,432 6,460 Ruby Tuesday, Inc. 167,314 6,080 Ryerson Tull, Inc. 86,762 4,370 Serologicals Corp. * 92,863 1,807 Sunrise Senior Living, Inc. * 97,542 2,185 Winnebago Industries, Inc. 71,559 ---------- Total $1,431,721 ==========
8 The accompanying notes are an integral part of these financial statements. Pioneer Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended 8/1/01 (a) 6/30/05 Year Ended Year Ended Year Ended to Class II (unaudited) 12/31/04 12/31/03 12/31/02 12/31/01 ------- ------- ------- ------- ------- Net asset value, beginning of period $ 12.85 $ 11.35 $ 9.07 $ 10.95 $ 11.18 ------- ------- ------- ------- ------- Increase (decrease) from investment operations: Net investment income (loss) $ (0.01) $ (0.05) $ (0.01) $ (0.01) $ -- Net realized and unrealized gain (loss) on investments (0.41) 1.55 2.29 1.87) (0.23) ------- ------- ------- ------- ------- Net increase (decrease) from investment operations $ (0.42) $ 1.50 $ 2.28 $ (1.88) $ (0.23) Distributions to shareowners: Net realized gain (1.28) -- -- -- -- ------- ------- ------- ------- ------- Net increase (decrease) in net asset value $ (1.70) $ 1.50 $ 2.28 $ (1.88) $ (0.23) ------- ------- ------- ------- ------- Net asset value, end of period $ 11.15 $ 12.85 $ 11.35 $ 9.07 $ 10.95 ======= ======= ======= ======= ======= Total return* 3.22% 13.22% 25.14% (17.14)% (2.06)% Ratio of net expenses to average net assets+ 1.49%** 1.48% 1.52% 1.58% 1.68%** Ratio of net investment income (loss) to average net assets+ (0.20)%** (0.44)% (0.23)% (0.18)% 0.01%** Portfolio turnover rate 78%** 114% 38% 53% 72% Net assets, end of period (in thousands) $10,095 $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 1.80%** 1.76% 2.67% 2.98% 6.71%** Net investment income (loss) (0.51)%** (0.72)% (1.38)% (1.58)% 5.02%**
(a) Class II 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 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $1,431,721) (Cost $13,863,035) $14,450,921 Cash 444,579 Receivables -- Investment securities sold 24,441 Fund shares sold 49,265 Dividends, interest and foreign taxes withheld 12,384 Other 649 ----------- Total assets $14,982,239 ----------- LIABILITIES: Payables -- Fund shares repurchased $ 28,968 Upon return of securities loaned 1,485,682 Due to affiliates 3,058 Accrued expenses 44,554 ----------- Total liabilities $ 1,562,262 ----------- NET ASSETS: Paid-in capital $13,031,415 Undistributed net investment income (loss) (9,927) Accumulated net realized gain (loss) (189,397) Net unrealized gain (loss) on: Investments 587,886 ----------- Total net assets $13,419,977 ----------- NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $ 3,325,190 Shares outstanding 294,597 ----------- Net asset value per share $ 11.29 Class II: (No par value, unlimited number of shares authorized) Net assets $10,094,787 Shares outstanding 904,964 ----------- Net asset value per share $ 11.15
10 The accompanying notes are an integral part of these financial statements. Pioneer Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $74) $ 69,117 Interest 7,795 Income on securities loaned, net 6,457 ---------- Total investment income $ 83,369 ---------- EXPENSES: Management fees $ 49,107 Transfer agent fees and expenses 1,488 Distribution fees (Class II) 12,162 Administrative reimbursements 9,326 Custodian fees 13,439 Professional fees 18,941 Printing expense 6,746 Fees and expenses of nonaffiliated trustees 117 Miscellaneous 2,400 ---------- Total expenses $ 113,726 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (20,430) ---------- Net expenses $ 93,296 ---------- Net investment income (loss) $ (9,927) ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from: Investments $ (127,957) ---------- Change in net unrealized gain or loss from: Investments $ (312,888) ---------- Net gain (loss) on investments $ (440,845) ========== Net increase (decrease) in net assets resulting from operations $ (450,772) ==========
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 - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended (unaudited) 12/31/04 FROM OPERATIONS: Net investment income (loss) $ (9,927) $ (46,684) Net realized gain (loss) on investments (127,957) 2,015,360 Change in net unrealized gain or loss on investments (312,888) (384,806) ------------ ------------ Net increase (decrease) in net assets resulting from operations $ (450,772) $ 1,583,870 ------------ ------------ DISTRIBUTIONS TO SHAREOWNERS: Net realized gain Class I $ (336,596) $ -- Class II (1,039,487) -- ------------ ------------ Total distributions to shareowners $ (1,376,083) $ -- ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 1,284,843 $ 4,450,765 Reinvestment of distributions 1,363,307 -- Cost of shares repurchased (1,271,434) (3,135,048) ------------ ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ 1,376,716 $ 1,315,717 ------------ ------------ Net increase (decrease) in net assets $ (450,139) $ 2,899,587 ------------ ------------ NET ASSETS: Beginning of period $ 13,870,116 $ 10,970,529 ------------ ------------ End of period $ 13,419,977 $ 13,870,116 ============ ============ Undistributed net investment income (loss), end of period $ (9,927) $ -- ============ ============
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 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Small Company VCT Portfolio (the Portfolio) is a Portfolio of Pioneer Variable Contracts Trust (the Trust), a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Conservative Allocation VCT Portfolio (Ibbotson Conservative Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) The investment objective of Small Company Portfolio is to seek capital appreciation. Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts or by qualified pension and retirement plans. The 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 NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Board of Trustees. 13 Pioneer Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 June 30, 2005, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 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 June 30, 2005, 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. dollars actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. D. Forward Foreign Currency Contracts The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. 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 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 year ended December 31, 2004. The tax character of current year distributions will be determined at the end of the current fiscal year.
- -------------------------------------------------------------------------------- 2004 - -------------------------------------------------------------------------------- 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 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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 the 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 Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 2. Management Agreement PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the portfolio. Management fees are calculated daily at the annual rate of 0.75% of the Portfolio's average daily net assets. Through May 1, 2006, PIM has agreed not to impose a portion of its management fees and to limit other operating expenses to the extent required to limit expenses of Class I shares to 1.25% of the average daily net assets attributable to Class I shares; the portion of portfolio expenses attributable to Class II shares will be reduced only to the extent such expenses are reduced for 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 June 30, 2005, $244 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 $506 in transfer agent fees payable to PIMSS at June 30, 2005. 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 $2,308 payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $13,913,382 $ 1,208,630 $ (671,091) $ 537,539 =========== =========== =========== =========== - -----------------------------------------------------------------------------------------------
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 six months ended June 30, 2005, were $4,907,059 and $5,164,631, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
- ----------------------------------------------------------------------------------------------- '05 Shares '05 Amount Small Company Portfolio (unaudited) (unaudited) '04 Shares '04 Amount - ----------------------------------------------------------------------------------------------- CLASS II: Shares sold 15,334 $ 186,274 56,890 $ 670,369 Reinvestment of distributions 28,887 323,820 -- -- Shares repurchased (41,394) (508,999) (103,931) (1,215,329) --------------------------------------------------------- Net increase 2,827 $ 1,095 (47,041) $ (544,960) ========================================================= CLASS II: Shares sold 90,132 $1,098,569 320,212 $ 3,780,396 Reinvestment of distributions 93,901 1,039,487 -- -- Shares repurchased (63,797) (762,435) (160,864) (1,919,719) --------------------------------------------------------- Net increase 120,236 $1,375,621 159,348 $ 1,860,677 ========================================================= - -----------------------------------------------------------------------------------------------
16 Pioneer Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as 17 Pioneer Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- the Fund's performance compared to both the performance of a peer group and two relevant indices, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the fifth quintile of the peer group for the 12 months ended June 30, 2004 and the fourth quintile for the three year period ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be fifth quintile.) The Trustees concluded that the actions of the Investment Adviser in appointing a new portfolio manager with the objective of enhancing performance supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the third quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio (before and after giving effect to the expense limitation) for the 12 months ended June 30, 2004 was in the fifth quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio, although higher than its peer group, was reasonable compared to that comparably sized funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset 18 Pioneer Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- levels, break points in the management fees were not necessary. As assets increase, the Trustees would continue to evaluate annually the appropriateness of break points. H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 19 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 20 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 21 [LOGO] PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17876-00-0805 [LOGO] PIONEER Investments(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 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 Factors Considered by the Independent Trustees in Approving the Management Contract 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 VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- Portfolio Diversification (As a percentage of total investment portfolio) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
U.S. Corporate Bonds 54.0% U.S. Government Securities 31.8% Foreign Government Bonds 6.7% Asset Backed Securities 3.7% Temporary Cash Investment 1.7% Municipal Bonds 1.0% Collateralized Mortgage Obligations 0.8% Convertible Corporate Bonds 0.3%
Maturity Distribution (As a percentage of total investment portfolio) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
0-1 year 5.8% 1-3 years 27.3% 3-4 years 17.5% 4-6 years 26.6% 6-8 years 17.1% 8+ years 5.7%
Five Largest Holdings (As a percentage of long-term holdings) 1. Federal Home Loan Mortgage Corp., 4.5%, 4/1/20 1.62% 2. Federal Home Loan Mortgage Corp., 6.0%, 8/1/34 1.54 3. Federal Home Loan Mortgage Corp., 5.5%, 11/1/34 1.26 4. U.S. Treasury Strip, 0.0%, 2/15/11 1.21 5. Federal National Mortgage Association, 6.375%, 8/15/07 1.12
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 10.97 $ 11.26 Distributions per Share Short-Term Long-Term (1/1/05 - 12/31/05) Dividends Capital Gains Capital Gains $ 0.3022 $ 0.0045 $ 0.1523
- -------------------------------------------------------------------------------- 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. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Pioneer Strategic Lehman U.S. Income VCT Portfolio Universal Index 7/99 $10,000 $10,000 $10,157 $10,521 6/01 $10,861 $11,654 $11,694 $12,553 6/03 $14,204 $13,999 $15,102 $14,140 6/05 $16,829 $15,186
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 June 30, 2005
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 9.19% (7/29/99) 5 Year 10.63 1 Year 11.43
All total returns shown assume reinvestment of distributions at net asset value. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. Call 800-688-9915 or visit www.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 semiannual 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 Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Strategic Income VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005.
Share Class II ---------------------------------------------------------------- Beginning Account Value on 1/1/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,015.40 Expenses Paid During Period* $ 5.70
* Expenses are equal to the Portfolio's annualized expense ratio of 1.14% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Strategic Income VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from January 1, 2005 through June 30, 2005.
Share Class II ---------------------------------------------------------------- Beginning Account Value on 1/1/05 $ 1,000.00 Ending Account Value on 6/30/05 $ 1,019.14 Expenses Paid During Period* $ 5.71
* Expenses are equal to the Portfolio's annualized expense ratio of 1.14% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- Prices of high-yield and foreign-denominated securities tended to slip in the first six months of 2005. While the Federal Reserve Board continued to raise short-term interest rates in the U.S. during the period, the yields of longer-term bonds declined for the period, leading to price appreciation of longer-maturity, high-quality bonds, which outperformed high-yield corporate debts. On international currency markets, the U.S. dollar strengthened for the six months, limiting the returns U.S.-based investors could realize in foreign, fixed-income securities. In the following interview, Kenneth J. Taubes discusses the factors that influenced the performance of Strategic Income VCT Portfolio during the six months. Mr. Taubes, Director of Pioneer's Fixed Income Group, oversees the team responsible for the daily management of the Portfolio. Q. How did the Portfolio perform during the first half of 2005? A. In a challenging environment for fixed-income investing, Strategic Income VCT Portfolio produced a positive return, although it underperformed its benchmark. For the six months ended June 30, 2005, the Portfolio's Class II shares had a total return of 1.54%, while the Lehman U.S. Universal Bond Index returned 2.51%. The Portfolio continued to produce a high level of income. On June 30, 2005, the standardized SEC yield for Class I shares was 7.02%. The performance data quoted represents past performance, which is no guarantee 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 type of investment environment affected the Portfolio during the six months? A. The Portfolio weathered a challenging environment of diverse and sometimes conflicting factors that influenced the global fixed-income markets. Domestically, corporate high-yield bonds underperformed investment-grade and high-grade debt, especially in the first three months of 2005. Although economic growth and corporate profits appeared to be growing steadily, investors were worried about the possibility that short-term interest rate hikes by the Federal Reserve, combined with rising energy prices, might slow the economy. The fears receded somewhat during the next three months, and high- yield bonds recovered some of their price losses and finished the period with positive performance, despite lagging the results of high-grade securities. Long-term interest rates backed up a bit in the first months of the year, adversely affecting the performance of long-term, higher-rated bonds, which are highly sensitive to interest-rate changes. But long-term rates declined in the final months of the six-month period, helping the performance of longer-maturity high-quality bonds. Additionally, one of the best-performing parts of the domestic fixed-income market was the mortgage sector. Internationally, one of the most influential factors affecting fixed-income markets was the strengthening of the U.S. dollar, which had been steadily weakening before the period began. Bonds denominated in non-dollar currencies declined in value as the dollar strengthened, undermining the performance of non-dollar investments. Q. What were your principal strategies during the six months, and what was the impact on performance? A. We reduced our exposure to foreign-denominated bonds. By June 30, 2005, our currency exposure to non-dollar denominated bonds had been cut from about 20% of Portfolio assets in late 2004 to 12.9%. We concentrated our foreign investments in countries with currencies in which we had the most confidence, including Norway, Canada and Australia. Domestically, we emphasized the mortgage sector, which accounted for 26.9% of total Portfolio assets by June 30, 2005. At the same time, we have been steadily upgrading the overall credit quality of our investments. Average credit quality of the Portfolio rose from BBB- to BBB over the six months as we reduced our below-investment grade, higher-yielding investments and reduced our exposure to lower-rated securities within the high-yield sector. On June 30, 2005 about 32% of Portfolio assets were invested in domestic high-yield bonds. As the yield curve flattened - the difference between yields of short-term and long-term securities grew tighter - we reduced the Portfolio's overall sensitivity to changes in interest rates, as measured by duration. At the end of the six months, the Portfolio's effective duration was 4.3 years, down from 4.6 years at the beginning of the year. The emphasis on mortgage-backed securities was a major positive contributor to Portfolio performance as the mortgage sector outperformed other parts of the market. Individual holdings that performed well included bonds of Shaw Group, a construction company that announced a tender offer to buy back its debt, and of Metro PCS, a wireless telecommunications company which provides services in several urban areas in the Western and Southeastern states. Bonds of Refco, a securities firm specializing in derivatives trading, also rose on news that the company planned an initial public stock offering. While our reduction of investments in foreign bonds and lower-quality, domestic high-yield bonds helped during a volatile period, our positions in both foreign bonds and high-yield bonds underperformed other parts of the Portfolio. Other disappointing investments included bonds issued by Northwest Airlines, which faced challenges in negotiating new labor agreements and in addressing its pension obligations, and Duane Reade, the New York-based retail pharmaceutical chain. Q. What is your investment outlook? A. We expect that the Federal Reserve will continue to raise short-term rates, at least until monetary policy is seen as neutral. How far the rate hikes go will depend upon the strength of the economy. However, we have seen increased stability in the bond market in the final weeks of the six-month period, and we have adopted a more conservative asset allocation policy in recognition of the relatively narrow spreads in yields between securities of different credit risk. In this environment, we expect to maintain a relatively short duration - to control the risk of a rise in interest rates - and we anticipate continuing to maintain a well diversified portfolio of investments from different fixed-income sectors. Domestically, we expect to maintain an emphasis on mortgage securities. We also think that currency fluctuations are less likely to have an influence on performance of foreign investments, and we expect that bonds of countries such as Norway and Sweden should fare well. 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. 4 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value CONVERTIBLE CORPORATE BONDS - 0.3% Semiconductors - 0.3% 170,000 NR/NR Brooks Automation, Inc., 4.75%, 6/1/08 $ 161,500 ----------- Total Semiconductors $ 161,500 ----------- TOTAL CONVERTIBLE CORPORATE BONDS (Cost $152,488) $ 161,500 ----------- ASSET BACKED SECURITIES - 2.5% Diversified Financials - 0.7% Consumer Finance - 0.0% DKK 42,226 AA+/Aa1 Realkredit Danmark, 7.0%, 10/1/32 $ 7,320 ----------- Diversified Financial Services - 0.7% 205,766 BBB-/Baa2 PF Export Receivable Master Trust, 6.436%, 6/1/15 (144A) $ 210,999 161,346 BBB/Baa2 Power Receivables Finance, 6.29%, 1/1/12 (144A) 167,626 ----------- Total Diversified Financials $ 378,625 ----------- Utilities - 1.8% 228,250 BBB-/Baa3 Empresa Electric, 8.625%, 4/30/13 (144A) $ 252,537 391,950 BB-/Ba2 FPL Energy Wind Funding, 6.876%, 6/27/17 (144A) 396,359 392,644 NR/NR Ormat Funding Corp., 8.25%, 12/30/20 396,571 ----------- Total Utilities $ 1,045,467 ----------- TOTAL ASSET BACKED SECURITIES (Cost $1,416,079) $ 1,431,412 ----------- COLLATERALIZED MORTGAGE OBLIGATIONS - 0.7% Diversified Financials - 0.7% 160,000 BBB-/Baa3 Tower 2004-1A E, 5.395%, 1/15/34 $ 157,270 265,000 NR/Ba2 Tower 2004-2A F, 6.376%, 12/15/14 265,769 ----------- Total Diversified Financials $ 423,039 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $425,000) $ 423,039 ----------- CORPORATE BONDS - 51.7% Energy - 6.8% Coal & Consumable Fuels - 0.5% 310,000 BBB-/NR Indocoal Exports Cayman, 7.134%, 7/6/12 (144A) $ 308,852 ----------- Oil & Gas Equipment and Services - 2.1% 370,000 B+/Ba3 Holly Energy Partners LP, 6.25%, 3/1/15 (144A) $ 360,750 350,000 CCC+/Caa1 J Ray McDermott SA, 11.0%, 12/15/13 (144A) 392,000 NOK 60,000 NR/NR Kvaerner ASA, 0.0%, 10/30/11 50,400 NOK 3,200,000 NR/NR Kvaerner ASA, 0.0%, 10/30/11 411,358 ----------- $ 1,214,508 ----------- Oil & Gas Exploration & Production - 3.4% 300,000 B-/B3 Baytex Energy, Ltd., 9.625%, 7/15/10 $ 311,624 55,000 B/B2 Comstock Resources, Inc., 6.875%, 3/1/12 55,550 75,000 B-/B3 Delta Petroleum Corp., 7.0%, 4/1/15 (144A) 70,500 500,000 BBB-/Baa3 Gazprom International SA, 7.201%, 2/1/20 (144A) 538,750 300,000 CCC+/Caa1 Petroquest Energy, Inc., 10.375%, 5/15/12 (144A) 296,250 ITL 275,000,000 BBB-/Baa2 Petroleos Mexicanos, 7.375%, 8/13/07 192,147 260,000 B+/B2 Stone Energy Corp., 6.75%, 12/15/14 252,850 225,000 BBB-/Baa3 Tengizchevroil LLP, 6.124%, 11/15/14 (144A) 230,063 ----------- $ 1,947,734 -----------
The accompanying notes are an integral part of these financial statements. 5 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Oil & Gas Storage & Transportation - 0.8% 380,000 B-/B1 Colorado Interstate Gas, 5.95%, 3/15/15 (144A) $ 374,636 76,000 B/B3 Transmontaigne, Inc., 9.125%, 6/1/10 79,040 ----------- $ 453,676 ----------- Total Energy $ 3,924,770 ----------- Materials - 9.1% Aluminum - 1.0% 435,000 BB/Ba3 Asia Aluminum Holdings, 8.0%, 12/23/11 (144A) $ 427,388 140,000 B/B1 Novelis, Inc., 7.25%, 2/15/15 (144A) 140,525 ----------- $ 567,913 ----------- Commodity Chemicals - 1.2% 110,000 BB-/B1 Arco Chemical Co., 9.8%, 2/1/20 $ 123,200 145,000 CCC+/B3 Aventine Renewable Energy, Floating Rate Note, 12/15/11 (144A) 139,200 370,000 B+/B1 Invista, 9.25%, 5/1/12 (144A) 404,687 ----------- $ 667,087 ----------- Construction Materials - 0.1% 53,000 BB-/Ba3 Texas Industries, Inc., 7.25%, 7/15/13 (144A) $ 54,325 ----------- Diversified Chemical - 0.3% 100,000 BB-/Ba3 Braskem International, Ltd., 9.375%, 6/1/15 (144A) $ 107,750 79,000 B/Caa1 Huntsman International LLC, 10.125%, 7/1/09 99,175 ----------- $ 206,925 ----------- Diversified Metals & Mining - 1.7% 200,000 B+/B1 Freeport-McMoran Copper & Gold, 6.875%, 2/1/09 $ 195,000 400,000 NR/Ba1 Vale Overseas, Ltd., 8.25%, 1/17/34 440,000 340,000 BB+/Ba2 Vedenta Resources Plc., 6.625%, 2/22/10 (144A) 335,496 ----------- $ 970,496 ----------- Forest Products - 0.6% 300,000 BB-/Ba2 Sino Forest Corp., 9.125%, 8/17/11 (144A) $ 327,750 ----------- Metal & Glass Containers - 0.6% 100,000 B+/NR Crown Holdings, 10.25%, 3/1/11 $ 137,638 130,000 BB-/B1 Greif Brothers Corp., 8.875%, 8/1/12 139,750 75,000 B+/B2 Vitro Envases Norteamerica, 10.75%, 7/23/11 (144A) 72,750 ----------- $ 350,138 ----------- Paper Packaging - 0.4% 210,000 CCC+/Caa2 Graham Packaging Co., 9.875%, 10/15/14 (144A) $ 210,525 ----------- Paper Products - 0.8% 100,000 BB-/Ba3 Abitibi-Consolidated, Inc., 6.0%, 6/20/13 $ 92,000 200,000 BB/Ba3 Bowater, Inc., 6.5%, 6/15/13 197,500 240,000 B/Caa1 Mercer International, Inc., 9.25%, 2/15/13 192,000 ----------- $ 481,500 -----------
6 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 - 2.0% 260,000 BBB-/Baa3 Basell Finance Co., 8.1%, 3/15/27 (144A) $ 258,663 275,000 B-/Caa2 Crystal US Holdings, Inc., Floating Rate Note, 10/1/14 191,125 300,000 BB/Ba1 Ferro Corp., 7.125%, 4/1/28 316,761 25,000 BB/Ba1 Ferro Corp., 7.625%, 5/1/13 26,241 110,000 B-/Caa1 OM Group, Inc., 9.25%, 12/15/11 110,000 EUR 140,000 CCC+/B3 Rhodia SA, 8.0%, 6/1/10 168,892 EUR 45,000 CCC+/Caa1 Rhodia SA, 9.25%, 6/1/11 53,769 ---------- $1,125,451 ---------- Steel - 0.4% 115,000 BB/Ba2 International Steel Group, 6.5%, 4/15/14 $ 110,400 135,000 BBB/Ba1 Ispat Inland ULC, Floating Rate Note, 4/1/10 (b) 143,775 ---------- $ 254,175 ---------- Total Materials $5,216,285 ---------- Capital Goods - 3.0% Building Products - 1.1% 355,000 B-/B3 Builders Firstsource, Inc., Floating Rate Note, 2/15/12 $ 353,225 195,000 B+/B2 Resolution Perform Production, 8.0%, 12/15/09 202,800 50,000 B-/B3 US Concrete, Inc., 8.375%, 4/1/14 47,000 ---------- $ 603,025 ---------- Construction & Farm Machinery & Heavy Trucks - 0.4% 140,000 B-/B3 American Rock Salt Co., LLC, 9.5%, 3/15/14 $ 142,100 115,000 BB-/Ba3 Navistar International, 7.5%, 6/15/11 117,300 ---------- $ 259,400 ---------- Industrial Machinery - 0.6% 50,000 B-/B3 Dresser-Rand Group, Inc., 7.375%, 11/1/14 (144A) $ 52,000 150,000 B/B2 Gardner Denver, Inc., 8.0%, 5/1/13 (144A) 151,749 113,000 B/B3 JLG Industries, Inc., 8.375%, 6/15/12 117,803 ---------- $ 321,552 ---------- Trading Companies & Distributors - 0.9% 550,000 BB+/Ba1 Noble Group, Ltd., 6.625%, 3/17/15 (144A) $ 507,779 ---------- Total Capital Goods $1,691,756 ---------- Commercial Services & Supplies - 1.9% Diversified Commercial Services - 1.5% 115,000 CCC+/B3 Cornell Co's, Inc., 10.75%, 7/1/12 $ 119,313 240,000 B-/Caa1 Hydrochem Industrial Service, 9.25%, 2/15/13 (144A) 222,000 290,000 CCC+/Caa1 Park-Ohio Industries, Inc., 8.375%, 11/15/14 (144A) 258,825 275,000 B+/B2 United Rentals, Inc., 7.75%, 11/15/13 (a) 270,188 ---------- $ 870,326 ----------
The accompanying notes are an integral part of these financial statements. 7 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Environmental & Facilities Services - 0.4% 200,000 B/B3 Clean Harbors, Inc., 11.25%, 7/15/12 (144A) $ 222,000 ----------- Total Commercial Services & Supplies $ 1,092,326 ----------- Transportation - 3.4% Air Freight & Couriers - 0.2% 130,000 BB-/B1 Petroleum Helicopters, 9.375%, 5/1/09 $ 136,825 ----------- Airlines - 0.6% 35,000 CCC/Caa2 AMR Corp., 9.0%, 8/1/12 (a) $ 27,475 50,000 CCC/Caa2 AMR Corp., 9.0%, 9/15/16 38,750 85,000 CCC/Caa2 AMR Corp., 9.8%, 10/1/21 56,525 150,000 B/B3 Continental Air, Inc., 7.568%, 12/1/06 129,158 25,000 CCC-/Caa3 Northwest Airlines, Inc., 8.7%, 3/15/07 12,250 150,000 CCC-/Caa3 Northwest Airlines, Inc. 9.88%, 3/15/07 75,000 ----------- $ 339,158 ----------- Marine - 1.4% 325,000 B/B2 Ship Finance International, Ltd., 8.5%, 12/15/13 $ 309,156 375,000 BB-/Ba3 Stena AB, 7.0%, 12/1/16 347,812 145,000 B-/B3 Trailer Bridge, Inc., 9.25%, 11/15/11 145,906 ----------- $ 802,874 ----------- Railroads - 0.6% 210,000 CCC+/B3 Atlantic Express Transport, 12.25%, 4/15/08 $ 201,600 130,000 B+/B2 TFM SA De CV, 9.375%, 5/1/12 (144A) 135,200 ----------- $ 336,800 ----------- Trucking - 0.6% 320,000 B+/B1 Greenbrier Co., Inc., 8.375%, 5/15/15 (144A) $ 325,600 ----------- Total Transportation $ 1,941,257 ----------- Automobiles & Components - 2.8% Auto Parts & Equipment - 2.0% 80,000 B+/Ba3 Commercial Vehicle Group, 8.0%, 7/1/13 $ 81,600 460,000 B-/B3 Delphi Corp., 6.55%, 6/15/06 (a) 447,350 250,000 B+/Ba2 Sun Sage BV, 8.25%, 3/26/09 (144A) 265,625 360,000 B-/B3 Tenneco Automotive, Inc., 8.625%, 11/15/14 361,800 ----------- $ 1,156,375 ----------- Automobile Manufacturers - 0.5% 340,000 BB+/Baa2 Ford Motor Credit Co., 5.7%, 1/15/10 $ 313,596 ----------- Tires & Rubber - 0.3% 150,000 B-/B3 Goodyear Tire & Rubber, 9.0%, 7/1/15 (144A) $ 148,875 ----------- Total Automobiles & Components $ 1,618,846 ----------- Consumer Durables & Apparel - 1.3% Footwear - 0.3% 183,000 BB-/B1 Brown Shoe Co., Inc., 8.75%, 5/1/12 $ 190,778 -----------
8 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 Homebuilding - 1.0% 208,000 BB-/Ba3 Meritage Homes Corp., 6.25%, 3/15/15 $ 193,440 400,000 B+/Ba3 WCI Communities, Inc., 6.625%, 3/15/15 366,000 ----------- $ 559,440 ----------- Total Consumer Durables & Apparel $ 750,218 ----------- Consumer Services - 0.2% Hotels, Resorts & Cruise Lines - 0.2% 100,000 B-/Caa1 Trump Entertainment Resorts, 8.5%, 6/1/15 $ 97,625 ----------- Total Consumer Services $ 97,625 ----------- Media - 2.2% Broadcasting & Cable Television - 1.4% 145,000 B-/B3 Innova S De R.L., 9.375%, 9/19/13 $ 163,488 200,000 B-/B2 Kabel Deutschland GMBH, 10.625%, 7/1/14 217,000 100,000 B-/B2 Kabel Deutschland, 10.75%, 7/1/14 (144A) 140,360 230,000 B-/B3 NTL Cable PLC, 8.75%, 4/15/14 293,607 ----------- $ 814,455 ----------- Movies & Entertainment - 0.4% 225,000 B+/Ba2 Corp Interamer De Entret, 8.875%, 6/14/15 (144A) $ 222,188 ----------- Publishing - 0.4% 200,000 B/B1 Sheridan Acquisition Corp., 10.25%, 8/15/11 $ 207,750 ----------- Total Media $ 1,244,393 ----------- Retailing - 0.4% Automotive Retail - 0.0% 35,000 B/B3 Pep Boys-Manny Moe Jack, 7.5%, 12/15/14 $ 31,325 ----------- Specialty Stores - 0.4% 145,000 B/B3 Asbury Automotive Group, 8.0%, 3/15/14 $ 139,925 100,000 BB/Ba2 Toys R Us, 7.375%, 10/15/18 81,000 ----------- $ 220,925 ----------- Total Retailing $ 252,250 ----------- Food & Drug Retailing - 0.4% Drug Retail - 0.4% 170,000 CCC+/Caa1 Duane Reade, Inc., 9.75%, 8/1/11 (a) $ 137,700 110,000 B-/B2 Duane Reade, Inc., Floating Rate Note, 12/15/10 (144A) 107,250 ----------- $ 244,950 ----------- Total Food & Drug Retailing $ 244,950 ----------- Food, Beverage & Tobacco - 1.0% Brewers - 0.8% 202,000 B-/B3 Argentine Beverages, 7.375%, 3/22/12 (144A) $ 205,535 220,000 BBB-/Baa3 Cia Brasileira de Bebida, 8.75%, 9/15/13 254,375 ----------- $ 459,910 ----------- Soft Drinks - 0.2% 80,000 BBB-/Baa3 Cia Brasileira de Bebida, 10.5%, 12/15/11 $ 98,800 ----------- Total Food, Beverage & Tobacco $ 558,710 -----------
The accompanying notes are an integral part of these financial statements. 9 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Health Care Equipment & Services - 0.7% Health Care Distributors - 0.1% 60,000 BB+/Ba2 Omnicare, Inc., 6.125%, 6/1/13 $ 59,100 ----------- Health Care Services - 0.4% 235,000 CCC+/Caa1 Rural/Metro Corp., 9.875%, 3/15/15 (144A) $ 232,650 ----------- Health Care Supplies - 0.2% 125,000 CCC+/Caa1 Inverness Medical Innovation, 8.75%, 2/15/12 $ 124,063 ----------- Total Health Care Equipment & Services $ 415,813 ----------- Pharmaceuticals & Biotechnology - 0.8% 235,000 BB/Ba1 Mayne Group, Ltd., 5.875%, 12/1/11 (144A) $ 236,175 240,000 CCC+/Caa1 Warner Chilcott Corp., 8.75%, 2/1/15 (144A) 233,400 ----------- $ 469,575 ----------- Total Pharmaceuticals & Biotechnology $ 469,575 ----------- Banks - 1.2% Diversified Banks - 1.2% 185,000 B/Ba1 ATF Bank JSC, 9.25%, 4/12/12 (144A) $ 189,624 200,000 B+/Baa2 Halyk Savings Bank Kazaktn, 8.125%, 10/7/09 (144A) 210,000 15,000 BBB+/A1 Skandinaviska Enskilda Bank, 8.125%, 9/6/49 (144A) 15,668 235,000 NR/Baa2 Turanalem Finance BV, 8.5%, 2/10/15 (144A) 242,050 ----------- Total Banks $ 657,342 ----------- Diversified Financials - 3.2% Consumer Finance - 0.6% 35,000 BB+/Baa2 Ford Motor Credit Co., 5.8%, 1/12/09 $ 33,225 320,000 A/A2 SLM Corp., Floating Rate Note, 7/25/14 317,002 ----------- $ 350,227 ----------- Investment Banking & Brokerage - 1.3% 325,000 B+/B1 E*Trade Financial Corp., 8.0%, 6/15/11 $ 342,063 375,000 B/B3 Refco Finance Holdings, 9.0%, 8/1/12 397,500 ----------- $ 739,563 ----------- Diversified Financial Services - 1.2% 260,000 B/B3 Dollar Financial Group, 9.75%, 11/15/11 $ 268,124 425,000 BBB-/Baa3 Glencore Funding LLC, 6.0%, 4/15/14 (144A) 407,531 ----------- $ 675,655 ----------- Specialized Finance - 0.1% 55,000 B-/Caa1 K&F Acquisition, Inc., 7.75%, 11/15/14 $ 56,238 ----------- Total Diversified Financials $ 1,821,683 ----------- Insurance - 3.8% Life & Health Insurance - 1.2% 365,000 B-/B2 Presidential Life Corp., 7.875%, 2/15/09 $ 372,300 300,000 BB+/Ba1 Provident Co., Inc., 7.0%, 7/15/18 302,696 ----------- $ 674,996 ----------- Multi-Line Insurance - 0.4% 210,000 BB/Ba1 Allmerica Financial Corp., 7.625%, 10/15/25 $ 230,869 -----------
10 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 Property & Casualty Insurance - 1.2% 285,000 BBB-/NR Kingsway America, Inc., 7.5%, 2/1/14 $ 302,521 350,000 BB/Baa3 Ohio Casualty Corp., 7.3%, 6/15/14 384,928 ----------- $ 687,449 ----------- Reinsurance - 1.0% 200,000 BBB-/Baa3 Odyssey Re Holdings, 7.65%, 11/1/13 $ 215,906 365,000 BBB/Baa2 Platinum Underwriters Financial, 7.5%, 6/1/17 (144A) 370,112 ----------- $ 586,018 ----------- Total Insurance $ 2,179,332 ----------- Real Estate - 2.4% Real Estate Management & Development - 0.4% 185,000 BB-/Ba3 Forest City Enterprises, 7.625%, 6/1/15 $ 197,950 ----------- Real Estate Investment Trusts - 2.0% 120,000 B+/B3 BF Saul Real Estate Investment Trust, 7.5%, 3/1/14 $ 124,200 155,000 B+/B1 Crescent Real Estate, 9.25%, 4/15/09 165,074 374,000 B+/Ba3 Host Marriot LP, 6.375%, 3/15/15 (144A) 370,260 300,000 B+/B1 Trustreet Properties, Inc., 7.5%, 4/1/15 (144A) 306,750 180,000 BB/Ba3 Ventas Realty LP/Cap Corp., 7.125%, 6/1/15 (144A) 187,200 ----------- $ 1,153,484 ----------- Total Real Estate $ 1,351,434 ----------- Software & Services - 0.7% Application Software - 0.2% 100,000 B-/B3 Riverdeep Group, Ltd., 9.25%, 4/15/11 (144A) $ 130,983 ----------- Internet Software & Services - 0.5% 250,000 BB/Ba2 Hanarotelecom, Inc., 7.0%, 2/1/12 (144A) $ 248,120 ----------- Total Software & Services $ 379,103 ----------- Technology, Hardware & Equipment - 0.7% Communications Equipment - 0.1% 50,000 BBB-/Ba2 Corning, Inc., 5.9%, 3/15/14 $ 51,383 ----------- Electronic Manufacturing Services - 0.2% 125,000 B/B1 Sanmina-Sci Corp., 6.75%, 3/1/13 (144A) $ 119,375 ----------- Technology Distributors - 0.4% 256,000 BB+/Ba1 Anixter International Corp., 5.95%, 3/1/15 $ 253,683 ----------- Total Technology, Hardware & Equipment $ 424,441 ----------- Telecommunication Services - 3.5% Integrated Telecommunication Services - 0.9% 325,000 B+/B2 GCI, Inc., 7.25%, 2/15/14 $ 312,000 315,000 B/B3 Zeus Special Sub, Ltd., Floating Rate Note, 2/1/15 (144A) 210,263 ----------- $ 522,263 -----------
The accompanying notes are an integral part of these financial statements. 11 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Wireless Telecommunication Services - 2.6% 150,000 CCC+/Caa1 Alamosa Delaware, 8.5%, 1/31/12 $ 157,312 200,000 B-/B2 Inmarsat Finance Plc., 7.625%, 6/3/12 211,000 115,000 BB-/Ba3 Mobile Telesystems Finance, 8.375%, 10/14/10 (144A) 119,313 240,000 BB/Ba3 Rogers Cantel, Inc., 10.5%, 6/1/06 206,431 200,000 BB/Ba3 Rogers Wireless, Inc., 7.625%, 12/15/11 175,267 285,000 NR/Baa3 Tele Norte Leste Participacoes, 8.0%, 12/18/13 293,550 275,000 CCC/Caa1 Ubiquitel Operating Co., 9.875%, 3/1/11 301,813 ----------- $ 1,464,686 ----------- Total Telecommunication Services $ 1,986,949 ----------- Utilities - 2.2% Electric Utilities - 1.6% 350,000 NR/NR Juniper Generation, 6.79%, 12/31/14 (144A) $ 348,397 250,000 BBB-/Baa3 Kiowa Power Partners LLC, 5.737%, 3/30/21 (144A) 255,265 250,000 BB-/Ba3 MSW Energy Holdings, 7.375%, 9/1/10 256,250 85,000 B+/B1 Tenaska Alabama II Part, 7.0%, 6/30/21 (144A) 86,063 ----------- $ 945,975 ----------- Multi-Utilities - 0.5% 290,000 B+/B1 Reliant Energy, Inc., 6.75%, 12/15/14 $ 283,475 ----------- Total Utilities $ 1,229,450 ----------- TOTAL CORPORATE BONDS (Cost $28,837,481) $29,548,508 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 30.5% 894,128 AAA/Aaa Federal Home Loan Mortgage Corp., 4.5%, 4/1/20 $ 890,741 47,185 AAA/Aaa Federal Home Loan Mortgage Corp., 5.0%, 5/1/34 47,244 149,893 AAA/Aaa Federal Home Loan Mortgage Corp., 5.0%, 6/1/35 150,084 63,854 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 10/1/16 65,575 188,546 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 11/1/34 191,304 682,247 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 11/1/34 692,648 385,752 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 1/1/35 391,394 307,767 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 6/1/17 318,245 17,424 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/33 17,884 12,601 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 2/1/33 12,934 77,881 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 11/1/33 79,911 233,597 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0% 11/1/33 239,686 308,897 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/34 316,944 822,349 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 8/1/34 843,773 159,251 AAA/Aaa Federal National Mortgage Association, 4.5%, 3/1/35 155,830 320,000 AAA/Aaa Federal National Mortgage Association, 4.5%, 7/1/20 318,500 195,138 AAA/Aaa Federal National Mortgage Association, 5.0%, 2/1/20 197,447 55,834 AAA/Aaa Federal National Mortgage Association, 5.5%, 3/1/18 57,349 103,548 AAA/Aaa Federal National Mortgage Association, 5.5%, 12/1/18 106,360 112,847 AAA/Aaa Federal National Mortgage Association, 5.5%, 4/1/19 115,921 196,646 AAA/Aaa Federal National Mortgage Association, 5.5%, 5/1/34 199,451 104,457 AAA/Aaa Federal National Mortgage Association, 6.0%, 7/1/17 108,039 9,825 AAA/Aaa Federal National Mortgage Association, 6.0% 12/1/31 10,086 12,002 AAA/Aaa Federal National Mortgage Association, 6.0% 2/1/32 12,320 9,625 AAA/Aaa Federal National Mortgage Association, 6.0% 11/1/32 9,874 403,084 AAA/Aaa Federal National Mortgage Association, 6.0%, 11/1/33 413,405
12 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 U.S. Government and Agency Obligations - (Cont.) 117,833 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/33 $ 120,850 147,085 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/33 150,851 142,818 AAA/Aaa Federal National Mortgage Association, 6.0%, 1/1/34 146,470 800,000 AAA/Aaa Federal National Mortgage Association, 6.375%, 8/15/07 615,845 2,081 AAA/Aaa Federal National Mortgage Association, 6.5% 7/1/31 2,160 4,914 AAA/Aaa Federal National Mortgage Association, 6.5%, 10/1/31 5,097 10,477 AAA/Aaa Federal National Mortgage Association, 6.5% 2/1/32 10,867 1,411 AAA/Aaa Federal National Mortgage Association, 7.0%, 9/1/29 1,489 457 AAA/Aaa Federal National Mortgage Association, 7.5%, 6/1/30 488 244,741 AAA/Aaa Government National Mortgage Association, 4.5%, 9/15/33 242,147 187,370 AAA/Aaa Government National Mortgage Association, 4.5%, 5/15/34 185,326 199,454 AAA/Aaa Government National Mortgage Association, 4.5%, 4/15/35 197,276 498,693 AAA/Aaa Government National Mortgage Association, 4.5%, 4/15/35 493,249 498,362 AAA/Aaa Government National Mortgage Association, 4.5%, 4/15/35 492,921 241,682 AAA/Aaa Government National Mortgage Association, 5.0%, 12/15/34 243,849 249,367 AAA/Aaa Government National Mortgage Association, 5.0%, 4/15/35 251,606 249,709 AAA/Aaa Government National Mortgage Association, 5.0%, 4/15/35 251,951 440,902 AAA/Aaa Government National Mortgage Association, 5.5%, 10/15/19 455,343 260,384 AAA/Aaa Government National Mortgage Association, 5.5%, 1/15/34 266,170 500,050 AAA/Aaa Government National Mortgage Association, 5.5%, 4/15/34 511,163 166,815 AAA/Aaa Government National Mortgage Association, 5.5%, 4/20/34 170,157 63,958 AAA/Aaa Government National Mortgage Association, 5.5%, 7/15/34 65,379 480,894 AAA/Aaa Government National Mortgage Association, 5.5%, 10/15/34 491,582 400,000 AAA/Aaa Government National Mortgage Association, 5.5%, 6/15/35 408,883 568,666 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/16 590,562 34,615 AAA/Aaa Government National Mortgage Association, 6.0%, 5/15/17 35,949 31,580 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/17 32,796 249,890 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/17 259,516 295,877 AAA/Aaa Government National Mortgage Association, 6.0%, 2/15/18 307,270 193,775 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/19 201,241 38,515 AAA/Aaa Government National Mortgage Association, 6.0%, 2/15/33 39,758 16,507 AAA/Aaa Government National Mortgage Association, 6.0%, 3/15/33 17,039 58,894 AAA/Aaa Government National Mortgage Association, 6.0%, 3/15/33 60,817 69,127 AAA/Aaa Government National Mortgage Association, 6.0% 3/15/33 71,358 76,450 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/33 78,917 61,303 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/33 63,281 92,050 AAA/Aaa Government National Mortgage Association, 6.0%, 7/15/33 95,020 53,582 AAA/Aaa Government National Mortgage Association, 6.0%, 7/15/33 55,311 42,512 AAA/Aaa Government National Mortgage Association, 6.0%, 9/15/33 43,883 119,728 AAA/Aaa Government National Mortgage Association, 6.0%, 9/15/33 123,591 85,841 AAA/Aaa Government National Mortgage Association, 6.0%, 10/15/33 88,611 325,960 AAA/Aaa Government National Mortgage Association, 6.0%, 11/20/33 335,765 423,137 AAA/Aaa Government National Mortgage Association, 6.0%, 10/15/34 436,750 38,212 AAA/Aaa Government National Mortgage Association, 6.5% 3/15/29 39,973 10,934 AAA/Aaa Government National Mortgage Association, 6.5%, 1/15/30 11,436 2,095 AAA/Aaa Government National Mortgage Association, 6.5%, 6/15/31 2,191 27,167 AAA/Aaa Government National Mortgage Association, 6.5%, 2/15/32 28,404 31,407 AAA/Aaa Government National Mortgage Association, 6.5% 3/15/32 32,836 38,469 AAA/Aaa Government National Mortgage Association, 6.5%, 11/15/32 40,223 35,320 AAA/Aaa Government National Mortgage Association, 6.5%, 1/15/33 36,917 55,943 AAA/Aaa Government National Mortgage Association, 6.5%, 5/15/33 58,472
The accompanying notes are an integral part of these financial statements. 13 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value U.S. Government and Agency Obligations - (Cont.) 120,688 AAA/Aaa Government National Mortgage Association, 6.5%, 1/15/34 $ 126,142 1,988 AAA/Aaa Government National Mortgage Association, 7.0%, 3/15/31 2,105 4,109 AAA/Aaa Government National Mortgage Association, 7.0%, 3/15/31 4,353 24,892 AAA/Aaa Government National Mortgage Association, 7.5% 5/15/23 26,484 159,735 AAA/Aaa Government National Mortgage Association II, 5.5%, 3/20/34 162,935 290,000 AAA/Aaa U.S. Treasury Bonds, 5.25%, 11/15/28 331,223 255,000 AAA/Aaa U.S. Treasury Bonds, 5.25%, 2/15/29 291,646 150,000 AAA/Aaa U.S. Treasury Bonds, 5.375%, 2/15/31 177,000 400,000 AAA/Aaa U.S. Treasury Notes, 4.0%, 2/15/15 401,423 275,000 AAA/Aaa U.S. Treasury Notes, 4.25%, 11/15/14 281,456 815,000 AAA/Aaa U.S. Treasury Strip, 0.0%, 2/15/11 660,637 ----------- Total Government $17,397,359 ----------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $17,186,671) $17,397,359 ----------- FOREIGN GOVERNMENT BONDS - 9.3% ITL 530,000,000 B+/B1 Banco Nac De Desen Econo, 8.0% 4/28/10 $ 359,550 CAD 27,000 AAA/Aaa Canadian Government, 4.25%, 9/1/08 22,796 CAD 659,000 AAA/Aaa Canadian Government 4.25%, 9/1/09 559,347 CAD 315,000 AAA/Aaa Canadian Government, 5.25%, 6/1/12 282,134 EUR 343,000 AAA/Aaa Government of France, 3.0%, 7/25/09 505,983 SEK 1,665,000 TSY/Aaa Government of Sweden, 5.25%, 3/15/11 243,898 NOK 1,500,000 AAA/Aaa Norwegian Government, 5.5%, 5/15/09 252,169 NOK 1,320,000 TSY/Aaa Norwegian Government, 6.0%, 5/16/11 232,852 NOK 3,410,000 TSY/Aaa Norwegian Government, 6.75%, 1/15/07 555,651 AUD 532,000 AA/Aa2 Ontario Province, 5.5%, 4/23/13 401,823 AUD 207,000 NR/Aaa Queensland Treasury, 6.0%, 8/14/13 164,885 474,815 BB+/Ba2 Republic of Columbia, 9.75%, 4/9/11 542,239 250,000 BB/Ba1 Republic of Panama, 7.25%, 3/15/15 271,750 SEK 2,955,000 TSY/Aaa Swedish Government, 5.5%, 10/8/12 447,012 SEK 2,150,000 TSY/Aaa Swedish Government, 8.0%, 8/15/07 310,182 DEM 180,000 BBB-/Baa3 United Mexican States, 8.25%, 2/24/09 130,636 ----------- TOTAL FOREIGN GOVERNMENT BONDS (Cost $4,652,043) $ 5,282,907 ----------- MUNICIPAL BONDS - 1.0% Government - 1.0% Muni Airport - 0.5% 175,000 B/Caa2 New Jersey Economic Development Authority Special Facility Revenue, 7.0%, 11/15/30 $ 162,323 50,000 B/Caa2 New Jersey Economic Development Authority, 6.25%, 9/15/29 43,462 100,000 NR/NR Wayne Charter County SPL, 6.75%, 12/1/15 89,748 ----------- $ 295,533 -----------
14 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 Muni Tobacco - 0.5% 90,000 BBB/Baa3 Golden State Tobacco Securitization, 6.75%, 6/1/39 $ 101,287 60,000 BBB/Baa3 Tobacco Settlement Financing Corp., 7.0%, 6/1/41 68,545 105,000 BBB/Baa3 Tobacco Settlement Authority Washington, 6.625%, 6/1/32 114,144 ----------- $ 283,976 ----------- Total Government $ 579,509 ----------- TOTAL MUNICIPAL BONDS (Cost $481,486) $ 579,509 ----------- Shares TEMPORARY CASH INVESTMENT - 1.7% Security Lending Collateral - 1.7% $ 949,383 ----------- 949,383 Security Lending Investment Fund, 3.29% TOTAL TEMPORARY CASH INVESTMENT (Cost $949,383) $ 949,383 ----------- TOTAL INVESTMENTS IN SECURITIES - 97.7% (Cost $54,100,632) $55,773,617 ----------- OTHER ASSETS AND LIABILITIES - 2.3% $ 1,316,689 ----------- TOTAL NET ASSETS - 100.% $57,090,306 ===========
(A.D.R.) American Depositary Receipt 144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At June 30, 2005 the value of these securities amounted to $13,562,566 or 23.8% of net assets. N/R Not rated by either S&P or Moody's TSY Treasury Security (a) At June 30, 2005 the following securities were out on loan:
Principal Amount Security Market Value 33,250 AMR Corp., 9.0%, 8/1/12 $ 26,101 437,000 Delphi Corp., 6.55%, 6/15/06 424,983 161,500 Duane Reade, Inc., 9.75%, 8/1/11 130,815 142,500 Northwest Airlines, Inc., 9.875%, 3/15/07 71,250 261,250 United Rentals, Inc., 7.75%, 11/15/13 256,678 -------- Total $909,827 ========
(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 dollar. SEK Swedish Krona. NOK Norwegian Kroner. ITL Italian Lira. CAD Canadian Dollar. AUD Australian Dollar. The accompanying notes are an integral part of these financial statements. 15 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months 5/1/03 Ended 6/30/05 Year Ended to Class II (a) (unaudited) 12/31/04 12/31/03 Net asset value, beginning of period $ 11.26 $ 11.01 $ 10.41 -------- -------- -------- Increase from investment operations: Net investment income $ 0.27 $ 0.55 $ 0.41 Net realized and unrealized gain (loss) on investments and foreign currency transactions (0.10) 0.49 0.62 -------- -------- -------- Net increase from investment operations $ 0.17 $ 1.04 $ 1.03 Distributions to shareholders: Net investment income (0.30) (0.63) (0.43) Net realized gain (0.16) -- -- Tax return of capital -- (0.16) -- -------- -------- -------- Net increase (decrease) in net asset value $ (0.29) $ 0.25 $ 0.60 -------- -------- -------- Net asset value, end of period $ 10.97 $ 11.26 $ 11.01 ======== ======== ======== Total return* 1.54% 9.95% 10.90% Ratio of net expenses to average net assets+ 1.14%** 1.29% 1.49%** Ratio of net investment income to average net assets+ 5.31%** 5.49% 5.08%** Portfolio turnover rate 46%** 53% 68% Net assets, end of period (in thousands) $ 35,102 $ 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 1.14%** 1.29% 1.49%** Net investment income 5.31%** 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. 16 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (including securities loaned of $909,827) (Cost $54,100,632) $55,773,617 Cash 989,821 Foreign currencies, at value 1,194,032 Receivables -- Investment securities sold 162,149 Fund shares sold 86,531 Dividends, interest and foreign taxes withheld 779,088 Forward foreign currency settlement contracts, net 2,601 Forward foreign currency portfolio hedge contracts, net 29,205 Other 488 ----------- Total assets $59,017,532 ----------- LIABILITIES: Payables -- Investment securities purchased $ 926,421 Dividends 2,900 Upon return for securities loaned 949,383 Due to affiliates 1,830 Accrued expenses 46,692 ----------- Total liabilities $ 1,927,226 ----------- NET ASSETS: Paid-in capital $54,480,483 Undistributed net investment income 265,575 Accumulated net realized gain 682,845 Net unrealized gain (loss) on: Investments 1,672,985 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (11,582) ----------- Total net assets $57,090,306 ----------- NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $21,988,129 Shares outstanding 2,004,720 ----------- Net asset value per share $ 10.97 Class II: (No par value, unlimited number of shares authorized) Net assets $35,102,177 Shares outstanding 3,200,225 ----------- Net asset value per share $ 10.97
The accompanying notes are an integral part of these financial statements. 17 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 INVESTMENT INCOME: Interest (net of foreign taxes withheld of $851) $ 1,651,584 Income on securities loaned, net 4,693 ------------ Total investment income $ 1,656,277 ------------ EXPENSES: Management fees $ 166,734 Transfer agent fees and expenses 1,488 Distribution fees (Class II) 37,914 Administrative reimbursements 9,326 Custodian fees 10,829 Professional fees 24,818 Printing expense 11,403 Fees and expenses of nonaffiliated trustees 417 Miscellaneous 3,213 ------------ Total expenses $ 266,142 ------------ Net expenses $ 266,142 ------------ Net investment income $ 1,390,135 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain from: Investments $ 584,915 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies 99,257 ------------ $ 684,172 ------------ Change in net unrealized gain or loss from: Investments $ (1,256,663) Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies 55,806 ------------ $ (1,200,857) ------------ Net gain (loss) on investments, futures contracts and foreign currency transactions $ (516,685) ------------ Net increase (decrease) in net assets resulting from operations $ 873,450 ============
18 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended (unaudited) 12/31/04 FROM OPERATIONS: Net investment income (loss) $ 1,390,135 $ 1,817,102 Net realized gain (loss) on investments 684,172 1,081,207 Change in net unrealized gain or loss on investments and foreign currency transactions (1,200,857) 767,697 ------------ ------------ Net increase (decrease) in net assets resulting from operations $ 873,450 $ 3,666,006 ------------ ------------ DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (601,687) $ (1,210,066) Class II (834,415) (733,628) Net realized gain Class I (308,226) (294,736) Class II (487,951) (171,204) ------------ ------------ Total distributions to shareowners $ (2,232,279) $ (2,409,634) ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 12,178,985 $ 25,764,732 Reinvestment of distributions 2,207,841 2,367,418 Cost of shares repurchased (1,778,583) (6,523,479) ------------ ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ 12,608,243 $ 21,608,671 ------------ ------------ Net increase (decrease) in net assets $ 11,249,414 $ 22,865,043 NET ASSETS: Beginning of period $ 45,840,892 $ 22,975,849 ------------ ------------ End of period $ 57,090,306 $ 45,840,892 ------------ ------------ Undistributed net investment income (loss), end of period $ 265,574 $ 311,542 ============ ============
The accompanying notes are an integral part of these financial statements. 19 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Strategic Income VCT Portfolio (The Portfolio) is a portfolio of Pioneer Variable Contracts Trust (the Trust), a Delaware business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust consists of twenty-eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Moderate Allocation VCT Portfolio (Ibbotson Moderate Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation 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 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 NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. 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 20 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 June 30, 2005, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 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. 21 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- The tax character of the current year distributions paid will be determined at the end of the fiscal year. 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. - --------------------------------------------------------------------------------
2004 - -------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $2,196,847 Long-Term gain capital 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 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 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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 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. 22 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 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 June 30, 2005, $1,083 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 $509 in transfer agent fees payable to PIMSS at June 30, 2005. 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 $238 payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $53,963,177 $2,005,875 $ (195,435) $1,810,440 =========== ========== ========== ========== - --------------------------------------------------------------------------------------------------
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 six months ended June 30, 2005, were $13,745,048 and $8,655,996, respectively. The cost of purchases and the proceeds from sales of U.S. Government obligations were $8,874,563 and $2,644,466, respectively. 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows for the six months ended June 30, 2005 and the fiscal year ended December 31, 2004:
- --------------------------------------------------------------------------------------------- Strategic Income Portfolio '05 Shares '05 Amount '04 Shares '04 Amount - --------------------------------- ------------ --------------- ------------- --------------- CLASS I: Shares sold 179,239 1,986,324 453,590 4,955,590 Reinvestment of distributions 80,230 885,497 134,927 1,462,624 Shares repurchased (103,176) (1,150,506) (494,192) (5,414,640) ------------------------------------------------------- Net increase 156,293 $ 1,721,315 94,325 $ 1,003,574 ======================================================= CLASS II: Shares sold 914,308 $ 10,192,661 1,907,997 $ 20,809,730 Reinvestment of distributions 119,896 1,322,344 83,281 904,794 Shares repurchased (56,555) (628,077) (101,494) (1,108,839) ------------------------------------------------------- Net increase 977,649 $ 10,886,928 1,889,784 $ 20,605,685 ======================================================= - ---------------------------------------------------------------------------------------------
23 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 8. Forward Foreign Currency Contracts During the six months ended June 30, 2005, 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. Outstanding forward portfolio hedge contracts were as follows:
- ----------------------------------------------------------------------------------------------------------- Net Contracts to In Exchange Settlement Unrealized Portfolio Deliver For Date Value Gain (Loss) - ----------------------------------------------------------------------------------------------------------- Strategic Income Portfolio AUD (831,000) $ 641,532 9/22/05 $ (628,626) $ 12,906 Strategic Income Portfolio EURO (1,300,000) $1,572,025 8/1/05 $ (1,574,968) $ (2,943) Strategic Income Portfolio EURO (1,400,000) $1,713,712 7/5/05 $ (1,694,470) $ 19,242 - -----------------------------------------------------------------------------------------------------------
Outstanding forward currency settlement contracts were as follows:
- -------------------------------------------------------------------------------------------- Net Gross Settlement Gross Receivable Receivable Date Payable (Payable) - -------------------------------------------------------------------------------------------- Strategic Income Portfolio $1,573,001 7/1/05 $ (1,570,400) $2,601 - --------------------------------------------------------------------------------------------
24 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 25 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and two relevant indices, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the second quintile of the peer group for the 12 months ended June 30, 2004 and the first quintile for the three years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) Further, the Trustees also considered that the yield to Fund Class 1 shareholders significantly exceeded the yield of the Lehman Aggregate Bond Index. The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the third quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio (before and after giving effect to any expense limitation) for the 12 months ended June 30, 2004 was in the fifth quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio (before giving effect to any expense limitation), although higher, was reasonable compared to that of most comparable funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there was potential for realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, 26 PIONEER VARIABLE CONTRACTS TRUST Pioneer Strategic Income VCT Portfolio - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- break points in the management fee are not necessary at this time. The Trustees will continue to evaluate annually the appropriateness of break points. H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund). The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 27 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 28 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 29 [LOGO] PIONEER Investments(R) Pioneer Variable Contracts Trust Officers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the fund's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the fund and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer fund, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17871-00-0805 [Logo]Pioneer Investements(R) PIONEER VARIABLE CONTRACTS TRUST Pioneer Value VCT Portfolio -- Class II Shares SEMIANNUAL REPORT June 30, 2005 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- T a b l e o f C o n t e n t s - --------------------------------------------------------------------------------
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 Factors Considered by the Independent Trustees in Approving the Management Contract 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 Value VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - --------------------------------------------------------------------------------
Portfolio Diversification (As a percentage of total investment portfolio) U.S Common Stocks 96.8% International Common Stocks 0.4% Depositary Receipts for International Stocks 2.8%
Sector Distribution (As a percentage of equity holdings) Financials 27.4% Utilities 1.2% Materials 5.2% Consumer Staples 5.3% Telecommnication Services 5.7% Information Technology 8.6% Industrials 9.5% Health Care 9.8% Consumer Discretionary 12.0% Energy 15.3%
Five Largest Holdings (As a percentage of equity holdings) 1. Citigroup, Inc. 4.66% 2. Bank of America Corp. 3.98 3. ConocoPhillips 3.06 4. General Electric Co. 2.50 5. Merrill Lynch & Co., Inc. 2.28
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $13.30 $13.40
Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $0.0119 $0.0073 $0.0828
- -------------------------------------------------------------------------------- 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.
Pioneer Value VCT Portfolio~Russell 1000 Value Index" 5/03 10000 10000 6/03 10193 10125 6/04 12002 12265 6/05 12960 13989
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 June 30, 2005)
Net Asset Value Life-of-Class 14.53% (5/1/03) 1 Year 7.98
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and 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 VARIABLE CONTRACTS TRUST Pioneer Value VCT Portfolio - -------------------------------------------------------------------------------- COMPARING ONGOING PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Portfolio, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Portfolio expenses; and (2) transaction costs, including sales charges (loads) on purchase payments. This example is intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other variable annuities. The example is based on an investment of $1,000 at the beginning of the Portfolio's latest six-month period and held throughout the six months. Using the Tables Actual Expenses The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period as follows: 1. Divide your account value by $1,000 Example: an $8,600 account value - $1,000 = 8.6 2. Multiply the result in (1) above by the corresponding share class's number in the third row under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Expenses Paid on a $1,000 Investment in Pioneer Value VCT Portfolio Based on actual returns from January 1, 2005 through June 30, 2005.
Share Class II - -------------------------------------------------------------- Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $1,000.10 Expenses Paid During Period* $ 7.44
* Expenses are equal to the Portfolio's annualized expense ratio of 1.50% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other variable annuities. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other variable annuities. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) that are charged at the time of the transaction. Therefore, the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different variable annuities. In addition, if these transaction costs were included, your costs would have been higher. Expenses Paid on a $1,000 Investment in Pioneer Value VCT Portfolio Based on a hypothetical 5% return per year before expenses, reflecting the period from January 1, 2005 through June 30, 2005.
Share Class II - -------------------------------------------------------------- Beginning Account Value on 1/1/05 $1,000.00 Ending Account Value on 6/30/05 $1,017.36 Expenses Paid During Period* $ 7.50
* Expenses are equal to the Portfolio's annualized expense ratio of 1.50% for Class II shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 3 PIONEER VARIABLE CONTRACTS TRUST Pioneer Value VCT Portfolio - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- Portfolio Manager J. Rodman Wright describes the economic background and investment strategies that affected results for Pioneer Value VCT Portfolio through the first half of 2005. Q. What was the investment background like and how did the Portfolio perform during the period? A. Stocks rose and fell in a narrow range through the first half of the year, as investors pondered the impact of rising short-term interest rates and wondered how soon and how much high energy prices might affect the U.S. economy. For the six months ended June 30, 2005, the Portfolio returned 0.01% at net asset value. In comparison, the Portfolio's benchmark, the Russell 1000 Value Index returned 1.76% over the same period. Q. Which sectors or stocks had the greatest impact on results? A. The Portfolio's healthcare holdings were a significant contributor to the period's return. We were overweight compared to our benchmark among stocks of large pharmaceutical manufacturers; Pfizer, among others, has begun to show improved performance after a period of decline. Generic drug maker IVAX rose based on FDA approvals of some new products. Shares of HCA moved higher as the hospital industry made strides to resolve issues, including uncollectable patient bills, which have plagued it. We were also overweight in the energy sector, the market's strongest segment during the period. Portfolio holdings Conoco, Occidental Petroleum, Devon Energy and Suncor all rode the wave of soaring oil prices. In telecommunications, Nextel's acquisition by Sprint aided returns. Relative returns also benefited because we did not own weak-performing Verizon. Similarly, in technology, our decision to avoid IBM was rewarded when its shares fell. We enjoyed a series of small gains in the materials sector and avoided disappointing performance by major chemical companies such as Dow and DuPont. Shares of industrial conglomerate Tyco fell back, after a long rebound, when first-quarter earnings lagged expectations. Among financial issues, we were underweight commercial banks; bank margins tend to be squeezed when short-term interest rates rise and long-term rates remain low, as has been the case this year. Citigroup, the Portfolio's largest holding, was down slightly. Results were hurt when insurance giant AIG come under intense regulatory scrutiny and because we were underweight in the strong REIT sector. The proposed acquisition of credit card provider Providian by Washington Mutual pushed shares moderately higher. Inadequate participation in the utilities sector was another barrier to performance. Utilities prices appear overextended to us, and yields are down sharply in this traditional income sector. Among consumer discretionary companies, failure to own Altria, formerly known as Philip Morris, also penalized results as shares moved up. Media stocks, including Time Warner and Comcast, made up another disappointing sector; investors were focused on specific weaknesses, while giving little weight to broader corporate strengths. Q. What is your outlook for the months ahead? A. Although its pace may be moderating, the economy continues to expand. Unemployment and inflation are both low, and favorable long-term interest rates are encouraging construction and holding down corporate borrowing costs. Balance sheets are generally healthy, aided by disciplined cost management at many companies. Reductions in the twin deficits - the federal budget and the nation's trade imbalances - are additional positive signs. Given those circumstances, the equity market does not appear especially expensive. However, some slowing of the expansion is certainly possible, as interest-rate hikes and record prices for gasoline and other fuels begin to move through the economy. And terrorism remains on everyone's mind. Signs from the Federal Reserve Board that interest-rate increases are nearing an end or a slackening in world demand for energy would be powerful psychological stimuli for investors. But on balance, we see the environment as favorable and the glass as half full. 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 VARIABLE CONTRACTS TRUST Pioneer Value VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 97.7% Energy - 14.9% Integrated Oil & Gas - 9.5% 4,444 Chevron Corp. $ 248,508 7,386 ConocoPhillips 424,621 4,710 Exxon Mobil Corp. 270,684 3,781 Occidental Petroleum Corp. 290,872 2,581 Suncor Energy, Inc. 122,133 ----------- $ 1,356,818 ----------- Oil & Gas Drilling - 2.0% 2,690 ENSCO International, Inc. $ 96,167 1,452 Nabors Industries, Inc.* 88,020 1,855 Transocean Offshore, Inc.* 100,114 ----------- $ 284,301 ----------- Oil & Gas Exploration & Production - 3.4% 1,407 Anadarko Petroleum Corp. $ 115,585 2,180 Apache Corp. 140,828 4,432 Devon Energy Corp. 224,614 ----------- $ 481,027 ----------- Total Energy $ 2,122,146 ----------- Materials - 5.1% Diversified Chemical - 0.9% 2,100 PPG Industries, Inc. $ 131,796 ----------- Diversified Metals & Mining - 1.0% 3,867 Freeport-McMoRan Copper & Gold, Inc. (Class B) $ 144,780 ----------- Forest Products - 1.3% 2,820 Weyerhaeuser Co. $ 179,493 ----------- Industrial Gases - 1.2% 3,684 Praxair, Inc. $ 171,674 ----------- Metal & Glass Containers - 0.7% 2,620 Ball Corp. $ 94,215 ----------- Total Materials $ 721,958 ----------- Capital Goods - 7.9% Aerospace & Defense - 2.4% 2,780 Northrop Grumman Corp. $ 153,595 3,800 United Technologies Corp. 195,130 ----------- $ 348,725 ----------- Construction, Farm Machinery & Heavy Trucks - 1.4% 3,020 Deere & Co. $ 197,780 ----------- Industrial Conglomerates - 4.1% 10,030 General Electric Co. $ 347,540 7,833 Tyco International, Ltd. 228,724 ----------- $ 576,264 ----------- Total Capital Goods $ 1,122,769 -----------
Shares Value Transportation - 1.4% Air Freight & Couriers - 0.7% 1,489 United Parcel Service $ 102,979 ----------- Airlines - 0.7% 6,479 Southwest Airlines Co. $ 90,252 ----------- Total Transportation $ 193,231 ----------- Consumer Durables & Apparel - 1.1% Photographic Products - 1.1% 5,590 Eastman Kodak Co. $ 150,092 ----------- Total Consumer Durables & Apparel $ 150,092 ----------- Media - 9.0% Broadcasting & Cable TV - 4.2% 9,270 Clear Channel Communications, Inc. $ 286,721 9,904 Comcast Corp.* 304,053 ----------- $ 590,774 ----------- Movies & Entertainment - 3.8% 18,923 Time Warner, Inc.* $ 316,203 6,977 Viacom, Inc. (Class B) 223,404 ----------- $ 539,607 ----------- Publishing - 1.0% 2,082 Gannett Co. $ 148,093 ----------- Total Media $ 1,278,474 ----------- Retailing - 1.6% Apparel Retail - 1.6% 6,140 Foot Locker, Inc. $ 167,131 3,400 Gap, Inc. 67,150 ----------- $ 234,281 ----------- Total Retailing $ 234,281 ----------- Food & Drug Retailing - 1.3% Food Retail - 1.3% 9,843 Kroger Co.* $ 187,312 ----------- Total Food & Drug Retailing $ 187,312 ----------- Food, Beverage & Tobacco - 3.6% Soft Drinks - 2.2% 3,385 The Coca-Cola Co. $ 141,324 3,033 PepsiCo, Inc. 163,570 ----------- $ 304,894 ----------- Tobacco - 1.4% 3,140 Altria Group, Inc. $ 203,032 ----------- Total Food, Beverage & Tobacco $ 507,926 ----------- Household & Personal Products - 0.2% Household Products - 0.2% 578 Kimberly-Clark Corp. $ 36,176 ----------- Total Household & Personal Products $ 36,176 -----------
The accompanying notes are an integral part of these financial statements. 5 PIONEER VARIABLE CONTRACTS TRUST Pioneer Value VCT Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Health Care Equipment & Services - 4.8% Health Care Distributors - 1.6% 3,860 Cardinal Health, Inc. $ 222,259 ----------- Health Care Equipment - 0.8% 4,380 Boston Scientific Corp.* $ 118,260 ----------- Health Care Facilities - 2.4% 2,627 HCA, Inc. $ 148,872 15,651 Tenet Healthcare Corp.* 191,568 ----------- $ 340,440 ----------- Total Health Care Equipment & Services $ 680,959 ----------- Pharmaceuticals & Biotechnology - 4.8% Pharmaceuticals - 4.8% 5,890 Bristol-Myers Squibb Co. $ 147,132 6,000 IVAX Corp.* 129,000 4,635 Merck & Co., Inc. 142,758 4,976 Pfizer, Inc. 137,238 2,810 Wyeth 125,045 ----------- $ 681,173 ----------- Total Pharmaceuticals & Biotechnology $ 681,173 ----------- Banks - 8.3% Diversified Banks - 5.1% 12,114 Bank of America Corp. $ 552,520 3,350 Wachovia Corp. 166,160 ----------- $ 718,680 ----------- Regional Banks - 1.3% 4,550 Fifth Third Bancorp $ 187,506 ----------- Thrifts & Mortgage Finance - 1.9% 4,137 Freddie Mac $ 269,857 ----------- Total Banks $ 1,176,043 ----------- Diversified Financials - 12.6% Asset Management & Custody Banks - 1.5% 7,343 The Bank of New York Co., Inc. $ 211,332 ----------- Consumer Finance - 2.0% 16,346 Providian Financial Corp.* $ 288,180 ----------- Investment Banking & Brokerage - 4.6% 1,545 Goldman Sachs Group, Inc. $ 157,621 1,744 Lehman Brothers Holdings, Inc. 173,144 5,760 Merrill Lynch & Co., Inc. 316,858 ----------- $ 647,623 ----------- Diversified Financial Services - 4.5% 13,984 Citigroup, Inc. $ 646,480 ----------- Total Diversified Financials $ 1,793,615 -----------
Shares Value Insurance - 5.9% Life & Health Insurance - 1.1% 8,745 UNUM Corp. $ 160,208 ----------- Multi-Line Insurance - 2.2% 5,358 American International Group, Inc. $ 311,300 ----------- Property & Casualty Insurance - 2.6% 2,739 Allstate Corp. $ 163,655 73 Berkshire Hathaway, Inc. (Class B)* 203,196 ----------- $ 366,851 ----------- Total Insurance $ 838,359 ----------- Software & Services - 5.1% Data Processing & Outsourced Services - 2.0% 6,976 First Data Corp. $ 280,017 ----------- Systems Software - 3.1% 10,770 Microsoft Corp. $ 267,527 7,150 Veritas Software Corp.* 174,460 ----------- $ 441,987 ----------- Total Software & Services $ 722,004 ----------- Technology Hardware & Equipment - 2.6% Communications Equipment - 1.5% 4,493 Motorola, Inc. $ 82,042 8,308 Nokia Corp. (A.D.R.) 138,244 ----------- $ 220,286 ----------- Computer Hardware - 1.1% 6,600 Hewlett-Packard Co. $ 155,166 ----------- Total Technology Hardware & Equipment $ 375,452 ----------- Semiconductors - 0.7% Semiconductors - 0.7% 3,575 Intel Corp. $ 93,165 ----------- Total Semiconductors $ 93,165 ----------- Telecommunication Services - 5.6% Integrated Telecommunication Services - 2.4% 2,223 Alltel Corp. $ 138,448 7,549 BellSouth Corp. 200,577 ----------- $ 339,025 ----------- Wireless Telecommunication Services - 3.2% 8,210 Nextel Communications, Inc.* $ 265,265 5,215 Vodafone Group Plc (A.D.R.) 126,829 25,451 Vodafone Group Plc 62,319 ----------- $ 454,413 ----------- Total Telecommunication Services $ 793,438 ----------- Utilities - 1.2% Electric Utilities - 1.2% 3,250 Exelon Corp. $ 166,823 ----------- Total Utilities $ 166,823 -----------
6 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Value VCT Portfolio - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value TOTAL COMMON STOCKS (Cost $13,051,368) $13,875,396 ----------- TOTAL INVESTMENT IN SECURITIES - 97.7% (Cost $13,051,368) $13,875,396 ----------- OTHER ASSETS AND LIABILITIES - 2.3% $ 328,975 ----------- TOTAL NET ASSETS - 100.0% $14,204,371 -----------
(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 Value VCT Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 Class II (unaudited) Net asset value, beginning of period $ 13.40 --------- Increase from investment operations: Net investment income $ 0.02 Net realized and unrealized gain (loss) on investments and foreign currency transactions (0.02) ---------- Net increase from investment operations $ -- ---------- Distributions to shareowners: Net investment income $ (0.01) Net realized gain (0.09) ---------- Net increase (decrease) in net asset value $ (0.10) ---------- Net asset value, end of period $ 13.30 ---------- Total return* 0.01% Ratio of net expenses to average net assets+ 1.50%** Ratio of net investment income to average net assets+ 0.40%** Portfolio turnover rate 36%** Net assets, end of period (in thousands) $ 14,204 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.92%** Net investment loss (0.02)%** Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.50%** Net investment income 0.40%**
5/1/03 (a) Year Ended to Class II 12/31/04 12/31/03 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 (loss) on investments and foreign currency transactions 1.36 2.03 ------- ------- Net increase from investment operations $ 1.38 $ 2.04 ------- ------- Distributions to shareowners: Net investment income $ (0.01) $ -- Net realized gain (0.01) -- ------- ------- Net increase (decrease) 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. 8 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Value VCT Portfolio - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (cost $13,051,368) $13,875,396 Cash 353,842 Receivables - Fund shares sold 169 Dividends, interest and foreign taxes withheld 24,644 Other 1,035 ----------- Total assets $14,255,086 ----------- LIABILITIES: Due to affiliates $ 712 Accrued expenses 50,003 ----------- Total liabilities $ 50,715 ----------- NET ASSETS: Paid-in capital $13,266,674 Undistributed net investment income 25,323 Accumulated net realized gain 88,359 Net unrealized gain on: Investments 824,028 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (13) ----------- Total net assets $14,204,371 ----------- NET ASSET VALUE PER SHARE: Class II: (No par value, unlimited number of shares authorized) Net assets $14,204,371 Shares outstanding 1,067,639 ----------- Net asset value per share $ 13.30
9 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Value VCT Portfolio - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
Six Months Ended 6/30/05 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $630) $ 116,159 Interest 4,289 ---------- Total investment income $ 120,448 ---------- EXPENSES: Management fees $ 47,479 Transfer agent fees and expenses 744 Distribution fees 15,826 Administrative reimbursements 9,325 Custodian fees 21,138 Professional fees 16,736 Printing expense 8,356 Fees and expenses of nonaffiliated trustees 106 Miscellaneous 1,761 ---------- Total expenses $ 121,471 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (26,442) ---------- Net expenses $ 95,029 ---------- Net investment income $ 25,419 ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain from: Investments $ 129,826 Forward foreign currency contracts and other assets and liabilities denominated in 609 ---------- foreign currencies $ 130,435 ---------- Change in net unrealized gain or loss from: Investments $ (121,885) Forward foreign currency contracts and other assets and liabilities denominated in (60) ---------- foreign currencies $ (121,945) ---------- Net gain on investments and foreign currency transactions $ 8,490 ---------- Net increase in net assets resulting from operations $ 33,909 ----------
10 The accompanying notes are an integral part of these financial statements. PIONEER VARIABLE CONTRACTS TRUST Pioneer Value VCT Portfolio - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended (unaudited) 12/31/04 FROM OPERATIONS: Net investment income $ 25,419 $ 14,601 Net realized gain on investments 130,435 56,068 Change in net unrealized gain or loss on investments and foreign currency transactions (121,945) 807,158 ----------- ----------- Net increase in net assets resulting from operations $ 33,909 $ 877,827 ----------- ----------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income: Class II $ (12,531) $ (2,607) Net realized gain Class II (94,867) (2,047) ----------- ----------- Total distributions to shareowners $ (107,398) $ (4,654) ----------- ----------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 3,475,509 $ 8,460,112 Reinvestment of distributions 104,862 4,364 Cost of shares repurchased (181,496) (154,122) ----------- ----------- Net increase in net assets resulting from Fund share transactions $ 3,398,875 $ 8,310,354 ----------- ----------- Net increase in net assets $ 3,325,386 $ 9,183,527 NET ASSETS: Beginning of period $10,878,985 $ 1,695,458 ----------- ----------- End of period $14,204,371 $10,878,985 ----------- ----------- Undistributed net investment income, end of period $ 25,323 $ 12,435 ----------- -----------
The accompanying notes are an integral part of these financial statements. 11 PIONEER VARIABLE CONTRACTS TRUST Pioneer Value VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies The Pioneer Value VCT Portfolio (the Portfolio), is a Portfolio of Pioneer Variable Contracts Trust (the Trust), 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-eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio)(Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio)(Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio)(Class II shares only) Pioneer Ibbotson Moderate Allocation VCT Portfolio (Ibbotson Moderate Allocation Portfolio)(Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio)(Class II shares only) The Value VCT Portfolio commenced operations on May 1, 2003. Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts or by qualified pension and retirement plans. The 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 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 NYSE. In computing the net asset values, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. The 12 PIONEER VARIABLE CONTRACTS TRUST Pioneer Value VCT Portfolio - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 June 30, 2005, there were no fair valued securities. Temporary cash investments are valued at amortized cost. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Portfolio becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income, including interest on income bearing cash accounts, is recorded on the accrual basis. 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. dollars actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price of those securities but are included with the net realized and unrealized gain or loss on investments. C. Forward Foreign Currency Contracts The Portfolio enters into forward foreign currency contracts (contracts) for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific investment transactions (settlement hedges) or portfolio positions (portfolio hedges). All contracts are marked to market daily at the applicable exchange rates, and any resulting unrealized gains or losses are recorded in the Portfolio's financial statements. The Portfolio records realized gains and losses at the time a portfolio hedge is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. At June 30, 2005, 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. 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. The tax character of current year distributions will be determined at the end of the current fiscal year. - --------------------------------------------------------------------------------
2004 - -------------------------------------------------------------------------------- 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 shares as of trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the principal 13 PIONEER VARIABLE CONTRACTS TRUST Pioneer Value VCT Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- underwriter for the Trust and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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 the 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 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 June 30, 2005, $361 was payable to PIM related to management fees, administrative fees and certain other services, and is included in due to affiliates. Through May 1, 2006, 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 June 30, 2005, 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 $254 in transfer agent fees payable to PIMSS at June 30, 2005. 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 $97 payable to PFD at June 30, 2005. 5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $13,093,400 $1,089,146 $(307,150) $781,996 ----------- ---------- ---------- --------
- -------------------------------------------------------------------------------- 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 six months ended June 30, 2005, were $5,433,142 and $2,226,577, respectively. 14 PIONEER VARIABLE CONTRACTS TRUST Pioneer Value VCT Portfolio - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: - --------------------------------------------------------------------------------
'05 Shares '05 Amount Value Portfolio (unaudited) (unaudited) '04 Shares '04 Amount - --------------------------------------------------------------------------------------- CLASS II: Shares sold 261,442 $3,475,509 683,440 $8,460,112 Reinvestment of distributions 7,797 104,862 353 4,364 Shares repurchased (13,661) (181,496) (12,576) (154,122) ------- ---------- ------- ---------- Net increase 255,578 $3,398,875 671,217 $8,310,354 ------- ---------- ------- ----------
15 PIONEER VARIABLE CONTRACTS TRUST Pioneer Value VCT Portfolio - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one year and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objective and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's performance 16 PIONEER VARIABLE CONTRACTS TRUST Pioneer Value VCT Portfolio - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- compared to both the performance of a peer group and the results of an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance record was too short to compare the fund's performance record on a quintile basis to a peer group. While strong in absolute terms, the Fund had underperformed relative to the index and peer group during the life of the Fund period. The Trustees concluded that, given the short performance record of the Fund, the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee was in the fifth quintile for the 12 months ended June 30, 2004 relative to the management fees paid by the other funds in that peer group for the comparable period. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees also evaluated the fee relative to the median fee of the peer group. In light of the tight range of fees in the peer group, the Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio (both before and after expense limitation) for the 12 months ended June 30, 2004 and expense ratios for the comparable period of an applicable peer group of funds. The Fund's expense ratio (both before and after expense limitation) was in the fifth quintile of the applicable peer group for the most recent fiscal year of the peer group. The Trustees concluded that the Fund's overall expense ratio, although higher than the peer group, was reasonable compared to that of most of the comparably sized funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, a 17 PIONEER VARIABLE CONTRACTS TRUST Pioneer Value VCT Portfolio - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- break point in the management fee was not necessary. The Trustees will continue to evaluate annually the appropriateness of break points. H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 18 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 19 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 20 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 21 [Logo] Pioneer Investments(R) Pioneer Variable Contracts Trust Of f icers John F. Cogan, Jr., President Osbert M. Hood, Executive Vice President Vincent Nave, Treasurer Dorothy E. Bourassa, Secretary Christopher J. Kelley, Assistant Secretary David C. Phelan, Assistant Secretary Mark E. Bradley, Assistant Treasurer Luis I. Presutti, Assistant Treasurer Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Trustees John F. Cogan, Jr., Chairman David R. Bock Mary K. Bush Margaret B.W. Graham Osbert M. Hood Marguerite A. Piret Stephen K. West John Winthrop Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Offering Legend Please consider the Portfolio's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. [LOGO} PIONEER Investment(R) 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 SEMIANNUAL REPORT Pioneer Balanced VCT Portfolio June 30, 2005 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 37 Pioneer International Value VCT Portfolio 39 Pioneer Small Cap Value VCT Portfolio 43 Pioneer Small Company VCT Portfolio 47 Pioneer Mid Cap Value VCT Portfolio 51 Pioneer Growth Shares VCT Portfolio 55 Pioneer Real Estate Shares VCT Portfolio 57 Pioneer Fund VCT Portfolio 58 Pioneer Equity Income VCT Portfolio 62 Pioneer Balanced VCT Portfolio 65 Pioneer High Yield VCT Portfolio 73 Pioneer Strategic Income VCT Portfolio 79 Pioneer America Income VCT Portfolio 90 Pioneer Money Market VCT Portfolio 95 Financial Statements 106 Notes to Financial Statements 120 Factors Considered by the Independent Trustees in Approving the Management Contract 137
PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- LETTER TO SHAREOWNERS 6/30/05 - -------------------------------------------------------------------------------- Dear Shareowner, The U.S. economy has expanded at an annualized rate of at least three percent for eight straight quarters, a feat it last achieved in the 1980s. Job conditions are strengthening as well: by mid-year, the unemployment rate had fallen to 5.0% for the first time since September 11, 2001. Retail sales trends - - apart from automobiles - were upbeat as sunnier employment prospects sent consumers to the malls. And with the economy expanding, corporate profits have been moving ahead smartly. But equity investors were unconvinced by this evidence and instead brooded about the possibility of slowing growth later in the year. For one thing, expectations were for a moderating pace of profit growth. For another, the Federal Reserve Board has raised short-term interest rates nine times. And some areas of the economy are feeling the impact of record high energy prices. So investors were lukewarm toward stocks, with modest losses in the S&P 500 Stock Index and the Dow Jones Industrials the result. The technology-heavy NASDAQ Composite also slid, as did small-company stocks, as measured by the Russell 2000 Index. Value stocks, viewed as less vulnerable to declines in a less robust economy, held up better than growth. Corporate bonds felt the sting of ratings downgrades in the automobile sector. Treasury issues fared better, as yields fell and prices rose among intermediate and longer-term issues, which were little affected by rising short-term rates. Low long-term yields may signal investor confidence that the Fed will succeed in dousing inflationary fires; they also brought more affordable mortgages, further boosting home construction. Municipal revenue bonds edged upward as healthier economic conditions bolstered tax collections. The dollar's rebound positively affected foreign markets. Europe's stock markets performed better than business and political conditions might suggest, and Japan's market inched higher. Pioneer's analysts believe that, although the rate of growth may slow, carefully selected, good quality stocks and bonds have the potential to deliver solid results. Our global investment experts are well positioned to discover what we believe are attractive opportunities in the world's markets. Large or small? Bonds or stocks? Domestic or international? Just what your mix of investments should be isn't a question to be taken lightly. Much of your long-term return will depend on the kinds of investments you own, not just the individual items in your portfolio. For an analysis of your holdings and some ideas to help bring your investments in line with your aspirations, talk to your financial professional. Please consider a portfolio's investment objective, risks, charges and expenses carefully before investing. The prospectus contains this and other information about each portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information, contact your financial advisor, call 1-800-688-9915 or visit our web site at www.pioneerfunds.com. 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 beneficial owner of one or more Portfolios, you incur two types of costs: (1) transactions costs, including sales charges (loads) at the time of purchase and redemption fees upon redemption of your shares, and (2) ongoing costs including management fees and other Portfolio expenses. The examples below are based on investment of $1,000 at the beginning of the period and held for the entire period (January 1, 2005 - June 30, 2005). These examples are intended to help you understand your ongoing costs (in dollars), of investing in a Portfolio and to compare these costs to investing in other variable annuity portfolios. 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 each Portfolio. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other variable annuities. 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 variable annuities. In addition, if these transaction costs were included, your costs would have been higher.
Class I Shares --------------------------------------------------- Beginning Ending Account Account Expenses Paid Value Value During Period 1/1/05 6/30/05 (1/1/05 - 6/30/05) - -------------------------------------------------------------------------------------------------- Pioneer Emerging Markets VCT Portfolio Actual $ 1,000.00 $ 1,054.40 $ 8.86 Hypothetical (a) $ 1,000.00 $ 1,016.17 $ 8.70 Pioneer Europe VCT Portfolio Actual $ 1,000.00 $ 985.90 $ 7.39 Hypothetical (a) $ 1,000.00 $ 1,017.36 $ 7.50 Pioneer International Value VCT Portfolio Actual $ 1,000.00 $ 961.90 $ 7.69 Hypothetical (a) $ 1,000.00 $ 1,016.96 $ 7.90 Pioneer Small Cap Value VCT Portfolio Actual $ 1,000.00 $ 1,016.80 $ 6.10 Hypothetical (a) $ 1,000.00 $ 1,018.74 $ 6.11 Pioneer Small Company VCT Portfolio Actual $ 1,000.00 $ 969.70 $ 6.10 Hypothetical (a) $ 1,000.00 $ 1,018.60 $ 6.26 Pioneer Mid Cap Value VCT Portfolio Actual $ 1,000.00 $ 1,043.00 $ 3.54 Hypothetical (a) $ 1,000.00 $ 1,021.27 $ 3.50 Pioneer Growth Shares VCT Portfolio Actual $ 1,000.00 $ 977.60 $ 4.71 Hypothetical (a) $ 1,000.00 $ 1,020.03 $ 4.81
2 PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Class I Shares --------------------------------------------------- Beginning Ending Account Account Expenses Paid Value Value During Period 1/1/05 6/30/05 (1/1/05 - 6/30/05) - ------------------------------------------------------------------------------------------------- Pioneer Real Estate Shares VCT Portfolio Actual $ 1,000.00 $ 1,068.60 $ 5.08 Hypothetical (a) $ 1,000.00 $ 1,019.89 $ 4.96 Pioneer Fund VCT Portfolio Actual $ 1,000.00 $ 993.20 $ 3.51 Hypothetical (a) $ 1,000.00 $ 1,021.27 $ 3.56 Pioneer Equity Income VCT Portfolio Actual $ 1,000.00 $ 1,019.60 $ 3.66 Hypothetical (a) $ 1,000.00 $ 1,021.17 $ 3.66 Pioneer Balanced VCT Portfolio Actual $ 1,000.00 $ 1,000.70 $ 4.66 Hypothetical (a) $ 1,000.00 $ 1,020.13 $ 4.71 Pioneer High Yield VCT Portfolio Actual $ 1,000.00 $ 992.90 $ 3.95 Hypothetical (a) $ 1,000.00 $ 1,020.83 $ 4.01 Pioneer Strategic Income VCT Portfolio Actual $ 1,000.00 $ 1,016.70 $ 4.45 Hypothetical (a) $ 1,000.00 $ 1,020.38 $ 4.46 Pioneer America Income VCT Portfolio Actual $ 1,000.00 $ 1,019.40 $ 4.06 Hypothetical (a) $ 1,000.00 $ 1,020.78 $ 4.06 Pioneer Money Market VCT Portfolio Actual $ 1,000.00 $ 1,009.60 $ 3.59 Hypothetical (a) $ 1,000.00 $ 1,021.22 $ 3.61
(a) reflecting 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 181/365 (to reflect the one-half year period.)
Annualized Expense Ratio - ------------------------------------------------------------ Pioneer Emerging Markets VCT Portfolio 1.74% Pioneer Europe VCT Portfolio 1.50% Pioneer International Value VCT Portfolio 1.58% Pioneer Small Cap Value VCT Portfolio 1.22% Pioneer Small Company VCT Portfolio 1.25% Pioneer Mid Cap Value VCT Portfolio 0.70% Pioneer Growth Shares VCT Portfolio 0.96% Pioneer Real Estate Shares VCT Portfolio 0.99% Pioneer Fund VCT Portfolio 0.71% Pioneer Equity Income VCT Portfolio 0.73% Pioneer Balanced VCT Portfolio 0.94% Pioneer High Yield VCT Portfolio 0.80% Pioneer Strategic Income VCT Portfolio 0.89% Pioneer America Income VCT Portfolio 0.81% Pioneer Money Market VCT Portfolio 0.72%
3 Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- Portfolio Diversification (As a percentage of total investment portfolio) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
International Common Stocks 66.4% Depositary Receipts for International Stocks 23.2% Temporary Cash Investment 5.1% U.S. Common Stocks 3.3% International Preferred Stocks 2.0%
Geographical Distribution (As a percentage of equity holdings) {DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
South Korea 21.1% Brazil 14.7% Taiwan 12.3% India 8.9% South Africa 8.9% People's Republic of China 4.0% Turkey 3.9% Mexico 3.8% Russia 3.4% Thailand 3.1% Indonesia 3.0% Malaysia 2.7% Israel 1.5% Peru 1.3% Hong Kong 1.1% Argentina 1.0% Other (individually less than 1%) 5.3%
Five Largest Holdings (As a percentage of equity holdings) - ------------------------------------------------------------- 1. Petrobras Brasileiro (A.D.R.) 5.37% - ------------------------------------------------------------- 2. Samsung Electronics 4.12 - ------------------------------------------------------------- 3. Fomento Economico Mexicano SA de CV 1.73 - ------------------------------------------------------------- 4. Anglogold Ashanti, Ltd. (A.D.R.) 1.72 - ------------------------------------------------------------- 5. Anglo American Platinum Corp., Ltd. 1.57 - -------------------------------------------------------------
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 21.47 $ 20.48 Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.1249 $ - $ -
- -------------------------------------------------------------------------------- Performance of a $10,000 Investment The following chart shows the change in value of an investment made in Pioneer Emerging Markets VCT Portfolio at net asset value, compared to that of the Morgan Stanley Capital International (MSCI) Emerging Markets Index. Portfolio returns are based on net asset value and do not reflect any applicable insurance fees or surrender charges. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Pioneer MSCI Emerging Emerging Markets VCT Markets Portfolio Index 10/98 10,000 10,000 14,120 14,931 17,323 16,347 6/01 11,777 12,127 12,194 12,287 6/03 13,062 13,141 17,019 17,540 6/05 22,451 23,659
The Morgan Stanley Capital International (MSCI) Emerging Markets Index measures the performance of emerging market stocks. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. - -------------------------------------------------------------------------------- Average Annual Total Returns (As of June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 12.90% (10/30/98) 5 Years 5.32% 1 Year 31.91%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- In the following interview, Christopher Smart and Sam Polyak, Pioneer Emerging Market VCT Portfolio's portfolio managers, discuss the factors that influenced performance during the six months ended June 30, 2005. Q. How did emerging markets equities perform during the Portfolio's semiannual reporting period? A. The asset class outpaced the developed markets amid an environment of steady worldwide growth, falling long-term interest rates, and strong commodity prices. Emerging markets equities performed very well in the first two months of the reporting period, but the investment environment turned more challenging in March. As continued high oil prices triggered fears of rising inflation and more aggressive interest rate hikes by the U.S. Federal Reserve, heightened risk aversion among investors led to a decline in most global equities markets. Emerging markets stocks quickly recovered, however, posting a strong return in the April through June period. Q. How did the Portfolio perform? A. For the six months ended June 30, 2005, Class I shares returned 5.44% at net asset value. We are pleased to report that the Portfolio outpaced the 4.24% return of the Morgan Stanley Capital International (MSCI) Emerging Markets Index during the 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. Did this shifting environment affect the way you managed the Portfolio? A. On the margin, yes. Although we generally buy stocks with a 12-18 month time horizon, we will sell them if we think that market excesses have driven them much above their intrinsic values. We therefore established a more conservative positioning in late February following several months of strong performance for emerging markets stocks. We reduced exposure to more volatile markets, such as India and Brazil, which helped performance when the global stock markets weakened during March and April. When the sell-off caused many of our favored companies to fall back into more attractive valuation ranges, we took advantage of the situation by adding them to the Portfolio. Specifically, we increased exposure to stocks that can benefit from the recovery of domestic consumption in countries such as Korea. We also increased our holdings in select technology stocks that were showing signs of improving sales growth. Q. What elements of the Portfolio's positioning affected performance? A. Our stock selection in Korea and Brazil, which are among the Portfolio's top country weightings, was helpful to performance. In Brazil, we benefited from positions in Natura Comesticos, which sells cosmetics door-to-door, and the retail banking concern Unibanco, which enjoyed a strong resurgence in lending. Our holdings in Korean shipbuilding stocks such as Daewoo Shipbuilding and Samsung Heavy were helpful as the demand for new ships continued to grow. Two utilities also contributed to performance: Samchully, which distributes natural gas to a growing number of households in Korea, and Korean Electric Power, which benefited as a recovery in the Korean currency helped reduce its foreign debt burden. Our position in Russian oil stocks was the largest detractor from performance. While the Russian economy continues to grow rapidly and benefit from high global oil prices, the government's aggressive efforts to dismantle the oil giant Yukos dealt a severe blow to investor sentiment. This led to a drop in Russian stocks, and the Portfolio's positions in Gazprom, Lukoil, and Surgutneftegaz underperformed. Performance also was hurt by our holdings in Thailand, which suffered from rising interest rates and a subsequent slowdown in the economy, affecting holdings such as Siam Cement and Siam Commercial Bank. Q. What is your overall view of the asset class, and where are you finding the most compelling opportunities? A. We retain a positive view on emerging markets. We believe the U.S. Federal Reserve will continue to raise interest rates, but not fast enough to significantly dampen growth in our markets. We also believe growth in China, while likely to slow somewhat, will not suffer the collapse that some investors fear. Additionally, the price-to-earnings (p/e) ratio of the MSCI Emerging Markets Index is about 60% of the developed markets p/e ratio, despite the fact that earnings growth is actually stronger in many emerging markets. These factors, in combination, should provide a positive underpinning for the asset class. Overall, we remain confident that our disciplined investment approach, which incorporates the analysis of both countries and individual companies, will help the Portfolio to take advantage of the positive long-term trends unfolding in many emerging markets. 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 Europe VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- Sector Distribution (As a percentage of total investment portfolio) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
International Common Stocks 98.5% International Preferred Stocks 1.5%
Geographical Distribution (As a percentage of equity holdings) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
United Kingdom 25.2% France 25.1% Switzerland 14.8% Germany 13.0% Spain 6.3% Netherlands 6.0% Sweden 2.5% Italy 2.5% Ireland 2.0% United States 1.0% Finland 0.8% Austria 0.8%
Five Largest Holdings (As a percentage of equity holdings) - ---------------------------------------------------------------- 1. Vodafone Group Plc 4.74% - ---------------------------------------------------------------- 2. Total SA 4.20 - ---------------------------------------------------------------- 3. Royal Bank of Scotland Group Plc 4.03 - ---------------------------------------------------------------- 4. BNP Paribas SA 3.80 - ---------------------------------------------------------------- 5. Societe Generale 3.54 - ----------------------------------------------------------------
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 10.42 $ 10.64 Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.0703 $ - $ -
- -------------------------------------------------------------------------------- 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. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Pioneer MSCI Europe VCT Europe Portfolio Index 10/98 10,000 10,000 10,426 10,728 13,341 12,348 6/01 8,883 9,663 8,179 8,918 6/03 7,589 8,452 9,393 10,891 6/05 10,827 12,730
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 1.20% (10/30/98) 5 Years -4.09% 1 Year 15.28%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 Europe VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- European stocks achieved solid gains early in 2005, but investors' concerns about high oil prices and corporate profitability this spring contributed to mixed performance results for the first half of the Europe VCT Portfolio's fiscal year. In the discussion below, Stan Pearson, who is responsible for the day-to-day management of the Portfolio, highlights these and other factors that influenced performance. Q. How did the Portfolio perform? A. For the six months ended June 30, 2005, Class I shares returned -1.41% at net asset value. In comparison, the Morgan Stanley Capital International (MSCI) Europe Index, the Portfolio's benchmark, posted a return of -0.38%. Bank holdings, particularly Royal Bank of Scotland, were a major factor in the Portfolio's underperformance relative to its benchmark. Investments in Royal Bank of Scotland underperformed during the first quarter of the year as a result of investor concerns about a potential slowdown in consumer spending and the housing market in the United Kingdom. We continue to hold this stock, because we believe the company still offers strong growth potential, is benefiting from its diversified business and has attractive valuations supported by high dividend yield. Royal Bank of Scotland gained during the second quarter, erasing some of its first quarter losses. The performance data quoted represents past performance, which is no guarantee 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. Did currency fluctuations have a material effect on performance? A. Yes. The euro weakened versus the U.S. dollar over the six-month period. In the first quarter, the stronger dollar was supported by expectations that its decline in recent years would help reduce the U.S. current account deficit. The dollar also gained as investors began to price in a faster-than-expected pace of monetary tightening by the Federal Reserve to ward off inflationary pressures. In the second quarter, the rejection of the proposed European Union constitution by French and Dutch voters sparked uncertainty among market participants about future economic integration in Europe and put downward pressure on the euro versus the dollar. For U.S. investors investing in euro-denominated investments, the decline in the euro's value hurt Portfolio performance when returns were translated back into dollar-denominated terms. Q. Which stocks positively influenced the Portfolio's performance? A. An overweight position and effective stock selection in the diversified financials sector proved positive. Deutsche Boerse (Germany) was a positive contributor. During the first quarter of 2005, the stock recovered strongly after withdrawing its bid for the London Stock Exchange. We sold the entire position in the company in March to profit from the price appreciation. Successful stock selection in the technology hardware sector also was a positive contributor. We added Ericsson (Sweden) to the Portfolio, which outperformed for the six months, and decided against owning the French stock Alcatel, which was favorable, since the stock lost ground for the six-month period. Ericsson, which is undervalued in our opinion, is the top telecommunications equipment producer for mobile phones and should benefit with the transition from second to third generation mobile telephony in Europe. Our positions in pharmaceutical companies Astrazeneca and Sanofi-Aventis outperformed thanks to some positive news on potential earnings growth. The energy sector was supported by high oil prices, which climbed to over $60 per barrel. Q. Did you add any new holdings? A. We found several new investment opportunities. In the automobile sector, we added Continental (Germany) based on its compelling price valuation and our expectation that the company will increase earnings as its new car safety system, the Electronic Stability Program, penetrates the U.S. market. Synthes (Switzerland), which develops and produces medical products for orthopedic surgery, is well positioned to benefit from a growing market. We think Swiss Re (Switzerland), a reinsurance company, offers an attractive growth opportunity. The outlook for the stock is supported by our view that the reinsurance cycle appears relatively stable at this time. We also added Telekom Austria, as the company is creating attractive growth opportunities in Eastern Europe. Among the Portfolio's holdings sold were Allied Irish Banks and Depfa Bank (Germany), HSBC Holding (U.K.), Fortis (Benelux) and Assicurazioni Generali (Italy), because the stocks had reached the price targets set by the portfolio management team. In the telecoms sector, we sold Belgacom, which had been a good performer since its initial offering in March 2004. Q. What is your outlook? A. Despite a challenging macroeconomic growth outlook, we remain upbeat about the European investment environment. Price valuations are quite reasonable and are already discounting the moderate economic outlook. Dividend yields are high and some have the potential to increase thanks to strong cash generation. We also think the supportive stance by the European Central Bank, which held interest rates at 2% during the period, is beneficial for equities and economic growth. 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 International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- Portfolio Diversification (As a percentage of total investment portfolio) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
International Common Stocks 88.6% Temporary Cash Investment 4.9% Depositary Receipts for International Stocks 3.3% U.S. Common Stocks 2.7% International Preferred Stocks 0.5%
Geographical Distribution (As a percentage of equity holdings) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
Japan 24.6% France 17.5% United Kingdom 16.5% Switzerland 10.4% Germany 6.3% Spain 5.5% Italy 3.7% Netherlands 3.4% South Korea 3.1% Brazil 1.2% Mexico 1.2% United States 1.1% Ireland 1.0% Singapore 1.0% Other (individually less than 1%) 3.5%
Five Largest Holdings (As a percentage of equity holdings)
- ------------------------------------ 1. Total SA 2.82% - ------------------------------------ 2. Vodafone Group Plc 2.57 - ------------------------------------ 3. Toyota Motor Co. 2.28 - ------------------------------------ 4. UBS AG 2.13 - ------------------------------------ 5. France Telecom SA 2.05 - ------------------------------------
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 11.41 $ 11.88 Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.0178 $ - $ -
- -------------------------------------------------------------------------------- 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. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Pioneer International MSCI AC Value VCT Wld FR USA Portfolio Index 6/95 10,000 10,000 11,433 11,317 6/97 13,405 12,917 12,437 13,096 6/99 12,531 14,343 15,879 16,941 6/01 10,941 12,905 10,088 11,852 6/03 9,229 11,354 11,692 15,044 6/05 12,897 17,598
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- 10 Years 2.58% 5 Years -4.07% 1 Year 10.31%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- During the six months ended June 30, 2005, international stocks produced mixed results. Fears of higher interest rates sparked inflation worries and tempered investors' appetite for risk. In the following interview, Portfolio Manager Christopher Smart discusses the changing sentiment and other factors that influenced the Portfolio's performance. Q. How did the Portfolio perform? A. For the six months ended June 30, 2005, Class I shares returned -3.81%, at net asset value. Investments in Japan proved to be the biggest disappointment and contributed to the Portfolio's underperformance relative to the Morgan Stanley Capital International (MSCI) All Country World Free Index, which rose 0.32%. Not only did the Japanese market underperform other global markets, but our stock selection in Japan also detracted from the Portfolio's absolute return. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Economic data released this spring suggested that Japanese economic growth had slowed slightly, which prompted economists to postpone their outlook for a broader recovery to the second half of 2005. In addition, rising interest rates in the United States helped trigger an 8.1% weakening in the yen during the six-month period, which dealt a further blow to the value of some of our stocks in dollar terms. Holdings in banking groups Sumitomo Trust and Banking and UFJ Holdings suffered as a result, although we remain confident about their prospects, because we anticipate loan growth will climb as demand picks up again. Another investment, Kajima, which makes prefabricated homes, also lagged during the period, but we still think its exposure to the housing industry should improve as consumers start to spend again. Finally, a mixed picture for technology exporters hurt our holding in Konica Minolta, which sells cameras and other photography equipment worldwide. Their global sales prospects in addition to our growing concerns about the company's restructuring efforts led us to sell the stock. While several Japanese holdings lagged, some stocks proved quite rewarding. For instance, the Portfolio's investments in OSG, which sells drilling and machine tools to the automobile industry, did very well. OSG's future looks strong in our estimation, especially given its sales to Toyota, which is one of the fastest growing automobile manufacturers in the world. Q. Has your view of investing in Europe changed in response to the French and Dutch rejection of the proposed European Union constitution? A. No. It is true that the No vote in France and the Netherlands may well cause concern for the pace of European integration and the overall management of the European economy. However, we have always taken a company-by company approach to investing in the European continent. Political and economic issues play into our analysis on some level, but they generally take a back seat to a company's fundamentals and its strategy against its competition. ACS Actividades (Spain), Vinci (France) and Deutsche Boerse, (Germany) performed well during the six-month period. Q. Did investments in emerging markets contribute positively to performance? A. Yes. Three holdings were particularly noteworthy. Grupo Televisa is the dominant Mexican broadcaster and has successfully increased its advertising rates and sales volume amidst the Mexican economic recovery. Unibanco, Brazil's third largest bank, has one of the largest retail networks in the country and has experienced significant loan growth with the domestic economic recovery. Finally, Kookmin Bank is one of the largest banks in South Korea and has recovered nicely from the high default rate of credit card holders in 2003. While emerging market holdings proved to be a plus overall, they did encounter some headwind in March, when inflationary fears shook investors' confidence. In anticipation of some uncertainty ahead, we scaled back some of the Portfolio's emerging market holdings, which had appreciated considerably. Our outlook for Turkey was also affected by the voting on the European constitution, which raised doubts about its candidacy to join the European Union. We sold four holdings - Norilsk Nickel (Russia), Turkcell Iletism Hizmet (Turkey), Brazil Telecom and Unibanco - to lock in their strong price gains and reduce the Portfolio's risk exposure. While we limited investments in those more volatile markets, we continue to believe their low valuations and strong growth potential provide important opportunities. During the decline, many emerging market stocks became attractively priced relative to their long-term earnings potential. As a result, we added Petrobras, the Brazilian oil giant. Q. What is your outlook? A. We became somewhat more defensive earlier this year, most notably in emerging markets. While the current market sentiment remains nervous, we believe that inflationary fears are probably excessive, given the prospects this year of a muted growth outlook in the United States. While foreign stocks may face temporary headwinds in the face of a recovering U.S. dollar, the long-term outlook for international markets remains attractive, especially given their relatively low stock prices. 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 Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- 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 75.7% Temporary Cash Investment 19.2% Depositary Receipts for International Stocks 2.6% International Common Stocks 1.9% Exchange Traded Fund 0.6%
Sector Distribution (As a percentage of equity holdings) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
Financials 28.8% Industrials 18.7% Energy 13.8% Consumer Discretionary 10.3% Health Care 10.0% Information Technology 8.4% Consumer Staples 3.8% Materials 3.3% Utilities 2.7% Telecommunication Services 0.2%
Five Largest Holdings (As a percentage of equity holdings) - ------------------------------------------------- 1. Insight Enterprises, Inc. 2.11% - ------------------------------------------------- 2. Sterling Bancshares, Inc. 1.84 - ------------------------------------------------- 3. Southwestern Energy Co. 1.83 - ------------------------------------------------- 4. Nu Skin Enterprises, Inc. 1.82 - ------------------------------------------------- 5. Texas Capital Bancshares, Inc. 1.79 - -------------------------------------------------
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 14.78 $ 15.02 Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ - $ - $ 0.4861
- -------------------------------------------------------------------------------- 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. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Pioneer Small Cap Russell Value VCT 2000 Value Portfolio Index 11/05 10,000 10,000 11,061 11,383 6/01 10,078 10,950 13,133 14,802 6/03 14,858 16,930
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 12.35% (11/8/01) 1 Year 13.13%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- In the following discussion, portfolio manager David Adams and assistant portfolio manager Jack McPherson review the economic background and describe some of the factors that influenced Pioneer Small Cap Value VCT Portfolio's performance. Q. How did the Portfolio perform over this period? A. For the six months ended June 30, 2005, Class I shares of the Portfolio returned 1.68% at net asset value. In comparison, the Russell 2000 Value Index, the Portfolio's benchmark returned 0.90%. The performance data quoted represent past performance, which is no guarantee 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 market conditions for the period and how they affected small-company stocks. A. After a strong rally in last year's fourth quarter, U.S. equity markets ran into stiff headwinds during the first weeks of 2005. Trends were erratic for the rest of the period, with declines in January and April offsetting upswings in March and May. The changing environment for equities, with interest rates rising and oil prices setting records, led investors to favor larger-cap issues. That more cautious approach interrupted a long stretch of small-cap outperformance. Within the small-cap universe, value issues continued to prevail over growth. Q. Which areas of the Portfolio had a favorable impact on results? A. As has been true for some time, holdings in the health care, energy and financial services sectors contributed positively to Fund returns. Chemed, best-known for its Roto-Rooter business, rose sharply, thanks to strong results at its Vitas division, the nation's largest hospice care company; new regulations favor home-based hospice treatment for terminally ill patients. PacifiCare also played a big role in performance, as the government moved more Medicare beneficiaries to managed care plans. We trimmed holdings of Chemed and PacifiCare as valuations rose. The June acquisition of Provident Senior Living by Ventas, another senior living real estate investment trust, also boosted results. Pediatrix, which specializes in care for premature and very ill newborns, continued to perform well. Shares of the NASDAQ Stock Market rose in anticipation of its purchase of Instinet, an electronic exchange serving institutional investors. NASDAQ, led by an effective new CEO, continues to trim costs and take market share from competitors, including the New York Stock Exchange. Apollo Investment also added to returns. Apollo offers specialized financing for small- to mid-sized businesses that face difficulty in raising capital from traditional sources during periods of higher interest rates. Rising energy prices and favorable drilling developments extended the run of good results at Southwestern Energy. Gulfmark Offshore, which runs supply vessels for drillers in the North Sea, also benefited from increased energy demand. TODCO, whose contract rigs operate in the Gulf of Mexico, took advantage of higher oil prices to raise fees. We sold out of our position in Joy Global Equipment, which manufactures machinery and equipment for coal mining and other extractive industries. Jarden, a niche consumer products company, also delivered solid returns. Jarden acquires and refurbishes consumer brands - examples include First Alert, Coleman Outdoor and Mr. Coffee - that have been poorly managed or marketed, then distributes them through its well-established network. Q. What areas held back performance? A. Reluctance by corporations to invest in technology pressured Borland Software, as disappointing earnings brought a sharp decline in the company's shares. Borland, which designs enterprise software applications, enjoys strong brand recognition and continues to generate cash. Any recovery in tech spending would present an opportunity for Borland to implement its new business strategies. Hancock Fabrics has suffered from slow sales of sewing and home decor products as well as from unsuccessful merchandising strategies. A dividend reduction and poor year-over-year sales comparisons also drove down shares. We are awaiting evidence of a possible turnaround as a new management team works to address shortcomings. Two financial companies also disappointed. Quanta Capital, a start-up property and casualty insurance company, was hit by exceptionally large claims during last year's Florida hurricanes. The cost of building corporate infrastructure was another negative. Shares recently traded below book value, and we believe valuation will improve as the business matures and Quanta puts earlier losses behind it. Minneapolis-based brokerage Piper Jaffray's shares fell when first quarter earnings showed the impact of sluggishness in capital markets. Piper is working to bring costs in line and may restructure by consolidating divisions or selling business units. Slowing demand and weak pricing for newsprint drove down shares of Domtar, a Canadian paper company. In addition, the strong Canadian dollar hurt sales to the United States. Shares of GrafTech International were negatively impacted when the company increased prices for their graphite electrodes and volumes fell, disappointing investors. Q. What is your outlook for the economy and the markets, and how have you positioned the Portfolio? A. Although we anticipate continued economic expansion, repeated hikes in interest rates and mounting energy costs may be slowing the rate of U.S. economic growth. For that reason, we remain focused on companies that we think can do well without the impetus of a rapidly growing economy. We continue to see positive long-term prospects for the health care and energy sectors, but are attuned to expanded valuations in both areas. A moderating economy is not ideal for technology, but we are emphasizing solidly grounded companies in that sector that can perform well under a slower-growth scenario. Among financial issues, we favor diversified financial companies as well as commercial banks that stand to benefit from increased business activity. Our selection process often leads us to good companies that the market has ignored. The process also allows us to be patient in challenging times and to take advantage of undervalued equities when we find them. 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 Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- 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 89.2% Temporary Cash Investment 10.3% International Common Stocks 0.5%
Sector Distribution (As a percentage of equity holdings) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
Financials 21.0% Information Technology 16.1% Industrials 14.8% Health Care 14.2% Consumer Discretionary 14.1% Energy 7.0% Materials 5.9% Consumer Staples 3.1% Utilities 3.0% Telecommunication Services 0.8%
Five Largest Holdings (As a percentage of equity holdings) - ------------------------------------------------- 1. Swift Transportation Co., Inc. 1.63% - ------------------------------------------------- 2. Forest Oil Corp. 1.47 - ------------------------------------------------- 3. Ruby Tuesday, Inc. 1.36 - ------------------------------------------------- 4. Stage Stores, Inc. 1.31 - ------------------------------------------------- 5. Arris Group, Inc. 1.18 - -------------------------------------------------
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 11.29 $ 12.97 Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ - $ - $ 1.2777
- -------------------------------------------------------------------------------- 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. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Pioneer Russell Small Company 2000 VCT Portfolio Index 1/01 10,000 10,000 11,215 10,156 10,577 9,283 6/03 9,362 9,132 11,630 12,177 6/05 12,039 13,328
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 5.30% (1/19/01) 1 Year 3.51%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- Co-managers Diego Franzin and Michael Rega describe conditions in the small-company universe for the first half of the year, and the stocks that affected the Portfolio's performance. Q. How did Pioneer Small Company VCT Portfolio perform over this period? A. For the six months ended June 30, 2005, the Portfolio returned -3.03% at net asset value. The result trailed the Portfolio's benchmark, the Russell 2000 Index, which returned -1.25% over the same period. The performance data quoted represent past performance, which is no guarantee 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. Small-capitalization issues, after a long climb during which they outperformed large-cap issues, reached valuation levels that many found uncomfortable at a time of moderating economic growth. As a result, small caps took a breather during the first half of the year, with growth issues declining more than value, based on the performance of Russell 2000 Value and Growth indices, respectively. Q. What stocks or sectors contributed to performance? A. Our style is to keep sector allocations closely aligned with those of our benchmark. For that reason, sector over- and underweightings play little role in the Portfolio's relative performance. In energy, the market's strongest sector, Forest Oil is restructuring successfully as new leadership moves to dispose of high risk/high reward properties and replace them with properties where risk is more favorably balanced with potential rewards. Benefits of the new strategy are evident in strong operating results. Administaff provides human-resources software to small and medium-sized businesses, relieving managers of burdensome administrative and regulatory paperwork. We had acquired shares at favorable valuations and took profits when our goals for the holding were largely realized. We also took profits in Netflix, an online DVD rental service. In our opinion, the entry of Blockbuster into the market, with its ability to integrate video stores and mail-in service, poses a serious competitive threat to Netflix. A rise in shares of Aeropostale also contributed to results. The retailer provides branded merchandise to fashion-conscious 11-18 year olds. We expect continued favorable earnings in upcoming quarters. In addition, the company is testing a new store concept, targeting customers as they move into their early twenties. Stage Stores continues to rebound after emerging from bankruptcy and rehiring a former CEO. The company, which operates Bealls, Peebles and other retail chains, sells quality, nationally branded goods in smaller cities where Wal-Mart (not in the portfolio) has not succeeded with its lower-tier offerings. Growth is now proceeding at a controlled pace. Q. Which of the Portfolio's holdings hurt results? A. Boston Communications Group fell dramatically when a court ordered it to pay sizeable damages to a competitor. At issue was an allegation of patent infringement in BCGI's online service for adding minutes to pay-as-you-go mobile phones. We exited the stock, a long-time holding, at a loss, and shares have declined substantially since. We also took a loss in Able Laboratories, which fell sharply when the company found deviations from standardized procedures in the manufacture of its products. Able has recalled all outstanding inventory and ceased manufacturing operations pending review. And we eliminated Rewards Network, a marketer of discount dining and hotel programs and another long-standing holding. Subscriber losses continue, and investor confidence in the company has waned. Q. What is your outlook for the rest of 2005? A. While higher interest rates and energy prices may eventually press harder on the economic brakes, for now the U.S. economy is expanding, albeit at a moderating pace. A slow-growth economy poses challenges to small-cap investors because small stocks have historically thrived when the economy is coming out of recession or growing rapidly. Nevertheless, as we move out of stocks that have reached our targets, we are still finding attractively valued companies with growth prospects offering above-market appreciation potential. 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 Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- 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 84.7% Temporary Cash Investment 14.7% Depositary Receipts for International Stocks 0.6%
Sector Distribution (As a percentage of equity holdings) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
Consumer Discretionary 20.7% Financials 19.3% Health Care 10.3% Industrials 9.9% Utilities 8.6% Information Technology 8.4% Materials 8.1% Consumer Staples 6.9% Energy 6.0% Telecommunication Services 1.8%
Five Largest Holdings (As a percentage of equity holdings) - ------------------------------------------- 1. Foot Locker, Inc. 2.35% - ------------------------------------------- 2. BJ's Wholesale Club, Inc. 1.94 - ------------------------------------------- 3. Safeway, Inc. 1.92 - ------------------------------------------- 4. Republic Services, Inc. 1.89 - ------------------------------------------- 5. The PMI Group, Inc. 1.88 - -------------------------------------------
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 24.17 $ 24.67 Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.0771 $ 0.1221 $ 1.3647
- -------------------------------------------------------------------------------- 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. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Pioneer Mid Cap Russell Value VCT Midcap Portfolio Value Index 6/95 10,000 10,000 12,702 12,144 6/97 14,593 15,537 17,115 19,536 6/99 17,665 20,637 17,474 19,006 6/01 21,870 23,557 21,157 24,009 6/03 21,626 23,853 28,597 31,202 6/05 33,463 38,006
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- 10 Years 12.84% 5 Years 13.88% 1 Year 17.01%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- While stocks prices showed significant short-term volatility during the first six months of 2005, mid-cap value stocks tended to outperform the overall market and value stocks outpaced the performance of growth-oriented styles. In the following discussion, Rod Wright, leader of the team that manages Pioneer Mid Cap Value VCT Portfolio, discusses the factors that affected performance over the past six months. Q: How did the Portfolio perform? A. Pioneer Mid Cap Value VCT Portfolio had reasonably good performance, despite trailing its benchmark index. During the six months ended June 30, 2005, the Portfolio's Class I shares had a total return of 4.30% at net asset value, while the Russell Midcap Value Index returned 5.51%. The performance data quoted represent past performance, which is no guarantee 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 affecting Portfolio performance? A. In a generally positive period for mid-cap value stocks, performance was helped substantially by several holdings which were the subjects of merger or buyout proposals at premiums to their stock prices. Our stocks selections within consumer staples were particularly successful, followed by our holdings in information technology, industrials and the health-care sectors. Among our consumer staples holdings, retail pharmaceutical company CVS performed especially well as it surpassed earnings forecasts and successfully integrated the operations of stores acquired from the former Eckerd chain. In information technology, SunGard Data Systems was acquired by private equity investors, adding to Portfolio results. Imation, which produces data storage tapes, also contributed to performance. Avoiding any investment in Xerox turned out to be a good decision as its stock price fell. In health care, the top contributors included Triad Hospitals, whose stock appreciated from a low valuation after it showed evidence that it had strengthened its management controls, and IVAX, a generic pharmaceutical manufacturer. Although we overweighted energy stocks, which were the best-performing part of the market, performance was held back because we no longer had a position in Valero Energy, an independent oil refiner that continued to appreciate in a strong rally for the sector. We had sold our position and taken profits in Valero in 2004, but the stock continued to rise in the new year. Energy stocks that helped performance included Occidental Petroleum and Devon Energy. Among Portfolio holdings that disappointed was Symbol Technologies, which produces bar code scanners and hand-held devices used in inventory controls. Although its earnings failed to meet expectations, a new management team has taken over and we continued to hold the company because of its long-term prospects. Ball, which produces packaging such as aluminum cans for the beverage industry, was another holding that detracted from results. The biggest drags on performance, however, were our underweighting in utilities and our lack of investments in real estate investment trusts (REITs). Both industries performed very well, benefiting from the decline in long-term interest rates. We de-emphasized utilities because we thought they were overvalued, had few growth prospects, and offered low dividend yields compared to their long-term averages. We generally avoid the REIT industry. Q: What is your investment outlook? A. We think mid-cap value companies continue to be a very attractive part of the market in which to be invested. Many of these corporations have big-company strengths with the dynamic growth of smaller firms. We make our investment decisions based on our analysis of individual companies, rather than focusing on sector and industry allocations. We expect to continue to follow our long-term discipline and emphasize strong companies with attractive stock valuations, and we will maintain our focus on managing for both capital preservation and price appreciation. 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 Growth Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- 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 87.6% Depositary Receipts for International Stocks 7.1% Temporary Cash Investment 5.3%
Sector Distribution (As a percentage of equity holdings) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
Information Technology 33.1% Health Care 21.0% Consumer Discretionary 15.2% Consumer Staples 12.9% Industrials 7.8% Financials 6.7% Telecommunication Services 1.7% Energy 1.6%
Five Largest Holdings (As a percentage of equity holdings) - --------------------------------------- 1. Microsoft Corp. 5.34% - --------------------------------------- 2. Cisco Systems, Inc. 4.05 - --------------------------------------- 3. Symantec Corp. 3.70 - --------------------------------------- 4. PepsiCo, Inc. 3.31 - --------------------------------------- 5. Procter & Gamble Co. 3.15 - ---------------------------------------
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 12.65 $ 13.04 Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.0994 $ - $ -
- -------------------------------------------------------------------------------- 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. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Pioneer Growth Shares Russell VCT Portfolio 1000 Index 10/97 10,000 10,000 12,574 12,371 6/99 14,970 15,084 14,576 16,479 6/01 12,281 14,016 8,155 11,510 6/03 8,083 11,620 8,883 13,883 6/05 9,359 14,980
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class -0.86% (10/31/97) 5 Years -8.48% 1 Year 5.36%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 Growth Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- Large company growth stocks slumped early in 2005 before staging a comeback in May and June. However, the comeback was not sufficient to avoid negative results for growth stocks for the six months ended June 30, 2005. In the following interview, Christopher Galizio discusses the factors that affected the performance of Pioneer Growth Shares VCT Portfolio during the six months ended June 30, 2005. Mr. Galizio is one of the co-managers responsible for day-to-day management of the Portfolio. Q. How did the Portfolio perform during the six months ended June 30, 2005? A. Performance slightly lagged that of the large-cap growth universe, principally because of poor results from a few holdings. For the first six months of 2005, the Portfolio's Class I shares had a total return of -2.24%, while Russell 1000 Growth Index returned -1.72%, and the average return of the 670 funds in Lipper's Large Cap Growth Fund category was -1.72%. The performance data quoted represent past performance, which is no guarantee 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 affecting the Portfolio's results for the period? A. We made good sector allocations during the six months, helping to support Portfolio performance. We began 2005 with an emphasis on the cyclical sectors, notably the materials, industrials and energy areas. We saw that the economy was continuing to recover, and a number of shortages were occurring in commodity markets, including copper. After these stocks rallied in the early months of the year, we took profits and reduced our positions substantially, even eliminating the Portfolio's materials investments. We believe the share prices of many of these companies had gone higher than we thought the corporations' values merited, and we decided to sell into strong demand. We were concerned that market interest rates - which had been declining despite the tightening policies of the U.S. Federal Reserve Board - finally would begin to rise, adversely affecting cyclical stocks. Our worry about the risk of higher interest rates also prompted us to reduce our investments in consumer discretionary stocks, especially retailers. As we did this, we moved from cyclical stocks into less cyclical growth stocks, including information technology and health care. Both those sectors went from being underweighted to being emphasized over the course of the six months. In general, we believed it was time to move into companies with long-term growth prospects not dependent on cyclical movements. Q. What were some of the individual investments that helped support performance? A. Our investment in Texas Instruments was a major help to performance as it appreciated significantly, with improved earnings prospects of its semiconductors and wireless phones and the introduction of a new generation of wireless telecommunications technology. Two of our best decisions were to avoid or de-emphasize major companies that were significant parts of the Russell 1000 Growth Index. We completely avoided IBM stock, which declined by 20% during the six months. We also limited exposure to Internet auction company eBay, whose stock declined 41% over the period. Two generic drug manufacturers turned in stellar performance for the period. Both IVAX and Endo Pharmaceutical rose with the improving outlook for generic manufacturers as several major drugs were scheduled to lose their patent protection in the near future. Both firms also had company-specific issues that gave their share prices extra support. IVAX received FDA approval of a new technology for inhalers for asthma patients, while Endo won a court case challenging another company's claimed patent for the pain reliever oxycontin. Other strong performers included copper miners Phelps Dodge and Freeport-McMoRan, both of which we sold before the period ended, Altria Group, which won a court fight in a tobacco liability suit in which it was a defendant, and Hewlett-Packard, which gained on news of the appointment of a new chief executive. Q. What were some of the investments that held back performance? A. The biggest disappointment was Avaya, the producer of enterprise telephone systems for large corporations and other major institutions, whose stock price declined by 50%. Avaya offers large enterprises both traditional phone equipment as well as a newer technology that helps institutions transition to Internet-based phone systems. However, sales of the traditional equipment lagged, while the new technology failed to meet expectations. Despite the disappointment, we have retained the position. We also continue to own another notable detractor, information technology consulting company Accenture. The company reported disappointing earnings, but we believe it has the potential to recover. Another disappointment was American International Group, the giant insurer, whose stock price plummeted in the midst of an SEC investigation into its finances that resulted in the forced resignation of its long-time chief executive. Q. What is your outlook for the coming months? A. We believe the best opportunities will come from investments in secular, or long-term, growth companies, that are less sensitive to interest rates and the business cycle than are cyclical companies. We think interest rates are very low and are due to start rising, while oil and basic materials prices may be vulnerable to price corrections. We have seen particular value in the information technology and health care companies, which have the potential to produce more consistent earnings. 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 Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- 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 82.0% Temporary Cash Investment 18.0%
Sector Distribution (As a percentage of equity holdings) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
Office 19.0% Apartment 18.1% Regional Mall 13.6% Shopping Center 12.1% Industrial 11.5% Hotel 9.7% Diversified 7.5% Self Storage 4.0% Cash & Cash Equivalents 1.9% Triple-Net 1.8% Manufactured Homes 0.4% Health Care 0.4%
Five Largest Holdings (As a percentage of equity holdings) - --------------------------------------------------------- 1. Simon DeBartolo Group, Inc. 7.11% - --------------------------------------------------------- 2. Boston Properties, Inc. 5.41 - --------------------------------------------------------- 3. AvalonBay Communities, Inc. 4.85 - --------------------------------------------------------- 4. Equity Residential Property Trust 4.24 - --------------------------------------------------------- 5. Catellus Development Corp. 4.00 - ---------------------------------------------------------
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 24.69 $ 24.30 Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.3600 $ - $ 0.886
- -------------------------------------------------------------------------------- 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. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Pioneer Wilshire Real Estate Real Estate Shares VCT Securities Portfolio Index 6/95 10,000 10,000 11,488 11,845 6/97 15,741 15,818 16,886 16,846 6/99 15,311 15,687 16,023 16,386 6/05 19,161 20,410 21,938 23,219 6/05 22,454 23,905 28,944 30,882 6/05 39,091 41,593
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- 10 Years 14.61% 5 Years 19.53% 1 Year 35.06%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- Despite a sharp but brief pullback in prices during the first quarter, real estate stocks delivered positive results for the six months ended June 30, 2005. As Matthew Troxell of AEW Capital Management, L.P., explains in the following interview, investors may be concerned about higher interest rates and the pace of economic growth, but real estate investments continue to offer an attractive mix of income, growth and diversification benefits. Q. The rally in real estate stocks has entered its sixth year. Was the momentum evenly spread across the sector's different property types? A. During the first half of 2005, we began to see some differentiation among the sub sectors as investors began to discern relative value and absorb concerns about higher interest rates, the strength of the economy and, quite frankly, the fact that real estate stocks have delivered five years of outperformance relative to the broader stock market. We continue to see improvement in the underlying fundamentals across the real estate sector and will rely on our bottom-up, company-focused strategy of selecting stocks in an effort to avoid overvalued or troubled companies. Q. How did the Portfolio perform in this environment? A. For the six months ended June 30, 2005, the Portfolio's Class I shares returned 6.86% at net asset value. This performance was slightly ahead of the Wilshire Real Estate Securities Index, which rose 6.79% 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 had the most impact on performance? A. The office sector was a major contributor to performance. Despite an underweight position in office holdings relative to the benchmark, the Portfolio's selection of office investments outperformed both the office sub sector within the Wilshire Real Estate Securities Index as well as the index as a whole. In effect, our stock selection more than made up for the Portfolio's smaller exposure to office investments relative to this benchmark. Brookfield Properties was a standout performer. This Canadian operating company owns high-quality office buildings in New York City and other major markets. Our decision to overweight the position was significant, because the stock outperformed - making its impact on the Portfolio even more significant. In the lodging sector, hotel investments delivered mixed results. Although performance was positive overall, this sector of the real estate market lagged the benchmark. Starwood Hotels and Resorts, a sizable holding (but not to the degree that it is in the benchmark), was a disappointment. Several factors may have contributed to the stock's weakness, including profit taking after strong performance in 2004 or investor concerns that a slowing economy might dampen the lodging recovery that had been priced into the stock. On the other hand, Strategic Hotel Capital proved rewarding. This relatively young company, which acquired two hotels during the period, is gaining wider appeal among investors. A significant management change also may have acted as a catalyst for the company's appreciating stock price. Finally, the mall sector contributed positively to performance. Strong operating fundamentals at the property level and healthy consumer spending patterns continue to favorably impact the returns of the mall REITs. Q. Any notable sales or additions in the Portfolio? A. During the six months, we continued to reduce the Portfolio's exposure to Equity Office Properties because we have concerns about the price of its stock relative to its future earnings prospects. Our decision to limit the Portfolio's exposure to that REIT was a drawback, since it performed well. However, we were able to sell into that strength as we pared back the position. We initiated a new position in Brandywine Realty Trust, an office REIT focused on properties in the Mid-Atlantic States. In addition to its attractive valuation, this REIT is developing a large office tower in Philadelphia, which we think will be a catalyst for continued growth and value over time. Q. What is your outlook? A. With the real estate market posting total returns in excess of 30% in 2003 and 2004, finding bargain investment opportunities has become more challenging. However, paying close attention to our valuation metrics, we think our investment process, which relies more heavily on stock selection rather than sector allocation strategies, will help identify the most attractive companies, which might be overlooked or undervalued by the market. We think our analysis will help ensure that we are not paying too much for future income and growth opportunities. 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 Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- 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 95.2% Depositary Receipts for International Stocks 3.2% International Common Stocks 1.4% Temporary Cash Investments 0.2%
Sector Distribution (As a percentage of equity holdings) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
Financials 17.0% Information Technology 15.1% Consumer Discretionary 14.1% Health Care 12.5% Industrials 11.0% Energy 9.1% Consumer Staples 9.0% Materials 6.3% Telecommunication Services 3.9% Utilities 2.0%
Five Largest Holdings (As a percentage of equity holdings) - ------------------------------------------- 1. Exxon Mobil Corp. 2.45% - ------------------------------------------- 2. Target Corp. 2.34 - ------------------------------------------- 3. Chevron Corp. 2.25 - ------------------------------------------- 4. United Technologies Corp. 2.10 - ------------------------------------------- 5. Johnson & Johnson 2.00 - -------------------------------------------
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 20.30 $ 20.57 Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.1300 $ - $ -
- -------------------------------------------------------------------------------- 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. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Pioneer Fund VCT Portfolio S&P 500 10/97 10,000 10,000 11,964 12,527 6/99 14,728 15,380 16,018 16,497 6/01 14,760 14,053 12,688 11,529 6/03 12,067 11,558 14,220 13,764 6/05 15,399 14,627
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 5.80% (10/31/97) 5 Years -0.78% 1 Year 8.29%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- In the following discussion, John Carey, portfolio manager of Pioneer Fund VCT Portfolio, reviews the past six months and gives an overview of the Portfolio's performance over that period. Q: Please discuss the performance of Pioneer Fund VCT Portfolio versus its stock-market benchmark. A. The first six months of 2005 were lackluster ones for the blue-chip U.S. stock market. While many foreign markets did well, and in the U.S. even the small and mid-cap sectors generally produced modest gains, the large-cap market here was largely dead in the water. Through June 30, Class I shares of Pioneer Fund VCT Portfolio returned -0.68% at net asset value, versus a decline of 0.81% for the benchmark Standard & Poor's 500 Index. Hence we finished a hair ahead of the S&P, in a period characterized mainly by backing and filling, spurting, then sputtering, of performance. Given a result approximately the same as that of the market, there were no particular problems in the portfolio, nor any investments in particular stocks, industries, or sectors that did so well or so poorly as to throw the contest decisively one way or the other. On the whole, it would appear to have been a rather forgettable time. However, beneath the surface, changes were brewing and valuation trends were shifting. The performance data quoted represent past performance, which is no guarantee 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 most striking sector performance came from energy and utilities. The high oil price spurred investors to load up on everything related to energy. The utilities undoubtedly benefited from some of that indiscriminate buying and also from investors' avid interest in higher dividend-paying stocks. Otherwise, though, health care and consumer staples, sectors usually considered more "growth" in nature than "value," outperformed financials, industrials, and materials, value-oriented groups that had done very well earlier in the cycle and right down through the end of last year. While information technology, another growth sector, was weak overall, there were signs of life in some industries within it, most notably semiconductors. We suspect that investors were re-allocating assets in their portfolios, taking profits in stocks that had done well and purchasing shares that appeared undervalued. We shall see in the upcoming months whether the trends continue. Q: Which sectors and stocks most affected investment results over the past six months? A. Our stock selections in consumer discretionary, information technology, and consumer staples were the biggest positive contributors to relative performance, while our selections in health care and industrials, as well as our overweight in materials, proved the largest negative contributors to performance. Greatly assisting in consumer discretionary were our holdings in May Department Stores, recipient of a premium take-over bid from competitor Federated Department Stores, and John Wiley & Sons, successful publisher of scientific, technical, and medical books and journals as well as various consumer, or "trade," books. Steering clear of the troubled stock eBay also helped. In information technology, it was similarly what we did not own that helped, namely the weak performers QUALCOMM and International Business Machines; in the case of I.B.M. we sold our underweight position during the period. With respect to consumer staples, we had a large overweight position in top performer Walgreen and no shares of laggard Wal-Mart. On the negative side, we were unrepresented in the health-care providers and services industry within health care, one of the bright spots for that sector, and in industrials, several of our names "corrected" after having previously enjoyed very good performance. Norfolk Southern, PACCAR, Deere, and Johnson Controls, the culprits, all seemed, however, like good long-term investments, and so we held onto them despite the recent share-price disappointments. Finally, we maintained an overweight in the difficult materials sector because we thought that, too, would justify our confidence longer term. Q: What changes did you make to the Portfolio? A. On the purchase side of the ledger, Weatherford International is an expert in oil services, particularly noted for its well-completion and "artificial lift" systems. CVS, a nationwide drugstore chain, Staples, the office-supply retailer, and Costco Wholesale, the operator of wholesale membership warehouses, extended the diversification of our portfolio in the consumer staples and consumer discretionary sectors. In finance, we invested in Bank of America and Citigroup, both of which were priced at levels we thought reflected the risks in their operations, and also in several new insurance names, including Hartford Financial Services and Montpelier Re Holdings. We enlarged our health-care investment with Bristol-Myers Squibb, a beleaguered pharmaceutical company, but one with recovery prospects, and Biomet, which we had earlier owned and sold profitably and now found selling again at a reasonable price. Among the liquidations were Illinois Tool Works, United Parcel Service, United Health Group, and American Electric Power, all of which we judged to be selling at fair values. We sold long-term holdings American International Group, Procter & Gamble, and International Business Machines at very significant profits, deciding in each case that we had attractive alternatives. Q: What is your outlook for the rest of the year? A. While we certainly share other investors' concerns about the spike in oil prices and the "tightening" by the Federal Reserve, we remain generally optimistic about the economy and the stock market. For sure, earnings growth will continue slowing as the economic cycle moves along, and we also tend to think that intermediate and long interest rates will eventually match some of the rise in short-term rates. As always, however, there are stocks that are relatively reasonably priced, and if one remembers to invest on the basis of the fundamental values there should still be plenty of good opportunities to make money over the long term. Thank you for your continued support. 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 Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- 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 94.1% Temporary Cash Investments 5.1% Convertible Preferred Stocks 0.8%
Sector Distribution (As a percentage of equity holdings) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
Financials 20.5% Utilities 18.3% Consumer Discretionary 10.3% Industrials 9.5% Health Care 9.0% Telecommunication Services 9.0% Energy 8.5% Consumer Staples 7.0% Materials 5.9% Information Technology 2.0%
Five Largest Holdings (As a percentage of equity holdings) - ------------------------------------------ 1. PACCAR, Inc. 3.64% - ------------------------------------------ 2. Exxon Mobil Corp. 3.15 - ------------------------------------------ 3. ConocoPhillips 2.95 - ------------------------------------------ 4. Questar Corp. 2.94 - ------------------------------------------ 5. Washington Mutual, Inc. 2.94 - ------------------------------------------
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 20.76 $ 20.58 Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.2200 $ - $ -
- -------------------------------------------------------------------------------- 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. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Pioneer Russell Equity Income 1000 Value VCT Portfoio Index 6/95 10,000 10,000 11,721 12,462 6/97 15,348 16,599 19,687 21,385 6/99 22,937 24,887 21,545 22,669 6/01 23,819 25,012 21,818 22,772 6/03 21,014 22,541 24,761 27,303 6/05 28,266 31,138
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- 10 Years 10.95% 5 Years 5.58% 1 Year 14.16%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- In the following discussion, John Carey, portfolio manager of Pioneer Equity Income VCT Portfolio, reviews the past six months of 2005 and gives an overview of the Portfolio's performance over that period. Q: How did the Portfolio perform versus its benchmark, the Russell 1000 Value Index? To what do you attribute the Portfolio's relative performance? A. For the six months ended June 30, 2005, Pioneer Equity Income VCT Portfolio rose in value by 1.96% at net asset value, versus 1.76% for the Russell 1000 Value Index. Overall, it was a quarter of modest gains for both the Portfolio and the market. Investors were troubled by high oil prices, rising short-term interest rates, and the continued violence in the Middle East. At the same time, corporate earnings were generally good, and companies continued to boost their dividends. Overseas investors also seemed more comfortable with the outlook for the United States economy, judging from the significant strengthening of the U.S. dollar versus the Euro. On balance, then, it was a positive period, though a period characterized by alternating bouts of optimism and pessimism. The performance data quoted represent past performance, which is no guarantee 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 relative outperformance of the Portfolio versus its benchmark was attributable principally to our overweighting of the utilities sector, which was one of the three top-performing sectors in our benchmark during the period. That overweighting, plus the good performance of the utility stocks we chose, particularly Questar, Constellation Energy, and Ameren, more than made up for our underweighting in energy and our weak stock selection in health care, the other two strong sectors in the first half of the year. Merger-and-acquisition activity continued at a brisk pace, as companies with large cash reserves and rich share prices used the opportunity to buy competitors and expand their market share. Our May Department Stores received a premium take-over bid from retailing rival Federated Department Stores. In this case, the projected deal is to include a combination of cash and Federated shares. Other notable performers in the portfolio were ConocoPhillips, beneficiary of the robust energy market, and Chubb, participant in the strong property-and-casualty insurance industry. Weak performers in the first half included some of our industrial, materials, and consumer-discretionary names. PACCAR, builder of heavy trucks, saw some profit taking in its shares. Roanoke Electric Steel saw its shares rise and fall with the volatile price of steel. Finally, Ford Motor and Johnson Controls both suffered with the soft market for domestic automobiles. Q: What changes did you make to the Portfolio? A. We bought six new stocks and liquidated about the same number of positions. Among the depressed financials, we added Citigroup and Bank of America. The two "mega banks" appeared to us to be priced at levels adequately reflecting the risks in their operations, and both sported attractive dividend yields of about 4%. Citizens Communications, based in Connecticut, provides telephone service throughout the U.S. and pays a very generous dividend of about 7%. Deere, the premier name in agricultural equipment, is doing particularly well as farm incomes rise and farmers buy bright, spanking new tractors. We also purchased shares of Coca-Cola, which we thought was quite reasonably priced, and Genuine Parts, leading distributor of auto parts, which does well whether people are buying new cars or not. Eliminated during the period were several stocks we judged had reached full value, including Occidental Petroleum, Boeing, General Dynamics, and Simon Property Group. We also sold General Motors, Microsoft, and International Business Machines, in each case concluding that we had found preferable alternatives. Q: What is your outlook? A. While we certainly share other investors' concerns about the spike in oil prices and the "tightening" by the Federal Reserve, we remain generally optimistic about the economy and the market. For sure, earnings growth will continue slowing as the economic cycle moves along, and we also tend to think that intermediate and long interest rates will sooner or later match part of the rise in short-term rates. As always, however, there are stocks that are relatively reasonably priced, and if one remembers to invest on the basis of the fundamental values there should still be plenty of good opportunities, we think, to make money over the long term. Thank you for your continued support. 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 Balanced VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- 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 61.7% U.S. Government Securities 23.4% U.S. Corporate Bonds 10.9% Depositary Receipts for International Stocks 1.8% Temporary Cash Investments 1.0% Asset Backed Securities 0.5% U.S. Government Agency Obligations 0.4% Collateralized Mortgage Obligations 0.3%
Sector Distribution (As a percentage of long-term holdings) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
Government Obligations 24.0% Consumer Staples 12.5% Financials 11.2% Information Technology 10.9% Health Care 10.8% Consumer Discretionarly 9.7% Energy 6.6% Materials 5.9% Industrials 5.7% Telecommunication Services 2.2% Utilities 0.5%
Five Largest Holdings (As a percentage of long-term holdings) - ------------------------------------------------------ 1. Berkshire Hathaway, Inc. (Class B) 3.24% - ------------------------------------------------------ 2. Northrop Grumman Corp. 3.12 - ------------------------------------------------------ 3. Microsoft Corp. 3.01 - ------------------------------------------------------ 4. PepsiCo, Inc. 2.86 - ------------------------------------------------------ 5. CVS Corp. 2.80 - ------------------------------------------------------
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 14.29 $ 14.40 Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.1200 $ - $ -
- -------------------------------------------------------------------------------- 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. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Pioneer Lehman Brothers Balanced VCT Aggregate Bond Portfolio S&P 500 Index 6/95 10,000 10,000 10,000 11,736 12,596 10,501 6/97 14,043 16,962 11,358 15,966 22,075 12,554 6/99 15,852 27,103 12,947 16,229 29,070 13,536 6/01 16,779 24,764 15,057 15,165 20,317 16,357 6/03 15,952 20,367 18,058 17,394 24,255 18,118 6/05 17,896 25,787 19,353
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- 10 Years 5.99% 5 Years 1.97% 1 Year 2.88%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 Balanced VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- 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 fixed-income component of the Portfolio, discuss the markets and the factors that affected performance. Throughout the six months, the Portfolio retained stable allocations to equities and bonds, with about 64% of assets in stocks and 36% in fixed-income securities. Q: How did the Portfolio perform? A. Pioneer Balanced VCT Portfolio had a total return of 0.07% at net asset value during the six months ended June 30, 2005. The performance data quoted represent past performance, which is no guarantee 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 general factors affected fixed income performance during the six months? A. Over the period, as the economy expanded and new jobs were created, the Federal Reserve Board raised the short-term Federal Funds rate from 2.25% to 3.25%. However, in a phenomenon that Fed Chairman Alan Greenspan referred to as a "conundrum," the yields of longer-maturity bonds resisted the upward pressure and actually declined, and the yield curve - which reflects the difference in yields of short- and long-term investments - flattened. During the six months, for example, the difference between the yields of two-year and 10-year Treasuries narrowed from 116 basis points (a basis point is one-hundredth of one percentage point) to 28 basis points. This led to additional stimulus in some parts of the economy, notably housing, where mortgage rates are highly influenced by 10-year Treasuries. There was considerable volatility in the corporate bond market, however, especially in the early spring when major credit agencies announced they were downgrading the debt of automotive giants General Motors and Ford from investment grade to below-investment grade. While we held some General Motors and Ford debt, the Fund was not significantly affected by the downgrade. It was an environment in which longer-maturity investments had a performance advantage over shorter-term securities, especially among high-quality securities. Treasuries outperformed mortgages, and investment-grade corporates outperformed high-yield corporates. The performance of the fixed-income portfolio, while consistent with that of the Lehman Brothers Aggregate Bond Index, was held back somewhat by our de-emphasis of long-term Treasuries. We also had cut our exposure to mortgage-backed securities, although we subsequently increased it again by investing in bonds with less prepayment risk. At the end of the six-month period, mortgages accounted for slightly less than 50% of fixed-income assets. Industrial and utility bonds represented the next largest sector weighting. Average credit quality was AA - on June 30, while duration - a measure of sensitivity to changes in interest rates - was 4.13 years. Q: What factors affected equity performance during the period? A. Equity investors struggled to detect an underlying trend for the six months, and most equity indexes ended the period close to where they started. The lackluster results came despite a healthy corporate profit picture. Investors were concerned about a variety of issues, including the effects of rising oil prices, higher short-term interest rates and even the possibility of a steep correction in real estate prices. Because of these factors influencing sentiment, stock prices did not keep pace with corporate earnings growth. In the overall stock market, small- and mid-cap stocks outdistanced large-company stocks, and value stocks performed better than growth stocks. Within the large-cap S&P 500 universe of stocks, only three of 10 sectors had positive performance - energy, utilities and health care. The portfolio's investments in the consumer staples sector helped performance. Two stocks from that sector did particularly well: Gillette, which announced it is being acquired by Proctor & Gamble at a 15% premium to its stock price; and CVS, the pharmacy chain which has successfully integrated the acquisition of the former Eckerd's stores. Within the energy sector, investments in EnCana, a Canadian oil and natural gas producer, and National Oil Well Barco, a leading provider of oil-field equipment and services, both benefited from rising commodity prices. In the health-care area, one of the top performers was the pharmaceutical company IVAX, which appreciated both because of the excellent prospects for generic drug products, and because of opportunities for some of its branded pharmaceuticals. Holding back results, however, was the portfolio's investment in Avaya, which provides telecommunications systems for large organizations. Its sales of traditional telephone equipment slumped, while newer equipment designed for the Internet did not meet growth expectations. UPS declined because of disappointing earnings linked to heightened competition in the domestic ground business, while Newmont Mining, a gold mining company, underperformed as the price of gold stopped rising. Not owning any utilities stocks also held back results. We avoided the sector because of the poor growth prospects of utilities companies, but their stock valuations rose as longer-term interest rates declined. Q: What is your outlook for equities? A. We think that equity prices in 2005 should rise consistent with corporate earnings growth. Even though profit growth may continue to decelerate, that should imply moderate positive performance from equity investments, especially as the Federal Reserve Board nears the end of its round of short-term interest-rate hikes. Although value stocks have outperformed growth stocks recently, we think the performance of growth stocks should be close to that of value issues in the coming months. We also think the performance of large-company stocks should improve relative to smaller company equities. This should be an environment that favors our strategy of emphasizing higher-quality, large-company growth stocks. Q: What is your outlook for bonds? A. At least in the near term, we anticipate that the Federal Reserve will keep raising short-term interest rates, while the economy should continue to grow at an annual rate in the range of 3% to 3.5%. Overall, we anticipate moderate, positive returns from fixed-income investments. 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 High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- Portfolio Diversification (As a percentage of total investment in securities) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
U.S. Corporate Bonds 67.9% Convertible Corporate Bonds 16.8% Temporary Cash Investments 6.1% U.S. Common Stocks 4.7% Convertible Preferred Stocks 2.9% Preferred Stocks 1.6%
Maturity Distribution (As a percentage of total investment in securities) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
0-1 year 0.2% 1-3 years 9.4% 3-4 years 20.8% 4-6 years 47.4% 6-8 years 11.7% 8+ years 10.5%
Five Largest Holdings (As a percentage of long-term holdings) - -------------------------------------------------------------- 1. Mueller Industries, Inc., 6.0%, 11/1/14 4.70% - -------------------------------------------------------------- 2. DRS Technologies, Inc., 6.875%, 11/1/13 3.08 - -------------------------------------------------------------- 3. Allegheny Energy Supply, 7.8%, 3/15/11 3.04 - -------------------------------------------------------------- 4. Novelis, Inc., 7.25%, 2/15/15, (144A) 3.02 - -------------------------------------------------------------- 5. Valeant Pharmaceuticals, 7.0%, 12/15/11 3.01 - --------------------------------------------------------------
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 10.89 $ 11.67 Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.3136 $ 0.0579 $ 0.3211
- -------------------------------------------------------------------------------- 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. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Pioneer ML High ML Convertible High Yield Yield Master Bonds (Speculative VCT Portfolio II Index Quality) Index 5/00 10,000 10,000 10,000 10,692 10,193 10,511 6/01 11,854 10,101 8,074 12,499 9,658 7,377 6/03 14,804 11,804 9,197 16,254 13,006 11,090 6/05 17,393 14,387 11,243
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 10.88% (5/1/00) 5 Years 10.22% 1 Year 7.00%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 The high-yield market posted a slightly positive return during the six months ended June 30, 2005, as the income provided by high-yield bonds offset their price depreciation. Portfolio manager Margaret Patel, in the interview that follows, explains the factors that influenced the high-yield market and the reasons behind the Portfolio's underperformance of its benchmark. Q. How did the Portfolio perform? A. During the six months ended June 30, 2005, the Portfolio's Class I shares had a total return based on net asset value of -0.71%. By comparison, the Merrill Lynch High Yield Master II Index returned 1.13%. The performance data quoted represents past performance, which is no guarantee 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. The high-yield market was relatively stable, in spite of rising short-term interest rates. The yield spread, or advantage, offered by high-yield bonds relative to comparable U.S. Treasuries widened somewhat, indicating the slight underperformance of non-investment-grade issues. High-yield bond prices declined modestly during the period, but the higher income the securities provide offset their capital depreciation. The price declines resulted from outflows from high-yield bond mutual funds and because of concerns about credit quality. Investors sought a slightly lower risk profile due to the downgrades of General Motors' and Ford's debt, and because they thought the U.S. economy might slow in the aftermath of continued hikes in short-term interest rates by the Federal Reserve Board. The market efficiently absorbed the automakers' debt - which currently constitutes more than 10% of the Merrill Lynch index - but the activity created some momentary volatility. Q. Why did the Portfolio's performance lag that of the Merrill Lynch High Yield Master II Index? A. While the Portfolio's investments in convertible securities historically have helped its relative performance, that was not the case during the period. Convertibles underperformed conventional high-yield bonds because they, by their nature, were more sensitive than comparable high-yield issues to the short-term interest rate hikes implemented by the Fed. Lower-than-normal volatility in the equity markets also contributed to the underperformance of convertible securities, and hence the Portfolio. At the same time, Portfolio performance was bolstered by our moves to raise its average credit quality, as lower-quality issues underperformed during the period. Q. Which investments proved to be some of the top performers during the fiscal period? Which disappointed? A. LNR Properties went private by making a tender offer for its bonds at a substantial premium to its face value. We took advantage of this offer. The Portfolio's investments in convertible securities issued by industrial equipment manufacturer Roper Industries rose in concert with its stock price, because the company enjoyed better markets for its products. Mueller Industries, which offers metals products, also benefited from improving demand. On the down side, Lyondell Chemical declined due to soft prices for and excess inventories of its products. Advertising agency Interpublic Group fell as its turnaround stalled and because of the firm's delay in submitting its compliance reporting. Finally, newsprint company Bowater dipped in response to overcapacity and softening prices for pulp and paper products. Q. What is your outlook? A. We are optimistic about the economy and the high-yield market, looking out over the balance of the Portfolio's fiscal year. After seeing their yield spreads widen during the period, high-yield issues should be more attractively valued relative to Treasuries at a time when the economy continues to grow. The default rate also remains well below its historical average. Therefore, prices for high-yield bonds - particularly those of higher credit quality - should offer attractive relative value if Treasury yields remain at current levels or move moderately higher as the Fed pursues its measured approach of raising short-term interest rates. 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 Strategic Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- Portfolio Diversification (As a percentage of total investment portfolio) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
U.S. Corporate Bonds 54.0% U.S. Government Securities 31.8% Foreign Government Bonds 6.7% Asset Backed Securities 3.7% Temporary Cash Investment 1.7% Municipal Bonds 1.0% Collateralized Mortgage Obligations 0.8% Convertible Corporate Bonds 0.3%
Maturity Distribution (As a percentage of total investment portfolio) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
0-1 year 5.8% 1-3 years 27.3% 3-4 years 17.5% 4-6 years 26.6% 6-8 years 17.1% 8+ years 5.7%
Five Largest Holdings (As a percentage of long-term holdings)
- -------------------------------------------------------------------------------- 1. Federal Home Loan Mortgage Corp., 4.5%, 4/1/20 1.62% - -------------------------------------------------------------------------------- 2. Federal Home Loan Mortgage Corp., 6.0%, 8/1/34 1.54 - -------------------------------------------------------------------------------- 3. Federal Home Loan Mortgage Corp., 5.5%, 11/1/34 1.26 - -------------------------------------------------------------------------------- 4. U.S. Treasury Strip, 0.0%, 2/15/11 1.21 - -------------------------------------------------------------------------------- 5. Federal National Mortgage Association, 6.375%, 8/15/07 1.12 - --------------------------------------------------------------------------------
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 10.97 $ 11.26 Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.3160 $ 0.0045 $ 0.1523
- -------------------------------------------------------------------------------- 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. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Pioneer Strategic Income VCT Lehman U.S. Portfolio Universal Index 7/99 10,000 10,000 10,180 10,521 6/01 10,913 11,654 11,780 12,553 6/03 14,225 13,999 15,152 14,140 6/05 16,929 15,186
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- Life-of-Class 9.30% (7/29/99) 5 Years 10.71% 1 Year 11.73%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 Strategic Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- Prices of high-yield and foreign-denominated securities tended to slip in the first six months of 2005. While the Federal Reserve Board continued to raise short-term interest rates in the U.S. during the period, the yields of longer-term bonds declined for the period, leading to price appreciation of longer-maturity, high-quality bonds, which outperformed high-yield corporate debts. On international currency markets, the U.S. dollar strengthened for the six months, limiting the returns U.S.-based investors could realize in foreign, fixed-income securities. In the following interview, Kenneth J. Taubes discusses the factors that influenced the performance of Strategic Income VCT Portfolio during the six months. Mr. Taubes, Director of Pioneer's Fixed Income Group, oversees the team responsible for the daily management of the Portfolio. Q. How did the Portfolio perform during the first half of 2005? A. In a challenging environment for fixed-income investing, Strategic Income VCT Portfolio produced a positive return, although it underperformed its benchmark. For the six months ended June 30, 2005, the Portfolio's Class I shares had a total return of 1.67%, while the Lehman U.S. Universal Bond Index returned 2.51%. The Portfolio continued to produce a high level of income. On June 30, 2005, the standardized SEC yield for Class I shares was 7.36%. The performance data quoted represents past performance, which is no guarantee 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 type of investment environment affected the Portfolio during the six months? A. The Portfolio weathered a challenging environment of diverse and sometimes conflicting factors that influenced the global fixed-income markets. Domestically, corporate high-yield bonds underperformed investment-grade and high-grade debt, especially in the first three months of 2005. Although economic growth and corporate profits appeared to be growing steadily, investors were worried about the possibility that short-term interest rate hikes by the Federal Reserve, combined with rising energy prices, might slow the economy. The fears receded somewhat during the next three months, and high- yield bonds recovered some of their price losses and finished the period with positive performance, despite lagging the results of high-grade securities. Long-term interest rates backed up a bit in the first months of the year, adversely affecting the performance of long-term, higher-rated bonds, which are highly sensitive to interest-rate changes. But long-term rates declined in the final months of the six-month period, helping the performance of longer-maturity high-quality bonds. Additionally, one of the best-performing parts of the domestic fixed-income market was the mortgage sector. Internationally, one of the most influential factors affecting fixed-income markets was the strengthening of the U.S. dollar, which had been steadily weakening before the period began. Bonds denominated in non-dollar currencies declined in value as the dollar strengthened, undermining the performance of non-dollar investments. Q. What were your principal strategies during the six months, and what was the impact on performance? A. We reduced our exposure to foreign-denominated bonds. By June 30, 2005, our currency exposure to non-dollar denominated bonds had been cut from about 20% of Portfolio assets in late 2004 to 12.9%. We concentrated our foreign investments in countries with currencies in which we had the most confidence, including Norway, Canada and Australia. Domestically, we emphasized the mortgage sector, which accounted for 26.9% of total Portfolio assets by June 30, 2005. At the same time, we have been steadily upgrading the overall credit quality of our investments. Average credit quality of the Portfolio rose from BBB- to BBB over the six months as we reduced our below-investment grade, higher-yielding investments and reduced our exposure to lower-rated securities within the high-yield sector. On June 30, 2005 about 32% of Portfolio assets were invested in domestic high-yield bonds. As the yield curve flattened - the difference between yields of short-term and long-term securities grew tighter - we reduced the Portfolio's overall sensitivity to changes in interest rates, as measured by duration. At the end of the six months, the Portfolio's effective duration was 4.3 years, down from 4.6 years at the beginning of the year. The emphasis on mortgage-backed securities was a major positive contributor to Portfolio performance as the mortgage sector outperformed other parts of the market. Individual holdings that performed well included bonds of Shaw Group, a construction company that announced a tender offer to buy back its debt, and of Metro PCS, a wireless telecommunications company which provides services in several urban areas in the Western and Southeastern states. Bonds of Refco, a securities firm specializing in derivatives trading, also rose on news that the company planned an initial public stock offering. While our reduction of investments in foreign bonds and lower-quality, domestic high-yield bonds helped during a volatile period, our positions in both foreign bonds and high-yield bonds underperformed other parts of the Portfolio. Other disappointing investments included bonds issued by Northwest Airlines, which faced challenges in negotiating new labor agreements and in addressing its pension obligations, and Duane Reade, the New York-based retail pharmaceutical chain. Q. What is your investment outlook? A. We expect that the Federal Reserve will continue to raise short-term rates, at least until monetary policy is seen as neutral. How far the rate hikes go will depend upon the strength of the economy. However, we have seen increased stability in the bond market in the final weeks of the six-month period, and we have adopted a more conservative asset allocation policy in recognition of the relatively narrow spreads in yields between securities of different credit risk. In this environment, we expect to maintain a relatively short duration - to control the risk of a rise in interest rates - and we anticipate continuing to maintain a well diversified portfolio of investments from different fixed-income sectors. Domestically, we expect to maintain an emphasis on mortgage securities. We also think that currency fluctuations are less likely to have an influence on performance of foreign investments, and we expect that bonds of countries such as Norway and Sweden should fare well. 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 America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO UPDATE 6/30/05 - -------------------------------------------------------------------------------- Portfolio Diversification (As a percentage of total investment portfolio) [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
U.S. Government Securities 92.3% U.S. Government Agency Obligations 5.5% Temporary Cash Investment 1.7% U.S. Corporate Bonds 0.5%
Maturity Distribution (As a percentage of total investment portfolio) [DATA BELOW IS REPRESENTED BY A PIE CHART INTHE ORIGINAL REPORT]
0-1 year 3.5% 1-3 years 64.1% 3-4 years 16.2% 4-6 years 2.6% 6-8 years 5.8% 8+ years 7.8%
Five Largest Holdings (As a percentage of long-term holdings)
- --------------------------------------------------------------------- 1. U.S. Treasury Notes, 6.5%, 2/15/10 11.40% - --------------------------------------------------------------------- 2. U.S. Treasury Notes, 6.25%, 8/15/23 5.25 - --------------------------------------------------------------------- 3. U.S. Treasury Notes, 6.375%, 8/15/27 2.59 - --------------------------------------------------------------------- 4. Federal Home Loan Mortgage Corp., 6.0%, 3/1/33 2.24 - --------------------------------------------------------------------- 5. Federal Home Loan Bank, 5.875%, 11/15/07 1.94 - ---------------------------------------------------------------------
The Portfolio is actively managed, and current holdings may be different. - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 10.07 $ 10.11 Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.2332 $ - $ -
- -------------------------------------------------------------------------------- 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. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Pioneer Lehman Brothers Lehman Brothers America Income Government Fixed Rate VCT Portfolio Bond Index Mortgage Index 6/95 10,000 10,000 10,000 10,228 10,450 10,586 6/97 10,849 11,222 11,549 11,861 12,486 12,579 6/99 12,109 12,865 13,084 12,612 13,507 13,743 6/01 13,880 14,905 15,293 15,031 16,217 16,667 6/03 16,211 18,057 17,618 16,222 17,815 18,009 6/05 17,075 19,000 19,117
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 June 30, 2005)
- -------------------------------------------------------------------------------- Net Asset Value - -------------------------------------------------------------------------------- 10 Years 5.50% 5 Years 6.25% 1 Year 5.26%
All total returns shown assume reinvestment of distributions at net asset value. Please refer to the variable product's report wrapper for performance that reflects the deduction of the variable product's fees and charges. The performance table does not reflect the deduction of taxes that a shareowner would pay on distributions or the redemption of shares. 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 America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 6/30/05 - -------------------------------------------------------------------------------- Despite rising interest-rates, investors in U.S. Government and agency securities were rewarded with positive total returns during the first half of 2005. In the interview below, Richard Schlanger, a member of the Pioneer fixed-income team, discusses the factors that affected the fixed-income market and Pioneer American Income VCT Portfolio over the past six months. Q. How did the Portfolio perform during the period? A. For the six-month period ended June 30, 2005, Class I shares of the Portfolio produced a total return of 1.94% at net asset value. The Portfolio underperformed its benchmark, the Lehman Brothers Government Bond Index, which returned 2.93% for the same period. The Portfolio also fell short of the Lehman Brothers Fixed-Rate Mortgage-Backed Index, which returned 2.15%. At the end of the period, the 30-day SEC yield for Class I shares was 3.72%. The performance data quoted represents past performance, which is no guarantee 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. Despite rising oil prices, the economy continued to grow at a steady pace, buoyed by job creation, a high level of consumer spending and escalating real estate prices. Along with this positive economic backdrop, the Federal Reserve continued to reverse its accommodative monetary policy by boosting the Federal funds rate four times during the six-month period, each time by one-quarter percentage point. The Federal funds rate, which is the rate that banks charge for overnight loans, moved from 2.25% to 3.25%. The Fed's actions resulted in rising yields and falling prices on short-term securities; however, yields on longer-term securities declined and prices rose. For example, the yield on the 10-year Treasury bond declined 0.31% and the yield on the 30-year Treasury bond went down 0.64%. Despite the general decline in long-term yields, long-term U.S. Treasury yields were among the highest of the developed economies, making the securities attractive to foreign investors. U.S. Treasuries were favored by overseas investors for another reason. In order to keep their currency values relatively low, overseas market participants invested substantial assets in Treasury securities. During the period, General Motors and Ford reported disappointing earnings, and credit agencies downgraded the companies' debt. As a result, we saw a flight to quality in the fixed-income markets, with investors moving assets into Treasury securities because they had no credit risk and the full faith and credit backing of the U.S. Government. All of these factors benefited government bonds. Q. What were the principal strategies used in managing the Portfolio in this environment? A. The Portfolio was divided among mortgage-backed, Treasury, agency securities and cash. While we trimmed exposure to mortgage securities, we continued to emphasize the sector relative to the benchmark. All of the mortgages in the Portfolio were issued by government sponsored enterprises, including the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corpoation (Freddie Mac), and 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, not to Portfolio shares. In selecting mortgages, we emphasized those with coupons in the 4.5% to 5.0% range, which carried less prepayment risk. When interest rates rose and yields on Treasuries moved higher, we opportunistically purchased longer-duration Treasury securities in the 7-to-15-year maturity range. At the end of the six-month period, the Portfolio's assets were allocated as follows: U.S. Treasury/agency securities, 33.2%; pass-through securities, 65.0%; cash, 1.8%. Q. What detracted from performance? A. We attribute the Portfolio's performance shortfall relative to the Lehman Brothers Fixed-Rate Mortgage Index to the defensive nature of our duration strategy. To limit the price volatility that usually accompanies rising interest rates, we kept the Portfolio's duration shorter than the index. (Stated in years, duration measures a bond's price sensitivity to interest-rate changes. A shorter duration can protect the Portfolio from price declines as yields rise.) Performance also suffered because of our relatively small exposure to long-term Treasury bonds, as we were skeptical that prices would continue to rise as the Fed continued to raise interest rates. Even Federal Reserve Chairman Alan Greenspan called the rally in long-term Treasuries a "conundrum." Ginnie Maes also had a negative impact on performance because the decline in long-term Treasury yields raised concerns about the potential for refinance risk that is associated with mortgages. Q. What contributed most to performance? A. Although we had less exposure (relative to the Portfolio's benchmark) in long-term Treasury securities, our position in the sector contributed to results. Conventional mortgages - those issued by Freddie Mac and Fannie Mae - also enhanced performance, as they outperformed Ginnie Maes. Minimizing prepayment risk by selecting specific mortgage pools was also helpful. Q. What is your outlook for the rest of 2005? A. Data associated with the economy continues to indicate that economic growth will keep improving at a steady rate, despite the fact that oil has now passed the $60-a-barrel level. Although inflation remains in check, there are indications that it is beginning to pick up. For example, rising global demand for commodities and industrial products has resulted in higher prices. We have also begun to see an upturn in airline, railroad and trucking prices, as companies pass along the cost of energy to consumers and businesses. Escalating real estate values are also a source of concern. Given these factors, the Fed has stated that it will continue raising interest rates in the near term in an effort to keep inflation from accelerating. As the Fed hikes rates, we expect to see longer-term yields drift higher. As we move into the second half of 2005, the Portfolio should continue to provide a relatively safe haven for investors who want to avoid the risk associated with the more volatile areas of the fixed-income market and with equities. 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 Money Market VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- PORTFOLIO AND PERFORMANCE UPDATE 6/30/05 - -------------------------------------------------------------------------------- The domestic economy expanded at a healthy pace during the first half of 2005. The U.S. Federal Reserve Board, continued its effort to restrain the pace of growth and avert any increase in inflationary threats, by raising the most influential short-term interest rate - the Federal Funds rate - four different times during the period. The rate climbed over the six months from 2.25% to 3.25%. As the Fed acted, yields of shorter-term securities, including money market instruments, rose. The Portfolio invests exclusively in high-quality money market instruments issued by the U.S. government and 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 six months ended June 30, 2005. Mr. Feltus is a member of Pioneer's Fixed Income Group, which is responsible for the daily management of the Portfolio. Q: How did the Portfolio perform during the first six months of 2005? A. For the six months ended June 30, 2005, Pioneer Money Market VCT Portfolio had a total return of 0.96% at net asset value. On June 30, 2005, the Portfolio's seven-day effective yield for Class I shares was 2.63%. The performance data quoted represent past performance, which is no guarantee 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 influenced Portfolio performance? A. The U.S. Federal Reserve Board continued to raise short-term rates in a gradual, measured manner persistent over the six months. The Fed began raising rates on June 29, 2004, and since then the rate has climbed from 1.00% to 3.25% on June 30, 2005. As the Fed acted, yields on the shorter-maturity securities in which we invest gradually went up, adding to the Fund's income. However, the yields of Treasuries with maturities of five years and beyond actually declined over the six months. Although some doubts about the sustainability of the economic recovery arose periodically, the economy continued to grow at a healthy rate throughout the first six months. Gross Domestic Product (GDP) grew at an annualized rate of 3.8% during the first quarter and was expected to approach that rate for the second quarter of the year. As this occurred, unemployment fell in June to the lowest level in four years. Q: What were your principal strategies during the period? A. We maintained to our policy of investing in only very high-quality securities and so we faced no credit issues over the period. We held a relatively neutral policy with respect to sensitivity to interest rate changes, maintaining an average portfolio maturity of between 60 and 70 days. To capture additional yield, we also invested in some extendable, floating-rate notes issued by high-quality, blue chip corporations. These notes reset their interest rates either every month or every quarter and give investors the option of extending their positions. The notes typically pay yields of about one-tenth of one percentage point above market rates. Q: What is your investment outlook? A. We expect economic growth to continue to proceed at a healthy pace. While we think general financial conditions finally have moved close to being neutral, we think that the Federal Reserve Board may continue to raise short-term rates, perhaps to 3.75% or 4.00%. In this environment, we plan to take advantage of opportunities to capture additional yield without taking risks incompatible with the Portfolio's charter. Prices and Distributions
6/30/05 12/31/04 Net Asset Value per Share $ 1.00 $ 1.00 Distributions per Share Short-Term Long-Term (1/1/05 - 6/30/05) Dividends Capital Gains Capital Gains $ 0.0096 $ - $ -
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 June 30, 2005)
- ---------------------------- Net Asset Value - ---------------------------- 10 Years 3.31% 5 Years 1.94% 1 Year 1.36%
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 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 Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value PREFERRED STOCKS - 2.8% Capital Goods - 0.1% Industrial Conglomerates - 0.1% 3,445 LG Corp. $ 52,236 ----------- Total Capital Goods $ 52,236 ----------- Media - 0.8% Broadcasting & Cable Television - 0.8% 1,283,300 Net Servicos de Comunicacao SA* $ 351,513 ----------- Total Media $ 351,513 ----------- Banks - 1.1% Diversified Banks - 1.1% 2,393 Banco Itau Holding Financeira $ 444,751 ----------- Total Banks $ 444,751 ----------- Telecommunication Services - 0.8% Integrated Telecommunication Services - 0.8% 19,601 Tele Norte Leste Participacoes (A.D.R.) $ 326,357 ----------- Total Telecommunication Services $ 326,357 ----------- TOTAL PREFERRED STOCKS (Cost $958,020) $ 1,174,857 ----------- COMMON STOCKS - 93.4% Energy - 13.4% Coal & Consumable Fuels - 0.4% 235,200 Yanzhou Coal Mining $ 183,474 ----------- Integrated Oil & Gas - 10.4% 485,600 Chine Petroleum & Chemical $ 189,909 11,700 Gazprom (A.D.R.) 423,657 3,100 Mol Magyar Olaj 259,701 47,400 Petrobras Brasileiro (A.D.R.) 2,182,296 540,000 PetroChina Co., Ltd. 397,621 48,500 PTT Public Co., Ltd. 255,850 7,800 Repsol SA (A.D.R.) 196,014 12,800 Surgutneftegaz (A.D.R.)*(b) 478,080 ----------- $ 4,383,128 ----------- Oil & Gas Exploration & Production - 0.8% 14,600 Oil & Natural Gas Commission, Ltd.* $ 342,553 ----------- Oil & Gas Refining & Marketing - 1.2% 2,066,400 Petron Corp. $ 108,666 14,300 Reliance Industries, Ltd. (144A) 416,273 ----------- $ 524,939 ----------- Oil & Gas Storage & Transportation - 0.6% 13,811,500 Ultrapar Participacoes SA $ 242,536 ----------- Total Energy $ 5,676,630 ----------- Materials - 11.0% Commodity Chemicals - 0.5% 128,076 CA Formosa Plastic Corp.* $ 208,703 ----------- Shares Value Construction Materials - 2.5% 6,450 Asia Cement Co., Ltd. $ 216,080 28,000 CA Siam Cement Co., Ltd.* 163,686 2,530 Hanil Cement Co., Ltd. 150,126 721,100 Lafarge Malayan Cement Bhd 114,886 460,000 PT Indocement Tunggal Prakarsa TBK* 161,764 31,500 Ultra Tech Cement, Ltd. 255,464 ----------- $ 1,062,006 ----------- Diversified Metals & Mining - 1.0% 6,000 Freeport-McMoRan Copper & Gold, Inc. (Class B) $ 224,640 899,000 PT Aneka Tambang TBK 219,886 ----------- $ 444,526 ----------- Fertilizers & Agricultural Chemicals - 0.6% 44,000 Makhteshim-Agan Industries, Ltd. $ 240,527 ----------- Gold - 2.7% 19,500 Anglogold Ashanti, Ltd. (A.D.R.) (b) $ 696,735 36,100 IAMGOLD Corp. 246,202 952,000 Zijin Mining Group Co., Ltd. 208,228 ----------- $ 1,151,165 ----------- Paper Products - 0.4% 5,270 Aracruz Cellulose SA (A.D.R.) (b) $ 183,133 ----------- Precious Metals & Minerals - 2.8% 14,200 Anglo American Platinum Corp., Ltd. $ 638,758 23,200 Compania de Minas Buenaventura SA 533,368 ----------- $ 1,172,126 ----------- Steel - 0.5% 7,900 Companhia Vale do Rio Doce (A.D.R.) $ 200,660 ----------- Total Materials $ 4,662,846 ----------- Capital Goods - 12.7% Aerospace & Defense - 0.5% 9,100 Elbit Systems, Ltd.* $ 202,075 ----------- Building Products - 0.5% 59,500 Trakya Cam Sanayii $ 201,062 ----------- Construction, Farm Machinery & Heavy Trucks - 3.3% 21,400 Daewoo Heavy Industries & Machinery, Ltd. $ 408,228 8,030 Hyundai Heavy Industries 401,233 46,200 Samsung Heavy Industries Co., Ltd. 415,922 17,499 Tata Motors 170,869 ----------- $ 1,396,252 -----------
The accompanying notes are an integral part of these financial statements. 33 Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Construction & Engineering - 4.8% 116,200 Aveng, Ltd. $ 217,072 442,435 CTCI Corp. 242,383 3,869 Daelim Industrial Co. 206,490 543,400 Empressa ICA Sociedad Controladora SA de CV* 220,827 11,900 GS Engineering & Construction Corp. 391,185 12,840 Kyeryong Construction Industrial Co., Ltd. 294,347 16,800 Larsen & Toubro, Ltd. 437,901 ----------- $ 2,010,205 ----------- Heavy Electrical Equipment - 0.7% 14,900 Bharat Heavy Electricals (Demat Shares)* $ 296,173 ----------- Industrial Conglomerates - 2.0% 20,956 Bidvest Group, Ltd. $ 226,136 29,000 Copec-Compania Petroleos 233,405 45,075 KOC Holding AS 198,182 6,825 LG Corp. 171,984 ----------- $ 829,707 ----------- Industrial Machinery - 0.9% 336,000 Yungtay Engineering Co., Ltd. $ 186,962 23,300 Doosan Heavy Industries & Construction Co. 203,393 ----------- $ 390,355 ----------- Total Capital Goods $ 5,325,829 ----------- Transportation - 1.0% Marine - 1.0% 256,000 China Shipping Development Co., Ltd.* $ 193,000 45,300 Malaysia International Shipping Bhd 213,240 ----------- $ 406,240 ----------- Total Transportation $ 406,240 ----------- Automobiles & Components - 2.0% Automobile Manufacturers - 1.4% 11,100 Hyundai Motor Co., Ltd. $ 613,115 ----------- Motorcycle Manufacturers - 0.6% 7,900 Bajaj Auto, Ltd. (Demat Shares) $ 249,071 ----------- Total Automobiles & Components $ 862,186 ----------- Consumer Durables & Apparel - 0.6% Household Appliances - 0.6% 44,940 Arcelik AS $ 267,388 ----------- Total Consumer Durables & Apparel $ 267,388 ----------- Consumer Services - 0.7% Hotels, Resorts & Cruise Lines - 0.7% 21,300 Indian Hotels Co., Ltd. $ 305,026 ----------- Total Consumer Services $ 305,026 ----------- Shares Value Media - 4.9% Advertising - 0.4% 9,200 G II R, Inc. $ 161,430 ----------- Broadcasting & Cable Television - 3.4% 459,000 Bec World Public Co., Ltd. $ 128,842 6,947 Grupo Televisa SA (A.D.R.) 431,339 890,200 Media Prima Bhd* 385,807 39,000 Television Broadcasts, Ltd. 220,237 79,000 Zee Telefilms, Ltd. 282,660 ----------- $ 1,448,885 ----------- Movies & Entertainment - 0.1% 97,300 Grammy Entertainment Plc $ 29,667 ----------- Publishing - 1.0% 173,916 Hurriyet Gazetecilik ve Matbaacilik AS $ 412,770 ----------- Total Media $ 2,052,752 ----------- Retailing - 0.7% Department Stores - 0.7% 6,300 Hyundai Department Store Co., Ltd. $ 289,643 ----------- Total Retailing $ 289,643 ----------- Food & Drug Retailing - 2.5% Food Retail - 0.7% 143,000 President Chain Store Corp. $ 281,045 ----------- Hypermarkets & Supercenters - 1.8% 13,300 Brasil Distr Pao Acu (A.D.R.)*(b) $ 264,537 29,700 Massmart Holdings, Ltd. 199,407 900 Shinsegae Co., Ltd.* 283,393 ----------- $ 747,337 ----------- Total Food & Drug Retailing $ 1,028,382 ----------- Food, Beverage & Tobacco - 4.0% Brewers - 1.1% 6,850 Efes Breweries International (G.D.R.) (144A)* $ 231,119 68,500 Grupo Modelo SA de CV 214,033 ----------- $ 445,152 ----------- Packaged Foods & Meats - 0.9% 5,380 CJ Corp. $ 398,616 ----------- Soft Drinks - 1.7% 11,800 Fomento Economico Mexicano SA de CV $ 702,926 61,900 Sermsuk Public Co., Ltd. 30,246 ----------- $ 733,172 ----------- Tobacco - 0.3% 97,200 PT Gudang Garam Public Co., Ltd. $ 125,857 ----------- Total Food, Beverage & Tobacco $ 1,702,797 -----------
34 The accompanying notes are an integral part of these financial statements. Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Household & Personal Products - 0.6% Personal Products - 0.6% 7,650 Natura Cosmeticos SA $ 243,562 ----------- Total Household & Personal Products $ 243,562 ----------- Pharmaceuticals & Biotechnology - 0.3% Pharmaceuticals - 0.3% 175,800 PT Tempo Scan Pacific $ 127,895 ----------- Total Pharmaceuticals & Biotechnology $ 127,895 ----------- Banks - 15.0% Diversified Banks - 15.0% 11,966 Banco Bradesco SA (b) $ 423,477 25,000 Banco do Brasil SA* 337,043 53,500 Bangkok Bank, Ltd. (Foreign Shares) 139,221 61,200 Bank Hapoalim, Ltd.* 191,745 1,017,200 Bank Mandiri 155,868 18,563 Bank of Baroda* 83,910 808,344 China Development Financial* 321,828 264,950 Chinatrust Financial Holding Co., Ltd. 288,213 163,800 Commerce Asset Holdings Bhd 217,525 263,000 E.Sun Financial Holding Co., Ltd. 210,660 218,000 First Financial Holding* 180,117 144,606 FirstRand, Ltd. 301,185 26,000 Grupo Financiero Galicia (A.D.R.)* 209,820 10,700 Hana Bank 285,475 131,600 Kasikornbank 181,036 1,900 Kookmin Bank 86,477 12,000 Kookmin Bank (A.D.R.) 546,960 221,500 Metropolitan Bank & Trust Co. 114,697 407,500 PT Bank Central Asia TBK 150,130 2,514,576 PT Lippo Bank* 303,696 331,500 RHB Capital Bhd* 183,057 123,700 Siam Commercial Bank Plc 139,191 353,234 Sinopac Holdings Co. 176,842 25,549 Standard Bank Group, Ltd. 246,479 13,600 State Bank of India 213,349 35,354 Turkiye Is Bankasi (Isbank) 205,631 11,762 Uniao de Bancos Brasileiros SA (Unibanco) (G.D.R.) (144A) 454,248 ----------- $ 6,347,880 ----------- Total Banks $ 6,347,880 ----------- Diversified Financials - 1.6% Investment Banking & Brokerage - 0.6% 8,800 Samsung Securities Co., Ltd. $ 233,799 ----------- Multi-Sector Holding - 0.6% 16,800 Remgro, Ltd. $ 265,974 ----------- Shares Value Diversified Financial Services - 0.4% 184,000 Fubon Group $ 178,839 ----------- Total Diversified Financials $ 678,612 ----------- Insurance - 4.0% Life & Health Insurance - 2.5% 11,900 Cathay Financial Holding Co., Ltd., (G.D.R.) (144A) $ 239,547 334,000 China Life Insurance Co., Ltd.* 227,368 130,500 Ping An Insurance (Group) Co. of China, Ltd.* 209,197 208,500 Sanlam, Ltd. 364,722 ----------- $ 1,040,834 ----------- Property & Casualty Insurance - 1.5% 4,100 Samsung Fire & Marine Insurance $ 331,423 76,267 Aksigorta AS 319,187 ----------- $ 650,610 ----------- Total Insurance $ 1,691,444 ----------- Real Estate - 0.9% Real Estate Management & Development - 0.9% 103,200 MCL Ladn, Ltd. $ 81,113 1,095,400 SM Prime Holdings 146,582 98,200 Wheelock Properties (Singapore), Ltd. 163,028 ----------- $ 390,723 ----------- Total Real Estate $ 390,723 ----------- Software & Services - 0.6% It Consulting & Other Services - 0.6% 4,732 Infosys Technologies, Ltd. $ 256,024 ----------- Total Software & Services $ 256,024 ----------- Technology, Hardware & Equipment - 2.5% Computer Hardware - 1.5% 104,000 ACER Sertek, Inc. $ 204,292 218,000 Quanta Computer, Inc. 413,988 ----------- $ 618,280 ----------- Electronic Manufacturing Services - 1.0% 80,269 Hon Hai Precision Industry $ 415,461 ----------- Total Technology, Hardware & Equipment $ 1,033,741 ----------- Semiconductors - 6.6% Semiconductors - 6.6% 3,530 Samsung Electronics $ 1,672,488 235,205 Taiwan Semiconductor Manufacturing Co. 406,421 31,500 Taiwan Semiconductor Manufacturing Co. (A.D.R.) 287,279 554,870 United Microelectronics Corp., Ltd. 401,113 ----------- $ 2,767,301 ----------- Total Semiconductors $ 2,767,301 -----------
The accompanying notes are an integral part of these financial statements. 35 Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Telecommunication Services - 6.6% Integrated Telecommunication Services - 2.5% 8,900 Brasil Telecom Participacoes SA* $ 321,290 49,287 Mahanagar Telephone Nigam, Ltd. 311,987 17,400 Telecom Argentina Stet-France Telecom SA (A.D.R.) 207,756 36,100 Telekomunikacja Polska SA 221,952 ----------- $ 1,062,985 ----------- Wireless Telecommunication Services - 4.1% 10,800 Korea Telecom Freetel Co. $ 249,575 7,500 Mobile Telesystems (A.D.R.)* 252,374 29,700 MTN Group, Ltd. 197,253 207,100 Shinawatra Computer Co., Plc 187,931 10,037 SK Telecom Co., Ltd.*(b) 204,755 146,000 Taiwan Mobile Co., Ltd. 150,285 65,400 Venfin, Ltd. 281,234 6,200 Vimpel-Communications (A.D.R.)* 210,986 ----------- $ 1,734,393 ----------- Total Telecommunication Services $ 2,797,378 ----------- Utilities - 1.2% Gas Utilities - 1.2% 3,600 Samchully Co., Ltd. $ 293,892 514,000 Panva Gas Holdings, Ltd.* 215,332 ----------- $ 509,224 ----------- Total Utilities $ 509,224 ----------- TOTAL COMMON STOCKS (Cost $31,297,972) $39,423,503 ----------- WARRANTS - 0.0% Commercial Services & Supplies - 0.0% Diversified Commercial Services - 0.0% 1,580 Bidvest Group, Ltd. 12/8/06* $ 3,584 ----------- TOTAL WARRANTS (Cost $0) $ 3,584 ----------- TEMPORARY CASH INVESTMENT - 5.2% Security Lending Collateral - 5.2% 2,191,114 Securities Lending Investment Fund, 3.29% $ 2,191,114 ----------- TOTAL TEMPORARY CASH INVESTMENT (Cost $2,191,114) $ 2,191,114 ----------- TOTAL INVESTMENT IN SECURITIES - 101.4% (Cost $34,447,106) (a) $42,793,058 ----------- OTHER ASSETS AND LIABILITIES - (1.4)% $ (574,444) ----------- TOTAL NET ASSETS - 100.0% $42,218,614 ===========
* Non-income producing security (A.D.R.) American Depositary Receipt (G.D.R.) Global Depositary Receipt 144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At June 30, 2005, the value of these securities amounted to $1,341,187 or 3.18% of net assets. (a) Distributions of investments by country of issue, as percentage of total equity holdings (excluding temporary cash investments) is as follows:
South Korea 21.1% Brazil 14.7 Taiwan 12.3 India 8.9 South Africa 8.9 People's Republic of China 4.0 Turkey 3.9 Mexico 3.8 Russia 3.4 Thailand 3.1 Indonesia 3.0 Malaysia 2.7 Israel 1.5 Peru 1.3 Hong Kong 1.1 Argentina 1.0 Other (Individually less than 1%) 5.3 ----- 100.0% =====
(b) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 18,500 Anglogold Ashanti, Ltd. (A.D.R.) $ 661,005 4,985 Aracruz Cellulose SA (A.D.R.) 173,229 11,323 Banco Bradesco SA 400,721 1,400 Centrais Eletricas Bra (A.D.R.)+ 8,922 12,635 Brasil Distr Pao Acu (A.D.R.)* 251,310 9,500 SK Telecom Co., Ltd. * 193,800 10,640 Surgutneftegaz (A.D.R.)* 397,404 ----------- Total $ 2,086,391 ===========
+ Pending sale for security Centrais Eletricas Bra (A.D.R.) as of 6/30/05 36 The accompanying notes are an integral part of these financial statements. Pioneer Europe VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value PREFERRED STOCKS - 1.5% Automobiles & Components - 1.5% Automobile Manufacturers - 1.5% 353 Porsche AG $ 264,596 ----------- Total Automobiles & Components $ 264,596 ----------- TOTAL PREFERRED STOCKS (Cost $159,038) $ 264,596 ----------- COMMON STOCKS - 96.0% Energy - 12.2% Integrated Oil & Gas - 12.2% 45,606 BP Amoco Plc $ 474,755 16,656 Eni S.p.A. 426,766 21,227 Repsol SA 538,462 3,114 Total SA 729,153 ----------- $ 2,169,136 ----------- Total Energy $ 2,169,136 ----------- Materials - 8.7% Construction Materials - 5.5% 13,391 CRH Plc $ 353,559 4,347 Holcim, Ltd. 263,743 3,932 Lafarge Br 356,769 ----------- $ 974,071 ----------- Diversified Chemical - 1.9% 5,031 BASF India, Ltd. $ 333,413 ----------- Diversified Metals & Mining - 1.3% 7,996 Rio Tinto Plc $ 243,007 ----------- Total Materials $ 1,550,491 ----------- Capital Goods - 9.0% Building Products - 1.9% 6,078 Compagnie de Saint Gobain $ 335,842 ----------- Construction & Engineering - 2.8% 11,478 ACS, Actividades de Construccion y Servicios, SA $ 319,945 2,240 VINCI SA 186,315 ----------- $ 506,260 ----------- Electrical Component & Equipment - 1.0% 2,344 Schneider Electric SA $ 176,159 ----------- Industrial Conglomerates - 2.6% 6,284 Siemens $ 456,775 ----------- Industrial Machinery - 0.7% 12,288 AB SKF $ 125,272 ----------- Total Capital Goods $ 1,600,308 ----------- Shares Value Commercial Services & Supplies - 1.0% Office Services & Supplies - 1.0% 17,713 Buhrmann NV $ 174,772 ----------- Total Commercial Services & Supplies $ 174,772 ----------- Transportation - 1.7% Air Freight & Couriers - 1.7% 12,170 TNT Post Group NV $ 308,117 ----------- Total Transportation $ 308,117 ----------- Automobiles & Components - 3.1% Tires & Rubber - 3.1% 3,898 Compagnie Generale des Etablissements Michelin $ 236,582 4,318 Continental AG 310,377 ----------- $ 546,959 ----------- Total Automobiles & Components $ 546,959 ----------- Consumer Durables & Apparel - 2.8% Apparel, Accessories & Luxury Goods - 1.5% 1,599 Adidas-Salomon AG $ 266,712 ----------- Consumer Electronics - 1.3% 9,053 Philips Electronics NV $ 227,621 ----------- Total Consumer Durables & Apparel $ 494,333 ----------- Consumer Services - 0.9% Restaurants - 0.9% 38,560 Compass Group Plc $ 161,681 ----------- Total Consumer Services $ 161,681 ----------- Media - 1.1% Advertising - 0.5% 2,942 Publicis SA $ 86,548 ----------- Movies & Entertainment - 0.6% 3,223 Vivendi Universal $ 100,920 ----------- Total Media $ 187,468 ----------- Retailing - 1.4% Computer & Electronics Retail - 0.6% 34,273 Dixons Group Plc $ 95,921 ----------- Specialty Stores - 0.8% 34,285 HMV Group Plc $ 145,217 ----------- Total Retailing $ 241,138 ----------- Food, Beverage & Tobacco - 1.8% Packaged Foods & Meats - 1.8% 1,229 Nestle SA (Registered Shares) $ 314,110 ----------- Total Food, Beverage & Tobacco $ 314,110 -----------
The accompanying notes are an integral part of these financial statements. 37 Pioneer Europe VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Health Care Equipment & Services - 0.9% Health Care Equipment - 0.9% 1,511 Synthes, Inc. $ 165,596 ----------- Total Health Care Equipment & Services $ 165,596 ----------- Pharmaceuticals & Biotechnology - 8.9% Biotechnology - 0.7% 1,230 Actelion, Ltd.* $ 127,690 ----------- Pharmaceuticals - 8.2% 12,656 Astrazeneca Plc $ 522,651 14,214 GlaxoSmithKline Plc 342,477 1,628 Roche Holdings AG 205,322 3,172 Schering AG 194,235 17,765 Shire Pharmaceuticals Group Plc 194,225 ----------- $ 1,458,910 ----------- Total Pharmaceuticals & Biotechnology $ 1,586,600 ----------- Banks - 13.7% Diversified Banks - 13.7% 46,711 Barclays Plc $ 464,021 9,640 BNP Paribas SA 658,996 23,171 Royal Bank of Scotland Group Plc 699,804 6,064 Societe Generale 614,167 ----------- $ 2,436,988 ----------- Total Banks $ 2,436,988 ----------- Diversified Financials - 7.0% Diversified Capital Markets - 6.0% 12,076 CS Group* $ 473,815 7,739 UBS AG 602,322 ----------- $ 1,076,137 ----------- Diversified Financial Services - 1.0% 6,106 ING Groep NV $ 171,762 ----------- Total Diversified Financials $ 1,247,899 ----------- Insurance - 5.2% Multi-Line Insurance - 3.9% 13,601 AXA $ 338,208 2,029 Zurich Financial Services* 348,492 ----------- $ 686,700 ----------- Reinsurance - 1.3% 3,860 Swiss Re $ 236,596 ----------- Total Insurance $ 923,296 ----------- Shares Value Technology Hardware & Equipment - 2.5% Communications Equipment - 2.5% 95,769 Telefonaktiebolaget LM Ericsson $ 305,958 8,468 Nokia Oyj 141,618 ----------- $ 447,576 ----------- Total Technology Hardware & Equipment $ 447,576 ----------- Semiconductors - 0.9% Semiconductor Equipment - 0.9% 10,703 ASM Lithography Holding NV* $ 167,291 ----------- Total Semiconductors $ 167,291 ----------- Telecommunication Services - 9.7% Integrated Telecommunication Services - 5.1% 18,818 France Telecom SA $ 546,630 14,162 Telefonica SA 231,887 6,902 Telekom Austria AG 134,144 ----------- $ 912,661 ----------- Wireless Telecommunication Services - 4.6% 336,929 Vodafone Group Plc $ 822,692 ----------- Total Telecommunication Services $ 1,735,353 ----------- Utilities - 3.5% Electric Utilities - 2.4% 4,834 E.On AG $ 429,110 ----------- Gas Utilities - 1.1% 48,966 Centrica Plc $ 202,852 ----------- Total Utilities $ 631,962 ----------- TOTAL COMMON STOCKS (Cost $14,518,458) $17,091,074 ----------- TOTAL INVESTMENT IN SECURITIES - 97.5% (Cost $14,677,496)(a) $17,355,670 ----------- OTHER ASSETS AND LIABILITIES - 2.5% $ 452,121 ----------- TOTAL NET ASSETS - 100.0% $17,807,791 ===========
* 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 25.2% France 25.1 Switzerland 14.8 Germany 13.0 Spain 6.3 Netherlands 6.0 Sweden 2.5 Italy 2.5 Ireland 2.0 United States 1.0 Finland 0.8 Austria 0.8 ----- 100.0% =====
38 The accompanying notes are an integral part of these financial statements. Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value PREFERRED STOCKS - 0.4% Health Care Equipment & Services - 0.4% Health Care Equipment - 0.4% 1,050 Fresenius AG $ 120,204 ----------- Total Health Care Equipment & Services $ 120,204 ----------- TOTAL PREFERRED STOCKS (Cost $112,283) $ 120,204 ----------- COMMON STOCKS - 98.0% Energy - 8.8% Integrated Oil & Gas - 8.1% 31,810 BP Amoco Plc $ 331,140 16,300 Eni S.p.A. (a) 417,644 3,400 Petrobras Brasileiro (A.D.R.) 156,536 16,500 Repsol SA (a) 418,553 2,930 Total SA 686,068 ----------- $ 2,009,941 ----------- Oil & Gas Equipment & Services - 0.4% 1,760 Technip* $ 81,824 ----------- Oil & Gas Refining & Marketing - 0.3% 12,000 Nippon Mitsubishi* $ 81,552 ----------- Total Energy $ 2,173,317 ----------- Materials - 8.5% Construction Materials - 2.6% 9,600 CRH Plc $ 253,319 1,600 Holcim, Ltd. 97,076 1,600 Lafarge Br (a) 145,176 16,900 Ultra Tech Cement, Ltd. 137,058 ----------- $ 632,629 ----------- Diversified Chemical - 1.5% 4,600 BASF India, Ltd. $ 304,850 2,400 Bayer AG 79,812 ----------- $ 384,662 ----------- Diversified Metals & Mining - 3.4% 11,102 Broken Hill Proprietary Co., Ltd. $ 151,594 36,800 Dowa Mining Co., Ltd.* 243,562 7,350 Freeport-McMoRan Copper & Gold, Inc. (Class B) 275,184 5,390 Rio Tinto Plc 163,808 ----------- $ 834,148 ----------- Industrial Gases - 1.0% 49,500 Taiyo Nippon Sanso Corp. $ 251,413 ----------- Total Materials $ 2,102,852 ----------- Capital Goods - 12.0% Building Products - 1.3% 5,900 Compagnie de Saint Gobain $ 326,007 ----------- Shares Value Construction, Farm Machinery & Heavy Trucks - 2.0% 13,700 Daewoo Heavy Industries & Machinery, Ltd. $ 261,342 4,700 Hyundai Heavy Industries 234,844 ----------- $ 496,186 ----------- Construction & Engineering - 4.3% 9,249 ACS, Actividades de Construccion y Servicios, SA $ 257,813 65,600 Kajima Corp.* 241,449 52,800 Shimizu Corp.* 244,825 3,960 VINCI SA 329,378 ----------- $ 1,073,465 ----------- Electrical Component & Equipment - 0.7% 2,400 Schneider Electric SA $ 180,367 ----------- Industrial Conglomerates - 1.4% 5,562 KOC Holding AS $ 24,454 4,390 Siemens 319,103 ----------- $ 343,557 ----------- Industrial Machinery - 1.5% 11,400 Atlas Copco AB $ 180,245 13,600 Koyo Seiko Co., Ltd.* 181,647 ----------- $ 361,892 ----------- Trading Companies & Distributors - 0.8% 20,000 Mitsui & Co. Ltd.* $ 189,531 ----------- Total Capital Goods $ 2,971,005 ----------- Commercial Services & Supplies - 0.4% Data Processing Services - 0.4% 2,700 Trans Cosmos, Inc.* $ 106,977 ----------- Total Commercial Services & Supplies $ 106,977 ----------- Transportation - 2.4% Air Freight & Couriers - 0.9% 8,100 TNT Post Group NV $ 205,074 ----------- Airport Services - 0.6% 14,400 BAA Plc $ 159,699 ----------- Railroads - 0.9% 28 Central Japan Railway Co. $ 216,032 ----------- Total Transportation $ 580,805 ----------- Automobiles & Components - 3.5% Automobile Manufacturers - 2.3% 15,500 Toyota Motor Co. $ 554,712 -----------
The accompanying notes are an integral part of these financial statements. 39 Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Tires & Rubber - 1.2% 3,500 Compagnie Generale des Etablissements Michelin $ 212,426 1,300 Continental AG 93,444 ----------- $ 305,870 ----------- Total Automobiles & Components $ 860,582 ----------- Consumer Durables & Apparel - 3.2% Apparel, Accessories & Luxury Goods - 1.0% 1,500 Adidas-Salomon AG $ 250,199 ----------- Consumer Electronics - 2.2% 9,500 Philips Electronics NV $ 238,860 20,000 Sharp Corp.* 312,996 ----------- $ 551,856 ----------- Total Consumer Durables & Apparel $ 802,055 ----------- Consumer Services - 1.5% Casinos & Gaming - 0.9% 3,500 Sega Sammy Holdings, Inc. $ 214,801 ----------- Restaurants - 0.6% 37,200 Compass Group Plc $ 155,979 ----------- Total Consumer Services $ 370,780 ----------- Media - 4.6% Broadcasting & Cable TV - 3.4% 16,200 British Sky Broadcasting Plc $ 152,428 4,600 Grupo Televisa SA (A.D.R.) 285,614 280 Jupiter Telecommunications Co., Ltd.* 235,472 14,100 Mediaset S.p.A 165,740 ----------- $ 839,254 ----------- Movies & Entertainment - 0.6% 4,900 Vivendi Universal $ 153,430 ----------- Publishing - 0.6% 1,800 Lagardere SCA $ 132,747 ----------- Total Media $ 1,125,431 ----------- Retailing - 0.8% Catalog Retail - 0.8% 12,000 GUS Plc $ 189,385 ----------- Total Retailing $ 189,385 ----------- Food & Drug Retailing - 2.2% Drug Retail - 0.3% 6,500 Boots Company Plc $ 70,699 ----------- Food Retail - 1.9% 5,400 Lawson, Inc. $ 188,361 51,400 Tesco Plc 292,813 ----------- $ 481,174 ----------- Total Food & Drug Retailing $ 551,873 ----------- Shares Value Food, Beverage & Tobacco - 2.4% Packaged Foods & Meats - 1.8% 1,700 Nestle SA (Registered Shares) $ 434,489 ----------- Tobacco - 0.6% 7,720 British American Tobacco Plc $ 149,300 ----------- Total Food, Beverage & Tobacco $ 583,789 ----------- Health Care Equipment & Services - 0.3% Health Care Equipment - 0.3% 400 Nobel Biocare Holding AG $ 80,960 ----------- Total Health Care Equipment & Services $ 80,960 ----------- Pharmaceuticals & Biotechnology - 8.1% Biotechnology - 0.3% 800 Actelion, Ltd.* $ 83,050 ----------- Pharmaceuticals - 7.8% 6,400 Astellas Pharma, Inc. $ 218,625 9,832 Astrazeneca Plc 406,029 12,100 Chugai Pharmaceutical Co.* 186,867 8,590 GlaxoSmithKline Plc 206,970 3,800 Novartis 180,502 3,538 Roche Holdings AG 446,210 1,380 Sanofi-Aventis (a) 112,965 4,900 Shire Pharmaceuticals Group Plc (A.D.R.) 160,720 ----------- $ 1,918,888 ----------- Total Pharmaceuticals & Biotechnology $ 2,001,938 ----------- Banks - 12.7% Diversified Banks - 12.7% 16,200 Banco Bilbao Vizcaya Argentaria, SA $ 249,816 32,825 Barclays Plc 326,079 5,200 BNP Paribas SA 355,475 8,145 Credit Agricole SA 205,771 28,900 Development Bank of Singapore, Ltd. 244,621 2,800 Kookmin Bank (A.D.R.) 127,624 13,520 Royal Bank of Scotland Group Plc 408,327 4,119 Societe Generale 417,175 45,500 Sumitomo Trust Bank* 276,006 22,700 Turkiye Is Bankasi 132,031 75 UFJ Holdings, Inc.* 389,233 ----------- $ 3,132,158 ----------- Total Banks $ 3,132,158 ----------- Diversified Financials - 4.9% Diversified Capital Markets - 3.4% 7,930 CS Group* $ 311,142 6,650 UBS AG 517,566 ----------- $ 828,708 -----------
40 The accompanying notes are an integral part of these financial statements. Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Diversified Financial Services - 1.5% 13,400 ING Groep NV $ 376,943 ----------- Total Diversified Financials $ 1,205,651 ----------- Insurance - 4.5% Life & Health Insurance - 0.5% 4,900 China Life Insurance Co. (A.D.R.)*(a) $ 133,770 ----------- Multi-Line Insurance - 2.7% 5,300 Assicurazioni Generali $ 164,860 10,900 AXA 271,043 1,380 Zurich Financial Services* 237,023 ----------- $ 672,926 ----------- Property & Casualty Insurance - 0.7% 20,000 Mitsui Sumitomo Insurance Co.* $ 179,459 ----------- Reinsurance - 0.6% 2,200 Swiss Re $ 134,847 ----------- Total Insurance $ 1,121,002 ----------- Real Estate - 1.1% Real Estate Management & Development - 1.1% 25,000 Mitsui Fudosan Co. $ 280,178 ----------- Total Real Estate $ 280,178 ----------- Software & Services - 0.7% IT Consulting & Other Services - 0.7% 2,100 Atos Origin* $ 132,776 300 OBIC Co., Ltd. 50,813 ----------- $ 183,589 ----------- Total Software & Services $ 183,589 ----------- Technology Hardware & Equipment - 2.2% Electronic Equipment & Instruments - 2.2% 600 Keyence Corp. $ 133,705 3,300 Kyocera Corp.* 251,695 10,000 Ricoh Co.* 156,408 ----------- $ 541,808 ----------- Total Technology Hardware & Equipment $ 541,808 ----------- Semiconductors - 0.7% Semiconductor Equipment - 0.7% 3,100 Tokyo Electron, Ltd. $ 162,695 ----------- Total Semiconductors $ 162,695 ----------- Shares Value Telecommunication Services - 9.0% Integrated Telecommunication Services - 5.4% 4,000 Brasil Telecom Participacoes SA* $ 144,400 17,200 France Telecom SA 499,630 30 Nippon Telegraph & Telephone Corp.* 128,709 46,486 Telecom Italia S.p.A. 144,833 25,823 Telefonica SA 422,824 ----------- $ 1,340,396 ----------- Wireless Telecommunication Services - 3.6% 4,000 Mobile Telesystems (A.D.R.)* $ 134,600 6,500 SK Telecom Co., Ltd.*(a) 132,600 256,211 Vodafone Group Plc 625,600 ----------- $ 892,800 ----------- Total Telecommunication Services $ 2,233,196 ----------- Utilities - 3.5% Electric Utilities - 2.6% 4,033 E.On AG $ 358,006 11,700 Tokyo Electric Power Co.* 279,554 ----------- $ 637,560 ----------- Multi-Utilities - 0.9% 23,300 National Grid Transco Plc $ 225,583 ----------- Total Utilities $ 863,143 ----------- TOTAL COMMON STOCKS (Cost $20,926,646) $24,225,169 ----------- TEMPORARY CASH INVESTMENT - 5.1% Security Lending Collateral - 5.1% 1,252,555 Securities Lending Investment Fund, 3.29% $ 1,252,555 ----------- TOTAL TEMPORARY CASH INVESTMENT (Cost $1,252,555) $ 1,252,555 ----------- TOTAL INVESTMENT IN SECURITIES - 103.5% (Cost $22,291,484)(b) $25,597,928 ----------- OTHER ASSETS AND LIABILITIES - (3.5)% $ (869,961) ----------- TOTAL NET ASSETS - 100.0% $24,727,967 -----------
The accompanying notes are an integral part of these financial statements. 41 Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- (A.D.R.) American Depositary Receipt * Non-income producing security (a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 4,580 China Life Insurance Co. (A.D.R.)* $ 125,034 15,400 Eni S.p.A. 394,583 1,500 Lafarge Br 136,102 12,300 Repsol SA 312,012 1,200 Sanofi-Aventis 98,230 6,175 SK Telecom Co., Ltd. * 125,970 ---------- Total $1,191,931 ==========
(b) Distributions of investments by country of issue, as a percentage of total equity holdings (excluding temporary cash investments) is as follows: Japan 24.6% France 17.5 United Kingdom 16.5 Switzerland 10.4 Germany 6.3 Spain 5.5 Italy 3.7 Netherlands 3.4 South Korea 3.1 Brazil 1.2 Mexico 1.2 United States 1.1 Ireland 1.0 Singapore 1.0 Other (individually less than 1%) 3.5 ----- 100.0% =====
42 The accompanying notes are an integral part of these financial statements. Pioneer Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 81.2% Energy - 11.3% Coal & Consumable Fuels - 1.4% 4,900 Alpha Natural Resources, Inc.* $ 117,012 10,814 Massey Energy Co. 407,904 ----------- $ 524,916 ----------- Oil & Gas Drilling - 2.4% 1,625 Atwood Oceanics, Inc.* $ 100,035 15,800 Todco* 405,586 8,469 Unit Corp.* 372,721 ----------- $ 878,342 ----------- Oil & Gas Equipment & Services - 3.0% 15,400 Gulfmark Offshore, Inc.* $ 420,574 29,036 Key Energy Services, Inc.* 351,336 11,140 Maverick Tube Corp.* 331,972 ----------- $ 1,103,882 ----------- Oil & Gas Exploration & Production - 4.3% 3,300 Forest Oil Corp.* $ 138,600 14,600 Parallel Petroleum Corp.* 129,210 6,400 Penn Virginia Corp. 285,888 16,900 Rosetta Resources, Inc., (144A)* 270,062 5,895 Swift Energy Co.* 211,159 11,698 Southwestern Energy Co.* 549,572 ----------- $ 1,584,491 ----------- Oil & Gas Storage & Transportation - 0.2% 2,700 Arlington Tankers, Ltd. $ 58,833 ----------- Total Energy $ 4,150,464 ----------- Materials - 2.7% Gold - 1.0% 30,625 Cambior, Inc.* $ 66,763 7,950 Glamis Gold, Ltd.*(a) 136,820 26,400 IAMGOLD Corp. 180,048 ----------- $ 383,631 ----------- Paper Products - 0.5% 24,693 Domtar, Inc. $ 182,481 ----------- Specialty Chemicals - 0.4% 4,175 Great Lakes Chemical Corp. $ 131,387 ----------- Steel - 0.8% 3,875 Carpenter Technology $ 200,725 8,496 NN, Inc. 107,729 ----------- $ 308,454 ----------- Total Materials $ 1,005,953 ----------- Shares Value Capital Goods - 7.3% Construction & Farm Machinery & Heavy Trucks - 2.9% 11,295 Federal Signal Corp. $ 176,202 5,130 Joy Global, Inc. 172,317 2,094 Nacco Industries, Inc. 224,519 23,475 Wabtec Corp. 504,243 ----------- $ 1,077,281 ----------- Construction & Engineering - 1.2% 9,100 Dycom Industries, Inc.* $ 180,271 16,625 Insituform Technologies, Inc.* 266,499 ----------- $ 446,770 ----------- Electrical Component & Equipment - 1.3% 50,193 Graftech International, Ltd.*(a) $ 215,830 42,279 Power-One, Inc.* 266,780 ----------- $ 482,610 ----------- Industrial Machinery - 1.4% 14,200 Flowserve Corp.* $ 429,692 3,425 Kaydon Corp. 95,386 ----------- $ 525,078 ----------- Trading Companies & Distributors - 0.5% 5,229 Applied Industrial Technologies, Inc. $ 168,844 ----------- Total Capital Goods $ 2,700,583 ----------- Commercial Services & Supplies - 5.3% Diversified Commercial Services - 2.9% 22,560 Cornell Co., Inc.* $ 303,658 4,175 Corrections Corp. of America* 163,869 35 Profit Recovery Group International* 99 10,975 Providence Service Corp.* 272,509 6,948 School Specialty, Inc.* 323,082 ----------- $ 1,063,217 ----------- Environmental & Facilities Services - 0.7% 20,000 Central Parking Corp. $ 275,000 ----------- Human Resource & Employment Services - 1.7% 48,600 On Assignment, Inc.* $ 242,028 6,170 Korn/Ferry International* 109,518 10,400 Watson Wyatt & Co., Holdings 266,552 ----------- $ 618,098 ----------- Total Commercial Services & Supplies $ 1,956,315 ----------- Transportation - 2.6% Air Freight & Couriers - 0.4% 4,600 Forward Air Corp. $ 130,042 -----------
The accompanying notes are an integral part of these financial statements. 43 Pioneer Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Marine - 0.6% 5,800 Dryships, Inc. $ 95,758 7,600 Excel Maritime Carriers, Ltd.* 113,620 ----------- $ 209,378 ----------- Railroads - 1.0% 14,143 Genesee & Wyoming, Inc.* $ 383,982 ----------- Trucking - 0.6% 4,268 Dollar Thrifty Automotive Group* $ 162,099 3,800 Universal Truckload Services, Inc.* 64,182 ----------- $ 226,281 ----------- Total Transportation $ 949,683 ----------- Automobiles & Components - 0.6% Auto Parts & Equipment - 0.6% 11,900 Commercial Vehicle Group, Inc.* $ 211,225 ----------- Total Automobiles & Components $ 211,225 ----------- Consumer Durables & Apparel - 0.8% Apparel, Accessories & Luxury Goods - 0.3% 4,650 Kellwood Co. $ 125,084 ----------- Housewares & Specialties - 0.5% 3,137 Jarden Corp.* $ 169,147 ----------- Total Consumer Durables & Apparel $ 294,231 ----------- Consumer Services - 0.8% Casinos & Gaming - 0.3% 8,600 Alliance Gaming Corp.*(a) $ 120,572 ----------- Restaurants - 0.5% 10,419 O'Charley's, Inc.* $ 184,000 ----------- Total Consumer Services $ 304,572 ----------- Media - 0.0% Advertising - 0.0% 7,166 EMAK Worldwide, Inc.* $ 77,321 ----------- Total Media $ 77,321 ----------- Retailing - 6.0% Apparel Retail - 1.2% 18,968 Charming Shoppes, Inc.* $ 176,971 5,795 Stage Stores, Inc.* 252,662 ----------- $ 429,633 ----------- Catalog Retail - 1.7% 31,475 Insight Enterprises, Inc.* $ 635,166 ----------- Computer & Electronics Retail - 0.1% 19,250 Tweeter Home Entertainment Group, Inc.*(a) $ 48,125 ----------- Distributors - 0.1% 7,940 Advanced Marketing Services, Inc.* $ 39,700 ----------- Shares Value General Merchandise Stores - 0.6% 13,800 Fred's, Inc. (a) $ 228,804 ----------- Homefurnishing Retail - 0.3% 4,300 Cost Plus, Inc.* $ 107,242 ----------- Specialty Stores - 2.0% 7,675 Claire's Stores, Inc. $ 184,584 25,407 Hancock Fabrics, Inc. 168,702 36,755 Rent-Way, Inc.* 361,669 ----------- $ 714,955 ----------- Total Retailing $ 2,203,625 ----------- Food, Beverage & Tobacco - 1.3% Agricultural Products - 0.8% 10,008 Fresh Del Monte Produce, Inc. (a) $ 269,415 ----------- Packaged Foods & Meats - 0.5% 13,050 B & G Foods, Inc. $ 191,052 ----------- Total Food, Beverage & Tobacco $ 460,467 ----------- Household & Personal Products - 1.9% Personal Products - 1.9% 5,225 NBTY, Inc.* $ 135,537 23,479 Nu Skin Enterprises, Inc. 547,061 ----------- $ 682,598 ----------- Total Household & Personal Products $ 682,598 ----------- Health Care Equipment & Services - 7.7% Health Care Equipment - 1.1% 7,900 Analogic Corp. $ 397,528 ----------- Health Care Facilities - 1.0% 3,650 Sunrise Senior Living, Inc.*(a) $ 197,027 2,983 Triad Hospitals, Inc.* 162,991 ----------- $ 360,018 ----------- Health Care Services - 3.6% 21,525 Cross Country Healthcares, Inc.* $ 365,925 11,556 Chemed Corp. 472,409 6,427 Pediatrix Medical Group, Inc.* 472,642 ----------- $ 1,310,976 ----------- Health Care Supplies - 0.0% 700 Merit Medical Systems, Inc.* $ 10,787 ----------- Managed Health Care - 2.0% 9,970 Amerigroup Corp.* $ 400,794 4,730 PacifiCare Health Systems* 337,959 ----------- $ 738,753 ----------- Total Health Care Equipment & Services $ 2,818,062 -----------
44 The accompanying notes are an integral part of these financial statements. Pioneer Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Pharmaceuticals & Biotechnology - 0.5% Biotechnology - 0.5% 11,055 Kendle International, Inc.* $ 167,483 ----------- Total Pharmaceuticals & Biotechnology $ 167,483 ----------- Banks - 8.7% Regional Banks - 6.5% 7,000 Alliance Bankshares Corp.* $ 106,750 4,531 Banner Corp. 126,913 29,825 Cardinal Financial Corp.* 280,057 4,175 City National Corp. 299,389 6,375 Irwin Financial Corp. 141,461 35,650 Sterling Bancshares, Inc. 554,714 3,500 Signature Bank* 85,400 27,225 Texas Capital Bancshares, Inc.* 537,422 2,400 Trustmark Corp. 70,224 5,707 Whitney Holding Corp. 186,219 ----------- $ 2,388,549 ----------- Thrifts & Mortgage Finance - 2.2% 16,530 BankAtlantic Bancorp, Inc. $ 313,244 4,575 BankUnited Financial Corp. (a) 123,708 10,275 First Niagara Financial Group, Inc. 149,810 12,050 Provident Financial Services, Inc. 211,719 ----------- $ 798,481 ----------- Total Banks $ 3,187,030 ----------- Diversified Financials - 6.2% Asset Management & Custody Banks - 1.2% 24,329 Apollo Investment Corp. $ 448,383 ----------- Consumer Finance - 1.7% 7,625 Advanta Corp. $ 196,115 8,178 Advanta Corp. (Class B) 230,292 7,100 Cash America International, Inc. 142,852 9,200 Rewards Network, Inc.* 49,680 ----------- $ 618,939 ----------- Investment Banking & Brokerage - 1.8% 6,700 A.G. Edwards, Inc. $ 302,505 10,100 OptionsXpress Holdings, Inc.*(a) 153,520 6,550 Piper Jaffray Co.* 199,317 ----------- $ 655,342 ----------- Specialized Finance - 1.5% 6,343 Financial Federal Corp. $ 245,094 15,700 Nasdaq Stock Market, Inc.* 296,102 ----------- $ 541,196 ----------- Total Diversified Financials $ 2,263,860 ----------- Shares Value Insurance - 4.5% Multi-Line Insurance - 0.7% 40,675 Quanta Capital Holdings (144A)* $ 253,405 ----------- Property & Casualty Insurance - 2.1% 19,175 Assured Guaranty, Ltd. $ 447,928 3,800 American Safety Insurance Group, Ltd.* 57,836 4,200 National Interstate Corp.* 84,294 1,300 RLI Corp. 57,980 2,725 Selective Insurance Group, Inc. 135,024 ----------- $ 783,062 ----------- Reinsurance - 1.7% 8,826 IPC Holdings, Ltd. $ 349,686 7,550 Odyssey Re Holdings, Corp. (a) 186,334 2,075 Platinum Underwriter Holdings, Ltd. 66,027 ----------- $ 602,047 ----------- Total Insurance $ 1,638,514 ----------- Real Estate - 3.7% Real Estate Investment Trusts - 3.7% 12,813 BioMed Property Trust, Inc. $ 305,590 11,550 Capital Trust, Inc. 385,886 2,128 Entertainment Properties Trust 97,887 23,425 Feldman Mall Properties, Inc. 326,779 11,450 Saxon Capital, Inc. 195,452 1,536 Universal Health Realty, Inc. 58,537 ----------- $ 1,370,131 ----------- Total Real Estate $ 1,370,131 ----------- Software & Services - 3.8% Application Software - 1.1% 14,979 SPSS, Inc.* $ 287,747 16,800 TIBCO Software, Inc.* 109,872 ----------- $ 397,619 ----------- Data Processing & Outsourced Services - 0.7% 17,542 Pegusus Systems, Inc.*(a) $ 195,593 5,275 Intrado, Inc.* 78,913 ----------- $ 274,506 ----------- IT Consulting & Other Services - 0.3% 10,900 Gartner Group, Inc.*(a) $ 115,758 ----------- Systems Software - 1.7% 39,250 Borland Software Corp.* $ 269,255 10,425 Internet Security Systems, Inc.* 211,523 7,625 Sybase, Inc.* 139,919 ----------- $ 620,697 ----------- Total Software & Services $ 1,408,580 -----------
The accompanying notes are an integral part of these financial statements. 45 Pioneer Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Technology, Hardware & Equipment - 2.3% Communications Equipment - 1.3% 9,275 Black Box Corp. $ 328,335 22,929 Remec, Inc.*(a) 146,746 ----------- $ 475,081 ----------- Computer Storage & Peripherals - 0.3% 4,985 Electronics for Imagine, Inc.* $ 104,884 ----------- Electronic Equipment & Instruments - 0.7% 15,025 Planar Systems, Inc.*(a) $ 110,433 11,000 Technitrol, Inc.* 155,430 ----------- $ 265,863 ----------- Total Technology, Hardware & Equipment $ 845,828 ----------- Semiconductors - 0.8% Semiconductor Equipment - 0.2% 3,893 Advanced Energy Industries, Inc.* $ 30,599 3,037 Brooks Automation, Inc.* 45,099 ----------- $ 75,698 ----------- Semiconductors - 0.6% 10,170 HI/FN, Inc.* $ 61,122 33,100 Lattice Semiconductor Corp.* 146,964 ----------- $ 208,086 ----------- Total Semiconductors $ 283,784 ----------- Telecommunication Services - 0.2% Integrated Telecommunication Services - 0.2% 1,300 Neustar, Inc.* $ 33,280 ----------- Wireless Telecommunication Services - 0.0% 8,003 Boston Communications Group, Inc.* $ 16,486 ----------- Total Telecommunication Services $ 49,766 ----------- Utilities - 2.2% Gas Utilities - 2.2% 6,100 AGL Resources, Inc. $ 235,765 5,100 Energen Corp. 178,754 7,105 People's Energy Corp. 308,783 3,550 UGI Corp. 99,045 ----------- $ 822,347 ----------- Total Utilities $ 822,347 ----------- TOTAL COMMON STOCKS (Cost $25,276,347) $29,852,422 ----------- EXCHANGE TRADED FUND - 0.6% 3,450 iShares Russell 2000 Value (a) $ 221,318 ----------- TOTAL EXCHANGE TRADED FUND (Cost $162,579) $ 221,318 ----------- Principal Amount Value TEMPORARY CASH INVESTMENTS - 19.4% Repurchase Agreement - 13.9% $ 5,100,000 UBS Warburg, Inc., 2.75%, dated 6/30/05, repurchase price of $5,100,000 plus accrued interest on 7/1/05 collateralized by $5,261,000 U.S. Treasury Bill, 2.0%, 5/15/06. $ 5,100,000 ----------- Shares Security Lending Collateral - 5.5% 2,023,358 Securities Lending Investment Fund, 3.29% $ 2,023,358 ----------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $7,123,358) $ 7,123,358 ----------- TOTAL INVESTMENT IN SECURITIES - 101.2% (Cost $32,562,284) (a) $37,197,098 ----------- OTHER ASSETS AND LIABILITIES - (1.2)% $ (418,286) ----------- TOTAL NET ASSETS - 100.0% $36,778,812 ===========
* 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 June 30, 2005, the value of these securities amounted to $523,467 or 1.42% of net assets. (a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 8,170 Alliance Gaming Corp. * $ 114,543 4,346 BankUnited Financial Corp. 117,516 9,975 Fred's, Inc. 165,385 10,355 Gartner Group, Inc. * 109,970 6,895 Glamis Gold, Ltd. * 118,663 25,380 Graftech International, Ltd. * 109,134 3,276 isharesRussell 2000 Value 210,156 7,172 Odyssey Re Holdings, Corp. 177,005 4,728 OptionsXpress Holdings, Inc. * 71,866 14,301 Pegusus Systems, Inc. * 159,456 10,830 Planar Systems, Inc. * 79,601 16,250 Remec, Inc. * 104,000 3,465 Sunrise Senior Living, Inc. * 187,041 690 Tweeter Home Entertainment Group, Inc. * 1,725 8,260 Fresh Del Monte Produce, Inc. 222,359 ---------- Total $1,948,420 ==========
46 The accompanying notes are an integral part of these financial statements. Pioneer Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 96.5% Energy - 6.6% Oil & Gas Equipment & Services - 2.5% 3,500 Maverick Tube Corp.* $ 104,300 4,200 NS Group, Inc.* 136,542 3,100 Offshore Logistics, Inc.* 101,804 ----------- $ 342,646 ----------- Oil & Gas Exploration & Production - 3.5% 4,525 Forest Oil Corp.* $ 190,050 2,000 Houston Exploration Co.* 106,100 2,103 Spinnaker Exploration Co.* 74,635 2,100 Stone Energy Corp.* 102,690 ----------- $ 473,475 ----------- Oil & Gas Storage & Transportation - 0.6% 1,300 Overseas Shipholding Group, Inc. $ 77,545 ----------- Total Energy $ 893,666 ----------- Materials - 5.7% Aluminum - 0.7% 4,500 Century Aluminum Co.* $ 91,800 ----------- Construction Materials - 0.9% 2,950 Mega Bloks Inc. (144A)* $ 57,716 1,200 Texas Industries, Inc. 67,476 ----------- $ 125,192 ----------- Diversified Chemical - 0.9% 2,100 FMC Corp.* $ 117,894 ----------- Diversified Metals & Mining - 0.5% 4,900 Brush Engineered Materials, Inc.* $ 69,874 ----------- Specialty Chemicals - 1.3% 3,300 H.B. Fuller Co. $ 112,398 9,700 PolyOne Corp.* 64,214 ----------- $ 176,612 ----------- Steel - 1.4% 1,600 Carpenter Technology $ 82,880 7,300 Ryerson Tull, Inc. (a) 104,171 ----------- $ 187,051 ----------- Total Materials $ 768,423 ----------- Capital Goods - 7.4% Aerospace & Defense - 1.3% 5,600 Hexcel Corp.* $ 94,752 7,300 Orbital Sciences Corp.* (a) 72,270 ----------- $ 167,022 ----------- Shares Value Construction, Farm Machinery & Heavy Trucks - 2.6% 4,500 AGCO Corp.* $ 86,040 2,000 Terex Corp.* 78,800 2,400 The Toro Co. 92,664 4,400 Wabtec Corp. 94,512 ----------- $ 352,016 ----------- Construction & Engineering - 0.8% 6,400 Perini Corp.* $ 105,088 ----------- Electrical Component & Equipment - 0.5% 2,500 Thomas & Betts Corp.* $ 70,600 ----------- Industrial Machinery - 2.2% 3,200 Albany International Corp. $ 102,752 3,100 Flowserve Corp.* 93,806 2,175 Kennametal, Inc. 99,724 ----------- $ 296,282 ----------- Total Capital Goods $ 991,008 ----------- Commercial Services & Supplies - 3.5% Commercial Printing - 1.3% 1,800 Consolidated Graphics, Inc.* $ 73,386 2,575 John H. Harland Co. 97,850 ----------- $ 171,236 ----------- Diversified Commercial Services - 0.6% 2,301 The Brinks Co. $ 82,836 ----------- Human Resource & Employment Services - 1.6% 5,800 Administaff, Inc. $ 137,808 4,400 Korn/Ferry International* 78,100 ----------- $ 215,908 ----------- Total Commercial Services & Supplies $ 469,980 ----------- Transportation - 3.4% Railroads - 1.3% 3,400 Genesee & Wyoming, Inc.* $ 92,310 6,900 RailAmerica, Inc.* 82,110 ----------- $ 174,420 ----------- Trucking - 2.1% 2,300 Arkansas Best Corp. $ 73,163 9,100 Swift Transportation Co., Inc.* 211,939 ----------- $ 285,102 ----------- Total Transportation $ 459,522 ----------- Automobiles & Components - 1.3% Auto Parts & Equipment - 0.7% 5,400 Aftermarket Technology Corp.* $ 94,122 -----------
The accompanying notes are an integral part of these financial statements. 47 Pioneer Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Automobile Manufacturers - 0.6% 2,300 Winnebago Industries, Inc. (a) $ 75,325 ----------- Total Automobiles & Components $ 169,447 ----------- Consumer Durables & Apparel - 3.3% Footwear - 1.8% 7,500 Skechers U.S.A.* $ 106,950 5,450 Wolverine World Wide, Inc. 130,855 ----------- $ 237,805 ----------- Housewares & Specialties - 1.4% 3,000 American Greetings Corp. $ 79,500 3,375 Yankee Candle Co. 108,338 ----------- $ 187,838 ----------- Leisure Products - 0.1% 625 Mega Blocks* $ 12,228 ----------- Total Consumer Durables & Apparel $ 437,871 ----------- Consumer Services - 3.5% Casinos & Gaming - 0.8% 3,900 Scientific Games Corp.* $ 105,027 ----------- Restaurants - 2.7% 5,000 O'Charley's, Inc.* $ 88,300 3,400 Rare Hospitality International, Inc.* 103,598 6,800 Ruby Tuesday, Inc. (a) 176,120 ----------- $ 368,018 ----------- Total Consumer Services $ 473,045 ----------- Media - 1.0% Advertising - 0.8% 1,800 R.H. Donnelley Corp.* $ 111,564 ----------- Broadcasting & Cable TV - 0.2% 1,198 Alliance Atlantis Communications, Inc.* $ 28,213 ----------- Total Media $ 139,777 ----------- Retailing - 4.5% Apparel Retail - 3.8% 4,500 Aeropostale, Inc.* $ 151,200 5,400 Charming Shoppes, Inc.* 50,382 8,600 Guess?, Inc.* 142,588 3,900 Stage Stores, Inc.* 170,040 ----------- $ 514,210 ----------- Specialty Stores - 0.7% 1,500 Guitar Center, Inc.* $ 87,555 ----------- Total Retailing $ 601,765 ----------- Shares Value Food, Beverage & Tobacco - 2.1% Packaged Foods & Meats - 2.1% 2,400 Lancaster Colony Corp. $ 103,008 1,900 Ralcorp Holdings, Inc. 78,185 2,139 The J.M. Smucker Co. 100,405 ----------- $ 281,598 ----------- Total Food, Beverage & Tobacco $ 281,598 ----------- Household & Personal Products - 0.9% Personal Products - 0.9% 5,050 Nu Skin Enterprises, Inc. $ 117,665 ----------- Total Household & Personal Products $ 117,665 ----------- Health Care Equipment & Services - 10.2% Health Care Equipment - 0.8% 4,300 Steris Corp. $ 110,811 ----------- Health Care Facilities - 3.4% 2,500 Kindred Healthcare, Inc.*(a) $ 99,025 2,500 Lifepoint Hospitals, Inc.* 126,300 1,902 Sunrise Senior Living, Inc.*(a) 102,670 2,100 Universal Health Services, Inc. (Class B) 130,578 ----------- $ 458,573 ----------- Health Care Services - 3.6% 2,000 Cerner Corp.*(a) $ 135,940 9,000 eResearch Technology, Inc.* 120,510 3,900 Lifeline Systems, Inc.* 125,268 1,325 Pediatrix Medical Group, Inc.* 97,441 ----------- $ 479,159 ----------- Health Care Supplies - 1.9% 1,975 Haemonetics Corp.* $ 80,263 5,800 Merit Medical Systems, Inc.* 89,378 2,575 PolyMedica Corp. 91,825 ----------- $ 261,466 ----------- Managed Health Care - 0.5% 904 Coventry Health Care, Inc* $ 63,958 ----------- Total Health Care Equipment & Services $ 1,373,967 ----------- Pharmaceuticals & Biotechnology - 3.5% Biotechnology - 2.8% 9,825 Cubist Pharmaceuticals, Inc.* $ 129,395 7,300 InterMune, Inc.*(a) 95,192 7,100 Serologicals Corp.*(a) 150,875 ----------- $ 375,462 ----------- Pharmaceuticals - 0.7% 5,100 Connetics Corp.* $ 89,964 ----------- Total Pharmaceuticals & Biotechnology $ 465,426 -----------
48 The accompanying notes are an integral part of these financial statements. Pioneer Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Banks - 9.0% Regional Banks - 4.1% 3,700 BancorpSouth, Inc. $ 87,320 3,400 Banner Corp. 95,234 4,100 Community Bank System, Inc. 99,999 4,400 Irwin Financial Corp. 97,636 2,600 Provident Bankshares Corp. 82,966 3,600 Susquehanna Bancshares, Inc. 88,524 ----------- $ 551,679 ----------- Thrifts & Mortgage Finance - 4.9% 3,100 BankUnited Financial Corp. (a) $ 83,824 4,500 Charter Municipal Mortgage Acceptance Co. 98,820 5,000 Commercial Capital Bankcorp, Inc. 83,550 3,025 Commercial Federal Corp. 101,882 6,800 First Niagara Financial Group, Inc. 99,144 4,800 Provident Financial Services, Inc. 84,336 2,125 Webster Financial Corp. 99,216 ----------- $ 650,772 ----------- Total Banks $ 1,202,451 ----------- Diversified Financials - 1.7% Asset Management & Custody Banks - 0.8% 6,078 Apollo Investment Corp. $ 112,017 ----------- Consumer Finance - 0.9% 4,078 Advanta Corp. (Class B) $ 114,836 ----------- Total Diversified Financials $ 226,853 ----------- Insurance - 2.8% Life & Health Insurance - 0.7% 2,100 AmerUs Group Co. (a) $ 100,905 ----------- Property & Casualty Insurance - 1.4% 4,600 Bristol West Holdings, Inc. $ 84,180 2,900 Infinity Property & Casualty Corp. 101,152 ----------- $ 185,332 ----------- Reinsurance - 0.7% 3,000 Platinum Underwriter Holdings, Ltd. $ 95,460 ----------- Total Insurance $ 381,697 ----------- Shares Value Real Estate - 6.8% Real Estate Investment Trusts - 6.8% 8,500 Anworth Mortgage Asset Corp. $ 83,640 4,577 BioMed Property Trust, Inc. 109,161 2,800 Brandywine Realty Trust 85,820 2,550 Capital Trust, Inc. 85,196 2,900 Cousins Properties, Inc. 85,782 2,800 Heritage Property Investment Trust (a) 98,056 10,000 MFA Mortgage Investments, Inc. 74,500 2,800 Newcastle Investment Corp. 84,420 1,600 Redwood Trust, Inc. (a) 82,560 4,057 Ventas, Inc.* 122,521 ----------- $ 911,656 ----------- Total Real Estate $ 911,656 ----------- Software & Services - 6.2% Application Software - 2.9% 4,300 Advent Software, Inc.* $ 87,118 16,600 Parametric Technology Co.* 105,908 12,375 Plato Learning, Inc.* 91,328 5,000 SPSS, Inc.* 96,050 ----------- $ 380,404 ----------- Data Processing & Outsourced Services - 0.6% 5,700 The BISYS Group, Inc.* $ 85,158 ----------- Internet Software & Services - 1.1% 7,000 Earthlink, Inc.* $ 60,620 7,100 Valueclick, Inc.* 87,543 ----------- $ 148,163 ----------- Systems Software - 1.6% 3,500 Macrovision Corp.* $ 78,890 8,900 Wind River Systems* 139,552 ----------- $ 218,442 ----------- Total Software & Services $ 832,167 ----------- Technology Hardware & Equipment - 7.0% Communications Equipment - 3.0% 17,600 Arris Group, Inc.* $ 153,296 4,800 CommScope, Inc.*(a) 83,568 13,900 Extreme Networks, Inc.* 56,990 10,200 Symmetricom, Inc.* 105,774 ----------- $ 399,628 ----------- Computer Hardware - 1.1% 4,100 Intergraph Corp.* $ 141,286 ----------- Computer Storage & Peripherals - 1.1% 14,700 Brocade Communications Systems, Inc.* $ 57,036 28,500 Quantum Corp.* 84,645 ----------- $ 141,681 -----------
The accompanying notes are an integral part of these financial statements. 49 Pioneer Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Electronic Equipment & Instruments - 0.9% 7,575 Aeroflex, Inc.* $ 63,630 12,400 Identix, Inc.* 62,371 ----------- $ 126,001 ----------- Electronic Manufacturing Services - 0.4% 7,800 TTM Technologies, Inc.* $ 59,358 ----------- Technology Distributors - 0.5% 4,400 Agilysys, Inc. $ 69,080 ----------- Total Technology Hardware & Equipment $ 937,034 ----------- Semiconductors - 2.4% Semiconductor Equipment - 2.3% 14,000 Axcelis Technologies, Inc.* $ 96,040 9,300 Entegris, Inc.* 92,070 5,246 Photronics, Inc.* 122,442 ----------- $ 310,552 ----------- Semiconductors - 0.1% 500 PortalPlayer, Inc.*(a) $ 10,410 ----------- Total Semiconductors $ 320,962 ----------- Telecommunication Services - 0.8% Integrated Telecommunication Services - 0.8% 8,059 CT Communications, Inc. $ 105,170 ----------- Total Telecommunication Services $ 105,170 ----------- Utilities - 2.9% Electric Utilities - 1.4% 2,100 CH Energy Group, Inc. (a) $ 102,123 3,100 IDACORP, Inc. 94,953 ----------- $ 197,076 ----------- Gas Utilities - 1.5% 4,600 Atmos Energy Corp. $ 132,480 1,500 People's Energy Corp. 65,190 ----------- $ 197,670 ----------- Total Utilities $ 394,746 ----------- TOTAL COMMON STOCKS (Cost $12,375,468) $12,955,896 ----------- WARRANTS - 0.1% Energy - 0.1% Oil & Gas Exploration & Production - 0.1% 1,850 Arena Resources Warrants EXP 8/9/08* $ 9,343 ----------- TOTAL WARRANTS (Cost $1,885) $ 9,343 ----------- Shares Value TEMPORARY CASH INVESTMENT - 11.1% Security Lending Collateral -11.1% 1,485,682 Securities Lending Investment Fund, 3.29% $ 1,485,682 ----------- TOTAL TEMPORARY CASH INVESTMENT (Cost $1,485,682) $ 1,485,682 ----------- TOTAL INVESTMENT IN SECURITIES - 107.7% (Cost $13,863,035) $14,450,921 ----------- OTHER ASSETS AND LIABILITIES - (7.7)% $(1,030,944) ----------- TOTAL NET ASSETS - 100.0% $13,419,977 ===========
* 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 June 30, 2005, the value of these securities amounted to $57,716 or 0.4% of net assets. (a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 1,995 AmerUs Group Co. $ 95,860 2,945 BankUnited Financial Corp. 79,633 1,900 Cerner Corp. * 129,143 4,560 CommScope, Inc. * 79,390 1,995 CH Energy Group, Inc. 97,017 2,660 Heritage Property Investment Trust 93,153 6,935 InterMune, Inc. * 90,432 2,375 Kindred Healthcare, Inc. * 94,074 6,935 Orbital Sciences Corp. * 68,657 475 PortalPlayer, Inc. * 9,890 1,520 Redwood Trust, Inc. 78,432 6,460 Ruby Tuesday, Inc. 167,314 6,080 Ryerson Tull, Inc. 86,762 4,370 Serologicals Corp. * 92,863 1,807 Sunrise Senior Living, Inc. * 97,542 2,185 Winnebago Industries, Inc. 71,559 ---------- Total $1,431,721 ==========
50 The accompanying notes are an integral part of these financial statements. Pioneer Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 99.4% Energy - 6.0% Integrated Oil & Gas - 1.4% 164,840 Occidental Petroleum Corp. $ 12,681,141 -------------- Oil & Gas Drilling - 1.8% 158,615 ENSCO International, Inc. $ 5,670,486 89,630 Nabors Industries, Inc.*(a) 5,433,371 100,830 Transocean Offshore, Inc.* 5,441,795 -------------- $ 16,545,652 -------------- Oil & Gas Equipment & Services - 0.6% 88,435 Weatherford International, Inc.* $ 5,127,461 -------------- Oil & Gas Exploration & Production - 2.2% 191,522 Devon Energy Corp. $ 9,706,335 232,885 Pioneer Natural Resources Co. 9,799,801 -------------- $ 19,506,136 -------------- Total Energy $ 53,860,390 -------------- Materials - 8.0% Diversified Chemical - 2.4% 106,000 Ashland, Inc. (a) $ 7,618,220 228,620 PPG Industries, Inc. 14,348,191 -------------- $ 21,966,411 -------------- Diversified Metals & Mining - 1.3% 190,900 Freeport-McMoRan Copper & Gold, Inc. (Class B) $ 7,147,296 46,485 Phelps Dodge Corp. 4,299,863 -------------- $ 11,447,159 -------------- Industrial Gases - 1.6% 233,445 Air Products & Chemicals, Inc. $ 14,076,734 -------------- Metal & Glass Containers - 1.5% 388,420 Ball Corp. $ 13,967,583 -------------- Paper Products - 1.2% 387,300 Meadwestvaco Corp. $ 10,859,892 -------------- Total Materials $ 72,317,779 -------------- Capital Goods - 4.2% Building Products - 1.1% 239,580 American Standard Companies, Inc. $ 10,043,194 -------------- Industrial Machinery - 2.0% 285,867 Flowserve Corp.* $ 8,650,335 98,520 ITT Industries, Inc. 9,618,508 -------------- $ 18,268,843 -------------- Trading Companies & Distributors - 1.1% 168,580 W.W. Grainger, Inc. $ 9,236,498 -------------- Total Capital Goods $ 37,548,535 -------------- Shares Value Commercial Services & Supplies - 4.4% Commercial Printing - 1.6% 405,140 R.R. Donnelly & Sons Co. $ 13,981,381 -------------- Diversified Commercial Services - 0.9% 137,200 The Dun & Bradstreet Corp.* $ 8,458,380 -------------- Environmental & Facilities Services - 1.9% 472,435 Republic Services, Inc. $ 17,012,384 -------------- Total Commercial Services & Supplies $ 39,452,145 -------------- Transportation - 1.3% Airlines - 0.5% 326,110 Southwest Airlines Co. $ 4,542,712 -------------- Railroads - 0.8% 120,620 Canadian National Railway Co. $ 6,953,743 -------------- Total Transportation $ 11,496,455 -------------- Consumer Durables & Apparel - 6.2% Apparel, Accessories & Luxury Goods - 1.0% 215,300 Liz Claiborne, Inc. $ 8,560,328 -------------- Household Appliances - 1.1% 146,800 Whirlpool Corp. (a) $ 10,292,148 -------------- Housewares & Specialties - 1.2% 212,700 American Greetings Corp. $ 5,636,550 169,400 Yankee Candle Co. 5,437,740 -------------- $ 11,074,290 -------------- Leisure Products - 1.7% 861,230 Mattel, Inc. $ 15,760,509 -------------- Photographic Products - 1.2% 402,600 Eastman Kodak Co. (a) $ 10,809,810 -------------- Total Consumer Durables & Apparel $ 56,497,085 -------------- Consumer Services - 2.3% Restaurants - 1.0% 348,600 Ruby Tuesday, Inc. (a) $ 9,028,740 -------------- Specialized Consumer Services - 1.3% 194,510 H & R Block, Inc. $ 11,349,659 -------------- Total Consumer Services $ 20,378,399 -------------- Media - 4.2% Advertising - 1.2% 897,800 The Interpublic Group of Companies, Inc.*(a) $ 10,935,204 -------------- Broadcasting & Cable Television - 1.3% 363,300 Entercom Communications Corp.* $ 12,094,257 -------------- Movies & Entertainment - 0.8% 386,560 Regal Entertainment Group (a) $ 7,298,253 --------------
The accompanying notes are an integral part of these financial statements. 51 Pioneer Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Publishing - 0.9% 219,800 Tribune Co. $ 7,732,564 -------------- Total Media $ 38,060,278 -------------- Retailing - 7.8% Apparel Retail - 2.3% 774,930 Foot Locker, Inc. (a) $ 21,093,595 -------------- Department Stores - 1.8% 220,700 Federated Department Stores, Inc. (a) $ 16,172,896 -------------- Internet Retail - 1.7% 625,300 InterActiveCorp.*(a) $ 15,038,465 -------------- Specialty Stores - 2.0% 1,059,600 Blockbuster, Inc. (a) $ 9,663,552 271,300 Tiffany & Co. (a) 8,887,788 -------------- $ 18,551,340 -------------- Total Retailing $ 70,856,296 -------------- Food & Drug Retailing - 5.3% Drug Retail - 1.4% 442,740 CVS Corp. (a) $ 12,870,452 -------------- Food Retail - 1.9% 764,000 Safeway, Inc. $ 17,258,760 -------------- Hypermarkets & Supercenters - 2.0% 537,470 BJ'S Wholesale Club, Inc.*(a) $ 17,462,400 -------------- Total Food & Drug Retailing $ 47,591,612 -------------- Food, Beverage & Tobacco - 1.6% Brewers - 0.6% 89,000 Molson Coors Brewing Co. (Class B)* $ 5,518,000 -------------- Packaged Foods & Meats - 1.0% 19,190 ConAgra, Inc. $ 444,440 248,818 Dean Foods Co.* 8,768,346 1 TreeHouse Foods, Inc.* 17 -------------- $ 9,212,803 -------------- Total Food, Beverage & Tobacco $ 14,730,803 -------------- Health Care Equipment & Services - 6.7% Health Care Distributors - 0.7% 140,300 McKesson Corp. $ 6,284,037 -------------- Health Care Equipment - 1.0% 335,200 Boston Scientific Corp.* $ 9,050,400 -------------- Health Care Facilities - 3.1% 1,167,800 Tenet Healthcare Corp.*(a) $ 14,293,872 246,260 Triad Hospitals, Inc.* 13,455,646 -------------- $ 27,749,518 -------------- Health Care Services - 0.6% 120,230 Laboratory Corporation of America Holdings* $ 5,999,477 -------------- Shares Value Managed Health Care - 1.3% 109,300 CIGNA Corp. $ 11,698,379 -------------- Total Health Care Equipment & Services $ 60,781,811 -------------- Pharmaceuticals & Biotechnology - 3.5% Pharmaceuticals - 3.5% 712,100 IVAX Corp.*(a) $ 15,310,150 299,900 Mylan Laboratories, Inc. 5,770,076 178,300 Par Pharmaceutical Co., Inc.* 5,671,723 347,400 Perrigo Co. 4,842,756 -------------- $ 31,594,705 -------------- Total Pharmaceuticals & Biotechnology $ 31,594,705 -------------- Banks - 7.1% Regional Banks - 4.2% 117,000 City National Corp. $ 8,390,070 220,330 KeyCorp 7,303,940 179,465 Marshall & Ilsley Corp. 7,977,219 196,056 North Fork Bancorporation, Inc. 5,507,213 739 Washington Banking Co. 11,196 116,600 Zions Bancorporation 8,573,598 -------------- $ 37,763,236 -------------- Thrifts & Mortgage Finance - 2.9% 459,200 Hudson City Bancorp, Inc.* $ 5,239,472 433,660 The PMI Group, Inc. 16,904,067 201,700 Sovereign Bancorp, Inc. 4,505,978 -------------- $ 26,649,517 -------------- Total Banks $ 64,412,753 -------------- Diversified Financials - 5.5% Asset Management & Custody Banks - 1.6% 486,690 Federated Investors, Inc. $ 14,605,567 -------------- Consumer Finance - 1.7% 851,100 Providian Financial Corp.*(a) $ 15,004,893 -------------- Investment Banking & Brokerage - 2.2% 302,800 A.G. Edwards, Inc. $ 13,671,420 308,650 Investment Technology Group, Inc.* 6,487,823 -------------- $ 20,159,243 -------------- Total Diversified Financials $ 49,769,703 -------------- Insurance - 6.5% Insurance Brokers - 1.0% 282,340 Willis Group Holdings, Ltd. $ 9,238,165 -------------- Life & Health Insurance - 1.4% 675,900 UNUM Corp. (a) $ 12,382,488 -------------- Multi-Line Insurance - 0.7% 186,450 Assurant, Inc. $ 6,730,845 --------------
52 The accompanying notes are an integral part of these financial statements. Pioneer Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Property & Casualty Insurance - 2.4% 168,100 Safeco Corp. $ 9,134,554 19,814 White Mountains Insurance Group, Ltd. 12,500,653 ------------- $ 21,635,207 ------------- Reinsurance - 1.0% 287,710 Platinum Underwriter Holdings, Ltd. $ 9,154,932 ------------- Total Insurance $ 59,141,637 ------------- Software & Services - 3.5% Data Processing & Outsourced Services - 1.5% 928,930 The BISYS Group, Inc.* $ 13,878,214 ------------- IT Consulting & Other Services - 0.5% 677,000 Unisys Corp.* $ 4,285,410 ------------- Systems Software - 1.5% 255,800 Symantec Corp.* $ 5,561,092 314,500 Veritas Software Corp.* 7,673,800 ------------- $ 13,234,892 ------------- Total Software & Services $ 31,398,516 ------------- Technology Hardware & Equipment - 5.0% Communications Equipment - 1.4% 203,900 Scientific-Atlanta, Inc. $ 6,783,753 678,121 Tellabs, Inc.* 5,899,653 ------------- $ 12,683,406 ------------- Computer Storage & Peripherals - 2.6% 327,200 Imation Corp. $ 12,692,088 300,600 Storage Technology Corp.* 10,908,774 ------------- $ 23,600,862 ------------- Electronic Equipment & Instruments - 1.0% 878,890 Symbol Technologies, Inc. $ 8,674,644 ------------- Total Technology Hardware & Equipment $ 44,958,912 ------------- Telecommunication Services - 1.8% Integrated Telecommunication Services - 1.8% 715,800 Cincinnati Bell, Inc.* $ 3,077,940 370,800 Century Telephone Enterprises, Inc. 12,840,804 ------------- $ 15,918,744 ------------- Total Telecommunication Services $ 15,918,744 ------------- Utilities - 8.5% Electric Utilities - 5.9% 177,100 Edison International $ 7,181,405 128,015 Entergy Corp. 9,671,533 342,600 NSTAR 10,562,358 326,500 PG&E Corp. 12,256,810 1,110,100 Reliant Energy*(a) 13,743,038 -------------- $ 53,415,144 -------------- Shares Value Gas Utilities - 0.4% 133,900 Atmos Energy Corp. (a) $ 3,856,320 ------------- Independent Power Producer & Energy Traders - 2.2% 176,775 Constellation Energy Group $ 10,198,151 120,054 NRG Energy, Inc.* 4,514,030 61,600 TXU Corp. 5,118,344 ------------- $ 19,830,525 ------------- Total Utilities $ 77,101,989 ------------- TOTAL COMMON STOCKS (Cost $764,234,576) $ 897,868,547 ------------- Principal Amount TEMPORARY CASH INVESTMENTS - 17.1% Repurchase Agreement - 0.7% $ 6,400,000 UBS Warburg, Inc., 2.75%, dated 6/30/05, repurchase price of $6,400,000 plus accrued interest on 7/1/05 collateralized by $6,536,000 U.S. Treasury Bill, 1.875%, 1/31/06 $ 6,400,000 ------------- Shares Security Lending Collateral - 16.4% 148,443,233 Securities Lending Investment Fund, 3.29% $ 148,443,233 ------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $154,843,233) $ 154,843,233 ------------- TOTAL INVESTMENT IN SECURITIES - 116.5% (Cost $919,077,809) $1,052,711,78 ------------- OTHER ASSETS AND LIABILITIES - (16.5)% $(149,226,586) -------------- TOTAL NET ASSETS - 100.0% $ 903,485,194 =============
The accompanying notes are an integral part of these financial statements. 53 Pioneer Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- * Non-income producing security (a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 23,400 Ashland, Inc. $ 1,681,758 106,875 Atmos Energy Corp. 3,078,000 86,005 BJ'S Wholesale Club, Inc. * 2,794,302 1,049,465 Blockbuster, Inc. 9,571,121 223,600 CVS Corp. 6,500,052 277,730 Eastman Kodak Co. 7,457,051 174,000 Federated Department Stores, Inc. 12,750,720 310,700 Foot Locker, Inc. 8,457,254 599,280 InterActiveCorp. * 14,412,684 788,400 The Interpublic Group of Companies, Inc. * 9,602,712 227,800 IVAX Corp. * 4,897,700 49,400 Nabors Industries, Inc. * 2,994,628 332,100 Providian Financial Corp. * 5,854,923 356,972 Regal Entertainment Group 6,739,631 221,100 Reliant Energy * 2,737,218 331,170 Ruby Tuesday, Inc. 8,577,303 817,200 Tenet Healthcare Corp. * 10,002,528 257,735 Tiffany & Co. 8,443,399 370,840 UNUM Corp. 6,793,789 139,460 Whirlpool Corp. 9,777,541 ------------ Total $143,124,314 ============
54 The accompanying notes are an integral part of these financial statements. Pioneer Growth Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 98.2% Energy - 1.6% Integrated Oil & Gas - 1.6% 4,300 Occidental Petroleum Corp. $ 330,799 9,900 Repsol SA (A.D.R.) 248,787 ----------- $ 579,586 ----------- Total Energy $ 579,586 ----------- Capital Goods - 7.0% Aerospace & Defense - 1.7% 3,400 L-3 Communications Holdings, Inc. $ 260,372 7,000 United Technologies Corp. 359,450 ----------- $ 619,822 ----------- Building Products - 1.1% 10,000 American Standard Co., Inc. $ 419,200 ----------- Construction, Farm Machinery & Heavy Trucks - 1.7% 9,300 Deere & Co. $ 609,057 ----------- Industrial Conglomerates - 1.3% 16,500 Tyco International, Ltd. $ 481,800 ----------- Industrial Machinery - 1.2% 5,300 Illinois Tool Works, Inc. $ 422,304 ----------- Total Capital Goods $ 2,552,183 ----------- Commercial Services & Supplies - 0.7% Diversified Commercial Services - 0.7% 4,200 The Dun & Bradstreet Corp.* $ 258,930 ----------- Total Commercial Services & Supplies $ 258,930 ----------- Consumer Durables & Apparel - 0.8% Apparel, Accessories & Luxury Goods - 0.8% 7,100 Liz Claiborne, Inc. $ 282,296 ----------- Total Consumer Durables & Apparel $ 282,296 ----------- Consumer Services - 1.8% Education Services - 1.0% 4,700 Apollo Group, Inc.* $ 367,634 ----------- Hotels, Resorts & Cruise Lines - 0.8% 5,100 Carnival Corp. $ 278,205 ----------- Total Consumer Services $ 645,839 ----------- Media - 4.7% Advertising - 0.9% 4,200 Omnicom Group $ 335,412 ----------- Broadcasting & Cable Television - 2.1% 76,100 Liberty Media Corp.* $ 775,459 ----------- Movies & Entertainment - 1.7% 24,400 The Walt Disney Co. $ 614,392 ----------- Total Media $ 1,725,263 ----------- Shares Value Retailing - 7.6% Apparel Retail - 1.8% 27,400 TJX Co., Inc. $ 667,190 ----------- Computer & Electronics Retail - 1.2% 6,400 Best Buy Co., Inc. $ 438,720 ----------- Home Improvement Retail - 4.6% 17,700 Home Depot, Inc. $ 688,530 17,300 Lowe's Co., Inc. 1,007,206 ----------- $ 1,695,736 ----------- Total Retailing $ 2,801,646 ----------- Food, Beverage & Tobacco - 7.4% Soft Drinks - 4.8% 9,700 Fomento Economico Mexicano SA de CV $ 577,829 22,000 PepsiCo, Inc. 1,186,460 ----------- $ 1,764,289 ----------- Tobacco - 2.6% 14,700 Altria Group, Inc. $ 950,502 ----------- Total Food, Beverage & Tobacco $ 2,714,791 ----------- Household & Personal Products - 5.2% Household Products - 3.1% 21,400 Procter & Gamble Co. $ 1,128,850 ----------- Personal Products - 2.1% 20,400 Avon Products, Inc. $ 772,140 ----------- Total Household & Personal Products $ 1,900,990 ----------- Health Care Equipment & Services - 8.2% Health Care Distributors - 2.5% 16,000 Cardinal Health, Inc. $ 921,280 ----------- Health Care Equipment - 4.8% 14,500 Biomet, Inc. $ 502,280 24,700 Boston Scientific Corp.* 666,900 8,600 Guidant Corp. 578,780 ----------- $ 1,747,960 ----------- Health Care Services - 0.9% 13,400 IMS Health, Inc. $ 331,918 ----------- Total Health Care Equipment & Services $ 3,001,158 ----------- Pharmaceuticals & Biotechnology - 12.4% Biotechnology - 4.7% 17,558 Amgen, Inc.* $ 1,061,557 6,500 Biogen Idec, Inc.* 223,925 9,600 Gilead Sciences, Inc.* 422,304 ----------- $ 1,707,786 -----------
The accompanying notes are an integral part of these financial statements. 55 Pioneer Growth Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Pharmaceuticals - 7.7% 12,300 Astrazeneca Plc (A.D.R.) $ 507,498 14,000 Bristol-Myers Squibb Co. 349,720 22,511 Endo Pharmaceuticals Holdings, Inc.* 591,589 32,300 IVAX Corp.* 694,450 7,000 Merck & Co., Inc. 215,600 15,092 Par Pharmaceutical Co., Inc.* 480,077 ----------- $ 2,838,934 ----------- Total Pharmaceuticals & Biotechnology $ 4,546,720 ----------- Banks - 1.3% Diversified Banks - 1.3% 9,500 Wachovia Corp. $ 471,200 ----------- Total Banks $ 471,200 ----------- Diversified Financials - 3.1% Consumer Finance - 0.8% 3,500 Capital One Financial Corp. $ 280,035 ----------- Diversified Financial Services - 2.3% 18,300 Citigroup, Inc. $ 846,009 ----------- Total Diversified Financials $ 1,126,044 ----------- Insurance - 2.2% Multi-Line Insurance - 2.2% 13,600 American International Group, Inc. $ 790,160 ----------- Total Insurance $ 790,160 ----------- Software & Services - 12.4% It Consulting & Other Services - 1.9% 31,300 Accenture, Ltd.* $ 709,571 ----------- Systems Software - 10.5% 26,600 Macrovision Corp.* $ 599,564 77,100 Microsoft Corp. 1,915,164 61,000 Symantec Corp.* 1,326,140 ----------- $ 3,840,868 ----------- Total Software & Services $ 4,550,439 ----------- Technology, Hardware & Equipment - 17.2% Communications Equipment - 8.7% 78,300 Avaya, Inc.* $ 651,456 76,000 Cisco Systems, Inc.* 1,452,360 32,500 Qualcomm, Inc. 1,072,825 ----------- $ 3,176,641 ----------- Computer Hardware - 4.8% 21,800 Dell, Inc.* $ 861,318 37,500 Hewlett-Packard Co. 881,625 ----------- $ 1,742,943 ----------- Computer Storage & Peripherals - 1.7% 25,900 Sandisk Corp.* $ 614,607 ----------- Shares Value Electronic Equipment & Instruments - 2.0% 3,100 Samsung Electronics $ 743,225 ----------- Total Technology, Hardware & Equipment $ 6,277,416 ----------- Semiconductors - 2.9% 5,300 Linear Technology Corp. $ 194,457 30,200 Texas Instruments, Inc. 847,714 ----------- $ 1,042,171 ----------- Total Semiconductors $ 1,042,171 ----------- Telecommunication Services - 1.7% Wireless Telecommunication Services - 1.7% 25,100 Vodafone Group Plc (A.D.R.) $ 610,432 ----------- Total Telecommunication Services $ 610,432 ----------- TOTAL COMMON STOCKS (Cost $35,042,319) $35,877,264 ----------- TEMPORARY CASH INVESTMENTS - 5.5% Security Lending Collateral - 5.5% 1,999,381 Securities Lending Investment Fund, 3.29% $ 1,999,381 ----------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $1,999,381) $ 1,999,381 ----------- TOTAL INVESTMENT IN SECURITIES - 103.7% (Cost $37,041,700) (a) $37,876,645 ----------- OTHER ASSETS AND LIABILITIES - (3.7)% $(1,335,377) ----------- TOTAL NET ASSETS - 100.0% $36,541,268 ===========
* Non-income producing security (A.D.R.) American Depositary Receipt (a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 5,600 Biogen Idec, Inc.* $ 192,920 3,325 Capital One Financial Corp. 266,033 12,730 IMS Health, Inc. 315,322 17,765 Procter & Gamble Co. 937,104 9,405 Repsol SA (A.D.R.) 236,348 ---------- Total $1,947,727 ==========
56 The accompanying notes are an integral part of these financial statements. Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 98.1% Consumer Services - 5.3% Hotels, Resorts & Cruise Lines - 5.3% 96,300 Hilton Hotels Corp.* $ 2,296,755 53,000 Starwood Hotels & Resorts 3,104,210 ------------ $ 5,400,965 ------------ Total Consumer Services $ 5,400,965 ------------ Real Estate - 92.8% Real Estate Management & Development - 3.6% 127,500 Brookfield Properties Corp. $ 3,672,000 ------------ Real Estate Investment Trusts - 89.3% 47,000 AMB Property Corp. (a) $ 2,041,210 38,000 Apartment Investment & Management Co. 1,554,960 102,000 Archstone Communities Trust 3,939,240 24,000 Arden Realty Group, Inc. 863,520 60,000 AvalonBay Communities, Inc. 4,848,000 34,100 BioMed Property Trust, Inc. 813,285 77,200 Boston Properties, Inc. 5,404,000 38,500 Brandywine Realty Trust 1,180,025 46,000 Camden Property Trust 2,472,500 14,100 Capital Automotive (a) 538,197 16,000 Carramerica Realty Corp. 578,880 122,000 Catellus Development Corp. 4,001,600 21,000 Corporate Office Properties 618,450 73,000 Developers Diversifies Realty Corp. 3,355,080 36,500 Duke Realty Investments, Inc. 1,155,590 11,300 Equity Lifestyle Properties, Inc. 449,288 53,500 Equity Office Properties Trust (a) 1,770,850 115,000 Equity Residential Property Trust 4,234,300 38,500 Federal Realty Investment Trust 2,271,500 12,100 First Potomac Realty Trust 300,080 72,000 General Growth Properties (a) 2,958,480 10,000 Healthcare Realty Trust, Inc. 386,100 52,600 Highwoods Properties, Inc. 1,565,376 14,500 Hospitality Properties Trust 639,015 196,800 Host Marriott Corp. (a) 3,444,000 24,100 iStar Financial, Inc. 1,002,319 12,000 Kilroy Realty Corp. 569,880 29,700 Kimco Realty Corp. (a) 1,749,627 28,700 Kite Realty Group Trust 430,500 86,500 Liberty Property Trust 3,832,815 23,300 Pan Pacific Retail Properties, Inc. 1,546,654 Shares Value 45,500 Prentiss Properties Trust $ 1,658,020 81,500 ProLogis Trust 3,279,560 25,000 PS Business Parks, Inc.* 1,111,250 43,000 Public Storage, Inc. 2,719,750 51,400 Regency Centers Corp. (a) 2,940,080 30,500 Shurgard Storage Centers, Inc. 1,401,780 98,000 Simon DeBartolo Group, Inc. (a) 7,104,020 27,000 Spirit Finance Corp. 317,250 22,700 Strategic Hotel Capital, Inc. 408,600 68,000 Taubman Centers, Inc. 2,318,120 21,500 The Macerich Co. 1,441,575 71,500 Trizec Properties, Inc. 1,470,755 57,000 United Dominion Realty Trust 1,370,850 35,000 Vornado Realty Trust 2,814,000 ------------ Total Real Estate $ 90,870,931 ------------ TOTAL COMMON STOCKS (Cost $64,521,886) $ 99,943,896 ------------ TEMPORARY CASH INVESTMENT - 21.5% Security Lending Collateral - 21.5% 21,916,656 Securities Lending Investment Fund, 3.29% $ 21,916,656 ------------ TOTAL TEMPORARY CASH INVESTMENT (Cost $21,916,656) $ 21,916,656 ------------ TOTAL INVESTMENT IN SECURITIES - 119.6% (Cost $86,438,542) (a) $121,860,552 ------------ OTHER ASSETS AND LIABILITIES - (19.6)% $(19,994,964) ------------ TOTAL NET ASSETS - 100.0% $101,865,588 ============
* Non-income producing security (a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 44,650 AMB Property Corp. $ 1,939,150 13,395 Capital Automotive 511,287 50,825 Equity Office Properties Trust 1,682,308 68,400 General Growth Properties 2,810,556 186,960 Host Marriott Corp. 3,271,800 25,175 Kimco Realty Corp. 1,483,059 52,150 Regency Centers Corp. 2,982,980 93,100 Simon DeBartolo Group, Inc. 6,748,819 ----------- Total $21,429,959 ===========
The accompanying notes are an integral part of these financial statements. 57 Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 99.6% Energy - 9.1% Integrated Oil & Gas - 6.2% 213,764 Chevron Corp. $ 11,953,682 72,566 ConocoPhillips 4,171,819 226,314 Exxon Mobil Corp. 13,006,265 50,756 Occidental Petroleum Corp. 3,904,659 ------------ $ 33,036,425 ------------ Oil & Gas Equipment & Services - 1.1% 57,405 Schlumberger, Ltd. $ 4,359,336 25,100 Weatherford International, Inc.* 1,455,298 ------------ $ 5,814,634 ------------ Oil & Gas Exploration & Production - 1.8% 96,121 Apache Corp. $ 6,209,417 80,387 Pioneer Natural Resources Co. 3,382,685 ------------ $ 9,592,102 ------------ Total Energy $ 48,443,161 ------------ Materials - 6.3% Aluminum - 0.4% 86,600 Alcoa, Inc. $ 2,262,858 ------------ Diversified Chemical - 0.7% 52,896 E.I. du Pont de Nemours & Co. $ 2,275,057 23,887 PPG Industries, Inc. 1,499,148 ------------ $ 3,774,205 ------------ Diversified Metals & Mining - 3.3% 107,769 BHP Billiton, Ltd. (A.D.R.) $ 2,942,094 101,586 Inco, Ltd. 3,834,872 45,369 Phelps Dodge Corp. 4,196,633 224,013 Rio Tinto Plc 6,842,884 ------------ $ 17,816,483 ------------ Gold - 0.2% 26,147 Newmont Mining Corp. $ 1,020,517 ------------ Industrial Gases - 1.1% 30,163 Air Products & Chemicals, Inc. $ 1,818,829 82,709 Praxair, Inc. 3,854,239 ------------ $ 5,673,068 ------------ Paper Products - 0.3% 60,721 Meadwestvaco Corp. $ 1,702,617 ------------ Specialty Chemicals - 0.3% 44,629 Ecolab, Inc. $ 1,444,193 ------------ Total Materials $ 33,693,941 ------------ Shares Value Capital Goods - 8.8% Aerospace & Defense - 3.2% 51,214 General Dynamics Corp. $ 5,609,982 216,651 United Technologies Corp. 11,125,029 ------------ $ 16,735,011 ------------ Construction, Farm Machinery & Heavy Trucks - 3.3% 43,924 Caterpillar, Inc. $ 4,186,396 90,182 Deere & Co. 5,906,019 108,616 PACCAR, Inc. 7,385,888 ------------ $ 17,478,303 ------------ Electrical Components & Equipment - 1.0% 65,964 Emerson Electric Co. $ 4,131,325 27,500 Rockwell International Corp. 1,339,525 ------------ $ 5,470,850 ------------ Industrial Conglomerates - 1.3% 201,363 General Electric Co. $ 6,977,228 ------------ Total Capital Goods $ 46,661,392 ------------ Transportation - 2.2% Airlines - 0.5% 180,270 Southwest Airlines Co. $ 2,511,161 ------------ Railroads - 1.7% 57,842 Burlington Northern, Inc. $ 2,723,201 208,346 Norfolk Southern Corp. 6,450,392 ------------ $ 9,173,593 ------------ Total Transportation $ 11,684,754 ------------ Automobiles & Components - 2.2% Auto Parts & Equipment - 1.3% 120,984 Johnson Controls, Inc. $ 6,815,029 ------------ Automobile Manufacturers - 0.9% 477,615 Ford Motor Corp. $ 4,890,778 ------------ Total Automobiles & Components $ 11,705,807 ------------ Consumer Durables & Apparel - 0.2% Apparel, Accessories & Luxury Goods - 0.2% 28,441 Liz Claiborne, Inc. $ 1,130,813 ------------ Total Consumer Durables & Apparel $ 1,130,813 ------------ Media - 4.9% Advertising - 0.8% 50,119 Omnicom Group $ 4,002,503 ------------ Movies & Entertainment - 0.3% 59,556 The Walt Disney Co. $ 1,499,620 ------------
58 The accompanying notes are an integral part of these financial statements. Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Publishing - 3.8% 48,893 Elsevier NV $ 681,530 81,911 Gannett Co. 5,826,329 149,146 John Wiley & Sons, Inc. 5,925,571 179,964 McGraw-Hill Co., Inc. 7,963,407 ------------ $ 20,396,837 ------------ Total Media $ 25,898,960 ------------ Retailing - 6.8% Apparel Retail - 0.3% 72,178 Gap, Inc. $ 1,425,516 ------------ Computer & Electronics Retail - 0.1% 11,064 GameStop Corp.* $ 330,814 ------------ Department Stores - 2.7% 161,232 May Department Stores Co. $ 6,475,077 118,523 Nordstrom, Inc. 8,056,008 ------------ $ 14,531,085 ------------ General Merchandise Stores - 2.5% 38,426 Family Dollar Stores, Inc. $ 1,002,918 228,656 Target Corp. 12,441,173 ------------ $ 13,444,091 ------------ Home Improvement Retail - 0.8% 27,800 Home Depot, Inc. $ 1,081,420 55,862 Lowe's Companies, Inc. 3,252,286 ------------ $ 4,333,706 ------------ Specialty Stores - 0.4% 34,554 Barnes & Noble, Inc.* $ 1,340,695 47,400 Staples, Inc. 1,010,568 ------------ $ 2,351,263 ------------ Total Retailing $ 36,416,475 ------------ Food & Drug Retailing - 2.6% Drug Retail - 1.8% 71,400 CVS Corp. $ 2,075,597 159,643 Walgreen Co. 7,341,982 ------------ $ 9,417,579 ------------ Food Distributors - 0.6% 97,240 Sysco Corp. $ 3,519,116 ------------ Hypermarkets & Supercenters - 0.2% 23,400 Costco Wholesale Corp. $ 1,048,788 ------------ Total Food & Drug Retailing $ 13,985,483 ------------ Shares Value Food, Beverage & Tobacco - 4.6% Packaged Foods & Meats - 2.9% 99,139 Campbell Soup Co. $ 3,050,507 51,516 General Mills, Inc. 2,410,434 62,650 Hershey Foods Corp. 3,890,564 84,513 H.J. Heinz Co., Inc. 2,993,450 28,200 Kellogg Co. 1,253,208 87,480 Sara Lee Corp. 1,732,979 ------------ $ 15,331,142 ------------ Soft Drinks - 1.7% 174,649 PepsiCo, Inc. $ 9,418,821 ------------ Total Food, Beverage & Tobacco $ 24,749,963 ------------ Household & Personal Products - 1.6% Household Products - 1.0% 16,975 Clorox Co. $ 945,847 94,894 Colgate-Palmolive Co. 4,736,160 ------------ $ 5,682,007 ------------ Personal Products - 0.6% 80,030 Estee Lauder Co. $ 3,131,574 ------------ Total Household & Personal Products $ 8,813,581 ------------ Health Care Equipment & Services - 3.5% Health Care Equipment - 3.5% 84,671 Becton, Dickinson & Co. $ 4,442,686 64,700 Biomet, Inc. 2,241,208 36,349 Guidant Corp. 2,446,288 81,252 Medtronic, Inc. 4,208,041 116,180 Stryker Corp. 5,525,521 ------------ $ 18,863,744 ------------ Total Health Care Equipment & Services $ 18,863,744 ------------ Pharmaceuticals & Biotechnology - 8.9% Biotechnology - 0.7% 64,036 Amgen, Inc.* $ 3,871,617 ------------
The accompanying notes are an integral part of these financial statements. 59 Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Pharmaceuticals - 8.2% 122,299 Abbott Laboratories $ 5,993,874 63,128 Barr Laboratorie, Inc.* 3,076,859 95,600 Bristol-Myers Squibb Co. 2,388,088 95,302 Eli Lilly & Co. 5,309,274 163,188 Johnson & Johnson 10,607,220 114,026 Merck & Co., Inc. 3,512,001 112,881 Mylan Laboratories, Inc. 2,171,830 66,289 Novartis AG (A.D.R.) 3,144,750 43,308 Roche Holdings AG (A.D.R.) 2,740,530 209,465 Schering-Plough Corp. 3,992,403 20,700 Teva Pharmaceutical Industries, Ltd. 644,598 ------------ $ 43,581,427 ------------ Total Pharmaceuticals & Biotechnology $ 47,453,044 ------------ Banks - 9.0% Diversified Banks - 4.6% 79,100 Bank of America Corp. $ 3,607,751 280,577 U.S. Bancorp 8,192,848 47,123 Wachovia Corp. 2,337,301 167,860 Wells Fargo & Co. 10,336,819 ------------ $ 24,474,719 ------------ Regional Banks - 3.1% 98,868 First Horizon National Corp. $ 4,172,230 160,746 National City Corp. 5,484,654 65,614 SunTrust Banks, Inc. 4,739,955 25,979 Zions Bancorporation 1,910,236 ------------ $ 16,307,075 ------------ Thrifts & Mortgage Finance - 1.3% 174,198 Washington Mutual, Inc. $ 7,088,117 ------------ Total Banks $ 47,869,911 ------------ Diversified Financials - 5.6% Asset Management & Custody Banks - 2.8% 61,775 The Bank of New York Co., Inc. $ 1,777,885 52,351 Federated Investors, Inc. 1,571,054 89,314 State Street Corp. 4,309,401 116,947 T. Rowe Price Associates, Inc. 7,320,882 ------------ $ 14,979,222 ------------ Consumer Finance - 1.4% 134,224 American Express Co. $ 7,144,744 ------------ Investment Banking & Brokerage - 0.7% 69,596 Merrill Lynch & Co., Inc. $ 3,828,476 ------------ Diversified Financial Services - 0.7% 79,601 Citigroup, Inc. $ 3,679,954 ------------ Total Diversified Financials $ 29,632,396 ------------ Shares Value Insurance - 2.4% Multi-Line Insurance - 0.2% 16,100 Hartford Financial Services Group, Inc. (a) $ 1,203,958 ------------ Property & Casualty Insurance - 2.0% 24,800 ACE, Ltd. $ 1,112,280 48,600 Axis Capital Holdings, Ltd. 1,375,380 65,620 Chubb Corp. 5,617,728 40,581 Safeco Corp. 2,205,172 ------------ $ 10,310,560 ------------ Reinsurance - 0.2% 33,136 Montpelier RE Holdings, Ltd. $ 1,145,843 ------------ Total Insurance $ 12,660,361 ------------ Software & Services - 5.3% Data Processing & Outsourced Services - 2.7% 107,497 Automatic Data Processing, Inc. $ 4,511,649 43,129 Computer Sciences Corp.* 1,884,737 30,767 DST Systems, Inc.* 1,439,896 33,477 Fiserv, Inc.* 1,437,837 152,686 SunGard Data Systems, Inc.* 5,369,967 ------------ $ 14,644,086 ------------ Systems Software - 2.6% 102,630 Adobe Systems, Inc. $ 2,937,271 259,781 Microsoft Corp. 6,452,960 112,323 Symantec Corp.* 2,441,902 82,800 Veritas Software Corp.* 2,020,320 ------------ $ 13,852,453 ------------ Total Software & Services $ 28,496,539 ------------ Technology Hardware & Equipment - 5.9% Communications Equipment - 1.8% 252,407 Motorola, Inc. $ 4,608,952 326,377 Nokia Corp. (A.D.R.) 5,430,913 ------------ $ 10,039,865 ------------ Computer Hardware - 3.0% 198,996 Dell, Inc.* $ 7,862,332 31,284 Diebold, Inc. 1,411,221 210,170 Hewlett-Packard Co. 4,941,097 455,771 Sun Microsystems, Inc.* 1,700,026 ------------ $ 15,914,676 ------------ Computer Storage & Peripherals - 0.4% 160,000 EMC Corp.* $ 2,193,600 ------------ Office Electronics - 0.7% 68,162 Canon, Inc. (A.D.R.)* $ 3,587,366 ------------ Total Technology Hardware & Equipment $ 31,735,507 ------------
60 The accompanying notes are an integral part of these financial statements. Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Semiconductors - 3.8% Semiconductor Equipment - 0.4% 137,606 Applied Materials, Inc. $ 2,226,465 ------------ Semiconductors - 3.4% 24,815 Freescale Semico, Inc.* $ 525,582 344,010 Intel Corp. 8,964,901 294,793 Texas Instruments, Inc. 8,274,840 ------------ $ 17,765,323 ------------ Total Semiconductors $ 19,991,788 ------------ Telecommunication Services - 3.9% Integrated Telecommunication Services - 3.9% 27,644 Alltel Corp. $ 1,721,668 168,960 BellSouth Corp. 4,489,267 88,606 Century Telephone Enterprises, Inc. 3,068,426 251,746 SBC Communications, Inc. 5,978,968 153,759 Verizon Communications, Inc. 5,312,373 ------------ $ 20,570,702 ------------ Total Telecommunication Services $ 20,570,702 ------------ Utilities - 2.0% Electric Utilities - 1.6% 41,563 Consolidated Edison, Inc. $ 1,946,811 83,985 Exelon Corp. 4,310,950 66,886 Southern Co. 2,318,938 ------------ $ 8,576,699 ------------ Gas Utilities - 0.3% 31,560 KeySpan Energy Corp. $ 1,284,492 ------------ Water Utilities - 0.1% 21,833 Aqua America, Inc. $ 649,313 ------------ Total Utilities $ 10,510,504 ------------ TOTAL COMMON STOCKS (Cost $430,468,642) $530,968,826 ------------ Shares Value TEMPORARY CASH INVESTMENT - 0.2% Security Lending Collateral - 0.2% 1,193,010 Securities Lending Investment Fund, 3.29% $ 1,193,010 ------------ TOTAL TEMPORARY CASH INVESTMENT (Cost $1,193,010) $ 1,193,010 ------------ TOTAL INVESTMENT IN SECURITIES - 99.8% (Cost $431,661,652) $532,161,836 ------------ OTHER ASSETS AND LIABILITIES - 0.2% $ 829,120 ------------ TOTAL NET ASSETS - 100.0% $532,990,956 ============
(A.D.R.) American Depositary Receipt * Non-income producing security (a) At June 30, 2005, the following security was out on loan:
Shares Security Market Value 15,295 Hartford Financial Services Group, Inc. $1,143,760
The accompanying notes are an integral part of these financial statements. 61 Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value CONVERTIBLE PREFERRED STOCKS - 0.8% Automobiles & Components - 0.7% Automobile Manufacturers - 0.7% 58,815 Ford Cap Trust, 6.5%, 1/15/32 $ 2,370,245 ------------ Total Automobiles & Components $ 2,370,245 ------------ Pharmaceuticals & Biotechnology - 0.1% Pharmaceuticals - 0.1% 4,255 Schering-Plough Corp., 6.0%, 9/14/07 $ 215,941 ------------ Total Pharmaceuticals & Biotechnology $ 215,941 ------------ TOTAL PREFERRED STOCKS (Cost $2,996,506) $ 2,586,186 ------------ COMMON STOCKS - 95.7% Energy - 8.2% Integrated Oil & Gas - 8.2% 136,116 Chevron Corp. $ 7,611,606 162,043 ConocoPhillips 9,315,852 173,197 Exxon Mobil Corp. 9,953,632 ------------ $ 26,881,090 ------------ Total Energy $ 26,881,090 ------------ Materials - 5.7% Construction Materials - 0.7% 37,024 Vulcan Materials Co. $ 2,406,190 ------------ Diversified Chemical - 1.2% 31,853 E.I. du Pont de Nemours & Co. $ 1,369,997 42,789 PPG Industries, Inc. 2,685,438 ------------ $ 4,055,435 ------------ Diversified Metals & Mining - 0.3% 39,319 Compass Minerals International, Inc. $ 920,065 ------------ Industrial Gases - 1.2% 64,826 Air Products & Chemicals, Inc. $ 3,909,008 ------------ Paper Products - 0.6% 72,699 Meadwestvaco Corp. $ 2,038,480 ------------ Specialty Chemicals - 0.7% 48,271 Valspar Corp. $ 2,331,007 ------------ Steel - 0.9% 57,554 Nucor Corp. $ 2,625,613 22,668 Roanoke Electric Steel Corp. 374,475 ------------ $ 3,000,088 ------------ Total Materials $ 18,660,273 ------------ Capital Goods - 8.2% Aerospace & Defense - 1.5% 94,712 United Technologies Corp. $ 4,863,461 ------------ Shares Value Construction, Farm Machinery & Heavy Trucks - 4.2% 35,067 Deere & Co. $ 2,296,538 169,137 PACCAR, Inc. 11,501,316 ------------ $ 13,797,854 ------------ Electrical Component & Equipment - 1.6% 83,366 Emerson Electric Co. $ 5,221,213 ------------ Industrial Machinery - 0.9% 30,350 Gorman-Rupp Co. $ 649,793 107,418 The Timken Co. 2,481,356 ------------ $ 3,131,149 ------------ Total Capital Goods $ 27,013,677 ------------ Transportation - 0.9% Railroads - 0.9% 66,411 Burlington Northern, Inc. $ 3,126,630 ------------ Total Transportation $ 3,126,630 ------------ Automobiles & Components - 2.2% Auto Parts & Equipment - 1.4% 85,242 Johnson Controls, Inc. $ 4,801,682 ------------ Automobile Manufacturers - 0.8% 249,843 Ford Motor Corp. $ 2,558,392 ------------ Total Automobiles & Components $ 7,360,074 ------------ Consumer Durables & Apparel - 0.8% Housewares & Specialties - 0.8% 112,409 Tupperware Corp. $ 2,626,998 ------------ Total Consumer Durables & Apparel $ 2,626,998 ------------ Consumer Services - 2.2% Leisure Facilities - 1.7% 168,393 Cedar Fair, L.P. $ 5,420,571 ------------ Specialized Consumer Services - 0.5% 131,488 Servicemaster Co. $ 1,761,939 ------------ Total Consumer Services $ 7,182,510 ------------ Media - 1.4% Publishing - 1.4% 103,523 McGraw-Hill Co., Inc. $ 4,580,892 ------------ Total Media $ 4,580,892 ------------ Retailing - 2.5% Department Stores - 2.1% 173,212 May Department Stores Co. $ 6,956,194 ------------ Distributors - 0.4% 32,918 Genuine Parts Co. $ 1,352,601 ------------ Total Retailing $ 8,308,795 ------------
62 The accompanying notes are an integral part of these financial statements. Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Food, Beverage & Tobacco - 5.5% Packaged Foods & Meats - 3.9% 171,844 Campbell Soup Co. $ 5,287,640 70,338 General Mills, Inc. 3,291,115 85,864 H.J. Heinz Co., Inc. 3,041,303 54,641 Sara Lee Corp. 1,082,438 ------------ $ 12,702,496 ------------ Soft Drinks - 1.6% 84,326 The Coca-Cola Co. $ 3,520,611 33,321 PepsiCo, Inc. 1,797,002 ------------ $ 5,317,613 ------------ Total Food, Beverage & Tobacco $ 18,020,109 ------------ Household & Personal Products - 1.2% Household Products - 1.2% 34,245 Clorox Co. $ 1,908,131 41,467 Colgate-Palmolive Co. 2,069,618 ------------ $ 3,977,749 ------------ Total Household & Personal Products $ 3,977,749 ------------ Health Care Equipment & Services - 0.7% Health Care Equipment - 0.7% 40,409 Becton, Dickinson & Co. $ 2,120,260 ------------ Total Health Care Equipment & Services $ 2,120,260 ------------ Pharmaceuticals & Biotechnology - 8.0% Pharmaceuticals - 8.0% 112,580 Abbott Laboratories $ 5,517,546 207,279 Bristol-Myers Squibb Co. 5,177,828 67,456 Eli Lilly & Co. 3,757,974 66,750 Johnson & Johnson 4,338,750 237,732 Merck & Co., Inc. 7,322,146 ------------ $ 26,114,244 ------------ Total Pharmaceuticals & Biotechnology $ 26,114,244 ------------ Banks - 11.3% Diversified Banks - 4.4% 16,994 Bank of America Corp. $ 775,096 28,656 Comerica, Inc. 1,656,317 100,311 U.S. Bancorp 2,929,081 93,864 Wachovia Corp. 4,655,654 68,274 Wells Fargo & Co. 4,204,313 ------------ $ 14,220,461 ------------ Regional Banks - 4.1% 80,601 First Horizon National Corp. $ 3,401,362 112,894 National City Corp. 3,851,943 86,260 SunTrust Banks, Inc. 6,231,422 ------------ $ 13,484,727 ------------ Shares Value Thrifts & Mortgage Finance - 2.8% 228,189 Washington Mutual, Inc. $ 9,285,010 ------------ Total Banks $ 36,990,198 ------------ Diversified Financials - 5.1% Asset Management & Custody Banks - 3.9% 139,304 Eaton Vance Corp. $ 3,330,759 31,364 State Street Corp. 1,513,313 127,500 T. Rowe Price Associates, Inc. 7,981,500 ------------ $ 12,825,572 ------------ Investment Banking & Brokerage - 0.7% 50,213 A.G. Edwards, Inc. $ 2,267,117 ------------ Diversified Financial Services - 0.5% 34,521 Citigroup, Inc. $ 1,595,906 ------------ Total Diversified Financials $ 16,688,595 ------------ Insurance - 3.4% Property & Casualty Insurance - 3.4% 64,911 Chubb Corp. $ 5,557,030 101,125 Safeco Corp. 5,495,133 ------------ $ 11,052,163 ------------ Total Insurance $ 11,052,163 ------------ Software & Services - 0.6% Data Processing & Outsourced Services - 0.6% 45,824 Automatic Data Processing, Inc. $ 1,923,233 ------------ Total Software & Services $ 1,923,233 ------------ Technology Hardware & Equipment - 1.4% Communications Equipment - 0.6% 103,347 Motorola, Inc. $ 1,887,116 ------------ Computer Hardware - 0.8% 58,880 Diebold, Inc. $ 2,656,077 ------------ Total Technology Hardware & Equipment $ 4,543,193 ------------ Telecommunication Services - 8.7% Integrated Telecommunication Services - 8.7% 60,408 Alltel Corp. $ 3,762,210 102,825 AT&T Corp. 1,957,788 229,318 BellSouth Corp. 6,092,979 282,236 Citizens Utilities Co. (Class B) (a) 3,793,252 197,826 SBC Communications, Inc. 4,698,368 232,145 Verizon Communications, Inc. 8,020,610 ------------ $ 28,325,207 ------------ Total Telecommunication Services $ 28,325,207 ------------
The accompanying notes are an integral part of these financial statements. 63 Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Utilities - 17.7% Electric Utilities - 8.6% 89,534 Ameren Corp. $ 4,951,230 75,249 American Electric Power Co., Inc. 2,774,431 86,352 Consolidated Edison, Inc. 4,044,728 76,895 FPL Group, Inc. 3,234,204 122,368 Great Plains Energy, Inc. (a) 3,902,316 135,402 NSTAR 4,174,444 143,822 Southern Co. 4,986,309 ------------ $ 28,067,662 ------------ Gas Utilities - 6.0% 17,375 Atmos Energy Corp. $ 500,400 56,505 Equitable Resources, Inc. 3,842,340 144,595 KeySpan Energy Corp. 5,885,017 141,019 Questar Corp. 9,293,152 ------------ $ 19,520,909 ------------ Independent Power Producer & Energy Traders - 2.4% 137,203 Constellation Energy Group $ 7,915,241 ------------ Water Utilities - 0.7% 82,718 Aqua America, Inc. $ 2,460,033 ------------ Total Utilities $ 57,963,845 ------------ TOTAL COMMON STOCKS (Cost $251,069,104) $313,459,735 ------------ Principal Amount TEMPORARY CASH INVESTMENTS - 5.2% Repurchase Agreement - 3.0% $9,800,000 UBS Warburg, Inc., 2.75%, dated 6/30/05, repurchase price of $9,800,000 plus accrued interest on 7/1/05 collateralized by $9,959,000 U.S. Treasury Note, 2.0%, 8/31/05 $ 9,800,000 ------------ Shares Value Security Lending Collateral - 2.2% 7,334,929 Securities Lending Investment Fund, 3.29% $ 7,334,929 ------------ TOTAL TEMPORARY CASH INVESTMENTS (Cost $17,134,929) $ 17,134,929 ------------ TOTAL INVESTMENT IN SECURITIES - 101.7% (Cost $271,200,539) $333,180,850 ------------ OTHER ASSETS AND LIABILITIES - (1.7)% $ (5,628,884) ------------ TOTAL NET ASSETS - 100.0% $327,551,966 ============
(a) At June 30, 2005, the following securities were out on loan:
Shares Security Market Value 255,378 Citizens Utilities Co. (Class B) $3,432,280 116,250 Great Plains Energy, Inc. 3,707,213 ---------- Total $7,139,493 ==========
64 The accompanying notes are an integral part of these financial statements. Pioneer Balanced VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Shares Value COMMON STOCKS - 63.3% Energy - 5.9% Integrated Oil & Gas - 0.6% 3,900 Exxon Mobil Corp. $ 224,133 ----------- Oil & Gas Drilling - 1.9% 23,800 ENSCO International, Inc. $ 850,850 ----------- Oil & Gas Equipment & Services - 1.7% 16,798 National-Oilwell Varco, Inc.* $ 798,577 ----------- Oil & Gas Exploration & Production - 1.7% 17,400 Encana Corp. $ 688,865 1,900 Pioneer Natural Resources Co. 79,952 ----------- $ 768,817 ----------- Total Energy $ 2,642,377 ----------- Materials - 4.2% Gold - 2.0% 23,000 Newmont Mining Corp. $ 897,690 ----------- Industrial Gases - 2.2% 21,600 Praxair, Inc. $ 1,006,560 ----------- Total Materials $ 1,904,250 ----------- Capital Goods - 3.1% Aerospace & Defense - 3.1% 25,000 Northrop Grumman Corp. $ 1,381,250 ----------- Total Capital Goods $ 1,381,250 ----------- Commercial Services & Supplies - 0.4% Diversified Commercial Services - 0.4% 4,600 Cintas Corp. $ 177,560 ----------- Total Commercial Services & Supplies $ 177,560 ----------- Transportation - 1.7% Air Freight & Couriers - 1.7% 11,200 United Parcel Service $ 774,592 ----------- Total Transportation $ 774,592 ----------- Consumer Durables & Apparel - 1.7% Apparel, Accessories & Luxury Goods - 1.7% 19,300 Liz Claiborne, Inc. $ 767,368 ----------- Total Consumer Durables & Apparel $ 767,368 ----------- Media - 2.9% Broadcasting & Cable TV - 0.9% 12,400 Comcast Corp.* $ 371,380 ----------- Movies & Entertainment - 2.0% 29,319 Viacom, Inc. (Class B) $ 938,794 ----------- Total Media $ 1,310,174 ----------- Shares Value Retailing - 2.6% Apparel Retail - 1.1% 17,400 Ross Stores, Inc. $ 503,034 ----------- General Merchandise Stores - 1.5% 25,500 Family Dollar Stores, Inc. $ 665,550 ----------- Total Retailing $ 1,168,584 ----------- Food & Drug Retailing - 3.2% Drug Retail - 2.8% 42,600 CVS Corp. $ 1,238,382 ----------- Hypermarkets & Supercenters - 0.4% 4,000 Wal-Mart Stores, Inc. $ 192,800 ----------- Total Food & Drug Retailing $ 1,431,182 ----------- Food, Beverage & Tobacco - 6.5% Brewers - 1.0% 9,600 Anheuser-Busch Companies, Inc. $ 439,200 ----------- Packaged Foods & Meats - 2.0% 13,000 Wm. Wrigley Jr. Co. $ 894,920 ----------- Soft Drinks - 3.5% 7,900 The Coca-Cola Co. $ 329,825 23,500 PepsiCo, Inc. 1,267,355 ----------- $ 1,597,180 ----------- Total Food, Beverage & Tobacco $ 2,931,300 ----------- Household & Personal Products - 2.2% Personal Products - 2.2% 17,000 Avon Products, Inc. $ 643,450 9,300 Estee Lauder Co. 363,909 ----------- $ 1,007,359 ----------- Total Household & Personal Products $ 1,007,359 ----------- Health Care Equipment & Services - 3.0% Health Care Distributors - 0.8% 6,400 Cardinal Health, Inc. $ 368,512 ----------- Health Care Equipment - 1.7% 7,000 Biomet, Inc. $ 242,480 7,700 Guidant Corp. 518,210 ----------- $ 760,690 ----------- Health Care Services - 0.5% 8,200 IMS Health, Inc. (a) $ 203,114 ----------- Total Health Care Equipment & Services $ 1,332,316 ----------- Pharmaceuticals & Biotechnology - 7.0% Biotechnology - 1.5% 11,616 Amgen, Inc.* $ 702,303 -----------
The accompanying notes are an integral part of these financial statements. 65 Pioneer Balanced VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Shares Value Pharmaceuticals - 5.5% 4,000 Eli Lilly & Co. $ 222,840 30,700 IVAX Corp.* 660,050 28,288 Pfizer, Inc. 780,183 17,800 Wyeth 792,100 ------------ $ 2,455,173 ------------ Total Pharmaceuticals & Biotechnology $ 3,157,476 ------------ Diversified Financials - 2.8% Asset Management & Custody Banks - 1.0% 15,700 The Bank of New York Co., Inc. $ 451,846 ------------ Consumer Finance - 1.4% 12,300 American Express Co. $ 654,729 ------------ Investment Banking & Brokerage - 0.4% 2,900 Merrill Lynch & Co., Inc. $ 159,529 ------------ Total Diversified Financials $ 1,266,104 ------------ Insurance - 4.3% Property & Casualty Insurance - 4.3% 515 Berkshire Hathaway, Inc. (Class B)* $ 1,433,503 4,800 Progressive Corp.* 474,288 ------------ $ 1,907,791 ------------ Total Insurance $ 1,907,791 ------------ Software & Services - 7.4% Data Processing & Outsourced Services - 2.7% 30,500 First Data Corp. $ 1,224,270 ------------ Shares Value Systems Software - 4.7% 53,700 Microsoft Corp. $ 1,333,908 35,600 Symantec Corp.* 773,944 ------------ $ 2,107,852 ------------ Total Software & Services $ 3,332,122 ------------ Technology Hardware & Equipment - 2.0% Communications Equipment - 0.5% 27,100 Avaya, Inc.* $ 225,472 ------------ Computer Hardware - 1.3% 25,622 Hewlett-Packard Co. $ 602,373 ------------ Electronic Manufacturing Services - 0.2% 3,400 Molex, Inc. $ 79,832 ------------ Total Technology Hardware & Equipment $ 907,677 ------------ Semiconductors - 0.6% Semiconductors - 0.6% 7,800 Intel Corp. $ 203,268 ------------ Total Semiconductors $ 203,268 ------------ Telecommunication Services - 1.8% Wireless Telecommunication Services - 1.8% 32,300 Vodafone Group Plc (A.D.R.) $ 785,536 ------------ Total Telecommunication Services $ 785,536 ------------ TOTAL COMMON STOCKS (Cost $25,202,462) $ 28,388,286 ------------
66 The accompanying notes are an integral part of these financial statements. Pioneer Balanced VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value ASSET BACKED SECURITIES - 0.5% Diversified Financials - 0.2% Diversified Financial Services - 0.2% 80,693 BBB-/Baa2 PF Export Receivable Master Trust, 6.436%, 6/1/15 (144A) $ 82,745 ----------- Total Diversified Financials $ 82,745 ----------- Utilities - 0.3% Electric Utilities - 0.3% 89,110 BBB-/Baa3 FPL Energy America Wind LLC, 6.639%, 6/20/23 (144A) $ 96,209 65,325 BB-/Ba2 FPL Energy Wind Funding, 6.876%, 6/27/17 (144A) 66,060 ----------- Total Utilities $ 162,269 ----------- TOTAL ASSET BACKED SECURITIES (Cost $240,084) $ 245,014 ----------- 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 $ 98,294 50,000 BBB-/Baa3 Tower 2004-2A F, 6.376%, 12/15/14 50,145 ----------- Total Diversified Financials $ 148,439 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $150,000) $ 148,439 ----------- CORPORATE BONDS - 10.9% Energy - 0.6% Integrated Oil & Gas - 0.1% 40,000 A-/A3 Occidental Petroleum, 6.75%, 1/15/12 $ 45,272 ----------- Oil & Gas Exploration & Production - 0.5% 100,000 BBB-/Baa3 Gazprom International SA, 7.201%, 2/1/20 (144A) $ 107,750 100,000 BBB-/Baa3 Tengizchevroil LLP, 6.124%, 11/15/14 (144A) 102,250 ----------- $ 210,000 ----------- Oil & Gas Refining & Marketing - 0.0% 25,000 BBB/Baa2 TGT Pipeline LLC, 5.5%, 2/1/17 (144A) $ 25,975 ----------- Total Energy $ 281,247 ----------- Materials - 1.6% Aluminum - 0.2% 50,000 B/B1 Novelis, Inc., 7.25%, 2/15/15 (144A) $ 50,188 ----------- Commodity Chemicals - 0.2% 100,000 BB+/Ba2 Nova Chemicals, Ltd., 6.5%, 1/15/12 $ 97,000 ----------- Diversified Metals & Mining - 0.3% 125,000 BBB-/Baa3 Inco, Ltd., 7.2%, 9/15/32 $ 148,783 ----------- Metal & Glass Containers - 0.1% 40,000 BBB/Baa2 Tenneco Packaging, 8.125%, 6/15/17 $ 49,916 ----------- Paper Packaging - 0.3% 150,000 A-/Baa1 Bemis Co., Inc., 6.7%, 7/1/05 $ 150,000 -----------
The accompanying notes are an integral part of these financial statements. 67 Pioneer Balanced VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Paper Products - 0.5% 100,000 B/B2 MDP Acquisitions, 9.625%, 10/1/12 $ 100,000 100,000 BB-/Ba3 Abitibi-Consolidated, Inc., 6.95%, 4/1/08 100,500 ----------- $ 200,500 ----------- Total Materials $ 696,387 ----------- Capital Goods - 0.4% Electrical Component & Equipment - 0.2% 75,000 BBB-/Ba1 Thomas & Betts Corp., 7.25%, 6/1/13 $ 82,238 ----------- Industrial Conglomerates - 0.2% 55,000 AAA/Aaa General Electric Capital Corp., 6.125%, 2/22/11 $ 59,755 30,000 AAA/Aaa General Electric Capital Corp., 6.75%, 3/15/32 37,020 ----------- $ 96,775 ----------- Total Capital Goods $ 179,013 ----------- Commercial Services & Supplies - 0.1% Diversified Commercial Services - 0.1% 25,000 BBB+/Baa1 Deluxe Corp., 3.5%, 10/1/07 $ 24,434 ----------- Total Commercial Services & Supplies $ 24,434 ----------- Automobiles & Components - 0.8% Auto Parts & Equipment - 0.4% 75,000 B-/B3 Delphi Corp., 6.55%, 6/15/06 (a) $ 72,938 100,000 B+/Ba2 Sun Sage BV, 8.25%, 3/26/09 (144A) 106,250 ----------- $ 179,188 ----------- Automobile Manufacturers - 0.4% 200,000 BB/Baa3 General Motors, 7.2%, 1/15/11 (a) $ 185,000 ----------- Total Automobiles & Components $ 364,188 ----------- Media - 1.3% Broadcasting & Cable TV - 0.9% 250,000 BBB+/Baa2 Comcast Cable Corp., 7.125%, 6/15/13 $ 286,505 100,000 BBB-/Baa3 Cox Communications, 7.125%, 10/1/12 112,142 ----------- $ 398,647 ----------- Publishing - 0.4% 170,000 BBB-/Baa3 News America, Inc., 7.3%, 4/30/28 $ 197,840 ----------- Total Media $ 596,487 ----------- Retailing - 0.2% Specialty Stores - 0.2% 100,000 B-/Ba2 Toys "R" Us, 7.875%, 4/15/13 $ 89,500 ----------- Total Retailing $ 89,500 ----------- Food, Beverage & Tobacco - 0.4% Tobacco - 0.4% 150,000 BBB/Baa2 Altria Group, Inc., 7.0%, 11/4/13 $ 167,865 ----------- Total Food, Beverage & Tobacco $ 167,865 ----------- Health Care Equipment & Services - 0.7% Health Care Facilities - 0.5% 200,000 BB+/Ba2 HCA, Inc., 6.3%, 10/1/12 $ 205,296 -----------
68 The accompanying notes are an integral part of these financial statements. Pioneer Balanced VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Health Care Supplies - 0.2% 100,000 BBB/Baa3 Bausch & Lomb, 7.125%, 8/1/28 $ 112,328 ----------- Total Health Care Equipment & Services $ 317,624 ----------- Banks - 0.3% Diversified Banks - 0.3% 50,000 NR/Aaa KFW-Kredit Wiederaufbau, 2.75%, 5/8/07 $ 49,068 75,000 AA-/Aa2 National Westminster, 7.375%, 10/1/09 84,191 ----------- $ 133,259 ----------- Total Banks $ 133,259 ----------- Diversified Financials - 0.8% Consumer Finance - 0.2% 100,000 A/A2 SLM Corp., Floating Rate Note, 7/25/14 $ 99,063 ----------- Investment Banking & Brokerage - 0.2% 75,000 B+/B1 E*Trade Financial Corp., 8.0%, 6/15/11 $ 78,938 ----------- Diversified Financial Services - 0.4% 100,000 A-/Baa3 Brascan Corp., 5.75%, 3/1/10 $ 104,149 100,000 BBB-/Baa3 Glencore Funding LLC, 6.0%, 4/15/14 (144A) 95,890 ----------- $ 200,039 ----------- Total Diversified Financials $ 378,040 ----------- Insurance - 1.3% Life & Health Insurance - 0.2% 100,000 BB+/Ba1 Provident Co., Inc., 7.0%, 7/15/18 $ 100,899 ----------- Multi-Line Insurance - 0.1% 50,000 A/Baa1 Loew Corp., 5.25%, 3/15/16 $ 50,362 ----------- Property & Casualty Insurance - 0.6% 85,000 BBB-/NR Kingsway America, Inc., 7.5%, 2/1/14 $ 90,226 150,000 BB/Baa3 Ohio Casualty Corp., 7.3%, 6/15/14 164,970 ----------- $ 255,196 ----------- Reinsurance - 0.4% 100,000 BBB-/Baa3 Odyssey Re Holdings, 7.65%, 11/1/13 $ 107,953 50,000 BBB/Baa3 Platinum Underwritters Financial, 7.5%, 6/1/17 (144A) 50,700 ----------- $ 158,653 ----------- Total Insurance $ 565,110 ----------- Real Estate - 1.1% Real Estate Investment Trusts - 1.1% 100,000 BBB-/Baa3 Colonial Reality LP, 6.15%, 4/15/13 $ 105,635 150,000 BBB-/Baa3 Hospitality Properties Trust, 6.75%, 2/15/13 164,744 107,000 B+/Ba3 Host Marriot LP, 6.375%, 3/15/15 (144A) 105,930 75,000 B+/B1 Trustreet Properties, Inc., 7.5%, 4/1/15 (144A) 76,688 50,000 BB/Ba3 Ventas Realty LP, 7.125%, 6/1/15 (144A) 52,000 ----------- $ 504,997 ----------- Total Real Estate $ 504,997 -----------
The accompanying notes are an integral part of these financial statements. 69 Pioneer Balanced VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Software & Services - 0.2% IT Consulting & Other Services - 0.2% 100,000 BB+/Ba1 Unisys Corp., 6.875%, 3/15/10 $ 98,250 ----------- Total Software & Services $ 98,250 ----------- Technology Hardware & Equipment - 0.6% Computer Hardware - 0.6% 250,000 BBB-/Baa3 NCR Corp., 7.125%, 6/15/09 $ 270,468 ----------- Total Technology Hardware & Equipment $ 270,468 ----------- Telecommunication Services - 0.4% Integrated Telecommunication Services - 0.4% 100,000 B/Caa1 Intelsat, Ltd., 6.5%, 11/1/13 $ 81,000 100,000 BBB+/Baa2 Telecom Italia Capital, 5.25%, 11/15/13 101,521 ----------- $ 182,521 ----------- Total Telecommunication Services $ 182,521 ----------- Utilities - 0.1% Electric Utilities - 0.1% 50,000 BBB+/Baa2 Entergy Gulf States, 5.7%, 6/1/15 $ 51,153 ----------- Total Utilities $ 51,153 ----------- TOTAL CORPORATE BONDS (Cost $4,689,691) $ 4,900,543 ----------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 23.7% Government - 23.7% 372,477 Federal Home Loan Mortgage Corp., 5.0%, 4/1/34 $ 372,949 228,337 Federal Home Loan Mortgage Corp., 5.0%, 5/1/34 228,626 127,708 Federal Home Loan Mortgage Corp., 5.5%, 10/1/16 131,150 164,063 Federal Home Loan Mortgage Corp., 5.5%, 9/1/17 168,445 399,434 Federal Home Loan Mortgage Corp., 5.5%, 1/1/34 405,275 188,837 Federal Home Loan Mortgage Corp., 5.5%, 1/1/35 191,593 91,346 Federal Home Loan Mortgage Corp., 6.0%, 1/1/32 93,820 1,053,440 Federal Home Loan Mortgage Corp., 6.0%, 1/1/33 1,081,244 233,641 Federal Home Loan Mortgage Corp., 6.0%, 11/1/33 239,731 40,009 Federal Home Loan Mortgage Corp., 6.0%, 6/1/34 41,051 28,450 Federal Home Loan Mortgage Corp., 6.5%, 5/1/09 29,444 15,295 Federal Home Loan Mortgage Corp., 6.5%, 7/1/33 15,902 1,838 Federal Home Loan Mortgage Corp., 6.5%, 11/1/33 1,903 138,047 Federal National Mortgage Association, 5.0%, 6/1/34 138,196 184,815 Federal National Mortgage Association, 5.5%, 2/1/17 189,860 213,157 Federal National Mortgage Association, 5.5%, 11/1/33 216,268 115,158 Federal National Mortgage Association, 5.5%, 3/1/34 116,800 196,288 Federal National Mortgage Association, 5.5%, 4/1/34 199,088 246,291 Federal National Mortgage Association, 5.5%, 9/1/34 249,805 279,957 Federal National Mortgage Association, 5.5%, 10/1/34 283,951 96,984 Federal National Mortgage Association, 5.5%, 12/1/34 98,368 117,449 Federal National Mortgage Association, 6.0%, 12/1/33 120,457 110,000 Federal National Mortgage Association, 6.125%, 3/15/12 123,016 17,843 Federal National Mortgage Association, 6.5%, 8/1/13 18,582 15,857 Federal National Mortgage Association, 6.5%, 8/1/14 16,515 56,344 Federal National Mortgage Association, 6.5%, 12/1/21 58,593 59,085 Federal National Mortgage Association, 6.5%, 4/1/29 61,806
70 The accompanying notes are an integral part of these financial statements. Pioneer Balanced VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value U.S. Government and Agency Obligations (Cont.) 194,053 Federal National Mortgage Association, 6.5%, 7/1/32 $ 201,213 56,325 Federal National Mortgage Association, 6.5%, 9/1/32 58,785 57,096 Federal National Mortgage Association, 6.5%, 10/1/32 59,188 10,000 Federal National Mortgage Association, 7.125%, 6/15/10 11,389 26,937 Federal National Mortgage Association, 9.0%, 4/1/33 28,612 150,000 Freddie Mac 5.75% 1/15/12 164,101 44,655 Government National Mortgage Association, 4.5%, 1/15/35 44,168 99,753 Government National Mortgage Association, 4.5%, 4/15/35 98,664 105,184 Government National Mortgage Association, 5.0%, 4/15/34 106,127 354,621 Government National Mortgage Association, 5.0%, 10/15/34 357,766 207,544 Government National Mortgage Association, 5.5%, 8/15/19 214,341 75,713 Government National Mortgage Association, 5.5%, 4/15/33 77,406 223,462 Government National Mortgage Association, 5.5%, 6/15/33 228,458 154,936 Government National Mortgage Association, 5.5%, 7/15/33 158,400 165,461 Government National Mortgage Association, 5.5%, 8/15/33 169,160 42,738 Government National Mortgage Association, 5.5%, 9/15/33 43,723 300,796 Government National Mortgage Association, 6.0%, 8/15/32 310,756 127,190 Government National Mortgage Association, 6.0%, 9/15/32 131,337 401,578 Government National Mortgage Association, 6.0%, 9/15/33 414,537 61,347 Government National Mortgage Association, 6.0%, 10/20/33 63,402 48,678 Government National Mortgage Association, 6.5%, 10/15/28 50,960 91,106 Government National Mortgage Association, 6.5%, 5/15/33 95,226 161,414 Government National Mortgage Association II, 5.50%, 2/20/34 164,648 20,471 Government National Mortgage Association II, 7.5%, 9/20/29 21,845 175,000 U.S. Treasury Bonds, 5.25%, 11/15/28 199,876 470,000 U.S. Treasury Notes, 4.0%, 11/15/12 475,269 500,000 U.S. Treasury Notes, 4.25%, 11/15/14 511,738 300,000 U.S. Treasury Notes, 4.75%, 11/15/08 309,938 200,000 U.S. Treasury Notes, 4.75%, 5/15/14 212,219 130,000 U.S. Treasury Notes, 5.375%, 2/15/31 153,400 500,000 U.S. Treasury Notes, 5.625%, 5/15/08 526,367 100,000 U.S. Treasury Strip, 0.0%, 11/15/15 65,508 ----------- Total Government $10,620,965 ----------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $10,504,524) $10,620,965 ----------- Shares TEMPORARY CASH INVESTMENTS - 1.0% Security Lending Collateral - 1.0% 459,990 Securities Lending Investment Fund, 3.29% $ 459,990 ----------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $459,990) $ 459,990 ----------- TOTAL INVESTMENTS IN SECURITIES - 99.7% (Cost $41,246,751) $44,763,237 ----------- OTHER ASSETS AND LIABILITIES - 0.3% $ 115,275 ----------- TOTAL NET ASSETS - 100.0% $44,878,512 ===========
The accompanying notes are an integral part of these financial statements. 71 Pioneer Balanced VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- (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 June 30, 2005, the value of these securities amounted to $1,018,635 or 2.3% of net assets. (a) At June 30, 2005, the following securities were out on loan:
Principal Amount Security Market Value $ 71,250 Delphi Corp., 6.55%, 6/15/06 $ 69,291 190,000 General Motors, 7.2%, 1/15/11 175,750 Shares 7,790 IMS Health, Inc. 192,958 -------- Total $437,999 ========
72 The accompanying notes are an integral part of these financial statements. Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
S&P/Moody's Ratings Shares (unaudited) Value CONVERTIBLE PREFERRED STOCKS - 2.9% Materials - 2.5% Construction Materials - 0.1% 1,750 B-/B3 TXI Capital Trust I, 5.5%, 6/30/28 $ 84,000 ------------ Diversified Metals & Mining - 2.4% 3,000 B+/B1 Freeport-McCorp., 5.5%, 12/31/49 (144A) $ 2,770,125 ------------ Total Materials $ 2,854,125 ------------ Banks - 0.4% Thrifts & Mortgage Finance - 0.4% 10,000 BB-/Ba1 Sovereign Cap Trust IV, 4.375%, 3/1/34 $ 440,000 ------------ Total Banks $ 440,000 ------------ TOTAL CONVERTIBLE PREFERRED STOCK (Cost $3,526,088) $ 3,294,125 ------------ Principal S&P/Moody's Amount Ratings USD ($) (unaudited) CONVERTIBLE CORPORATE BONDS - 17.2% Materials - 2.9% Commodity Chemicals - 0.4% 200,000 B+/B1 Millennium Chemicals, Inc. 4.0%, 11/15/23 $ 401,500 ------------ Gold - 0.7% 1,000,000 B-/NR Coeur D'Alene Mines Corp., 1.25%, 1/15/24 $ 747,500 ------------ Steel - 1.8% 3,000,000 CCC+/B2 Graftech International, 1.625%, 1/15/24 (144A) $ 1,987,500 ------------ Total Materials $ 3,136,500 ------------ Capital Goods - 3.3% Aerospace & Defense - 1.4% 1,500,000 B/B2 Alliant Techsystems, 2.75%, 2/15/24 $ 1,565,624 ------------ Construction & Engineering - 0.7% 875,000 NR/NR Quanta Services, Inc., 4.0%, 7/1/07 $ 832,344 ------------ Electrical Component & Equipment - 1.2% 2,595,000 NR/B1 Roper Industries, Inc., 1.4813%, 1/15/34 $ 1,339,669 ------------ Total Capital Goods $ 3,737,637 ------------ Consumer Services - 1.9% Specialized Consumer Services - 1.9% 2,200,000 B+/Ba3 SCI Systems, Inc., 3.0%, 3/15/07 $ 2,068,000 ------------ Total Consumer Services $ 2,068,000 ------------ Media - 1.9% Advertising - 1.9% 1,800,000 BB+/Baa3 Interpublic Group Co., 4.5%, 3/15/23 $ 2,139,750 ------------ Total Media $ 2,139,750 ------------ Retailing - 1.3% Automotive Retail - 1.3% 1,500,000 B+/B3 Sonic Automotive, Inc., 5.25%, 5/7/09 $ 1,455,000 ------------ Total Retailing $ 1,455,000 ------------
The accompanying notes are an integral part of these financial statements. 73 Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Health Care Equipment & Services - 0.7% Health Care Equipment - 0.7% 375,000 NR/NR Epix Medical, 3.0%, 6/15/24 (144A) $ 293,438 600,000 NR/NR Wilson Greatbatch Technology, 2.25%, 6/15/13 516,000 ------------ $ 809,438 ------------ Total Health Care Equipment & Services $ 809,438 ------------ Pharmaceuticals & Biotechnology - 1.4% Biotechnology - 1.0% 300,000 NR/NR Cubist Pharmaceuticals, 5.5%, 11/1/08 $ 280,500 850,000 NR/NR CV Therapeutics, 4.75%, 3/7/07 841,500 ------------ $ 1,122,000 ------------ Pharmaceuticals - 0.4% 400,000 NR/NR Vertex Pharmaceuticals, Inc., 5.75%, 2/15/11 (144A) $ 471,000 ------------ Total Pharmaceuticals & Biotechnology $ 1,593,000 ------------ Software & Services - 0.4% Application Software - 0.2% 200,000 NR/NR Mentor Graphics, 6.875%, 6/15/07 $ 198,000 ------------ IT Consulting & Other Services - 0.2% 400,000 NR/NR Safeguard Scientifics, 2.625%, 3/15/24 $ 259,000 ------------ Total Software & Services $ 457,000 ------------ Technology Hardware & Equipment - 2.5% Communications Equipment - 0.9% 1,200,000 B-/NR Adaptec, Inc., 0.75%, 12/22/23 $ 973,500 ------------ Electronic Equipment & Instruments - 1.2% 300,000 B+/NR Flir Systems, Inc., 3.0%, 6/1/23 $ 446,250 1,000,000 NR/NR Veeco Instruments, 4.125%, 12/21/08 893,750 ------------ $ 1,340,000 ------------ Technology Distributors - 0.4% 400,000 NR/NR Bell Microproducts, Inc., 3.75%, 3/5/24 $ 421,000 ------------ Total Technology, Hardware & Equipment $ 2,734,500 ------------ Semiconductors - 0.9% Semiconductor Equipment - 0.9% 600,000 B-/NR Advanced Energy Industries, Inc., 5.25%, 11/15/06 $ 586,500 500,000 B-/NR Cymer, Inc., 3.5%, 2/15/09 473,125 ------------ Total Semiconductors $ 1,059,625 ------------ TOTAL CONVERTIBLE CORPORATE BONDS (Cost $20,740,597) $ 19,190,450 ------------
74 The accompanying notes are an integral part of these financial statements. Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
S&P/Moody's Ratings Shares (unaudited) Value PREFERRED STOCKS - 1.7% Real Estate - 1.7% Real Estate Management & Development - 1.7% 75,000 BB-/Ba3 Forest City Enterprises, 7.375%, 2/1/34 $ 1,916,250 ------------ Total Real Estate $ 1,916,250 ------------ TOTAL PREFERRED STOCKS (Cost $1,917,000) $ 1,916,250 ------------ COMMON STOCKS - 4.8% Materials - 1.0% Specialty Chemicals - 1.0% 63,100 RPM, Inc. $ 1,152,206 ------------ Total Materials $ 1,152,206 ------------ Household & Personal Products - 1.0% Personal Products - 1.0% 24,600 Alberto-Culver Co. (Class B) $ 1,065,918 ------------ Total Household & Personal Products $ 1,065,918 ------------ Health Care Equipment & Services - 0.5% Health Care Equipment - 0.5% 8,100 Bio-Rad Laboratories, Inc.* $ 479,601 ------------ Total Health Care Equipment & Services $ 479,601 ------------ Pharmaceuticals & Biotechnology - 1.3% Biotechnology - 0.2% 11,900 Protein Design Labs, Inc.* $ 240,499 ------------ Pharmaceuticals - 1.1% 43,900 Bristol-Myers Squibb Co. $ 1,096,622 4,500 Merck & Co., Inc. 138,600 ------------ $ 1,235,222 ------------ Total Pharmaceuticals & Biotechnology $ 1,475,721 ------------ Utilities - 1.0% Independent Power Producer & Energy Traders - 1.0% 31,100 NRG Energy, Inc.* $ 1,169,360 ------------ Total Utilities $ 1,169,360 ------------ TOTAL COMMON STOCK (Cost $5,303,635) $ 5,342,806 ------------
The accompanying notes are an integral part of these financial statements. 75 Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value CORPORATE BONDS - 69.5% Energy - 1.9% Oil & Gas Equipment & Services - 0.9% 1,000,000 B+/Ba3 Holly Energy Partners LP, 6.25%, 3/1/15 (144A) $ 975,000 ------------ Oil & Gas Refining & Marketing - 1.0% 1,000,000 BB-/B2 Tesoro Petroleum Corp., 9.625%, 4/1/12 $ 1,106,250 ------------ Total Energy $ 2,081,250 ------------ Materials - 21.4% Aluminum - 2.9% 3,235,000 B/B1 Novelis, Inc., 7.25%, 2/15/15 (144A) $ 3,247,131 ------------ Commodity Chemicals - 6.1% 1,550,000 BB-/B1 Arco Chemical Co., 9.8%, 2/1/20 $ 1,736,000 2,650,000 BB+/Ba2 Nova Chemicals Corp., 7.4%, 4/1/09 2,683,125 2,500,000 BB+/Ba2 Nova Chemicals Corp., 7.875%, 9/15/25 2,500,000 ------------ $ 6,919,125 ------------ Construction Materials - 1.0% 1,104,000 BB-/Ba3 Texas Industries, Inc., 7.25% 7/15/13 (144A) $ 1,131,600 ------------ Diversified Metals & Mining - 1.2% 1,375,000 B+/B1 Freeport-McMoran Copper & Gold, 6.875%, 2/1/09 $ 1,340,625 ------------ Fertilizers & Agricultural Chemicals - 0.5% 500,000 B+/Ba2 Scotts Co., 6.625%, 11/15/13 $ 516,250 ------------ Metal & Glass Containers - 1.2% 1,500,000 B/B3 Crown Cork & Seal Co., Inc., 7.375%, 12/15/26 $ 1,376,250 ------------ Paper Products - 5.8% 200,000 BB-/Ba3 Abitibi-Consolidated, Inc., 6.0%, 6/20/13 $ 184,000 2,250,000 BB-/Ba3 Abitibi-Consolidated, Inc., 8.55%, 8/1/10 2,345,625 3,100,000 BB/Ba3 Bowater, Inc., 6.5%, 6/15/13 3,061,250 885,000 BB/Ba3 Bowater Canada Finance, 7.95%, 11/15/11 936,994 ------------ $ 6,527,869 ------------ Specialty Chemicals - 2.7% 1,950,000 BB-/B1 Millenium America, Inc., 7.625%, 11/15/26 $ 1,818,375 1,000,000 BB-/B1 Millenium America, Inc., 9.25%, 6/15/08 1,082,500 ------------ $ 2,900,875 ------------ Total Materials $ 23,959,725 ------------ Capital Goods - 14.1% Aerospace & Defense - 5.7% 3,200,000 B/B2 DRS Technologies, Inc., 6.875%, 11/1/13 $ 3,312,000 1,525,000 B+/B1 Esterline Technology, 7.75%, 6/15/13 1,616,500 600,000 BB+/Ba3 L-3 Communications Corp., 6.125%, 1/15/14 600,000 850,000 BB+/Ba3 L-3 Communications Corp., 5.875%, 1/15/15 824,500 ------------ $ 6,353,000 ------------
76 The accompanying notes are an integral part of thesefinancial statements. Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Industrial Machinery - 8.4% 3,000,000 B/B2 Gardner Denver, Inc. 8.0%, 5/1/13 (144A) $ 3,034,980 517,000 B/B3 JLG Industries, Inc., 8.375%, 6/15/12 538,973 800,000 B+/B1 Manitowoc Co., Inc., 7.125%, 11/1/13 836,000 5,100,000 NR/NR Mueller Industries, Inc., 6.0%, 11/1/14 5,049,000 ------------ $ 9,458,953 ------------ Total Capital Goods $ 15,811,953 ------------ Automobiles & Components - 0.3% Tires & Rubber - 0.3% 300,000 B-/B3 Goodyear Tire & Rubber, 7.857%, 8/15/11 (a) $ 292,500 ------------ Total Automobiles & Components $ 292,500 ------------ Consumer Durables & Apparel - 0.2% Homebuilding - 0.2% 185,000 BB-/Ba3 Meritage Homes Corp., 6.25%, 3/15/15 $ 172,050 ------------ Total Consumer Durables & Apparel $ 172,050 ------------ Consumer Services - 1.9% Hotels, Resorts & Cruise Lines - 1.9% 2,000,000 CCC+/B2 Meristar Hospitality Corp., 9.125%, 1/15/11 $ 2,100,000 ------------ Total Consumer Services $ 2,100,000 ------------ Media - 2.3% Advertising - 2.3% 2,550,000 BB-/Baa3 Interpublic Group, Inc., 7.25%, 8/15/11 $ 2,570,423 ------------ Total Media $ 2,570,423 ------------ Retailing - 2.7% Automotive Retail - 1.8% 2,290,000 B/B1 Pep Boys-Manny Moe Jack, 7.5%, 12/15/14 $ 2,049,550 ------------ Department Stores - 0.9% 1,000,000 BB+/Ba1 J.C. Penney Co., Inc., 7.625%, 3/1/97 $ 995,000 ------------ Total Retailing $ 3,044,550 ------------ Health Care Equipment & Services - 2.0% Health Care Facilities - 0.5% 500,000 BB+/Ba2 HCA, Inc., 6.25%, 2/15/13 $ 511,057 ------------ Health Care Supplies - 1.5% 1,700,000 CCC+/Caa1 Inverness Medical Innovation, 8.75%, 2/15/12 $ 1,687,250 ------------ Total Health Care Equipment & Services $ 2,198,307 ------------ Pharmaceuticals & Biotechnology - 2.9% Pharmaceuticals - 2.9% 3,300,000 BB-/B1 Valeant Pharmaceuticals, 7.0%, 12/15/11 $ 3,234,000 ------------ Total Pharmaceuticals & Biotechnology $ 3,234,000 ------------ Real Estate - 6.2% Real Estate Management & Development - 2.6% 2,735,000 BB-/Ba3 Forest City Enterprises, 7.625%, 6/1/15 $ 2,926,450 ------------
The accompanying notes are an integral part of these financial statements. 77 Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Real Estate Investment Trusts - 3.6% 1,500,000 B+/B3 BF Saul Real Estate Investment Trust, 7.5%, 3/1/14 $ 1,552,500 2,300,000 B+/B1 Crescent Real Estate, 9.25%, 4/15/09 2,449,500 ------------ $ 4,002,000 ------------ Total Real Estate $ 6,928,450 ------------ Technology Hardware & Equipment - 5.1% Electronic Equipment & Instruments - 1.7% 1,835,000 B/B2 General Cable Corp, 9.5%, 11/15/10 $ 1,963,450 ------------ Technology Distributors - 3.4% 1,000,000 BB+/Ba1 Anixter International Corp., 5.95%, 3/1/15 $ 990,948 2,550,000 BBB-/Baa3 Arrow Electronic, Inc., 6.875%, 6/1/18 2,796,418 ------------ $ 3,787,366 ------------ Total Technology Hardware & Equipment $ 5,750,816 ------------ Utilities - 8.5% Electric Utilities - 5.6% 3,000,000 B/Ba3 Allegheny Energy Supply, 7.8%, 3/15/11 (a) $ 3,270,000 1,750,000 B/Ba3 Allegheny Energy Supply, 8.25%, 4/15/12 (144A) 1,960,000 1,000,000 B+/B1 CMS Energy Corp., 7.5%, 1/15/09 1,052,500 ------------ $ 6,282,500 ------------ Multi-Utilities - 2.9% 3,000,000 B+/B1 CMS Energy Corp., 7.75%, 8/1/10 $ 3,225,000 ------------ Total Utilities $ 9,507,500 ------------ TOTAL CORPORATE BONDS (Cost $76,226,505) $ 77,651,524 ------------ TEMPORARY CASH INVESTMENTS - 6.2% Repurchase Agreement - 5.0% 5,600,000 UBS Warburg, Inc., 2.75%, dated 6/30/05, repurchase price of $5,600,000 plus accrued interest on 7/1/05 collateralized by $5,719,000 U.S. Treasury Bill, 1.875%, 1/31/06 $ 5,600,000 ------------ Shares Security Lending Collateral - 1.2% 1,316,415 Securities Lending Investment Fund, 3.29% $ 1,316,415 ------------ TOTAL TEMPORARY CASH INVESTMENT (Cost $6,916,415) $ 6,916,415 ------------ TOTAL INVESTMENTS IN SECURITIES - 102.3% (Cost $114,630,240) $114,311,570 ------------ OTHER ASSETS AND LIABILITIES - (2.3)% $ (2,553,165) ------------ TOTAL NET ASSETS - 100.0% $111,758,405 ============
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 June 30, 2005, the value of these securities amounted to $15,870,774 or 14.2% of net assets. (a) At June 30, 2005, the following securities were out on loan:
Principal Amount Security Market Value $ 899,750 Allegheny Energy Supply, 7.8%, 3/15/11 $ 980,728 285,000 Goodyear Tire & Rubber, 7.857%, 8/15/11 277,875 ---------- Total $1,258,603 ==========
78 The accompanying notes are an integral part of these financial statements. Pioneer Strategic Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value CONVERTIBLE CORPORATE BONDS - 0.3% Semiconductors - 0.3% 170,000 NR/NR Brooks Automation, Inc., 4.75%, 6/1/08 $ 161,500 ----------- Total Semiconductors $ 161,500 ----------- TOTAL CONVERTIBLE CORPORATE BONDS (Cost $152,488) $ 161,500 ----------- ASSET BACKED SECURITIES - 2.5% Diversified Financials - 0.7% Consumer Finance - 0.0% DKK 42,226 AA+/Aa1 Realkredit Danmark, 7.0%, 10/1/32 $ 7,320 ----------- Diversified Financial Services - 0.7% 205,766 BBB-/Baa2 PF Export Receivable Master Trust, 6.436%, 6/1/15 (144A) $ 210,999 161,346 BBB/Baa2 Power Receivables Finance, 6.29%, 1/1/12 (144A) 167,626 ----------- Total Diversified Financials $ 378,625 ----------- Utilities - 1.8% 228,250 BBB-/Baa3 Empresa Electric, 8.625%, 4/30/13 (144A) $ 252,537 391,950 BB-/Ba2 FPL Energy Wind Funding, 6.876%, 6/27/17 (144A) 396,359 392,644 NR/NR Ormat Funding Corp., 8.25%, 12/30/20 396,571 ----------- Total Utilities $ 1,045,467 ----------- TOTAL ASSET BACKED SECURITIES (Cost $1,416,079) $ 1,431,412 ----------- COLLATERALIZED MORTGAGE OBLIGATIONS - 0.7% Diversified Financials - 0.7% 160,000 BBB-/Baa3 Tower 2004-1A E, 5.395%, 1/15/34 $ 157,270 265,000 NR/Ba2 Tower 2004-2A F, 6.376%, 12/15/14 265,769 ----------- Total Diversified Financials $ 423,039 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $425,000) $ 423,039 ----------- CORPORATE BONDS - 51.7% Energy - 6.8% Coal & Consumable Fuels - 0.5% 310,000 BBB-/NR Indocoal Exports Cayman, 7.134%, 7/6/12 (144A) $ 308,852 ----------- Oil & Gas Equipment and Services - 2.1% 370,000 B+/Ba3 Holly Energy Partners LP, 6.25%, 3/1/15 (144A) $ 360,750 NOK 350,000 CCC+/Caa1 J Ray McDermott SA, 11.0%, 12/15/13 (144A) 392,000 NOK 60,000 NR/NR Kvaerner ASA, 0.0%, 10/30/11 50,400 3,200,000 NR/NR Kvaerner ASA, 0.0%, 10/30/11 411,358 ----------- $ 1,214,508 ----------- Oil & Gas Exploration & Production - 3.4% 300,000 B-/B3 Baytex Energy, Ltd., 9.625%, 7/15/10 $ 311,624 55,000 B/B2 Comstock Resources, Inc., 6.875%, 3/1/12 55,550 75,000 B-/B3 Delta Petroleum Corp., 7.0%, 4/1/15 (144A) 70,500 500,000 BBB-/Baa3 Gazprom International SA, 7.201%, 2/1/20 (144A) 538,750 300,000 CCC+/Caa1 Petroquest Energy, Inc., 10.375%, 5/15/12 (144A) 296,250 ITL 275,000,000 BBB-/Baa2 Petroleos Mexicanos, 7.375%, 8/13/07 192,147 260,000 B+/B2 Stone Energy Corp., 6.75%, 12/15/14 252,850 225,000 BBB-/Baa3 Tengizchevroil LLP, 6.124%, 11/15/14 (144A) 230,063 ----------- $ 1,947,734 -----------
The accompanying notes are an integral part of these financial statements. 79 Pioneer Strategic Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Oil & Gas Storage & Transportation - 0.8% 380,000 B-/B1 Colorado Interstate Gas, 5.95%, 3/15/15 (144A) $ 374,636 76,000 B/B3 Transmontaigne, Inc., 9.125%, 6/1/10 79,040 ----------- $ 453,676 ----------- Total Energy $ 3,924,770 ----------- Materials - 9.1% Aluminum - 1.0% 435,000 BB/Ba3 Asia Aluminum Holdings, 8.0%, 12/23/11 (144A) $ 427,388 140,000 B/B1 Novelis, Inc., 7.25%, 2/15/15 (144A) 140,525 ----------- $ 567,913 ----------- Commodity Chemicals - 1.2% 110,000 BB-/B1 Arco Chemical Co., 9.8%, 2/1/20 $ 123,200 145,000 CCC+/B3 Aventine Renewable Energy, Floating Rate Note, 12/15/11 (144A) 139,200 370,000 B+/B1 Invista, 9.25%, 5/1/12 (144A) 404,687 ----------- $ 667,087 ----------- Construction Materials - 0.1% 53,000 BB-/Ba3 Texas Industries, Inc., 7.25%, 7/15/13 (144A) $ 54,325 ----------- Diversified Chemical - 0.3% 100,000 BB-/Ba3 Braskem International, Ltd., 9.375%, 6/1/15 (144A) $ 107,750 79,000 B/Caa1 Huntsman International LLC, 10.125%, 7/1/09 99,175 ----------- $ 206,925 ----------- Diversified Metals & Mining - 1.7% 200,000 B+/B1 Freeport-McMoran Copper & Gold, 6.875%, 2/1/09 $ 195,000 400,000 NR/Ba1 Vale Overseas, Ltd., 8.25%, 1/17/34 440,000 340,000 BB+/Ba2 Vedenta Resources Plc., 6.625%, 2/22/10 (144A) 335,496 ----------- $ 970,496 ----------- Forest Products - 0.6% 300,000 BB-/Ba2 Sino Forest Corp., 9.125%, 8/17/11 (144A) $ 327,750 ----------- Metal & Glass Containers - 0.6% 100,000 B+/NR Crown Holdings, 10.25%, 3/1/11 $ 137,638 130,000 BB-/B1 Greif Brothers Corp., 8.875%, 8/1/12 139,750 75,000 B+/B2 Vitro Envases Norteamerica, 10.75%, 7/23/11 (144A) 72,750 ----------- $ 350,138 ----------- Paper Packaging - 0.4% 210,000 CCC+/Caa2 Graham Packaging Co., 9.875%, 10/15/14 (144A) $ 210,525 ----------- Paper Products - 0.8% 100,000 BB-/Ba3 Abitibi-Consolidated, Inc., 6.0%, 6/20/13 $ 92,000 200,000 BB/Ba3 Bowater, Inc., 6.5%, 6/15/13 197,500 240,000 B/Caa1 Mercer International, Inc., 9.25%, 2/15/13 192,000 ----------- $ 481,500 -----------
80 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 - 2.0% 260,000 BBB-/Baa3 Basell Finance Co., 8.1%, 3/15/27 (144A) $ 258,663 275,000 B-/Caa2 Crystal US Holdings, Inc., Floating Rate Note, 10/1/14 191,125 300,000 BB/Ba1 Ferro Corp., 7.125%, 4/1/28 316,761 25,000 BB/Ba1 Ferro Corp., 7.625%, 5/1/13 26,241 110,000 B-/Caa1 OM Group, Inc., 9.25%, 12/15/11 110,000 EUR 140,000 CCC+/B3 Rhodia SA, 8.0%, 6/1/10 168,892 EUR 45,000 CCC+/Caa1 Rhodia SA, 9.25%, 6/1/11 53,769 ---------- $1,125,451 ---------- Steel - 0.4% 115,000 BB/Ba2 International Steel Group, 6.5%, 4/15/14 $ 110,400 135,000 BBB/Ba1 Ispat Inland ULC, Floating Rate Note, 4/1/10 (b) 143,775 ---------- $ 254,175 ---------- Total Materials $5,216,285 ---------- Capital Goods - 3.0% Building Products - 1.1% 355,000 B-/B3 Builders Firstsource, Inc., Floating Rate Note, 2/15/12 $ 353,225 195,000 B+/B2 Resolution Perform Production, 8.0%, 12/15/09 202,800 50,000 B-/B3 US Concrete, Inc., 8.375%, 4/1/14 47,000 ---------- $ 603,025 ---------- Construction & Farm Machinery & Heavy Trucks - 0.4% 140,000 B-/B3 American Rock Salt Co., LLC, 9.5%, 3/15/14 $ 142,100 115,000 BB-/Ba3 Navistar International, 7.5%, 6/15/11 117,300 ---------- $ 259,400 ---------- Industrial Machinery - 0.6% 50,000 B-/B3 Dresser-Rand Group, Inc., 7.375%, 11/1/14 (144A) $ 52,000 150,000 B/B2 Gardner Denver, Inc., 8.0%, 5/1/13 (144A) 151,749 113,000 B/B3 JLG Industries, Inc., 8.375%, 6/15/12 117,803 ---------- $ 321,552 ---------- Trading Companies & Distributors - 0.9% 550,000 BB+/Ba1 Noble Group, Ltd., 6.625%, 3/17/15 (144A) $ 507,779 ---------- Total Capital Goods $1,691,756 ---------- Commercial Services & Supplies - 1.9% Diversified Commercial Services - 1.5% 115,000 CCC+/B3 Cornell Co's, Inc., 10.75%, 7/1/12 $ 119,313 240,000 B-/Caa1 Hydrochem Industrial Service, 9.25%, 2/15/13 (144A) 222,000 290,000 CCC+/Caa1 Park-Ohio Industries, Inc., 8.375%, 11/15/14 (144A) 258,825 275,000 B+/B2 United Rentals, Inc., 7.75%, 11/15/13 (a) 270,188 ---------- $ 870,326 ----------
The accompanying notes are an integral part of these financial statements. 81 Pioneer Strategic Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Environmental & Facilities Services - 0.4% 200,000 B/B3 Clean Harbors, Inc., 11.25%, 7/15/12 (144A) $ 222,000 ----------- Total Commercial Services & Supplies $ 1,092,326 ----------- Transportation - 3.4% Air Freight & Couriers - 0.2% 130,000 BB-/B1 Petroleum Helicopters, 9.375%, 5/1/09 $ 136,825 ----------- Airlines - 0.6% 35,000 CCC/Caa2 AMR Corp., 9.0%, 8/1/12 (a) $ 27,475 50,000 CCC/Caa2 AMR Corp., 9.0%, 9/15/16 38,750 85,000 CCC/Caa2 AMR Corp., 9.8%, 10/1/21 56,525 150,000 B/B3 Continental Air, Inc., 7.568%, 12/1/06 129,158 25,000 CCC-/Caa3 Northwest Airlines, Inc., 8.7%, 3/15/07 12,250 150,000 CCC-/Caa3 Northwest Airlines, Inc., 9.88%, 3/15/07 75,000 ----------- $ 339,158 ----------- Marine - 1.4% 325,000 B/B2 Ship Finance International, Ltd., 8.5%, 12/15/13 $ 309,156 375,000 BB-/Ba3 Stena AB, 7.0%, 12/1/16 347,812 145,000 B-/B3 Trailer Bridge, Inc., 9.25%, 11/15/11 145,906 ----------- $ 802,874 ----------- Railroads - 0.6% 210,000 CCC+/B3 Atlantic Express Transport, 12.25%, 4/15/08 $ 201,600 130,000 B+/B2 TFM SA De CV, 9.375%, 5/1/12 (144A) 135,200 ----------- $ 336,800 ----------- Trucking - 0.6% 320,000 B+/B1 Greenbrier Co., Inc., 8.375%, 5/15/15 (144A) $ 325,600 ----------- Total Transportation $ 1,941,257 ----------- Automobiles & Components - 2.8% Auto Parts & Equipment - 2.0% 80,000 B+/Ba3 Commercial Vehicle Group, 8.0%, 7/1/13 $ 81,600 460,000 B-/B3 Delphi Corp., 6.55%, 6/15/06 (a) 447,350 250,000 B+/Ba2 Sun Sage BV, 8.25%, 3/26/09 (144A) 265,625 360,000 B-/B3 Tenneco Automotive, Inc., 8.625%, 11/15/14 361,800 ----------- $ 1,156,375 ----------- Automobile Manufacturers - 0.5% 340,000 BB+/Baa2 Ford Motor Credit Co., 5.7%, 1/15/10 $ 313,596 ----------- Tires & Rubber - 0.3% 150,000 B-/B3 Goodyear Tire & Rubber, 9.0%, 7/1/15 (144A) $ 148,875 ----------- Total Automobiles & Components $ 1,618,846 ----------- Consumer Durables & Apparel - 1.3% Footwear - 0.3% 183,000 BB-/B1 Brown Shoe Co., Inc., 8.75%, 5/1/12 $ 190,778 -----------
82 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 Homebuilding - 1.0% 208,000 BB-/Ba3 Meritage Homes Corp., 6.25%, 3/15/15 $ 193,440 400,000 B+/Ba3 WCI Communities, Inc., 6.625%, 3/15/15 366,000 ----------- $ 559,440 ----------- Total Consumer Durables & Apparel $ 750,218 ----------- Consumer Services - 0.2% Hotels, Resorts & Cruise Lines - 0.2% 100,000 B-/Caa1 Trump Entertainment Resorts, 8.5%, 6/1/15 $ 97,625 ----------- Total Consumer Services $ 97,625 ----------- Media - 2.2% Broadcasting & Cable Television - 1.4% 145,000 B-/B3 Innova S De R.L., 9.375%, 9/19/13 $ 163,488 200,000 B-/B2 Kabel Deutschland GMBH, 10.625%, 7/1/14 217,000 100,000 B-/B2 Kabel Deutschland, 10.75%, 7/1/14 (144A) 140,360 230,000 B-/B3 NTL Cable PLC, 8.75%, 4/15/14 293,607 ----------- $ 814,455 ----------- Movies & Entertainment - 0.4% 225,000 B+/Ba2 Corp Interamer De Entret, 8.875%, 6/14/15 (144A) $ 222,188 ----------- Publishing - 0.4% 200,000 B/B1 Sheridan Acquisition Corp., 10.25%, 8/15/11 $ 207,750 ----------- Total Media $ 1,244,393 ----------- Retailing - 0.4% Automotive Retail - 0.0% 35,000 B/B3 Pep Boys-Manny Moe Jack, 7.5%, 12/15/14 $ 31,325 ----------- Specialty Stores - 0.4% 145,000 B/B3 Asbury Automotive Group, 8.0%, 3/15/14 $ 139,925 100,000 BB/Ba2 Toys R Us, 7.375%, 10/15/18 81,000 ----------- $ 220,925 ----------- Total Retailing $ 252,250 ----------- Food & Drug Retailing - 0.4% Drug Retail - 0.4% 170,000 CCC+/Caa1 Duane Reade, Inc., 9.75%, 8/1/11 (a) $ 137,700 110,000 B-/B2 Duane Reade, Inc., Floating Rate Note, 12/15/10 (144A) 107,250 ----------- $ 244,950 ----------- Total Food & Drug Retailing $ 244,950 ----------- Food, Beverage & Tobacco - 1.0% Brewers - 0.8% 202,000 B-/B3 Argentine Beverages, 7.375%, 3/22/12 (144A) $ 205,535 220,000 BBB-/Baa3 Cia Brasileira de Bebida, 8.75%, 9/15/13 254,375 ----------- $ 459,910 ----------- Soft Drinks - 0.2% 80,000 BBB-/Baa3 Cia Brasileira de Bebida, 10.5%, 12/15/11 $ 98,800 ----------- Total Food, Beverage & Tobacco $ 558,710 -----------
The accompanying notes are an integral part of these financial statements. T 83 Pioneer Strategic Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Health Care Equipment & Services - 0.7% Health Care Distributors - 0.1% 60,000 BB+/Ba2 Omnicare, Inc., 6.125%, 6/1/13 $ 59,100 ----------- Health Care Services - 0.4% 235,000 CCC+/Caa1 Rural/Metro Corp., 9.875%, 3/15/15 (144A) $ 232,650 ----------- Health Care Supplies - 0.2% 125,000 CCC+/Caa1 Inverness Medical Innovation, 8.75%, 2/15/12 $ 124,063 ----------- Total Health Care Equipment & Services $ 415,813 ----------- Pharmaceuticals & Biotechnology - 0.8% 235,000 BB/Ba1 Mayne Group, Ltd., 5.875%, 12/1/11 (144A) $ 236,175 240,000 CCC+/Caa1 Warner Chilcott Corp., 8.75%, 2/1/15 (144A) 233,400 ----------- $ 469,575 ----------- Total Pharmaceuticals & Biotechnology $ 469,575 ----------- Banks - 1.2% Diversified Banks - 1.2% 185,000 B/Ba1 ATF Bank JSC, 9.25%, 4/12/12 (144A) $ 189,624 200,000 B+/Baa2 Halyk Savings Bank Kazaktn, 8.125%, 10/7/09 (144A) 210,000 15,000 BBB+/A1 Skandinaviska Enskilda Bank, 8.125%, 9/6/49 (144A) 15,668 235,000 NR/Baa2 Turanalem Finance BV, 8.5%, 2/10/15 (144A) 242,050 ----------- Total Banks $ 657,342 ----------- Diversified Financials - 3.2% Consumer Finance - 0.6% 35,000 BB+/Baa2 Ford Motor Credit Co., 5.8%, 1/12/09 $ 33,225 320,000 A/A2 SLM Corp., Floating Rate Note, 7/25/14 317,002 ----------- $ 350,227 ----------- Investment Banking & Brokerage - 1.3% 325,000 B+/B1 E*Trade Financial Corp., 8.0%, 6/15/11 $ 342,063 375,000 B/B3 Refco Finance Holdings, 9.0%, 8/1/12 397,500 ----------- $ 739,563 ----------- Diversified Financial Services - 1.2% 260,000 B/B3 Dollar Financial Group, 9.75%, 11/15/11 $ 268,124 425,000 BBB-/Baa3 Glencore Funding LLC, 6.0%, 4/15/14 (144A) 407,531 ----------- $ 675,655 ----------- Specialized Finance - 0.1% 55,000 B-/Caa1 K&F Acquisition, Inc., 7.75%, 11/15/14 $ 56,238 ----------- Total Diversified Financials $ 1,821,683 ----------- Insurance - 3.8% Life & Health Insurance - 1.2% 365,000 B-/B2 Presidential Life Corp., 7.875%, 2/15/09 $ 372,300 300,000 BB+/Ba1 Provident Co., Inc., 7.0%, 7/15/18 302,696 ----------- $ 674,996 ----------- Multi-Line Insurance - 0.4% 210,000 BB/Ba1 Allmerica Financial Corp., 7.625%, 10/15/25 $ 230,869 -----------
84 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 Property & Casualty Insurance - 1.2% 285,000 BBB-/NR Kingsway America, Inc., 7.5%, 2/1/14 $ 302,521 350,000 BB/Baa3 Ohio Casualty Corp., 7.3%, 6/15/14 384,928 ----------- $ 687,449 ----------- Reinsurance - 1.0% 200,000 BBB-/Baa3 Odyssey Re Holdings, 7.65%, 11/1/13 $ 215,906 365,000 BBB/Baa2 Platinum Underwriters Financial, 7.5%, 6/1/17 (144A) 370,112 ----------- $ 586,018 ----------- Total Insurance $ 2,179,332 ----------- Real Estate - 2.4% Real Estate Management & Development - 0.4% 185,000 BB-/Ba3 Forest City Enterprises, 7.625%, 6/1/15 $ 197,950 ----------- Real Estate Investment Trusts - 2.0% 120,000 B+/B3 BF Saul Real Estate Investment Trust, 7.5%, 3/1/14 $ 124,200 155,000 B+/B1 Crescent Real Estate, 9.25%, 4/15/09 165,074 374,000 B+/Ba3 Host Marriot LP, 6.375%, 3/15/15 (144A) 370,260 300,000 B+/B1 Trustreet Properties, Inc., 7.5%, 4/1/15 (144A) 306,750 180,000 BB/Ba3 Ventas Realty LP/Cap Corp., 7.125%, 6/1/15 (144A) 187,200 ----------- $ 1,153,484 ----------- Total Real Estate $ 1,351,434 ----------- Software & Services - 0.7% Application Software - 0.2% 100,000 B-/B3 Riverdeep Group, Ltd., 9.25%, 4/15/11 (144A) $ 130,983 ----------- Internet Software & Services - 0.5% 250,000 BB/Ba2 Hanarotelecom, Inc., 7.0%, 2/1/12 (144A) $ 248,120 ----------- Total Software & Services $ 379,103 ----------- Technology, Hardware & Equipment - 0.7% Communications Equipment - 0.1% 50,000 BBB-/Ba2 Corning, Inc., 5.9%, 3/15/14 $ 51,383 ----------- Electronic Manufacturing Services - 0.2% 125,000 B/B1 Sanmina-Sci Corp., 6.75%, 3/1/13 (144A) $ 119,375 ----------- Technology Distributors - 0.4% 256,000 BB+/Ba1 Anixter International Corp., 5.95%, 3/1/15 $ 253,683 ----------- Total Technology, Hardware & Equipment $ 424,441 ----------- Telecommunication Services - 3.5% Integrated Telecommunication Services - 0.9% 325,000 B+/B2 GCI, Inc., 7.25%, 2/15/14 $ 312,000 315,000 B/B3 Zeus Special Sub, Ltd., Floating Rate Note, 2/1/15 (144A) 210,263 ----------- $ 522,263 -----------
The accompanying notes are an integral part of these financial statements. 85 Pioneer Strategic Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value Wireless Telecommunication Services - 2.6% 150,000 CCC+/Caa1 Alamosa Delaware, 8.5%, 1/31/12 $ 157,312 200,000 B-/B2 Inmarsat Finance Plc., 7.625%, 6/3/12 211,000 115,000 BB-/Ba3 Mobile Telesystems Finance, 8.375%, 10/14/10 (144A) 119,313 240,000 BB/Ba3 Rogers Cantel, Inc., 10.5%, 6/1/06 206,431 200,000 BB/Ba3 Rogers Wireless, Inc., 7.625%, 12/15/11 175,267 285,000 NR/Baa3 Tele Norte Leste Participacoes, 8.0%, 12/18/13 293,550 275,000 CCC/Caa1 Ubiquitel Operating Co., 9.875%, 3/1/11 301,813 ----------- $ 1,464,686 ----------- Total Telecommunication Services $ 1,986,949 ----------- Utilities - 2.2% Electric Utilities - 1.6% 350,000 NR/NR Juniper Generation, 6.79%, 12/31/14 (144A) $ 348,397 250,000 BBB-/Baa3 Kiowa Power Partners LLC, 5.737%, 3/30/21 (144A) 255,265 250,000 BB-/Ba3 MSW Energy Holdings, 7.375%, 9/1/10 256,250 85,000 B+/B1 Tenaska Alabama II Part, 7.0%, 6/30/21 (144A) 86,063 ----------- $ 945,975 ----------- Multi-Utilities - 0.5% 290,000 B+/B1 Reliant Energy, Inc., 6.75%, 12/15/14 $ 283,475 ----------- Total Utilities $ 1,229,450 ----------- TOTAL CORPORATE BONDS (Cost $28,837,481) $29,548,508 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 30.5% 894,128 AAA/Aaa Federal Home Loan Mortgage Corp., 4.5%, 4/1/20 $ 890,741 47,185 AAA/Aaa Federal Home Loan Mortgage Corp., 5.0%, 5/1/34 47,244 149,893 AAA/Aaa Federal Home Loan Mortgage Corp., 5.0%, 6/1/35 150,084 63,854 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 10/1/16 65,575 188,546 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 11/1/34 191,304 682,247 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 11/1/34 692,648 385,752 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 1/1/35 391,394 307,767 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 6/1/17 318,245 17,424 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/33 17,884 12,601 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 2/1/33 12,934 77,881 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 11/1/33 79,911 233,597 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0% 11/1/33 239,686 308,897 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/34 316,944 822,349 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 8/1/34 843,773 159,251 AAA/Aaa Federal National Mortgage Association, 4.5%, 3/1/35 155,830 320,000 AAA/Aaa Federal National Mortgage Association, 4.5%, 7/1/20 318,500 195,138 AAA/Aaa Federal National Mortgage Association, 5.0%, 2/1/20 197,447 55,834 AAA/Aaa Federal National Mortgage Association, 5.5%, 3/1/18 57,349 103,548 AAA/Aaa Federal National Mortgage Association, 5.5%, 12/1/18 106,360 112,847 AAA/Aaa Federal National Mortgage Association, 5.5%, 4/1/19 115,921 196,646 AAA/Aaa Federal National Mortgage Association, 5.5%, 5/1/34 199,451 104,457 AAA/Aaa Federal National Mortgage Association, 6.0%, 7/1/17 108,039 9,825 AAA/Aaa Federal National Mortgage Association, 6.0% 12/1/31 10,086 12,002 AAA/Aaa Federal National Mortgage Association, 6.0% 2/1/32 12,320 9,625 AAA/Aaa Federal National Mortgage Association, 6.0% 11/1/32 9,874 403,084 AAA/Aaa Federal National Mortgage Association, 6.0%, 11/1/33 413,405
86 The accompanying notes are an integral part of thesefinancial statements. Pioneer Strategic Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value U.S. Government and Agency Obligations - (Cont.) 117,833 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/33 $ 120,850 147,085 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/33 150,851 142,818 AAA/Aaa Federal National Mortgage Association, 6.0%, 1/1/34 146,470 800,000 AAA/Aaa Federal National Mortgage Association, 6.375%, 8/15/07 615,845 2,081 AAA/Aaa Federal National Mortgage Association, 6.5% 7/1/31 2,160 4,914 AAA/Aaa Federal National Mortgage Association, 6.5%, 10/1/31 5,097 10,477 AAA/Aaa Federal National Mortgage Association, 6.5% 2/1/32 10,867 1,411 AAA/Aaa Federal National Mortgage Association, 7.0%, 9/1/29 1,489 457 AAA/Aaa Federal National Mortgage Association, 7.5%, 6/1/30 488 244,741 AAA/Aaa Government National Mortgage Association, 4.5%, 9/15/33 242,147 187,370 AAA/Aaa Government National Mortgage Association, 4.5%, 5/15/34 185,326 199,454 AAA/Aaa Government National Mortgage Association, 4.5%, 4/15/35 197,276 498,693 AAA/Aaa Government National Mortgage Association, 4.5%, 4/15/35 493,249 498,362 AAA/Aaa Government National Mortgage Association, 4.5%, 4/15/35 492,921 241,682 AAA/Aaa Government National Mortgage Association, 5.0%, 12/15/34 243,849 249,367 AAA/Aaa Government National Mortgage Association, 5.0%, 4/15/35 251,606 249,709 AAA/Aaa Government National Mortgage Association, 5.0%, 4/15/35 251,951 440,902 AAA/Aaa Government National Mortgage Association, 5.5%, 10/15/19 455,343 260,384 AAA/Aaa Government National Mortgage Association, 5.5%, 1/15/34 266,170 500,050 AAA/Aaa Government National Mortgage Association, 5.5%, 4/15/34 511,163 166,815 AAA/Aaa Government National Mortgage Association, 5.5%, 4/20/34 170,157 63,958 AAA/Aaa Government National Mortgage Association, 5.5%, 7/15/34 65,379 480,894 AAA/Aaa Government National Mortgage Association, 5.5%, 10/15/34 491,582 400,000 AAA/Aaa Government National Mortgage Association, 5.5%, 6/15/35 408,883 568,666 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/16 590,562 34,615 AAA/Aaa Government National Mortgage Association, 6.0%, 5/15/17 35,949 31,580 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/17 32,796 249,890 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/17 259,516 295,877 AAA/Aaa Government National Mortgage Association, 6.0%, 2/15/18 307,270 193,775 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/19 201,241 38,515 AAA/Aaa Government National Mortgage Association, 6.0%, 2/15/33 39,758 16,507 AAA/Aaa Government National Mortgage Association, 6.0%, 3/15/33 17,039 58,894 AAA/Aaa Government National Mortgage Association, 6.0%, 3/15/33 60,817 69,127 AAA/Aaa Government National Mortgage Association, 6.0% 3/15/33 71,358 76,450 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/33 78,917 61,303 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/33 63,281 92,050 AAA/Aaa Government National Mortgage Association, 6.0%, 7/15/33 95,020 53,582 AAA/Aaa Government National Mortgage Association, 6.0%, 7/15/33 55,311 42,512 AAA/Aaa Government National Mortgage Association, 6.0%, 9/15/33 43,883 119,728 AAA/Aaa Government National Mortgage Association, 6.0%, 9/15/33 123,591 85,841 AAA/Aaa Government National Mortgage Association, 6.0%, 10/15/33 88,611 325,960 AAA/Aaa Government National Mortgage Association, 6.0%, 11/20/33 335,765 423,137 AAA/Aaa Government National Mortgage Association, 6.0%, 10/15/34 436,750 38,212 AAA/Aaa Government National Mortgage Association, 6.5% 3/15/29 39,973 10,934 AAA/Aaa Government National Mortgage Association, 6.5%, 1/15/30 11,436 2,095 AAA/Aaa Government National Mortgage Association, 6.5%, 6/15/31 2,191 27,167 AAA/Aaa Government National Mortgage Association, 6.5%, 2/15/32 28,404 31,407 AAA/Aaa Government National Mortgage Association, 6.5% 3/15/32 32,836 38,469 AAA/Aaa Government National Mortgage Association, 6.5%, 11/15/32 40,223 35,320 AAA/Aaa Government National Mortgage Association, 6.5%, 1/15/33 36,917 55,943 AAA/Aaa Government National Mortgage Association, 6.5%, 5/15/33 58,472
The accompanying notes are an integral part of these financial statements. 87 Pioneer Strategic Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal S&P/Moody's Amount Ratings USD ($) (unaudited) Value U.S. Government and Agency Obligations - (Cont.) 120,688 AAA/Aaa Government National Mortgage Association, 6.5%, 1/15/34 $ 126,142 1,988 AAA/Aaa Government National Mortgage Association, 7.0%, 3/15/31 2,105 4,109 AAA/Aaa Government National Mortgage Association, 7.0%, 3/15/31 4,353 24,892 AAA/Aaa Government National Mortgage Association, 7.5% 5/15/23 26,484 159,735 AAA/Aaa Government National Mortgage Association II, 5.5%, 3/20/34 162,935 290,000 AAA/Aaa U.S. Treasury Bonds, 5.25%, 11/15/28 331,223 255,000 AAA/Aaa U.S. Treasury Bonds, 5.25%, 2/15/29 291,646 150,000 AAA/Aaa U.S. Treasury Bonds, 5.375%, 2/15/31 177,000 400,000 AAA/Aaa U.S. Treasury Notes, 4.0%, 2/15/15 401,423 275,000 AAA/Aaa U.S. Treasury Notes, 4.25%, 11/15/14 281,456 815,000 AAA/Aaa U.S. Treasury Strip, 0.0%, 2/15/11 660,637 ----------- Total Government $17,397,359 ----------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $17,186,671) $17,397,359 ----------- FOREIGN GOVERNMENT BONDS - 9.3% ITL 530,000,000 B+/B1 Banco Nac De Desen Econo, 8.0% 4/28/10 $ 359,550 CAD 27,000 AAA/Aaa Canadian Government, 4.25%, 9/1/08 22,796 CAD 659,000 AAA/Aaa Canadian Government 4.25%, 9/1/09 559,347 CAD 315,000 AAA/Aaa Canadian Government, 5.25%, 6/1/12 282,134 EUR 343,000 AAA/Aaa Government of France, 3.0%, 7/25/09 505,983 SEK 1,665,000 TSY/Aaa Government of Sweden, 5.25%, 3/15/11 243,898 NOK 1,500,000 AAA/Aaa Norwegian Government, 5.5%, 5/15/09 252,169 NOK 1,320,000 TSY/Aaa Norwegian Government, 6.0%, 5/16/11 232,852 NOK 3,410,000 TSY/Aaa Norwegian Government, 6.75%, 1/15/07 555,651 AUD 532,000 AA/Aa2 Ontario Province, 5.5%, 4/23/13 401,823 AUD 207,000 NR/Aaa Queensland Treasury, 6.0%, 8/14/13 164,885 474,815 BB+/Ba2 Republic of Columbia, 9.75%, 4/9/11 542,239 250,000 BB/Ba1 Republic of Panama, 7.25%, 3/15/15 271,750 SEK 2,955,000 TSY/Aaa Swedish Government, 5.5%, 10/8/12 447,012 SEK 2,150,000 TSY/Aaa Swedish Government, 8.0%, 8/15/07 310,182 DEM 180,000 BBB-/Baa3 United Mexican States, 8.25%, 2/24/09 130,636 ----------- TOTAL FOREIGN GOVERNMENT BONDS (Cost $4,652,043) $ 5,282,907 ----------- MUNICIPAL BONDS - 1.0% Government - 1.0% Muni Airport - 0.5% 175,000 B/Caa2 New Jersey Economic Development Authority Special Facility Revenue, 7.0%, 11/15/30 $ 162,323 50,000 B/Caa2 New Jersey Economic Development Authority, 6.25%, 9/15/29 43,462 100,000 NR/NR Wayne Charter County SPL, 6.75%, 12/1/15 89,748 ----------- $ 295,533 -----------
88 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 Muni Tobacco - 0.5% 90,000 BBB/Baa3 Golden State Tobacco Securitization, 6.75%, 6/1/39 $ 101,287 60,000 BBB/Baa3 Tobacco Settlement Financing Corp., 7.0%, 6/1/41 68,545 105,000 BBB/Baa3 Tobacco Settlement Authority Washington, 6.625%, 6/1/32 114,144 ----------- $ 283,976 ----------- Total Government $ 579,509 ----------- TOTAL MUNICIPAL BONDS (Cost $481,486) $ 579,509 ----------- Shares TEMPORARY CASH INVESTMENT - 1.7% Security Lending Collateral - 1.7% $ 949,383 ----------- 949,383 Security Lending Investment Fund, 3.29% TOTAL TEMPORARY CASH INVESTMENT (Cost $949,383) $ 949,383 ----------- TOTAL INVESTMENTS IN SECURITIES - 97.7% (Cost $54,100,632) $55,773,617 ----------- OTHER ASSETS AND LIABILITIES - 2.3% $ 1,316,689 ----------- TOTAL NET ASSETS - 100.% $57,090,306 ===========
(A.D.R.) American Depositary Receipt 144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold normally to qualified institutional buyers in a transaction exempt from registration. At June 30, 2005 the value of these securities amounted to $13,562,566 or 23.8% of net assets. N/R Not rated by either S&P or Moody's TSY Treasury Security (a) At June 30, 2005 the following securities were out on loan:
Principal Amount Security Market Value $ 33,250 AMR Corp., 9.0%, 8/1/12 $ 26,101 437,000 Delphi Corp., 6.55%, 6/15/06 424,983 161,500 Duane Reade, Inc., 9.75%, 8/1/11 130,815 142,500 Northwest Airlines, Inc., 9.875%, 3/15/07 71,250 261,250 United Rentals, Inc., 7.75%, 11/15/13 256,678 -------- Total $909,827 ========
(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. DKK Danish Krone. EURO Euro dollar. SEK Swedish Krona. NOK Norwegian Kroner. ITL Italian Lira. CAD Canadian Dollar. AUD Australian Dollar. The accompanying notes are an integral part of these financial statements. 89 Pioneer America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Principal Amount Value COLLATERALIZED MORTGAGE OBLIGATIONS - 1.1% Government - 1.1% $ 154,082 Freddie Mac, 5.0%, 1/15/16 $ 155,829 350,000 Freddie Mac, 5.5%, 7/15/28 358,230 ----------- $ 514,059 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $517,620) $ 514,059 ----------- CORPORATE BONDS - 0.5% Diversified Financials - 0.5% 250,000 Private Export Funding, 3.375%, 2/15/09 $ 245,760 ----------- TOTAL CORPORATE BONDS (Cost $250,000) $ 245,760 ----------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 95.9% 247,526 Fannie Mae, 5.5%, 6/1/23 $ 252,679 250,000 Fannie Mae, Floating Rate Note, 3/1/19 248,410 250,000 Federal Farm Credit Bank, 3.25%, 6/15/07 247,209 250,000 Federal Farm Credit Bank, 4.45%, 6/1/15 252,487 400,000 Federal Farm Credit Bank, 4.9%, 3/17/14 394,894 100,000 Federal Farm Credit Bank, 5.88%, 9/8/08 105,837 200,000 Federal Farm Credit Bank, Medium Term Note, 6.38%, 11/27/06 206,953 250,000 Federal Home Loan Bank, 4.25%, 2/16/10 250,252 400,000 Federal Home Loan Bank, 4.53%, 10/30/06 403,700 850,000 Federal Home Loan Bank, 5.875%, 11/15/07 888,524 300,000 Federal Home Loan Bank, 5.89%, 6/30/08 317,255 264,936 Federal Home Loan Mortgage Corp., 5.5%, 9/1/34 268,811 238,298 Federal Home Loan Mortgage Corp., 5.5%, 12/1/34 241,783 89,892 Federal Home Loan Mortgage Corp., 6.0% 10/1/32 92,265 592,118 Federal Home Loan Mortgage Corp., 6.0%, 11/1/32 607,746 189,091 Federal Home Loan Mortgage Corp., 6.0%, 12/1/32 194,082 218,379 Federal Home Loan Mortgage Corp., 6.0%, 2/1/33 224,143 1,000,581 Federal Home Loan Mortgage Corp., 6.0%, 3/1/33 1,026,662 685,632 Federal Home Loan Mortgage Corp., 6.0%, 5/1/34 703,495 89,290 Federal Home Loan Mortgage Corp., 6.5%, 3/1/11 92,873 262,050 Federal Home Loan Mortgage Corp., 6.5%, 7/1/16 272,696 63,770 Federal Home Loan Mortgage Corp., 6.5%, 1/1/29 66,262 38,467 Federal Home Loan Mortgage Corp., 6.5%, 3/1/29 39,956 40,225 Federal Home Loan Mortgage Corp., 6.5%, 4/1/31 41,730 86,048 Federal Home Loan Mortgage Corp., 6.5%, 10/1/31 89,266 49,706 Federal Home Loan Mortgage Corp., 6.5%, 2/1/32 51,565 248,946 Federal Home Loan Mortgage Corp., 6.5% 4/1/32 258,101 84,468 Federal Home Loan Mortgage Corp., 6.5%, 7/1/32 87,575 140,000 Federal Home Loan Mortgage Corp., 6.7%, 1/5/07 145,907 2,718 Federal Home Loan Mortgage Corp., 7.0%, 4/1/30 2,862 22,837 Federal Home Loan Mortgage Corp., 7.0%, 2/1/31 24,047 9,080 Federal Home Loan Mortgage Corp., 7.0%, 6/1/31 9,578 4,598 Federal Home Loan Mortgage Corp., 7.0%, 7/1/31 4,850 5,159 Federal Home Loan Mortgage Corp., 7.0%, 9/1/31 5,432 31,395 Federal Home Loan Mortgage Corp., 7.0%, 3/1/32 33,235 43,996 Federal Home Loan Mortgage Corp., 7.0%, 4/1/32 46,328
90 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.) $ 41,635 Federal Home Loan Mortgage Corp., 7.5%, 8/1/31 $ 44,580 257,833 Federal National Mortgage Association, 4.5%, 4/1/19 256,861 92,123 Federal National Mortgage Association, 5.0%, 3/1/09 93,087 233,603 Federal National Mortgage Association, 5.0%, 7/1/19 236,345 333,818 Federal National Mortgage Association, 5.5%, 3/1/18 342,911 363,461 Federal National Mortgage Association, 5.5%, 4/1/18 373,920 403,026 Federal National Mortgage Association, 5.5%, 4/1/19 414,003 362,504 Federal National Mortgage Association, 5.5%, 11/1/23 370,049 242,140 Federal National Mortgage Association, 5.5%, 3/1/24 247,104 201,378 Federal National Mortgage Association, 5.5%, 2/1/33 204,192 346,858 Federal National Mortgage Association, 5.5%, 9/1/33 351,921 408,288 Federal National Mortgage Association, 5.5%, 11/1/33 414,248 274,616 Federal National Mortgage Association, 5.5%, 3/1/34 278,533 193,969 Federal National Mortgage Association, 5.5%, 12/1/34 196,736 221,641 Federal National Mortgage Association, 6.0%, 12/1/11 229,255 65,501 Federal National Mortgage Association, 6.0%, 12/1/31 67,238 49,003 Federal National Mortgage Association, 6.0%, 10/1/32 50,271 458,576 Federal National Mortgage Association, 6.0%, 11/1/32 470,445 585,585 Federal National Mortgage Association, 6.0%, 3/1/33 600,740 140,920 Federal National Mortgage Association, 6.0%, 4/1/33 144,568 195,885 Federal National Mortgage Association, 6.0%, 5/1/33 200,901 157,810 Federal National Mortgage Association, 6.0%, 6/1/33 161,851 178,136 Federal National Mortgage Association, 6.0%, 7/1/34 182,691 183,793 Federal National Mortgage Association, 6.0%, 9/1/34 188,493 48,215 Federal National Mortgage Association, 6.5%, 7/1/21 50,140 93,127 Federal National Mortgage Association, 6.5%, 11/1/28 96,709 57,076 Federal National Mortgage Association, 6.5%, 1/1/29 59,275 86,400 Federal National Mortgage Association, 6.5%, 10/1/31 89,622 87,425 Federal National Mortgage Association, 6.5%, 1/1/32 90,685 37,670 Federal National Mortgage Association, 6.5%, 2/1/32 39,075 194,017 Federal National Mortgage Association, 6.5%, 3/1/32 201,184 106,710 Federal National Mortgage Association, 6.5%, 4/1/32 110,620 87,262 Federal National Mortgage Association, 6.5%, 7/1/32 90,459 294,885 Federal National Mortgage Association, 6.5% 8/1/32 305,743 42,886 Federal National Mortgage Association, 6.5%, 9/1/32 44,458 446,686 Federal National Mortgage Association, 6.5%, 7/1/34 462,434 53,230 Federal National Mortgage Association, 7.0%, 9/1/18 56,344 32,109 Federal National Mortgage Association, 7.0%, 8/1/19 33,955 13,141 Federal National Mortgage Association, 7.0%, 1/1/29 13,869 146,868 Federal National Mortgage Association, 7.0%, 9/1/30 155,003 3,984 Federal National Mortgage Association, 7.0%, 5/1/31 4,202 24,473 Federal National Mortgage Association, 7.0%, 7/1/31 25,813 30,689 Federal National Mortgage Association, 7.0%, 1/1/32 32,371 20,536 Federal National Mortgage Association, 7.5%, 2/1/31 21,944 54,476 Federal National Mortgage Association, 9.0%, 4/1/33 57,865 300,000 Freddie Mac, 5.25%, 11/15/12 302,936 297,531 Government National Mortgage Association, 4.5%, 4/15/20 298,303 403,362 Government National Mortgage Association, 4.5%, 8/15/33 399,087 708,863 Government National Mortgage Association, 4.5%, 6/15/34 701,133
The accompanying notes are an integral part of these financial statements. 91 Pioneer America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal Amount Value U.S. Government and Agency Obligations - (Cont.) $ 291,890 Government National Mortgage Association, 5.0%, 7/15/17 $ 298,380 343,306 Government National Mortgage Association, 5.0%, 12/20/18 348,526 184,364 Government National Mortgage Association, 5.0%, 7/15/19 187,715 224,542 Government National Mortgage Association, 5.0%, 11/20/19 227,847 196,668 Government National Mortgage Association, 5.0%, 1/20/20 199,571 195,611 Government National Mortgage Association, 5.0%, 2/15/20 199,184 230,552 Government National Mortgage Association, 5.0%, 9/15/33 232,669 594,144 Government National Mortgage Association, 5.0%, 4/15/35 599,481 376,290 Government National Mortgage Association, 5.5%, 6/15/17 388,639 177,367 Government National Mortgage Association, 5.5%, 2/15/19 183,192 229,938 Government National Mortgage Association, 5.5%, 7/15/19 237,470 414,829 Government National Mortgage Association, 5.5%, 7/20/19 427,123 162,627 Government National Mortgage Association, 5.5%, 4/15/31 166,440 226,931 Government National Mortgage Association, 5.5%, 3/15/33 232,004 267,824 Government National Mortgage Association, 5.5%, 4/15/33 273,812 280,790 Government National Mortgage Association, 5.5%, 7/15/33 287,068 403,535 Government National Mortgage Association, 5.5%, 2/20/34 411,619 234,144 Government National Mortgage Association, 5.5%, 10/15/34 239,348 188,543 Government National Mortgage Association, 5.5%, 11/20/34 192,321 248,435 Government National Mortgage Association, 5.5%, 1/15/35 250,666 133,248 Government National Mortgage Association, 6.0%, 6/20/16 137,963 110,509 Government National Mortgage Association, 6.0%, 5/15/17 114,766 218,475 Government National Mortgage Association, 6.0%, 2/15/18 226,887 78,787 Government National Mortgage Association, 6.0%, 12/20/18 81,575 182,009 Government National Mortgage Association, 6.0%, 7/20/19 188,453 170,399 Government National Mortgage Association, 6.0%, 8/15/19 176,964 395,325 Government National Mortgage Association, 6.0%, 7/15/23 409,362 190,469 Government National Mortgage Association, 6.0%, 4/15/28 197,028 140,221 Government National Mortgage Association, 6.0%, 9/15/32 144,793 415,634 Government National Mortgage Association, 6.0%, 10/15/32 429,185 408,789 Government National Mortgage Association, 6.0%, 11/15/32 422,806 266,989 Government National Mortgage Association, 6.0%, 12/15/32 276,465 395,533 Government National Mortgage Association, 6.0% 1/15/33 408,336 499,286 Government National Mortgage Association, 6.0%, 2/15/33 515,398 299,320 Government National Mortgage Association, 6.0%, 9/15/33 308,979 235,284 Government National Mortgage Association, 6.0%, 11/20/33 242,362 644,853 Government National Mortgage Association, 6.0%, 3/15/34 665,598 322,062 Government National Mortgage Association, 6.0%, 6/20/34 331,718 352,084 Government National Mortgage Association, 6.0%, 8/15/34 363,575 132,381 Government National Mortgage Association, 6.0%, 9/15/34 136,639 743,266 Government National Mortgage Association, 6.0%, 10/15/34 767,178 153,745 Government National Mortgage Association, 6.5%, 4/15/17 160,829 27,867 Government National Mortgage Association, 6.5%, 6/15/17 29,151 20,233 Government National Mortgage Association, 6.5%, 3/15/26 21,201 108,603 Government National Mortgage Association, 6.5%, 6/15/28 113,701 33,881 Government National Mortgage Association, 6.5%, 2/15/29 35,442 402,745 Government National Mortgage Association, 6.5%, 5/15/29 421,435 9,016 Government National Mortgage Association, 6.5%, 6/15/29 9,431 61,016 Government National Mortgage Association, 6.5%, 5/15/31 63,799 323,505 Government National Mortgage Association, 6.5%, 6/15/31 338,264
92 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.) $ 86,440 Government National Mortgage Association, 6.5%, 7/15/31 $ 90,384 89,354 Government National Mortgage Association, 6.5%, 9/15/31 93,430 36,211 Government National Mortgage Association, 6.5%, 9/20/31 37,704 90,553 Government National Mortgage Association, 6.5%, 10/15/31 94,684 102,541 Government National Mortgage Association, 6.5%, 12/15/31 107,219 17,054 Government National Mortgage Association, 6.5%, 2/15/32 18,063 73,161 Government National Mortgage Association, 6.5%, 4/15/32 76,490 108,170 Government National Mortgage Association, 6.5%, 6/15/32 113,093 96,084 Government National Mortgage Association, 6.5%, 7/15/32 100,456 181,031 Government National Mortgage Association, 6.5%, 1/15/34 189,213 15,747 Government National Mortgage Association, 7.0%, 1/15/26 16,722 47,128 Government National Mortgage Association, 7.0%, 5/20/26 49,811 45,094 Government National Mortgage Association, 7.0%, 7/15/26 47,887 17,658 Government National Mortgage Association, 7.0%, 9/15/27 18,735 59,743 Government National Mortgage Association, 7.0%, 2/15/28 63,342 29,883 Government National Mortgage Association, 7.0%, 3/15/28 31,684 25,877 Government National Mortgage Association, 7.0%, 4/15/28 27,436 55,985 Government National Mortgage Association, 7.0%, 11/15/28 59,358 33,619 Government National Mortgage Association, 7.0%, 1/15/29 35,623 95,259 Government National Mortgage Association, 7.0%, 2/20/29 100,460 34,984 Government National Mortgage Association, 7.0%, 6/15/29 37,070 50,897 Government National Mortgage Association, 7.0%, 7/15/29 53,930 4,877 Government National Mortgage Association, 7.0%, 12/15/30 5,166 37,495 Government National Mortgage Association, 7.0%, 2/15/31 39,715 26,801 Government National Mortgage Association, 7.0%, 5/15/31 28,389 29,782 Government National Mortgage Association, 7.0%, 8/15/31 31,545 127,412 Government National Mortgage Association, 7.0%, 5/15/32 134,951 7,969 Government National Mortgage Association, 7.5%, 10/15/22 8,596 1,829 Government National Mortgage Association, 7.5%, 6/15/23 1,972 1,874 Government National Mortgage Association, 7.5%, 8/15/23 2,021 1,786 Government National Mortgage Association, 7.5%, 8/15/29 1,914 27,944 Government National Mortgage Association, 7.5%, 10/15/29 29,959 38,846 Government National Mortgage Association, 7.5%, 11/15/29 41,646 15,810 Government National Mortgage Association, 7.5%, 1/15/31 16,943 19,796 Government National Mortgage Association, 7.5%, 1/15/32 21,214 117,410 Government National Mortgage Association I, 6.0%, 2/15/29 121,339 64,717 Government National Mortgage Association I, 7.0%, 1/15/30 68,551 39,469 Government National Mortgage Association I, 7.0%, 12/15/30 41,807 35,894 Government National Mortgage Association II, 6.5%, 8/20/28 37,424 48,697 Government National Mortgage Association II, 6.5%, 12/20/28 50,765 18,077 Government National Mortgage Association II, 7.0%, 1/20/31 19,057 7,903 Government National Mortgage Association II, 7.5%, 8/20/27 8,443 2,990 Government National Mortgage Association II, 8.0%, 8/20/25 3,220 12,000 Tennessee Valley Authority, Variable Rate Note, 6/1/28 306,000 1,950,000 U.S. Treasury Bonds, 6.25%, 8/15/23 2,430,111 925,000 U.S. Treasury Bonds, 6.375%, 8/15/27 1,199,284 400,000 U.S. Treasury Bonds, 7.25%, 5/15/16 512,203 500,000 U.S. Treasury Notes, 4.0%, 11/15/12 505,606 650,000 U.S. Treasury Notes, 4.0%, 2/15/14 653,910 370,000 U.S. Treasury Notes, 4.25%, 11/15/14 378,686
The accompanying notes are an integral part of these financial statements. 93 Pioneer America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal Amount Value U.S. Government and Agency Obligations - (Cont.) $ 375,000 U.S. Treasury Notes, 4.75%, 5/15/14 $ 397,910 4,700,000 U.S. Treasury Notes, 6.5%, 2/15/10 5,245,092 ----------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $44,276,509) $45,192,213 ----------- TOTAL INVESTMENTS IN SECURITIES - 97.5% (Cost $45,044,129) $45,952,032 ----------- OTHER ASSETS AND LIABILITIES - 2.5% $ 1,173,415 ----------- TOTAL NET ASSETS - 100.0% $47,125,447 ===========
94 The accompanying notes are an integral part of these financial statements. Pioneer Money Market VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Principal Amount Value COLLATERALIZED MORTGAGE OBLIGATIONS - 2.5% Banks - 2.5% Thrifts & Mortgage Finance - 2.5% $ 987,813 Federal Home Loan Mortgage Corp. Multifamily VRD Certificate, 1.12%, 1/15/42 $ 987,813 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $987,813) $ 987,813 ----------- CORPORATE BONDS - 41.1% Capital Goods - 3.4% Industrial Conglomerates - 3.4% 500,000 General Electric Capital Corp., Floating Rate, 12/16/05 $ 500,000 800,000 General Electric Capital Corp., Floating Rate, 1/9/06 800,136 ----------- $ 1,300,136 ----------- Total Capital Goods $ 1,300,136 ----------- Commercial Services & Supplies - 1.8% Office Services & Supplies - 1.8% 700,000 Pitney Bowes, Inc., 5.875%, 5/1/06 $ 712,595 ----------- Total Commercial Services & Supplies $ 712,595 ----------- Food & Drug Retailing - 1.9% Hypermarkets & Supercenters - 1.9% 750,000 Wal-Mart Stores, Floating Rate, 3/16/06 $ 749,459 ----------- Total Food & Drug Retailing $ 749,459 ----------- Pharmaceuticals & Biotechnology - 1.3% Pharmaceuticals - 1.3% 500,000 Pfizer, Inc., 5.625%, 2/1/06 $ 506,835 ----------- Total Pharmaceuticals & Biotechnology $ 506,835 ----------- Banks - 10.0% Diversified Banks - 10.0% 1,000,000 Bank of America Corp., 7.125%, 5/1/06 $ 1,027,529 1,200,000 Bank One Corp., Floating Rate, 8/23/05 1,200,277 650,000 UBS AG Jersey Branch, Zero Coupon, 10/14/05 643,483 1,000,000 Wachovia Corp., 7.55%, 8/18/05 1,005,460 ----------- $ 3,876,749 ----------- Total Banks $ 3,876,749 ----------- Principal Amount Value Diversified Financials - 21.7% Consumer Finance - 4.4% $ 450,000 American Express Credit, Floating Rate, 10/14/05 $ 450,139 250,000 National Rural Utilities, 6.0%, 5/15/06 254,834 1,000,000 SLM Corp., Floating Rate, 3/15/06 1,001,541 ----------- $ 1,706,514 ----------- Investment Banking & Brokerage - 13.4% 1,500,000 Lehman Brothers Holdings, 6.25%, 5/15/06 $ 1,532,531 1,000,000 Merrill Lynch, Floating Rate, 2/10/06 1,000,596 1,000,000 Merrill Lynch & Co., Floating Rate, 3/17/06 1,000,578 1,700,000 Morgan Stanley, Floating Rate, 3/27/06 1,703,985 ----------- $ 5,237,690 ----------- Diversified Financial Services - 3.9% 760,000 Bank One Corp., 7.625%, 8/1/05 $ 762,990 750,000 Citigroup, Inc., Floating Rate, 9/1/05 750,104 ----------- $ 1,513,094 ----------- Total Diversified Financials $ 8,457,298 ----------- Insurance - 1.0% Multi-Line Insurance - 1.0% 400,000 American International Group, 2.85%, 12/1/05 $ 399,188 ----------- Total Insurance $ 399,188 ----------- TOTAL CORPORATE BONDS (Cost $16,002,260) $16,002,260 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 31.8% Banks - 12.6% Thrifts & Mortgage Finance - 12.6% 1,900,000 Federal National Mortgage Association, 3.04%, 7/20/05 $ 1,896,951 1,500,000 Federal National Mortgage Association, 3.14%, 7/22/05 1,497,252 1,500,000 Federal National Mortgage Association, 3.19%, 8/3/05 1,495,614 ----------- $ 4,889,817 ----------- Total Banks $ 4,889,817 -----------
The accompanying notes are an integral part of these financial statements. 95 Pioneer Money Market VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Principal Amount Value Government - 19.2% $ 1,000,000 Federal Home Loan Mortgage Corp., 2.98%, 7/11/05 $ 999,172 1,800,000 Federal Home Loan Mortgage Corp, 3.08%, 7/27/05 1,795,997 1,800,000 Federal Home Loan Mortgage Corp., 3.08%, 7/29/05 1,795,687 1,000,000 Federal Home Loan Mortgage Corp., 3.20%, 8/2/05 997,244 1,900,000 Federal Home Loan Bank, 3.05%, 7/19/05 1,897,112 ----------- $ 7,485,212 ----------- Total Government $ 7,485,212 ----------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $12,375,029) $12,375,029 ----------- COMMERCIAL PAPER - 18.3% 800,000 Coca Cola Co., 3.03%, 7/13/05 $ 799,240 1,000,000 Coca Cola Co., 3.12%, 7/25/05 997,920 1,800,000 E.I. Dupont de Nemours, 3.13%, 7/18/05 1,797,339 1,900,000 Golden Peanut, 3.130%, 7/26/05 1,895,896 1,625,000 Paccar Financial, 3.26%, 8/15/05 1,618,386 ----------- $ 7,108,781 ----------- TOTAL COMMERCIAL PAPER (Cost $7,108,781) $ 7,108,781 ----------- Principal Amount Value REPURCHASE AGREEMENT - 6.4% $ 2,500,000 UBS Warburg, Inc., 2.75%, dated 6/30/05, repurchase price of $2,500,000 plus accrued interest on 7/1/05 collateralized by $2,553,000 U.S. Treasury Bill, 1.875%, 1/31/06 $ 2,500,000 ----------- TOTAL REPURCHASE AGREEMENT (Cost $9,608,781) $ 9,608,781 ----------- TOTAL INVESTMENTS IN SECURITIES - 100.1% (Cost $38,973,883) $38,973,883 ----------- OTHER ASSETS AND LIABILITIES - (0.1)% $ (22,337) ----------- TOTAL NET ASSETS - 100.0% $38,951,546 ===========
96 The accompanying notes are an integral part of these financial statements. Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year Year 6/30/05 Ended Ended Class I (unaudited) 12/31/04 12/31/03 Net asset value, beginning of period $ 20.48 $ 17.37 $ 11.03 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.19 $ 0.22 $ 0.20 Net realized and unrealized gain (loss) on investments and foreign currency transactions 0.92 3.04 6.20 --------- --------- --------- Net increase (decrease) from investment operations $ 1.11 $ 3.26 $ 6.40 Distributions to shareowners: Net investment income (0.12) (0.15) (0.06) Net realized gain -- -- -- --------- --------- --------- Net increase (decrease) in net asset value $ 0.99 $ 3.11 $ 6.34 --------- --------- --------- Net asset value, end of period $ 21.47 $ 20.48 $ 17.37 ========= ========= ========= Total return* 5.44% 18.93% 58.17% Ratio of net expenses to average net assets(+) 1.74%** 1.75% 1.75% Ratio of net investment income (loss) to average net assets(+) 1.77%** 1.12% 1.43% Portfolio turnover rate 95%** 66% 79% Net assets, end of period (in thousands) $ 8,773 $ 8,633 $ 8,399 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.74%** 1.87% 2.51% Net investment income (loss) 1.77%** 1.00% 0.67% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.74%** 1.75% 1.75% Net investment income (loss) 1.77%** 1.12% 1.43% Year Year Year Ended Ended Ended Class I 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 11.23 $ 12.10 $ 18.75 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.06 $ 0.15 $ (0.12) Net realized and unrealized gain (loss) on investments and foreign currency transactions (0.19) (1.02) (6.20) --------- --------- --------- Net increase (decrease) from investment operations $ (0.13) $ (0.87) $ (6.32) Distributions to shareowners: Net investment income (0.07) -- -- Net realized gain -- -- (0.33) --------- --------- --------- Net increase (decrease) in net asset value $ (0.20) $ (0.87) $ (6.65) --------- --------- --------- Net asset value, end of period $ 11.03 $ 11.23 $ 12.10 ========= ========= ========= Total return* (1.20)% (7.19)% (34.20)% Ratio of net expenses to average net assets(+) 1.75% 1.66% 1.79% Ratio of net investment income (loss) to average net assets(+) 0.63% 1.30% (0.59)% Portfolio turnover rate 124% 175% 156% Net assets, end of period (in thousands) $ 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 2.88% 3.83% 2.45% Net investment income (loss) (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% 1.66% 1.75% Net investment income (loss) 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. ** Annualized. + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 97 Pioneer Europe VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year Year 6/30/05 Ended Ended Class I (unaudited) 12/31/04 12/31/03 Net asset value, beginning of period $ 10.64 $ 9.05 $ 6.82 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.12 $ 0.11 $ 0.09 Net realized and unrealized gain (loss) on investments and foreign currency transactions (0.27) 1.55 2.17 --------- --------- --------- Net increase (decrease) from investment operations $ (0.15) $ 1.66 $ 2.26 Distributions to shareowners: Net investment income (0.07) (0.07) (0.03) Net realized gain -- -- -- --------- --------- --------- Net increase (decrease) in net asset value $ (0.22) $ 1.59 $ 2.23 --------- --------- --------- Net asset value, end of period $ 10.42 $ 10.64 $ 9.05 ========= ========= ========= Total return* (1.41)% 18.48% 33.26% Ratio of net expenses to average net assets(+) 1.50%** 1.50% 1.50% Ratio of net investment income (loss) to average net assets(+) 2.16%** 0.92% 1.14% Portfolio turnover rate 70%** 55% 52% Net assets, end of period (in thousands) $ 8,728 $ 9,478 $ 9,330 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.69%** 1.94% 2.52% Net investment income (loss) 1.97%** 0.48% 0.12% 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% Net investment income (loss) 2.16%** 0.92% 1.14% Year Year Year Ended Ended Ended Class I 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 8.42 $ 11.07 $ 13.61 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.05 $ 0.01 $ (0.06) Net realized and unrealized gain (loss) on investments and foreign currency transactions (1.65) (2.51) (2.45) --------- --------- --------- Net increase (decrease) from investment operations $ (1.60) $ (2.50) $ (2.51) Distributions to shareowners: Net investment income -- (0.15) (0.02) Net realized gain -- -- (0.01) --------- --------- --------- Net increase (decrease) in net asset value $ (1.60) $ (2.65) $ (2.54) --------- --------- --------- Net asset value, end of period $ 6.82 $ 8.42 $ 11.07 ========= ========= ========== Total return* (19.00)% (22.66)% (18.46)% Ratio of net expenses to average net assets(+) 1.50% 1.50% 1.48% Ratio of net investment income (loss) to average net assets(+) 0.68% 0.25% (0.28)% Portfolio turnover rate 94% 73% 92% Net assets, end of period (in thousands) $ 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 2.21% 1.99% 1.55% Net investment income (loss) 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% 1.48% Net investment income (loss) 0.68% 0.25% (0.28)%
Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year Year 6/30/05 Ended Ended Class I (unaudited) 12/31/04 12/31/03 Net asset value, beginning of period $ 11.88 $ 10.06 $ 7.79 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.10 $ 0.05 $ 0.07 Net realized and unrealized gain (loss) on investments and foreign currency transactions (0.55) 1.82 2.26 --------- --------- --------- Net increase (decrease) from investment operations $ (0.45) $ 1.87 $ 2.33 Distributions to shareowners: Net investment income (0.02) (0.05) (0.06) --------- --------- --------- Net increase (decrease) in net asset value $ (0.47) $ 1.82 $ 2.27 --------- --------- --------- Net asset value, end of period $ 11.41 $ 11.88 $ 10.06 ========= ========= ========= Total return* (3.81)% 18.71% 30.06% Ratio of net expenses to average net assets(+) 1.58%** 1.75% 1.69% Ratio of net investment income (loss) to average net assets(+) 1.63%* 0.45% 0.68% Portfolio turnover rate 103%** 129% 99% Net assets, end of period (in thousands) $ 19,950 $ 22,859 $ 22,506 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.58%** 1.75% 1.69% Net investment income 1.63%** 0.45% 0.68% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.58%** 1.75% 1.69% Net investment income 1.63%** 0.45% 0.68% Year Year Year Ended Ended Ended Class I 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 9.00 $ 11.83 $ 15.38 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.03 $ 0.02 $ 0.01 Net realized and unrealized gain (loss) on investments and foreign currency transactions (1.23) (2.83) (3.45) --------- --------- --------- Net increase (decrease) from investment operations $ (1.20) $ (2.81) $ (3.44) Distributions to shareowners: Net investment income (0.01) (0.02) (0.11) --------- --------- --------- Net increase (decrease) in net asset value $ (1.21) $ (2.83) $ (3.55) --------- --------- --------- Net asset value, end of period $ 7.79 $ 9.00 $ 11.83 ========= ========= ========= Total return* (13.31)% (23.74)% (22.50)% Ratio of net expenses to average net assets(+) 1.46% 1.38% 1.25% Ratio of net investment income (loss) to average net assets(+) 0.62% 0.21% 0.10% Portfolio turnover rate 31% 39% 55% Net assets, end of period (in thousands) $ 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 1.46% 1.38% 1.25% Net investment income 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 1.46% 1.38% 1.25% Net investment income 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. ** Annualized. + Ratios with no reduction for fees paid indirectly. 98 The accompanying notes are an integral part of these financial statements. Pioneer Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended Class I (unaudited) 12/31/04 Net asset value, beginning of period $ 15.02 $ 12.50 --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.01 $ (0.03) Net realized and unrealized gain (loss) on investments and foreign currency transactions 0.24 2.55 --------- --------- Net increase (decrease) from investment operations $ 0.25 $ 2.52 Distributions to shareowners: Net investment income -- -- Net realized gain (0.49) -- --------- --------- Net increase (decrease) in net asset value $ (0.24) $ 2.52 --------- --------- Net asset value, end of period $ 14.78 $ 15.02 ========= ========= Total return* 1.68% 20.16% Ratio of net expenses to average net assets 1.22%** 1.25% Ratio of net investment income (loss) to average net assets 0.21%** (0.21)% Portfolio turnover rate 34%** 36% Net assets, end of period (in thousands) $ 21,017 $ 17,993 Ratios with no waiver of management fees and assumption of expenses by PIM: Net expenses 1.22%** 1.30% Net investment income (loss) 0.21%** (0.26)% Ratios with waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.22%** 1.25% Net investment income (loss) 0.21%** (0.21)% Year Year 11/08/01(a) Ended Ended to Class I 12/31/03 12/31/02 12/31/01 Net asset value, beginning of period $ 9.23 $ 10.87 $ 10.00 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ -- $ (0.01) $ 0.01 Net realized and unrealized gain (loss) on investments and foreign currency transactions 3.27 (1.63) 0.86 --------- --------- --------- Net increase (decrease) from investment operations $ 3.27 $ (1.64) $ 0.87 Distributions to shareowners: Net investment income -- (0.00)(b) -- Net realized gain -- (0.00)(b) -- --------- --------- --------- Net increase (decrease) in net asset value $ 3.27 $ (1.65) $ 0.87 --------- --------- --------- Net asset value, end of period $ 12.50 $ 9.23 $ 10.87 ========= ========= ========= Total return* 35.43% (15.08)% 8.70% Ratio of net expenses to average net assets 1.25% 1.25% 1.21%** Ratio of net investment income (loss) to average net assets 0.03% (0.05)% 0.86%** Portfolio turnover rate 74% 50% 0% Net assets, end of period (in thousands) $ 12,049 $ 6,603 $ 504 Ratios with no waiver of management fees and assumption of expenses by PIM: Net expenses 2.40% 2.76% 77.48%** Net investment income (loss) (1.12)% (1.56)% (75.41)%** Ratios with waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.25% 1.25% 1.21%** Net investment income (loss) 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. 99 Pioneer Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year 6/30/05 Ended Class I (unaudited) 12/31/04 Net asset value, beginning of period $ 12.97 $ 11.44 --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.00(b) $ (0.03) Net realized and unrealized gain (loss) on investments and foreign currency transactions (0.40) 1.56 --------- --------- Net increase (decrease) from investment operations $ (0.40) $ 1.53 Distributions to shareowners: Net investment income -- -- Net realized gain (1.28) -- --------- --------- Net increase (decrease) in net asset value $ (1.68) $ 1.53 --------- --------- Net asset value, end of period $ 11.29 $ 12.97 ========= ========= Total return* (3.03)% 13.38% Ratio of net expenses to average net assets(+) 1.25%** 1.25% Ratio of net investment income (loss) to average net assets(+) (0.01)%** (0.25)% Portfolio turnover rate 78%** 114% Net assets, end of period (in thousands) $ 3,325 $ 3,784 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 1.56%** 1.53% Net investment income (loss) (0.32)%** (0.53)% 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) (0.01)%** (0.25)% Year Year 1/19/01(a) Ended Ended to Class I 12/31/03 12/31/02 12/31/01 Net asset value, beginning of period $ 9.13 $ 10.97 $ 10.00 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.00(b) $ 0.00(b) $ 0.02 Net realized and unrealized gain (loss) on investments and foreign currency transactions 2.31 (1.84) 0.95 --------- --------- --------- Net increase (decrease) from investment operations $ 2.31 $ (1.84) $ 0.97 Distributions to shareowners: Net investment income -- ( 0.00)(b) -- Net realized gain -- -- -- --------- --------- --------- Net increase (decrease) in net asset value $ 2.31 $ (1.84) $ 0.97 --------- --------- --------- Net asset value, end of period $ 11.44 $ 9.13 $ 10.97 ========= ========= ========= Total return* 25.30% (16.75)% 9.70% Ratio of net expenses to average net assets(+) 1.25% 1.25% 1.24%** Ratio of net investment income (loss) to average net assets(+) 0.02% 0.07% 0.30%** Portfolio turnover rate 38% 53% 72% Net assets, end of period (in thousands) $ 3,875 $ 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 2.42% 2.68% 7.49%** Net investment income (loss) (1.15)% (1.36)% (5.95)%** Ratio with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.25% 1.25% 1.24%** Net investment income (loss) 0.02% 0.07% 0.30%**
Pioneer Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year Year 6/30/05 Ended Ended Class I unaudited) 12/31/04 12/31/03 Net asset value, beginning of period $ 24.67 $ 20.47 $ 14.94 --------- --------- ----------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.06 $ 0.08 $ 0.14 Net realized and unrealized gain (loss) on investments 1.01 4.41 5.45 --------- --------- ----------- Net increase (decrease) from investment operations $ 1.07 $ 4.49 $ 5.59 Distributions to shareowners: Net investment income (0.08) (0.08) (0.06) Net realized gain (1.49) (0.21) -- --------- --------- ----------- Net increase (decrease) in net asset value $ (0.50) $ 4.20 $ 5.53 --------- --------- ----------- Net asset value, end of year $ 24.17 $ 24.67 $ 20.47 ========= ========= =========== Total return* 4.30% 22.12% 37.48% Ratio of net expenses to average net assets(+) 0.70%** 0.72% 0.76% Ratio of net investment income (loss) to average net assets(+) 0.51%** 0.53% 0.86% Portfolio turnover rate 58%** 55% 52% Net assets, end of period (in thousands) $ 326,912 $ 303,138 $ 170,237 Ratio with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.70%** 0.72% 0.76% Net investment income (loss) 0.51%** 0.53% 0.86% Ratio with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.70%** 0.72% 0.76% Net investment income (loss) 0.51%** 0.53% 0.86% Year Year Year Ended Ended Ended Class I 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 17.35 $ 17.79 $ 16.26 ----------- ----------- ----------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.07 $ 0.07 $ 0.13 Net realized and unrealized gain (loss) on investments (1.97) 1.06 2.62 ----------- ----------- ----------- Net increase (decrease) from investment operations $ (1.90) $ 1.13 $ 2.75 Distributions to shareowners: Net investment income (0.05) (0.10) (0.13) Net realized gain (0.46) (1.47) (1.09) ----------- ----------- ----------- Net increase (decrease) in net asset value $ (2.41) $ (0.44) $ 1.53 ----------- ----------- ----------- Net asset value, end of year $ 14.94 $ 17.35 $ 17.79 =========== =========== =========== Total return* (11.21)% 6.49% 18.00% Ratio of net expenses to average net assets(+) 0.80% 0.79% 0.77% Ratio of net investment income (loss) to average net assets(+) 0.46% 0.45% 0.63% Portfolio turnover rate 68% 95% 85% Net assets, end of period (in thousands) $ 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 0.80% 0.79% 0.77% Net investment income (loss) 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 0.80% 0.79% 0.77% Net investment income (loss) 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. ** Annualized. + Ratios with no reduction for fees paid indirectly. 100 The accompanying notes are an integral part of thesefinancial statements. Pioneer Growth Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year Year 6/30/05 Ended Ended Class I (unaudited) 12/31/04 12/31/03 Net asset value, beginning of period $ 13.04 $ 12.22 $ 9.75 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.02 $ 0.09 $ (0.01) Net realized and unrealized gain (loss) on investments (0.31) 0.73 2.48 --------- --------- --------- Net increase (decrease) from investment operations $ (0.29) $ 0.82 $ 2.47 Distributions to shareowners: Net investment income (0.10) -- ( 0.00)(a) Net realized gain -- -- -- --------- --------- --------- Net increase (decrease) in net asset value $ (0.39) $ 0.82 $ 2.47 --------- --------- --------- Net asset value, end of period $ 12.65 $ 13.04 $ 12.22 ========= ========= ========= Total return* (2.24)% 6.71% 25.35% Ratio of net expenses to average net assets(+) 0.96%** 0.96% 1.08% Ratio of net investment income (loss) to average net assets(+) 0.27%** 0.71% (0.05)% Portfolio turnover rate 87%** 206% 58% Net assets, end of period (in thousands) $ 28,393 $ 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 0.96%** 0.96% 1.08% Net investment income (loss) 0.27%** 0.71% (0.05)% Ratios with waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.96%** 0.96% 1.08% Net investment income (loss) 0.27%** 0.71% (0.05)% Year Year Year Ended Ended 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(a) 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 no reduction for fees paid indirectly: Net expenses 0.97% 0.85% 0.73% Net investment income (loss) 0.01% 0.07% (0.11)%
Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year Year 6/30/05 Ended Ended Class I (unaudited) 12/31/04 12/31/03 Net asset value, beginning of period $ 24.30 $ 18.57 $ 14.47 --------- --------- --------- Increase (decrease) from investment operations: Net investment income $ 0.37 $ 0.52 $ 0.74 Net realized and unrealized gain (loss) on investments 1.27 5.99 4.16 --------- --------- --------- Net increase (decrease) from investment operations $ 1.64 $ 6.51 $ 4.90 Distributions to shareowners: Net investment income (0.36) (0.45) (0.64) Net realized gain (0.89) (0.33) -- Tax return of capital -- -- (0.16) --------- --------- --------- Net increase (decrease) in net asset value $ 0.39 $ 5.73 $ 4.10 --------- --------- --------- Net asset value, end of period $ 24.69 $ 24.30 $ 18.57 ========= ========= ========= Total return* 6.86% 35.74% 34.75% Ratio of net expenses to average net assets(+) 0.99%** 0.98% 1.03% Ratio of net investment income to average net assets(+) 3.05%** 2.41% 4.49% Portfolio turnover rate 12%** 35% 20% Net assets, end of period (in thousands) $ 33,785 $ 36,447 $ 31,891 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.99%** 0.98% 1.03% Net investment income 3.05%** 2.41% 4.49% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.99%** 0.98% 1.03% Net investment income 3.05%** 2.41% 4.49% Year Year Year Ended Ended Ended Class I 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 14.77 $ 14.42 $ 11.73 --------- --------- --------- Increase (decrease) from investment operations: Net investment income $ 0.62 $ 0.68 $ 0.71 Net realized and unrealized gain (loss) on investments (0.23) 0.40 2.67 --------- --------- --------- Net increase (decrease) from investment operations $ 0.39 $ 1.08 $ 3.38 Distributions to shareowners: Net investment income (0.69) (0.56) (0.59) Net realized gain -- -- -- Tax return of capital -- (0.17) (0.10) --------- --------- --------- Net increase (decrease) in net asset value $ (0.30) $ 0.35 $ 2.69 --------- --------- --------- Net asset value, end of period $ 14.47 $ 14.77 $ 14.42 ========= ========= ========= Total return* (2.53)% 7.80% 29.51% Ratio of net expenses to average net assets(+) 1.07% 1.16% 1.10% Ratio of net investment income to average net assets(+) 4.76% 4.71% 5.02% Portfolio turnover rate 29% 34% 31% Net assets, end of period (in thousands) $ 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 1.07% 1.16% 1.10% Net investment income 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 1.07% 1.16% 1.10% Net investment income 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. ** Annualized + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 101 Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year Year 6/30/05 Ended Ended Class I (unaudited) 12/31/04 12/31/03 Net asset value, beginning of period $ 20.57 $ 18.70 $ 15.28 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.13 $ 0.24 $ 0.20 Net realized and unrealized gain (loss) on investments (0.27) 1.85 3.41 --------- --------- --------- Net increase (decrease) from investment operations $ (0.14) $ 2.09 $ 3.61 Distributions to shareowners: Net investment income (0.13) (0.22) (0.19) Net realized gain -- -- -- --------- --------- --------- Net increase (decrease) in net asset value $ (0.27) $ 1.87 $ 3.42 --------- --------- --------- Net asset value, end of period $ 20.30 $ 20.57 $ 18.70 ========= ========= ========= Total return* (0.68)% 11.26% 23.76% Ratio of net expenses to average net assets(+) 0.71%** 0.71% 0.76% Ratio of net investment income (loss) to average net assets(+) 1.27%** 1.26% 1.16% Portfolio turnover rate 22%** 17% 11% Net assets, end of period (in thousands) $ 400,472 $ 454,136 $ 154,839 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.71%** 0.71% 0.76% Net investment income (loss) 1.27%** 1.26% 1.16% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.71%** 0.71% 0.76% Net investment income (loss) 1.27%** 1.26% 1.16% Year Year Year Ended Ended Ended Class I 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 19.08 $ 22.67 $ 22.70 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.19 $ 0.17 $ 0.18 Net realized and unrealized gain (loss) on investments (3.81) (2.57) 0.10 --------- --------- --------- Net increase (decrease) from investment operations $ (3.62) $ (2.40) $ 0.28 Distributions to shareowners: Net investment income (0.18) (0.17) (0.18) Net realized gain -- (1.02) (0.13) --------- --------- --------- Net increase (decrease) in net asset value $ (3.80) $ (3.59) $ (0.03) --------- --------- --------- Net asset value, end of period $ 15.28 $ 19.08 $ 22.67 ========= ========= ========= Total return* 19.03% (10.85)% 1.22% Ratio of net expenses to average net assets(+) 0.80% 0.74% 0.69% Ratio of net investment income (loss) to average net assets(+) 1.09% 0.83% 0.78% Portfolio turnover rate 11% 7% 37% Net assets, end of period (in thousands) $ 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 0.80% 0.74% 0.69% Net investment income (loss) 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 0.80% 0.74% 0.69% Net investment income (loss) 1.09% 0.83% 0.78%
Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year Year 6/30/05 Ended Ended Class I (unaudited) 12/31/04 12/31/03 Net asset value, beginning of period $ 20.58 $ 18.09 $ 15.11 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.22 $ 0.44 $ 0.41 Net realized and unrealized gain (loss) on investments 0.18 2.49 2.96 --------- --------- --------- Net increase (decrease) from investment operations $ 0.40 $ 2.93 $ 3.37 Distributions to shareowners: Net investment income (0.22) (0.44) (0.39) Net realized gain -- -- -- --------- --------- --------- Net increase (decrease) in net asset value $ 0.18 $ 2.49 $ 2.98 --------- --------- --------- Net asset value, end of period $ 20.76 $ 20.58 $ 18.09 ========= ========= ========= Total return* 1.96% 16.39% 0.86% Ratio of net expenses to average net assets(+) 0.73%** 0.72% 0.78% Ratio of net investment income (loss) to average net assets(+) 2.34%** 2.40% 2.55% Portfolio turnover rate 17%** 19% 12% Net assets, end of period (in thousands) $ 212,737 $ 188,234 $ 155,634 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.73%** 0.72% 0.78% Net investment income (loss) 2.34%** 2.40% 2.55% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.73%** 0.72% 0.78% Net investment income (loss) 2.34%** 2.40% 2.55% Year Year Year Ended Ended Ended Class I 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 18.40 $ 21.28 $ 20.72 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.42 $ 0.40 $ 0.51 Net realized and unrealized gain (loss) on investments (3.30) (1.86) 2.28 --------- --------- --------- Net increase (decrease) from investment operations $ (2.88) $ (1.46) $ 2.79 Distributions to shareowners: Net investment income (0.41) (0.36) (0.49) Net realized gain -- (1.06) (1.74) --------- --------- --------- Net increase (decrease) in net asset value $ (3.29) $ (2.88) $ 0.56 --------- --------- --------- Net asset value, end of period $ 15.11 $ 18.40 $ 21.28 ========= ========= ========= Total return* (15.82)% (6.97)% 14.85% Ratio of net expenses to average net assets(+) 0.80% 0.75% 0.71% Ratio of net investment income (loss) to average net assets(+) 2.48% 2.07% 2.40% Portfolio turnover rate 12% 13% 13% Net assets, end of period (in thousands) $ 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 0.80% 0.75% 0.71% Net investment income (loss) 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 0.80% 0.75% 0.71% Net investment income (loss) 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. ** Annualized. + Ratios with no reduction for fees paid indirectly. 102 The accompanying notes are an integral part of these financial statements. Pioneer Balanced VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year Year 6/30/05 Ended Ended Class I (unaudited) 12/31/04 12/31/03 Net asset value, beginning of period $ 14.40 $ 14.04 $ 12.27 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.12 $ 0.28 $ 0.23 Net realized and unrealized gain (loss) on investments (0.11) 0.39 1.80 --------- --------- --------- Net increase (decrease) from investment operations $ 0.01 $ 0.67 $ 2.03 Distributions to shareowners: Net investment income (0.12) (0.31) (0.26) --------- --------- --------- Net increase (decrease) in net asset value $ (0.11) $ 0.36 $ 1.77 --------- --------- --------- Net asset value, end of period $ 14.29 $ 14.40 $ 14.04 ========= ========= ========= Total return* 0.07% 4.79% 16.71% Ratio of net expenses to average net assets(+) 0.94%** 0.90% 0.91% Ratio of net investment income (loss) to average net assets(+) 1.67%** 1.96% 1.75% Portfolio turnover rate 31%** 30% 37% Net assets, end of period (in thousands) $ 32,071 $ 35,312 $ 40,773 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.94%** 0.90% 0.91% Net investment income (loss) 1.67%** 1.96% 1.75% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.94%** 0.90% 0.91% Net investment income (loss) 1.67%** 1.96% 1.75% Year Year Year Ended Ended Ended Class I 12/31/02 12/31/01(a) 12/31/00 Net asset value, beginning of period $ 13.91 $ 14.60 $ 14.31 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.21 $ 0.34 $ 0.48 Net realized and unrealized gain (loss) on investments (1.63) (0.67) 0.29 --------- --------- --------- Net increase (decrease) from investment operations $ (1.42) $ (0.33) $ 0.77 Distributions to shareowners: Net investment income (0.22) (0.36) (0.48) --------- --------- --------- Net increase (decrease) in net asset value $ (1.64) $ (0.69) $ 0.29 --------- --------- --------- Net asset value, end of period $ 12.27 $ 13.91 $ 14.60 ========= ========== ========= Total return* (10.27)% (2.26)% 5.45% Ratio of net expenses to average net assets(+) 0.95% 0.84% 0.82% Ratio of net investment income (loss) to average net assets(+) 1.62% 2.42% 3.21% Portfolio turnover rate 179% 136% 15% Net assets, end of period (in thousands) $ 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 0.95% 0.84% 0.82% Net investment income (loss) 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 0.95% 0.84% 0.82% Net investment income (loss) 1.62% 2.42% 3.21%
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year Year 6/30/05 Ended Ended Class I (unaudited) 12/31/04 12/31/03 Net asset value, beginning of period $ 11.67 $ 11.45 $ 9.27 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.31 $ 0.62 $ 0.76 Net realized and unrealized gain (loss) on investments (0.40) 0.27 2.18 --------- --------- --------- Net increase (decrease) from investment operations $ (0.09) $ 0.89 $ 2.94 Distributions to shareowners: Net investment income (0.31) (0.62) (0.76) Net realized gain (0.38) (0.05) -- --------- --------- --------- Net increase (decrease) in net asset value $ (0.78) $ 0.22 $ 2.18 --------- --------- --------- Net asset value, end of period $ 10.89 $ 11.67 $ 11.45 ========= ========= ========= Total return* (0.71)% 8.03% 32.78% Ratio of net expenses to average net assets(+) 0.80%** 0.78% 0.89% Ratio of net investment income (loss) to average net assets(+) 5.57%** 5.40% 7.22% Portfolio turnover rate 43%** 42% 48% Net assets, end of period (in thousands) $ 64,050 $ 70,890 $ 66,587 Ratios with no waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.80%** 0.78% 0.89% Net investment income (loss) 5.57%** 5.40% 7.22% Year Year 5/1/00(b) Ended Ended to Class I 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 10.33 $ 9.82 $ 10.00 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.92 $ 0.95 $ 0.61 Net realized and unrealized gain (loss) on investments (1.06) 0.62 (0.18) --------- --------- --------- Net increase (decrease) from investment operations $ (0.14) $ 1.57 $ 0.43 Distributions to shareowners: Net investment income (0.92) (0.95) (0.61) Net realized gain -- (0.11) -- --------- --------- --------- Net increase (decrease) in net asset value $ (1.06) $ 0.51 $ (0.18) --------- --------- --------- Net asset value, end of period $ 9.27 $ 10.33 $ 9.82 ========= ========= ========= Total return* (1.42)% 16.60% 4.12% Ratio of net expenses to average net assets(+) 1.02% 1.15% 1.25%** Ratio of net investment income (loss) to average net assets(+) 9.39% 9.15% 9.18%** Portfolio turnover rate 42% 36% 33% Net assets, end of period (in thousands) $ 41,111 $ 32,331 $ 6,849 Ratios with no waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 1.02% 1.28% 2.35%** Net investment income (loss) 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. The accompanying notes are an integral part of these financial statements. 103 Pioneer Strategic Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year Year 6/30/05 Ended Ended Class I (unaudited) 12/31/04 12/31/03 Net asset value, beginning of period $ 11.26 $ 11.01 $ 9.67 --------- --------- --------- Increase (decrease) from investment operations: Net investment income $ 0.30 $ 0.60 $ 0.62 Net realized and unrealized gain (loss) on investments and foreign currency transactions (0.11) 0.47 1.38 --------- --------- --------- Net increase (decrease) from investment operations $ 0.19 $ 1.07 $ 2.00 Distributions to shareowners: Net investment income (0.32) (0.66) (0.66) Net realized gain (0.16) (0.16) -- --------- --------- --------- Net increase (decrease) in net asset value $ (0.29) $ 0.25 $ 1.34 --------- --------- --------- Net asset value, end of period $ 10.97 $ 11.26 $ 11.01 ========= ========= ========= Total return* 1.67% 10.25% 21.24% Ratio of net expenses to average net assets(+) 0.89%** 1.03% 1.25% Ratio of net investment income to average net assets(+) 5.57%** 5.52% 5.95% Portfolio turnover rate 46%** 53% 68% Net assets, end of period (in thousands) $ 21,988 $ 20,814 $ 19,312 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.89%** 1.03% 1.25% Net investment income 5.57%** 5.52% 5.95% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.89%** 1.03% 1.25% Net investment income 5.57%** 5.52% 5.95% Year Year Year Ended Ended Ended Class I 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 9.33 $ 9.43 $ 9.75 --------- --------- --------- Increase (decrease) from investment operations: Net investment income $ 0.65 $ 0.67 $ 0.73 Net realized and unrealized gain (loss) on investments and foreign currency transactions 0.32 (0.04) (0.32) --------- --------- --------- Net increase (decrease) from investment operations $ 0.97 $ 0.63 $ 0.41 Distributions to shareowners: Net investment income (0.63) (0.67) (0.73) Net realized gain -- (0.06) -- --------- --------- --------- Net increase (decrease) in net asset value $ 0.34 $ (0.10) $ (0.32) --------- --------- --------- Net asset value, end of period $ 9.67 $ 9.33 $ 9.43 ========= ========= ========= Total return* 10.72% 6.90% 4.51% Ratio of net expenses to average net assets(+) 1.25% 1.25% 1.30% Ratio of net investment income to average net assets(+) 6.75% 7.16% 7.53% Portfolio turnover rate 50% 55% 54% Net assets, end of period (in thousands) $ 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 1.62% 2.44% 2.97% Net investment income 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 1.25% 1.25% 1.25% Net investment income 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. ** Annualized. + Ratios with no reduction for fees paid indirectly. 104 The accompanying notes are an integral part of these financial statements. Pioneer America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year Year 6/30/05 Ended Ended Class I (unaudited) 12/31/04 12/31/03 Net asset value, beginning of period $ 10.11 $ 10.35 $ 10.59 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.19 $ 0.37 $ 0.35 Net realized and unrealized gain (loss) on investments 0.00(b) (0.03) (0.16) --------- --------- --------- Net increase (decrease) from investment operations $ 0.19 $ 0.34 $ 0.19 Distributions to shareowners: Net investment income (0.23) (0.58) (0.43) Net increase (decrease) in net asset value $ (0.04) $ (0.24) $ (0.24) --------- --------- --------- Net asset value, end of period $ 10.07 $ 10.11 $ 10.35 ========= ========= ========= Total return* 1.94% 3.42% 1.81% Ratio of net expenses to average net assets(+) 0.81%** 0.79% 0.78% Ratio of net investment income (loss) to average net assets(+) 3.94%** 3.74% 3.45% Portfolio turnover rate 18%** 37% 34% Net assets, end of period (in thousands) $ 29,926 $ 32,342 $ 44,526 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.81%** 0.79% 0.78% Net investment income (loss) 3.94%** 3.74% 3.45% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.81%** 0.79% 0.78% Net investment income (loss) 3.94%** 3.74% 3.45% Year Year Year Ended Ended Ended Class I 12/31/02 12/31/01(a) 12/31/00 Net asset value, beginning of period $ 10.06 $ 9.97 $ 9.47 --------- --------- --------- Increase (decrease) from investment operations: Net investment income (loss) $ 0.46 $ 0.52 $ 0.58 Net realized and unrealized gain (loss) on investments 0.56 0.12 0.50 --------- --------- --------- Net increase (decrease) from investment operations $ 1.02 $ 0.64 $ 1.08 Distributions to shareowners: Net investment income (0.49) (0.55) (0.58) Net increase (decrease) in net asset value $ 0.53 $ 0.09 $ 0.50 --------- --------- --------- Net asset value, end of period $ 10.59 $ 10.06 $ 9.97 ========= ========= ========= Total return* 10.32% 6.48% 11.76% Ratio of net expenses to average net assets(+) 0.81% 0.83% 0.84% Ratio of net investment income (loss) to average net assets(+) 4.39% 5.19% 6.00% Portfolio turnover rate 54% 71% 55% Net assets, end of period (in thousands) $ 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 0.81% 0.85% 0.84% Net investment income (loss) 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 0.81% 0.82% 0.81% Net investment income (loss) 4.39% 5.20% 6.03%
Pioneer Money Market VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Six Months Ended Year Year 6/30/05 Ended Ended Class I (unaudited) 12/31/04 12/31/03 Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 --------- --------- --------- Increase (decrease) from investment operations: Net investment income $ 0.03 $ 0.007 $ 0.006 Net realized and unrealized gain (loss) on investments (0.02) -- -- --------- --------- --------- Net increase (decrease) from investment operations $ 0.01 $ 0.007 $ 0.006 Distributions to shareowners: Net investment income (0.01) (0.007) (0.006) --------- --------- --------- Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 ========= ========= ========= Total return* 0.96% 0.65% 0.56% Ratio of net expenses to average net assets(+) 0.72%** 0.74% 0.72% Ratio of net investment income to average net assets(+) 1.93%** 0.66% 0.58% Net assets, end of period (in thousands) $ 38,952 $ 42,896 $ 34,736 Ratios with no waiver of fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses 0.72%** 0.74% 0.72% Net investment income 1.93%** 0.66% 0.58% Ratios with waiver of fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses 0.72%** 0.74% 0.72% Net investment income 1.93%** 0.66% 0.58% Year Year Year Ended Ended Ended Class I 12/31/02 12/31/01 12/31/00 Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 --------- --------- --------- Increase (decrease) from investment operations: Net investment income $ 0.01 $ 0.03 $ 0.06 Net realized and unrealized gain (loss) on investments -- -- -- --------- --------- --------- Net increase (decrease) from investment operations $ 0.01 $ 0.03 $ 0.06 Distributions to shareowners: Net investment income (0.01) (0.03) (0.06) --------- --------- --------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 ========= ========= ========= Total return* 1.19% 3.39% 5.71% Ratio of net expenses to average net assets(+) 0.78% 0.78% 0.76% Ratio of net investment income to average net assets(+) 1.11% 3.16% 5.58% Net assets, end of period (in thousands) $ 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 0.78% 0.78% 0.76% Net investment income 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 0.78% 0.78% 0.75% Net investment income 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. (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. 105 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Pioneer Emerging Pioneer Markets Europe VCT Portfolio VCT Portfolio ASSETS: Investment in securities, at value (including securities loaned of $2,086,391, $0, $1,191,931, $1,948,420, $1,431,721, $143,124,314 and $1,947,727, respectively) (Cost $34,447,106, $14,677,496, $22,291,484, $32,562,284, $13,863,035, $919,077,809, and $37,041,700, respectively) $ 42,793,058 $ 17,355,670 Cash 924,068 392,620 Foreign currencies, at value (Cost $220,067, $0, $31,958, $0, $0, $0, and $0, respectively) 221,081 -- Receivables -- Investment securities sold 215,309 -- Fund shares sold 266,051 50,910 Dividends, interest and foreign taxes withheld 134,951 50,605 Forward foreign currency settlement contracts, net 2 -- Other 3,277 510 ------------ ------------ Total assets $ 44,557,797 $ 17,850,315 ------------ ------------ LIABILITIES: Payables -- Investment securities purchased $ 35,720 $ -- Fund shares repurchased 57 13,672 Upon return of securities loaned 2,191,114 -- Variation Margin -- -- Forward foreign currency portfolio hedge contracts, net -- -- Reserve for repatriation taxes 41,230 -- Due to bank -- -- Due to affiliates 2,134 995 Accrued expenses 68,928 27,857 ------------ ------------ Total liabilities $ 2,339,183 $ 42,524 ------------ ------------ NET ASSETS: Paid-in capital $ 32,011,634 $ 21,500,002 Undistributed net investment income (loss) 149,710 183,525 Accumulated net realized gain (loss) 1,752,164 (6,552,609) Net unrealized gain (loss) on: Investments 8,304,722 2,678,174 Futures contracts -- -- Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies 384 (1,301) ------------ ------------ Total net assets $ 42,218,614 $ 17,807,791 ------------ ------------ NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $ 8,773,194 $ 8,728,103 Shares outstanding 408,653 837,800 ------------ ------------ Net asset value per share $ 21.47 $ 10.42 Class II: (No par value, unlimited number of shares authorized) Net assets $33,445,420 $ 9,079,688 Shares outstanding 1,570,031 887,595 ------------ ------------ Net asset value per share $ 21.30 $ 10.23
106 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 $ 25,597,928 $ 37,197,098 $14,450,921 $ 1,052,711,780 $ 37,876,645 334,085 16,556 444,579 -- 478,279 31,536 -- -- -- -- 2,496,521 465,149 24,441 21,282,802 417,574 2,647 1,972,705 49,265 439,445 10,477 66,026 46,043 12,384 847,621 39,031 -- -- -- -- -- 402 864 649 613 968 ------------- ------------ ----------- --------------- ------------- $ 28,529,145 $ 39,698,415 $14,982,239 $ 1,075,282,261 $ 38,822,974 ------------- ------------ ----------- --------------- ------------- $ 2,476,021 $ 824,422 $ -- $ 17,077,745 $ 225,834 464 10,063 28,968 5,535,046 5,784 1,252,555 2,023,358 1,485,682 148,443,233 1,999,381 -- 2,875 -- -- -- 1,276 -- -- -- -- -- -- -- -- -- -- -- -- 622,722 -- 1,299 1,400 3,058 21,805 1,345 69,563 57,485 44,554 96,516 49,362 ------------- ------------ ----------- --------------- ------------- $ 3,801,178 $ 2,919,603 $ 1,562,262 $ 171,797,067 $ 2,281,706 ------------- ------------ ----------- --------------- ------------- $ 33,699,659 $ 31,368,860 $13,031,415 $ 729,691,981 $ 74,300,109 201,860 19,527 (9,927) 1,516,021 40,173 (12,474,265) 700,521 (189,397) 38,643,221 (38,633,959) 3,306,444 4,634,814 587,886 133,633,971 834,945 -- 55,090 -- -- -- (5,731) -- -- -- -- ------------- ------------ ----------- --------------- ------------- $ 24,727,967 $ 36,778,812 $13,419,977 $ 903,485,194 $ 36,541,268 ------------- ------------ ----------- --------------- ------------- $ 19,950,192 $ 21,017,142 $ 3,325,190 $ 326,912,435 $ 28,393,264 1,748,351 1,421,949 294,597 13,525,350 2,243,980 ------------- ------------ ----------- --------------- ------------- $ 11.41 $ 14.78 $ 11.29 $ 24.17 $ 12.65 $ 4,777,775 $ 15,761,670 $10,094,787 $ 576,572,759 $ 8,148,004 420,460 1,072,898 904,964 24,097,349 652,020 ------------- ------------ ----------- --------------- ------------- $ 11.36 $ 14.69 $ 11.15 $ 23.93 $ 12.50
The accompanying notes are an integral part of these financial statements. 107 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Pioneer Real Estate Pioneer Shares Fund VCT Portfolio VCT Portfolio ASSETS: Investment in securities, at value (including securities loaned of $21,429,959, $1,143,760, $7,139,493, $437,999, $1,258,603, $909,827, $0, and $0, respectively) (Cost $86,438,542, $431,661,652, $271,200,539, $41,246,751, $114,630,240, $54,100,632, $45,044,129, and $36,473,883, respectively) $ 121,860,552 $ 532,161,836 Temporary cash investments (Cost $0, $0, $0, $0, $0, $0, $0, and $2,500,000, respectively) -- -- ------------- ------------- Total Investments in Securities $ 121,860,552 $ 532,161,836 Cash 1,592,680 -- Foreign currencies, at value (Cost $0, $0, $0, $0, $0, $0, $1,229,883, $0, and $0, respectively) -- -- Receivables -- Investment securities sold 192,656 4,778,241 Fund shares sold 71,379 492,046 Dividends, interest and foreign taxes withheld 466,997 663,377 Forward foreign currency settlement contracts, net -- -- Forward foreign currency portfolio hedge contracts, net -- -- Other 485 548 ------------- ------------- Total assets $ 124,184,749 $ 538,096,048 ------------- ------------- LIABILITIES: Payables -- Investment securities purchased $ 280,721 $ 1,181,829 Fund shares repurchased 36,891 -- Dividends -- -- Upon return for securities loaned 21,916,656 1,193,010 Due to bank -- 2,644,982 Due to affiliates 3,274 11,166 Accrued expenses 81,619 74,105 ------------- ------------- Total liabilities $ 22,319,161 $ 5,105,092 ------------- ------------- NET ASSETS: Paid-in capital $ 64,521,827 $ 488,926,764 Undistributed net investment income (loss) 279,770 397,459 Accumulated net realized gain (loss) 1,641,981 (56,833,451) Net unrealized gain (loss) on: Investments 35,422,010 100,500,184 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies -- -- ------------- ------------- Total net assets $ 101,865,588 $ 532,990,956 ------------- ------------- NET ASSET VALUE PER SHARE: Class I: (No par value, unlimited number of shares authorized) Net assets $ 33,784,790 $ 400,471,866 Shares outstanding 1,368,635 19,728,266 ------------- ------------- Net asset value per share $ 24.69 $ 20.30 Class II: (No par value, unlimited number of shares authorized) Net assets $ 68,080,799 $ 132,519,090 Shares outstanding 2,762,191 6,546,928 ------------- ------------- Net asset value per share $ 24.65 $ 20.24
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 Equity Pioneer High Strategic America Money Income Balanced Yield Income Income Market VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio $333,180,850 $ 44,763,237 $114,311,570 $55,773,617 $ 45,952,032 $36,473,883 -- -- -- -- -- 2,500,000 ------------ ------------ ------------ ----------- ------------ ----------- $333,180,850 $ 44,763,237 $114,311,570 $55,773,617 $ 45,952,032 $38,973,883 -- 299,931 -- 989,821 821,885 -- -- -- -- 1,194,032 -- -- -- -- -- 162,149 -- -- 1,644,772 189,816 155,374 86,531 29,506 -- 594,447 160,884 1,529,652 779,088 383,611 114,466 -- -- -- 2,601 -- -- -- -- -- 29,205 -- -- 848 553 2,018 488 823 1,023 ------------ ------------ ------------ ----------- ------------ ----------- $335,420,917 $ 45,414,421 $115,998,614 $59,017,532 $ 47,187,857 $39,089,372 ------------ ------------ ------------ ----------- ------------ ----------- $ -- $ -- $ 2,645,042 $ 926,421 $ -- $ -- 201,742 17,416 132,792 -- 6,385 92,455 -- -- -- 2,900 -- 1,476 7,334,929 459,990 1,316,415 949,383 -- -- 217,611 -- 70,275 -- -- 13,629 7,526 1,472 2,912 1,830 1,407 863 107,143 57,031 72,773 46,692 54,618 29,403 ------------ ------------ ------------ ----------- ------------ ----------- $ 7,868,951 $ 535,909 $ 4,240,209 $ 1,927,226 $ 62,410 $ 137,826 ------------ ------------ ------------ ----------- ------------ ----------- $271,604,704 $ 45,883,485 $110,259,417 $54,480,483 $ 47,701,359 $38,952,394 1,399,456 5,299 42,581 265,575 (442,685) 2,126 (7,432,505) (4,526,758) 1,775,077 682,845 (1,041,130) (2,974) 61,980,311 3,516,486 (318,670) 1,672,985 907,903 -- -- -- -- (11,582) -- -- ------------ ------------ ------------ ----------- ------------ ----------- $327,551,966 $ 44,878,512 $111,758,405 $57,090,306 $ 47,125,447 $38,951,546 ------------ ------------ ------------ ----------- ------------ ----------- $212,737,473 $ 32,071,136 $ 64,049,589 $21,988,129 $ 29,926,222 $38,951,546 10,248,184 2,244,010 5,879,994 2,004,720 2,971,384 38,956,760 ------------ ------------ ------------ ----------- ------------ ----------- $ 20.76 $ 14.29 $ 10.89 $ 10.97 $ 10.07 $ 1.00 $114,814,493 $ 12,807,376 $ 47,708,816 $35,102,177 $ 17,199,225 $ -- 5,502,731 898,357 4,380,321 3,200,225 1,704,851 -- ------------ ------------ ------------ ----------- ------------ ----------- $ 20.87 $ 14.26 $ 10.89 $ 10.97 $ 10.09 $ --
The accompanying notes are an integral part of these financial statements. 109 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS 6/30/05 (UNAUDITED) - --------------------------------------------------------------------------------
Pioneer Pioneer Emerging Markets Europe VCT Portfolio VCT Portfolio Six Months Six Months Ended Ended 6/30/05 6/30/05 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $94,687, $52,941, $53,476, $194, $74, $7,200, and $2,900, respectively) $ 688,302 $ 323,716 Interest 9,907 3,017 Income on securities loaned, net 3,634 -- Other -- -- ------------ ------------ Total investment income $ 701,843 $ 326,733 ------------ ------------ EXPENSES: Management fees $ 229,762 $ 88,245 Transfer agent fees and expenses 1,488 1,488 Distribution fees (Class II) 39,196 10,757 Administrative reimbursements 9,326 9,326 Custodian fees 65,342 22,885 Professional fees 20,835 12,098 Printing expense 8,278 6,180 Fees and expenses of nonaffiliated trustees 987 94 Miscellaneous 9,785 8,906 ------------ ------------ Total expenses $ 384,999 $ 159,979 Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. -- (16,838) Less fees paid indirectly -- -- ------------ ------------ Net expenses $ 384,999 $ 143,141 ------------ ------------ Net investment income (loss) $ 316,844 $ 183,592 ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments (net of foreign capital gain taxes of $2,682, $0, $0, $0, $0, $0, and $0, respectively) $ 4,124,651 $ 1,310,078 Futures contracts -- -- Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (40,575) (17,290) ------------ ------------ $ 4,084,076 $ 1,292,788 ------------ ------------ Change in net unrealized gain or loss from: Investments (the change in reserve for repatriation taxes of $5,740, $0, $0, $0, $0, $0, and $0, respectively) $ (2,352,670) $ (1,734,631) Futures contracts -- -- Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (7,363) (3,887) ------------ ------------ $ (2,360,033) $ (1,738,518) ------------ ------------ Net gain (loss) on investments, futures contracts and foreign currency transactions $ 1,724,043 $ (445,730) ============ ============ Net increase (decrease) in net assets resulting from operations $ 2,040,887 $ (262,138) ============ ============
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 International Value Small Cap Value Small Company Mid Cap Value Growth Shares VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio Six Months Six Months Six Months Six Months Six Months Ended Ended Ended Ended Ended 6/30/05 6/30/05 6/30/05 6/30/05 6/30/05 $ 397,070 $ 165,732 $ 69,117 $ 4,982,762 $ 225,810 3,370 54,429 7,795 211,841 2,335 14,342 2,211 6,457 49,491 1,897 70 -- -- -- -- ------------ ---------- ---------- ------------- ------------ $ 414,852 $ 222,372 $ 83,369 $ 5,244,094 $ 230,042 ------------ ---------- ---------- ------------- ------------ $ 128,119 $ 115,053 $ 49,107 $ 2,803,181 $ 131,298 1,488 1,488 1,488 1,488 1,488 5,603 16,377 12,162 697,649 9,823 9,326 9,326 9,326 83,917 9,326 23,087 18,311 13,439 39,877 15,753 25,084 22,509 18,941 37,475 16,938 8,002 17,079 6,746 39,309 983 181 243 117 5,899 237 7,944 2,719 2,400 17,420 3,836 ------------ ---------- ---------- ------------- ------------ $ 208,834 $ 203,105 $ 113,726 $ 3,726,215 $ 189,682 -- -- (20,430) -- -- -- -- -- -- -- ------------ ---------- ---------- ------------- ------------ $ 208,834 $ 203,105 $ 93,296 $ 3,726,215 $ 189,682 ------------ ---------- ---------- ------------- ------------ $ 206,018 $ 19,267 $ (9,927) $ 1,517,879 $ 40,360 ------------ ---------- ---------- ------------- ------------ $ 1,647,560 $1,137,201 $ (127,957) $ 45,761,817 $ 1,202,364 -- (58,940) -- -- -- (13,839) -- -- -- -- ------------ ---------- ---------- ------------- ------------ $ 1,633,721 $1,078,261 $ (127,957) $ 45,761,817 $ 1,202,364 ------------ ---------- ---------- ------------- ------------ $ (2,844,618) $ (466,213) $ (312,888) $ (10,521,594) $ (2,141,818) -- 21,925 -- -- -- (4,396) -- -- -- -- ------------ ---------- ---------- ------------- ------------ $ (2,849,014) $ (444,288) $ (312,888) $ (10,521,594) $ (2,141,818) ------------ ---------- ---------- ------------- ------------ $ (1,215,293) $ 633,973 $ (440,845) $ 35,240,223 $ (939,454) ============ ========== ========== ============= ============ $ (1,009,275) $ 653,240 $ (450,772) $ 36,758,102 $ (899,094) ============ ========== ========== ============= ============
The accompanying notes are an integral part of these financial statements. 111 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
Pioneer Pioneer Real Estate Shares Fund VCT Portfolio VCT Portfolio Six Months Six Months Ended Ended 6/30/05 6/30/05 INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $3,443, $50,822, $0, $457, $0, $0, $0 and $0, respectively) $1,898,904 $ 5,372,334 Interest (net of foreign taxes withheld of $0, $0, $0, $0, $0, $851, $0, and $0, respectively) 11,247 63,949 Income on securities loaned, net 7,675 20,681 ---------- ------------- Total investment income $1,917,826 $ 5,456,964 ---------- ------------- EXPENSES: Management fees $ 375,728 $ 1,796,836 Transfer agent fees and expenses 1,488 1,488 Distribution fees (Class II) 76,650 162,601 Administrative reimbursements 9,326 55,890 Custodian fees 15,905 23,121 Professional fees 22,831 25,741 Printing expense 32,568 37,460 Fees and expenses of nonaffiliated trustees 358 2,122 Miscellaneous 4,297 11,216 ---------- ------------- Total expenses $ 539,151 $ 2,116,475 ---------- ------------- Net expenses $ 539,151 $ 2,116,475 ---------- ------------- Net investment income (loss) $1,378,675 $ 3,340,489 ---------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments $1,885,132 $ 13,226,255 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies -- (4,974) ---------- ------------- $1,885,132 $ 13,221,281 ---------- ------------- Change in net unrealized gain or loss from: Investments $3,040,365 $ (21,031,810) Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies -- -- ---------- ------------- $3,040,365 $ (21,031,810) ---------- ------------- Net gain (loss) on investments, futures contracts and foreign currency transactions $4,925,497 $ (7,810,529) ========== ============= Net increase (decrease) in net assets resulting from operations $6,304,172 $ (4,470,040) ========== =============
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 Pioneer America Money Equity Income Balanced High Yield Strategic Income Income Market VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio Six Months Six Months Six Months Six Months Six Months Six Months Ended Ended Ended Ended Ended Ended 6/30/05 6/30/05 6/30/05 6/30/05 6/30/05 6/30/05 $ 4,400,669 $ 162,430 $ 49,269 $ -- $ -- $ -- 161,165 422,917 3,537,094 1,651,584 1,092,755 549,941 386 469 10,009 4,693 -- -- ------------ ------------ ------------ ------------ ---------- -------- $ 4,562,220 $ 585,816 $ 3,596,372 $ 1,656,277 $1,092,755 $549,941 ------------ ------------ ------------ ------------ ---------- -------- $ 964,185 $ 145,895 $ 366,819 $ 166,734 $ 127,417 $103,733 1,488 1,488 1,488 1,488 1,488 744 128,140 14,385 58,997 37,914 19,431 -- 28,591 9,326 11,597 9,326 9,326 9,325 20,598 9,032 10,907 10,829 10,533 13,051 20,550 25,085 23,945 24,818 24,876 18,952 40,238 16,402 29,617 11,403 9,955 1,000 115 1,018 841 417 885 122 8,196 3,482 6,168 3,213 3,808 3,138 ------------ ------------ ------------ ------------ ---------- -------- $ 1,212,101 $ 226,113 $ 510,379 $ 266,142 $ 207,719 $150,065 ------------ ------------ ------------ ------------ ---------- -------- $ 1,212,101 $ 226,113 $ 510,379 $ 266,142 $ 207,719 $150,065 ------------ ------------ ------------ ------------ ---------- -------- $ 3,350,119 $ 359,703 $ 3,085,993 $ 1,390,135 $ 885,036 $399,876 ------------ ------------ ------------ ------------ ---------- -------- $ 5,965,404 $ 815,556 $ 1,775,706 $ 584,915 $ -- $ 85 -- -- -- 99,257 -- -- ------------ ------------ ------------ ------------ ---------- -------- $ 5,965,404 $ 815,556 $ 1,775,706 $ 684,172 $ -- $ 85 ------------ ------------ ------------ ------------ ---------- -------- $ (3,267,633) $ (1,174,355) $ (5,649,019) $ (1,256,663) $ 15,014 $ -- -- -- -- 55,806 -- -- ------------ ------------ ------------ ------------ ---------- -------- $ (3,267,633) $ (1,174,355) $ (5,649,019) $ (1,200,857) $ 15,014 $ -- ------------ ------------ ------------ ------------ ---------- -------- $ 2,697,771 $ (358,799) $ (3,873,313) $ (516,685) $ 15,014 $ 85 ============ ============ ============ ============ ========== ======== $ 6,047,890 $ 904 $ (787,320) $ 873,450 $ 900,050 $399,961 ============ ============ ============ ============ ========== ========
The accompanying notes are an integral part of these financial statements. 113 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS 6/30/05 - --------------------------------------------------------------------------------
Pioneer Emerging Pioneer Markets VCT Portfolio Europe VCT Portfolio Six Months Six Months Ended Year Ended Year 6/30/05 Ended 6/30/05 Ended (unaudited) 12/31/04 (unaudited) 12/31/04 FROM OPERATIONS: Net investment income (loss) $ 316,844 $ 322,489 $ 183,592 $ 118,530 Net realized gain (loss) on investments 4,084,076 5,573,183 1,292,788 1,154,559 Change in net unrealized gain or loss on investments, futures contracts and foreign currency transactions (2,360,033) 22,693 (1,738,518) 1,402,807 ------------ ------------- ------------ ------------ Net increase (decrease) in net assets resulting from operations $ 2,040,887 $ 5,918,365 $ (262,138) $ 2,675,896 ------------ ------------- ------------ ------------ DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (50,778) $ (65,091) $ (58,420) $ (65,951) Class II (161,235) (196,317) (44,828) (38,910) Net realized gain Class I -- -- -- -- Class II -- -- -- -- ------------ ------------- ------------ ------------ Total distributions to shareowners $ (212,013) $ (261,408) $ (103,248) $ (104,861) ------------ ------------- ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 6,887,498 $ 9,587,268 $ 2,080,270 $ 3,890,105 Reinvestment of distributions 210,764 259,912 103,248 104,862 Cost of shares repurchased (5,688,727) (11,459,650) (1,735,979) (3,175,336) ------------ ------------- ------------ ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ 1,409,535 $ (1,612,470) $ 447,539 $ 819,631 ------------ ------------- ------------ ------------ Net increase (decrease) in net assets $ 3,238,409 $ 4,044,487 $ 82,153 $ 3,390,666 ------------ ------------- ------------ ------------ NET ASSETS: Beginning of period $ 38,980,205 $ 34,935,718 $ 17,725,638 $ 14,334,972 ------------ ------------- ------------ ------------ End of period $ 42,218,614 $ 38,980,205 $ 17,807,791 $ 17,725,638 ============ ============= ============ ============ Undistributed net investment income (loss), end of period $ 149,711 $ 44,879 $ 183,525 $ 103,181 ============ ============= ============ ============
114 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 Six Months Six Months Six Months Ended Year Ended Year Ended Year 6/30/05 Ended 6/30/05 Ended 6/30/05 Ended (unaudited) 12/31/04 (unaudited) 12/31/04 (unaudited) 12/31/04 $ 206,018 $ 93,454 $ 19,267 $ (55,495) $ (9,927) $ (46,684) 1,633,721 2,810,326 1,078,261 1,744,190 (127,957) 2,015,360 (2,849,014) 1,310,186 (444,288) 2,532,121 (312,888) (384,806) ------------ ------------ ------------ ------------ ------------ ------------ $ (1,009,275) $ 4,213,966 $ 653,240 $ 4,220,816 $ (450,772) $ 1,583,870 ------------ ------------ ------------ ------------ ------------ ------------ $ (31,154) $ (113,573) $ -- $ -- $ -- $ -- (3,084) (8,890) -- -- -- -- -- -- (593,880) -- (336,596) -- -- -- (497,417) -- (1,039,487) -- ------------ ------------ ------------ ------------ ------------ ------------ $ (34,238) $ (122,463) $ (1,091,297) $ -- $ (1,376,083) $ -- ------------ ------------ ------------ ------------ ------------ ------------ $ 1,350,733 $ 4,380,480 $ 10,551,393 $ 14,302,057 $ 1,284,843 $ 4,450,765 34,238 122,460 1,086,410 -- 1,363,307 -- (2,605,824) (5,189,620) (3,258,953) (4,493,153) (1,271,434) (3,135,048) ------------ ------------ ------------ ------------ ------------ ------------ $ (1,220,853) $ (686,680) $ 8,378,850 $ 9,808,904 $ 1,376,716 $ 1,315,717 ------------ ------------ ------------ ------------ ------------ ------------ $ (2,264,366) $ 3,404,823 $ 7,940,793 $ 14,029,720 $ (450,139) $ 2,899,587 ------------ ------------ ------------ ------------ ------------ ------------ $ 26,992,333 $ 23,587,510 $ 28,838,019 $ 14,808,299 $ 13,870,116 $ 10,970,529 ------------ ------------ ------------ ------------ ------------ ------------ $ 24,727,967 $ 26,992,333 $ 36,778,812 $ 28,838,019 $ 13,419,977 $ 13,870,116 ============ ============ ============ ============ ============ ============ $ 201,860 $ 30,080 $ 19,527 $ 260 $ (9,927) $ -- ============ ============ ============ ============ ============ ============
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 6/30/05 (continued) - --------------------------------------------------------------------------------
Pioneer Mid Cap Pioneer Growth Value VCT Portfolio Shares VCT Portfolio Six Months Six Months Ended Year Ended Year 6/30/05 Ended 6/30/05 Ended (unaudited) 12/31/04 (unaudited) 12/31/04 FROM OPERATIONS: Net investment income (loss) $ 1,517,879 $ 2,164,987 $ 40,360 $ 271,723 Net realized gain (loss) on investments 45,761,817 53,898,712 1,202,364 1,562,700 Change in net unrealized gain or loss on investments, futures contracts and foreign currency transactions (10,521,594) 70,310,429 (2,141,818) 618,844 ------------- ------------- ------------ ------------ Net increase (decrease) in net assets resulting from operations $ 36,758,102 $ 126,374,128 $ (899,094) $ 2,453,267 ------------- ------------- ------------ ------------ DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (980,182) $ (711,725) $ (221,887) $ -- Class II (1,186,576) (1,067,643) (50,023) -- Net realized gain Class I (18,901,870) (1,863,831) -- -- Class II (33,992,323) (3,740,321) -- -- ------------- ------------- ------------ ------------ Total distributions to shareowners $ (55,060,951) $ (7,383,520) $ (271,910) $ -- ------------- ------------- ------------ ------------ FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 106,359,054 $ 331,791,818 $ 1,335,660 $ 5,638,676 Class I shares issued in reorganization -- 49,670,328 -- -- Reinvestment of distributions 55,060,951 7,383,520 271,910 -- Cost of shares repurchased (79,607,898) (49,217,509) (3,944,651) (6,840,932) ------------- ------------- ------------ ------------ Net increase (decrease) in net assets resulting from Fund share transactions $ 81,812,107 $ 339,628,157 $ (2,337,081) $ (1,202,256) ------------- ------------- ------------ ------------ Net increase (decrease) in net assets $ 63,509,258 $ 458,618,765 $ (3,508,085) $ 1,251,011 ------------- ------------- ------------ ------------ NET ASSETS: Beginning of period $ 839,975,936 $ 381,357,171 $ 40,049,353 $ 38,798,342 ------------- ------------- ------------ ------------ End of period $ 903,485,194 $ 839,975,936 $ 36,541,268 $ 40,049,353 ============= ============= ============ ============ Undistributed net investment income (loss), end of period $ 1,516,021 $ 2,164,900 $ 40,173 $ 271,723 ============= ============= ============ ============
116 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 Six Months Six Months Six Months Ended Year Ended Year Ended Year 6/30/05 Ended 6/30/05 Ended 6/30/05 Ended (unaudited) 12/31/04 (unaudited) 12/31/04 (unaudited) 12/31/04 $ 1,378,675 $ 1,806,090 $ 3,340,489 $ 3,200,048 $ 3,350,119 $ 5,474,342 1,885,132 7,508,438 13,221,281 1,084,379 5,965,404 2,001,864 3,040,365 15,633,552 (21,031,810) 30,978,376 (3,267,633) 29,937,321 ------------- ------------- ------------- ------------- ------------- ------------- $ 6,304,172 $ 24,948,080 $ (4,470,040) $ 35,262,803 $ 6,047,890 $ 37,413,527 ------------- ------------- ------------- ------------- ------------- ------------- $ (488,135) $ (707,216) $ (2,640,280) $ (1,685,576) $ (2,137,713) $ (3,809,792) (850,075) (916,414) (736,503) (1,069,680) (1,040,999) (1,595,526) (1,168,583) (493,376) -- -- -- -- (2,348,726) (803,210) -- -- -- -- ------------- ------------- ------------- ------------- ------------- ------------- $ (4,855,519) $ (2,920,216) $ (3,376,783) $ (2,755,256) $ (3,178,712) $ (5,405,318) ------------- ------------- ------------- ------------- ------------- ------------- $ 9,387,520 $ 20,027,996 $ 23,980,979 $ 60,072,885 $ 55,925,809 $ 63,295,941 -- -- -- 298,220,832 -- -- 4,855,519 2,920,216 3,376,534 2,755,256 3,178,712 5,405,317 (12,072,272) (18,513,875) (74,283,563) (48,119,744) (16,347,511) (34,772,572) ------------- ------------- ------------- ------------- ------------- ------------- $ 2,170,767 $ 4,434,337 $ (46,926,050) $ 312,929,229 $ 42,757,010 $ 33,928,686 ------------- ------------- ------------- ------------- ------------- ------------- $ 3,619,420 $ 26,462,201 $ (54,772,873) $ 345,436,776 $ 45,626,188 $ 65,936,895 ------------- ------------- ------------- ------------- ------------- ------------- $ 98,246,168 $ 71,783,967 $ 587,763,829 $ 242,327,053 $ 281,925,778 $ 215,988,883 ------------- ------------- ------------- ------------- ------------- ------------- $ 101,865,588 $ 98,246,168 $ 532,990,956 $ 587,763,829 $ 327,551,966 $ 281,925,778 ============= ============= ============= ============= ============= ============= $ 279,770 $ 286,854 $ 397,459 $ 433,753 $ 1,399,456 $ 1,228,049 ============= ============= ============= ============= ============= =============
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 6/30/05 (continued) - --------------------------------------------------------------------------------
Pioneer Pioneer High Yield Balanced VCT Portfolio VCT Portfolio Six Months Six Months Ended Year Ended Year 6/30/05 Ended 6/30/05 Ended (unaudited) 12/31/04 (unaudited) 12/31/04 FROM OPERATIONS: Net investment income (loss) $ 359,703 $ 857,444 $ 3,085,993 $ 5,467,810 Net realized gain (loss) on investments 815,556 1,099,149 1,775,706 3,746,873 Change in net unrealized gain or loss on investments, futures contracts and foreign currency transactions (1,174,355) 127,896 (5,649,019) (1,480,061) ------------ ------------ ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 904 $ 2,084,489 $ (787,320) $ 7,734,622 ------------ ------------ ------------- ------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income Class I $ (275,659) $ (789,468) $ (1,828,371) $ (3,715,003) Class II (93,154) (155,092) (1,257,947) (1,764,209) Net realized gain Class I -- -- (2,147,727) (265,040) Class II -- -- (1,587,624) (135,300) ------------ ------------ ------------- ------------- Total distributions to shareowners $ (368,813) $ (944,560) $ (6,821,669) $ (5,879,552) ------------ ------------ ------------- ------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 3,105,397 $ 8,978,890 $ 23,842,024 $ 75,619,514 Class I shares issued in reorganization -- -- -- -- Reinvestment of distributions 368,809 944,549 6,787,550 5,846,576 Cost of shares repurchased (3,991,995) (9,461,531) (34,063,642) (44,707,455) ------------ ------------ ------------- ------------- Net increase (decrease) in net assets resulting from Fund share transactions $ (517,789) $ 461,908 $ (3,434,068) $ 36,758,635 ------------ ------------ ------------- ------------- Net increase (decrease) in net assets $ (885,698) $ 1,601,837 $ (11,043,057) $ 38,613,705 ------------ ------------ ------------- ------------- NET ASSETS: Beginning of period $ 45,764,210 44,162,373 $ 122,801,462 $ 84,187,757 ------------ ------------ ------------- ------------- End of period $ 44,878,512 $ 45,764,210 $ 111,758,405 $ 122,801,462 ============ ============ ============= ============= Undistributed net investment income (loss), end of period $ 5,299 $ 14,409 $ 42,581 $ 42,906 ============ ============ ============= =============
118 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 Six Months Six Months Six Months Ended Year Ended Year Ended Year 6/30/05 Ended 6/30/05 Ended 6/30/05 Ended (unaudited) 12/31/04 (unaudited) 12/31/04 (unaudited) 12/31/04 $ 1,390,135 $ 1,817,102 $ 885,036 $ 1,625,595 $ 399,876 $ 205,313 684,172 1,081,207 -- 206,989 85 -- (1,200,857) 767,697 15,014 (352,583) -- -- ------------ ------------ ------------ ------------- ------------- ------------- $ 873,450 $ 3,666,006 $ 900,050 $ 1,480,001 $ 399,961 $ 205,313 ------------ ------------ ------------ ------------- ------------- ------------- $ (601,687) $ (1,210,066) $ (719,999) $ (2,102,796) $ (399,751) $ (203,312) (834,415) (733,628) (342,895) (401,489) -- -- (308,226) (294,736) -- -- -- -- (487,951) (171,204) -- -- -- -- ------------ ------------ ------------ ------------- ------------- ------------- $ (2,232,279) $ (2,409,634) $ (1,062,894) $ (2,504,285) $ (399,751) $ (203,312) ------------ ------------ ------------ ------------- ------------- ------------- $ 12,178,985 $ 25,764,732 $ 4,308,873 $ 15,160,465 $ 14,436,770 $ 18,483,037 -- -- -- -- -- 21,976,837 2,207,841 2,367,418 1,062,884 2,504,258 399,743 203,307 (1,778,583) (6,523,479) (4,216,563) (17,669,980) (18,781,369) (32,505,228) ------------ ------------ ------------ ------------- ------------- ------------- $ 12,608,243 $ 21,608,671 $ 1,155,194 $ (5,257) $ (3,944,856) $ 8,157,953 ------------ ------------ ------------ ------------- ------------- ------------- $ 11,249,414 $ 22,865,043 $ 992,350 $ (1,029,541) $ (3,944,646) $ 8,159,954 ------------ ------------ ------------ ------------- ------------- ------------- $ 45,840,892 $ 22,975,849 $ 43,133,097 $ 47,162,638 $ 42,896,192 $ 34,736,238 ------------ ------------ ------------ ------------- ------------- ------------- $ 57,090,306 $ 45,840,892 $ 44,125,447 $ 46,133,097 $ 38,951,546 $ 42,896,192 ============ ============ ============ ============= ============= ============= $ 265,574 $ 311,542 $ (442,685) $ (264,827) $ 2,126 $ -- ============ ============ ============ ============= ============= =============
The accompanying notes are an integral part of these financial statements. 119 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - ------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) - -------------------------------------------------------------------------------- 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 eight 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) Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio) (Class II shares only) Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio) (Class II shares only) Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio) (Class II shares only) Pioneer Ibbotson Aggressive Allocation VCT Portfolio (Ibbotson Aggressive Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Moderate Allocation VCT Portfolio (Ibbotson Moderate Allocation Portfolio) (Class II shares only) Pioneer Ibbotson Growth Allocation VCT Portfolio (Ibbotson Growth Allocation Portfolio) (Class II shares only) Portfolio shares may be purchased only by either insurance companies for the purpose of funding variable annuity and variable life insurance contracts or by qualified pension and retirement plans. The 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, Bond Portfolio, Cullen Value Portfolio, Equity Opportunity Portfolio, Global High Yield Portfolio, Ibbotson Aggressive Allocation Portfolio, Ibbotson Moderate Allocation Portfolio and Ibbotson Growth Allocation 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, International Value Portfolio and Equity Opportunity Portfolio is to seek long-term capital growth. Small Company Portfolio, Small Cap Value Portfolio, Mid-Cap Value Portfolio, 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 seek current income and long-term capital growth. Balanced Portfolio's investment objectives are capital growth and current income. High Yield Portfolio and Global High Yield Portfolio seek 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, 120 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 period. 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 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 June 30, 2005, 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. 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 121 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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. 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 June 30, 2005, open contracts are shown in the table below. 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 September 2005 $1,607,750 $55,090 - -----------------------------------------------------------------------------------------------------------------
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. 122 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 six months ended June 30, 2005, 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 June 30, 2005, the Portfolios had no reserves related to taxes on capital gains, except that Emerging Markets Portfolio, which had a reserve of $41,230 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 =========== =========== =========== ========== =========== - -------------------------------------------------------------------------------------------------------
123 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 $ -- - --------------------------------------------------------------------------------
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. The tax character of current year distributions will be determined at the end of the current fiscal year.
- ---------------------------------------------------------------------------------------- Pioneer Emerging Pioneer Markets Europe VCT Portfolio VCT Portfolio 2004 2004 - ---------------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 261,408 $ 104,861 Long-Term capital gain -- -- ------------------------------------------- $ 261,408 $ 104,861 Return of Capital -- -- ------------------------------------------- Total distributions $ 261,408 $ 104,861 ------------------------------------------- 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) =========================================== Pioneer Pioneer International Small Cap Value Value VCT Portfolio VCT Portfolio 2004 2004 - --------------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 122,463 $ -- Long-Term capital gain -- -- ------------------------------------------ $ 122,463 $ -- Return of Capital -- -- ------------------------------------------ Total distributions $ 122,463 $ -- ------------------------------------------ Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ 34,169 $ -- Undistributed long-term gain/(Capital loss carryforward) (14,094,402) 1,086,729 Unrealized appreciation (depreciation) 6,132,054 4,761,280 ------------------------------------------ Total $ (7,928,179) $ 5,848,009 ========================================== - ----------------------------------------------------------------------------------------
124 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------- Pioneer Pioneer Small Mid Cap Company Value VCT Portfolio VCT Portfolio 2004 2004 - ------------------------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ -- $ 3,095,474 Long-Term capital gain -- 4,288,046 ------------------------------------------ $ -- $ 7,383,520 Return of Capital -- -- ------------------------------------------ Total distributions $ -- $ 7,383,520 ------------------------------------------ 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) 1,364,989 (5,981,262) Unrealized appreciation (depreciation) 850,428 143,022,546 ------------------------------------------ Total $ 2,215,417 $192,096,062 ========================================== Pioneer Pioneer Growth Real Estate Shares Shares VCT Portfolio VCT Portfolio 2004 2004 - ------------------------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ -- $ 2,449,917 Long-Term capital gain -- 470,299 ------------------------------------------ $ -- $ 2,920,216 Return of Capital -- -- ------------------------------------------ Total distributions $ -- $ 2,920,216 ------------------------------------------ Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ 271,723 $ -- Undistributed long-term gain/(Capital loss carryforward) (38,789,169) 3,564,562 Post-October loss deferred/REIT Dividend Payable (389,332) 286,854 Unrealized appreciation (depreciation) 2,318,941 32,043,692 ------------------------------------------ Total $(36,587,837) $ 35,895,108 ========================================== Pioneer Pioneer Equity Fund Income VCT Portfolio VCT Portfolio 2004 2004 - ------------------------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 2,755,256 $ 5,405,318 Long-Term capital gain -- -- ------------------------------------------ $ 2,755,256 $ 5,405,318 Return of Capital -- -- ------------------------------------------ Total distributions $ 2,755,256 $ 5,405,318 ------------------------------------------ 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 ========================================== - -------------------------------------------------------------------------------------------------
125 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------- Pioneer Pioneer Balanced High Yield VCT Portfolio VCT Portfolio 2004 2004 - -------------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 944,560 $5,479,212 Long-Term capital gain -- 400,340 ------------------------------------------ $ 944,560 $5,879,552 Return of Capital -- -- ------------------------------------------ Total distributions $ 944,560 $5,879,552 ------------------------------------------ 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 ========================================== Pioneer Pioneer America Strategic Income Income VCT Portfolio VCT Portfolio 2004 2004 - -------------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $2,196,847 $2,504,285 Long-Term capital gain/(Capital loss carryforward) 212,787 -- ------------------------------------------ $2,409,634 $2,504,285 Return of Capital -- -- ------------------------------------------ Total distributions $2,409,634 $2,504,285 ------------------------------------------ Distributable Earnings (Accumulated Losses): Undistributed ordinary income $ 218,814 $ -- Undistributed long-term gain/(Capital loss carryforward) 773,272 (989,590) Post-October loss deferred -- (47,565) Unrealized appreciation (depreciation) 2,976,566 624,087 ------------------------------------------ Total $3,968,652 $(413,068) ========================================== 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) ======================= - --------------------------------------------------------------------------------------
126 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- * 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), $525,089 in commissions on the sale of Trust shares for the six months ended June 30, 2005. 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 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 the 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. 127 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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% - --------------------------------------------------------------------------------
PIM has agreed not to impose a portion of its management fees and to assume other operating expenses for certain Portfolios through May 1, 2006 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% 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). 128 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 June 30, 2005, 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 $1,398 Europe Portfolio 425 International Value Portfolio 757 Small Cap Value Portfolio 787 Small Company Portfolio 244 Mid Cap Value Portfolio 17,057 Growth Shares Portfolio 781 Real Estate Shares Portfolio 2,301 Fund Portfolio 9,744 Equity Income Portfolio 6,229 Balanced Portfolio 875 High Yield Portfolio 2,084 Strategic Income Portfolio 1,083 America Income Portfolio 781 Money Market Portfolio 609 - --------------------------------------------------------------------------------
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 June 30, 2005:
- -------------------------------------------------------------------------------- Portfolio Amount - -------------------------------------------------------------------------------- Emerging Markets Portfolio $509 Europe Portfolio 508 International Value Portfolio 509 Small Cap Value Portfolio 505 Small Company Portfolio 506 Mid Cap Value Portfolio 758 Growth Shares Portfolio 509 Real Estate Shares Portfolio 508 Fund Portfolio 507 Equity Income Portfolio 509 Balanced Portfolio 510 High Yield Portfolio 505 Strategic Income Portfolio 509 America Income Portfolio 509 Money Market Portfolio 254 - --------------------------------------------------------------------------------
129 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 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 June 30, 2005:
- -------------------------------------------------------------------------------- Portfolio Amount - -------------------------------------------------------------------------------- Emerging Markets Portfolio $ 227 Europe Portfolio 62 International Value Portfolio 33 Small Cap Value Portfolio 108 Small Company Portfolio 2,308 Mid Cap Value Portfolio 3,990 Growth Shares Portfolio 56 Real Estate Shares Portfolio 465 Fund Portfolio 915 Equity Income Portfolio 788 Balanced Portfolio 87 High Yield Portfolio 323 Strategic Income Portfolio 238 America Income Portfolio 117 - --------------------------------------------------------------------------------
5. Aggregate Unrealized Appreciation and Depreciation At June 30, 2005, 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 $ 34,905,128 $ 8,456,339 $ (568,409) $ 7,887,930 Europe Portfolio $ 15,546,999 $ 1,939,775 $ (131,104) $ 1,808,671 International Value Portfolio $ 22,305,068 $ 3,629,029 $ (336,169) $ 3,292,860 Small Cap Value Portfolio $ 32,902,031 $ 5,703,044 $ (1,407,977) $ 4,295,067 Small Company Portfolio $ 13,913,382 $ 1,208,630 $ (671,091) $ 537,539 Mid Cap Value Portfolio $920,210,828 $143,180,509 $ (10,679,557) $132,500,952 Growth Shares Portfolio $ 37,699,522 $ 1,665,116 $ (1,487,993) $ 177,123 Real Estate Shares Portfolio $ 86,729,006 $ 35,131,546 $ -- $ 35,131,546 Fund Portfolio $432,338,214 $120,160,272 $ (20,336,650) $ 99,823,622 Equity Income Portfolio $270,094,757 $ 68,821,554 $ (5,735,461) $ 63,086,093 Balanced Portfolio $ 41,335,531 $ 4,602,009 $ (1,174,303) $ 3,427,706 High Yield Portfolio $114,630,279 $ 3,111,086 $ (3,429,795) $ (318,709) Strategic Income Portfolio $ 53,963,177 $ 2,005,875 $ (195,435) $ 1,810,440 America Income Portfolio $ 45,312,931 $ 771,671 $ (132,570) $ 639,101 Money Market Portfolio $ 38,973,883 $ -- $ -- $ -- - ------------------------------------------------------------------------------------------------------------
130 Pioneer Variable Contracts Trust 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 six months ended June 30, 2005, were as follows:
- -------------------------------------------------------------------------------- Portfolio Purchases Sales - -------------------------------------------------------------------------------- Emerging Markets Portfolio $ 19,783,177 $ 18,359,069 Europe Portfolio 6,338,998 6,088,568 International Value Portfolio 13,030,416 14,299,558 Small Cap Value Portfolio 7,751,722 4,593,649 Small Company Portfolio 4,907,059 5,164,631 Mid Cap Value Portfolio 268,454,902 244,131,823 Growth Shares Portfolio 16,141,361 19,103,736 Real Estate Shares Portfolio 5,564,970 6,602,925 Fund Portfolio 60,619,869 103,002,160 Equity Income Portfolio 68,917,854 24,677,663 Balanced Portfolio 5,278,367 5,839,212 High Yield Portfolio 23,783,023 38,454,884 Strategic Income Portfolio 13,745,048 8,655,996 America Income Portfolio -- -- Money Market Portfolio 461,380,939 465,485,558 - --------------------------------------------------------------------------------
The cost of purchases and the proceeds from sales of U.S. Government obligations for the six months ended June 30, 2005, were as follows:
- -------------------------------------------------------------------------------- Portfolio Purchases Sales - -------------------------------------------------------------------------------- Balanced Portfolio $1,561,668 $1,207,323 Strategic Income Portfolio 8,874,563 2,644,466 America Income Portfolio 5,599,098 4,126,863 Money Market Portfolio -- -- - --------------------------------------------------------------------------------
131 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- 7. Capital Shares At June 30, 2005, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows for the six months ended June 30, 2005 and the fiscal year ended December 31, 2004:
- --------------------------------------------------------------------------------------------- '05 Shares '05 Amount (unaudited) (unaudited) '04 Shares '04 Amount - --------------------------------------------------------------------------------------------- Emerging Markets Portfolio CLASS I: Shares sold 21,854 $ 459,899 72,945 $ 1,305,983 Reinvestment of distributions 2,300 49,529 3,952 63,595 Shares repurchased (37,031) (774,914) (138,809) (2,377,707) -------------------------------------------------------- Net increase (decrease) (12,877) $ (265,486) (61,912) $ (1,008,129) ======================================================== CLASS II: Shares sold 305,893 $ 6,427,599 468,119 $ 8,281,285 Reinvestment of distributions 7,548 161,235 12,278 196,317 Shares repurchased (236,423) (4,913,813) (524,708) (9,081,943) -------------------------------------------------------- Net increase (decrease) 77,018 $ 1,675,021 (44,311) $ (604,341) ======================================================== Europe Portfolio CLASS I: Shares sold 18,811 $ 199,671 43,531 $ 395,370 Reinvestment of distributions 5,590 58,420 7,232 65,952 Shares repurchased (77,964) (833,429) (190,688) (1,758,638) -------------------------------------------------------- Net increase (decrease) (53,563) $ (575,338) (139,925) $ (1,297,316) ======================================================== CLASS II: Shares sold 179,362 $ 1,880,599 374,441 $ 3,494,736 Reinvestment of distributions 4,369 44,828 4,343 38,910 Shares repurchased (86,536) (902,550) (151,264) (1,416,699) -------------------------------------------------------- Net increase (decrease) 97,195 $ 1,022,877 227,520 $ 2,116,947 ======================================================== International Value Portfolio: CLASS I: Shares sold 30,107 $ 350,932 125,954 $ 1,319,269 Reinvestment of distributions 2,721 31,154 10,994 113,572 Shares repurchased (208,221) (2,433,250) (449,994) (4,643,483) -------------------------------------------------------- Net increase (decrease) (175,393) $ (2,051,164) (313,046) $ (3,210,642) ======================================================== CLASS II: Shares sold 85,781 $ 999,801 294,244 $ 3,061,211 Reinvestment of distributions 270 3,084 862 8,888 Shares repurchased (14,702) (172,574) (53,626) (546,137) -------------------------------------------------------- Net increase (decrease) 71,349 $ 830,311 241,480 $ 2,523,962 ======================================================== Small Cap Value Portfolio CLASS I: Shares sold 361,402 $ 5,301,386 510,952 $ 6,774,823 Reinvestment of distributions 40,427 589,019 -- -- Shares repurchased (177,578) (2,570,590) (277,189) (3,672,701) -------------------------------------------------------- Net increase (decrease) 224,251 $ 3,319,815 233,763 $ 3,102,122 ======================================================== CLASS II: Shares sold 360,679 $ 5,250,007 566,136 $ 7,527,234 Reinvestment of distributions 34,350 497,391 -- -- Shares repurchased (47,609) (688,363) (61,897) (820,452) -------------------------------------------------------- Net increase (decrease) 347,420 $ 5,059,035 504,239 $ 6,706,782 ======================================================== - ---------------------------------------------------------------------------------------------
132 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------- ' '05 Shares '05 Amount (unaudited) (unaudited) '04 Shares '04 Amount - ------------------------------------------------------------------------------------------------------------- Small Company Portfolio CLASS I: Shares sold 15,334 $ 186,274 56,890 $ 670,369 Reinvestment of distributions 28,887 323,820 -- -- Shares repurchased (41,394) (508,999) (103,931) (1,215,329) --------------------------------------------------------------- Net increase (decrease) 2,827 $ 1,095 (47,041) $ (544,960) =============================================================== CLASS II: Shares sold 90,132 $ 1,098,569 320,212 $ 3,780,396 Reinvestment of distributions 93,901 1,039,487 -- -- Shares repurchased (63,797) (762,435) (160,864) (1,919,719) --------------------------------------------------------------- Net increase (decrease) 120,236 $ 1,375,621 159,348 $ 1,860,677 =============================================================== Mid Cap Value Portfolio CLASS I: Shares sold 1,471,944 $ 36,359,356 3,133,632 $ 68,612,090 Class I shares issued in reorganization -- -- 2,087,866 49,670,328 Reinvestment of distributions 821,233 19,882,052 117,982 2,575,556 Shares repurchased (1,057,623) (26,040,234) (1,365,569) (29,591,496) --------------------------------------------------------------- Net increase (decrease) 1,235,554 $ 32,201,174 3,973,911 $ 91,266,478 =============================================================== CLASS II: Shares sold 2,866,070 $ 69,999,698 12,236,512 $ 263,179,728 Reinvestment of distributions 1,468,234 35,178,899 221,974 4,807,964 Shares repurchased (2,203,219) (53,567,664) (881,455) (19,626,013) --------------------------------------------------------------- Net increase (decrease) 2,131,085 $ 51,610,933 11,577,031 $ 248,361,679 =============================================================== Growth Shares Portfolio CLASS I: Shares sold 21,290 $ 269,594 66,360 $ 806,587 Reinvestment of distributions 17,362 221,887 -- -- Shares repurchased (271,806) (3,456,905) (515,053) (6,176,527) --------------------------------------------------------------- Net increase (decrease) (233,154) $ 2,965,424 (448,693) $ (5,369,940) =============================================================== CLASS II: Shares sold 84,954 $ 1,066,066 406,516 $ 4,832,089 Reinvestment of distributions 3,964 50,023 -- -- Shares repurchased (38,869) (487,746) (56,565) (664,405) --------------------------------------------------------------- Net increase (decrease) 50,049 $ 628,343 349,951 $ 4,167,684 =============================================================== Real Estate Shares Portfolio CLASS I: Shares sold 31,427 $ 750,133 151,466 $ 3,192,487 Reinvestment of distributions 68,403 1,656,718 56,986 1,200,592 Shares repurchased (230,942) (5,395,622) (425,846) (8,497,885) --------------------------------------------------------------- Net increase (decrease) (131,112) $ (2,988,771) (217,394) $ (4,104,806) =============================================================== CLASS II: Shares sold 369,033 $ 8,637,387 820,863 $ 16,835,509 Reinvestment of distributions 132,001 3,198,801 81,377 1,719,624 Shares repurchased (286,633) (6,676,650) (505,041) (10,015,990) --------------------------------------------------------------- Net increase (decrease) 214,401 $ 5,159,538 397,199 $ 8,539,143 =============================================================== - -------------------------------------------------------------------------------------------------------------
133 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------- '05 Shares '05 Amount (unaudited) (unaudited) '04 Shares '04 Amount - ------------------------------------------------------------------------------------------------------------- Fund Portfolio CLASS I: Shares sold 334,546 $ 6,811,410 451,723 $ 8,690,214 Class I shares issued in reorganization -- -- 14,822,109 298,220,832 Reinvestment of distributions 130,147 2,640,280 87,609 1,685,576 Shares repurchased (2,818,386) (57,044,186) (1,561,121) (29,970,569) --------------------------------------------------------------- Net increase (decrease) (2,353,693) $ (47,592,496) 13,800,320 $ 278,626,053 =============================================================== CLASS II: Shares sold 851,031 $ 17,169,569 2,721,468 $ 51,382,671 Reinvestment of distributions 36,380 736,254 55,486 1,069,680 Shares repurchased (854,451) (17,239,377) (952,397) (18,149,175) --------------------------------------------------------------- Net increase (decrease) 32,960 $ 666,446 1,824,557 $ 34,303,176 =============================================================== Equity Income Portfolio CLASS I: Shares sold 1,632,023 $ 33,558,634 1,757,096 $ 33,474,454 Reinvestment of distributions 103,814 2,137,713 198,654 3,809,791 Shares repurchased (635,606) (13,043,210) (1,411,407) (26,451,072) --------------------------------------------------------------- Net increase (decrease) 1,100,231 $ 22,653,137 544,343 $ 10,833,173 =============================================================== CLASS II: Shares sold 1,081,873 $ 22,367,175 1,571,139 $ 29,821,487 Reinvestment of distributions 50,295 1,040,999 82,473 1,595,526 Shares repurchased (158,972) (3,304,301) (442,520) (8,231,500) --------------------------------------------------------------- Net increase (decrease) 973,196 $ 20,103,873 1,211,092 $ 23,095,513 =============================================================== Balanced Portfolio CLASS I: Shares sold 28,236 $ 403,907 78,321 $ 1,113,192 Reinvestment of distributions 19,335 275,659 55,609 789,468 Shares repurchased (254,960) (3,646,322) (586,843) (8,291,593) --------------------------------------------------------------- Net increase (decrease) (207,389) $ (2,966,756) (452,913) $ (6,388,933) =============================================================== CLASS II: Shares sold 189,135 $ 2,701,490 557,386 $ 7,865,698 Reinvestment of distributions 6,548 93,150 10,920 155,081 Shares repurchased (24,254) (345,673) (83,119) (1,169,938) --------------------------------------------------------------- Net increase (decrease) 171,429 $ 2,448,967 485,187 $ 6,850,841 =============================================================== High Yield Portfolio CLASS I: Shares sold 1,068,551 $ 12,094,305 2,699,382 $ 30,852,667 Reinvestment of distributions 356,883 3,942,019 346,267 3,947,046 Shares repurchased (1,619,249) (18,400,833) (2,787,689) (31,727,505) --------------------------------------------------------------- Net increase (decrease) (193,815) $ (2,364,509) 257,960 $ 3,072,208 =============================================================== CLASS II: Shares sold 1,044,029 $ 11,747,719 3,916,481 $ 44,766,847 Reinvestment of distributions 257,681 2,845,531 166,648 1,899,530 Shares repurchased (1,369,303) (15,662,809) (1,171,662) (12,979,950) --------------------------------------------------------------- Net increase (decrease) (67,593) $ (1,069,559) 2,911,467 $ 33,686,427 =============================================================== - -------------------------------------------------------------------------------------------------------------
134 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------- '05 Shares '05 Amount (unaudited) (unaudited) '04 Shares '04 Amount - -------------------------------------------------------------------------------------------------------------- Strategic Income Portfolio CLASS I: Shares sold 179,239 $ 1,986,324 453,590 $ 4,955,590 Reinvestment of distributions 80,230 885,497 134,927 1,462,624 Shares repurchased (103,176) (1,150,506) (494,192) (5,414,640) ---------------------------------------------------------------- Net increase (decrease) 156,293 $ 1,721,315 94,325 $ 1,003,574 ================================================================ CLASS II: Shares sold 914,308 $ 10,192,661 1,907,997 $ 20,809,730 Reinvestment of distributions 119,896 1,322,344 83,281 904,794 Shares repurchased (56,555) (628,077) (101,494) (1,108,839) ---------------------------------------------------------------- Net increase (decrease) 977,649 $ 10,886,928 1,889,784 $ 20,605,685 ================================================================ America Income Portfolio CLASS I: Shares sold 47,672 $ 480,069 245,204 $ 2,472,061 Reinvestment of distributions 71,646 719,999 206,467 2,102,795 Shares repurchased (347,892) (3,497,649) (1,551,998) (15,847,044) ---------------------------------------------------------------- Net increase (decrease) (228,574) $ (2,297,581) (1,100,327) $ (11,272,188) ================================================================ CLASS II: Shares sold 379,967 $ 3,828,804 1,247,751 $ 12,688,404 Reinvestment of distributions 34,065 342,885 39,513 401,463 Shares repurchased (71,554) (718,914) (179,116) (1,822,936) ---------------------------------------------------------------- Net increase (decrease) 342,478 $ 3,452,775 1,108,148 $ 11,266,931 ================================================================ Money Market Portfolio CLASS I: Shares sold 14,437,179 $ 14,436,770 18,483,037 $ 18,483,037 Class I shares issued in reorganization -- -- 21,976,837 21,976,837 Reinvestment of distributions 399,743 399,743 203,307 203,307 Shares repurchased (18,781,369) (18,781,369) (32,505,228) (32,505,228) ---------------------------------------------------------------- Net increase (decrease) (3,944,447) $ (3,944,856) 8,157,953 $ 8,157,953 ================================================================ - --------------------------------------------------------------------------------------------------------------
8. Forward Foreign Currency Contracts During the six months ended June 30, 2005, 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 June 30, 2005, 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 (831,000) $ 641,532 9/22/05 $ (628,626) $ 12,906 Strategic Income Portfolio EURO (1,300,000) $1,572,025 8/1/05 $ (1,574,968) $ (2,943) Strategic Income Portfolio EURO (1,400,000) $1,713,712 7/5/05 $ (1,694,470) $ 19,242 - --------------------------------------------------------------------------------------------------------------------------------
135 Pioneer Variable Contracts Trust PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 6/30/05 (UNAUDITED) (continued) - -------------------------------------------------------------------------------- Outstanding forward currency settlement contracts as of June 30, 2005 were as follows:
- ---------------------------------------------------------------------------------------------------- Net Gross Settlement Gross Receivable/ Portfolio Receivable Date Payable (Payable) - ---------------------------------------------------------------------------------------------------- Emerging Markets $ 4,476 7/1/05 $ (4,474) $ 2 International Value Portfolio $ 25,351 7/1/05 $ (26,627) $ (1,276) Strategic Income $1,573,001 7/1/05 $ (1,570,400) $ 2,601 - ----------------------------------------------------------------------------------------------------
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: 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 - ----------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------- 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 - ----------------------------------------------------------------------------------------------------
136 Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objective and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 137 Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and the results of an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the fourth quintile of the peer group for the 12 months ended June 30, 2004, the second quintile for the three years ended June 30, 2004, and the second quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the second quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio (before and after giving effect to the expense limitation) for the 12 months ended June 30, 2004 and expense ratios for the comparable period of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio (after giving effect to the expense limitation) was in the fourth quintile of this peer group for the most recent fiscal year. The Trustees concluded that the Fund's overall expense ratio was reasonable compared to that of most of the comparably sized funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there is potential for 138 Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, a break point in management fee was not necessary. The Trustees will continue to evaluate annually the appropriateness of break points. H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 139 Pioneer Europe VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objective and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 140 Pioneer Europe VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and the results of an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the second quintile of the peer group for the 12 months ended June 30, 2004, the second quintile for the three years ended June 30, 2004, and the second quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the fourth quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio (before and after giving effect to the expense limitation) for the 12 months ended June 30, 2004 and expense ratios for the comparable period of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio (after giving effect to the expense limitation) was in the fifth quintile of this peer group for the most recent fiscal year. The Trustees concluded that the Fund's overall expense ratio, although higher, was reasonable compared to that of most of the comparably sized funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there is potential for realiza- 141 Pioneer Europe VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- tion of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, a break point in the management fee was not necessary. The Trustees will continue to evaluate annually the appropriateness of break points. H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 142 Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objective and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 143 Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and the results of an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the second quintile of the peer group for the 12 months ended June 30, 2004, the second quintile for the three years ended June 30, 2004, and the second quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the fourth quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio for the 12 months ended June 30, 2004 and expense ratios for the comparable period of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio was in the fifth quintile of this peer group for the most recent fiscal year. The Trustees concluded that the Fund's overall expense ratio, although higher than its peer group, was reasonable compared to that of most of the comparably sized funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, break points in the management fee are not necessary. As assets increase, the Trustees will continue to evaluate annually the appropriateness of the break points. 144 Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 145 Pioneer Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 146 Pioneer Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the fourth quintile of the peer group for the 12 months ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that, given the absolute performance record of the Fund (30.31%), the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the first quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio (after giving effect to the expense limitation) for the 12 months ended June 30, 2004 was in the fourth quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio was reasonable compared to that of comparably sized funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there was potential for realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, a break point in the management fee was not necessary. As assets increase, the Trustees will continue to evaluate annually the appropriateness of break points. 147 Pioneer Small Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 148 Pioneer Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 149 Pioneer Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and two relevant indices, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the fifth quintile of the peer group for the 12 months ended June 30, 2004 and the fourth quintile for the three year period ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be fifth quintile.) The Trustees concluded that the actions of the Investment Adviser in appointing a new portfolio manager with the objective of enhancing performance supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the third quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio (before and after giving effect to the expense limitation) for the 12 months ended June 30, 2004 was in the fifth quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio, although higher than its peer group, was reasonable compared to that comparably sized funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there is potential 150 Pioneer Small Company VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- for realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, break points in the management fees were not necessary. As assets increase, the Trustees would continue to evaluate annually the appropriateness of break points. H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 151 Pioneer Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 152 Pioneer Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the first quintile of the peer group for the 12 months ended June 30, 2004, the first quintile of the peer group for the three years ended June 30, 2004, and the first quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that the consistent out performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the second quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio for the 12 months ended June 30, 2004 was in the first quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio was lower than that of comparable funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there was potential for realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, break points in the management fee were not necessary at this time. The Trustees will continue to evaluate annually the appropriateness of break points. 153 Pioneer Mid Cap Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 154 Pioneer Growth Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT ONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 155 Pioneer Growth Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the fifth quintile of the peer group for the 12 months ended June 30, 2004, the fifth quintile of the peer group for the three years ended June 30, 2004, and the fifth quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees noted that recently the Investment Adviser had changed the portfolio manager for the Fund. The Trustees concluded that the actions of the Investment Adviser in appointing a new portfolio manager with the objective of enhancing performance supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the second quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio for the 12 months ended June 30, 2004 was in the fifth quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio, although higher than its peer group, was reasonable compared to that of comparably sized funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there was potential for real- 156 Pioneer Growth Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, break points in the management fees were not necessary. As assets increase, the Trustees will continue to evaluate annually the appropriateness of break points. H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 157 Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 158 Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the second quintile of the peer group for the 12 months ended June 30, 2004, the first quintile of the peer group for the three years ended June 30, 2004 and the second quintile of the peer group for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline, including members of the sub-adviser's team. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group, as well as senior management of the sub-adviser. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's and sub-adviser's investment staffs, their use of technology and emphasis on analytics in the view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser as well as the sub-adviser have the quality and depth of personnel and the well-developed methods essential to performing their duties under the Management Contract and the Sub-Advisory Agreement. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the third quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio for the 12 months ended June 30, 2004 was in the second quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio was lower than that of most of the comparable funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there was potential for real- 159 Pioneer Real Estate Shares VCT Portfolio - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- ization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, break points in the management fee are not necessary at this time. The Trustees will continue to evaluate annually the appropriateness of break points. H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 160 Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 161 Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the first quintile of the peer group for the 12 months ended June 30, 2004, the first quintile of the peer group for the three years ended June 30, 2004, and the first quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the third quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio for the 12 months ended June 30, 2004 was in the second quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio was lower than that of comparable funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there was potential for realization of any further economies of scale. The Trustees concluded that, given current or anticipated asset levels, break points in the management fees were not necessary. As the assets increase, the Trustees will continue to evaluate annually the appropriateness of break points. 162 Pioneer Fund VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 163 Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to sharehold ers of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return and yield, as well as 164 Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- the Fund's performance compared to both the performance of a peer group and an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the first quintile of the peer group for the 12 months ended June 30, 2004, the second quintile of the peer group for the three years ended June 30, 2004, and was in the second quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees also considered that the yield to Fund Class I shareholders exceeded the yield of the Standard & Poor's 500 Index. The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the third quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio for the 12 months ended June 30, 2004 was in the second quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio was lower than that of most of the comparable. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there was potential for real- 165 Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- ization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, break points in the management fee are not necessary at this time. The Trustees will continue to evaluate annually the appropriateness of break points. H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 166 Pioneer Balanced VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 167 Pioneer Balanced VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and two relevant indices, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the third quintile of the peer group for the 12 months ended June 30, 2004, the fourth quintile of the peer group for the three years ended June 30, 2004, and the second quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's fixed income and equities groups. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the third quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio for the 12 months ended June 30, 2004 was in the fourth quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio was reasonable compared to that of peer funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, a break point in management fees was not necessary. The Trustees will continue to evaluate annually the appropriateness of break points. 168 Pioneer Balanced VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund), and benefits to the Investment Adviser from the use of "soft" commission dollars to pay for research and brokerage services. The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 169 Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 170 Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the fourth quintile of the peer group for the 12 months ended June 30, 2004 and the first quintile for the three years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that the performance of the Fund, particularly the Fund's longer-term performance, supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's fixed income group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the second quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio for the 12 months ended June 30, 2004 was in the third quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio was reasonable compared to that of comparable funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there was potential for realization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, break points in the management fee are not necessary at this time. The Trustees will continue to evaluate annually the appropriateness of break points. 171 Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund). The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 172 Pioneer Strategic Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return, as well as the Fund's 173 Pioneer Strategic Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- performance compared to both the performance of a peer group and two relevant indices, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the second quintile of the peer group for the 12 months ended June 30, 2004 and the first quintile for the three years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) Further, the Trustees also considered that the yield to Fund Class 1 shareholders significantly exceeded the yield of the Lehman Aggregate Bond Index. The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equities group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the third quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio (before and after giving effect to any expense limitation) for the 12 months ended June 30, 2004 was in the fifth quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio (before giving effect to any expense limitation), although higher, was reasonable compared to that of most comparable funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there was potential for real- 174 Pioneer Strategic Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ization of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, break points in the management fee are not necessary at this time. The Trustees will continue to evaluate annually the appropriateness of break points. H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund). The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 175 Pioneer America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return and yield, as well as 176 Pioneer America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- the Fund's performance compared to both the performance of a peer group and an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the second quintile of the peer group for the 12 months ended June 30, 2004, the second quintile for the three years ended June 30, 2004, and the second quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's fixed income group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the second quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio for the 12 months ended June 30, 2004 was in the fourth quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio was acceptable relative to comparable Funds. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there was potential for realization of any further economies of scale. The Trustees concluded, given current and anticipated asset levels, that break points in the management fee are not necessary at this time. The Trustees will continue to evaluate annually the appropriateness of break points. 177 Pioneer America Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund). The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 178 Pioneer Money Market VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT - -------------------------------------------------------------------------------- The Investment Company Act of 1940 requires that both the Board of Trustees and a majority of the Independent Trustees (collectively "the Trustees") vote separately annually to approve the Fund's management contract (the "Management Contract"). The Trustees have determined that the terms of the Management Contract are fair and reasonable and that renewal of the contract will enable the Fund to receive quality investment advisory services at a cost deemed reasonable and in the best interests of the Fund and its shareholders. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees and counsel to the Fund. Throughout the year, the Independent Trustees regularly met in executive session separately from the Interested Trustees of the Fund and any officer of Pioneer Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or its affiliates. While the Trustees, including the Independent Trustees, act on all major matters relating to the Fund, a significant portion of the activities of the Board of Trustees (including certain of those described herein) is conducted through committees, the members of which are comprised exclusively of Independent Trustees. Such committee meetings are attended by officers of the Fund or the Investment Adviser to the extent requested by the members of the committee. In evaluating the Management Contract, the Trustees conducted a review that was specifically focused upon the renewal of the Management Contract, and relied upon their knowledge, resulting from their meetings throughout the year, of the Investment Adviser, its services and the Fund. Both in meetings specifically dedicated to renewal of the Management Contract and at other meetings during the course of the year, the Trustees, including the Independent Trustees, received materials relating to the Investment Adviser's investment and management services under the Management Contract. These materials included (i) information on the investment performance of the Fund, a peer group of funds and two indices, in each case selected by the Independent Trustees for this purpose, (ii) sales and redemption data in respect to the Fund, (iii) the general investment outlook in the markets in which the Fund invests, (iv) arrangements in respect of the distribution of the Fund's shares, (v) the procedures employed to determine the value of each of the Fund's assets, (vi) the Investment Adviser's management of the relationships with the Fund's unaffiliated service providers, (vii) the record of compliance with the Fund's investment policies and restrictions and with the Fund's Code of Ethics and the structure and responsibilities of the Investment Adviser's compliance department, (viii) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates and (ix) the disclosures included in the Fund's prospectuses and reports to shareholders. Specifically in connection with the Independent Trustees' review of the Management Contract, the Independent Trustees requested and the Investment Adviser provided additional information in order to evaluate the quality of the Investment Adviser's services and the reasonableness of the fee under the Management Contract. Among other items, this information included data or analyses of (1) investment performance for one and three years and life of the Fund periods for the Fund and a peer group selected by the Independent Trustees for this purpose, (2) management fees incurred by a peer group of funds selected by the Independent Trustees for this purpose, (3) the advisory fees of comparable portfolios of other clients of the Investment Adviser, (4) expense ratios for the Fund and a peer group of funds selected by the Independent Trustees for this purpose, (5) the overall organization of the Investment Adviser, (6) the Investment Adviser's financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund, (7) transfer agency fees and administrative reimbursements paid to the Investment Adviser or affiliates, (8) investment management staffing, and (9) operating expenses paid to third parties. The Trustees also reviewed information regarding the potential for the Fund and the Investment Adviser to benefit from further economies of scale in the management of the Fund in light of reasonable growth expectations for the Fund and certain of the Fund's expenses that are not incurred as fees based on a percentage of net assets. The following summarizes matters considered by the Trustees in connection with their renewal of the Fund's Management Contract. The Trustees did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered. A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to shareholders of investing in a Fund that is part of a large number of investment companies offering a variety of investment disciplines and providing for a large variety of Fund and shareholder services. B. Compliance and Investment Performance. The Trustees determined that the Investment Adviser had policies and systems reasonably designed to achieve compliance with the Fund's investment objectives and regulatory requirements. The Trustees also reviewed the Fund's investment performance based upon total return and yield, as well as 179 Pioneer Money Market VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT (continued) - -------------------------------------------------------------------------------- the Fund's performance compared to both the performance of a peer group and an index, in each case selected by the Independent Trustees for this purpose. The Fund's performance based upon total return was in the first quintile of the peer group for the 12 months ended June 30, 2004, the first quintile for the three years ended June 30, 2004, and the first quintile for the five years ended June 30, 2004. (In all quintile rankings referred to throughout this discussion first quintile is most favorable to the Fund's shareholders. Thus, highest relative performance would be first quintile and lowest relative expenses also would be first quintile.) The Trustees also considered the Fund's yield relative to a peer group of funds, and treasury securities. The Trustees concluded that the performance of the Fund supported the continuation of the Management Contract. C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the background of members of the team responsible for the daily management of the Fund and the Fund's investment objective and discipline. The Independent Trustees also have had discussions with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's fixed income group. Among other things, the Trustees considered the number, education and experience of the Investment Adviser's investment staff and their use of technology and emphasis on analytics in view of the risk profile of securities in which the Fund invests. The Trustees concluded that the Investment Adviser had the quality and depth of personnel and the well-developed methods essential to performing its duties under the Management Contract. D. Nature and Quality of Other Services. The Trustees considered the nature, quality, cost and extent of other services provided to shareholders of the Fund, including administrative and shareholder services performed by the Investment Adviser under the Management Contract. The Trustees also considered the reasonableness of the arrangements for reimbursement of the Investment Adviser's out-of-pocket costs and expenses, including overhead, for certain administrative services that the Investment Adviser is not required to provide under the Management Contract. The Trustees also considered the nature and extent of the other services provided by the Investment Adviser's affiliates under other contracts and its supervision of third party service providers. Based on these considerations, the Trustees concluded that the nature, quality, cost and extent of such services are satisfactory and reliable and serve the shareholders of the Fund well. E. Management Fee and Expenses. The Trustees considered the Investment Adviser's fee under the Management Contract relative to the management fees charged by a peer group of funds selected by the Independent Trustees for this purpose using data provided by an independent third party. The Fund's management fee for the 12 months ended June 30, 2004 was in the fifth quintile relative to the management fees paid by the other funds in that peer group for the comparable period. The Trustees also evaluated the fee relative to the median fee of the peer group and determined that is was only modestly higher than the median. In light of the range of fees included in the peer group, the Trustees determined that the fee under the Management Contract was reasonable and fair in light of both the overall nature and quality of services provided by the Investment Adviser and the fees charged by the funds in the peer group. The Trustees also considered the Fund's expense ratio and expense ratios of a peer group of funds selected by the Independent Trustees for this purpose. The Fund's expense ratio for the 12 months ended June 30, 2004 was in the fifth quintile of the applicable peer group for the most recent fiscal year of the peer group for the comparable period. The Trustees concluded that the Fund's overall expense ratio, although higher, was reasonable compared to that of comparably sized. F. Profitability. The Trustees considered the level of the Investment Adviser's profits with respect to the management of the Pioneer Funds, including details with respect to the Fund. This consideration included a review of the Investment Adviser's methodology in allocating certain of its costs to the management of each Fund. The Trustees also considered the financial results realized by the Investment Adviser in connection with the operation of the Fund. They further considered the profits realized by the Investment Adviser and its affiliates from non-fund businesses that may benefit from or be related to the Fund's business. The Trustees considered the Investment Adviser's profit margins in comparison with the limited available industry data. The Trustees concluded that the Investment Adviser's profits from management of the Pioneer Funds, including the financial results derived from the Fund, bear a reasonable relationship to the services rendered and are fair for the management of the Fund. G. Economies of Scale. The Trustees considered the economies of scale with respect to the management of the Fund, whether the Fund had appropriately benefited from any economies of scale, and whether there is potential for realiza- 180 Pioneer Money Market VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- tion of any further economies of scale. The Trustees concluded that, given current and anticipated asset levels, a break point in the management fee was not necessary. The Trustees will continue to evaluate annually the appropriateness of break points. H. Other Benefits to the Investment Adviser. The Trustees also considered the character and amount of fees paid by the Fund, other than under the Management Contract, for services provided by the Investment Adviser and affiliates, including fees for services such as shareholder services. The Trustees also considered the receipt of sales loads and payments under Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund). The Trustees further considered the revenues and profitability of the Investment Adviser's businesses other than the fund business, including the Investment Adviser's institutional investment advisory business. The Trustees considered the intangible benefits that accrue to the Investment Adviser and its affiliates by virtue of its relationship with the Fund and the Pioneer Funds as a group. The Trustees concluded that all these types of benefits accruing to the Investment Adviser were reasonable in the context of the overall relationship between the Investment Adviser and the Fund. Conclusion. The Trustees, in light of the Investment Adviser's overall performance, considered it appropriate to continue to retain the management services of the Investment Adviser. Based on their evaluation of all material factors deemed relevant and the advice of independent counsel, the Trustees concluded that the Management Contract with the Fund is fair and reasonable and voted to approve the continuation of the Management Contract for another year. 181 [LOGO} PIONEER Investment(R) Pioneer Variable Contracts Trust Officers Trustees John F. Cogan, Jr., President John F. Cogan, Jr., Chairman Osbert M. Hood, Executive Vice President David R. Bock Vincent Nave, Treasurer Mary K. Bush Dorothy E. Bourassa, Secretary Margaret B.W. Graham Christopher J. Kelley, Assistant Secretary Osbert M. Hood David C. Phelan, Assistant Secretary Marguerite A. Piret Mark E. Bradley, Assistant Treasurer Stephen K. West Luis I. Presutti, Assistant Treasurer John Winthrop Gary Sullivan, Assistant Treasurer Katherine Kim Sullivan, Assistant Treasurer Martin J. Wolin, Chief Compliance Officer Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Wilmer Cutler Pickering Hale and Dorr LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. 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 Offering Legend Please consider the Portfolios's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Portfolio and should be read carefully before you invest or send money. To obtain a prospectus and for other information on any Pioneer Portfolio, call 1-800-225-6292 or visit our web site www.pioneerfunds.com. 17856-00-0805 17884-00-0805 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. N/A (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. N/A (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. N/A (d) Disclose, under the caption ALL OTHER FEES, the aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. N/A (e) (1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. PIONEER FUNDS APPROVAL OF AUDIT, AUDIT-RELATED, TAX AND OTHER SERVICES PROVIDED BY THE INDEPENDENT AUDITOR SECTION I - POLICY PURPOSE AND APPLICABILITY The Pioneer Funds recognize the importance of maintaining the independence of their outside auditors. Maintaining independence is a shared responsibility involving Pioneer Investment Management, Inc ("PIM"), the audit committee and the independent auditors. The Funds recognize that a Fund's independent auditors: 1) possess knowledge of the Funds, 2) are able to incorporate certain services into the scope of the audit, thereby avoiding redundant work, cost and disruption of Fund personnel and processes, and 3) have expertise that has value to the Funds. As a result, there are situations where it is desirable to use the Fund's independent auditors for services in addition to the annual audit and where the potential for conflicts of interests are minimal. Consequently, this policy, which is intended to comply with Rule 210.2-01(C)(7), sets forth guidelines and procedures to be followed by the Funds when retaining the independent audit firm to perform audit, audit-related tax and other services under those circumstances, while also maintaining independence. Approval of a service in accordance with this policy for a Fund shall also constitute approval for any other Fund whose pre-approval is required pursuant to Rule 210.2-01(c)(7)(ii). In addition to the procedures set forth in this policy, any non-audit services that may be provided consistently with Rule 210.2-01 may be approved by the Audit Committee itself and any pre-approval that may be waived in accordance with Rule 210.2-01(c)(7)(i)(C) is hereby waived. Selection of a Fund's independent auditors and their compensation shall be determined by the Audit Committee and shall not be subject to this policy.
SECTION II - POLICY - ---------------- -------------------------------- ------------------------------------------------- SERVICE SERVICE CATEGORY DESCRIPTION SPECIFIC PRE-APPROVED SERVICE SUBCATEGORIES CATEGORY - ---------------- -------------------------------- ------------------------------------------------- I. AUDIT Services that are directly o Accounting research assistance SERVICES related to performing the o SEC consultation, registration independent audit of the Funds statements, and reporting o Tax accrual related matters o Implementation of new accounting standards o Compliance letters (e.g. rating agency letters) o Regulatory reviews and assistance regarding financial matters o Semi-annual reviews (if requested) o Comfort letters for closed end offerings - ---------------- -------------------------------- ------------------------------------------------- II. Services which are not o AICPA attest and agreed-upon procedures AUDIT-RELATED prohibited under Rule o Technology control assessments SERVICES 210.2-01(C)(4) (the "Rule") o Financial reporting control assessments and are related extensions of o Enterprise security architecture the audit services support the assessment audit, or use the knowledge/expertise gained from the audit procedures as a foundation to complete the project. In most cases, if the Audit-Related Services are not performed by the Audit firm, the scope of the Audit Services would likely increase. The Services are typically well-defined and governed by accounting professional standards (AICPA, SEC, etc.) - ---------------- -------------------------------- ------------------------------------------------- ------------------------------------- ------------------------------------ AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE REPORTING POLICY ------------------------------------- ------------------------------------ o "One-time" pre-approval o A summary of all such for the audit period for all services and related fees pre-approved specific service reported at each regularly subcategories. Approval of the scheduled Audit Committee independent auditors as meeting. auditors for a Fund shall constitute pre approval for these services. ------------------------------------- ------------------------------------ o "One-time" pre-approval o A summary of all such for the fund fiscal year within services and related fees a specified dollar limit (including comparison to for all pre-approved specified dollar limits) specific service subcategories reported quarterly. o Specific approval is needed to exceed the pre-approved dollar limit for these services (see general Audit Committee approval policy below for details on obtaining specific approvals) o Specific approval is needed to use the Fund's auditors for Audit-Related Services not denoted as "pre-approved", or to add a specific service subcategory as "pre-approved" ------------------------------------- ------------------------------------
SECTION III - POLICY DETAIL, CONTINUED - ----------------------- --------------------------- ----------------------------------------------- SERVICE CATEGORY SERVICE CATEGORY SPECIFIC PRE-APPROVED SERVICE SUBCATEGORIES DESCRIPTION - ----------------------- --------------------------- ----------------------------------------------- III. TAX SERVICES Services which are not o Tax planning and support prohibited by the Rule, o Tax controversy assistance if an officer of the Fund o Tax compliance, tax returns, excise determines that using the tax returns and support Fund's auditor to provide o Tax opinions these services creates significant synergy in the form of efficiency, minimized disruption, or the ability to maintain a desired level of confidentiality. - ----------------------- --------------------------- ----------------------------------------------- - ------------------------------------- ------------------------- AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE REPORTING POLICY - ------------------------------------- ------------------------- - ------------------------------------- ------------------------- o "One-time" pre-approval o A summary of for the fund fiscal year all such services and within a specified dollar limit related fees (including comparison to specified dollar limits) reported quarterly. o Specific approval is needed to exceed the pre-approved dollar limits for these services (see general Audit Committee approval policy below for details on obtaining specific approvals) o Specific approval is needed to use the Fund's auditors for tax services not denoted as pre-approved, or to add a specific service subcategory as "pre-approved" - ------------------------------------- -------------------------
SECTION III - POLICY DETAIL, CONTINUED - ----------------------- --------------------------- ----------------------------------------------- SERVICE CATEGORY SERVICE CATEGORY SPECIFIC PRE-APPROVED SERVICE SUBCATEGORIES DESCRIPTION - ----------------------- --------------------------- ----------------------------------------------- IV. OTHER SERVICES Services which are not o Business Risk Management support prohibited by the Rule, o Other control and regulatory A. SYNERGISTIC, if an officer of the Fund compliance projects UNIQUE QUALIFICATIONS determines that using the Fund's auditor to provide these services creates significant synergy in the form of efficiency, minimized disruption, the ability to maintain a desired level of confidentiality, or where the Fund's auditors posses unique or superior qualifications to provide these services, resulting in superior value and results for the Fund. - ----------------------- --------------------------- ----------------------------------------------- - --------------------------------------- ------------------------ AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE REPORTING POLICY - ------------------------------------- -------------------------- o "One-time" pre-approval o A summary of for the fund fiscal year within all such services and a specified dollar limit related fees (including comparison to specified dollar limits) reported quarterly. o Specific approval is needed to exceed the pre-approved dollar limits for these services (see general Audit Committee approval policy below for details on obtaining specific approvals) o Specific approval is needed to use the Fund's auditors for "Synergistic" or "Unique Qualifications" Other Services not denoted as pre-approved to the left, or to add a specific service subcategory as "pre-approved" - ------------------------------------- --------------------------
SECTION III - POLICY DETAIL, CONTINUED - ----------------------- ------------------------- ----------------------------------------------- SERVICE CATEGORY SERVICE CATEGORY SPECIFIC PROHIBITED SERVICE SUBCATEGORIES DESCRIPTION - ----------------------- ------------------------- ----------------------------------------------- PROHIBITED SERVICES Services which result 1. Bookkeeping or other services in the auditors losing related to the accounting records or independence status financial statements of the audit under the Rule. client* 2. Financial information systems design and implementation* 3. Appraisal or valuation services, fairness* opinions, or contribution-in-kind reports 4. Actuarial services (i.e., setting actuarial reserves versus actuarial audit work)* 5. Internal audit outsourcing services* 6. Management functions or human resources 7. Broker or dealer, investment advisor, or investment banking services 8. Legal services and expert services unrelated to the audit 9. Any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible - ----------------------- ------------------------- ----------------------------------------------- - ------------------------------------------- ------------------------------ AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE REPORTING POLICY - ------------------------------------------- ------------------------------ o These services are not to be o A summary of all performed with the exception of the(*) services and related services that may be permitted fees reported at each if they would not be subject to audit regularly scheduled procedures at the audit client (as Audit Committee meeting defined in rule 2-01(f)(4)) level will serve as continual the firm providing the service. confirmation that has not provided any restricted services. - ------------------------------------------- ------------------------------
- -------------------------------------------------------------------------------- GENERAL AUDIT COMMITTEE APPROVAL POLICY: o For all projects, the officers of the Funds and the Fund's auditors will each make an assessment to determine that any proposed projects will not impair independence. o Potential services will be classified into the four non-restricted service categories and the "Approval of Audit, Audit-Related, Tax and Other Services" Policy above will be applied. Any services outside the specific pre-approved service subcategories set forth above must be specifically approved by the Audit Committee. o At least quarterly, the Audit Committee shall review a report summarizing the services by service category, including fees, provided by the Audit firm as set forth in the above policy. - -------------------------------------------------------------------------------- (2) Disclose the percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. 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"), 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 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. 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. N/A (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. N/A 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 August 29, 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 August 29, 2005 By (Signature and Title)* /s/ Vincent Nave Vincent Nave, Treasurer Date August 29, 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: August 29, 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: August 29, 2005 /s/ Vincent Nave Vincent Nave Treasurer SECTION 906 CERTIFICATION Pursuant to 18 U.S.C. ss. 1350, the undersigned officer of Pioneer 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 June 30, 2005 (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: August 29, 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 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. SECTION 906 CERTIFICATION Pursuant to 18 U.S.C. ss. 1350, the undersigned officer of Pioneer 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 June 30, 2005 (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: August 29, 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-----