<PAGE>
[PIONEER LOGO]
PIONEER
VARIABLE
CONTRACTS
TRUST
Equity-Income Portfolio -- Class II Shares
ANNUAL REPORT
December 31, 1999
<PAGE>
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Table of Contents
<TABLE>
<S> <C>
Portfolio and Performance Update 1
Portfolio Management Discussion 2
Schedule of Investments 3
Financial Statements 6
Notes to Financial Statements 10
Report of Independent Public Accountants 12
</TABLE>
<PAGE>
Equity-Income Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO AND PERFORMANCE UPDATE 12/31/99
- --------------------------------------------------------------------------------
Portfolio Diversification
(As a percentage of total investment portfolio)
[PIE CHART]
U.S. Common Stocks 97%
U.S. Convertible Securities 2%
Short-Term Cash Equivalents 1%
[END PIE CHART]
Sector Distribution
(As a percentage of equity holdings)
[PIE CHART]
Financial 19%
Communication Services 15%
Utilities 13%
Consumer Staples 10%
Healthcare 9%
Consumer Cyclicals 8%
Energy 8%
Basic Materials 6%
Technology 5%
Other 7%
[END PIE CHART]
- --------------------------------------------------------------------------------
Five Largest Holdings
(As a percentage of equity holdings)
<TABLE>
<S> <C>
1. SBC Communications, Inc. 5.50%
2. Schering-Plough Corp. 3.42
3. Hewlett-Packard Co. 2.90
4. Exxon Mobil Corp. 2.82
5. GTE Corp. 2.80
</TABLE>
Holdings will vary for other periods.
- --------------------------------------------------------------------------------
Prices and Distributions
<TABLE>
<CAPTION>
12/31/99 9/14/99
<S> <C> <C>
Net Asset Value per Share $20.82 $21.29
</TABLE>
<TABLE>
<CAPTION>
Distributions per Share Income Short-Term Long-Term
(9/14/99 - 12/31/99) Dividends Capital Gains Capital Gains
<S> <C> <C> <C>
$0.120 -- --
</TABLE>
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the value of an investment made in Equity-Income
Portfolio at net asset value, compared to the growth of Standard & Poor's (S&P)
500 Index.
Growth of $10,000
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Equity Income S&P 500
Portfolio* Index
<S> <C> <C>
9/14/99 10000 10000
9/30/99 9638 9599
10/99 10127 10200
11/99 9901 10394
12/99 9835 10995
</TABLE>
[END LINE CHART PLOT POINTS]
The S&P 500 Index is an unmanaged measure of 500 widely held common stocks
listed on the New York Exchange and the over-the-counter market. Index
returns assume reinvestment of dividends and, unlike Portfolio returns, do
not reflect any fees or expenses. 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 Return
- -----------------------------
Net Asset Value*
- -----------------------------
<TABLE>
<S> <C>
Period
Life-of-Portfolio -1.65%
(9/14/99)
</TABLE>
All total returns shown assume reinvestment of distributions at net asset
value.
* Reflects Portfolio performance only. Does not reflect any applicable
insurance fees or surrender charges.
1 Past performance does not guarantee future results. Return and share prices
fluctuate so that your investment, when redeemed, may be worth more or less
than its original cost.
<PAGE>
Equity-Income Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/99
- --------------------------------------------------------------------------------
Following is an interview with John Carey, portfolio manager of Equity-Income
Portfolio, where he provides an update on the economic environment and
investment strategies that shaped the Portfolio's performance over the period.
Q: Over the past year market conditions have changed quite a bit. What has taken
place, and how has the Portfolio performed in this environment?
A: The last year saw an intensification of investor interest in large growth
stocks, especially in the technology industry. Above all, the internet and
stocks related to it fascinated investors, and some internet share prices
recorded astronomical gains. At the same time, many other stocks had a
difficult time attracting investors, and unfortunately that included many of
the conservative, dividend-paying stocks in the Portfolio.
In fact, it was a frustrating period for our style of investing -- with the
Portfolio returning -1.65% at net asset value. The Portfolio's return trailed
the 6.88% average return (for the period from September 30, 1999 to December
31, 1999) for annuity portfolios in the Lipper, Inc. equity-income universe.
(Lipper is an independent firm that reports annuity portfolio performance.)
Q: The Portfolio's largest concentration is in the financial sector. How have
rising interest rates affected these companies?
A: Higher rates generally create difficulties for the financial sector, cyclical
companies and utilities. The Portfolio invests in all three groups because
stocks of these companies traditionally provide above-average dividend
yields. To moderate risk to the Portfolio from a rise in interest rates, we
have made an effort to identify companies with the potential to increase
their dividend payments.
We also devote much attention to the analysis of companies' balance sheets
and aim to avoid those that might become overburdened by the higher cost of
borrowing. Of course, the stock market may not make such fine distinctions
between companies when rates first rise. Ultimately, we believe, stronger
companies will be sorted out from weaker ones and temporary price weaknesses
will often appear to have been opportunities to buy good-quality stocks at
reasonable prices.
Q: What market sectors do you find particularly attractive now?
A: Transportation, consumer staples, and basic materials. All have been out of
favor with Wall Street, yet we think all include companies with major
opportunities for improved earnings over the next few years. Important
holdings for us in these sectors include Burlington Northern, in
transportation; Campbell Soup and H. J. Heinz, in consumer staples; and E.I.
du Pont de Nemours and Phelps Dodge, in basic materials. All provide goods
and services with constant demand and have the potential for better future
results than what is reflected in their share prices.
Q: What is your view of the current market environment, and what is your outlook
for the future?
A: It has been another strong year, with corporate growth rates well ahead of
last year's estimates. Results in the stock market have been more varied,
with tremendous gains in some areas and lackluster results elsewhere. The
narrow focus of the market on the companies with the fastest earnings growth
has been cited as a cause to worry that the long bull market is cresting.
With so many fine companies having trouble securing investor interest,
commentators point to the possibility of a sell-off if and when the market
leaders tumble. We do not believe that the market can be predicted with any
kind of consistency. However, we do think it is reasonable to expect another
turbulent year with many crosscurrents. But, as always, we shall devote our
major effort to finding and maintaining investments that we believe will help
you pursue your long-term investment goals.
2
<PAGE>
Equity-Income Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/99
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
INVESTMENT IN SECURITIES - 98.4%
CONVERTIBLE CORPORATE BOND - 0.1%
$ 200,000 Commscope, Inc. 4.0%, 12/15/06 (144A) $ 214,212
------------
Total Convertible Corporate Bond
(Cost $200,000) $ 214,212
------------
</TABLE>
<TABLE>
<CAPTION>
Shares
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS - 1.6%
570 Sprint Corp., 8.25%, 3/31/00 $ 42,322
27,000 Cox Communication, Inc., 7.0%, 8/16/02 1,836,000
15,300 Union Pacific Capital, Inc., 6.25%, 4/1/28 629,243
27,000 Union Pacific Capital, Inc., 6.25%, 4/1/28
(144A) 1,110,429
------------
Total Convertible Preferred Stocks
(Cost $3,280,519) $ 3,617,994
------------
COMMON STOCKS - 96.7%
Basic Materials - 6.1%
Aluminum - 1.9%
50,800 Alcoa, Inc. $ 4,216,400
------------
Chemicals - 1.3%
45,441 E.I. du Pont de Nemours & Co. $ 2,993,426
------------
Iron & Steel - 0.7%
31,500 AK Steel Holding Corp. $ 594,562
15,450 Roanoke Electric Steel Corp. 251,063
50,000 Worthington Industries, Inc. 828,125
------------
$ 1,673,750
------------
Metals Mining - 1.5%
50,400 Phelps Dodge Corp. $ 3,383,100
------------
Paper & Forest Products - 0.7%
50,000 Consolidated Papers, Inc. $ 1,590,625
------------
Total Basic Materials $ 13,857,301
------------
Capital Goods - 4.7%
Aerospace/Defense - 1.1%
40,000 General Dynamics Corp. $ 2,110,000
22,900 Lockheed Martin Corp. 500,938
------------
$ 2,610,938
------------
Machinery (Diversified) - 0.6%
7,000 The Gorman-Rupp Co. $ 122,500
57,300 The Timken Co. 1,171,069
------------
$ 1,293,569
------------
Manufacturing (Diversified) - 1.4%
24,000 Johnson Controls, Inc. $ 1,365,000
17,500 Minnesota Mining and Manufacturing Co. 1,712,813
------------
$ 3,077,813
------------
Manufacturing (Specialized) - 0.3%
31,000 Diebold, Inc. $ 728,500
------------
Trucks & Parts - 1.3%
68,500 PACCAR, Inc. $ 3,035,406
------------
Total Capital Goods $ 10,746,226
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Communication Services - 15.2%
Telecommunications (Long Distance) - 0.3%
10,000 Sprint Corp. $ 673,125
------------
Telephone - 14.9%
31,944 Alltel Corp $ 2,641,369
33,400 Bell Atlantic Corp. 2,056,187
92,400 BellSouth Corp. 4,325,475
88,500 GTE Corp. 6,244,781
251,331 SBC Communications, Inc. 12,252,386
84,800 US West Communications Group, Inc. 6,105,600
------------
$ 33,625,798
------------
Total Communication Services $ 34,298,923
------------
Consumer Cyclicals - 8.3%
Auto Parts and Equipment - 1.7%
173,871 Delphi Automotive Systems Corp. $ 2,738,468
35,000 The Goodyear Tire & Rubber Co. 986,563
------------
$ 3,725,031
------------
Automobiles - 3.6%
102,800 Ford Motor Co. $ 5,493,375
37,000 General Motors Corp. 2,689,437
------------
$ 8,182,812
------------
Publishing - 0.9%
33,700 McGraw-Hill Co., Inc. $ 2,076,762
------------
Publishing (Newspapers) - 0.1%
5,000 Tribune Co. $ 275,313
------------
Retail (Department Stores) - 1.4%
97,825 May Department Stores Co. $ 3,154,856
------------
Services (Advertising/Marketing) - 0.6%
25,200 The Interpublic Group of Companies, Inc. $ 1,453,725
------------
Total Consumer Cyclicals $ 18,868,499
------------
Consumer Staples - 8.9%
Beverages (Non-Alcoholic) - 0.4%
26,800 PepsiCo, Inc. $ 944,700
------------
Entertainment - 1.0%
114,200 Cedar Fair, L.P. $ 2,212,625
------------
Foods - 5.5%
96,200 Bestfoods $ 5,056,512
45,000 Campbell Soup Co. 1,740,938
74,000 General Mills, Inc. 2,645,500
58,000 H.J. Heinz Co. 2,309,125
30,000 Sara Lee Corp. 661,875
------------
$ 12,413,950
------------
Household Products (Non-Durables) - 1.7%
38,000 Colgate-Palmolive Co. $ 2,470,000
12,000 Procter & Gamble Co. 1,314,750
------------
$ 3,784,750
------------
Personal Care - 0.2%
10,000 The Gillette Co. $ 411,875
------------
Retail Stores (Food Chains) - 0.1%
15,000 Winn-Dixie Stores $ 359,063
------------
Total Consumer Staples $ 20,126,963
------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 3
<PAGE>
Equity-Income Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/99 (continued)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Energy - 7.5%
Oil (Domestic Integrated) - 2.5%
54,000 Atlantic Richfield Co. $ 4,671,000
32,919 Conoco, Inc. (Class B) 818,860
------------
$ 5,489,860
------------
Oil (International Integrated) - 5.0%
59,000 Chevron Corp. $ 5,110,875
77,983 Exxon Mobil Corp. 6,282,506
------------
$ 11,393,381
------------
Total Energy $ 16,883,241
------------
Financial - 18.8%
Banks (Major Regional) - 5.3%
56,800 The Bank of New York Co., Inc. $ 2,272,000
13,000 Comerica, Inc. 606,937
29,610 Fleet Boston Financial Corp. 1,030,798
84,400 Mellon Bank Corp. 2,874,875
84,500 National City Corp. 2,001,594
87,977 Old Kent Financial Corp. 3,112,186
------------
$ 11,898,390
------------
Banks (Money Center) - 0.3%
8,000 The Chase Manhattan Corp. $ 621,500
------------
Banks (Regional) - 4.0%
180,600 First Security Corp. $ 4,610,944
58,700 First Tennessee National Corp. 1,672,950
11,000 North Fork Bancorporation, Inc. 192,500
71,200 SouthTrust Corp. 2,692,250
------------
$ 9,168,644
------------
Insurance (Life/Health) - 2.2%
8,300 American National Insurance Co. $ 529,125
40,500 Hartford Life, Inc. 1,782,000
65,200 ReliaStar Financial Corp. 2,555,025
------------
$ 4,866,150
------------
Insurance (Property/Casualty) - 2.3%
39,000 Chubb Corp. $ 2,196,187
35,500 HSB Group, Inc. 1,200,344
53,400 St. Paul Companies, Inc. 1,798,913
------------
$ 5,195,444
------------
Investment Banking/Brokerage - 1.3%
40,500 AG Edwards, Inc. $ 1,298,531
42,300 Paine Webber Group, Inc. 1,641,769
------------
$ 2,940,300
------------
Investment Management - 2.5%
81,200 Alliance Capital Management L.P. $ 2,430,925
13,000 Eaton Vance Corp. 494,000
75,000 T. Rowe Price Associates, Inc. 2,770,312
------------
$ 5,695,237
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Savings & Loans Companies - 0.9%
22,876 Astoria Financial Corp. $ 696,288
4,900 Queens County Bancorp, Inc. 132,913
50,400 Washington Mutual, Inc. 1,310,400
------------
$ 2,139,601
------------
Total Financial $ 42,525,266
------------
Healthcare - 8.4%
Healthcare (Diversified) - 3.5%
77,300 Abbott Laboratories $ 2,806,956
45,800 Bristol-Myers Squibb Co. 2,939,787
23,500 Johnson & Johnson 2,188,438
------------
$ 7,935,181
------------
Healthcare (Drugs/Major Pharmaceuticals) - 4.4%
34,900 Merck & Co., Inc. $ 2,340,481
180,400 Schering-Plough Corp. 7,610,625
------------
$ 9,951,106
------------
Healthcare (Medical Products/Supplies) - 0.5%
42,000 Becton, Dickinson & Co. $ 1,123,500
------------
Total Healthcare $ 19,009,787
------------
Technology - 5.3%
Communications Equipment - 0.5%
38,000 Harris Corp. $ 1,014,125
38,000 Lanier Worldwide, Inc. 147,250
------------
$ 1,161,375
------------
Computers (Hardware) - 3.2%
56,600 Hewlett-Packard Co. $ 6,448,863
7,000 IBM Corp. 756,000
------------
$ 7,204,863
------------
Equipment (Semiconductors) - 0.1%
4,600 Helix Technology Corp. $ 206,138
------------
Photography/Imaging - 1.5%
51,300 Eastman Kodak Co. $ 3,398,625
------------
Total Technology $ 11,971,001
------------
Transportation - 0.9%
Railroads - 0.9%
28,000 Burlington Northern, Inc. $ 679,000
66,200 Norfolk Southern Corp. 1,357,100
------------
Total Transportation $ 2,036,100
------------
Utilities - 12.6%
Electric Companies - 7.4%
73,000 Allegheny Energy, Inc. $ 1,966,438
53,000 American Electric Power Co., Inc. 1,702,625
136,000 Constellation Energy Group 3,944,000
80,300 DPL, Inc. 1,390,194
40,000 DQE, Inc. 1,385,000
50,000 Duke Energy Corp. 2,506,250
12,500 FPL Group, Inc. 535,156
62,000 Kansas City Power & Light Co. 1,367,875
50,000 NSTAR 2,025,000
------------
$ 16,822,538
------------
</TABLE>
4 The accompanying notes are an integral part of these financial statements.
<PAGE>
Equity-Income Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Natural Gas - 4.8%
14,000 Buckeye Partners, L.P. $ 364,000
36,750 Consolidated Natural Gas Co. 2,386,453
33,200 Indiana Energy, Inc. 589,300
99,600 KeySpan Energy Corp. 2,309,475
18,475 Kinder Morgan Energy Partners, L.P. 765,558
15,000 Lakehead Pipe Line Partners, L.P. 522,187
49,200 NICOR, Inc. 1,599,000
26,600 Public Service Co. of North Carolina, Inc. 859,513
94,600 Questar Corp. 1,419,000
------------
$ 10,814,486
------------
Power Producers (Independent) - 0.1%
25,000 Consol Energy Inc. $ 253,125
------------
Water Utilities - 0.3%
32,000 American Water Works Co., Inc. $ 680,000
------------
Total Utilities $ 28,570,149
------------
Total Common Stocks
(Cost $189,387,032) $218,893,456
------------
TOTAL INVESTMENT IN SECURITIES
(Cost $192,867,551) $222,725,662
------------
Principal
Amount
TEMPORARY CASH INVESTMENT - 1.6%
Repurchase Agreement - 1.6%
$3,700,000 Credit Suisse First Boston Group, Inc.,
3.0%, dated 12/31/99, repurchase $ 3,700,000
price of $3,700,000 plus accrued interest ------------
on 1/3/00, collateralized by $3,881,000
U.S. Treasury Bills, 5.737%, 6/29/00
TOTAL TEMPORARY CASH INVESTMENT $ 3,700,000
------------
TOTAL INVESTMENT IN SECURITIES AND
TEMPORARY CASH
INVESTMENT - 100%
(Cost $196,567,551) $226,425,662
============
144A Security is exempt from registration under Rule 144A of the Securities Act
of 1933. Such securities may be resold normally to qualified institutional
buyers in a transaction exempt from registration At December 31, 1999, the
value of these securities amounted to $1,324,641 or 0.6% of total net
assets.
</TABLE>
The accompanying notes are an integral part of these financial statements. 5
<PAGE>
Equity-Income Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 12/31/99
- --------------------------------------------------------------------------------
CLASS II(a)
<TABLE>
<CAPTION>
9/14/99
to
12/31/99
<S> <C>
Net asset value, beginning of period $21.29
------
Increase (decrease) from investment operations:
Net investment income $ 0.08
Net realized and unrealized loss on investments (0.43)
------
Net decrease from investment operations $(0.35)
Distributions to shareholders:
Net investment income (0.12)
------
Net decrease in net asset value $(0.47)
------
Net asset value, end of period $20.82
======
Total return* (1.65)%
Ratio of net expenses to average net assets 0.96%**
Ratio of net investment income to average net assets 1.90%**
Portfolio turnover rate 23%
Net assets, end of period (in thousands) $178
</TABLE>
(a) Class II shares were first publicly offered on September 14, 1999.
* 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.
6 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
BALANCE SHEET 12/31/99
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Equity-Income
Portfolio
<S> <C>
ASSETS:
Investment in securities, at value (cost $192,867,551) $ 222,725,662
Temporary cash investments (at amortized cost) 3,700,000
Cash 22,209
Receivables -
Investment securities sold 143,618
Fund shares sold 10,847
Dividends and interest 510,284
Other 3,180
-------------
Total assets $ 227,115,800
-------------
LIABILITIES:
Payables -
Investment securities purchased $ 252,500
Fund shares repurchased 151,681
Due to affiliates 129,305
Accrued expenses 25,323
-------------
Total liabilities $ 558,809
-------------
NET ASSETS:
Paid-in capital $ 181,021,194
Accumulated undistributed net investment income 489,191
Accumulated undistributed net realized gain on investments 15,188,495
Net unrealized gain on investments 29,858,111
-------------
Total net assets $ 226,556,991
-------------
NET ASSET VALUE PER SHARE:
Class I:
(Unlimited number of shares authorized)
Net assets $ 226,379,052
Shares outstanding 10,927,670
Net asset value per share $ 20.72
-------------
Class II:
(Unlimited number of shares authorized)
Net assets $ 177,939
Shares outstanding 8,547
Net asset value per share $ 20.82
=============
</TABLE>
The accompanying notes are an integral part of these financial statements. 7
<PAGE>
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Equity
Income
Portfolio
Year Ended
12/31/99
<S> <C>
INVESTMENT INCOME:
Dividends $ 5,897,262
Interest 189,666
-------------
Total investment income $ 6,086,928
-------------
EXPENSES:
Management fees $ 1,459,899
Transfer agent fees 906
Distribution fees (Class II) 101
Administrative fees 45,919
Custodian fees 43,555
Professional fees 18,199
Printing 8,034
Fees and expenses of nonaffiliated trustees 539
Miscellaneous 15,714
-------------
Total expenses $ 1,592,866
Less fees paid indirectly (1,025)
-------------
Net expenses $ 1,591,841
-------------
Net investment income $ 4,495,087
-------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain from investments $ 15,265,131
Change in net unrealized gain from investments $ (17,458,854)
-------------
Net loss on investments $ (2,193,723)
-------------
Net increase in net assets resulting from operations $ 2,301,364
=============
</TABLE>
8 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Equity-Income
Portfolio
Year Year
Ended Ended
12/31/99 12/31/98
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 4,495,087 $ 3,336,915
Net realized gain on investments 15,265,131 6,127,770
Change in net unrealized gain on investments (17,458,854) 22,790,102
------------- -------------
Net increase in net assets resulting from operations $ 2,301,364 $ 32,254,787
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class I $ (4,351,482) $ (3,318,604)
Class II (1,074) -
Net realized gain
Class I (6,090,521) (1,835,100)
------------- -------------
Total distributions to shareholders $ (10,443,077) $ (5,153,704)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 34,058,957 $ 59,078,823
Reinvestment of distributions 10,443,077 5,153,704
Cost of shares repurchased (13,779,546) (11,570,695)
------------- -------------
Net increase in net assets resulting from
fund share transactions $ 30,722,488 $ 52,661,832
------------- -------------
Net increase in net assets $ 22,580,775 $ 79,762,915
------------- -------------
NET ASSETS:
Beginning of year 203,976,216 124,213,301
------------- -------------
End of year $ 226,556,991 $ 203,976,216
============= =============
Accumulated undistributed net investment income, end of period $ 489,191 $ 398,525
============= =============
CAPITAL SHARE ACTIVITY:
Class I:
Shares sold by subscription 1,570,521 3,004,720
Shares issued for distributions reinvested 490,175 257,547
Shares redeemed (645,785) (595,292)
------------- -------------
Net increase in fund shares 1,414,911 2,666,975
============= =============
Class II:
Shares sold by subscription 10,044
Shares issued for distributions reinvested 52
Shares redeemed (1,549)
-------------
Net increase in fund shares 8,547
=============
</TABLE>
The accompanying notes are an integral part of these financial statements. 9
<PAGE>
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/99
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer Variable Contracts Trust (the Trust) is a Delaware business trust
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The Trust consists of thirteen separate
portfolios (collectively, the Portfolios): Emerging Markets Portfolio, Europe
Portfolio, International Growth Portfolio, Capital Growth Portfolio, Growth
Shares Portfolio, Real Estate Growth Portfolio, Growth and Income Portfolio,
Equity-Income Portfolio, Balanced Portfolio, Strategic Income Portfolio, Swiss
Franc Bond Portfolio, America Income Portfolio, and Money Market Portfolio.
Shares of each Portfolio may only be purchased by insurance companies for the
purpose of funding variable annuity or variable life insurance contracts.
The investment objective of Equity-Income Portfolio (the Portfolio) is to seek
current income as well as long term capital growth.
The Trust's financial statements have been prepared in conformity with
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 revenues and expenses 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 on trade date. The net asset value for
the Portfolio is computed once daily, on each day the New York Stock
Exchange is open, as of the close of regular trading on the Exchange. In
computing the net asset value, securities are valued at the last sale price
on the principal exchange where they are traded. Securities that have not
traded on the date of valuation, or securities for which sale prices are
not generally reported, are valued at the mean between the last bid and
asked prices. Securities for which market quotations are not readily
available are valued at their fair values as determined by, or under the
direction of, the Board of Trustees. Dividend income is recorded on the ex-
dividend date and interest income is recorded on the accrual basis.
Temporary cash investments are valued at amortized cost.
Gains and losses from sales on investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes.
It is the Trust's practice to first select for sale those securities that
have the highest cost and also qualify for long-term capital gain or loss
treatment for tax purposes.
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 value of the contracts may not
directly correlate to the changes in value of the underlying securities.
These risks may decrease the effectiveness of the Portfolio's hedging and
trading strategies and potentially result in a loss. As of December 31,
1999, the Portfolio had no outstanding futures contracts.
C. Federal Income 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
shareholders. Therefore, no federal income tax provision is required.
The characterization of distributions to shareholders for financial
reporting purposes is determined in accordance with income tax rules.
Therefore, the source of the Portfolio's distributions may be shown in the
accompanying financial statements as either from or in excess of net
investment income or net realized gain on investment transactions, or from
paid-in capital, depending on the type of book/tax differences that may
exist.
At December 31, 1999, the Portfolio reclassified $51,865 from accumulated
undistributed net investment income to accumulated undistributed net
realized gain on investments. The reclassification has no impact on the net
asset value of the Portfolio and is designed to present the Portfolio's
capital accounts on a tax basis.
10 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In order to comply with federal income tax regulations, the Portfolio has
designated $15,265,131 as a capital gain dividend for the purposes of the
dividend paid deduction.
D. Fund Shares
The Portfolio records sales and repurchases of its fund shares on trade
date. Net losses, if any, as a result of cancellations are absorbed by
Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the
Trust and an indirect subsidiary of The Pioneer Group, Inc. (PGI).
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
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 subcustodians. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
2. Management Agreement
PIM manages the Portfolio, and is a wholly owned subsidiary of PGI.
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 December 31, 1999, $129,119
was payable to PIM related to management fees, administrative fees, and
certain other services.
3. Transfer Agent
PSC, a wholly owned subsidiary of PGI, provides substantially all transfer
agent and shareholder services to the Trust at negotiated rates. At December
31, 1999, $186 in transfer agent fees payable was included in due to
affiliates for the Portfolio.
4. Distribution Plan
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 to PFD a distribution fee of 0.25% of the
average daily net assets attributable to Class II shares.
5. Expense Offsets
The Trust has entered into certain expense offset arrangements resulting in a
reduction in the Portfolio's total expenses. For the year ended December 31,
1999, the Portfolio's expenses were reduced by $1,025 under such
arrangements.
6. Aggregate Unrealized Appreciation and Depreciation
At December 31, 1999, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost of $196,567,551 for federal income tax purposes
were $41,751,239 and $11,893,128, respectively, resulting in net
appreciation of $29,858,111.
7. Portfolio Transactions
The cost of purchases and the proceeds from sales of investments other than
U.S. Government obligations and temporary cash investments for the year
ended December 31, 1999 were $74,268,972 and $51,497,207, respectively.
The accompanying notes are an integral part of these financial statements. 11
<PAGE>
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareowners and the Board of Trustees of Pioneer Variable Contracts
Trust:
We have audited the accompanying balance sheet, including the schedule of
investments, of Pioneer Equity-Income Portfolio (one of the portfolios
constituting the Pioneer Variable Contracts Trust) as of December 31, 1999, and
the related statement of operations, the statements of changes in net assets
and the financial highlights for the periods presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Pioneer Equity-Income Portfolio as of December 31, 1999, the results of its
operations, the changes in its net assets, and the financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 4, 2000
12
<PAGE>
[PIONEER LOGO]
Pioneer Variable Contracts Trust
Officers
John F. Cogan, Jr., Chairman and President
David D. Tripple, Executive Vice President
Stephen G. Kasnet, Vice President
Eric W. Reckard, Treasurer
Joseph P. Barri, Secretary
Trustees
John F. Cogan, Jr.
Richard H. Egdahl, M.D.
Marguerite A. Piret
David D. Tripple
Stephen K. West
Investment Adviser
Pioneer Investment Management, Inc.
Custodian
Brown Brothers Harriman & Co.
Legal Counsel
Hale and Dorr LLP
Independent Public Accountants
Arthur Andersen LLP
This report must be preceded or accompanied by a prospectus, which includes
more information about charges and expenses. Please read the prospectus
carefully before you invest or send money.
8092-00-0200
