-----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, J4xiONNXZlGIY9C5wGuRbpF2yLcqwR3coBN4CEGKUPSz7I8QbREcLlgkLJ1Tka97 IRiO8KZO6QjzmEwYdRuw6w== 0001145443-08-001905.txt : 20090331 0001145443-08-001905.hdr.sgml : 20090331 20080618171016 ACCESSION NUMBER: 0001145443-08-001905 CONFORMED SUBMISSION TYPE: N-14 PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 20080618 DATE AS OF CHANGE: 20080812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER TAX FREE INCOME FUND CENTRAL INDEX KEY: 0000202679 IRS NUMBER: 362892530 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-14 SEC ACT: 1933 Act SEC FILE NUMBER: 333-151757 FILM NUMBER: 08906272 BUSINESS ADDRESS: STREET 1: 60 STATE ST 20TH FLOOR CITY: BOSTON STATE: MA ZIP: 02109-1820 BUSINESS PHONE: 6178211239 MAIL ADDRESS: STREET 1: 60 STATE STREET STREET 2: 20TH FLOOR CITY: BOSTON STATE: MA ZIP: 02109-1820 FORMER COMPANY: FORMER CONFORMED NAME: PIONEER TAX FREE INCOME FUND INC DATE OF NAME CHANGE: 19940301 FORMER COMPANY: FORMER CONFORMED NAME: MUTUAL OF OMAHA TAX FREE INCOME FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MUTUAL OF OMAHA TAX EXEMPT BOND FUND INC DATE OF NAME CHANGE: 19770222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER MUNICIPAL & EQUITY INCOME TRUST CENTRAL INDEX KEY: 0001267150 IRS NUMBER: 510492660 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-14 SEC ACT: 1933 Act SEC FILE NUMBER: 333-151758 FILM NUMBER: 08906273 BUSINESS ADDRESS: STREET 1: 60 STATE STREET CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 617 742 7825 MAIL ADDRESS: STREET 1: 60 STATE STREET CITY: BOSTON STATE: MA ZIP: 02109 FORMER COMPANY: FORMER CONFORMED NAME: PIONEER TAX ADVANTAGED BALANCED TRUST DATE OF NAME CHANGE: 20031215 FORMER COMPANY: FORMER CONFORMED NAME: PIONEER TAX ADVANTAGED BALANCED FUND DATE OF NAME CHANGE: 20031017 FORMER COMPANY: FORMER CONFORMED NAME: PIONEER TAX ADVANTAGED BALANCED TRUST DATE OF NAME CHANGE: 20031015 CENTRAL INDEX KEY: 0000202679 S000010135 Pioneer Tax Free Income Fund C000028133 Pioneer Tax Free Income Fund: Class A MOMTX CENTRAL INDEX KEY: 0001267150 N-14 1 d23329n14.txt As filed with the Securities and Exchange Commission on June 18, 2008 File No. 333-_____ United States Securities and Exchange Commission Washington, D.C. 20549 FORM N-14 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. ___ Post-Effective Amendment No. ___ (Check appropriate box or boxes) PIONEER TAX FREE INCOME FUND (Exact Name of Registrant as Specified in Charter) (617) 742-7825 (Area Code and Telephone Number) 60 State Street, Boston, Massachusetts 02109 (Address of Principal Executive Offices: Number, Street, City, State, Zip Code) Dorothy E. Bourassa, Esq. Pioneer Investment Management, Inc. 60 State Street Boston, Massachusetts 02109 (Name and Address of Agent for Service) Copies to: Roger P. Joseph, Esq. Bingham McCutchen LLP One Federal Street Boston, Massachusetts 02110 Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement. Calculation of Registration Fee under the Securities Act of 1933: No filing fee is due because of reliance on Section 24(f) of the Investment Company Act of 1940, which permits registration of an indefinite number of securities. Title of Securities Being Registered: Shares of beneficial interest of the Registrant. It is proposed that this registration statement will become effective on July 18, 2008, pursuant to Rule 488 under the Securities Act of 1933, as amended. COMBINED PROXY STATEMENT OF PIONEER MUNICIPAL AND EQUITY INCOME TRUST AND PROSPECTUS FOR CLASS A SHARES OF PIONEER TAX FREE INCOME FUND (each, a "Pioneer Fund" and together, the "Pioneer Funds") The address and telephone number of each Pioneer Fund is: 60 State Street Boston, Massachusetts 02109 1-800-225-6292 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS SCHEDULED FOR SEPTEMBER 11, 2008 To the Shareholders of Pioneer Municipal and Equity Income Trust: This is the formal agenda for your fund's shareholder meeting. It tells you what matters will be voted on and the time and place of the meeting, in case you want to attend in person. A special shareholder meeting for your fund will be held at the offices of Bingham McCutchen LLP, One Federal Street, Boston, Massachusetts on September 11, 2008, at 2:00 p.m., Eastern Time (the "Meeting"), to consider the following: 1. A proposal to approve an Agreement and Plan of Merger between your fund and Pioneer Tax Free Income Fund. Under this Agreement and Plan of Merger, your fund (a closed-end fund) will merge with and into an open-end fund, Pioneer Tax Free Income Fund. 2. Any other business that may properly come before the Meeting. YOUR TRUSTEES RECOMMEND THAT YOU VOTE IN FAVOR OF THE PROPOSAL. Shareholders of record as of the close of business on July 7, 2008 are entitled to vote at the Meeting and any related follow-up meetings. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY. If shareholders do not return their proxies in sufficient numbers, your fund may be required to make additional solicitations. By Order of the Board of Trustees, /s/Dorothy E. Bourassa Dorothy E. Bourassa Secretary Boston, Massachusetts _______________, 2008 COMBINED PROXY STATEMENT OF PIONEER MUNICIPAL AND EQUITY INCOME TRUST AND PROSPECTUS FOR CLASS A SHARES OF PIONEER TAX FREE INCOME FUND (each, a "Pioneer Fund" and together, the "Pioneer Funds") The address and telephone number of each Pioneer Fund is: 60 State Street Boston, Massachusetts 02109 1-800-225-6292 Shares of the Pioneer Funds have not been approved or disapproved by the Securities and Exchange Commission (the "SEC"). The SEC has not passed on upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. An investment in either Pioneer Fund (each sometimes referred to herein as a "fund") is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. 1 INTRODUCTION This combined proxy statement/prospectus, dated __________, 2008 (the "Proxy Statement/Prospectus"), is being furnished to shareholders of Pioneer Municipal and Equity Income Trust (NYSE symbol: PBF) in connection with the solicitation by the Board of Trustees (the "Board" or the "Trustees") of proxies to be used at a special meeting of the shareholders of Pioneer Municipal and Equity Income Trust to be held at the offices of Bingham McCutchen LLP, One Federal Street, Boston, Massachusetts on September 11, 2008, at 2:00 p.m., Eastern Time (the "Meeting"). The Proxy Statement/Prospectus is being mailed to shareholders of Pioneer Municipal and Equity Income Trust on or about __________, 2008. The purpose of this Proxy Statement/Prospectus is to obtain shareholder approval to merge Pioneer Municipal and Equity Income Trust with and into Pioneer Tax Free Income Fund, an open-end fund (commonly referred to as a "mutual fund"). Pioneer Tax Free Income Fund and your fund have the same investment adviser, Pioneer Investment Management, Inc. ("Pioneer"). Reorganizing your fund into Pioneer Tax Free Income Fund will enable you to share in certain potential benefits, including (i) the opportunity to invest in an established open-end fund that, like your fund, pursues a tax-oriented investment approach and also offers lower expenses and a comparable tax- equivalent yield; (ii) elimination of the discount to net asset value at which shares of your fund have traded historically; (iii) the ability to redeem your shares at their net asset value on a daily basis; and (iv) allowing you to choose the timing of any recognition of taxable gain or loss occasioned by the redemption of shares. These potential benefits are described in greater detail below. It should be noted that past performance is no assurance of future results. The Trustees recommend that you vote FOR this proposal. The Proxy Statement/Prospectus contains information you should know before voting on the proposed Agreement and Plan of Merger that provides for the merger of your fund into Pioneer Tax Free Income Fund (the "Merger"). Please read the Proxy Statement/Prospectus carefully, including Exhibit A and Exhibit B, because they are a part of this Proxy Statement/Prospectus and contain details that are not in the summary. The date of this Proxy Statement/Prospectus is __________, 2008. Additional information about each Pioneer Fund has been filed with the SEC (http://www.sec.gov) and is available upon oral or written request and without charge. See "Where to Get More Information" below.
- ---------------------------------------------------------------------------------------------------------------- Where to Get More Information - ---------------------------------------------------------------------------------------------------------------- Pioneer Tax Free Income Fund's current Class A shares On file with the SEC (http://www.sec.gov) and prospectus, multi-class statement of additional available at no charge by calling our toll-free information, and any applicable supplements. number: 1-800-225-6292 Each Pioneer Fund's most recent annual and semi-annual reports to shareholders. On file with the SEC (http://www.sec.gov) and available at no charge by calling our toll-free number: 1-800-225-6292. See "Available Information." - ---------------------------------------------------------------------------------------------------------------- A statement of additional information for this Proxy On file with the SEC (http://www.sec.gov) and Statement/Prospectus (the "SAI"), dated [ ], 2008. It available at no charge by calling our toll-free contains additional information about the Pioneer Funds. number: 1-800-225-6292. This SAI is incorporated by reference into this Proxy Statement/Prospectus. - ---------------------------------------------------------------------------------------------------------------- To ask questions about this Proxy Statement/Prospectus. Call our toll-free telephone number: 1-800-225-6292. - ----------------------------------------------------------------------------------------------------------------
How the Merger Will Work o The Merger is scheduled to occur as of the close of business on [ ], 2008 but may occur on such later date as the parties may agree in writing (the "Closing Date"). o Your fund will merge with and into an open-end fund, Pioneer Tax Free Income Fund. All of the assets and liabilities of your fund will become the assets and liabilities of Pioneer Tax Free Income Fund, and your fund will cease to exist. The outstanding common shares of your fund will be converted into a number of whole or fractional Class A shares of Pioneer Tax Free Income Fund with an aggregate net asset value equal to the aggregate net asset value of the common shares of your fund immediately prior to the Merger. Your fund's net asset value can be expected to vary from the market value attributable to your fund's common shares. The net asset value of both Pioneer Funds will be computed as of the close of regular trading on the New York Stock Exchange ("NYSE") on the Closing Date. 2 o Holders of each of your fund's common shares and Auction Market Preferred Shares ("AMPS") are entitled to vote on the Agreement and Plan of Merger. An affirmative vote of a majority of the outstanding common shares and an affirmative vote of a majority of the outstanding AMPS, voting separately, will be required to approve the Agreement and Plan of Merger. However, after the Meeting but prior to the Closing Date, your fund will call for redemption and redeem all of its outstanding AMPS. Only common shares will be converted into Class A shares of Pioneer Tax Free Income Fund in the Merger. o No sales load, contingent deferred sales charge, commission, redemption fee or other transaction fee will be charged as a result of the Merger. After the Merger, holders of common shares of your fund will be able to exchange your Class A shares of Pioneer Tax Free Income Fund into Class A shares of other Pioneer Funds without a sales charge. Class A shares are subject to a Rule 12b-1 fee of 0.25%. Class A shares do not currently charge a redemption fee. o The Merger generally will not result in income, gain or loss being recognized for federal income tax purposes by either Pioneer Fund or its common shareholders. However, prior to the Closing Date, your fund is expected to sell certain securities in its portfolio, including all of its non-municipal securities. The disposition of these securities could result in significant brokerage expense to your fund and also will cause your fund to realize gains or losses in its current tax year, which will end on the Closing Date. Your fund will be able to offset any net gain from such securities dispositions with its available net capital loss carryovers, and any gain not so offset will result in a distribution that will be taxable to you. The Trustees anticipate, however, that there will be sufficient loss carryovers to offset any net gain recognized by your fund as a result of securities dispositions. In addition, as noted above, after the Meeting but prior to the Closing Date, your fund will call for redemption and redeem all of its outstanding AMPS. Holders of AMPS will recognize gain or loss equal to the difference between the amount realized on the redemption and the shareholder's tax basis in the shares redeemed. o Any net capital loss carryovers of your fund not used in the taxable year ending on the Closing Date may be utilized in the future by Pioneer Tax Free Income Fund, as the surviving single entity, subject to tax law limitations resulting from the Merger. Subject to applicable limitations, Pioneer Tax Free Income Fund, as the surviving single entity, will be able to utilize its separate tax loss carryforwards against capital gains recognized by Pioneer Tax Free Income Fund following the Merger. o In recommending the Merger, the Board of Trustees of each Pioneer Fund, including all of the Trustees who are not "interested" persons (as defined in the Investment Company Act of 1940, as amended (the "1940 Act")) of the Pioneer Funds, Pioneer Investment Management, Inc., the Pioneer Funds' investment adviser ("Pioneer"), or Pioneer Funds Distributor, Inc., Pioneer Tax Free Income Fund's principal underwriter and distributor ("PFD") (the "Independent Trustees"), have determined that the Merger is in the best interest of the Pioneer Fund and will not dilute the interests of shareholders of the Pioneer Fund. The Trustees of each Pioneer Fund have made this determination based on factors that are discussed below and in greater detail under the proposal. Why Your Fund's Trustees Recommend the Merger The Trustees believe that merging your fund with and into Pioneer Tax Free Income Fund offers you a number of potential benefits, which are highlighted by the following discussion of key differences between the two funds. These potential benefits and considerations include: o Liquidity at net asset value. Pioneer Tax Free Income Fund is an open-end fund that permits redeeming or purchasing shares at net asset value. The Trustees noted that, because common shares of closed-end funds, such as your fund, are not redeemable and instead are bought and sold on the open market, the market price of these shares is influenced by a number of factors and, at times, may trade at a discount (or premium) to net asset value. Your fund's net asset value per share can be expected to vary from the market price of its shares, and your fund's common shares generally have traded at a discount to net asset value, ranging from (3.02)% (high) to (17.25)% (low) over the past two years ended February 29, 2008 and currently have traded at a discount of (6.14)% as of April 30, 2008. The Trustees noted that the merger of your fund into Pioneer Tax Free Income Fund effectively would provide your fund's shareholders with liquidity for their common shares at net asset value, thereby eliminating the discount at which your fund's common shares historically have traded. The Trustees also noted requests for enhanced liquidity from shareholders and changes in your fund's shareholder base related to investors seeking liquidity. o Tax-oriented investment approach. Pioneer Tax Free Income Fund is an established open-end fund that, like your fund, invests in municipal securities that provide income that is exempt from regular federal income tax. The portion of your fund's portfolio invested in municipal securities is similar in many respects to Pioneer Tax Free Income Fund, including overall credit quality, maturity distribution and sector weights. However, unlike Pioneer Tax Free Income Fund, your fund invests at least 25%, and may invest up to 50%, of its total assets in equity securities. As noted above, prior to the Closing Date, your fund will sell the non-municipal securities in its portfolio. 3 o Comparable Performance. Pioneer Tax Free Income Fund's performance was comparable to your fund's performance. As of February 29, 2008, your fund's average annual returns for the past one and three year periods were (14.69)% and 0.72%, respectively. In comparison, Pioneer Tax Free Income Fund's Class A shares' average annual returns as of March 31, 2008 for the past one and three year periods were (5.14)% and 1.29%, respectively. As of February 29, 2008, the average annual return of your fund since its inception on January 30, 2004 is 3.18%. As of March 31, 2008, the average annual return of Class A shares of Pioneer Tax Free Income Fund since its inception on January 18, 1977 is 5.82%. o Yield. The combined fund is expected to have a yield that is comparable to the yield of your fund. Your fund currently offers a slightly higher yield than Pioneer Tax Free Income Fund, mostly as a result of its somewhat higher exposure to below investment-grade bonds. Your fund's portfolio of municipal bonds has a yield calculated using its book value ("book yield") of approximately 6%. Pioneer Tax Free Income Fund's portfolio has a book yield of approximately 5.4%. As of March 31, 2008 the 30-day SEC yields for your Fund's common shares and the Class A shares of Pioneer Tax Free Income Fund were 8.03% and 4.43%, respectively. o Lower operating expenses. The pro forma gross expense ratio for the combined fund's Class A shares is anticipated to be 0.87%. In addition, if shareholders of your fund approve the Merger, Pioneer will contractually agree to limit ordinary operating expense to the extent required to reduce the combined fund's expenses to 0.89% of the average daily net assets attributable to Class A shares of the combined fund. The historical expense ratio for common shares of your fund is 1.26% (the expense ratio does not reflect the effect of dividend payments to preferred shareowners). Therefore, the expense ratio will be lower for the Class A shares of the combined fund as compared to the common shares of your fund. The expense limitation discussed above would be in effect for three years from the date of the Merger. There can be no assurance that Pioneer will extend the expense limitation beyond such time. o Lower management fees. Pioneer Tax Free Income Fund pays a lower management fee rate. Pioneer Tax Free Income Fund's current management fee rate of 0.48% of average daily net assets and the combined fund's anticipated pro forma management fee rate of 0.45% of average daily net assets are each lower than your fund's management fee, which is 0.60% of your fund's average daily managed assets (which is equivalent to 0.83% of your fund's average daily net assets attributable to common shareowners). o Tax Consequences. The transaction is expected to be treated as a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and therefore you will not recognize gain or loss for federal income tax purposes on the conversion of your fund shares into Class A shares of Pioneer Tax Free Income Fund. However, in considering the Merger, the Board noted that prior to the Closing Date, your fund is expected to sell certain securities in its portfolio, including all of its non-municipal securities. The Board recognized that the sale of these securities could result in significant brokerage expense to your fund and also will cause your fund to realize gains or losses in the current tax year, which would then be distributed to shareholders in one or more taxable distributions. The Board also considered that your fund will be able to offset any net gain from the disposition of such securities with its available net capital loss carryovers. The Board anticipates that there will be sufficient loss carryovers to offset any net gain recognized by your fund as a result of securities dispositions. The Board also noted that after the Meeting but prior to the Closing Date, your fund will call for redemption and redeem all of its outstanding AMPS. The Board considered that holders of AMPS will recognize gain or loss equal to the difference between the amount realized on the redemption and the shareholder's tax basis in the shares redeemed. o Alternatives. If the Merger is not approved, the Board will meet to consider all available options, including liquidating your fund to provide all shareholders the opportunity to receive their net asset value and make their own choices as to how to invest their assets. o Other differences. Your fund has used investment leverage through the issuance of AMPS. Your fund has currently issued AMPS with an aggregate liquidation preference of approximately 32% of the fund's total assets. In contrast, Pioneer Tax Free Income Fund may not use leverage through AMPS. As noted above, after the Meeting but prior to the Closing Date, your fund will call for redemption and redeem all of its outstanding AMPS. Holders of AMPS will receive $25,000 per share, plus an amount equal to accumulated but unpaid dividends thereon through the date fixed for redemption. There are differences in shareholder voting between your fund and Pioneer Tax Free Income Fund. Generally, shareholders of listed closed-end funds like your fund have greater voting rights, including rights to vote at annual meetings for the election of trustees in accordance with NYSE rules. Your voting rights and the voting rights of shareholders of Pioneer Tax Free Income Fund are described in more detail below. Therefore, your fund's Trustees recommend that you vote FOR the Merger. 4 What are the Federal Income Tax Consequences of the Merger As a condition to the closing of the Merger, the funds must receive an opinion of Bingham McCutchen LLP to the effect that the Merger will constitute a "reorganization" within the meaning of Section 368 of the Code. Accordingly, subject to the limited exceptions described below under the heading "Tax Status of the Merger," it is expected that neither your fund nor common shareholders of your fund will recognize gain or loss as a direct result of the Merger, and that the aggregate tax basis of the Pioneer Tax Free Income Fund Class A shares that holders of common shares of your fund receive in the Merger will be the same as the aggregate tax basis of the common shares of your fund that you held prior to the Merger. However, in accordance with the Pioneer Funds' policy that each Pioneer Fund distributes its investment company taxable income, net tax-exempt income and net capital gains for each taxable year (in order to qualify for tax treatment as a regulated investment company and avoid federal income tax thereon at the fund level), your fund will declare and pay a distribution of such income and gains to its shareholders shortly before the Merger. Such distribution may affect the amount, timing or character of taxable income that you realize in respect of your fund shares. Such distribution is currently estimated to total $0.1120 in ordinary income per share. Pioneer Tax Free Income Fund may make a comparable distribution to its shareholders shortly before the Merger. Additionally, following the Merger, Pioneer Tax Free Income Fund will declare and pay to its shareholders before the end of 2008 a distribution of any remaining 2008 income and gains. Distributions that Pioneer Tax Free Income Fund declares and pays on your shares after the Closing Date will be reportable to you for tax purposes, even though those distributions may include a portion of Pioneer Tax Free Income Fund's income and gains that were accrued and/or realized before the Closing Date. In addition, as noted above, prior to the Closing Date, your fund is expected to sell certain securities in its portfolio, including all of its non-municipal securities. The disposition of these securities will cause your fund to realize gains or losses in the current tax year. Your fund will be able to offset any net gain from such securities dispositions with its available net capital loss carryovers, and any gain not so offset will result in a distribution that will be taxable to you. The Trustees anticipate, however, that there will be sufficient loss carryovers to offset any net gain recognized by your fund as a result of securities dispositions. Further, as noted above, after the Meeting but prior to the Closing Date, your fund will call for redemption and redeem all of its outstanding AMPS. Holders of AMPS will recognize gain or loss equal to the difference between the amount realized on the redemption and the shareholder's tax basis in the shares redeemed. Who Bears the Expenses Associated with the Merger Your fund will bear the costs of preparing and printing the Proxy Statement/Prospectus and the solicitation costs incurred in connection with the Merger. Your fund also will bear its own costs in connection with the Merger, including the costs associated with redeeming AMPS and the costs of liquidating portfolio securities as described herein, and other redemptions anticipated in connection with the Merger. The Board estimates that these expenses in the aggregate will be approximately $200,000. What Happens if the Merger is Not Approved If the required approval of shareholders of your fund is not obtained, the meeting may be adjourned as more fully described in this Proxy Statement/Prospectus, your fund will continue to engage in the business as a closed-end fund and the Board will consider what further action may be appropriate. Who is Eligible to Vote? Shareholders of record on July 7, 2008 are entitled to attend and vote at the meeting or any adjourned meeting. Each share is entitled to one vote. Holders of common shares and AMPS will vote as separate classes on the proposal. Approval by a majority of holders of common shares and majority of holders of AMPS, voting separately, is required to approve the Agreement and Plan of Merger. Shares represented by properly executed proxies, unless revoked before or at the Meeting, will be voted according to shareholders' instructions. If you sign a proxy but do not fill in a vote, your shares will be voted to approve the Agreement and Plan of Merger. If any other business comes before the meeting, your shares will be voted at the discretion of the persons named as proxies. 5 TABLE OF CONTENTS Page ---- SUMMARY ................................................................................ 7 COMPARISON OF PIONEER MUNICIPAL AND EQUITY INCOME TRUST TO PIONEER TAX FREE INCOME FUND 7 OTHER IMPORTANT INFORMATION CONCERNING THE PROPOSED MERGER ............................. 27 TERMS OF THE AGREEMENT AND PLAN OF MERGER .............................................. 29 TAX STATUS OF THE MERGER ............................................................... 30 BOARDS' EVALUATION AND RECOMMENDATION .................................................. 31 ADDITIONAL INFORMATION ABOUT THE PIONEER FUNDS ......................................... 32 FINANCIAL HIGHLIGHTS ................................................................... 44 INFORMATION CONCERNING THE MEETING ..................................................... 47 VOTING RIGHTS AND REQUIRED VOTE ........................................................ 48 OWNERSHIP OF SHARES OF THE PIONEER FUNDS ............................................... 49 EXPERTS ................................................................................ 49 AVAILABLE INFORMATION .................................................................. 50 EXHIBIT A -- FORM OF AGREEMENT AND PLAN OF MERGER ...................................... A-1 EXHIBIT B -- PORTFOLIO MANAGEMENT DISCUSSION OF EACH PIONEER FUND'S PERFORMANCE ........ B-1
6 PIONEER MUNICIPAL AND EQUITY INCOME TRUST AND PIONEER TAX FREE INCOME FUND SUMMARY The following is a summary of more complete information appearing later in this Proxy Statement/Prospectus or incorporated herein. You should read carefully the entire Proxy Statement/Prospectus, including the form of Agreement and Plan of Merger attached as Exhibit A, because they contain details that are not in the summary. If Proposal 1 is approved, your fund will be merged with and into Pioneer Tax Free Income Fund, as described in this Proxy Statement/ Prospectus. Both your fund and Pioneer Tax Free Income Fund invest in municipal securities that provide income that is exempt from regular federal income tax. The portion of your fund's portfolio invested in municipal securities is similar in many respects to Pioneer Tax Free Income Fund, including overall credit quality, maturity distribution and sector weights. However, unlike Pioneer Tax Free Income Fund, your fund invests at least 25%, and may invest up to 50%, of its total assets in equity securities. Prior to the Closing Date, your fund will sell the non-municipal securities in its portfolio. Your fund, unlike Pioneer Tax Free Income Fund, uses investment leverage through the issuance of AMPS. Your fund has currently issued AMPS with an aggregate liquidation preference of approximately 32% of the fund's total assets. In contrast, Pioneer Tax Free Income Fund does not use leverage in its investment strategy and as an open-end fund is not permitted to issue AMPS. After the Meeting but prior to the Closing Date, your fund will call for redemption and redeem all of its outstanding AMPS. Your fund is subject to additional risks (and the potential higher or lower returns) associated with its equity investments and use of leverage. Your fund, unlike Pioneer Tax Free Income Fund, is a closed-end management investment company, which means that shareholders do not have the right to redeem or exchange their shares. Instead, shareholders of your fund must sell their common shares on the NYSE at the prevailing market price. Market prices can be expected to deviate from the net asset value per share of your fund. Your fund's common shares generally have traded at a discount to net asset value over the past two years ended February 29, 2008, ranging from (3.02)% (high) to (17.25)% (low). Pioneer Tax Free Income Fund is an open-end management investment company, which means that it issues redeemable securities on an ongoing basis and pays its shareholders the net asset value of such shares upon redemption. A more complete discussion of these differences is provided under the heading, "Comparison of a Closed-End Fund and an Open-End Fund." Comparison of Pioneer Municipal and Equity Income Trust to Pioneer Tax Free Income Fund The table below provides a more detailed comparison of the two funds. In the table below, if a row extends across the entire table, the policy disclosed applies to both your fund and Pioneer Tax Free Income Fund.
- --------------------------------------------------------------------------------------------------------------------------- Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund - --------------------------------------------------------------------------------------------------------------------------- Business A diversified closed-end management A diversified open-end management investment company organized as a Delaware investment company organized as a Delaware statutory trust. statutory trust. - --------------------------------------------------------------------------------------------------------------------------- Net assets (as of March 31, $548 million $505.5 million 2008) - $372 million of which is attributable to common assets, $176 million of which is attributable to preferred assets - $301 million of which is attributable to municipal securities, $241 million of which is attributable to equity securities - --------------------------------------------------------------------------------------------------------------------------- Investment adviser and Investment Adviser: portfolio manager Pioneer Investment Management, Inc. ("Pioneer") - ---------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------- Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund - ------------------------------------------------------------------------------------------------------------------------------- Portfolio Managers: Portfolio Manager: Day-to-day management of the fund's portfolio Day-to-day management of the fund's portfolio of municipal securities is the responsibility is the responsibility of David Eurkus, lead of a team of fixed income portfolio managers portfolio manager. Mr. Eurkus is supported by led by Kenneth J. Taubes. The team, which Timothy Pynchon, portfolio manager, and the also includes David Eurkus and Timothy fixed income team. Members of this team Pynchon, manages other Pioneer funds manage other Pioneer funds investing investing primarily in fixed income primarily in fixed income securities. The securities. portfolio managers and the team also may draw upon the research and investment management Mr. Taubes is responsible for overseeing expertise of Pioneer's affiliate, Pioneer Pioneer's fixed income team. Mr. Taubes Investment Management Limited. joined Pioneer as a senior vice president in September 1998 and has been an investment Mr. Eurkus joined Pioneer as a senior vice professional since 1982. Prior to joining president in 2001 and has been an investment Pioneer, Mr. Taubes had served since 1991 as professional since 1969. Mr. Pynchon joined a senior vice president and senior portfolio Pioneer as a vice president in 2000 and has manager for several institutional accounts been an investment professional since 1982. and mutual funds at another investment adviser. Mr. Eurkus joined Pioneer as a The fund's statement of additional senior vice president in 2001 and has been an information provides additional information investment professional since 1969. Mr. about the portfolio manager's compensation, Pynchon joined Pioneer as a vice president in other accounts managed by the portfolio 2000 and has been an investment professional manager, and the portfolio manager's since 1982. ownership of shares of the fund. Day-to-day management of the fund's portfolio of equity securities is the responsibility of a team of domestic equity portfolio managers led by John A. Carey. The team manages other Pioneer funds investing primarily in U.S. equity securities. John A. Carey is the director of portfolio management and an executive vice president of Pioneer. Mr. Carey joined Pioneer as an analyst and has been an investment professional since 1979. The equity team also includes Walter Hunnewell, Jr., a vice president of Pioneer. Mr. Hunnewell joined Pioneer in August 2001 and has been an investment professional since 1985. Prior to joining Pioneer, Mr. Hunnewell was an independent investment manager and a fiduciary of private asset portfolios from 2000 to 2001. He was a global equity analyst with Putnam Investment from 1994 to 1999. - ------------------------------------------------------------------------------------------------------------------------------- Investment objective The fund's investment objective is to provide The fund's investment objective is to provide a high level of total after-tax return, as high a level of current income exempt from including attractive tax-advantaged income. federal income taxes as possible consistent with the preservation of capital. - -------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------- Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund - ------------------------------------------------------------------------------------------------------------------------------- Primary investments Under normal market conditions, the fund Normally, the fund invests at least 80% of invests in a portfolio consisting primarily its total assets in investment grade of (i) municipal securities and (ii) common securities that provide income that is exempt stocks and preferred securities that pay from regular federal income tax and is not tax-qualified dividends. subject to the alternative minimum tax (AMT). These investments include bonds, notes and Municipal Securities other debt instruments issued by or on behalf of states, counties, municipalities, The fund invests at least 50%, and may invest territories and possessions of the United up to 75%, of its total assets in municipal States and the District of Columbia and their securities. The fund is not limited in the authorities, political subdivisions, agencies portion of its municipal securities portfolio or instrumentalities. that may be invested in municipal securities the interest income on which is a preference The fund may invest in securities of any item for purposes of the alternative minimum maturity. The fund may invest 25% or more of tax (AMT). its assets in issuers in any one or more states or securities the payments on which The fund may invest in municipal securities are derived from gas, electric, telephone, with a broad range of maturities and credit sewer and water segments of the municipal ratings, including both investment grade and bond market. The fund may also invest up to below-investment grade municipal securities. 20% of its assets in industrial development bonds. Duration. The average duration of the fund's portfolio of municipal securities ranges from The fund's investments may have fixed or five years to 12 years; however, Pioneer is variable principal payments and all types of not restricted as to such range if Pioneer interest rate payment and reset terms, determines a shorter or longer average including fixed rate, inverse floating rate, duration is in the best interests of the fund floating rate, zero coupon, contingent, in light of market conditions at such times. deferred and payment in kind and auction rate features. The fund's investments may include Credit Management. The fund may invest in instruments that allow for balloon payments municipal securities with a broad range of or negative amortization payments. Such credit ratings, including both investment investments permit the borrower to avoid grade and below-investment grade municipal paying currently a portion of the interest securities. The fund may invest in high yield accruing on the instrument. While these municipal securities of any rating, including features make the debt instrument more securities that are in default at the time of affordable to the borrower in the near term, purchase. they increase the risk that the borrower will be unable to make the resulting higher The fund's investments in revenue obligations payment or payments that become due at the emphasizes municipal securities backed by maturity of the loan. revenue from essential services, such as hospitals and healthcare, power generation, transportation, education and housing. The fund will not invest 25% or more of its assets in municipal securities backed by revenues in the same industry. - -------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------- Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund - ------------------------------------------------------------------------------------------------------------------------------- Equity Investments The fund invests at least 25%, and may invest up to 50%, of its total assets in equity securities. A substantial portion of the equity allocation is invested in securities that Pioneer believes qualify to pay tax-qualified dividends. Investments in equity securities that do not qualify to pay tax-qualified dividends and non-municipal debt securities are not a principal investment strategy. Pioneer retains broad discretion to allocate this portion of the fund's investments between common and preferred stocks. The fund is not limited either in the types of equity securities or the market capitalization of issuers in which it may invest. Although the fund ordinarily focuses its equity investments in securities of U.S. issuers, subject to the limitation of the fund's investments in equity securities and its focus on equity securities that pay tax-qualified dividends, the fund may invest in American Depositary Receipts ("ADRs") and in other securities of foreign issuers located in any geographic region, including securities of issuers based in developing or "emerging market" countries. The fund does not concentrate its investments in a particular industry but is not precluded from focusing investments in issuers in a group of industries in related sectors (such as different types of utilities industries). Tax-qualified dividends generally include dividends from domestic corporations and dividends from foreign corporations that meet certain specified criteria. The fund generally can pass through the tax treatment of tax- qualified dividends it receives from such corporations to its shareholders. For the fund to receive tax-qualified dividends generally, the fund must hold the otherwise qualified stock for more than 60 days during the 120-day period beginning 60 days before the ex- dividend date (or, in the case of preferred stock, more than 90 days during the 180-day period beginning 90 days before the ex- dividend date).
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- ------------------------------------------------------------------------------------------------------------------------------- Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund - ------------------------------------------------------------------------------------------------------------------------------- Investment strategies Pioneer Investment Management, Inc., the fund's investment adviser, considers both broad economic factors and issuer specific factors in selecting a portfolio designed to achieve the fund's investment objective. In assessing the appropriate maturity and rating weighting of the fund's portfolio, Pioneer considers a variety of factors that are expected to influence economic activity and interest rates. These factors include fundamental economic indicators, such as the rates of economic growth and inflation, Federal Reserve monetary policy and the relative value of the U.S. dollar compared to other currencies. Once Pioneer determines the preferable portfolio characteristics, Pioneer selects individual securities based upon the terms of the securities (such as yields compared to U.S. Treasuries or comparable issues), liquidity and rating and issuer diversification. Pioneer also employs fundamental research, an evaluation of the issuer based on its financial statements and operations, to assess an issuer's credit quality, taking into account financial condition, future capital needs and potential for change in rating. In making these portfolio decisions, Pioneer relies on the knowledge, experience and judgment of its staff and the staff of its affiliates who have access to a wide variety of research. - ------------------------------------------------------------------------------------------------------------------------------- Pioneer uses a value approach in selecting the fund's equity investments. Using this investment style, Pioneer seeks securities selling at substantial discounts to their underlying values and then holds these securities until the market values reflect their intrinsic values. Pioneer evaluates a security's potential value, including the attractiveness of its market valuation, based on the company's assets and prospectus for earnings growth. Pioneer also considers a security's potential to provide a reasonable amount of income. In making these assessments, Pioneer employs due diligence and fundamental research, an evaluation of the issuer based on its financial statements and operations, employing a bottom-up analytic style. Pioneer relies on the knowledge, experience and judgment of its staff who have access to a wide variety of research. Pioneer focuses on the quality and price of individual issuers, not on economic sector or market- timing strategies. In selecting investments, Pioneer considers various factors, including: o favorable expected returns relative to perceived risk; o management with demonstrated ability and commitment to the company; o low market valuations relative to earnings forecast, book value, cash flow and sales; and o dividend growth prospects. - -------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------- Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund - ------------------------------------------------------------------------------------------------------------------------------- Other Tax Management The fund also seeks to achieve favorable Strategies after-tax returns in part by reducing the capital gains taxes incurred by shareholders in connection with the fund's portfolio investments. Pioneer attempts to minimize distributions of long-term capital gains taxable to shareholders by avoiding, to the extent consistent with its investment objective, the sale of securities with large accumulated capital gains. Pioneer may sell securities to realize capital losses that can be used to offset realized gains. To protect against price declines in securities holdings with large accumulated gains, the fund may use various hedging techniques (such as the purchase and sale of futures contracts on securities and securities indices and options thereon, the purchase of put options and the sale of call options on securities held, equity swaps, covered short sales, forward sales of securities and the purchase and sale of forward currency exchange contracts and currency futures). By using these techniques rather than selling appreciated securities, the Fund may, subject to certain limitations, attempt to reduce its exposure to price declines in the securities without realizing substantial capital gains under current tax law. There is no assurance that the fund will use these strategies or that they will be successful if used. - ------------------------------------------------------------------------------------------------------------------------------- Other investments -- In addition to investing in municipal The fund may invest up to 20% of its net Taxable investments securities and equity securities that pay assets in taxable securities of other tax-qualified dividends, the fund may invest investment companies, investment grade in other securities, including debt commercial paper, U.S. government securities, instruments, real estate investment trusts U.S. or foreign bank instruments and ("REITs") and equity securities, that repurchase agreements. generate income taxable at ordinary income, rather than long-term capital gain, rates. Although the fund invests primarily in municipal securities and equity securities that pay tax-qualified dividends and to satisfy the holding period requirements, a portion of the fund's income distributions may be taxable as ordinary income. - -------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------- Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund Derivatives The fund may, but is not required to, use futures and options on securities, indices and other derivatives. A derivative is a security or instrument whose value is determined by reference to the value or the change in value of one or more securities, indices or other financial instruments. Although there is no specific limitation on investing in derivatives, the fund does not use derivatives as a primary investment technique and generally limits their use to hedging. However, the fund may use derivatives for a variety of non-principal purposes, including: o As a hedge against adverse changes in the market prices of securities or interest rates o As a substitute for purchasing or selling securities o To increase the fund's return as a non-hedging strategy that may be considered speculative Derivatives may be subject to market risk, interest rate risk and credit risk. The fund's use of certain derivatives may, in some cases, involve forms of financial leverage, which involves risk and may increase the volatility of the fund's net asset value. Even a small investment in derivatives can have a significant impact on the fund's investment exposure to the market prices of securities or interest rates. Therefore, using derivatives can disproportionately increase losses and reduce opportunities for gain. If changes in a derivative's value do not correspond to changes in the value of the fund's other investments or do not correlate well with the underlying asset, rate or index, the fund may not fully benefit from or could lose money on the derivative position. In addition, some derivatives involve risk of loss if the issuer of the derivative defaults on its obligation. Certain derivatives may be less liquid. Some derivatives may involve the risk of improper valuation, which may reduce the returns of the fund if it cannot sell or terminate the derivative at an advantageous time or price. The fund will only invest in derivatives to the extent Pioneer believes these investments do not prevent the fund from seeking its investment objective, but derivatives may not perform as intended. Suitable derivatives may not be available in all circumstances or at reasonable prices and may not be used by the fund for a variety of reasons. - ------------------------------------------------------------------------------------------------------------------------------- Illiquid Investments The fund may invest up to 20% of its total The fund may invest up to 15% of its net assets in illiquid securities. assets in illiquid and other securities that are not readily marketable. - ------------------------------------------------------------------------------------------------------------------------------- Below investment grade The fund will not invest more than 15% of its The fund may invest up to 10% of its net securities total assets in fixed income securities, assets in debt securities rated below including municipal securities, rated below investment grade or, if unrated, of investment grade at the time of acquisition equivalent quality as determined by Pioneer. (that is, rated Ba or lower by Moody's or BB The fund may invest in debt securities rated or lower by S&P or, if unrated, determined by "D" or better, or comparable unrated Pioneer to be of comparable credit quality). securities. - -------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------- Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund - ------------------------------------------------------------------------------------------------------------------------------- Collateralized debt The fund may invest in asset-backed obligations securities issued by special entities, such as trusts, that are backed by a pool of financial assets. The fund may invest in collateralized debt obligations (CDOs), which include collateralized bond obligations (CBOs), collateralized loan obligations (CLOs) and other similarly structured securities. A CDO is a trust backed by a pool of fixed income securities. The trust typically is split into two or more portions, called tranches, which vary in credit quality and yield. Lower tranches pay higher interest rates but represent lower degrees of credit quality and are more sensitive to the rate of defaults in the pool of obligations. The risks of an investment in a CDO depend largely on the type of the underlying obligations (e.g., an underlying obligation may decline in quality or default) and the tranche of the CDO in which the fund invests (e.g., the fund may invest in a tranche of CDO that is subordinate to other tranches). Investments in CDOs may be characterized by the fund as illiquid securities, which may be difficult to sell at an advantageous time or price. - ------------------------------------------------------------------------------------------------------------------------------- Inverse floating rate The fund may invest up to 10% of its net obligations assets in inverse floating rate obligations (a type of derivative instrument). Inverse floating rate obligations represent interests in tax- exempt bonds. The interest rate on inverse floating rate obligations will generally decrease as short-term interest rates increase, and increase as short-term rates decrease. Due to their leveraged structure, the sensitivity of the market value of an inverse floating rate obligation to changes in interest rates is generally greater than a comparable long-term bond issued by the same municipality and with similar credit quality, redemption and maturity provisions. Inverse floating rate obligations may be volatile and involve leverage risk. - -------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------- Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund - ------------------------------------------------------------------------------------------------------------------------------- Cash management and Normally, the fund invests substantially all temporary investments of its assets to meet its investment objective. The fund may invest the remainder of its assets in securities with remaining maturities of less than one year or cash equivalents, or may hold cash. For temporary defensive purposes, including during periods of unusual cash flows, the fund may depart from its principal investment strategies and invest part or all of its assets in these securities or may hold cash. During such periods, the fund may not be able to achieve its investment objective. The fund may adopt a defensive strategy when Pioneer believes securities in which the fund normally invests have extraordinary risks due to political or economic factors and in other extraordinary circumstances. - ------------------------------------------------------------------------------------------------------------------------------- Short-term trading The fund usually does not trade for short-term profits. The fund will sell an investment, however, even if it has only been held for a short time, if it no longer meets the fund's investment criteria. If the fund does a lot of trading, it may incur additional operating expenses, which would reduce performance, and could cause shareowners to incur a higher level of taxable income or capital gains. - ------------------------------------------------------------------------------------------------------------------------------- Fees and Expenses - ------------------------------------------------------------------------------------------------------------------------------- Sales charges and fees Shares purchased on the secondary market are o Class A shares are generally offered not subject to sales charges but may be with an initial sales charge up to 4.50% subject to brokerage commissions or other of the offering price, which is reduced charges. or waived for large purchases and certain types of investors. At the time of your purchase, your investment firm may receive a commission from PFD, the fund's distributor, of up to 4%, declining as the size of your investment increases. The Class A shares that the holders of common shares of Pioneer Municipal and Equity Income Trust will receive in connection with the Merger will not be subject to an initial sales charge. - -------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------- Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund - ------------------------------------------------------------------------------------------------------------------------------- Fees and Expenses - ------------------------------------------------------------------------------------------------------------------------------- o There are no contingent deferred sales charges, except in certain circumstances when the initial sales charge is waived. A contingent deferred sales charge may be payable to PFD, the fund's distributor, in the event of a share redemption within 18 months following the share purchase at the rate of 1% of the lesser of the value of the shares redeemed or the total cost of such shares, subject to certain waivers. o Class A shares are subject to distribution and service (12b-1) fees of 0.25% of average daily net assets. These fees are paid out of the fund's assets on an ongoing basis. Over time these fees will increase the cost of investments and may cost more than other types of sales charges. - ------------------------------------------------------------------------------------------------------------------------------- Management fees The fund pays Pioneer a fee for managing the The fund pays Pioneer a fee for managing the fund and to cover the cost of providing fund and to cover the cost of providing certain services to the fund. Pioneer's certain services to the fund. Pioneer's annual fee is equal to 0.60% of the fund's annual fee is equal to 0.50% of the fund's average daily managed assets. "Managed average daily net assets up to $250 million, assets" is the average daily value of the 0.45% of the next $500 million and 0.40% on fund's total assets minus the sum of the assets over $750 million. The fee is accrued fund's liabilities, which liabilities exclude daily and paid monthly. debt related to leverage, short-term debt and the aggregate liquidation preference of any Prior to January 1, 2008, the fund paid outstanding AMPS. Pioneer an annual fee equal to 0.50% of the fund's average daily net assets up to $250 For the year ended November 30, 2007, the net million, 0.48% of the next $50 million and management fee was 0.60% of the fund's 0.45% on assets over $300 million. average daily managed assets, which was equivalent to 0.83% of the fund's average For the fiscal year ended December 31, 2007, daily net assets attributable to common the fund paid management fees equivalent to shareholders. 0.47% of the fund's average daily net assets. A discussion regarding the basis for the A discussion regarding the basis for the Board of Trustees' most recent approval of Board of Trustees' most recent approval of the management contract is available in the the management contract is available in the fund's annual report to shareholders for the fund's annual report to shareholders for the fiscal year ended November 30, 2007. fiscal year ended December 31, 2007. - ------------------------------------------------------------------------------------------------------------------------------- Fees and Expenses For a comparison of the gross and net expenses of both Pioneer Funds, please see the fee tables in the "The Pioneer Funds' Fees and Expenses" section starting on page 20. - -------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------- Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund - ------------------------------------------------------------------------------------------------------------------------------- Buying, Selling and Exchanging Shares - ------------------------------------------------------------------------------------------------------------------------------- Buying shares Shares of your fund are listed on the NYSE You may buy shares from any investment firm and may be purchased in the secondary market that has a sales agreement with PFD, the through an authorized broker and subject to fund's distributor. You can buy shares at the brokerage commission or other fees charged by offering price. You may use securities you such broker. own to purchase shares of the fund provided that Pioneer, in its sole discretion, Your fund does not issue new shares except in determines that the securities are consistent connection with its dividend reinvestment with the fund's objective and policies and plan. its acquisition is in the best interests of the fund. If you have an existing non-retirement account, you may purchase shares of the fund by telephone or online. Certain IRAs also may use the telephone purchase privilege. - ------------------------------------------------------------------------------------------------------------------------------- Minimum initial investment Not applicable. See "Buying Shares" above. Your initial investment must be at least $1,000 for Class A shares. Additional investments must be at least $100 for Class A shares. You may qualify for lower initial or subsequent investment minimums if you are opening a retirement plan account, establishing an automatic investment plan or placing your trade through your investment firm. - ------------------------------------------------------------------------------------------------------------------------------- Exchanging shares Not applicable. See "Buying Shares" above. You may exchange your Class A shares for shares of the same class of another Pioneer mutual fund. Your exchange request must be for at least $1,000. Each Pioneer Fund allows you to exchange your shares at net asset value without charging you either an initial or contingent deferred shares charge at the time of the exchange. Shares you acquire as part of an exchange will continue to be subject to any contingent deferred sales charge that applies to the shares you originally purchased. When you ultimately sell your shares, the date of your original purchase will determine your contingent deferred sales charge. An exchange generally is treated as a sale and a new purchase of shares for federal income tax purposes. Class A shares received by shareholders of Pioneer Municipal and Equity Income Trust in connection with the Merger will not be subject to a contingent deferred sales charge. After you establish an eligible fund account, you can exchange shares of a Pioneer Fund by telephone or online. - -------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------- Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund - ------------------------------------------------------------------------------------------------------------------------------- Selling shares Shares of your fund are listed on the NYSE Your shares will be sold at net asset value and may be sold in the secondary market per share next calculated after the fund through an authorized broker at the market receives your request in good order. If the value. shares you are selling are subject to a deferred sales charge, it will be deducted from the sale proceeds. If you have an eligible non-retirement account, you may sell up to $100,000 per account per day by telephone or online. You may sell shares of the fund held in a retirement plan account by telephone only if your account is an eligible IRA (tax penalties may apply). - ------------------------------------------------------------------------------------------------------------------------------- Net asset value Each Pioneer Fund's net asset value is the value of its portfolio of securities plus any other assets minus its operating expenses and any other liabilities. Each Pioneer Fund calculates a net asset value for each class of shares every day the New York Stock Exchange is open when regular trading closes (normally 4:00 p.m. Eastern time). - ------------------------------------------------------------------------------------------------------------------------------- You buy or sell shares at the share price. When you buy Class A shares, you pay an initial sales charge unless you qualify for a waiver or reduced sales charge. When you sell Class A shares, you may pay a contingent deferred sales charge depending on how long you have owned your shares. The Class A shares that the holders of common shares of Pioneer Municipal and Equity Income Trust will receive in connection with the Merger will not be subject to an initial sales charge or a contingent deferred sales charge. - -------------------------------------------------------------------------------------------------------------------------------
Comparison of Principal Risks of Investing in the Pioneer Funds Each Pioneer Fund is subject to similar principal risks. You could lose money on your investment in each Pioneer Fund or not make as much as if you invested elsewhere if: o Interest rates go up, causing the value of the fund's investments to decline. This is known as interest rate risk (this risk may be greater for securities with longer maturities) o The issuer of a security owned by the fund fails to pay principal and/or interest, otherwise defaults or is perceived to be less creditworthy, the security's credit rating is downgraded, or the credit quality of any underlying assets declines. This is known as credit risk. This risk is greater for high yield securities than for securities of higher credit quality o New federal or state legislation or other developments adversely affects the tax-exempt status of securities held by the fund or the financial ability of municipalities to repay these obligations o The issuer of a security owned by the fund may not be able to make timely payments because of a general economic downturn or increased governmental costs o To the extent the fund concentrates its investments in a single state or securities the payments on which are dependent upon a single industry, the fund will be more susceptible to risks associated with that state or industry o Pioneer is incorrect in its expectation of changes in interest rates or the credit quality of an issuer 18 Although distributions of interest income from each Pioneer Fund's tax-exempt securities are generally exempt from federal income tax, distributions from other sources, including capital gain distributions, and any gains on the sale of your shares, are not. You should consult a tax adviser about whether the alternative minimum tax applies to you and about state and local taxes on your fund distributions. To the extent that a Pioneer Fund emphasizes, from time to time, investments in a market segment, the fund will be subject to a greater degree to the risks particular to the industries in that segment, and may experience greater market fluctuation, than a fund without the same focus. Additional Principal Risks of Investing in Pioneer Municipal and Equity Income Trust Shareholders of your fund are subject to the following additional risks as a result of the fund's equity investments: o Common Stock Risk. The common stocks and other equity securities in which your fund invests may experience substantial volatility in their market value. Although common stocks typically provide higher returns than debt securities, they are also more susceptible to adverse changes in market value due to issuer-specific events, such as unfavorable earnings reports, negative press releases and market related news. The market values of common stocks are also sensitive to changes in investor perceptions as well as general movements in the equities markets. Common stock holders are also subordinate to debt holders and other senior security holders in an issuer's capital structure, and a common stock may not have any value in the event the issuer declares bankruptcy or is subject to the claims of creditors if the value of the issuer's assets does not exceed the issuer's liabilities. Common stock prices may be sensitive to rising interest rates, as the costs of capital or borrowing increase. Common stocks are also subject to the general risks of the issuer's industry, sector, geographic region and market capitalization. o Value Investing Risk. Your fund focuses its equity investments on dividend-paying common and preferred stocks that Pioneer believes are undervalued or inexpensive relative to other investments. Such securities are subject to the risk of mis-estimation of certain fundamental factors. In addition, during certain time periods market dynamics may favor "growth" stocks of issuers that do not display strong fundamentals relative to market price based upon positive price momentum and other factors. Because your fund is a closed-end fund that uses leverage, shareholders of the fund are subject to the following additional risks: o Market Discount Risk. Because your fund is a closed-end fund, it is subject to the risk that its shares may trade at prices lower than net asset value. This is a risk that is not applicable to open-end funds, such as Pioneer Tax Free Income Fund, because shares of open-end funds are not traded on a secondary market and are redeemable at their net asset value on any day the NYSE is open. A more complete discussion on these differences is provided under the heading, "Comparison of a Closed-End Fund and an Open-End Fund." o Leveraging Risk. Your fund uses investment leverage through the issuance of AMPS. Your fund has currently issued AMPS with an aggregate liquidation preference of approximately 32% of the fund's total assets. Your fund is also authorized to borrow or issue debt securities for leveraging purposes up to such limitation and in excess of such limitation for temporary purposes, such as the settlement of transactions. In contrast, Pioneer Tax Free Income Fund does not use leverage in its investment strategy and, as an open-end fund, is not permitted to issue AMPS. Leverage creates risks which may adversely affect the return for the holders of common shares of your fund, including: o the likelihood of greater volatility of net asset value and market price of and dividends on the fund's common shares; o fluctuations in the dividend rates on any AMPS or in interest rates on borrowings and short-term debt; o increased operating costs, which are borne entirely by the fund's common shares and which may reduce the total return on the Fund's common shares; and o the potential for a decline in the value of an investment acquired with leverage, while the fund's obligations as a result of such leverage remain fixed. To the extent the income or capital appreciation derived from securities purchased with funds received from leverage exceeds the cost of leverage, the fund's return will be greater than if leverage had not been used. Conversely, if the income or capital appreciation from the securities purchased with such funds is not sufficient to cover the cost of leverage or if the fund's assets decline in value, the return of the fund will be less than if leverage had not been used, and therefore the amount available for distribution to shareholders as dividends and other distributions will be reduced or potentially eliminated. 19 The dividend rates for your fund's AMPS are reset in auctions conducted every seven or 28 days. Recently, the credit markets have experienced increased volatility and significantly reduced availability of capital, which have led many of the auctions of auction rate securities, including the auctions of your fund's AMPS, to fail. Upon auction failure, the dividend rate for the next succeeding dividend period is set according to a pre-determined formula, and the resulting rate is higher than the rate which the fund otherwise would pay as a result of a successful auction. Higher dividend rates on the AMPS, which may be indefinite in duration, may reduce the amount of the distributions the fund pays to the holders of its common shares. Alternative forms of leverage have different features and costs. Investment in AMPS of your fund are subject to certain special risk considerations, including: Liquidity Risk. Liquidity risk is the possibility that holders of AMPS might be unable to redeem their shares at an auction. Historically, the auctions have provided a means of liquidity to investors wishing to sell their AMPS. An auction is deemed to "fail" if some portion of the preferred shares that were offered for sale at a particular auction were not matched with buyers. Recently, auctions of AMPS have failed as a result of developments in the credit markets. o When an auction fails, holders of AMPS will not be able to sell some or all of their shares. This situation may continue for a prolonged period of time. o Because of the nature of the market for AMPS, holders of AMPS may receive less than the price they paid for their AMPS if the AMPS are sold outside of the auction, especially when market interest rates are rising. A market outside the auction may not be available. o A rating agency could, at any time, downgrade or withdraw its rating assigned to the AMPS without prior notice to the fund or shareholders. Any downgrading or withdrawal of rating could affect the liquidity of the AMPS in an auction. Credit Risk. If interest rates rise, the value of the fund's investment portfolio will decline, reducing the asset coverage for the AMPS. Consequently, holders of AMPS could get back less than the par value of their shares. Redemption. The fund may be forced to redeem AMPS to meet regulatory or rating agency requirements or may voluntarily redeem AMPS in certain circumstances. Dividends. In certain circumstances, the fund may not earn sufficient income from its investments to pay dividends on the AMPS. The Pioneer Funds' Fees and Expenses Shareholders of both Pioneer Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy and hold shares of each Pioneer Fund. The expenses in the tables appearing below are based on (i) for your fund, the expenses of common shares your fund for the twelve-month period ended November 30, 2007, and (ii) for Pioneer Tax Free Income Fund, the expenses of Class A shares of Pioneer Tax Free Income Fund for the twelve-month period ended December 31, 2007. Future expenses for all share classes may be greater or less. The tables also show the pro forma expenses of the combined fund assuming the Merger occurred on December 31, 2007. 20
Combined Pioneer Pioneer Pioneer Tax Free Municipal and Tax Free Income Fund Equity Income Trust Income Fund (Pro Forma (12 months ended (12 months ended 12 months ended November 30, 2007) December 31, 2007) December 31, 2007) --------------------- ------------------- ------------------ Shareholder transaction fees (paid directly from your investment) Common Shares Class A Class A Maximum sales charge (load) when you buy shares as a percentage of offering price ......................... None(1) 4.50% 4.50% Maximum deferred sales charge (load) as a percentage of offering price or the amount you receive when you sell shares, whichever is less ............................ None(2) None(4) None(4) Dividend reinvestment plan fees ....................... None(2) None None Redemption fee as a percentage of amount redeemed, if applicable ........................................ None(3) None None Annual Fund operating expenses (deducted from fund assets) as a % of average daily net assets Management Fee ........................................ 0.83%(5) 0.48%(7) 0.45%(7) Distribution and Service (12b-1) Fee .................. None(1) 0.25% 0.25% Other Expenses ........................................ 0.43% 0.16%(7) 0.17%(7) Total Annual Fund Operating Expenses(6) ............... 1.26% 0.89%(7) 0.87%(7) - ----------------------------------------------------------------------------------------------------------------------------- Less: Fee Waiver and Expense Limitations .............. 0.00% 0.00% 0.00%(8) Net Expenses .......................................... 1.26% 0.89%(7) 0.87%(8)
The hypothetical examples below help you compare the cost of investing in each Pioneer Fund. It assumes that: (a) you invest $10,000 in each Pioneer Fund for the time periods shown, (b) you reinvest all dividends and distributions, (c) your investment has a 5% return each year, (d) each Pioneer Fund's total operating expenses remain the same and (e) Pioneer's contractual expense limitation for the combined Pioneer Tax Free Income Fund's Class A shares is in effect through year three. Pro forma expenses are included assuming a Merger with your fund and Pioneer Tax Free Income Fund. The examples are for comparison purposes only and are not a representation of either fund's actual expenses or returns, either past or future.
Combined Pioneer Pioneer Number of years Municipal and Pioneer Tax Free Income Fund you own your shares Equity Income Trust Tax Free Income Fund (Pro Forma) - ------------------------------------- ------------------- -------------------- -------------------- Class A -- assuming redemption at end of period Year 1 ............................. $ 128 $ 537 $ 535 Year 3 ............................. $ 400 $ 721 $ 715 Year 5 ............................. $ 692 $ 921 $ 911 Year 10 ............................ $1,523 $1,497 $1,474 Class A -- assuming no redemption Year 1 ............................. $ 128 $ 537 $ 535 Year 3 ............................. $ 400 $ 721 $ 715 Year 5 ............................. $ 692 $ 921 $ 911 Year 10 ............................ $1,523 $1,497 $1,474
- ---------- (1) Shares of your fund purchased on the secondary market are not subject to sales charges, deferred sales charges (or 12b-1 fees) but may be subject to brokerage commissions or other charges. The table does not reflect the underwriting commission paid by your fund's shareholders in connection with the initial offering of common shares. (2) A shareholder that directs the dividend reinvestment plan agent to sell shares held in a dividend reinvestment account will pay brokerage charges. (3) Shares of your fund are not redeemable, and any sales of shares must be effected in the secondary market. 21 (4) Class A purchases of $1 million or more and purchases by participants in certain group plans are not subject to an initial sales charge but may be subject to a contingent deferred sales charge of 1%. (5) Pioneer's annual fee is equal to 0.60% of your fund's average daily managed assets. "Managed assets" is the average daily value of your fund's total assets minus the sum of the your fund's liabilities, which liabilities exclude debt related to leverage, short-term debt and the aggregate liquidation preference of any outstanding AMPS. For the year ended, November 30, 2007, the net management fee was 0.60% of your fund's average daily managed assets, which was equivalent to 0.83% of the Trust's average daily net assets attributable to common shareowners. (6) Each Pioneer Fund's total annual operating expenses in the table have not been reduced by any expense offset arrangements. (7) Fees and expenses of Pioneer Tax Free Income Fund have been restated to reflect current fees. (8) If shareholders of your fund approve the Merger, Pioneer will contractually agree to limit the combined fund's ordinary operating expense to the extent required to reduce the combined fund's expenses to 0.89% of the average daily net assets attributable to Class A shares of the combined fund. This expense limitation would be in effect for three years from the date of the Merger. There can be no assurance that Pioneer will extend the expense limitations beyond such time. Comparison of each Pioneer Fund's Performance The following table shows your fund's highest and lowest NYSE market price per share for each quarter over the past two fiscal years and the quarters ended February 29, 2008 and May 31, 2008. Also included in the table is the net asset value per share of your fund on that date and the percentage discount or premium to net asset value (expressed as a percentage) that the sales price represents.
- ----------------------------------------------------------------------------------- (Discount)/Premium NYSE Market Price* Net Asset Value Percentage - ----------------------------------------------------------------------------------- Quarter Ended High Low High Low High Low - ----------------------------------------------------------------------------------- February 28, 2006 $12.87 $12.05 $15.24 $14.53 (14.91)% (18.35)% - ----------------------------------------------------------------------------------- May 31, 2006 $12.91 $12.21 $15.28 $14.64 (14.86)% (16.68)% - ----------------------------------------------------------------------------------- August 31, 2006 $13.05 $12.25 $15.45 $14.66 (15.08)% (17.25)% - ----------------------------------------------------------------------------------- November 30, 2006 $14.00 $13.00 $16.17 $15.39 (13.42)% (15.67)% - ----------------------------------------------------------------------------------- February 28, 2007 $14.55 $13.87 $16.43 $16.08 (10.46)% (14.54)% - ----------------------------------------------------------------------------------- May 31, 2007 $15.25 $14.32 $16.64 $16.15 (7.70)% (11.75)% - ----------------------------------------------------------------------------------- August 31, 2007 $15.26 $12.97 $16.50 $14.76 (6.11)% (12.13)% - ----------------------------------------------------------------------------------- November 30, 2007 $14.58 $13.22 $15.64 $14.46 (5.57)% (10.13)% - ----------------------------------------------------------------------------------- February 29, 2008 $14.03 $12.56 $14.82 $12.97 (3.02)% (9.61)% - ----------------------------------------------------------------------------------- May 31, 2008 $12.99 $11.60 $13.44 $12.76 (2.11)% (9.18)% - -----------------------------------------------------------------------------------
- ---------- As of June 30, 2008, your fund had a market value per share of $[ ] and a net asset value per share of $[ ], resulting in a [ ]% discount to net asset value. * Market price refers to the inter-dealer price, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions. The following charts provide some indication of the risk of investing in your fund or Pioneer Tax Free Income Fund by showing changes in each fund's performance from year to year and by showing how each fund's average annual returns for 1, 5 and 10 years compare with those of a broad measure of market performance. The bar charts show the year-by-year performance of common shares of Pioneer Municipal and Equity Income Trust and Class A shares of Pioneer Tax Free Income Fund for the past 10 calendar years or since inception if less than 10 years. The chart does not reflect any sales charge you may pay when you buy or sell Pioneer Fund shares. Any sales charge will reduce your return. 22 The table below shows the average annual total returns for Pioneer Municipal and Equity Income Trust (at net asset value and at market price) and average annual total returns (before and after taxes) for Pioneer Tax Free Income Fund's Class A shares over time, each compared with a broad-based securities market index. Past performance (before and after taxes) does not indicate future results. Pioneer Municipal and Equity Income Trust's Annual Returns -- Common Shares* (Years ended December 31) [THE FOLLOWING DATA IS A REPRESENTATION OF A BAR CHART IN THE PRINTED MATERIAL] '05 5.39 '06 14.36 '07 -5.14
- ---------- * During the period shown in the bar chart, Pioneer Municipal and Equity Income Trust's highest quarterly return was 6.70% for the quarter ended September 30, 2006, and the lowest quarterly return was (4.75)% for the quarter ended December 31, 2007. For the period from January 1, 2008 to June 30, 2008, Pioneer Municipal and Equity Income Trust's return was [ ]%. Pioneer Tax Free Income Fund's Annual Returns -- Class A Shares* (Years ended December 31) [THE FOLLOWING DATA IS A REPRESENTATION OF A BAR CHART IN THE PRINTED MATERIAL] '98 6.20 '99 -4.29 '00 11.63 '01 4.13 '02 7.06 '03 5.80 '04 4.76 '05 4.05 '06 5.31 '07 -1.23
- ---------- * During the period shown in the bar chart, Pioneer Tax Free Income Fund's highest quarterly return was 4.84% for the quarter ended December 31, 2000, and the lowest quarterly return was (3.38)% for the quarter ended June 30, 2004. For the period from January 1, 2008 to June 30, 2008, Pioneer Tax Free Income Fund's return was [ ]% 23 Average Annual Total Returns (for periods ended December 31, 2007)
- --------------------------------------------------------------------------------------------------------------------------- Since Inception 1 Year (1/30/04) - --------------------------------------------------------------------------------------------------------------------------- Pioneer Municipal and Equity Income Trust - --------------------------------------------------------------------------------------------------------------------------- Common Shares -- (at net asset value before taxes)(1) (5.14)% 5.71% - --------------------------------------------------------------------------------------------------------------------------- Common Shares -- (at market value before taxes)(1) 2.76% 2.94% - --------------------------------------------------------------------------------------------------------------------------- Lehman Brothers Municipal Bond Index (reflects no deduction for taxes)(2) 3.36% 3.98% - --------------------------------------------------------------------------------------------------------------------------- Standard & Poor's 500 Stock Index (reflects no deduction for taxes)(2) 5.49% 8.87% - ---------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------- Since Inception 1 Year 5 Years 10 Years (1/18/77) - --------------------------------------------------------------------------------------------------------------------------- Pioneer Tax Free Income Fund - --------------------------------------------------------------------------------------------------------------------------- Class A -- Before Taxes (5.65)% 2.75% 3.78% 5.84% - --------------------------------------------------------------------------------------------------------------------------- Class A -- After Taxes on Distribution(3) (5.68)% 2.73% 3.66% 5.67% - --------------------------------------------------------------------------------------------------------------------------- Class A -- After Taxes on Distributions and Sale of Fund Shares(3) (2.31)% 2.98% 3.82% 5.72% - --------------------------------------------------------------------------------------------------------------------------- Lehman Brothers Municipal Bond Index 3.36% 4.30% 5.18% 7.49%(5) (reflects no deduction for taxes)(4) - ---------------------------------------------------------------------------------------------------------------------------
- ---------- (1) The average annual total returns reflect reinvestment of all dividends and distributions. Distributions are assumed, for this calculation, to be reinvested at prices obtained under the dividend reinvestment plan. The performance does not reflect any brokerage commissions associated with the purchase or sale of the common shares on the NYSE, any underwriting spread or sales charges paid in Pioneer Municipal and Equity Income Trust's initial public offering of its common shares or the deduction of taxes a shareholder would pay on distributions or the sale of common shares. (2) The Lehman Brothers Municipal Bond Index is a broad measure of the municipal bond market. The Standard & Poor's 500 Stock Index (the S&P 500) is a commonly used measure of the broad U.S. stock market. Unlike the fund, the indexes are not managed and do not incur fees, expenses or taxes. You cannot invest directly in an index. (3) After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. Furthermore, the after-tax returns shown are not relevant to shareholders who hold a Pioneer Fund's shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. (4) The Lehman Brothers Municipal Bond Index is a broad measure of the municipal bond market. Unlike the fund, the index is not managed and does not incur fees, expenses or taxes. You cannot invest directly in an index. The table reflects sales charges applicable to the class, assumes that you sell your shares at the end of the period and assumes that you reinvest all of your dividends and distributions. (5) Since December 31, 1979. Index return information is not available for prior periods. The most recent portfolio management discussion of each Pioneer Fund's performance is attached as Exhibit B. 24 Other Investment Policies In addition to the principal investment policies described above, each Pioneer Fund is subject to the following fundamental investment restrictions. These restrictions may not be changed without the approval of the holders of a majority of the fund's outstanding voting securities (as defined in the 1940 Act) (a "1940 Act Majority"). A 1940 Act Majority means the lesser of (i) 67% of the shares represented at a meeting, if the holders of more than 50% of the outstanding shares are present in person or by proxy, or (ii) more than 50% of the outstanding shares of the fund. With respect to your fund, the investment restrictions cannot be changed without the approval of a 1940 Act Majority of the outstanding common shares and AMPS, voting together as a class, and the approval of a 1940 Act Majority of the outstanding AMPS, voting separately.
- ------------------------------------------------------------------------------------------------------------------ Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund - ------------------------------------------------------------------------------------------------------------------ Borrowing The fund may not borrow money, except as The fund may not borrow money except as permitted by applicable law, as amended and permitted by (i) the 1940 Act, or interpreted or modified from time to time by interpretations or modifications by the any regulatory authority having jurisdiction. Securities and Exchange Commission (the "SEC"), SEC staff or other authority of competent jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority of competent jurisdiction. - ------------------------------------------------------------------------------------------------------------------ Underwriting The fund may not act as an underwriter, The fund may not engage in the business of except insofar as the fund technically may be underwriting the securities of other issuers deemed to be an underwriter in connection except as permitted by (i) the 1940 Act, or with the purchase or sale of its portfolio interpretations or modifications by the SEC, securities. SEC staff or other authority of competent jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority of competent jurisdiction. - ------------------------------------------------------------------------------------------------------------------ Lending The fund may not make loans, except that the The fund may lend money or other assets to fund may (i) lend portfolio securities in the extent permitted by (i) the 1940 Act, or accordance with the fund's investment interpretations or modifications by the SEC, policies, (ii) enter into repurchase SEC staff or other authority of competent agreements, (iii) purchase all or a portion jurisdiction, or (ii) exemptive or other of an issue of publicly distributed debt relief or permission from the SEC, SEC staff securities, bank loan participation or other authority of competent jurisdiction. interests, bank certificates of deposit, acceptances, debentures or other securities, whether or not the purchase is made upon the original issuance of the securities, (iv) participate in a credit facility whereby the fund may directly lend to and borrow money from other affiliated funds to the extent permitted under the 1940 Act or an exemption therefrom, and (v) make loans in any other manner consistent with applicable law, as amended and interpreted or modified from time to time by any regulatory authority having jurisdiction. - ------------------------------------------------------------------------------------------------------------------ Issuing Senior The fund may not issue senior securities, The fund may not issue senior securities Securities except as permitted by applicable law, as except as permitted by (i) the 1940 Act, or amended and interpreted or modified from time interpretations or modifications by the SEC, to time by any regulatory authority having SEC staff or other authority of competent jurisdiction. Senior securities that the fund jurisdiction, or (ii) exemptive or other may issue in accordance with the 1940 Act relief or permission from the SEC, SEC staff include AMPS, borrowing, futures, when-issued or other authority of competent jurisdiction. and delayed delivery securities and forward foreign currency exchange transactions. - ------------------------------------------------------------------------------------------------------------------
25
- ------------------------------------------------------------------------------------------------------------------- Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund - ------------------------------------------------------------------------------------------------------------------- Real Estate The fund may not invest in real estate, The fund may not purchase or sell real estate except the fund may invest in securities of except as permitted by (i) the 1940 Act, or issuers that invest in real estate or interpretations or modifications by the SEC, interests therein, securities that are SEC staff or other authority of competent secured by real estate or interests therein, jurisdiction, or (ii) exemptive or other securities of real estate investment trusts, relief or permission from the SEC, SEC staff mortgage-backed securities and other or other authority of competent jurisdiction. securities that represent a similar indirect interest in real estate, and the fund may acquire real estate or interests therein through exercising rights or remedies with regard to an instrument. - ------------------------------------------------------------------------------------------------------------------- Commodities The fund may not invest in commodities or The fund may purchase or sell commodities or commodity contracts, except that the fund may contracts related to commodities to the invest in currency instruments and contracts extent permitted by (i) the 1940 Act, or and financial instruments and contracts that interpretations or modifications by the SEC, might be deemed to be commodities and SEC staff or other authority of competent commodity contracts. A futures contract, for jurisdiction, or (ii) exemptive or other example, may be deemed to be a commodity relief or permission from the SEC, SEC staff contract. or other authority of competent jurisdiction. - ------------------------------------------------------------------------------------------------------------------- Concentration The fund may not invest 25% or more of the Except as permitted by exemptive or other value of its total assets in any one relief or permission from the SEC, SEC staff industry, provided that this limitation does or other authority of competent jurisdiction, not apply to municipal securities other than the fund may not make any investment if, as a those municipal securities backed by assets result, the Fund's investments will be and revenues of similar projects. concentrated in any one industry. - ------------------------------------------------------------------------------------------------------------------- Diversification The fund may not make any investment The fund does not have a fundamental policy inconsistent with its classification as a regarding diversification. However, the fund diversified closed-end investment company (or is a diversified open-end investment company series thereof) under the 1940 Act. This under the 1940 Act. This means that with means that with respect to 75% of the its respect to 75% of the its total assets, the total assets, the fund may not purchase fund may not purchase securities of an issuer securities of an issuer (other than the U.S. (other than the U.S. government, its agencies government, its agencies or or instrumentalities), if such purchase would instrumentalities), if such purchase would cause more than 5% of the fund's total cause more than 5% of the fund's total assets, taken at market value, to be invested assets, taken at market value, to be invested in the securities of a single issuer, or if in the securities of a single issuer, or if such purchase would at the same time result such purchase would at the same time result in more than 10% of the outstanding voting in more than 10% of the outstanding voting securities of such issuer being held by the securities of such issuer being held by the fund. The fund may not change its fund. classification from diversified to non-diversified without shareholder approval. - -------------------------------------------------------------------------------------------------------------------
In addition to the above, Pioneer Tax Free Income Fund's policy that the fund will invest at least 80% of its assets in investments the income from which will be exempt from regular federal income tax is fundamental. Each Pioneer Fund's investment objective is fundamental. 26 OTHER IMPORTANT INFORMATION CONCERNING THE MERGER Portfolio Securities The Merger is scheduled to occur as of the close of business on [ ], 2008 but may occur on such later date as the parties may agree in writing (the "Closing Date"). After the Meeting but prior to the Closing Date, your fund will sell certain securities in its portfolio, including all of its non-municipal securities. The disposition of certain of your fund's securities prior to the Closing Date could result in significant brokerage expense to your fund and also will cause your fund to realize gains or losses in the current tax year. Your fund will be able to offset any net gain from such securities dispositions with its available net capital loss carryovers, and any gain not so offset will result in a distribution that will be taxable to you. The Trustees anticipate, however, that there will be sufficient loss carryovers to offset any net gain recognized by your fund as a result of securities dispositions. If the Merger is consummated, Pioneer will analyze and evaluate the portfolio securities of your fund invested in municipal securities. Consistent with Pioneer Tax Free Income Fund's investment objective and policies, any restrictions imposed by the Code and in the best interests of Pioneer Tax Free Income Fund's shareholders (including former shareholders of your fund), management will influence the extent and duration for which the portfolio securities of your fund will be held by Pioneer Tax Free Income Fund. It is possible that there may be additional sales of some of the portfolio securities of your fund following the Merger. Subject to market conditions at the time of any such sale, the sale of the portfolio securities by the combined fund may result in a capital gain or loss. The actual tax consequences of any sale of portfolio securities will vary depending upon the specific security(ies) being sold and the combined fund's ability to use any available tax loss carryforwards. As noted above, the sale of portfolio securities may also result in significant brokerage expense to the combined fund. Comparison of a Closed-End Fund and an Open-End Fund It is proposed that your fund be merged with and into Pioneer Tax Free Income Fund. Although each fund is a Delaware statutory trust, your fund is a closed-end fund whose shares are traded on the NYSE whereas Pioneer Tax Free Income Fund is an open-end fund whose shares can be redeemed on request. The differences between the rights of shareholders of your fund and those of Pioneer Tax Free Income Fund relate primarily to the different characteristics of a closed-end fund and an open-end fund. Below is a summary of the principal differences between a closed-end fund and an open-end fund. Closed-end investment companies neither redeem their outstanding shares nor engage in the ongoing sale of new shares, and thus operate with a relatively fixed capitalization. Shares of closed-end investment companies typically are bought and sold on national securities exchanges. The shares of your fund currently are traded on the NYSE and during the last few years have traded at a discount from net asset value. Pioneer Tax Free Income Fund is registered as an open-end investment company under the 1940 Act. Open-end investment companies are commonly referred to as "mutual funds" and generally issue redeemable securities on an ongoing basis. Open-end fund shares are redeemable each day the NYSE is open at their net asset value. Pioneer Tax Free Income Fund engages in a continuous offering of its shares of beneficial interest. Class A shares of Pioneer Tax Free Income Fund are offered with an initial sales charge up to 4.50% of the offering price, which is reduced or waived for large purchases and certain types of investors. You will be able to exchange your Class A shares received as a result of the Merger into Class A shares of other Pioneer Funds. Class A shares are subject to distribution and service (12b-1) fees of 0.25% of average daily net assets. Other classes of shares of Pioneer Tax Free Income Fund have different features. Shareholders of Pioneer Tax Free Income Fund may, on any day the NYSE is open, redeem their shares and receive the net asset value of the shares next computed after the receipt of the redemption request in good order, less any applicable sales charges. In addition to the methods of acquiring and disposing of shares and their potential impact on portfolio management, there are a number of other differences between the funds that you should consider: o Effect of redemption rights on value of shares. As stated above, the shareholders of open-end funds redeem their shares at the "public offering price," meaning net asset value plus any applicable sales charge. The right to transact at the public offering price is established by Section 22(d) of the 1940 Act. This provision effectively eliminates any discount that may occur when shares of a closed-end fund trade on the secondary market. Conversely, this provision precludes the possibility of ever receiving a premium over net asset value at which shares of a closed-end fund may trade on the secondary market. o Shareholder services. Shareholders of Pioneer Tax Free Income Fund may participate in an exchange privilege allowing them to exchange their shares for Class A shares of other Pioneer open-end funds. These exchange privileges are not available to shareholders 27 of closed-end funds, such as your fund. In addition, shareholders of Pioneer Tax Free Income Fund receive other shareholder services and privileges that are not provided to shareholders of your fund, as discussed under "Additional Information About The Pioneer Funds". o Dividend Reinvestment Plan. For the period prior to the proposed Merger, shareholders of your fund participating in the Dividend Reinvestment Plan will continue to have their dividends reinvested in shares of the fund in accordance with the Dividend Reinvestment Plan unless they elect otherwise. The Dividend Reinvestment Plan is expected to be suspended, however, with respect to any dividend payable on the business day immediately preceding and up through the Closing Date. Any such dividend will be paid to Dividend Reinvestment Plan participants in cash. Following the Merger, former shareholders of your fund who participated in the Dividend Reinvestment Plan may have their dividends reinvested in Class A shares of Pioneer Tax Free Income Fund at net asset value. o Shareholder meetings. The NYSE listing regulations require that your fund hold an annual meeting of shareholders. Pioneer Tax Free Income Fund is not required to and generally does not hold such annual meetings. Capitalization The following table sets forth the capitalization of each Pioneer Fund as of December 31, 2007 and the pro forma combined capitalization of the combined fund as if the Merger had occurred on that date. If the Merger is consummated, the actual exchange ratios on the Closing Date may vary from the exchange ratios indicated. This is due to changes in the market value of the portfolio securities of both Pioneer Funds between December 31, 2007 and the Closing Date, changes in the amount of undistributed net investment income and net realized capital gains of both Pioneer Funds during that period resulting from income and distributions, and changes in the accrued liabilities of both Pioneer Funds during the same period.
Pioneer Tax Free Pro Forma Pioneer Pioneer Income Fund Pioneer Municipal and Tax Free Pro Forma Tax Free Equity Income Trust Income Fund Adjustments Income Fund (December 31, 2007) (December 31, 2007) (December 31, 2007)(1) (December 31, 2007)(1) ------------------- ------------------- ---------------------- ---------------------- Net Assets Class A .................. -- $313,705,643 $413,426,136 $727,131,779 Class B .................. -- $ 14,622,470 -- $ 14,622,470 Class C .................. -- $ 13,580,501 -- $ 13,580,501 Class Y .................. -- $219,814,431 -- $219,814,431 Common Shares ............ $413,631,136 -- -- -- AMPS ..................... $176,250,000 -- $(176,250,000) -- Total Net Assets ......... -- $561,723,045 -- $975,149,181 Net Asset Value Per Share Class A .................. -- $ 11.13 -- $ 11.13 Class B .................. -- $ 11.04 -- $ 11.04 Class C .................. -- $ 10.96 -- $ 10.96 Class Y .................. -- $ 11.07 -- $ 11.07 Common Shares ............ $ 14.41 -- -- -- AMPS ..................... $ 25,000 -- -- -- Shares Outstanding Class A .................. -- 28,179,852 37,145,655 65,325,507 Class B .................. -- 1,324,866 -- 1,324,866 Class C .................. -- 1,239,065 -- 1,239,065 Class Y .................. -- 19,858,193 -- 19,858,193 Common Shares ............ 28,706,981 -- (28,706,981) -- AMPS ..................... 7,050 -- (7,050) --
- ---------- (1) The pro forma data reflects the liquidation of Pioneer Municipal and Equity Income Trust's non-municipal securities for cash, with the proceeds of such redemption used to redeem AMPS. The pro forma data also reflects adjustments to account for the costs of the Merger to be borne by Pioneer Municipal and Equity Income Trust, which are estimated to be $200,000, and Class A shares of Pioneer Tax Free Income Fund, which are estimated to be $5,000. 28 It is impossible to predict how many Class A shares of Pioneer Tax Free Income Fund actually will be received by common shareholders of your fund on the Closing Date. The table should not be relied upon to determine the amount of Pioneer Tax Free Income Fund shares that will actually be received and distributed. TERMS OF THE AGREEMENT AND PLAN OF MERGER The Merger o The Merger is scheduled to occur on the Closing Date. o Your fund will merge with and into Pioneer Tax Free Income Fund. All of the assets and liabilities of your fund will become the assets and liabilities of Pioneer Tax Free Income Fund, and your fund will cease to exist. The outstanding common shares of your fund will be converted into a number of whole or fractional Class A shares of Pioneer Tax Free Income Fund with an aggregate net asset value equal to the aggregate net asset value of the common shares of your fund immediately prior to the Merger. The net asset value of both Pioneer Funds will be computed as of the close of regular trading on the New York Stock Exchange on the Closing Date. o Holders of each of your fund's common shares and AMPS are entitled to vote on the Agreement and Plan of Merger. An affirmative vote of a 1940 Act Majority of the outstanding common shares and the affirmative vote of a 1940 Act Majority of the outstanding AMPS, voting separately, will be required to approve the Agreement and Plan of Merger. After the Meeting but prior to the Closing Date, your fund will call for redemption and redeem all of its outstanding AMPS. Only common shares will be converted into Class A shares of Pioneer Tax Free Income Fund in the Merger. o No sales load, contingent deferred sales charge, commission, redemption fee or other transaction fee will be charged as a result of the Merger. After the Merger, you will be permitted to exchange your Class A shares of Pioneer Tax Free Income Fund into Class A shares of other Pioneer Funds without a sales charge. Class A shares are subject to a Rule 12b-1 fee of 0.25%. Class A shares do not currently charge a redemption fee. o The Merger generally will not result in income, gain or loss being recognized for federal income tax purposes by either Pioneer Fund or its shareholders, except as set forth below under the heading "Tax Status of the Merger," and will not take place unless the Pioneer Funds receive an opinion concerning the tax consequences of the Merger from Bingham McCutchen LLP, counsel to the Pioneer Funds, as further described below under the heading "Tax Status of the Merger." Agreement and Plan of Merger The shareholders of your fund are being asked to approve an Agreement and Plan of Merger, the form of which is attached as Exhibit A to this Proxy Statement/Prospectus and incorporated herein by this reference. The description of the Agreement and Plan of Merger contained herein, which includes the material provisions of the Agreement and Plan of Merger, is qualified in its entirety by the attached copy. Cancellation of Share Certificates. If your shares are represented by one or more share certificates before the Closing Date, on the Closing Date all certificates will be canceled, will no longer evidence ownership of your fund's shares and will evidence ownership of Pioneer Tax Free Income Fund shares. Pioneer Tax Free Income Fund will not issue share certificates in the Merger. Conditions to Closing the Merger. The obligation of your fund to consummate the Merger is subject to the satisfaction of certain conditions, including the performance by Pioneer Tax Free Income Fund of all its obligations under the Agreement and Plan of Merger and the receipt of all consents, orders and permits necessary to consummate the Merger (see Agreement and Plan of Merger, Section 6). The obligation of Pioneer Tax Free Income Fund to consummate the Merger is subject to the satisfaction of certain conditions, including your fund's performance of all of its obligations under the Agreement and Plan of Merger, the receipt of certain documents and financial statements from your fund and the receipt of all consents, orders and permits necessary to consummate the Merger (see Agreement and Plan of Merger, Section 7). The obligations of your fund and Pioneer Tax Free Income Fund are subject to approval of the Agreement and Plan of Merger by the necessary vote of the outstanding shares of your fund in accordance with the provisions of your fund's Declaration of Trust and By-Laws and the Statement of Preferences with respect to the AMPS. The Pioneer Funds' obligations are also subject to the receipt of a favorable opinion of Bingham McCutchen LLP as to the federal income tax consequences of the Merger (see Agreement and Plan of Merger, Section 8.5). 29 Termination of Agreement and Plan of Merger. The Board of Trustees of either Pioneer Fund may terminate the Agreement and Plan of Merger (even if the shareholders of your fund have already approved it) at any time before the Closing Date if the Board believes that proceeding with the Merger would no longer be in the best interests of shareholders of the Fund. Expenses of the Merger. Your fund will bear the costs of preparing and printing the Proxy Statement/Prospectus and the solicitation costs incurred in connection with the Merger. Your fund also will bear its own costs in connection with the Merger, including the costs associated with redeeming AMPS and the costs of liquidating portfolio securities as described herein, and other redemptions anticipated in connection with the Merger. TAX STATUS OF THE MERGER The Merger is conditioned upon the receipt by each Pioneer Fund of an opinion from Bingham McCutchen LLP, counsel to the Pioneer Funds, substantially to the effect that, for federal income tax purposes: o The Merger will constitute a "reorganization" within the meaning of Section 368(a) of the Code, and each of your fund and Pioneer Tax Free Income Fund will be a "party to a reorganization" within the meaning of Section 368(b) of the Code; o No gain or loss will be recognized by your fund upon the vesting of the assets and liabilities of your fund as assets and liabilities of Pioneer Tax Free Income Fund or upon the conversion of shares of your fund into a number of shares of Pioneer Tax Free Income Fund, including fractional shares, except for (A) gain or loss that may be recognized on the transfer of "section 1256 contracts" as defined in Section 1256(b) of the Code, (B) gain that may be recognized on the transfer of stock in a "passive foreign investment company" as defined in Section 1297(a) of the Code, or (C) any other gain that may be required to be recognized as a result of the closing of your fund's taxable year; o The tax basis of the assets of your fund acquired by Pioneer Tax Free Income Fund will be the same as the tax basis of those assets in the hands of your fund immediately prior to the Merger, increased by the amount of gain (or decreased by the amount of loss), if any, recognized by your fund on the Merger; o The holding periods of the assets of your fund in the hands of Pioneer Tax Free Income Fund, other than assets with respect to which gain or loss is required to be recognized, will include your fund's holding period for those assets; o No gain or loss will be recognized by Pioneer Tax Free Income Fund upon the vesting of the assets and liabilities of your fund as assets and liabilities of Pioneer Tax Free Income Fund; o You will not recognize gain or loss on the conversion of your shares into shares of Pioneer Tax Free Income Fund as part of the Merger; o The aggregate basis of Pioneer Tax Free Income Fund shares received by you in the Merger will be the same as the aggregate basis of the shares of your fund you held immediately prior to the Merger; o The holding period of Pioneer Tax Free Income Fund shares received by you in the Merger will include the holding period of the shares of your fund that were converted into such Pioneer Tax Free Income Fund shares, provided that you held the shares of your fund as capital assets on the Closing Date. In rendering such opinion, counsel shall rely upon, among other things, certain facts, assumptions and representations of Pioneer Tax Free Income Fund and your fund. No tax ruling has been or will be received from the Internal Revenue Service ("IRS") in connection with the Merger. An opinion of counsel is not binding on the IRS or a court, and no assurance can be given that the IRS would not assert, or a court would not sustain, a contrary position. Immediately prior to the Merger, your fund will declare and pay a dividend, which, together with all previous dividends, is intended to have the effect of distributing to your fund's shareholders all of your fund's investment company taxable income for taxable years ending on or prior to the Closing Date (computed without regard to any deduction for dividends paid), all of its net tax-exempt income and all of its net capital gain, if any, realized in taxable years ending on or prior to the Closing Date (after reduction for any available capital loss carryover). Such distributions may result in taxable income to you. The foregoing discussion is very general, and does not take into account any considerations that may apply to certain classes of taxpayers who are subject to special circumstances, such as shareholders who are not citizens of or residents of the United States, insurance companies, tax-exempt organizations, financial institutions, dealers in securities or foreign currencies, or persons who hold their shares 30 as part of a straddle or conversion transaction. You should consult your tax adviser for the particular tax consequences to you of the transaction, including the applicability of any state, local or foreign tax laws. BOARDS' EVALUATION AND RECOMMENDATION The Trustees of your fund believe that the proposed Merger will be advantageous to the shareholders of your fund for several reasons. The Trustees considered the following matters, among others, in approving the proposal: The Board considered the benefit to shareholders of an open-end fund that permits redeeming or purchasing shares at net asset value. The Trustees noted that, because common shares of closed-end funds, such as your fund, are not redeemable and instead are bought and sold on the open market, the market price of these shares is influenced by a number of factors and, at times, may trade at a discount (or premium) to net asset value. Your fund's net asset value per share can be expected to vary from the market price of its shares, and your fund's common shares generally have traded at a discount to net asset value, ranging from (3.02)% (high) to (17.25)% (low) over the past two years ended February 29, 2008 and currently have traded at a discount of (6.14)% as of April 30, 2008. The Trustees noted that the merger of your fund into Pioneer Tax Free Income Fund effectively would provide your fund's shareholders with liquidity for their common shares at net asset value, thereby eliminating the discount at which your fund's common shares historically have traded. The Trustees also noted requests for enhanced liquidity from shareholders and changes in your fund's shareholder base related to investors seeking liquidity. The Board considered that Pioneer Tax Free Income Fund is an established open-end fund that, like your fund, pursues a tax-oriented investment approach. Pioneer Tax Free Income Fund invests at least 80% of its total assets in investment grade securities that provide income that is exempt from regular federal income tax and is not subject to the alternative minimum tax (AMT). Your fund invests in a portfolio consisting primarily of (i) municipal securities and (ii) common stocks and preferred securities that pay tax-qualified dividends. Your fund invests at least 50%, and may invest up to 75%, of its total assets in municipal securities. The portion of your fund's portfolio invested in municipal securities is similar in many respects to Pioneer Tax Free Income Fund, including overall credit quality, maturity distribution and sector weights. However, unlike Pioneer Tax Free Income Fund, your fund invests at least 25%, and may invest up to 50%, of its total assets in equity securities. The Board noted that prior to the Closing Date, your fund will sell the non-municipal securities in its portfolio. The Board considered that Pioneer Tax Free Income Fund's performance was comparable to your fund's performance. As of February 29, 2008, your fund's average annual returns for the past one and three year periods were (14.69)% and 0.72%, respectively. In comparison, Pioneer Tax Free Income Fund's Class A shares' average annual returns as of March 31, 2008 for the past one and three year periods were (5.14)% and 1.29%, respectively. As of February 29, 2008, the average annual return of your fund since its inception on January 30, 2004 is 3.18%. As of March 31, 2008, the average annual return of Class A shares of Pioneer Tax Free Income Fund since its inception on January 18, 1977 is 5.82%. The Board considered that the combined fund is expected to have a yield that is comparable to the yield of your fund. Your fund's portfolio of municipal bonds has a book yield of approximately 6%. Pioneer Tax Free Income Fund's portfolio has a book yield of approximately 5.4%. As of March 31, 2008 the 30-day SEC yields for your Fund shares and Class A shares of Pioneer Tax Free Income Fund were 8.03% and 4.43%, respectively. The Board considered that the pro forma gross expense ratio for the combined fund's Class A shares is anticipated to be 0.87%, and in addition, that if shareholders of your fund approve the Merger, Pioneer will contractually agree to limit ordinary operating expense to the extent required to reduce the combined fund's expenses to 0.89% of the average daily net assets attributable to Class A shares of the combined fund. The Board noted that the historical expense ratio for common shares of your fund is 1.26% (the expense ratio does not reflect the effect of dividend payments to preferred shareowners). Therefore, the expense ratio will be lower for the Class A shares of the combined fund as compared to the common shares of your fund. The expense limitation described above would be in effect for three years from the date of the Merger. There can be no assurance that Pioneer will extend the expense limitation beyond such time. The Board considered that Pioneer Tax Free Income Fund's current management fee rate of 0.48% of average daily net assets and the combined fund's anticipated pro forma management fee rate of 0.45% of average daily net assets are each lower than your fund's management fee, which is 0.60% of your fund's average daily managed assets (which is equivalent to 0.83% of your fund's average daily net assets attributable to common shareholders). The Board considered that the transaction is expected to be treated as a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and therefore will not result in a taxable sale of your fund shares. However, in considering the Merger, the Board noted that prior to the Closing Date, your fund is expected to sell certain securities in its portfolio, including all of its non-municipal securities. The Board recognized that the disposition of these securities could result in significant brokerage expense to your fund and also will cause your fund to realize gains or losses in the current tax year, which would then be distributed to shareholders in one or more taxable 31 distributions. However, the Board also considered that your fund will be able to offset any net gain from the disposition of these securities with its available net capital loss carryovers. The Board anticipates that there will be sufficient loss carryovers to offset any net gain recognized by your fund as a result of securities dispositions. The Board also noted that after the Meeting but prior to the Closing Date, your fund will call for redemption and redeem all of its outstanding AMPS. The Board considered that holders of AMPS will recognize gain or loss equal to the difference between the amount realized on the redemption and the shareholder's tax basis in the shares redeemed. The Board considered that your fund would bear the costs of preparing and printing the Proxy Statement/Prospectus and the solicitation costs incurred in connection with the Merger. The Board considered that your fund also would bear its own costs in connection with the Merger, including the costs associated with redeeming AMPS and the costs of liquidating portfolio securities, and other redemptions anticipated in connection with the Merger. The Board estimated that these expenses in the aggregate would be approximately $200,000. The Board considered that the funds' investment adviser and the principal distributor of Pioneer Tax Free Income Fund would benefit from the Merger. For example, Pioneer might achieve cost savings from managing one larger fund compared to managing more than one fund with similar investment strategies. Pioneer also will avoid the potential cost, burden and adverse consequences associated with potential future proxy contests, including the possible termination of Pioneer as investment adviser to your fund and the consequent loss of investment advisory fees by Pioneer. The Board also considered the fact that Pioneer Tax Free Income Fund shareholders pay Pioneer and its affiliates fees for administrative services, including transfer agency fees. The Boards believe, however, that these savings and revenues will not amount to a significant economic benefit to Pioneer or PFD. Further, the Board considered that Pioneer's advisory fee rate is lower for Pioneer Tax Free Income Fund than for your fund. The Board also considered that the Merger presents an excellent opportunity for the shareholders of Pioneer Municipal and Equity Income Trust to become investors in a combined fund that has (i) lower advisory fees, (ii) lower operating expenses (historically), and (iii) a larger asset size than either Pioneer Fund alone without the obligation to pay commissions or other transaction costs that a fund normally incurs when purchasing securities. This opportunity provides an immediate economic benefit to Pioneer Municipal and Equity Income Trust and its shareholders and the potential for benefit for Pioneer. While the Board of Trustees considered alternatives to the Merger, it concluded that the Merger offered a method to eliminate the discount to net asset value, while offering continuity of portfolio management. For all of the reasons described above, all of the Trustees of your fund, including all of the Independent Trustees, approved the Merger. In particular, the Trustees determined that the Merger is in the best interest of your fund and that your interests, and the interests of your fund's other shareholders would not be diluted as a result of the Merger. Similarly, the Board of Trustees of Pioneer Tax Free Income Fund, including the Independent Trustees, approved the Merger. They also determined that the Merger is in the best interests of Pioneer Tax Free Income Fund and that the interests of Pioneer Tax Free Income Fund's shareholders would not be diluted as a result of the Merger. The Trustees of your fund recommend that you vote FOR the proposal to approve the Agreement and Plan of Merger. ADDITIONAL INFORMATION ABOUT THE PIONEER FUNDS Investment Adviser Pioneer serves as the investment adviser to each Pioneer Fund. Pioneer oversees each Pioneer Fund's operations and is responsible for the day-to-day management of the fund's portfolio. Pioneer is an indirect, wholly owned subsidiary of UniCredito Italiano S.P.A., one of the largest banking groups in Italy. Pioneer is part of the global asset management group providing investment management and financial services to mutual funds, institutional and other clients. As of April 30, 2008, assets under management were approximately $328 billion worldwide, including over $73 billion in assets under management by Pioneer. Pioneer's main office is at 60 State Street, Boston, Massachusetts 02109. Pioneer's U.S. mutual fund investment history includes creating one of the first mutual funds in 1928. The Board of Trustees of each Pioneer Fund is responsible for overseeing the performance of Pioneer and determining whether to approve and renew each Pioneer Fund's investment management agreement. Administrator, Custodian, Distributor and Transfer Agent Because your fund is a closed-end fund traded on the NYSE, your fund does not have an underwriting agreement with a distributor to distribute shares. PFD is the distributor of Pioneer Tax Free Income Fund's shares. Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") is the transfer agent for Pioneer Tax Free Income Fund and common shares of Pioneer Municipal and Equity Income Trust. The principal business address of PIMSS is P.O. Box 55150 Boston, MA 02205-5150. Mellon Investor Services ("Mellon") serves as the sub-transfer agent for common shares of Pioneer Municipal and Equity Income Trust. 32 Deutsche Bank Trust Company Americas ("Deutsche Bank") serves as the auction agent, transfer agent, dividend paying agent and registrar for AMPS. Brown Brothers Harriman & Co. ("BBH") is each fund's custodian. The principal business address of Brown Brothers Harriman & Co. is 40 Water Street, Boston, MA 02109. Pioneer is each Pioneer Fund's administrator. Pioneer provides certain accounting, administration and legal services to Pioneer Tax Free Income Fund for a fee at the annual rate of 0.0225% of average daily net assets, and to Pioneer Municipal and Equity Income Trust for a fee at the annual rate of 0.0175% of average daily net assets. Princeton Administrators, LLC ("Princeton"), an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, serves as the sub-administrator of Pioneer Municipal and Equity Income Trust. For its services, Princeton receives a monthly fee at an annual rate of 0.07% of the average daily value of the fund's managed assets up to $500 million and 0.03% for average daily managed assets in excess of $500 million, subject to a minimum monthly fee of $10,000. Pioneer Tax Free Income Fund compensates Pioneer, PFD, PIMSS and BBH for their services. Pioneer Municipal and Equity Income Trust compensates PIMSS, Deutsche, BBH and Princeton for their services. PIMSS is responsible for paying the fees of Mellon. PFD and PIMSS are affiliates of Pioneer. Capital Stock (Pioneer Municipal and Equity Income Trust) Your fund's Agreement and Declaration of Trust ("Declaration of Trust") authorizes issuance of an unlimited number of common shares. Common shareholders are entitled to share pro rata in the net assets of the fund available for distribution to common shareholders upon liquidation of the fund. Common shareholders are entitled to one vote for each share held (or, in the case of fractional shares, a proportionate fractional vote). So long as any shares of the fund's preferred shares, including the AMPS, are outstanding, holders of common shares will not be entitled to receive any net income of or other distributions from the fund unless all accumulated dividends on preferred shares have been paid, and unless asset coverage (as defined in the 1940 Act) with respect to preferred shares would be at least 200% after giving effect to such distributions. There are no preemptive rights, conversion rights, redemption provisions or sinking fund provisions with respect to common shares. Your fund's Declaration of Trust also authorizes issuance of an unlimited number of AMPS. AMPS are preferred shares of beneficial interest that entitle their holders to receive dividends when, as and if declared by the Board of Trustees out of funds legally available therefor. AMPS are non-assessable and have no preemptive, conversion or cumulative voting rights. AMPS are not convertible into common shares or other shares of beneficial interest of the fund, and the holders thereof have no preemptive rights. AMPS are not be subject to any sinking fund but are subject to redemption at the option of the fund on any dividend payment date for the AMPS at a redemption price generally equal to $25,000 per share plus accumulated and unpaid dividends. In certain circumstances, the AMPS may be subject to mandatory redemption by the fund at a redemption price of $25,000 per share plus accumulated and unpaid dividends. Pioneer Municipal and Equity Income Trust Outstanding Securities (As of July 7, 2008)
- ------------------------------------------------------------------------------------------------------- (3) Amount Held by Pioneer (4) Amount Outstanding Municipal and Equity Income Exclusive of Amount shown (1) Title of Class (2) Amount Authorized Trust for its Account under (3) - ------------------------------------------------------------------------------------------------------- Common Shares - ------------------------------------------------------------------------------------------------------- AMPS - -------------------------------------------------------------------------------------------------------
Set forth below is information about the closed-end fund's AMPS as of the end of each of the fund's fiscal years ended November 30 since the fund commenced operations on January 30, 2004.
- ---------------------------------------------------------------------------------------------------------- Total Number of Asset Coverage Ratio Involuntary Liquidation Average Market Value Year AMPS Outstanding Per Preferred Share Preference Per Preferred Share Per Preferred Share - ---------------------------------------------------------------------------------------------------------- 2004 7,050 339% -0- $25,000 - ---------------------------------------------------------------------------------------------------------- 2005 7,050 339% -0- $25,000 - ---------------------------------------------------------------------------------------------------------- 2006 7,050 361% -0- $25,000 - ---------------------------------------------------------------------------------------------------------- 2007 7,050 341% -0- $25,000 - ----------------------------------------------------------------------------------------------------------
33 Certain Provisions of Pioneer Municipal and Equity Income Trust's Agreement and Declaration of Trust Your fund's Declaration of Trust includes provisions that could have the effect of limiting the ability of other entities or persons to acquire control of your fund or to change the composition of its Board of Trustees and could have the effect of depriving shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the fund. The Board of Trustees of your fund is divided into three classes of approximately equal size. The terms of the Trustees of the different classes are staggered so that approximately one-third of the Board of Trustees is elected by shareholders each year. A Trustee may be removed from office with or without cause by a vote of at least a majority of the Trustees if such removal is approved by a vote of the holders of at least 75% of the shares entitled to be voted on the matter. The Declaration requires the favorable vote of the holders of at least 75% of the fund's shares to approve, adopt or authorize the following: o a merger or consolidation or statutory share exchange of the fund with any other corporations; o a sale of all or substantially all of the fund's assets (other than in the regular course of the Fund's investment activities); or o a liquidation or dissolution of the fund; unless such action has been approved, adopted or authorized by the affirmative vote of at least 75% of the total number of Trustees fixed in accordance with your fund's By-Laws, in which case the affirmative vote of a majority of the fund's shares is required. The approval, adoption or authorization of the foregoing also would require the favorable vote of a majority of the fund's AMPS then entitled to be voted, voting as a separate class. Conversion of your fund to an open-end investment company would require an amendment to the fund's Declaration. The amendment would have to be declared advisable by the Board of Trustees prior to its submission to shareholders. Such an amendment would require the favorable vote of the holders of at least 75% of the fund's outstanding common shares entitled to vote on the matter, (or a majority of such shares if the amendment was previously approved, adopted or authorized by 75% of the total number of Trustees fixed in accordance with the By-Laws), and the affirmative vote of a majority of outstanding AMPS, voting as a separate class. Automatic Dividend Reinvestment Plan (Pioneer Municipal and Equity Income Trust) All common shareowners of your fund automatically participate in the Automatic Dividend Reinvestment Plan (the "Plan"), under which participants receive all dividends and capital gain distributions (collectively, "dividends") in full and fractional common shares of your fund in lieu of cash. Shareowners may elect not to participate in the Plan. Shareowners not participating in the Plan receive all dividends and capital gain distributions in cash. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by notifying American Stock Transfer & Trust Company, the agent for shareowners in administering the Plan (the "Plan Agent"), in writing prior to any dividend record date; otherwise such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution. Whenever your fund declares a dividend on common shares payable in cash, participants in the Plan will receive the equivalent in common shares acquired by the Plan Agent either (i) through receipt of additional unissued but authorized common shares from your fund or (ii) by purchase of outstanding common shares on the New York Stock Exchange or elsewhere. If, on the payment date for any dividend, the net asset value per common share is equal to or less than the market price per share plus estimated brokerage trading fees ("market premium"), the Plan Agent will invest the dividend amount in newly issued common shares. The number of newly issued common shares to be credited to each account will be determined by dividing the dollar amount of the dividend by the net asset value per common share on the date the shares are issued, provided that the maximum discount from the then current market price per share on the date of issuance does not exceed 5%. If, on the payment date for any dividend, the net asset value per common share is greater than the market value ("market discount"), the Plan Agent will invest the dividend amount in common shares acquired in open-market purchases. There are no brokerage charges with respect to newly issued common shares. However, each participant will pay a pro rata share of brokerage trading fees incurred with respect to the Plan Agent's open-market purchases. Participating in the Plan does not relieve shareowners from any federal, state or local taxes which may be due on dividends paid in any taxable year. Shareowners holding Plan shares in a brokerage account may not be able to transfer the shares to another broker and continue to participate in the Plan. 34 Description of Shares (Pioneer Tax Free Income Fund) Pioneer Tax Free Income Fund's Declaration of Trust authorizes the Trustees to classify or reclassify any series of the shares into one or more classes. The Trustees have authorized the issuance of the following classes of shares of the fund, designated as Class A shares, Class B shares, Class C shares and Class Y shares. The shares of each class represent an interest in the same portfolio of investments of Pioneer Tax Free Income Fund. Each class has equal rights as to voting, redemption, dividends and liquidation, except that each class bears different distribution and transfer agent fees and may bear other expenses properly attributable to the particular class. Class A, Class B and Class C shareholders have exclusive voting rights with respect to the rule 12b-1 plan adopted by holders of those shares in connection with the distribution of those shares. Shareholders are entitled to one vote for each share held (or, in the case of fractional shares, a proportionate fractional vote) and may vote in the election of the Trustees and on other matters submitted to a meeting of shareholders. Although Trustees are not elected annually by the shareholders, shareholders have, under certain circumstances, the right to remove one or more Trustees. Pioneer Tax Free Income Fund is not required, and does not intend, to hold annual shareholder meetings although special meetings may be called for such purposes as electing or removing Trustees, changing fundamental investment restrictions or approving a management contract. The shares of each series of the fund are entitled to vote separately to approve investment advisory agreements or changes in investment restrictions, but shareholders of all series vote together in the election and selection of Trustees and accountants. Shares of all series of the fund vote together as a class on matters that affect all series of Pioneer Tax Free Income Fund in substantially the same manner. As to matters affecting a single series or class, shares of such series or class will vote separately. No amendment adversely affecting the rights of shareholders may be made to the Declaration of Trust without the affirmative vote of a majority of Pioneer Tax Free Income Fund's shares. Disclosure of Portfolio Holdings (Pioneer Tax Free Income Fund) Pioneer Tax Free Income Fund's policies and procedures with respect to the disclosure of its portfolio securities are described in the statement of additional information and on Pioneer's website at www.pioneerinvestments.com. Buying, Exchanging and Selling Shares of the Pioneer Funds Net Asset Value. Each Pioneer Fund's net asset value is the value of its securities plus any other assets minus its accrued operating expenses and other liabilities. Each Pioneer Fund calculates a net asset value for each class of shares every day the New York Stock Exchange is open when regular trading closes (normally 4:00 p.m. Eastern time). Each Pioneer Fund generally values its securities using closing market prices or readily available market quotations. When closing market prices or market quotations are not available or are considered by Pioneer to be unreliable, the fund uses fair value methods to value its securities pursuant to procedures adopted by the Board of Trustees. Valuing securities using fair value methods may cause the net asset value of the fund's shares to differ from the net asset value that would be calculated only using market prices. For market prices and quotations, as well as for some fair value methods, the fund relies upon securities prices provided by pricing services. Each Pioneer Fund uses fair value pricing methods for a security, including a non-U.S. security, when Pioneer determines that the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security at the time the fund calculates its net asset value. This may occur for a variety of reasons that affect either the relevant securities markets generally or the specific issuer. For example, with respect to non-U.S. securities held by the fund, developments relating to specific events in the securities markets or the specific issuer may occur between the time the primary market closes and the time the fund determines its net asset value. International securities markets may be open on days when the U.S. markets are closed. For this reason, the values of any international securities owned by the fund could change on a day you cannot buy or sell shares of the fund. Certain types of securities, including those discussed in this paragraph, are priced using fair value pricing methods rather than market prices. Each Pioneer Fund uses a pricing matrix to determine the value of fixed income securities that may not trade daily. A pricing matrix is a means of valuing a debt security on the basis of current market prices for other debt securities and historical trading patterns in the market for fixed income securities. Each Pioneer Fund values cash equivalent securities with remaining maturities of 60 days or less at amortized cost. To the extent that the fund invests in the shares of other registered open-end investment companies that are not traded on an exchange (mutual funds), such shares are valued at their published net asset values per share as reported by the funds. The prospectuses of these funds explain the circumstances under which the funds will use fair value pricing methods to value their securities and the effects of using the fair value methodology. You buy or sell shares at the share price. When you buy Class A shares of Pioneer Tax Free Income Fund, you pay an initial sales charge unless you qualify for a waiver or reduced sales charge. 35 Distribution and Service Plan (Pioneer Tax Free Income Fund). Pioneer Tax Free Income Fund has adopted a distribution plan for its Class A shares in accordance with Rule 12b-1 under the 1940 Act. Under the plan, a Pioneer Fund pays distribution and service fees to PFD. Because these fees are an ongoing expense of a Pioneer Fund, over time they increase the cost of your investment and your shares may cost more than shares that are subject to other types of sales charges. Additional Payments to Financial Intermediaries (Pioneer Tax Free Income Fund). There are two principal ways you compensate the financial intermediary through which you buy shares of Pioneer Tax Free Income Fund -- directly, by the payment of sales commissions, if any; and indirectly, as a result of the fund paying Rule 12b-1 fees. The fund also may pay intermediaries for administrative services and transaction processing. Pioneer and its affiliates may make additional payments to your financial intermediary. These payments by Pioneer may provide your financial intermediary with an incentive to favor the Pioneer funds over other mutual funds or assist the distributor in its efforts to promote the sale of the fund's shares. Financial intermediaries include broker-dealers, banks (including bank trust departments), registered investment advisers, financial planners, retirement plan administrators and other types of intermediaries. Pioneer makes these additional payments (sometimes referred to as "revenue sharing") to financial intermediaries out of its own assets. Revenue sharing is not an expense of the Pioneer funds. Pioneer may base these payments on a variety of criteria, including the amount of sales or assets of the Pioneer funds attributable to the financial intermediary or as a per transaction fee. Not all financial intermediaries receive additional compensation and the amount of compensation paid varies for each financial intermediary. In certain cases, these payments may be significant. Pioneer determines which firms to support and the extent of the payments it is willing to make, generally choosing firms that have a strong capability to effectively distribute shares of the Pioneer funds and that are willing to cooperate with Pioneer's promotional efforts. Pioneer also may compensate financial intermediaries (in addition to amounts that may be paid by the fund) for providing certain administrative services and transaction processing services. Pioneer may benefit from revenue sharing if the intermediary features the Pioneer funds in its sales system (such as by placing certain Pioneer funds on its preferred fund list or giving access on a preferential basis to members of the financial intermediary's sales force or management). In addition, the financial intermediary may agree to participate in the distributor's marketing efforts (such as by helping to facilitate or provide financial assistance for conferences, seminars or other programs at which Pioneer personnel may make presentations on the Pioneer funds to the intermediary's sales force). To the extent intermediaries sell more shares of the Pioneer funds or retain shares of the Pioneer funds in their clients' accounts, Pioneer receives greater management and other fees due to the increase in the Pioneer funds' assets. The intermediary may earn a profit on these payments to the intermediary if the amount of the payment exceeds the intermediary's costs. The compensation that Pioneer pays to financial intermediaries is discussed in more detail in the fund's statement of additional information. Your intermediary may charge you additional fees or commissions other than those disclosed in this prospectus. Intermediaries may categorize and disclose these arrangements differently than the discussion above and in the statement of additional information. You can ask your financial intermediary about any payments it receives from Pioneer or the Pioneer funds, as well as about fees and/or commissions it charges. Pioneer and its affiliates may have other relationships with your financial intermediary relating to the provision of services to the Pioneer funds, such as providing omnibus account services or effecting portfolio transactions for the Pioneer funds. If your intermediary provides these services, Pioneer or the Pioneer funds may compensate the intermediary for these services. In addition, your intermediary may have other relationships with Pioneer or its affiliates that are not related to the Pioneer funds. Opening Your Account (Pioneer Tax Free Income Fund). If shares of Pioneer Tax Free Income Fund are held in an investment firm's name, the options and services available to you may be different from those described herein or in the fund's prospectus. Ask your investment professional for more information. If you invest in Pioneer Tax Free Income Fund through investment professionals or other financial intermediaries, including wrap programs and fund supermarkets, additional conditions may apply to your investment in a Pioneer fund, and the investment professional or intermediary may charge you a transaction-based or other fee for its services. These conditions and fees are in addition to those imposed by a Pioneer Fund and its affiliates. You should ask your investment professional or financial intermediary about its services and any applicable fees. Account Options (Pioneer Tax Free Income Fund). Use your account application to select options and privileges for your account. You can change your selections at any time by sending a completed account options form to the transfer agent. You may be required to obtain a signature guarantee to make certain changes to an existing account. 36 Call or write to the transfer agent for account applications, account options forms and other account information: PIONEER INVESTMENT MANAGEMENT SHAREHOLDER SERVICES, INC. P.O. Box 55014 Boston, Massachusetts 02205-5014 Telephone 1-800-225-6292 Telephone Transaction Privileges (Pioneer Tax Free Income Fund). If your account is registered in your name, you can buy, exchange or sell shares of the Pioneer funds by telephone. If you do not want your account to have telephone transaction privileges, you must indicate that choice on your account application or by writing to the transfer agent. When you request a telephone transaction the transfer agent will try to confirm that the request is genuine. The transfer agent records the call, requires the caller to provide validating information for the account and sends you a written confirmation. Each Pioneer Fund may implement other confirmation procedures from time to time. Different procedures may apply if you have a non-U.S. account or if your account is registered in the name of an institution, broker-dealer or other third party. Online Transaction Privileges (Pioneer Tax Free Income Fund). If your account is registered in your name, you may be able to buy, exchange or sell shares of Pioneer Tax Free Income Fund online. Your investment firm may also be able to buy, exchange or sell your fund shares online. To establish online transaction privileges complete an account options form, write to the transfer agent or complete the online authorization screen on www.pioneerinvestments.com. To use online transactions, you must read and agree to the terms of an online transaction agreement available on the Pioneer website. When you or your investment firm requests an online transaction the transfer agent electronically records the transaction, requires an authorizing password and sends a written confirmation. Pioneer Tax Free Income Fund may implement other procedures from time to time. Different procedures may apply if you have a non-U.S. account or if your account is registered in the name of an institution, broker-dealer or other third party. You may not be able to use the online transaction privilege for certain types of accounts, including most retirement accounts. Share Price (Pioneer Tax Free Income Fund). If you place an order to purchase, exchange, or sell shares of Pioneer Tax Free Income Fund with the transfer agent or a broker-dealer, your investment firm or plan administrator by the close of regular trading on the New York Stock Exchange (currently 4:00 p.m. Eastern time), your transaction will be completed at the share price determined as of the close of trading on the New York Stock Exchange on that day. If your order is placed with the transfer agent or a broker-dealer, your investment firm or plan administrator after 4:00 p.m., or your order is not in good order, your transaction will be completed at the share price next determined after your order is received in good order by the fund. Your investment firm or plan administrator is responsible for transmitting your order to the fund in a timely manner. Transaction Limitations (Pioneer Tax Free Income Fund). Your transactions are subject to certain limitations, including the limitation on the purchase of Pioneer Tax Free Income Fund's shares within 30 calendar days of a redemption. See "Excessive Trading" below. Buying Pioneer Fund Shares (Pioneer Tax Free Income Fund). You may buy shares of Pioneer Tax Free Income Fund from any investment firm that has a sales agreement with PFD. Participants in retirement plans generally must contact the plan's administrator to purchase shares. You can buy shares of Pioneer Tax Free Income Fund at the offering price. PFD may reject any order until it has confirmed the order in writing and received payment. Pioneer Tax Free Income Fund reserves the right to stop offering any class of shares. Minimum Investment Amounts (Pioneer Tax Free Income Fund). Your initial investment for Class A shares must be at least $1,000. Additional investments must be at least $100 for Class A shares. You may qualify for lower initial or subsequent investment minimums if you are opening a retirement plan account, establishing an automatic investment plan or placing your trade through your investment firm. The minimum investment amount does not apply for purposes of the Merger. Maximum Purchase Amounts (Pioneer Tax Free Income Fund). Class A shares are not subject to a maximum purchase amount. Exchanging Pioneer Fund Shares (Pioneer Tax Free Income Fund). You may exchange your shares in Pioneer Tax Free Income Fund for shares of the same class of another Pioneer mutual fund. Your exchange request must be for at least $1,000. The fund allows you to exchange your shares at net asset value without charging you either an initial or contingent deferred sales charge at the time of the exchange. An exchange generally is treated as a sale and a new purchase of shares for federal income tax purposes. 37 Shares you acquire as part of an exchange and shares your acquire as a result of this Merger will continue to be subject to any contingent deferred sales charge that applies to the shares you originally purchased. When you ultimately sell your shares, the date of your original purchase will determine your contingent deferred sales charge. Before you request an exchange, consider each Pioneer Fund's investment objective and policies as described in the relevant Pioneer Fund's prospectus. Selling Pioneer Fund Shares (Pioneer Tax Free Income Fund). Shares of Pioneer Tax Free Income Fund will be sold at net asset value per share next calculated after Pioneer Tax Free Income Fund or its authorized agent receives your request in good order. If the shares you are selling are subject to a deferred sales charge, it will be deducted from the sale proceeds. Pioneer Tax Free Income Fund generally will send your sale proceeds by check, bank wire or electronic funds transfer. If you recently sent a check to purchase the shares being sold, the fund may delay payment of the sale proceeds until your check has cleared. This may take up to 10 calendar days from the purchase date. Normally you will be paid within seven days. If you are selling shares from a non-retirement account or certain IRAs, you may use any of the methods described below. If you are selling shares from a retirement account other than an IRA, you must make your request in writing. You may have to pay federal income taxes on a sale or an exchange or any distributions received in cash or additional shares. Good order means that: o You have provided adequate instructions o There are no outstanding claims against your account o There are no transaction limitations on your account o If you have any Pioneer Fund share certificates, you submit them and they are signed by each record owner exactly as the shares are registered o Your request includes a signature guarantee if you: -- Are selling over $100,000 or exchanging over $500,000 worth of shares -- Changed your account registration or address within the last 30 days -- Instruct the transfer agent to mail the check to an address different from the one on your account -- Want the check paid to someone other than the account owner(s) -- Are transferring the sale proceeds to a Pioneer mutual fund account with a different registration
- --------------------------------------------------------------------------------------------------------------------- Buying Shares Exchanging Shares - --------------------------------------------------------------------------------------------------------------------- THROUGH YOUR Normally, your investment firm will send your Normally, your investment firm will send your INVESTMENT FIRM purchase request to PFD and/or the Pioneer exchange request to the Pioneer Funds' Funds' transfer agent. transfer agent. CONSULT YOUR INVESTMENT PROFESSIONAL FOR MORE CONSULT YOUR INVESTMENT PROFESSIONAL FOR MORE INFORMATION. INFORMATION ABOUT EXCHANGING YOUR SHARES. Your investment firm may receive a commission from PFD for your purchase of fund shares, and may receive additional compensation from Pioneer for your purchase of fund shares. - ---------------------------------------------------------------------------------------------------------------------
38
- ------------------------------------------------------------------------------------------------------------------------- Buying Shares Exchanging Shares - ------------------------------------------------------------------------------------------------------------------------- BY PHONE OR ONLINE You can use the telephone or online privilege After you establish your eligible fund if you have an existing non-retirement account, you can exchange fund shares by account. Certain IRAs can use the telephone phone or online if: purchase privilege. If your account is eligible, you can purchase additional fund o You are exchanging into an existing shares by phone or online if: account or using the exchange to establish a new account, provided the o You established your bank account of new account has a registration identical record at least 30 days ago to the original account o Your bank information has not changed o The fund into which you are exchanging for at least 30 days offers the same class of shares o You are not purchasing more than $25,000 o You are not exchanging more than worth of shares per account per day $500,000 worth of shares per account per day o You can provide the proper account identification information o You can provide the proper account identification information When you request a telephone or online purchase, the transfer agent will electronically debit the amount of the purchase from your bank account of record. The transfer agent will purchase fund shares for the amount of the debit at the offering price determined after the transfer agent receives your telephone or online purchase instruction and good funds. It usually takes three business days for the transfer agent to receive notification from your bank that good funds are available in the amount of your investment. - ------------------------------------------------------------------------------------------------------------------------- IN WRITING, BY MAIL You can purchase fund shares for an existing You can exchange fund shares by mailing or OR BY FAX fund account by mailing a check to the faxing a letter of instruction to the transfer agent. Make your check payable to transfer agent. You can exchange Pioneer Fund the fund. Neither initial nor subsequent shares directly through a Pioneer Fund only investments should be made by third party if your account is registered in your name. check. Your check must be in U.S. dollars and However, you may not fax an exchange request drawn on a U.S. bank. Include in your for more than $500,000. Include in your purchase request the fund's name, the account letter: number and the name or names in the account registration. o The name, social security number and signature of all registered owners o A signature guarantee for each registered owner if the amount of the exchange is more than $500,000 o The name of the fund out of which you are exchanging and the name of the fund into which you are exchanging o The class of shares you are exchanging o The dollar amount or number of shares your are exchanging - -------------------------------------------------------------------------------------------------------------------------
39
- ------------------------------------------------------------------------------------------------------------ Selling Shares How to Contact Pioneer - ------------------------------------------------------------------------------------------------------------ Normally, your investment firm will send your BY PHONE request to sell shares to the Pioneer Funds' For information or to request a telephone transfer agent. transaction between 8:00 a.m. and 7:00 p.m. (Eastern time) by speaking with a shareholder CONSULT YOUR INVESTMENT PROFESSIONAL FOR MORE services representative call 1-800-225-6292 INFORMATION. To request a transaction using FactFone(SM) call Each Pioneer Fund has authorized PFD to act as its 1-800-225-4321 agent in the repurchase of fund shares from qualified investment firms. Each Pioneer Fund Telecommunications Device for the Deaf (TDD) reserves the right to terminate this procedure at 1-800-225-1997 any time. - ------------------------------------------------------------------------------------------------------------ IF YOU HAVE AN ELIGIBLE NON-RETIREMENT ACCOUNT, BY MAIL YOU MAY SELL UP TO $100,000 PER ACCOUNT PER DAY BY Send your written instructions to: PIONEER INVESTMENT PHONE OR ONLINE. You may sell fund shares held in MANAGEMENT SHAREHOLDER SERVICES, INC. P.O. Box a retirement plan account by phone only if your 55014 Boston, Massachusetts 02205-5014 account is an eligible IRA (tax penalties may apply). You may not sell your shares by phone or PIONEER WEBSITE online if you have changed your address (for www.pioneerinvestments.com checks) or your bank information (for wires and transfers) in the last 30 days. BY FAX Fax your exchange and sale requests to: You may receive your sale proceeds: 1-800-225-4240 o By check, provided the check is made payable exactly as your account is registered o By bank wire or by electronic funds transfer, provided the sale proceeds are being sent to your bank address of record - ------------------------------------------------------------------------------------------------------------ You can sell some or all of your fund shares by WRITING DIRECTLY TO A PIONEER FUND only if your account is registered in your name. Include in your request your name, your social security number, the fund's name, your fund account number, the class of shares to be sold, the dollar amount or number of shares to be sold, and any other applicable requirements as described below. The transfer agent will send the sale proceeds to your address of record unless you provide other instructions. Your request must be signed by all registered owners and be in good order. The transfer agent will not process your request until it is received in good order. You may sell up to $100,000 per account per day by fax. - -------------------------------------------------------------------------------------------------------------------------
Pioneer Fund Shareholder Account Policies (Pioneer Tax Free Income Fund) Signature Guarantees and Other Requirements (Pioneer Tax Free Income Fund). You are required to obtain a signature guarantee when you are: o Requesting certain types of exchanges or sales of Pioneer Fund shares o Redeeming shares for which you hold a share certificate o Requesting certain types of changes for your existing account You can obtain a signature guarantee from most broker-dealers, banks, credit unions (if authorized understate law) and federal savings and loan associations. You cannot obtain a signature guarantee from a notary public. 40 The Pioneer Funds generally will accept only medallion signature guarantees. A medallion signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency, savings association, or other financial institution that is participating in a medallion program recognized by the Securities Transfer Association. Signature guarantees from financial institutions that are not participating in one of these programs are not accepted as medallion signature guarantees. The Pioneer Funds may accept other forms of guarantee from financial intermediaries in limited circumstances. Fiduciaries and corporations are required to submit additional documents to sell Pioneer Fund shares. Distribution Options (Pioneer Tax Free Income Fund). Pioneer Tax Free Income Fund offers three distribution options. Any fund shares you buy by reinvesting distributions will be priced at the applicable net asset value per share. 1. Unless you indicate another option on your account application, any dividends and capital gain distributions paid to you by the fund will automatically be invested in additional fund shares. 2. You may elect to have the amount of any dividends paid to you in cash and any capital gain distributions reinvested in additional shares. 3. You may elect to have the full amount of any dividends and/or capital gain distributions paid to you in cash. Options (2) or (3) are not available to retirement plan accounts or accounts with a current value of less than $500. If your distribution check is returned to the transfer agent or you do not cash the check for six months or more, the transfer agent may reinvest the amount of the check in your account and automatically change the distribution on your account to option (1) until you request a different option in writing. These additional shares will be purchased at the then current net asset value. Directed Dividends (Pioneer Tax Free Income Fund). You can invest the dividends paid by one of your Pioneer mutual fund accounts in a second Pioneer mutual fund account. The value of your second account must be at least $1,000. You may direct the investment of any amount of dividends. There are no fees or charges for directed dividends. If you have a retirement plan account, you may only direct dividends to accounts with identical registrations. Excessive Trading (Pioneer Tax Free Income Fund). Frequent trading into and out of the fund can disrupt portfolio management strategies, harm fund performance by forcing the fund to hold excess cash or to liquidate certain portfolio securities prematurely and increase expenses for all investors, including long-term investors who do not generate these costs. An investor may use short-term trading as a strategy, for example, if the investor believes that the valuation of the fund's portfolio securities for purposes of calculating its net asset value does not fully reflect the then current fair market value of those holdings. The fund discourages, and does not take any intentional action to accommodate, excessive and short-term trading practices, such as market timing. Although there is no generally applied standard in the marketplace as to what level of trading activity is excessive, we may consider trading in the fund's shares to be excessive for a variety of reasons, such as if: o You sell shares within a short period of time after the shares were purchased; o You make two or more purchases and redemptions within a short period of time; o You enter into a series of transactions that indicate a timing pattern or strategy; or o We reasonably believe that you have engaged in such practices in connection with other mutual funds. The fund's Board of Trustees has adopted policies and procedures with respect to frequent purchases and redemptions of fund shares by fund investors. Pursuant to these policies and procedures, we monitor selected trades on a daily basis in an effort to detect excessive short-term trading. If we determine that an investor or a client of a broker or other intermediary has engaged in excessive short-term trading that we believe may be harmful to the fund, we will ask the investor, broker or other intermediary to cease such activity and we will refuse to process purchase orders (including purchases by exchange) of such investor, broker, other intermediary or accounts that we believe are under their control. In determining whether to take such actions, we seek to act in a manner that is consistent with the best interests of the fund's shareholders. While we use our reasonable efforts to detect excessive trading activity, there can be no assurance that our efforts will be successful or that market timers will not employ tactics designed to evade detection. If we are not successful, your return from an investment in the fund may be adversely affected. Frequently, fund shares are held through omnibus accounts maintained by financial intermediaries such as brokers and retirement plan administrators, where the holdings of multiple shareholders, such as all the clients of a particular broker or other intermediary, are aggregated. Our ability to monitor trading practices by investors purchasing shares through omnibus accounts may be limited and dependent upon the cooperation of the broker or other intermediary in taking steps to limit this type of activity. 41 The fund may reject a purchase or exchange order before its acceptance or the issuance of shares. The fund may also restrict additional purchases or exchanges in an account. Each of these steps may be taken for any transaction, for any reason, without prior notice, including transactions that the fund believes are requested on behalf of market timers. The fund reserves the right to reject any purchase or exchange request by any investor or financial institution if the fund believes that any combination of trading activity in the account or related accounts is potentially disruptive to the fund. A prospective investor whose purchase or exchange order is rejected will not achieve the investment results, whether gain or loss, that would have been realized if the order were accepted and an investment made in the fund. The fund and its shareholders do not incur any gain or loss as a result of a rejected order. The fund may impose further restrictions on trading activities by market timers in the future. To limit the negative effects of excessive trading on the fund, the fund has adopted the following restriction on investor transactions. If an investor redeems $5,000 or more (including redemptions that are a part of an exchange transaction) from the fund, that investor shall be prevented (or "blocked") from purchasing shares of the fund (including purchases that are a part of an exchange transaction) for 30 calendar days after the redemption. This policy does not apply to systematic purchase or withdrawal plan transactions, transactions made through employer-sponsored retirement plans described under Section 401(a), 403(b) or 457 of the Internal Revenue Code or employee benefit plans, scheduled (Internal Revenue Code Section 72(t) election) or mandatory (required minimum distribution) withdrawals from IRAs, rebalancing transactions made through certain asset allocation or "wrap" programs, transactions by insurance company separate accounts or transactions by other funds that invest in the fund. This policy does not apply to purchase or redemption transactions of less than $5,000 or to the Pioneer money market funds. Purchases pursuant to the reinstatement privilege for Class A and Class B shares are subject to this policy. We rely on financial intermediaries that maintain omnibus accounts to apply to their customers either the fund's policy described above or their own policies or restrictions designed to limit excessive trading of fund shares. However, we do not impose this policy at the omnibus account level. Minimum Account Size (Pioneer Tax Free Income Fund). Pioneer Tax Free Income Fund requires that you maintain a minimum account value of $500. If you hold less than $500 in your account, Pioneer Tax Free Income Fund reserves the right to notify you that it intends to sell your shares and close your account. You will be given 60 days from the date of the notice to make additional investments to avoid having your shares sold. This policy does not apply to certain qualified retirement plan accounts. Telephone and Website Access (Pioneer Tax Free Income Fund). You may have difficulty contacting Pioneer Tax Free Income Fund by telephone or accessing www.pioneerinvestments.com during times of market volatility or disruption in telephone or internet service. On New York Stock Exchange holidays or on days when the exchange closes early, Pioneer will adjust the hours for the telephone center and for online transaction processing accordingly. If you are unable to reach Pioneer Tax Free Income Fund by telephone, you should communicate with the fund in writing. Share Certificates (Pioneer Tax Free Income Fund). The Pioneer Funds do not offer share certificates. Shares are electronically recorded. Any existing certificated shares can only be sold by returning your certificate to the transfer agent, along with a letter of instruction or a stock power (a separate written authority transferring ownership) and a signature guarantee. Other Policies (Pioneer Tax Free Income Fund). Pioneer Tax Free Income Fund and PFD reserve the right to: o reject any purchase or exchange order for any reason, without prior notice o charge a fee for exchanges or to modify, limit or suspend the exchange privilege at any time without notice. Each Pioneer Fund will provide 60 days' notice of material amendments to or termination of the exchange privilege o revise, suspend, limit or terminate the account options or services available to shareowners at any time, except as required by the rules of the SEC Pioneer Tax Free Income Fund reserves the right to: o suspend transactions in shares when trading on the New York Stock Exchange is closed or restricted, when the SEC determines an emergency or other circumstances exist that make it impracticable for Pioneer Tax Free Income Fund to sell or value its portfolio securities o redeem in kind by delivering to you portfolio securities owned by Pioneer Tax Free Income Fund rather than cash. Securities you receive this way may increase or decrease in value while you hold them and you may incur brokerage and transaction charges and tax liability when you convert the securities to cash 42 o charge transfer, shareholder servicing or similar agent fees, such as an account maintenance fee for small balance accounts, directly to accounts upon at least 30 days' notice. The fund may do this by deducting the fee from your distribution of dividends and/or by redeeming shares to the extent necessary to cover the fee. Dividends and Capital Gains. Pioneer Municipal and Equity Income Trust's policy is to distribute each quarter substantially all of its net investment income and annually substantially all of its net realized capital gains, if any. It is Pioneer Municipal and Equity Income Trust's policy to offset capital gains with any capital loss-carryforward before making additional capital gains distributions. Pioneer Tax Free Income Fund declares a dividend daily. Dividends are normally paid on the last business day of each month. Each Pioneer Fund generally pays any distributions of net short- and long-term capital gains in November, and generally pays dividends from any net investment income in December. Each Pioneer Fund may also pay dividends and capital gain distributions at other times if necessary for the fund to avoid U.S. federal income or excise tax. If you invest in a Pioneer Fund close to the time that such Pioneer Fund makes a distribution, generally you will pay a higher price per share and you will pay taxes on the amount of the distribution whether you reinvest the distribution or receive it as cash. Taxes. For U.S. federal income tax purposes, distributions from each Pioneer Fund's tax-exempt interest income, called "exempt-interest dividends," are exempt from regular federal income tax, but may be subject to state or local income taxes. A portion of these dividends may be tax preference items for purposes of the alternative minimum tax. Distributions from each fund's net capital gains (if any) are considered long-term capital gains and may be taxable to you at reduced rates depending upon their source and other factors. Distributions from each fund's net short-term capital gains are taxable as ordinary income. Other dividends are generally taxable as ordinary income or, for taxable years beginning on or before December 31, 2010, if so designated by the fund and certain other conditions, including holding period requirements, are met by the applicable fund and shareholder, as "qualified dividend income" taxable to individual shareholders at a maximum 15% U.S. federal income tax rate. "Qualified dividend income" generally is income derived from dividends from U.S. corporations or certain foreign corporations that are either incorporated in a U.S. possession or eligible for tax benefits under certain U.S. income tax treaties. Since Pioneer Tax Free Income Fund's income is derived from sources that do not pay dividends, it is not expected that any dividends paid by that fund will qualify for either the dividends-received deduction for corporations or the reduced rate available to individuals on "qualified dividend income." Any taxable dividends and distributions are taxable whether you take payment in cash or reinvest them to buy additional fund shares. If a fund declares a taxable dividend in October, November or December, payable to shareholders of record in such a month, but pays it in January of the following year, you will be taxed on the dividend as if you received it in the year in which it was declared. When you sell or exchange fund shares you will generally recognize a capital gain or capital loss in an amount equal to the difference between the net amount of sale proceeds (or, in the case of an exchange, the fair market value of the shares) that you receive and your tax basis for the shares that you sell or exchange. You must provide your social security number or other taxpayer identification number to the fund in which you hold shares along with the certifications required by the Internal Revenue Service when you open an account. If you do not or if it is otherwise legally required to do so, the fund will apply "backup withholding" at the rate of 28% to your dividends (other than exempt-interest dividends) and distributions, sale proceeds and any other payments to you that are subject to backup withholding. If you are neither a citizen nor a resident of the United States, the fund will withhold U.S. federal income tax at the rate of 30% (or any lower applicable treaty rate) on certain taxable dividends and other payments (but not on distributions of net capital gains). You should ask your tax adviser about any federal and state tax considerations relating to an investment in a fund, including the potential application of the alternative minimum tax to you on the fund's exempt interest dividends and possible state and local income taxation of the fund's exempt-interest dividends and other distributions. You may also consult each fund's statement of additional information for a more detailed discussion of U.S. federal income tax considerations that may affect the fund and its shareowners. Share Classes. Pioneer Tax Free Income Fund offers four share classes (designated Class A, B, C and Y, respectively) that have different sales loads, 12b-1 fees and/or other class-specific expenses. As the investors in the other share classes have loads, 12b-1 fees and/or different class-specific expenses, the NAV and performance of each class varies. Class A has one of the highest class-specific expense ratios. Shareholders are only offered Class A shares by means of this prospectus. Pioneer Municipal and Equity Income Trust offers common shares and AMPS. AMPS will be redeemed by the fund after the Meeting but prior to the Closing Date. Only common shares will be converted to Class A shares of Pioneer Tax Free Income Fund in connection with the Merger. 43 FINANCIAL HIGHLIGHTS PIONEER MUNICIPAL AND EQUITY INCOME TRUST The following table shows the financial performance of your fund since its inception. The total returns in the tables represent the rate that your investment would have increased or decreased during each period (assuming reinvestment of all dividends and distributions at net asset value). The information below has been audited by Ernst & Young LLP, your fund's independent registered public accounting firm, whose report is included in your fund's annual report along with your fund's financial statements. The annual report is available upon request.
Year Year Year 1/30/04(b) Ended Ended Ended to 11/30/07 11/30/06 11/30/05 11/30/04 -------- -------- -------- ---------- Per Common Share Operating Performance Net asset value, beginning of period $ 16.17 $ 14.65 $ 14.55 $ 14.33(c) -------- -------- -------- -------- Increase (decrease) from investment operations:(a) Net investment income $ 0.97 $ 0.98 $ 0.95 $ 0.66 Net realized and unrealized gain (loss) on investments and interest rate swaps (1.07) 1.57 0.13 0.27 Dividends and distributions to preferred shareowners from: Net Investment income (0.27) (0.26) (0.19) (0.06) Net realized gain (0.03) (0.02) --(d) -- -------- -------- -------- -------- Net increase (decrease) from investment operations $ (0.40) $ 2.27 $ 0.89 $ 0.87 Dividends and distributions to common shareowners from: Net investment income (0.85) (0.67) (0.79) (0.55) Net realized gain (0.10) (0.08) -- -- Capital charge with respect to issuance of: Common shares -- -- -- (0.03) Preferred shares -- -- -- (0.07) -------- -------- -------- -------- Net increase (decrease) in net asset value $ (1.35) $ 1.52 $ 0.10 $ 0.22 -------- -------- -------- -------- Net asset value, end of period(e) $ 14.82 $ 16.17 $ 14.65 $ 14.55 ======== ======== ======== ======== Market value, end of period(e) $ 13.41 $ 14.00 $ 12.18 $ 12.74 ======== ======== ======== ======== Total return(f) 2.30% 21.79% 1.51% (11.26)% Ratios to average net assets of common shareowners Net expenses(g) 1.26% 1.12% 1.12% 1.04%(h) Net investment income before preferred share dividends 6.12% 6.43% 6.32% 5.69%(h) Preferred share dividends 1.70% 1.69% 1.28% 0.55%(h) Net investment income available to common shareowners 4.42% 4.74% 5.04% 5.14%(h) Portfolio turnover 23% 16% 27% 63% Net assets of common shareowners, end of period (in thousands) $425,358 $464,291 $420,476 $417,789 Preferred shares outstanding (in thousands) $176,250 $176,250 $176,250 $176,250 Asset coverage per preferred share, end of period $ 85,354 $ 90,870 $ 84,651 $ 84,264 Average market value per preferred share $ 25,000 $ 25,000 $ 25,000 $ 25,000 Liquidation value, including dividends payable, per preferred share $ 25,019 $ 25,015 $ 25,009 $ 25,003 Ratios to average net assets of common shareowners before reimbursement of waivers and reimbursement of expenses Net expenses(g) 1.26% 1.12% 1.12% 1.05%(h) Net investment income before preferred share dividends 6.12% 6.43% 6.32% 5.68%(h) Preferred share dividends 1.70% 1.69% 1.28% 0.55%(h) Net investment income available to common shareowners 4.42% 4.74% 5.04% 5.13%(h)
(a) The per common share data presented above is based upon the average common shares outstanding for the periods presented. (b) Trust shares were first publicly offered on January 28, 2004. (c) Net asset value immediately after the closing of the first public offering was $14.30. (d) Amount is less than $0.01 per common share. 44 (e) Net asset value and market value are published in Barron's on Saturday, The Wall Street Journal on Monday and The New York Times on Monday and Saturday. (f) Total investment return is calculated assuming a purchase of common shares at the current market value on the first day and a sale at the current market value on the last day of the periods reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Trust's dividend reinvestment plan. Total investment return does not reflect brokerage commissions. Total investment return less than a full period is not annualized. Past performance is not a guarantee of future results. (g) Expense ratios do not reflect the effect of dividend payments to preferred shareowners. (h) Annualized. The information above represents the audited operating performance data for a common share outstanding, total investment return, ratios to average net assets of common shareowners and other supplemental data for the periods indicated. This information has been determined based upon financial information provided in the financial statements and market value data for the Trust's common shares. 45 FINANCIAL HIGHLIGHTS PIONEER TAX FREE INCOME FUND The following tables show the financial performance of Class A shares of Pioneer Tax Free Income Fund for the past five fiscal years. Certain information reflects financial results for a single share. The total returns in the tables represent the rate that your investment in Pioneer Tax Free Income Fund would have increased or decreased during each period (assuming reinvestment of all dividends and distributions). The information below has been audited by Ernst & Young LLP, Pioneer Tax Free Income Fund's independent registered public accounting firm, whose report is included in the fund's annual report along with the fund's financial statements. The annual report is available upon request.
Year Ended Year Ended Year Ended Year Ended Year Ended 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 Class A shares ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period $ 11.75 $ 11.62 $ 11.67 $ 11.70 $ 11.61 -------- -------- -------- -------- -------- Increase (decrease) from investment operations: Net investment income $ 0.46 $ 0.47 $ 0.51 $ 0.56 $ 0.56 Net realized and unrealized gain (loss) on investments (0.60) 0.13 (0.04) (0.02) 0.09 -------- -------- -------- -------- -------- Net increase (decrease) from investment operations $ (0.14) $ 0.60 $ 0.47 $ 0.54 $ 0.65 Distributions to shareowners: Net investment income (0.48) (0.47) (0.52) (0.57) (0.56) -------- -------- -------- -------- -------- Net increase (decrease) in net asset value $ (0.62) $ 0.13 $ (0.05) $ (0.03) $ 0.09 -------- -------- -------- -------- -------- Net asset value, end of period $ 11.13 $ 11.75 $ 11.62 $ 11.67 $ 11.70 ======== ======== ======== ======== ======== Total return* (1.23)% 5.31% 4.05% 4.75% 5.80% Ratio of net expenses to average net assets+ 0.84% 0.86% 0.91% 0.91% 0.93% Ratio of net investment income to average net assets+ 4.05% 4.08% 4.36% 4.88% 4.88% Portfolio turnover rate 68% 66% 26% 39% 80% Net assets, end of period (in thousands) $313,706 $349,683 $315,855 $307,463 $326,173 Ratios with reductions for fees paid indirectly: Net expenses 0.84% 0.86% 0.91% 0.91% 0.93% Net investment income 4.05% 4.08% 4.36% 4.88% 4.88%
* 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. + Ratio with no reduction for fees paid indirectly. 46 INFORMATION CONCERNING THE MEETING Solicitation of Proxies In addition to the mailing of these proxy materials, proxies may be solicited by telephone, by fax or in person by the Trustees, officers and employees of your fund; by personnel of Pioneer or PIMSS, or by broker-dealer firms. Pioneer and its affiliates, together with a third party solicitation firm, have agreed to provide proxy solicitation services to your fund at a cost of approximately $[ ]. Your fund will bear the costs of preparing and printing the Proxy Statement/Prospectus and the solicitation costs incurred in connection with the Merger. Revoking Proxies If you sign and return a proxy, you can revoke it at any time before it is exercised: o By filing a written notice of revocation with your fund's transfer agent, Pioneer Investment Management Shareholder Services, Inc., 60 State Street, Boston, Massachusetts 02109, o By returning a duly executed proxy with a later date before the time of the meeting, or o If you have executed a proxy but are present at the meeting and wish to vote in person, by notifying the secretary of your fund (without complying with any formalities) at any time before it is voted. Being present at the meeting alone does not revoke a previously executed and returned proxy. Outstanding Shares Only shareholders of record on July 7, 2008 (the "record date") are entitled to notice of and to vote at the meeting. As of the record date, the following shares of your fund were outstanding:
Pioneer Municipal and Equity Income Trust Shares Outstanding (as of July 7, 2008) ----------------------------------------- --------------------------------------- Common Shares ...................... [ ] AMPS ............................... [ ]
As described above, AMPS and common shares will each be entitled to vote to approve the Agreement and Plan of Merger. However, AMPS will be redeemed prior to the Closing Date. Other Business Your fund's Board of Trustees knows of no business to be presented for consideration at the meeting other than Proposal 1. If other business is properly brought before the meeting, proxies will be voted according to the best judgment of the persons named as proxies. Adjournments If, by the time scheduled for the meeting, a quorum of shareholders of your fund is not present or if a quorum is present but sufficient votes "for" the proposal have not been received, the persons named as proxies may propose an adjournment of the meeting to another date and time, and the meeting may be held as adjourned within a reasonable time after the date set for the original meeting without further notice. Any such adjournment will require the affirmative vote of a majority of the votes cast in person or by proxy at the session of the meeting to be adjourned. The persons named as proxies will vote all proxies in favor of the adjournment that voted in favor of the proposal or that abstained. Broker non-votes will be disregarded in the vote for adjournment. Telephone and Internet Voting In addition to soliciting proxies by mail, by fax or in person, your fund may also arrange to have votes recorded by telephone, the Internet or other electronic means. The voting procedures used in connection with such voting methods are designed to authenticate shareholders' identities, to allow shareholders to authorize the voting of their shares in accordance with their instructions and to confirm that their instructions have been properly recorded. In the case of telephone voting, shareholders would be called at the phone number PIMSS has in its records for their accounts and would be asked for their Social Security number or other identifying information. The shareholders would then be given an opportunity to authorize proxies to vote their shares at the meeting in accordance with their instructions. In the case of automated telephone and Internet voting, shareholders would be required to provide their identifying information and will receive a confirmation of their instructions. 47 Shareholders' Proposals Your fund holds an annual meeting of shareholders each year. In accordance with your fund's by-laws, any shareholder desiring to present a proposal for consideration at the next annual meeting of shareholders must submit a proposal in writing, so that it is received by your fund at 60 State Street, Boston, Massachusetts 02109 no later than the close of business on the 90th day (and no earlier than the close of business on the 120th day) prior to the one year anniversary of the date on which notice of the preceding year's annual meeting was mailed. Last year's mailing of notice for the annual shareholders meeting occurred on April 30, 2007, so proposals for this year's annual shareholder meeting should have been received by your fund no later than the close of business on January 31, 2008 and no earlier than the close of business on January 1, 2008. Pioneer Tax Free Income Fund is not required, and does not intend, to hold meetings of shareholders each year. Instead, meetings will be held only when and if required. Any shareholder desiring to present a proposal for consideration at the next annual meeting of shareholders must submit a proposal in writing, so that it is received by your fund at 60 State Street, Boston, Massachusetts 02109 within a reasonable time before the meeting. VOTING RIGHTS AND REQUIRED VOTE Holders of common shares and AMPS of your fund are each entitled to vote to approve the Agreement and Plan of Merger. Each share is entitled to one vote. Common shares and AMPS will vote as separate classes on the proposal. A quorum is required to conduct business at the meeting. With respect to your fund, one-third of the outstanding shares of each class of your fund entitled to cast votes at the meeting constitutes a quorum for the transaction of business with respect to such class; however, since the proposal must be approved by a 1940 Act Majority of each class, at least 50% of the outstanding shares of each class must have submitted votes to approve the proposal with respect to your fund. For this purpose, a "majority of the outstanding shares of each class of your fund" means the affirmative vote of the lesser of: 1. 67% or more of the shares of each class of your fund present at the meeting, if the holders of more than 50% of the outstanding shares of each class of your fund entitled to vote are present or represented by proxy, or 2. more than 50% of the outstanding shares of each class of your fund. The table below shows how shares will be treated for the purposes of quorum and voting requirements.
- ------------------------------------------------------------------------------------------------------------------------------------ Shares Quorum Voting - ------------------------------------------------------------------------------------------------------------------------------------ In General All shares "present" in person or by proxy Shares "present" in person will be voted in are counted toward a quorum. person at the meeting. Shares present by proxy will be voted in accordance with instructions. - ------------------------------------------------------------------------------------------------------------------------------------ Signed Proxy with no Voting Considered "present" at meeting for purposes Voted "for" the proposal. Instruction (other than Broker of quorum. Non-Vote) - ------------------------------------------------------------------------------------------------------------------------------------ Broker Non-Vote (where the Considered "present" at meeting for purposes Broker non-votes do not count as a vote "for" underlying holder had not of quorum. the proposal and effectively result in a vote voted and the broker does not "against" the proposal. have discretionary authority to vote the shares) - ------------------------------------------------------------------------------------------------------------------------------------ Vote to Abstain Considered "present" at meeting for purposes Abstentions do not constitute a vote "for" the of quorum. proposal and effectively result in a vote "against" the proposal. - ------------------------------------------------------------------------------------------------------------------------------------
If the required approval of shareholders is not obtained, the meeting may be adjourned as more fully described in this Proxy Statement/ Prospectus, and your fund will continue to engage in business as a separate fund and the Board of Trustees will consider what further action may be appropriate. 48 OWNERSHIP OF SHARES OF THE PIONEER FUNDS As of July 7, 2008, the Trustees and officers of each Pioneer Fund owned in the aggregate less than 1% of the outstanding shares of a Pioneer Fund. The following is a list of the holders of 5% or more of the outstanding shares of any class of a Pioneer Fund as of July 7, 2008.(1)(2)
Pioneer Municipal and Equity Income Trust Record Holder Share Class Number of Shares Percent of Class Common Shares AMPS Pioneer Tax Free Income Fund Record Holder Share Class Number of Shares Percent of Class(1) Class A Class B Class C Class Y
- ---------- (1) To the knowledge of each Pioneer Fund, the amount of each class owned of record, unless otherwise noted. (2) Calculated on the basis of each record holder's present holdings and commitments as of the record date, and assuming the Merger took place on that same day. Bulldog Investors General Partnership ("BIGP") and one of its partners, Full Value Partners, L.P. ("Full Value"), investors holding in the aggregate approximately 18.6% of the common shares of Pioneer Municipal and Equity Income Trust, have reached an agreement with Pioneer to vote their shares in favor of the Merger. BIGP and Full Value also have agreed to vote their shares in accordance with the recommendation of the Trustees of Pioneer Municipal and Equity Income Trust with respect to each proposal submitted to shareholders at Pioneer Municipal and Equity Income Trust's 2008 annual meeting of shareholders, if held, or at any other meeting of Pioneer Municipal and Equity Income Trust's shareholders held prior to the completion of the Merger. In addition, BIGP and Full Value have agreed not to nominate any person for election as trustee at, or to make or submit any proposal for, these shareholder meetings. If the Merger is approved, the 2008 annual shareholder meeting would not be held. EXPERTS The financial highlights for the past four years for Pioneer Municipal and Equity Income Trust and the financial highlights for the past five fiscal years for Pioneer Tax Free Income and the financial statements for each Pioneer Fund for the past two years are incorporated by reference into this Proxy Statement/Prospectus. The financial highlights and financial statements of each Pioneer Fund for its most recent fiscal year end have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon incorporated by reference into this registration statement. Such financial statements and financial highlights are incorporated by reference herein in reliance upon such reports given on the authority of such firm as experts in accounting and auditing. 49 AVAILABLE INFORMATION You can obtain more free information about each Pioneer Fund from your investment firm or by writing to Pioneer Investment Management Shareholder Services, Inc., 60 State Street, Boston, Massachusetts 02109. You may also call 1-800-225-6292. Pioneer Tax Free Income Fund's statement of additional information and each Pioneer Fund's shareholder reports are available free of charge on the Pioneer Funds' website at www.pioneerinvestments.com Shareholder reports. Annual and semiannual reports to shareholders, and quarterly reports filed with the SEC, provide information about each Pioneer Fund's investments. The annual report discusses market conditions and investment strategies that significantly affected each Pioneer Fund's performance during its last fiscal year. Visit our website www.pioneerinvestments.com Each Pioneer Fund is subject to the informational requirements of the Securities Exchange Act of 1934, as amended and the 1940 Act and files reports, proxy statements and other information with the SEC. These reports, proxy statements and other information filed by the Pioneer Funds and their predecessors can be inspected and copied (for a duplication fee) at the public reference facilities of the SEC at 100 F Street, N.E., Washington, D.C. Copies of these materials can also be obtained by mail from the Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, D.C. 20549, at prescribed rates. In addition, copies of these documents may be viewed on-screen or downloaded from the SEC's Internet site at http://www.sec.gov. 50 EXHIBIT A -- FORM OF AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of the [ ] day of [ ], 2008, by and between Pioneer Tax Free Income Fund, a Delaware statutory trust, in its individual capacity (the "Surviving Trust"), and on behalf of its sole series, Pioneer Tax Free Income Fund (the "Surviving Fund"), with its principal place of business at 60 State Street, Boston, Massachusetts 02109, and Pioneer Municipal and Equity Income Trust, a Delaware statutory trust, in its individual capacity (the "Merging Trust"), and on behalf of its sole series, Pioneer Municipal and Equity Income Trust (the "Merging Fund"), with its principal place of business at 60 State Street, Boston, Massachusetts 02109. The Surviving Fund and the Merging Fund are sometimes referred to collectively herein as the "Funds" and individually as a "Fund." WHEREAS, the Surviving Trust is a registered investment company classified as a management company of the open-end type. WHEREAS, the Merging Trust is a registered investment company classified as a management company of the closed-end type. WHEREAS, this Agreement is intended to constitute a plan of a "reorganization" as defined in Section 368(a) of the United States Internal Revenue Code of 1986, as amended (the "Code") and the Treasury Regulations thereunder, and the parties hereby adopt this Agreement as a "plan of reorganization" within the meaning of Treasury Regulations Sections 1.368-2(g) and 1.368-3(a). WHEREAS, the reorganization will consist of the merger of the Merging Trust into the Surviving Trust pursuant to the provisions of the Delaware Statutory Trust Act (the "Merger") and will have the consequences described in Section 1.2 below. WHEREAS, the Surviving Fund is authorized to issue shares of beneficial interest. WHEREAS, the Board of Trustees of each of the Surviving Trust and the Merging Trust have determined that the Merger is in the best interests of the Surviving Fund shareholders and the Merging Fund shareholders, respectively, and is not dilutive of the interests of those shareholders. NOW, THEREFORE, in consideration of the premises of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows: 1. THE MERGER 1.1 Subject to the terms and conditions herein set forth and on the basis of the representations and warranties contained herein, a certificate of merger of the Merging Trust with and into the Surviving Trust (the "Certificate of Merger") shall be executed and acknowledged on behalf of the Surviving Trust and thereafter delivered to the Secretary of State of the State of Delaware by the Surviving Trust for filing, as provided in Section 3815 of the Delaware Statutory Trust Act 12 Del.C. Section 3801, et. seq. (the "DSTA"). The Merger shall become effective at 5:00 p.m. (Eastern time) (the "Effective Time") on the closing date of the Merger (the "Closing Date"), unless otherwise mutually agreed by the parties hereto. At the Effective Time, the separate existence of the Merging Trust and the Merging Fund shall cease and the Merging Trust and the Merging Fund shall be merged with and into the Surviving Trust and the Surviving Fund, respectively. 1.2 At the Effective Time, by virtue of the Merger and without any further action on the part of Surviving Fund, Merging Fund, or the holders of common shares of the Merging Fund or the Class A shares of the Surviving Fund, (i) all of the assets of the Merging Fund as set forth in Paragraph 1.3 ("Merging Fund Assets") and all of the liabilities and obligations of the Merging Fund, whether accrued or contingent, known or unknown, existing at the Closing Date (collectively, the "Merging Fund Liabilities") are hereby assigned to, and will become the assets and liabilities of, the Surviving Fund, and the Surviving Fund hereby agrees to accept and assume all such assets and liabilities, and (ii) the common shares of the Merging Fund issued and outstanding immediately prior to the Merger shall be exchanged for a number of Class A shares of the Surviving Fund, including fractional Class A shares of the Surviving Fund ("Surviving Fund Shares"), with an aggregate net asset value ("NAV") equal to the NAV of the common shares of the Merging Fund, as determined in the manner set forth in Paragraphs 2.1 and 2.2. Such transactions shall take place at the Closing (as defined in Paragraph 3.1 below). 1.3 (a) The Merging Fund Assets shall consist of all of the Merging Fund's property, including, without limitation, all portfolio securities and instruments, dividends and interest receivables, cash, goodwill, contractual rights and choses in action of the Merging Fund or the Merging Trust in respect of the Merging Fund, all other intangible property owned by the Merging Fund, originals or copies of all books and records of the Merging Fund, and all other assets of the Merging Fund as of the Effective Time. The Surviving Fund shall also be entitled to receive copies of all records that the Merging Fund is required to maintain under the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the rules of the Securities and Exchange Commission (the "Commission") thereunder to the extent such records pertain to the Merging Fund. A-1 (b) The Merging Fund has provided the Surviving Fund with a list of all of the Merging Fund's securities and other assets as of the date of execution of this Agreement, and the Surviving Fund has provided the Merging Fund with a copy of the current fundamental investment policies and restrictions and fair value procedures applicable to the Surviving Fund. The Merging Fund reserves the right to sell any of such securities or other assets before the Effective Time and agrees not to acquire any portfolio security that is not an eligible investment for, or that would violate an investment policy or restriction of, the Surviving Fund. 1.4 The Merging Fund will endeavor to discharge all of its known liabilities and obligations that are or will become due prior to the Closing. 1.5 On or as soon after the Closing Date as is conveniently practicable, accounts on the share records of the Surviving Fund will be established in the names of each shareholder of record of the Merging Fund, determined as of the Effective Time (the "Merging Fund Shareholders"), representing the number of Surviving Fund Shares due to the shareholder pursuant to Paragraph 1.2 hereof. Each Merging Fund Shareholder shall receive the number of Surviving Fund Shares corresponding to common shares of the Merging Fund (the "Merging Fund Shares") held by such Merging Fund Shareholder that have an aggregate NAV equal to the aggregate NAV of the Merging Fund Shares held of record by such Merging Fund Shareholder as of the Effective Time. The Surviving Fund shall not issue certificates representing the Surviving Fund Shares in connection with the Merger. 1.6 Ownership of Surviving Fund Shares will be shown on the books of the Surviving Fund's transfer agent. Any certificates representing ownership of Merging Fund Shares that remain outstanding at the Effective Time shall be deemed to be cancelled and shall no longer evidence ownership of Merging Fund Shares. 1.7 Any transfer taxes payable upon issuance of Surviving Fund Shares in a name other than the registered holder of the Merging Fund Shares on the books of the Merging Fund as of that time shall, as a condition of such issuance and transfer, be paid by the person to whom such Surviving Fund Shares are to be issued and transferred. 2. VALUATION 2.1 The NAV of the Surviving Fund Shares and the NAV of the Merging Fund shall, in each case, be determined as of the close of regular trading on the New York Stock Exchange (generally, 4:00 p.m., Boston time) on the Closing Date, but immediately prior to giving effect to the assignment and assumption of assets and liabilities between the Merging Fund and the Surviving Fund as set forth herein (the "Valuation Time"). Pioneer Investment Management, Inc. (the "Surviving Fund Adviser") shall compute the NAV per Surviving Fund Share in the manner set forth in the Surviving Trust's Agreement and Declaration of Trust (the "Declaration"), or By-Laws, and the Surviving Fund's then-current prospectus and statement of additional information. The Surviving Fund Adviser shall compute the NAV per share of the Merging Fund in the manner set forth in the Merging Trust's Agreement and Declaration of Trust, or By-laws, and the Merging Fund's then-current prospectus and statement of additional information. The Surviving Fund Adviser shall confirm to the Surviving Fund the NAV of the Merging Fund. 2.2 The number of Surviving Fund Shares to be issued (including fractional shares, if any) in the exchange of the Merging Fund Shares for Surviving Fund Shares shall be determined by the Surviving Fund Adviser by dividing the NAV with respect to common shares of the Merging Fund, as determined in accordance with Paragraph 2.1, by the NAV of the Surviving Fund Shares, as determined in accordance with Paragraph 2.1. 2.3 The Surviving Fund and the Merging Fund shall cause the Surviving Fund Adviser to deliver a copy of its valuation report to the other party at Closing (as defined in Paragraph 3.1). All computations of value shall be made by the Surviving Fund Adviser in accordance with its regular practice as pricing agent for the Surviving Fund and the Merging Fund. 3. CLOSING AND CLOSING DATE 3.1 The Closing Date shall be [ ], 2008, or such later date as the parties may agree to in writing. All acts necessary to consummate the Merger (the "Closing") shall be deemed to take place simultaneously as of the Effective Time unless otherwise provided. The Closing shall be held at the offices of Bingham McCutchen LLP, One Federal Street, Boston, Massachusetts, or at such other place as the parties may agree. 3.2 Portfolio securities that are held other than in book-entry form in the name of Brown Brothers Harriman & Co. (the "Merging Fund Custodian") as record holder for the Merging Fund shall be presented by the Merging Fund to Brown Brothers Harriman & Co. (the "Surviving Fund Custodian") for examination no later than three business days preceding the Closing Date. Such portfolio securities shall be transferred to the Surviving Fund Custodian for the account of the Surviving Fund on the Closing Date, duly endorsed in proper form for transfer, in such condition as to constitute good delivery thereof in accordance with the custom of brokers, and shall be accompanied A-2 by all necessary federal and state stock transfer stamps or a check for the appropriate purchase price thereof. Portfolio securities held of record by the Merging Fund Custodian in book-entry form on behalf of the Merging Fund shall be transferred by the Merging Fund Custodian through the Depository Trust Company to the Surviving Fund Custodian and by the Surviving Fund Custodian recording the beneficial ownership thereof by the Surviving Fund on the Surviving Fund Custodian's records, in each case on the Closing Date. Any cash shall be transferred by the Merging Fund Custodian transmitting immediately available funds by wire transfer to the Surviving Fund Custodian the cash balances maintained by the Merging Fund Custodian and the Surviving Fund Custodian crediting such amount to the account of the Surviving Fund, in each case on the Closing Date. 3.3 The Surviving Fund Custodian shall deliver within one business day after the Closing a certificate of an authorized officer stating that: (a) the Merging Fund Assets have been transferred in proper form to the Surviving Fund on the Closing Date, and (b) all necessary transfer taxes including all applicable federal and state stock transfer stamps, if any, have been paid, or provision for payment has been made in conjunction with the transfer of portfolio securities as part of the Merging Fund Assets. 3.4 If on the Closing Date (a) the New York Stock Exchange is closed to trading or trading thereon shall be restricted or (b) trading or the reporting of trading on such exchange or elsewhere is disrupted so that accurate appraisal of the NAV of the Surviving Fund Shares or the Merging Fund pursuant to Paragraph 2.1 is impracticable (in the judgment of the Surviving Trust Board with respect to the Surviving Fund and the Merging Trust Board with respect to the Merging Fund), the Closing Date shall be postponed until the first business day after the day when trading shall have been fully resumed and reporting shall have been restored. 3.5 The Merging Fund shall deliver at the Closing a list of the names, addresses, federal taxpayer identification numbers and backup withholding and nonresident alien withholding status and certificates of the Merging Fund Shareholders and the number and percentage ownership of outstanding Merging Fund Shares owned by each Merging Fund Shareholder as of the Valuation Time, certified by the President or a Secretary of the Merging Trust and its Treasurer, Secretary or other authorized officer (the "Shareholder List") as being an accurate record of the information (a) provided by the Merging Fund Shareholders, (b) provided by the Merging Fund Custodian, or (c) derived from the Merging Fund's records by such officers or one of the Merging Fund's service providers. The Surviving Fund shall issue and deliver to the Merging Fund a confirmation evidencing the Surviving Fund Shares to be credited on the Closing Date, or provide evidence satisfactory to the Merging Fund that such Surviving Fund Shares have been credited on the Closing Date to the shareholders of record of the Merging Fund. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, stock certificates, receipts or other documents as such other party or its counsel may reasonably request. 4. REPRESENTATIONS AND WARRANTIES 4.1 Except as set forth on Schedule 4.1 of this Agreement, the Merging Trust, on behalf of itself and the Merging Fund, as applicable, represents, warrants and covenants to the Surviving Fund, which representations, warranties and covenants will be true and correct on the date hereof and on the Closing Date as though made on and as of the Closing Date, as follows: (a) The Merging Fund is a statutory series of the Merging Trust pursuant to Section 3804 and 3806(b)(2) of the DSTA. The Merging Fund is the only series of the Merging Trust. The Merging Trust is a statutory trust validly existing and in good standing under the laws of the State of Delaware and has the power to own all of its properties and assets and, subject to approval by the Merging Fund's shareholders, to perform its obligations under this Agreement. The Merging Fund is not required to qualify to do business in any jurisdiction in which it is not so qualified or where failure to qualify would subject it to any material liability or disability. Each of the Merging Trust and the Merging Fund has all necessary federal, state and local authorizations to own all of its properties and assets and to carry on its business as now being conducted; (b) The Merging Trust is a registered investment company classified as a management company of the closed-end type, and its registration with the Commission as an investment company under the Investment Company Act is in full force and effect; (c) The Merging Trust is not in violation of, and the Merging Trust's execution and delivery of this Agreement and the performance of its obligations under this Agreement in respect and on behalf of the Merging Fund will not result in a material violation of, any provision of the Merging Trust's Declaration or By-Laws or any material agreement, indenture, instrument, contract, lease or other undertaking to which the Merging Fund, or the Merging Trust on behalf of the Merging Fund, is a party or by which the Merging Fund or any of its assets are bound; (d) No litigation or administrative proceeding or investigation of or before any court or governmental body is currently pending or to its knowledge threatened against the Merging Fund or any of the Merging Fund's properties or assets that, if adversely determined, would materially and adversely affect its financial condition or the conduct of the Merging Fund's business. The Merging Fund is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially adversely A-3 affects the Merging Fund's business or its ability to consummate the transactions contemplated herein or would be binding upon the Surviving Fund as the successor to the Merging Fund; (e) The statement of assets and liabilities of the Merging Fund, and the related statements of operations and changes in net assets, as of and for the fiscal year ended November 30, 2007, have been audited by Ernst & Young LLP, independent registered public accounting firm, and are in accordance with generally accepted accounting principles ("GAAP") consistently applied and fairly reflect, in all material respects, the financial condition of the Merging Fund as of such date and the results of its operations for the period then ended, and all known liabilities, whether actual or contingent, of the Merging Fund as of the date thereof are disclosed therein. The statement of assets and liabilities of the Merging Fund, and the related statements of operations and changes in net assets, as of and for the six-month period ended May 31, 2008 will be in accordance with GAAP consistently applied and will fairly reflect, in all material respects the financial condition of the Merging Fund as of such date and the results of its operations for the period then ended, and all known liabilities, whether actual or contingent, of the Merging Fund as of the date thereof are disclosed therein. The Statement of Assets and Liabilities will be in accordance with GAAP consistently applied and will fairly reflect, in all material respects, the financial condition of the Merging Fund as of such date and the results of its operations for the period then ended. Except for the Merging Fund Liabilities, the Merging Fund will not have any known or contingent liabilities on the Closing Date. No significant deficiency, material weakness, fraud, significant change or other factor that could significantly affect the internal controls of the Merging Fund has been disclosed or is required to be disclosed in the Merging Fund's reports on Form N-CSR to enable the chief executive officer and chief financial officer or other officers of the Merging Trust to make the certifications required by the Sarbanes-Oxley Act, and no deficiency, weakness, fraud, change, event or other factor exists with respect to the Merging Fund will be required to be disclosed in the Surviving Fund's Form N-CSR after the Closing Date; (f) Since its most recent fiscal year end, except as specifically disclosed in the Merging Fund's semi-annual report for the six-month period ended May 31, 2008, there has not been any material adverse change in the Merging Fund's financial condition, assets, liabilities, business or prospects, or any incurrence by the Merging Fund of indebtedness, except for normal contractual obligations incurred in the ordinary course of business or in connection with the settlement of purchases and sales of portfolio securities. For the purposes of this subparagraph (f) (but not for any other purpose of this Agreement), a decline in NAV per Merging Fund Share arising out of its normal investment operations or a decline in market values of securities in the Merging Fund's portfolio, a decline in net assets of the Merging Fund as a result of redemptions or the discharge of Merging Fund liabilities shall not constitute a material adverse change; (g) On the Closing Date, all federal and other tax returns, dividend reporting forms and other tax-related reports of the Merging Fund and/or the Merging Trust required by law to have been filed by such date (including any extensions) shall have been filed and are or will be correct in all material respects, and all federal and other taxes shown as due or required to be shown as due on said returns and reports shall have been paid or provision shall have been made for the payment thereof and, to the best of the Merging Trust's knowledge, no such return is currently under audit and no assessment has been asserted with respect to such returns; (h) For each taxable year of its existence, including the taxable year ending on the Closing Date, the Merging Trust has had in effect an election to be treated as a "regulated investment company" under Subchapter M of the Code, has satisfied or will satisfy all of the requirements of Subchapter M of the Code for treatment as a regulated investment company, and has been or will be eligible to compute, and has computed or will compute, its federal income tax under Section 852 of the Code, and on or before the Closing Date, shall have distributed to its shareholders, substantially all of its investment company taxable income (as defined in Section 852(b)(2) of the Code, determined without regard to Section 852(b)(2)(D) of the Code), all of the excess of (i) its interest income excludable from gross income under Section 103(a) of the Code over (ii) its deductions disallowed under Sections 265 and 171(a)(2) of the Code ("net tax-exempt income"), and all of its net capital gain (as such term is used in Sections 852(b)(3)(A) and (C) of the Code), after reduction by any available capital loss carryforward, through the Closing Date such that for all tax periods ending on or before the Closing Date, the Merging Trust will not have any tax liability under Section 852 or Section 4982; (i) All issued and outstanding Merging Fund Shares are, and at the Closing Date will be, legally issued and outstanding, fully paid and nonassessable by the Merging Fund. All of the issued and outstanding Merging Fund Shares will, at the time of Closing, be held of record by the persons and in the amounts set forth in the Shareholder List submitted to the Surviving Fund pursuant to Paragraph 3.5 hereof. The Merging Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any Merging Fund Shares, nor is there outstanding any security convertible into any Merging Fund Shares; (j) At the Effective Time and the Valuation Time, the Merging Fund will have good and marketable title to the Merging Fund Assets, and full right, power and authority to merge with and assign all of its assets and liabilities to the Surviving Fund pursuant to this Agreement. At the Effective Time, the Merging Fund Assets and Merging Fund Liabilities will be assigned to and vest in the A-4 Surviving Fund and the Surviving Fund will have good and marketable title thereto, subject to no restrictions on the full transfer thereof, except such restrictions as might arise under the Securities Act; (k) The Merging Trust has the trust power and authority, on behalf of the Merging Fund, to enter into and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Merging Trust's Board of Trustees, and, subject to the approval of the Merging Fund's shareholders, assuming due authorization, execution and delivery by the Surviving Trust in its individual capacity and on behalf of the Surviving Fund, this Agreement will constitute a valid and binding obligation of the Merging Trust, on behalf of the Merging Fund, enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights and to general equity principles; (l) The information to be furnished by the Merging Fund to the Surviving Fund for use in applications for orders, registration statements, proxy materials and other documents which may be necessary in connection with the transactions contemplated hereby and any information necessary to compute the total return of the Merging Fund shall be accurate and complete in all material respects and shall comply in all material respects with federal securities and other laws and regulations applicable thereto; (m) The information included in the proxy statement (the "Proxy Statement") forming part of the Surviving Fund's Registration Statement on Form N-14 filed in connection with this Agreement (the "Registration Statement") that has been furnished in writing by the Merging Fund to the Surviving Fund for inclusion in the Registration Statement, on the effective date of that Registration Statement and on the Closing Date, will conform in all material respects to the applicable requirements of the Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Investment Company Act and the rules and regulations of the Commission thereunder and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (n) Upon the effectiveness of the Registration Statement, no consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Merging Trust or the Merging Fund of the transactions contemplated by this Agreement; (o) All of the issued and outstanding Merging Fund Shares have been offered for sale and sold in compliance in all material respects with all applicable federal and state securities laws, except as may have been previously disclosed in writing to the Surviving Fund; (p) The prospectus and statement of additional information of the Merging Fund and any amendments or supplements thereto, furnished to the Surviving Fund, did not as of their dates or the dates of their distribution to the public contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which such statements were made, not materially misleading; (q) The Merging Fund currently complies in all material respects with the requirements of, and the rules and regulations under, the Investment Company Act, the Securities Act, the Exchange Act, state "Blue Sky" laws and all other applicable federal and state laws or regulations. The Merging Fund currently complies in all material respects with all of its investment objectives, policies, guidelines and restrictions and any compliance procedures established by the Merging Trust with respect to the Merging Fund. All advertising and sales material currently used by the Merging Fund complies in all material respects with the applicable requirements of the Securities Act, the Investment Company Act, the rules and regulations of the Commission, and, to the extent applicable, the Conduct Rules of the Financial Industry Regulatory Authority ("FINRA") and any applicable state regulatory authority. All registration statements, prospectuses, reports, proxy materials or other filings required to be made or filed with the Commission, FINRA or any state securities authorities used by the Merging Fund during the three (3) years prior to the date of this Agreement have been duly filed and have been approved or declared effective, if such approval or declaration of effectiveness is required by law. Such registration statements, prospectuses, reports, proxy materials and other filings under the Securities Act, the Exchange Act and the Investment Company Act (i) are or were in compliance in all material respects with the requirements of all applicable statutes and the rules and regulations thereunder and (ii) do not or did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not false or misleading; (r) Neither the Merging Fund nor, to the knowledge of the Merging Trust, any "affiliated person" of the Merging Fund has been convicted of any felony or misdemeanor, described in Section 9(a)(1) of the Investment Company Act, nor, to the knowledge of the Merging Trust, has any affiliated person of the Merging Fund been the subject, or presently is the subject, of any proceeding or investigation with respect to any disqualification that would be a basis for denial, suspension or revocation of registration as an A-5 investment adviser under Section 203(e) of the Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), or Rule 206(4)-4(b) thereunder or of a broker-dealer under Section 15 of the Exchange Act, or for disqualification as an investment adviser, employee, officer or director of an investment company under Section 9 of the Investment Company Act; and (s) The tax representation certificate to be delivered by the Merging Trust to Bingham McCutchen LLP at the Closing pursuant to Paragraph 7.4 (the "Merging Trust Tax Representation Certificate") will not on the Closing Date contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading. 4.2 Except as set forth on a disclosure schedule previously provided by the Surviving Fund to the Merging Fund, the Surviving Trust, on behalf of the Surviving Fund, represents, warrants and covenants to the Merging Fund, which representations, warranties and covenants will be true and correct on the date hereof and on the Closing Date as though made on and as of the Closing Date, as follows: (a) The Surviving Fund is a statutory series of the Surviving Trust pursuant to Sections 3804 and 3806(b)(2) of the DSTA. The Surviving Fund is the only series of the Surviving Trust. The Surviving Trust is a statutory trust duly organized, validly existing and in good standing under the laws of the State of Delaware. The Surviving Trust has the power to own all of its properties and assets and to perform the obligations under this Agreement. The Surviving Fund is not required to qualify to do business in any jurisdiction in which it is not so qualified or where failure to qualify would subject it to any material liability or disability. Each of the Surviving Trust and the Surviving Fund has all necessary federal, state and local authorizations to own all of its properties and assets and to carry on its business as now being conducted; (b) The Surviving Trust is a registered investment company classified as a management company of the open-end type, and its registration with the Commission as an investment company under the Investment Company Act is in full force and effect; (c) The current prospectus and statement of additional information of the Surviving Fund and each prospectus and statement of additional information for the Surviving Fund used during the three years previous to the date of this Agreement, and any amendment or supplement to any of the foregoing, conform or conformed at the time their distribution to the public in all material respects to the applicable requirements of the Securities Act and the Investment Company Act and the rules and regulations of the Commission thereunder and do not or did not at the time of their distribution to the public include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading; (d) The Surviving Fund's registration statement on Form N-1A that will be in effect on the Closing Date, and the prospectus and statement of additional information of the Surviving Fund included therein, will conform in all material respects with the applicable requirements of the Securities Act and the Investment Company Act and the rules and regulations of the Commission thereunder, and did not as of the effective date thereof and will not as of the Closing Date contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; (e) The Registration Statement, the Proxy Statement and statement of additional information with respect to the Surviving Fund, and any amendments or supplements thereto in effect on or prior to the Closing Date included in the Registration Statement (other than written information furnished by the Merging Fund for inclusion therein, as covered by the Merging Fund's warranty in Paragraph 4.1(n) hereof) will conform in all material respects to the applicable requirements of the Securities Act and the Investment Company Act and the rules and regulations of the Commission thereunder. Neither the Registration Statement nor the Proxy Statement (other than written information furnished by the Merging Fund for inclusion therein, as covered by the Merging Fund's warranty in Paragraph 4.1(n) hereof) includes or will include any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (f) The Surviving Trust is not in violation of, and the Surviving Trust's execution and delivery of this Agreement and performance of its obligations under this Agreement in respect and on behalf of the Surviving Fund will not result in a material violation of, any provisions of the Declaration of Trust or by-laws of the Surviving Trust or any material agreement, indenture, instrument, contract, lease or other undertaking to which the Surviving Fund or the Surviving Trust on behalf of the Surviving Fund is a party or by which the Surviving Fund or any of its assets is bound; (g) No litigation or administrative proceeding or investigation of or before any court or governmental body is currently pending or threatened against the Surviving Fund or any of the Surviving Fund's properties or assets that, if adversely determined, would materially and adversely affect its financial condition or the conduct of the Surviving Fund's business. Neither the Surviving Trust nor the Surviving Fund is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially adversely affects the Surviving Fund's business or its ability to consummate the transactions contemplated herein; A-6 (h) The statement of assets and liabilities of the Surviving Fund, and the related statements of operations and changes in net assets, as of and for the fiscal year ended December 31, 2007 have been audited by Ernst & Young LLP, independent registered public accounting firm, and are in accordance with GAAP consistently applied and fairly reflect, in all material respects, the financial condition of the Surviving Fund as of such date and the results of its operations for the period then ended, and all known liabilities, whether actual or contingent, of the Surviving Fund as of the date thereof are disclosed therein; (i) Since the most recent fiscal year end, except as specifically disclosed in the Surviving Fund's prospectus, its statement of additional information as in effect on the date of this Agreement, or its semi-annual report for the period ended June 30, 2008, there has not been any material adverse change in the Surviving Fund's financial condition, assets, liabilities, business or prospects, or any incurrence by the Surviving Fund of indebtedness, except for normal contractual obligations incurred in the ordinary course of business or in connection with the settlement of purchases and sales of portfolio securities. For the purposes of this subparagraph (i) (but not for any other purpose of this Agreement), a decline in NAV per Surviving Fund Share arising out of its normal investment operations or a decline in market values of securities in the Surviving Fund's portfolio, a decline in net assets of the Surviving Fund as a result of redemptions or the discharge of Surviving Fund liabilities shall not constitute a material adverse change; (j) On the Closing Date, all federal and other tax returns, dividend reporting forms and other tax-related reports of the Surviving Fund and/or the Surviving Trust required by law to have been filed by such date (including any extensions) shall have been filed and are or will be correct in all material respects, and all federal and other taxes shown as due or required to be shown as due on said returns and reports shall have been paid or provision shall have been made for the payment thereof and, to the best of the Surviving Trust's knowledge, no such return is currently under audit and no assessment has been asserted with respect to such returns; (k) For each taxable year of its existence, the Surviving Trust has had in effect an election to be treated as a "regulated investment company" under Subchapter M of the Code, has satisfied all of the requirements of Subchapter M of the Code for treatment as a regulated investment company, and has been eligible to compute its federal income tax under Section 852 of the Code. (l) The authorized capital of the Surviving Fund consists of an unlimited number of shares of beneficial interest in the assets of the Surviving Fund, no par value per share. As of the Closing Date, the Surviving Fund will be authorized to issue an unlimited number of shares of beneficial interest in the assets of the Surviving Fund, no par value per share. The Surviving Fund Shares to be issued and delivered to the Merging Fund for the account of the Merging Fund Shareholders pursuant to the terms of this Agreement will have been duly authorized on the Closing Date and, when so issued and delivered, will be legally issued and outstanding, fully paid and non-assessable. The Surviving Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any Surviving Fund Shares, nor is there outstanding any security convertible into any Surviving Fund shares; (m) All issued and outstanding Surviving Fund Shares are, and on the Closing Date will be, legally issued, fully paid and non-assessable and have been offered and sold in every state and the District of Columbia in compliance in all material respects with all applicable federal and state securities laws; (n) The Surviving Trust has the full right, power and authority, on behalf of the Surviving Fund, to enter into and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Surviving Trust's Board of Trustees, and, assuming due authorization, execution and delivery by the Merging Trust, in its individual capacity and on behalf of the Merging Fund, this Agreement will constitute a valid and binding obligation of the Surviving Trust, on behalf of the Surviving Fund, enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights and to general equity principles; (o) The information to be furnished in writing by the Surviving Trust, on behalf of the Surviving Fund, or the Surviving Fund Adviser for use in applications for orders, registration statements, proxy materials and other documents which may be necessary in connection with the transactions contemplated hereby shall be accurate and complete in all material respects and shall comply in all material respects with federal securities and other laws and regulations applicable thereto or the requirements of any form for which its use is intended, and shall not contain any untrue statement of a material fact or omit to state a material fact necessary to make the information provided not misleading; A-7 (p) No consent, approval, authorization or order of or filing with any court or governmental authority is required for the execution of this Agreement or the consummation of the transactions contemplated by the Agreement by the Surviving Fund, except for the registration of the Surviving Fund Shares under the Securities Act and the Investment Company Act; (q) The Surviving Trust currently complies in all material respects with, the requirements of, and the rules and regulations under, the Investment Company Act, the Securities Act, the Exchange Act, state "Blue Sky" laws and all other applicable federal and state laws or regulations. The Surviving Trust currently complies in all material respects with all of its investment objectives, policies, guidelines and restrictions and any compliance procedures established by the Surviving Trust with respect to the Surviving Fund. All advertising and sales material currently used by the Surviving Trust complies in all material respects with the applicable requirements of the Securities Act, the Investment Company Act, the rules and regulations of the Commission, and, to the extent applicable, the Conduct Rules of FINRA and any applicable state regulatory authority. All registration statements, prospectuses, reports, proxy materials or other filings required to be made or filed with the Commission, FINRA or any state securities authorities used by the Surviving Trust during the three (3) years prior to the date of this Agreement have been duly filed and have been approved or declared effective, if such approval or declaration of effectiveness is required by law. Such registration statements, prospectuses, reports, proxy materials and other filings under the Securities Act, the Exchange Act and the Investment Company Act (i) are or were in compliance in all material respects with the requirements of all applicable statutes and the rules and regulations thereunder and (ii) do not or did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not false or misleading; (r) Neither the Surviving Fund nor, to the knowledge of the Surviving Trust, any "affiliated person" of the Surviving Fund has been convicted of any felony or misdemeanor, described in Section 9(a)(1) of the Investment Company Act, nor, to the knowledge of the Surviving Trust, has any affiliated person of the Surviving Fund been the subject, or presently is the subject, of any proceeding or investigation with respect to any disqualification that would be a basis for denial, suspension or revocation of registration as an investment adviser under Section 203(e) of the Investment Advisers Act or Rule 206(4)-4(b) thereunder or of a broker-dealer under Section 15 of the Exchange Act, or for disqualification as an investment adviser, employee, officer or director of an investment company under Section 9 of the Investment Company Act; and (s) The tax representation certificate to be delivered by the Surviving Trust to Bingham McCutchen LLP at Closing pursuant to Section 6.3 (the "Surviving Trust Tax Representation Certificate") will not on the Closing Date contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading. 5. COVENANTS OF THE FUNDS The Merging Fund and the Surviving Fund, respectively, hereby further covenant as follows: 5.1 The Merging Trust will call a special meeting of the Merging Fund's shareholders to consider approval of this Agreement and act upon the matters set forth in the Proxy Statement. 5.2 The Surviving Fund will prepare the notice of meeting, form of proxy and Proxy Statement (collectively, "Proxy Materials") to be used in connection with such meeting, and will promptly prepare and file with the Commission the Registration Statement. The Merging Fund will provide the Surviving Fund with information reasonably requested for the preparation of the Registration Statement in compliance with the Securities Act, the Exchange Act, and the Investment Company Act. 5.3 The Merging Fund will assist the Surviving Fund in obtaining such information as the Surviving Fund reasonably requires concerning the beneficial ownership of the Merging Fund Shares. 5.4 Subject to the provisions of this Agreement, each Fund will take, or cause to be taken, all actions, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate the transactions contemplated by this Agreement. 5.5 The Merging Fund shall furnish to the Surviving Fund on the Closing Date a statement of assets and liabilities of the Merging Fund ("Statement of Assets and Liabilities") as of the Closing Date setting forth the NAV (as computed pursuant to Paragraph 2.1) of the Merging Fund as of the Valuation Time, which statement shall be prepared in accordance with GAAP consistently applied and certified by the Merging Fund's Treasurer or Assistant Treasurer. As promptly as practicable, but in any case within 30 days after the Closing Date, the Merging Fund shall furnish to the Surviving Fund, in such form as is reasonably satisfactory to the Surviving Fund, a statement of the earnings and profits of the Merging Fund for federal income tax purposes, and of any capital loss carryovers and other items that will be carried over to the Surviving Fund under the Code, and which statement will be certified by the Treasurer of the Merging Fund. A-8 5.6 Neither Fund shall take any action that is inconsistent with (i) the representations set forth herein, (ii) with respect to the Merging Fund, the Merging Trust Tax Representation Certificate and, (iii) with respect to the Surviving Fund, the Surviving Trust Tax Representation Certificate. Unless otherwise required pursuant to a "determination" within the meaning of Section 1313(a) of the Code, the parties hereto shall treat and report the transactions contemplated hereby as a reorganization within the meaning of Section 368(a) of the Code on their federal income tax returns for their respective taxable years in which the Merger occurs, including filing any and all statements required by Treasury Regulations Section 1.368-3, and shall not take any position inconsistent with such treatment. 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE MERGING FUND The obligations of the Merging Fund to complete the transactions provided for herein shall be, at its election, subject to the performance by the Surviving Fund of all the obligations to be performed by it hereunder on or before the Closing Date, and, in addition thereto, the following further conditions, unless waived by the Merging Fund in writing: 6.1 All representations and warranties by the Surviving Trust, on behalf of the Surviving Fund, contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date; 6.2 The Surviving Trust shall have delivered to the Merging Trust on the Closing Date a certificate of the Surviving Trust, on behalf of the Surviving Fund, executed in its name by its President or Vice President and its Treasurer or Assistant Treasurer, in form and substance satisfactory to the Merging Trust and dated as of the Closing Date, to the effect that the representations and warranties of the Surviving Trust made in this Agreement on behalf of itself and the Surviving Fund are true and correct in all material respects at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, that each of the conditions to Closing in this Article 6 have been met, and as to such other matters as the Merging Trust shall reasonably request; 6.3 The Surviving Trust, on its own behalf and on behalf of the Surviving Fund, shall have delivered to Bingham McCutchen LLP a Surviving Trust Tax Representation Certificate, satisfactory to Bingham McCutchen LLP, in a form mutually acceptable to the Surviving Trust and the Merging Trust, concerning certain tax-related matters; 6.4 The Board of Trustees of the Surviving Trust shall have determined that the Merger is in the best interests of the Surviving Fund and, based upon such determination, shall have approved this Agreement and the transactions contemplated hereby; and 6.5 The Merging Trust, on behalf of the Merging Fund, shall have received at the Closing a favorable opinion of Bingham McCutchen LLP as to the due authorization of this Agreement by the Surviving Trust, on behalf of the Surviving Fund, and related matters, dated as of the Closing Date, in a form reasonably satisfactory to the Merging Trust. 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SURVIVING FUND The obligations of the Surviving Fund to complete the transactions provided for herein shall be, at its election, subject to the performance by the Merging Fund of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following further conditions, unless waived by the Surviving Fund in writing: 7.1 All representations and warranties of the Merging Trust, on behalf of the Merging Fund, contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date; 7.2 The Merging Trust shall have delivered to the Surviving Fund the Statement of Assets and Liabilities of the Merging Fund pursuant to Paragraph 5.6, together with a list of its portfolio securities showing the federal income tax bases and holding periods of such securities, as of the Closing Date, certified by the Merging Trust's Treasurer or Assistant Treasurer; 7.3 The Merging Trust shall have delivered to the Surviving Trust on the Closing Date a certificate of the Merging Trust, on behalf of the Merging Fund, executed in its name by its President or Vice President and a Treasurer or Assistant Treasurer, in form and substance reasonably satisfactory to the Surviving Trust and dated as of the Closing Date, to the effect that the representations and warranties of the Merging Trust contained in this Agreement on behalf of itself and the Merging Fund are true and correct in all material respects at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, that each of the conditions to Closing in this Article 7 have been met, and as to such other matters as the Surviving Trust shall reasonably request; 7.4 The Merging Trust, on its own behalf and on behalf of the Merging Fund, shall have delivered to Bingham McCutchen LLP a Merging Trust Tax Representation Certificate, satisfactory to Bingham McCutchen LLP , in a form mutually acceptable to the Surviving Trust and the Merging Trust, concerning certain tax-related matters; and A-9 7.5 The Board of Trustees of the Merging Trust shall have determined that the Merger is in the best interests of the Merging Fund and, based upon such determination, shall have approved this Agreement and the transactions contemplated hereby. 8. FURTHER CONDITIONS PRECEDENT If any of the conditions set forth below does not exist on or before the Closing Date with respect to either party hereto, the other party to this Agreement shall, at its option, not be required to consummate the transactions contemplated by this Agreement: 8.1 This Agreement and the transactions contemplated herein (including, without limitation, the Merger) shall have been approved by the requisite vote of the Merging Fund's shareholders in accordance with the provisions of the Merging Trust's Declaration and By-Laws, and certified copies of the resolutions evidencing such approval by the Merging Fund's shareholders shall have been delivered by the Merging Fund to the Surviving Fund. Notwithstanding anything herein to the contrary, neither party hereto may waive the conditions set forth in this Paragraph 8.1; 8.2 On the Closing Date, no action, suit or other proceeding shall be pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or the transactions contemplated herein; 8.3 All consents of other parties and all other consents, orders and permits of federal, state and local regulatory authorities (including those of the Commission and of state Blue Sky and securities authorities) deemed necessary by either party hereto to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent, order or permit would not involve a risk of a material adverse effect on the assets or properties of either party hereto, provided that either party may waive any such conditions for itself; 8.4 The Surviving Fund's Registration Statement on Form N-14 shall have become effective under the Securities Act and no stop orders suspending the effectiveness of such Registration Statement shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending under the Securities Act; 8.5 The parties shall have received an opinion of Bingham McCutchen LLP, satisfactory to the Merging Trust and the Surviving Trust, substantially to the effect that, based upon certain facts, assumptions and representations, and upon certifications contained in the Merging Trust Tax Representation Certificate and the Surviving Trust Tax Representation Certificate, for federal income tax purposes (i) the Merger will constitute a "reorganization" within the meaning of Section 368(a) of the Code, and each of the Merging Trust and the Surviving Trust will be a "party to a reorganization" within the meaning of Section 368(b) of the Code; (ii) no gain or loss will be recognized by the Merging Trust upon the vesting of the Merging Fund Assets and Merging Fund Liabilities as assets and liabilities of the Surviving Fund or upon the exchange of shares of the Merging Fund for a number of Surviving Fund Shares, including fractional Surviving Fund Shares, except for (A) gain or loss that may be recognized on the transfer of "section 1256 contracts" as defined in Section 1256(b) of the Code, (B) gain that may be recognized on the transfer of stock in a "passive foreign investment company" as defined in Section 1297(a) of the Code, or (C) any other gain that may be required to be recognized as a result of the closing of the Merging Trust's taxable year; (iii) the tax basis in the hands of the Surviving Trust of the Merging Fund Assets will be the same as the tax basis of such assets in the hands of the Merging Trust immediately prior to the Merger, increased by the amount of gain (or decreased by the amount of loss), if any, recognized by the Merging Trust on the Merger; (iv) the holding periods of the Merging Fund Assets in the hands of the Surviving Trust, other than assets with respect to which gain or loss is required to be recognized, will include in each instance the period during which those assets were held by the Merging Trust; (v) no gain or loss will be recognized by the Surviving Trust upon the vesting of the Merging Fund Assets and Merging Fund Liabilities as assets and liabilities of the Surviving Fund; (vi) no gain or loss will be recognized by the shareholders of the Merging Fund on the exchange of all of their Merging Fund Shares for a number of Surviving Fund Shares, including fractional Surviving Fund Shares, as part of the Merger; (vii) the aggregate basis of the Surviving Fund Shares that each Merging Fund Shareholder receives in the Merger will be the same as the aggregate basis of the Merging Fund Shares held immediately prior to the Merger; and (viii) each Merging Fund Shareholder's holding period for the Surviving Fund Shares received in the Merger will include the period for which such shareholder held the Merging Fund Shares that were exchanged for such Surviving Fund Shares, provided that the Merging Fund Shareholder held such Merging Fund Shares as capital assets on the Closing Date. Notwithstanding anything in this Agreement to the contrary, neither the Merging Fund nor the Surviving Fund may waive the condition set forth in this paragraph 8.5. 9. BROKERAGE FEES AND EXPENSES 9.1 Each party hereto represents and warrants to the other party hereto that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for herein. A-10 9.2 The Merging Fund agrees to bear the costs of preparing and printing the proxy statement and the solicitation costs incurred in connection with the Merger. Each of the Merging Fund and the Surviving Fund agrees to bear its own costs in connection with the Merger. 10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES 10.1 The Surviving Trust, on behalf of itself and the Surviving Fund, and the Merging Trust, on behalf of itself and the Merging Fund, each agrees that neither party has made any representation, warranty or covenant not set forth herein or referred to in Paragraphs 4.1 or 4.2 hereof and that this Agreement constitutes the entire agreement between the parties. 10.2 The covenants to be performed after the Closing by both the Surviving Trust and the Merging Trust shall survive the Closing. The representations and warranties contained in this Agreement or in any document delivered pursuant hereto or in connection herewith shall not survive the consummation of the transactions contemplated hereunder. 11. TERMINATION 11.1 This Agreement may be terminated by the mutual agreement of the Surviving Trust and the Merging Trust. In addition, either party may at its option terminate this Agreement at or prior to the Closing Date: (a) by resolution of the Surviving Trust's Board of Trustees if circumstances should develop that, in the good faith opinion of such Board, make proceeding with the Agreement not in the best interests of the Surviving Fund's shareholders; or (b) by resolution of the Merging Trust's Board of Trustees if circumstances should develop that, in the good faith opinion of such Board, make proceeding with the Agreement not in the best interests of the Merging Fund's shareholders. 11.2 In the event of any such termination, there shall be no liability for damages on the part of the Surviving Trust, the Surviving Fund, the Merging Trust or the Merging Fund, or the trustees or officers of the Merging Trust or the Surviving Trust, but, subject to Paragraph 9.2, each party shall bear the expenses incurred by it incidental to the preparation and carrying out of this Agreement. 12. AMENDMENTS This Agreement may be amended, modified or supplemented in such manner as may be mutually agreed upon in writing by the authorized officers of the Merging Trust and the Surviving Trust. 12.1 Specifically, this Agreement may be amended, modified or supplemented to the extent necessary for the Agreement to constitute a "plan of reorganization" within the meaning of Treasury Regulations Sections 1.369-2(g) and 1.368-3(a), however nothing contained in this Section 12 shall be construed to require that the Agreement constitute such a "plan of reorganization". 12.2 Following the meeting of the Merging Fund's shareholders called by the Merging Trust pursuant to Paragraph 5.1 of this Agreement, no amendment to this Agreement in accordance with this Section 12 may have the effect of changing the provisions regarding the method for determining the number of Surviving Fund Shares to be received by the Merging Fund Shareholders under this Agreement to their detriment without their further approval. 12.3 Nothing contained in this Section 12 shall be construed to prohibit the parties from amending this Agreement to change the Closing Date. 13. NOTICES Any notice, report, statement or demand required or permitted by any provision of this Agreement shall be in writing and shall be given by prepaid telegraph, telecopy or certified mail addressed to the Merging Fund and the Surviving Fund at 60 State Street, Boston, Massachusetts 02109. 14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT 14.1 The article and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 14.2 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. A-11 14.3 This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to conflict of laws principles (other than Delaware Code Title 6 [sec] 2708); provided that, in the case of any conflict between those laws and the federal securities laws, the latter shall govern. 14.4 This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by either party without the prior written consent of the other party hereto. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, or other entity, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement. 14.5 It is expressly agreed that the obligations of the Surviving Trust and the Merging Trust shall not be binding upon any of their respective trustees, shareholders, nominees, officers, agents or employees personally, but bind only to the property of the Surviving Fund or the Merging Fund, as the case may be, as provided in the Surviving Trust's Declaration and the Merging Fund's Declaration of Trust, respectively. The execution and delivery of this Agreement have been authorized by the trustees of the Surviving Trust and of the Merging Trust and this Agreement has been executed by authorized officers of the Surviving Trust and the Merging Trust, acting as such, and neither such authorization by such trustees nor such execution and delivery by such officers shall be deemed to have been made by any of them individually or to imposed any liability on any of them personally, but shall bind only the property of the Surviving Fund and the Merging Fund, as the case may be, as provided in the Surviving Trust's Declaration and the Merging Trust's Declaration of Trust, respectively. * * * * * A-12 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed on its behalf as of the date first set forth above by its President or Vice President and attested by its Secretary or Assistant Secretary. Attest: PIONEER MUNICIPAL AND EQUITY INCOME TRUST, in its individual capacity on its own behalf and on behalf of its series, PIONEER MUNICIPAL AND EQUITY INCOME TRUST By: ------------------------------ By: ------------------------------ Name: Name: Title: Title: Attest: PIONEER TAX FREE INCOME FUND, in its individual capacity on its own behalf and on behalf of its series, PIONEER TAX FREE INCOME FUND By: ------------------------------ By: ------------------------------ Name: Name: Title: Title: A-13 SCHEDULE 4.1 ------------ A-14 EXHIBIT B -- PORTFOLIO MANAGEMENT DISCUSSION OF EACH PIONEER FUND'S PERFORMANCE - ------------------------------------------------------------------------------- PIONEER TAX FREE INCOME FUND - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/07 CLASS A SHARES - -------------------------------------------------------------------------------- The mountain chart on the right shows the change in value of a $10,000 investment made in Pioneer Tax Free Income Fund at public offering price, compared to that of the Lehman Brothers Municipal Bond Index. Average Annual Total Returns (As of December 31, 2007)
Net Asset Public Offering Period Value (NAV) Price (POP) 10 Years 4.26% 3.78% 5 Years 3.71 2.75 1 Year -1.23 -5.65 Expense Ratio (Per prospectus dated May 1, 2007) Gross Net 0.86% 0.86%
[THE FOLLOWING DATA IS A REPRESENTATION OF A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Value of $10,000 Investment Pioneer Tax Free Lehman Brothers Income Fund Municipal Bond Index 12/97 $ 9,550 $10,000 12/99 $ 9,709 $10,429 12/01 $11,286 $12,245 12/03 $12,784 $14,134 12/05 $13,935 $15,286 12/07 $14,494 $16,564
Call 1-800-225-6292 or visit www.pioneerinvestments.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. NAV results represent the percent change in net asset value per share. Returns would have been lower had sales charges been reflected. POP returns reflect deduction of maximum 4.5% sales charge. All results are historical and assume the reinvestment of dividends and capital gains. Other share classes are available for which performance and expenses will differ. 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. The performance table and graph do not reflect the deduction of fees and taxes that a shareowner would pay on Fund distributions or the redemption of Fund shares. The Lehman Brothers Municipal Bond Index is a broad measure of the municipal bond market. You cannot invest directly in an Index. B-1 PORTFOLIO MANAGEMENT DISCUSSION PIONEER TAX FREE INCOME FUND 12/31/07 In the following interview, David Eurkus, the Fund's portfolio manager, discusses some of the factors that had an impact for the past year on the municipal bond market and the Fund. Q: How did the Fund perform in 2007? A: For the 12-month period ended December 31, 2007, the total return on Pioneer Tax Free Income Fund's Class A shares was -1.23% at net asset value. The Fund's benchmark index, the Lehman Brothers Municipal Bond Index, generated a return of 3.36% for the same period, and the average return of the 237 funds in the Lipper General Municipal Debt Funds category was 1.15%. Lipper is an independent monitor of mutual fund performance. The Fund's Class A shares generated a 30-day SEC tax-free yield of 3.84% on December 31, 2007. That translates into a taxable equivalent yield of 5.91%, based on the maximum federal income tax rate of 35%. At the end of the period, the Fund had 205 issues in 42 states, and the average credit quality of the portfolio was AA-. At a time when only the highest quality investments outperformed, the portfolio's below investment-grade and lower-rated investment-grade securities held back returns. Call 1-800-225-6292 or visit www.pioneerinvestments.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: What was the investment environment like during 2007? A: The major event of 2007 was the mid-summer turmoil in the subprime mortgage sector that led to a loss of confidence in the fixed-income markets. As some large financial institutions were forced to take write-downs on their subprime mortgage debt, bond credit agencies became concerned that bond insurers, which insure both taxable and tax-free bonds, would suffer the same fate; that is, they would not have enough capital to cover the defaults on taxable bonds backed by subprime mortgages. In this environment, credit agencies issued warnings to insurers that their AAA credit quality ratings could be downgraded. The actions of the credit agencies led to a "flight to quality" to the Treasury market and to a significant decline in virtually every other type of fixed-income asset class, including municipal bonds. Q: How did you manage the Fund in this environment? A: As we closed out the fiscal year, 10% of the portfolio was invested in high-yield bonds, which until the latter part of 2007 had been the best-performing area of the municipal bond market. The rest of the portfolio was invested in investment-grade bonds. Throughout the fiscal year, the Fund maintained an emphasis on market sectors that underpin the U.S. economy. Health care (26.9% of net assets), education (10.1% of net assets) and special revenue, or tobacco bonds (10.4% of net assets) were among the largest positions in the portfolio. Nearly all of the Fund's assets were invested in revenue bonds, on which the payment of interest and principal depends on the revenues derived from the particular asset the bond was issued to finance. Only 3.7% of Fund holdings were in general obligation bonds, whose principal and interest are guaranteed by the financial resources and taxing power of the issuing municipality. Q: What affected performance? A: The portfolio's lower-quality investment-grade bonds were instrumental in the underperformance relative to the Lehman Brothers Municipal Bond Index. These included hospital and tobacco bonds, which accounted for about 37% of the Fund's total net assets and which were rated Baa and BBB. On a more positive note, we were able to provide shareholders with a relatively high level of tax-free income by remaining fully invested throughout the 12-month period. Q: What is your outlook for 2008? A: We expect economic growth to weaken over the next several months, with the problems in the housing sector having the biggest negative impact. Because of rising oil prices and an upturn in unemployment, consumer spending is also likely to decline. Given this backdrop, the Federal Reserve seems poised to continue to add more liquidity to the economy through further interest rate cuts. At the close of 2007, the municipal bond market was at parity with the taxable bond market, which means that high quality municipal bonds were cheap. We are taking advantage of these more attractive valuations of municipal bonds and the opportunity to add value to the portfolio. B-2 When interest rates rise, the prices of fixed-income securities in the Fund will generally fall. Conversely, when interest rates fall, the prices of fixed-income securities in the Fund will generally rise. Investments in the Fund are subject to possible loss due to the financial failure of issuers of underlying securities and their inability to meet their debt obligations. A portion of income may be subject to local, state, federal, and/or alternative minimum tax. Capital gains, if any, are subject to a capital gains tax. At times, the Fund's investments may represent industries or industry sectors that are interrelated or have common risks, making it more susceptible to any economic, political, or regulatory developments or other risks affecting those industries and sectors. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These opinions should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. B-3 PIONEER MUNICIPAL AND EQUITY INCOME TRUST - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 11/30/07 - -------------------------------------------------------------------------------- The mountain chart on the right shows the change in market value, including reinvestment of dividends and distributions, of a $10,000 investment made in common shares of Pioneer Municipal and Equity Income Trust, compared to that of the Lehman Brothers Municipal Bond Index and the S&P 500 Index. Cumulative Total Returns (As of November 30, 2007)
Net Asset Value Period (NAV) Market Price Life-of-Trust (1/30/04) 29.83% 12.23% 1 Year -2.12 2.30
[THE FOLLOWING DATA IS A REPRESENTATION OF A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Value of $10,000 Investment Pioneer Municipal and Lehman Brothers Standard & Poor's Equity Income Fund Municipal Bond Index 500 Index 1/04 $10,000 $10,000 $10,000 11/04 $ 8,374 $10,263 $10,529 11/05 $ 9,008 $10,662 $11,418 11/06 $10,970 $11,314 $13,041 11/07 $11,223 $11,621 $14,048
Call 1-800-225-6292 or visit www.pioneerinvestments.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. Performance data shown represents past performance. Past performance is no guarantee of future results. Investment return and market price will fluctuate, and your shares may trade below net asset value ("NAV"), due to such factors as interest rate changes, and the perceived credit quality of borrowers. Total investment return does not reflect broker sales charges or commissions. All performance is for common shares of the Trust. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and once issued, shares of closed-end funds are sold in the open market through a stock exchange and frequently trade at prices lower than their NAV. NAV is total assets less total liabilities, which includes preferred shares, divided by the number of common shares outstanding. When NAV is lower than market price, dividends are assumed to be reinvested at the greater of NAV or 95% of the market price. When NAV is higher, dividends are assumed to be reinvested at prices obtained under the Trust's dividend reinvestment plan. The performance table and graph do not reflect the deduction of fees and taxes that a shareowner would pay on Trust distributions or the redemption of Trust shares. Index comparisons begin January 31, 2004. The Lehman Brothers Municipal Bond Index is a broad measure of the municipal bond market. 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 are calculated monthly, assume reinvestment of dividends and, unlike Trust returns, do not reflect any fees, expenses or charges. You cannot invest directly in an index. B-4 PORTFOLIO MANAGEMENT DISCUSSION PIONEER MUNICIPAL AND EQUITY INCOME TRUST 11/30/07 During the fiscal year ended November 30, 2007, the Trustees voted to change the name of Pioneer Tax Advantaged Balance Trust to Pioneer Municipal and Equity Income Trust, a name that the Trustees believe better reflects the composition of the Trust's underlying portfolio, which combines municipal bonds and qualified dividend-producing equity securities. In June 2007, the Trustees adopted a level-distribution policy, which may include a return of capital component. In the following interview, David Eurkus, who is responsible for the Trust's fixed-income investments, and Walter Hunnewell, Jr., who is responsible for the Trust's equity investments, discuss the Trust's investment strategy and outlook. Q: How did the Trust perform over the 12 months ended November 30, 2007? A: For the 12-month period ended November 30, 2007, Pioneer Municipal and Equity Income Trust returned -2.12% at net asset value and 2.30% at market price. As of November 30, 2007, the Trust was selling at a discount of market price to net asset value of 9.5%. For the same 12-month period, the Lehman Brothers Municipal Bond Index returned 2.71%, and the S&P 500 Index returned 7.72%. Call 1-800-225-6292 or visit www.pioneerinvestments.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: What was the investment environment like for fixed-income and equity securities during the 12-month period ended November 30, 2007? A: The major event of the year was the mid-summer turmoil in the fixed-income markets, which was triggered by concerns that weakness in the financial sector, which resulted from write-downs of subprime mortgage debt, would spread to the wider economy. In that environment, market participants generally gravitated toward the safest investments and both bonds and stocks declined. When it appeared that the loss of confidence in debt collateral could result in a credit crunch, the Federal Reserve ("Fed") stepped in and lowered short-term interest rates on two occasions during the fiscal year for a total of three-quarters of a percentage point. (The Fed also trimmed interest rates by one-quarter percentage point on December 11.) The central bank's actions had a calming effect on the financial markets, and fixed-income and equity prices stabilized. While the financial markets were volatile for the remainder of the fiscal year, both bonds and stocks ended the period with positive returns. Q: What were the principal strategies used in managing the Trust during the 12-month period ended November 30, 2007? A: We continued to focus on providing tax-favored income from a mix of about 55% municipal bonds and 45% qualified dividend income (QDI) dividend-paying equity securities during the period. The emphasis of the fixed-income portion of the Trust remained on sectors that underpin the economy, with the largest positions being in bonds related to the health care sector and other various revenue bonds on which the payment of interest and principal depends on revenues generated from the particular asset that the bond was issued to finance. About 22% of the Trust's fixed-income investments were insured as of November 30, 2007, which means that the interest and principal of those AAA-rated securities are guaranteed by private insurance companies. Below investment-grade bonds accounted for almost 19% of the Trust's fixed-income assets as of November 30, 2007. On November 30, 2007, the Trust had 124 fixed-income issues in 38 states, territories and the District of Columbia. The average credit quality of the fixed-income holdings was A as of November 30, 2007, compared with A- on May 31, 2007. In the equity portion of the Trust, the focus continued to be on higher QDI dividend-paying common and preferred equities. At period-end, the split between preferred and common stocks was 40%/60%. Financial companies, which typically pay healthy dividends, accounted for 36% of the equity portion of the Trust. Moreover, approximately three-quarters of the Trust's preferred equities were in the financials sector and, while diversified across many different securities, these holdings, which trade like fixed-income securities, reacted to the late summer tumult in the credit markets. Where appropriate, we made some changes to the preferred holdings to strengthen the Trust's portfolio; but our view is that the credit markets dislocation will eventually pass, and the value of the Trust's high-quality, preferred holdings will be recognized. The Trust's common equity holdings in the financial sector have always de-emphasized large, diversified financial institutions. Nonetheless, the nation-wide weakness in real estate values had an adverse effect on many of the Trust's bank holdings, such as KeyCorp, National City, and most notably Washington Mutual. We sold National City late in the period and Washington Mutual shortly after fiscal year end. The utilities sector, at 16% of equities on November 30, 2007, was the next-largest weighting after financials. Telecommunications services (15%), consumer staples (13%) and health care (8%) B-5 rounded out the top-five equity sector concentrations at period-end. Among the changes in common equities during the period, we sold Great Plains Energy out of concern for risks related to that company's future capital expenditures. We purchased Diamond Offshore Drilling, a mid- and deep-water oil drilling company with a good historical record of returning cash to shareholders. Another addition was B&G Foods, which manufactures an offering of food products, all with strong regional brand identification. Near period-end we added a convertible preferred of Avery Dennison, a leading manufacturer of pressure-sensitive and office product materials. On November 30, 2007, 28.9% of the Trust was leveraged, which means that the Trust borrowed and invested those funds in high-yielding securities. Short-term rates declined over the fiscal period. However, a rise in short-term rates in the future would add to the Trust's borrowing costs, and the ability to sustain present dividend levels could be affected. Should short-term rates continue to decline, the cost of borrowing would go down, providing the Trust with a modest amount of additional income. Q: What affected the Trust's performance during the 12-month period ended November 30, 2007? A: Remaining fully invested in municipal securities contributed to the Trust's tax-free income and principal appreciation during the period. However, the performance of below investment-grade bonds during the period held back results, as investors sought high quality securities above everything else in response to the market volatility created by the subprime mortgage debacle. A reduction in investor demand for municipal securities was also a factor in the Trust's underperformance during the period. In the equity portion of the Trust, some of the strongest contributions to absolute performance during the period came from more defensive names in consumer staples, health care and telecommunications. As tobacco litigation risks receded, Carolina Group, the tobacco tracking stock of Lowes, and Altria Group posted total returns of 46% and 27%, respectively, for the period. In health care, Merck added substantially to performance because of good results in the vaccine area, and Bristol-Myers Squibb did well after weathering a patent challenge. In telecommunications, AT&T and Verizon helped boost return. Detractors from returns during the period centered on the Trust's financial holdings. Washington Mutual (-53%) did poorly due to market fears of its subprime mortgage exposure. As noted, the stock was sold shortly after period-end. Preferred holdings Scottish Re Group (-45%) and SLM Holdings (-17%) also held back results, due to concerns with subprime exposure in the companies' investment portfolios and private equity deals in an unfavorable debt market. Both stocks remained in the portfolio at November 30, 2007 because we believe they have the potential to do well in the future and continue to pay their dividends. In the utility sector, Atmos Energy (-17%) lost ground compared to other utility stocks during the period because of its lack of exposure to unregulated power generation. The Trust continued to hold the stock at November 30, 2007 for its dividend and because we believe the company has attractive opportunities in its natural gas pipeline businesses. Q: What is your outlook? A: We expect to see further weakness in the economy and believe that the Fed is likely to continue lowering short-term interest rates well into 2008. A decline in rates would likely enhance the value of the fixed-income securities in the portfolio and would make equities more attractive to investors. In the equity markets, we plan to maintain our focus on preferred and common stocks that emphasize dividend yield. As has always been the case, we will seek diversification and the potential for long-term capital return. Our view is that when the economy moderates, the credit market concerns that have depressed the Trust's preferred holdings should ease, and we should see some price appreciation. When investing in common equities, we will continue to seek opportunities that strengthen the portfolio and that have the potential to benefit from improving economic growth over the long term. Information regarding the Trust's principal investment risks is contained in the Trust's prospectus. Please refer to those documents when considering the Trust's risks. There can be no assurance as to the portion of the Trust's dividends that will be tax-exempt or tax-qualified. A portion of income may be subject to state, federal, and/or alternative minimum tax. Capital gains, if any, are subject to a capital gains tax. When interest rates rise, the prices of fixed-income securities in the Trust will generally fall. Conversely, when interest rates fall the prices of fixed-income securities in the Trust will generally rise. By concentrating in municipal securities, the portfolio is more susceptible to adverse economic, political or regulatory developments than is a portfolio that invests more broadly. Investments in the Trust are subject to possible loss due to the financial failure of underlying securities and their inability to meet their debt obligations. The Trust may invest in derivative securities, which may include futures and options. These types of instruments can increase price fluctuation. B-6 The Trust currently uses leverage through the issuance of preferred shares. The Trust is also authorized to borrow from banks and to issue debt securities, which are other forms of leverage. Leverage creates significant risks, including the risk that the Trust's income or capital appreciation will not be sufficient to cover the cost of leverage, which may adversely affect the return of the holders of common shares. Any information in this shareowner report regarding market or economic trends or the factors influencing the Trust's historical or future performance are statements of the opinion of Trust 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 the market forecasts discussed will be realized. B-7 PIONEER TAX FREE INCOME FUND 60 State Street Boston, Massachusetts 02109 STATEMENT OF ADDITIONAL INFORMATION [ ], 2008 This Statement of Additional Information is not a Prospectus. It should be read in conjunction with the related Proxy Statement and Prospectus (also dated [ ], 2008) which covers Class A shares of Pioneer Tax Free Income Fund to be issued in exchange for shares of Pioneer Municipal and Equity Income Trust. Please retain this Statement of Additional Information for further reference. The Prospectus is available to you free of charge (please call 1-800-225-6292). Page ---- INTRODUCTION .......................................................... 2 EXHIBITS AND DOCUMENTS INCORPORATED BY REFERENCE ...................... 2 ADDITIONAL INFORMATION ABOUT PIONEER TAX FREE INCOME FUND ............. 3 FUND HISTORY ......................................................... 3 DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS ..................... 3 MANAGEMENT OF THE FUND ............................................... 6 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES .................. 9 INVESTMENT ADVISORY AND OTHER SERVICES ............................... 9 PORTFOLIO MANAGERS ................................................... 11 BROKERAGE ALLOCATION AND OTHER PRACTICES ............................. 11 CAPITAL STOCK AND OTHER SECURITIES ................................... 11 PURCHASE, REDEMPTION AND PRICING OF SHARES ........................... 13 TAXATION OF THE FUND ................................................. 13 UNDERWRITERS ......................................................... 13 FINANCIAL STATEMENTS ................................................. 13 ADDITIONAL INFORMATION ABOUT PIONEER MUNICIPAL AND EQUITY INCOME TRUST 13 FINANCIAL STATEMENTS ................................................. 13 PRO FORMA COMBINED FINANCIAL STATEMENTS ............................... 14
INTRODUCTION This Statement of Additional Information is intended to supplement the information provided in a Proxy Statement and Prospectus dated [ ] 2008 (the "Proxy Statement and Prospectus") relating to the proposed merger of Pioneer Municipal and Equity Income Trust with and into Pioneer Tax Free Income Fund, and in connection with the solicitation by the management of Pioneer Municipal and Equity Income Trust of proxies to be voted at the special meeting of shareholders of Pioneer Municipal and Equity Income Trust to be held on September 11, 2008. EXHIBITS AND DOCUMENTS INCORPORATED BY REFERENCE The following documents are incorporated herein by reference, unless otherwise indicated. Shareholders will receive a copy of each document that is incorporated by reference upon any request to receive a copy of this Statement of Additional Information. 1. Pioneer Tax Free Income Fund's Statement of Additional Information, dated May 1, 2008 (File Nos. 2-57653; 811-02704), as filed with the Securities and Exchange Commission on April 29, 2008 (Accession No. 0000202679-08-000012) is incorporated herein by reference. 2. Pioneer Tax Free Income Fund's Annual Report for the fiscal year ended December 31, 2007 (File No. 811-02704), as filed with the Securities and Exchange Commission on February 28, 2008 (Accession No. 0000276776-08-000025) is incorporated herein by reference. 3. Pioneer Municipal and Equity Income Trust's Annual Report for the fiscal year ended November 30, 2007 (File No. 811-21448), as filed with the Securities and Exchange Commission on January 29, 2008 (Accession No. 0000921023-08-000005) is incorporated herein by reference. 2 ADDITIONAL INFORMATION ABOUT PIONEER TAX FREE INCOME FUND FUND HISTORY For additional information about Pioneer Tax Free Income Fund generally and its history, see "Fund History" in Pioneer Tax Free Income Fund's SAI. DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS For additional information about Pioneer Tax Free Income Fund's investment objective, policies, risks and restrictions, see "Investment Policies, Risks and Restrictions" in Pioneer Tax Free Income Fund's SAI. Following is additional information about the Fundamental Investment Policies of Pioneer Tax Free Income Fund: Fundamental Investment Policies. The fund has adopted certain fundamental investment policies which, along with the fund's investment objective, may not be changed without the affirmative vote of the holders of a "majority of the outstanding voting securities" (as defined in the 1940 Act) of the fund. For this purpose, a majority of the outstanding shares of the fund means the vote of the lesser of: 1. 67% or more of the shares represented at a meeting, if the holders of more than 50% of the outstanding shares are present in person or by proxy, or 2. more than 50% of the outstanding shares of the fund. The fund's fundamental policies are as follows: (1) The fund may not borrow money except as permitted by (i) the 1940 Act, or interpretations or modifications by the SEC, SEC staff or other authority of competent jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority of competent jurisdiction. (2) The fund may not engage in the business of underwriting the securities of other issuers except as permitted by (i) the 1940 Act, or interpretations or modifications by the SEC, SEC staff or other authority of competent jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority of competent jurisdiction. (3) The fund may lend money or other assets to the extent permitted by (i) the 1940 Act, or interpretations or modifications by the SEC, SEC staff or other authority of competent jurisdiction or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority of competent jurisdiction. (4) The fund may not issue senior securities except as permitted by (i) the 1940 Act, or interpretations or modifications by the SEC, SEC staff or other authority of competent jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority of competent jurisdiction. (5) The fund may not purchase or sell real estate except as permitted by (i) the 1940 Act, or interpretations or modifications by the SEC, SEC staff or other authority of competent jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority of competent jurisdiction. (6) The fund may purchase or sell commodities or contracts related to commodities to the extent permitted by (i) the 1940 Act, or interpretations or modifications by the SEC, SEC staff or other authority of competent jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority of competent jurisdiction. (7) Except as permitted by exemptive or other relief or permission from the SEC, SEC staff or other authority of competent jurisdiction, each fund may not make any investment if, as a result, the fund's investments will be concentrated in any one industry. With respect to the fundamental policy relating to borrowing money set forth in (1) above, the 1940 Act permits a fund to borrow money in amounts of up to one-third of the fund's total assets from banks for any purpose, and to borrow up to 5% of the fund's total assets from banks or other lenders for temporary purposes. To limit the risks attendant to borrowing, the 1940 Act requires the fund to maintain at all times an "asset coverage" of at least 300% of the amount of its borrowings. Asset coverage means the ratio that the value of the fund's total assets, minus liabilities other than borrowings, bears to the aggregate amount of all borrowings. Certain trading practices and investments, such as reverse repurchase agreements, may be considered to be borrowing and thus subject to the 1940 Act restrictions. Borrowing money to increase a fund's investment portfolio is known as "leveraging." Borrowing, especially when used for leverage, may cause the value of a fund's shares to be more volatile than if the fund did not borrow. This is because borrowing tends to magnify the 3 effect of any increase or decrease in the value of the fund's portfolio holdings. Borrowed money thus creates an opportunity for greater gains, but also greater losses. To repay borrowings, the fund may have to sell securities at a time and at a price that is unfavorable to the fund. There also are costs associated with borrowing money, and these costs would offset and could eliminate a fund's net investment income in any given period. Currently, the fund does not contemplate borrowing money for leverage, but if the fund does so, it will not likely do so to a substantial degree. The policy in (1) above will be interpreted to permit the fund to engage in trading practices and investments that may be considered to be borrowing to the extent permitted by the 1940 Act. Short-term credits necessary for the settlement of securities transactions and arrangements with respect to securities lending will not be considered to be borrowings under the policy. Practices and investments that may involve leverage but are not considered to be borrowings are not subject to the policy. With respect to the fundamental policy relating to underwriting set forth in (2) above, the 1940 Act does not prohibit a fund from engaging in the underwriting business or from underwriting the securities of other issuers; in fact, the 1940 Act permits a fund to have underwriting commitments of up to 25% of its assets under certain circumstances. Those circumstances currently are that the amount of the fund's underwriting commitments, when added to the value of the fund's investments in issuers where the fund owns more than 10% of the outstanding voting securities of those issuers, cannot exceed the 25% cap. A fund engaging in transactions involving the acquisition or disposition of portfolio securities may be considered to be an underwriter under the Securities Act of 1933, as amended (the "1933 Act"). Under the 1933 Act, an underwriter may be liable for material omissions or misstatements in an issuer's registration statement or prospectus. Securities purchased from an issuer and not registered for sale under the 1933 Act are considered restricted securities. There may be a limited market for these securities. If these securities are registered under the 1933 Act, they may then be eligible for sale but participating in the sale may subject the seller to underwriter liability. These risks could apply to a fund investing in restricted securities. Although it is not believed that the application of the 1933 Act provisions described above would cause a fund to be engaged in the business of underwriting, the policy in (2) above will be interpreted not to prevent the fund from engaging in transactions involving the acquisition or disposition of portfolio securities, regardless of whether the fund may be considered to be an underwriter under the 1933 Act. With respect to the fundamental policy relating to lending set forth in (3) above, the 1940 Act does not prohibit a fund from making loans; however, SEC staff interpretations currently prohibit funds from lending more than one-third of their total assets, except through the purchase of debt obligations or the use of repurchase agreements. (A repurchase agreement is an agreement to purchase a security, coupled with an agreement to sell that security back to the original seller on an agreed-upon date at a price that reflects current interest rates. The SEC frequently treats repurchase agreements as loans.) While lending securities may be a source of income to a fund, as with other extensions of credit, there are risks of delay in recovery or even loss of rights in the underlying securities should the borrower fail financially. However, loans would be made only when the fund's manager or a subadviser believes the income justifies the attendant risks. The fund also will be permitted by this policy to make loans of money, including to other funds. The fund has obtained exemptive relief from the SEC to make loans to other Pioneer funds through a credit facility. The policy in (3) above will be interpreted not to prevent the fund from purchasing or investing in debt obligations and loans. In addition, collateral arrangements with respect to options, forward currency and futures transactions and other derivative instruments, as well as delays in the settlement of securities transactions, will not be considered loans. With respect to the fundamental policy relating to issuing senior securities set forth in (4) above, "senior securities" are defined as fund obligations that have a priority over the fund's shares with respect to the payment of dividends or the distribution of fund assets. The 1940 Act prohibits a fund from issuing senior securities except that the fund may borrow money in amounts of up to one-third of the fund's total assets from banks for any purpose. A fund also may borrow up to 5% of the fund's total assets from banks or other lenders for temporary purposes, and these borrowings are not considered senior securities. The issuance of senior securities by a fund can increase the speculative character of the fund's outstanding shares through leveraging. Leveraging of a fund's portfolio through the issuance of senior securities magnifies the potential for gain or loss on monies, because even though the fund's net assets remain the same, the total risk to investors is increased to the extent of the fund's gross assets. The policy in (4) above will be interpreted not to prevent collateral arrangements with respect to swaps, options, forward or futures contracts or other derivatives, or the posting of initial or variation margin. With respect to the fundamental policy relating to real estate set forth in (5) above, the 1940 Act does not prohibit a fund from owning real estate; however, a fund is limited in the amount of illiquid assets it may purchase. Investing in real estate may involve risks, including that real estate is generally considered illiquid and may be difficult to value and sell. Owners of real estate may be subject to various liabilities, including environmental liabilities. To the extent that investments in real estate are considered illiquid, the current SEC staff position generally limits a fund's purchases of illiquid securities to 15% of net assets. The policy in (5) above will be interpreted not to prevent the fund from investing in real estate-related companies, companies whose businesses consist in whole or in part of investing in real estate, instruments (like mortgages) that are secured by real estate or interests therein, or real estate investment trust securities. 4 With respect to the fundamental policy relating to commodities set forth in (6) above, the 1940 Act does not prohibit a fund from owning commodities, whether physical commodities and contracts related to physical commodities (such as oil or grains and related futures contracts), or financial commodities and contracts related to financial commodities (such as currencies and, possibly, currency futures). However, a fund is limited in the amount of illiquid assets it may purchase. To the extent that investments in commodities are considered illiquid, the current SEC staff position generally limits a fund's purchases of illiquid securities to 15% of net assets. If a fund were to invest in a physical commodity or a physical commodity-related instrument, the fund would be subject to the additional risks of the particular physical commodity and its related market. The value of commodities and commodity-related instruments may be extremely volatile and may be affected either directly or indirectly by a variety of factors. There also may be storage charges and risks of loss associated with physical commodities. The policy in (6) above will be interpreted to permit investments in exchange traded funds that invest in physical and/or financial commodities. With respect to the fundamental policy relating to concentration set forth in (7) above, the 1940 Act does not define what constitutes "concentration" in an industry. The SEC staff has taken the position that investment of 25% or more of a fund's total assets in one or more issuers conducting their principal activities in the same industry or group of industries constitutes concentration. It is possible that interpretations of concentration could change in the future. A fund that invests a significant percentage of its total assets in a single industry may be particularly susceptible to adverse events affecting that industry and may be more risky than a fund that does not concentrate in an industry. The policy in (7) above will be interpreted to refer to concentration as that term may be interpreted from time to time. The policy also will be interpreted to permit investment without limit in the following: securities of the U.S. government and its agencies or instrumentalities; securities of state, territory, possession or municipal governments and their authorities, agencies, instrumentalities or political subdivisions; securities of foreign governments; and repurchase agreements collateralized by any such obligations. Accordingly, issuers of the foregoing securities will not be considered to be members of any industry. There also will be no limit on investment in issuers domiciled in a single jurisdiction or country. The policy also will be interpreted to give broad authority to the fund as to how to classify issuers within or among industries. The fund's fundamental policies are written and will be interpreted broadly. For example, the policies will be interpreted to refer to the 1940 Act and the related rules as they are in effect from time to time, and to interpretations and modifications of or relating to the 1940 Act by the SEC and others as they are given from time to time. When a policy provides that an investment practice may be conducted as permitted by the 1940 Act, the policy will be interpreted to mean either that the 1940 Act expressly permits the practice or that the 1940 Act does not prohibit the practice. 5 MANAGEMENT OF THE FUND Following is additional information about Pioneer Tax Free Income Fund's recently elected Board of Trustees: The Board of Trustees provides broad supervision over the fund's affairs. The officers of the fund are responsible for the fund's operations. The Trustees and officers are listed below, together with their principal occupations during the past five years. Trustees who are interested persons of the fund within the meaning of the 1940 Act are referred to as Interested Trustees. Trustees who are not interested persons of the fund are referred to as Independent Trustees. Each of the Trustees serves as a Trustee of each of the 77 U.S. registered investment portfolios for which Pioneer serves as investment adviser (the "Pioneer Funds"). The address for all Trustees and all officers of the fund is 60 State Street, Boston, Massachusetts 02109.
- ------------------------------------------------------------------------------------------------------------------------------------ Name, Age Position Held Term of Office and Principal Occupation Other Directorships and Address With the Fund Length of Service During Past Five Years Held by this Trustee - ------------------------------------------------------------------------------------------------------------------------------------ Interested Trustees: - ------------------------------------------------------------------------------------------------------------------------------------ John F. Cogan Jr. Chairman of the Board, Trustee since 1996. Deputy Chairman and a Director None (82)* Trustee and President Serves until a successor of Pioneer Global Asset trustee is elected or Management S.p.A. ("PGAM"); earlier retirement or Non-Executive Chairman and a removal. Director of Pioneer Investment Management USA Inc. ("PIM- USA"); Chairman and a Director of Pioneer; Chairman and Director of Pioneer Institutional Asset Management, Inc. (since 2006); Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; Director of PIOGLOBAL Real Estate Investment Fund (Russia) (until June 2006); Director of Nano-C, Inc. (since 2003); Director of Cole Management Inc. (since 2004); Director of Fiduciary Counseling, Inc.; President and Director of Pioneer Funds Distributor, Inc. ("PFD") (until May 2006); President of all of the Pioneer Funds; and Of Counsel, Wilmer Cutler Pickering Hale and Dorr LLP - ------------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------------ Name, Age Position Held Term of Office and Principal Occupation Other Directorships and Address With the Fund Length of Service During Past Five Years Held by this Trustee - ------------------------------------------------------------------------------------------------------------------------------------ Daniel K. Kingsbury Trustee and Executive Trustee since Director, CEO and President None (49)* Vice President March 2007. Serves of Pioneer Investment until a successor trustee Management USA Inc. (since is elected or earlier February 2007); Director and retirement or removal. President of Pioneer Investment Management, Inc. and Pioneer Institutional Asset Management, Inc. (since February 2007); Executive Vice President of all of the Pioneer Funds (since March 2007); Director of Pioneer Global Asset Management S.p.A. (since April 2007); Head of New Markets Division, Pioneer Global Asset Management S.p.A. (2000-2007) - ------------------------------------------------------------------------------------------------------------------------------------ Independent Trustees: David R. Bock (64) Trustee Trustee since 2005. Executive Vice President and Director of Enterprise Serves until a successor Chief Financial Officer, I-trax, Community trustee is elected Inc. (publicly traded health care Investment, Inc. or earlier retirement services company) (privately-held or removal. (2004-2007); Partner, Federal affordable housing City Capital Advisors (boutique finance company); and merchant bank) (1997 to 2004 Director of New York and 2008-present); and Mortgage Trust Executive Vice President and (publicly traded Chief Financial Officer, Pedestal mortgage REIT) Inc. (internet-based mortgage trading company) (2000-2002) - ------------------------------------------------------------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------------------------------------------------------- Name, Age Position Held Term of Office and Principal Occupation Other Directorships and Address With the Fund Length of Service During Past Five Years Held by this Trustee - --------------------------------------------------------------------------------------------------------------------------------- Mary K. Bush (60) Trustee Trustee since 1997. President, Bush International, Director of Brady Serves until a successor LLC (international financial Corporation (industrial trustee is elected or advisory firm) identification and earlier retirement or specialty coated material removal. products manufacturer); Director of Briggs & Stratton Co. (engine manufacturer); Director of UAL Corporation (airline holding company); Director of Mantech International Corporation (national security, defense, and intelligence technology firm); and Member, Board of Governors, Investment Company Institute - --------------------------------------------------------------------------------------------------------------------------------- Benjamin M. Trustee Trustee since May, 2008 Professor, Harvard University Trustee, Mellon Friedman (63) Institutional Funds Investment Trust and Mellon Institutional Funds Master Portfolio (oversees 17 portfolios in fund complex) - --------------------------------------------------------------------------------------------------------------------------------- Margaret B.W. Trustee Trustee since 1996. Founding Director, Vice- None Graham (61) Serves until a successor President and Corporate trustee is elected or Secretary, The Winthrop Group, earlier retirement or Inc. (consulting firm); and removal. Desautels Faculty of Management, McGill University --------------------------------------------------------------------------------------------------------------------------------- Thomas J. Perna Trustee Trustee since 2006. Private investor (2004-present); Director of Quadriserv (57) Serves until a successor and Senior Executive Vice Inc. (technology trustee is elected or President, The Bank of New products for securities earlier retirement or York (financial and securities lending industry) removal. services) (1986-2004) --------------------------------------------------------------------------------------------------------------------------------- Marguerite A. Piret Trustee Trustee since 1996. President and Chief Executive Director of New (60) Serves until a successor Officer, Newbury, Piret & America High Income trustee is elected or Company, Inc. (investment Fund, Inc. (closed-end earlier retirement or banking firm) investment company) removal. - --------------------------------------------------------------------------------------------------------------------------------- John Winthrop (71) Trustee Trustee since 1996. President, John Winthrop None Serves until a successor & Co., Inc. (private trustee is elected or investment firm) earlier retirement or removal. - ---------------------------------------------------------------------------------------------------------------------------------
* Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are officers or directors of the fund's investment adviser and certain of its affiliates. 8 For additional information about Pioneer Tax Free Income Fund's Board of Trustees and officers, see "Trustees and Officers" in Pioneer Tax Free Income Fund's SAI. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES For additional information, see "Annual Fee, Expense and Other Information--Share Ownership" in Pioneer Tax Free Income Fund's SAI. INVESTMENT ADVISORY AND OTHER SERVICES Following is additional information about Pioneer Investment Management, Inc. ("Pioneer"), the investment adviser and administrator of Pioneer Tax Free Income Fund: INVESTMENT ADVISER The fund has contracted with Pioneer to act as its investment adviser pursuant to an amended and restated management agreement (the "management contract"). Pioneer is an indirect, wholly owned subsidiary of UniCredito Italiano. Certain Trustees or officers of the fund are also directors and/or officers of certain of UniCredito Italiano's subsidiaries (see management biographies in Pioneer Tax Free Income Fund's SAI.). Pioneer has entered into an agreement with its affiliate, Pioneer Investment Management Limited ("PIML"), pursuant to which PIML provides certain services and personnel to Pioneer. As the fund's investment adviser, Pioneer provides the fund with investment research, advice and supervision and furnishes an investment program for the fund consistent with the fund's investment objective and policies, subject to the supervision of the fund's Trustees. Pioneer determines what portfolio securities will be purchased or sold, arranges for the placing of orders for the purchase or sale of portfolio securities, selects brokers or dealers to place those orders, maintains books and records with respect to the fund's securities transactions, and reports to the Trustees on the fund's investments and performance. The Trustees' approval of and the terms, continuance and termination of the management contract are governed by the 1940 Act and the Investment Advisers Act of 1940, as applicable. Pursuant to the management contract, Pioneer assumes no responsibility other than to render the services called for under the management contract, in good faith, and Pioneer will not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission in the execution of securities or other transactions for the fund. Pioneer, however, is not protected against liability by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under the management contract. The management contract requires Pioneer to furnish all necessary services, facilities and personnel in connection with the performance of its services under the management contract, and except as specifically stated therein, Pioneer is not responsible for any of the fund's ordinary and extraordinary expenses. Pioneer has received an order from the Securities and Exchange Commission that permits Pioneer, subject to the approval of the fund's Board of Trustees, to hire and terminate a subadviser or to materially modify an existing subadvisory contract for the fund without shareholder approval. Pioneer retains the ultimate responsibility to oversee and recommend the hiring, termination and replacement of any subadviser. To the extent that the Securities and Exchange Commission adopts a rule that would supersede the order, or would provide greater flexibility than the order, Pioneer and the fund intend to rely on such rule to permit Pioneer, subject to the approval of the fund's Board of Trustees and any other applicable conditions of the rule, to hire and terminate a subadviser or to materially modify an existing subadvisory contract for the fund without shareholder approval. Advisory Fee. As compensation for its management services and expenses incurred, the fund pays Pioneer a fee at the annual rate of 0.50% of the fund's average daily net assets up to $250 million, 0.45% of the next $500 million and 0.40% on assets over $750 million. This fee is computed and accrued daily and paid monthly. See the table in Annual Fee, Expense and Other Information for management fees paid to Pioneer during recently completed fiscal years in Pioneer Tax Free Income Fund's SAI.. Administration Agreement. The fund has entered into an amended and restated administration agreement with Pioneer pursuant to which certain accounting, administration and legal services are performed by Pioneer and pursuant to which Pioneer receives a fee at the annual rate of 0.0225% of the fund's average daily net assets. See "Annual Fee, Expense and Other Information" for fees the fund paid to Pioneer for administration and related services. Under the terms of the amended and restated administration agreement with the fund, Pioneer pays or reimburses the fund for expenses relating to its services for the fund, with the exception of the following, which are to be paid by the fund: (a) charges and expenses 9 for fund accounting, pricing and appraisal services and related overhead, including, to the extent such services are performed by personnel of Pioneer, or its affiliates, office space and facilities and personnel compensation, training and benefits; (b) the charges and expenses of auditors; (c) the charges and expenses of any custodian, transfer agent, plan agent, dividend disbursing agent and registrar appointed by the fund; (d) issue and transfer taxes, chargeable to the fund in connection with securities transactions to which the fund is a party; (e) insurance premiums, interest charges, dues and fees for membership in trade associations and all taxes and corporate fees payable by the fund to federal, state or other governmental agencies; (f) fees and expenses involved in registering and maintaining registrations of the fund and/or its shares with federal regulatory agencies, state or blue sky securities agencies and foreign jurisdictions, including the preparation of prospectuses and statements of additional information for filing with such regulatory authorities; (g) all expenses of shareholders' and Trustees' meetings and of preparing, printing and distributing prospectuses, notices, proxy statements and all reports to shareholders and to governmental agencies; (h) charges and expenses of legal counsel to the fund and the Trustees; (i) any distribution fees paid by the fund in accordance with Rule 12b-1 promulgated by the SEC pursuant to the 1940 Act; (j) compensation of those Trustees of the fund who are not affiliated with or interested persons of Pioneer, the fund (other than as Trustees), PIM-USA or PFD; (k) the cost of preparing and printing share certificates; (l) interest on borrowed money, if any; (m) fees payable by the fund under management agreements and the administration agreement; and (n) extraordinary expenses. The fund shall also assume and pay any other expense that the fund, the manager or any other agent of the fund may incur not listed above that is approved by the Board of Trustees (including a majority of the Independent Trustees) as being an appropriate expense of the fund. In addition, the fund shall pay all brokers' and underwriting commissions chargeable to the fund in connection with securities transactions to which the fund is a party. Potential Conflicts of Interest. The fund is managed by Pioneer which also serves as investment adviser to other Pioneer mutual funds and other accounts (including separate accounts and unregistered products) with investment objectives identical or similar to those of the fund. Securities frequently meet the investment objectives of the fund, the other Pioneer mutual funds and such other accounts. In such cases, the decision to recommend a purchase to one fund or account rather than another is based on a number of factors. The determining factors in most cases are the amount of securities of the issuer then outstanding, the value of those securities and the market for them. Other factors considered in the investment recommendations include other investments which each fund or account presently has in a particular industry and the availability of investment funds in each fund or account. It is possible that at times identical securities will be held by more than one fund and/or account. However, positions in the same issue may vary and the length of time that any fund or account may choose to hold its investment in the same issue may likewise vary. To the extent that more than one of the Pioneer mutual funds or a private account managed by Pioneer seeks to acquire the same security at about the same time, the fund may not be able to acquire as large a position in such security as it desires or it may have to pay a higher price for the security. Similarly, the fund may not be able to obtain as large an execution of an order to sell or as high a price for any particular portfolio security if Pioneer decides to sell on behalf of another account the same portfolio security at the same time. On the other hand, if the same securities are bought or sold at the same time by more than one fund or account, the resulting participation in volume transactions could produce better executions for the fund. In the event more than one account purchases or sells the same security on a given date, the purchases and sales will normally be made as nearly as practicable on a pro rata basis in proportion to the amounts desired to be purchased or sold by each account. Although the other Pioneer mutual funds may have the same or similar investment objectives and policies as the fund, their portfolios do not generally consist of the same investments as the fund or each other, and their performance results are likely to differ from those of the fund. Personal Securities Transactions. The fund, Pioneer, and PFD have adopted a code of ethics under Rule 17j-1 under the 1940 Act which is applicable to officers, trustees/directors and designated employees of Pioneer and certain of Pioneer's affiliates. The code permits such persons to engage in personal securities transactions for their own accounts, including securities that may be purchased or held by the fund, and is designed to prescribe means reasonably necessary to prevent conflicts of interest from arising in connection with personal securities transactions. The code is on public file with and available from the SEC. For additional information, see "Shareholder Servicing/Transfer Agent," "Custodian" and "Independent Registered Public Accounting Firm" in Pioneer Tax Free Income Fund's SAI. PORTFOLIO MANAGERS For addition information, see "Portfolio Management" in Pioneer Tax Free Income Fund's SAI. BROKERAGE ALLOCATION AND OTHER PRACTICES For additional information about the Pioneer Tax Free Income Fund's brokerage allocation practices, see "Portfolio Transactions" in Pioneer Tax Free Income Fund's SAI. 10 CAPITAL STOCK AND OTHER SECURITIES Pioneer Tax Free Income Fund issues Class A, B, C and Y shares. As an open-end management investment company, the fund continuously offers its shares to the public and under normal conditions must redeem its shares upon the demand of any shareholder at the next determined net asset value per share less any applicable CDSC. See "Sales Charges" in Pioneer Tax Free Income Fund's SAI. When issued and paid for in accordance with the terms of the prospectus and statement of additional information, shares of the fund are fully paid and non-assessable. Shares will remain on deposit with the fund's transfer agent and certificates will not normally be issued. The shares of each class represent an interest in the same portfolio of investments of the fund. Each class has equal rights as to voting, redemption, dividends and liquidation, except that each class bears different distribution and transfer agent fees and may bear other expenses properly attributable to the particular class. Class A, Class B and Class C shareholders have exclusive voting rights with respect to the Rule 12b-1 Plan adopted by holders of those shares in connection with the distribution of shares. The Trust The Trust's operations are governed by the Amended and Restated Agreement and Declaration of Trust, dated as of July 1, 2008 (referred to in this section as the declaration). A copy of the Trust's Certificate of Trust dated July 26, 1996, as amended, is on file with the office of the Secretary of State of Delaware. The fund is a series of the trust, a Delaware statutory trust. Delaware law provides a statutory framework for the powers, duties, rights and obligations of the board (referred to in this section as the trustees) and shareholders of the Delaware statutory trust, while the more specific powers, duties, rights and obligations of the trustees and the shareholders are determined by the trustees as set forth declaration. Some of the more significant provisions of the declaration are described below. Shareholder Voting The declaration provides for shareholder voting as required by the 1940 Act or other applicable laws but otherwise permits, consistent with Delaware law, actions by the trustees without seeking the consent of shareholders. The trustees may, without shareholder approval, amend the declaration or authorize the merger or consolidation of the trust into another trust or entity, reorganize the trust or any series or class into another trust or entity or a series or class of another entity, sell all or substantially all of the assets of the trust or any series or class to another entity, or a series or class of another entity, or terminate the trust or any series or class. The fund is not required to hold an annual meeting of shareholders, but the fund will call special meetings of shareholders whenever required by the 1940 Act or by the terms of the declaration. The declaration gives the Board the flexibility to specify either per share voting or dollar-weighted voting. Under per share voting, each share of the fund is entitled to one vote. Under dollar-weighted voting, a shareholder's voting power is determined, not by the number of shares the shareholder owns, but by the dollar value of those shares determined on the record date. All shareholders of all series and classes of the trust vote together, except where required by the 1940 Act to vote separately by series or by class, or when the trustees have determined that a matter affects only the interests of one or more series or classes of shares. Election and Removal of Trustees The declaration provides that the trustees may establish the number of trustees and that vacancies on the board may be filled by the remaining trustees, except when election of trustees by the shareholders is required under the 1940 Act. Trustees are then elected by a plurality of votes cast by shareholders at a meeting at which a quorum is present. The declaration also provides that a mandatory retirement age may be set by action of two thirds of the trustees and that trustees may be removed at any time or for any reason by a majority of the Board or by a majority of the outstanding shareholders of the trust. Amendments to the Declaration The trustees are authorized to amend the declaration without the vote of shareholders, but no amendment may be made that impairs the exemption from personal liability granted in the declaration to persons who are or have been shareholders, trustees, officers or, employees of the trust or that limit the rights to indemnification or insurance provided in the declaration with respect to actions or omissions of persons entitled to indemnification under the declaration prior to the amendment. 11 Issuance and Redemption of Shares The fund may issue an unlimited number of shares for such consideration and on such terms as the trustees may determine. Shareholders are not entitled to any appraisal, preemptive, conversion, exchange or similar rights, except as the trustees may determine. The fund may involuntarily redeem a shareholder's shares upon certain conditions as may be determined by the trustees, including, for example, if the shareholder fails to provide the fund with identification required by law, or if the fund is unable to verify the information received from the shareholder. Additionally, as discussed below, shares may be redeemed in connection with the closing of small accounts. Disclosure of Shareholder Holdings The declaration specifically requires shareholders, upon demand, to disclose to the fund information with respect to the direct and indirect ownership of shares in order to comply with various laws or regulations, and the fund may disclose such ownership if required by law or regulation. Small Accounts The declaration provides that the fund may close out a shareholder's account by redeeming all of the shares in the account if the account falls below a minimum account size (which may vary by class) that may be set by the trustees from time to time. Alternately, the declaration permits the fund to assess a fee for small accounts (which may vary by class) and redeem shares in the account to cover such fees, or convert the shares into another share class that is geared to smaller accounts. Series and Classes The declaration provides that the trustees may establish series and classes in addition to those currently established and to determine the rights and preferences, limitations and restrictions, including qualifications for ownership, conversion and exchange features, minimum purchase and account size, expenses and charges, and other features of the series and classes. The trustees may change any of those features, terminate any series or class, combine series with other series in the trust, combine one or more classes of a series with another class in that series or convert the shares of one class into another class. Each share of the fund, as a series of the trust, represents an interest in the fund only and not in the assets of any other series of the trust. Shareholder, Trustee and Officer Liability The declaration provides that shareholders are not personally liable for the obligations of the fund and requires a fund to indemnify a shareholder against liability arising solely from the shareholder's ownership of shares in the fund. In addition, the fund will assume the defense of any claim against a shareholder for personal liability at the request of the shareholder. The declaration further provides that no trustee, officer or employee of the fund shall be liable to the fund or any shareholder for any action, failure to act, error or mistake except in cases of bad faith, willful misfeasance, gross negligence or reckless disregard of duty. The declaration requires the fund to indemnify each trustee, director, officer, employee and authorized agent to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been such a trustee, director, officer, employee, or agent and against amounts paid or incurred by him in settlement thereof. The 1940 Act currently provides that no officer or director shall be protected from liability to the fund or shareholders for misfeasance, bad faith, gross negligence, or reckless disregard of the duties of office. The declaration extends to trustees, officers and employees of the fund the full protection from liability that the law allows. The declaration provides that the appointment or designation of a trustee as chairperson, a member of a committee, an expert, lead independent trustee, or any other special appointment shall not impose any heightened standard of care or liability on such trustee. Derivative Actions The declaration provides a detailed process for the bringing of derivative actions by shareholders in order to permit legitimate inquiries and claims while avoiding the time, expense, distraction, and other harm that can be caused to the fund or its shareholders as a result of spurious shareholder demands and derivative actions. Prior to bringing a derivative action, a demand by three unrelated shareholders must first be made on the fund's trustees. The declaration details various information, certifications, undertakings and acknowledgements that must be included in the demand. Following receipt of the demand, the trustees have a period of 90 days, which may be extended by an additional 60 days, to consider the demand. If a majority of the trustees who are considered independent for the purposes of 12 considering the demand determine that maintaining the suit would not be in the best interests of the fund, the trustees are required to reject the demand and the complaining shareholders may not proceed with the derivative action unless the shareholders are able to sustain the burden of proof to a court that the decision of the trustees not to pursue the requested action was not a good faith exercise of their business judgment on behalf of the fund. The declaration further provides that shareholders owning shares representing at least 10% of the voting power of the affected fund must join in bringing the derivative action. If a demand is rejected, the complaining shareholders will be responsible for the costs and expenses (including attorneys' fees) incurred by the fund in connection with the consideration of the demand, if in the judgment of the independent trustees, the demand was made without reasonable cause or for an improper purpose. If a derivative action is brought in violation of the declaration, the shareholders bringing the action may be responsible for the fund's costs, including attorneys' fees. The declaration further provides that the fund shall be responsible for payment of attorneys' fees and legal expenses incurred by a complaining shareholder only if required by law, and any attorneys' fees that the fund is obligated to pay shall be calculated using reasonable hourly rates. The declaration also requires that actions by shareholders against the fund be brought only in federal court in Boston, Massachusetts, or if not permitted to be brought in federal court, then in state court in Boston, Massachusetts, and that shareholders have no right to jury trial for such actions. PURCHASE, REDEMPTION AND PRICING OF SHARES For additional information about purchase, redemption and pricing of shares of Pioneer Tax Free Income Fund, see "Sales Charges," "Redeeming Shares," "Telephone and Online Transactions" and "Pricing of Shares" in Pioneer Tax Free Income Fund's SAI. TAXATION OF THE FUND For additional information about tax matters related to an investment in Pioneer Tax Free Income Fund, see "Tax Status" in Pioneer Tax Free Income Fund's SAI. UNDERWRITERS For additional information about the Pioneer Tax Free Income Fund's principal underwriter and distribution plans, see "Principal Underwriter and Distribution Plan" and "Sales Charges" in Pioneer Tax Free Income Fund's SAI. FINANCIAL STATEMENTS For additional information, see "Financial Statements" in Pioneer Tax Free Income Fund's SAI. 13 ADDITIONAL INFORMATION ABOUT PIONEER MUNICIPAL AND EQUITY INCOME TRUST FINANCIAL STATEMENTS For additional information, see "Financial Statements" in Pioneer Municipal and Equity Income Trust's 2007 Annual Report. 14 PRO FORMA COMBINED FINANCIAL STATEMENTS Pro Forma Schedule of Investments (a) 12/31/07 (Unaudited)
Pioneer Pioneer Tax Free Municipal Pioneer Income Fund and Equity Tax Free Pro Forma % of Income Trust Income Fund Combined Pro Forma Principal Principal Pro Forma Principal Combined Amount ($) Amount ($) Adjustment Amount ($) Net Assets - ------------ ----------- ---------- ----------- ----------- TAX EXEMPT OBLIGATIONS 90.0% No State 0.5% 5,000,000 5,000,000 Northern Mariana Islands, 5.0%, 6/1/17 Alabama 2.0% 7,500,000 7,500,000 DCH Health Care Authority, 5.125%, 6/1/36 405,000 405,000 Florence Alabama Water General, 4.4%, 12/1/08 550,000 550,000 Huntsville Alabama Electric System, 4.6%, 12/1/09 1,445,000 1,445,000 Huntsville Alabama General, 4.75%, 11/1/18 1,895,000 1,895,000 Huntsville Alabama, 5.125%, 5/1/20 5,000,000 5,000,000 Huntsville-Redstone Village Special Care Facilities Financing Authority, 5.5%, 1/1/43 725,000 725,000 Madison Alabama Water & Waste Water Board, 4.6%, 12/1/11 645,000 645,000 Mobile Alabama Regulation General, 0.0%, 2/15/09 500,000 500,000 Southeast, Alabama Gas District, 5.3%, 6/1/12 1,500,000 1,500,000 Sylacauga Health Care Authority Revenue, 6.0%, 8/1/35 Arizona 2.4% 1,000,000 1,000,000 Maricopa County Hospital Revenue, 5.0%, 4/1/35 1,000,000 1,000,000 Maricopa County School District, 7.0%, 7/1/08 4,000,000 4,000,000 Phoenix Arizona Civic Corp., District Revenue, 0.0%, 7/1/25 8,005,000 8,005,000 Phoenix Arizona Civic Corp., District Revenue, 0.0%, 7/1/26 10,000,000 10,000,000 Phoenix Arizona Civic Corp., Floating Rate Note, 7/1/43 470,000 470,000 Pima County Industrial Development Authority, 6.375%, 7/1/31 530,000 530,000 Pima County Industrial Development Authority, 6.375%, 7/1/31 989,000 989,000 Pima County Industrial Development Authority, 6.75%, 7/1/31 1,000,000 1,000,000 Pima County Industrial Development Authority, 7.5%, 7/1/34 California 9.1% 5,000,000 5,000,000 Alhambra California CTFS Part, 6.75%, 9/1/23 1,000,000 1,000,000 California Health Facilities Authority Revenue, 5.25%, 7/1/23 10,000,000 10,000,000 California State Department of Veteran Affairs, 4.6%, 12/1/28 1,000,000 1,000,000 California State, 4.25%, 8/1/33 4,875,000 4,875,000 California Statewide Communities Development Authority, 5.0%, 5/15/30 5,125,000 5,125,000 California Statewide Communities Development Authority, 5.0%, 5/15/38 20,000,000 20,000,000 Foothill Eastern Transportation Corridor Agency Toll Road Revenue, 0.0%, 1/1/28 1,000,000 1,000,000 Franklin-McKinley California School District, 6.0%, 7/1/16 9,000,000 9,000,000 Golden State Tobacco Securitization Corp., 5.125%, 6/1/47 9,655,000 9,655,000 Golden State Tobacco Securitization Corp., 5.817%, 6/1/45 (144A) RIB 4,000,000 4,000,000 Golden State Tobacco Securitization Corp., 6.75%, 6/1/39 4,525,000 4,525,000 Golden State Tobacco Securitization, 7.8%, 6/1/42 1,000,000 1,000,000 Golden State Tobacco Securitization, 7.875%, 6/1/42 3,000,000 3,000,000 Golden State Tobacco Securitization, 7.9%, 6/1/42 12,000,000 12,000,000 Golden State Tobacco Security Corp. California, 5.125%, 6/1/47 Pioneer Pioneer Pioneer Tax Free Municipal Municipal Pioneer Income Fund and Equity and Equity Tax Free Pro Forma Income Trust Income Trust Income Fund Combined Principal Market Market Pro Forma Market Amount ($) Value Value Adjustment (a) Value - ------------ ------------ ----------- -------------- ----------- $ -- $ 4,937,050 $ $ 4,937,050 ---------- ----------- -------------- ----------- $ -- $ 4,937,050 $ $ 4,937,050 ---------- ----------- -------------- ----------- $ -- $ 7,318,800 $ $ 7,318,800 -- 410,229 410,229 -- 561,655 561,655 -- 1,472,845 1,472,845 -- 2,037,599 2,037,599 5,000,000 4,349,550 -- 4,349,550 -- 752,217 752,217 -- 647,522 647,522 -- 534,450 534,450 1,500,000 1,415,250 -- 1,415,250 ---------- ----------- -------------- ----------- $5,764,800 $13,735,317 $ $19,500,117 ---------- ----------- -------------- ----------- 1,000,000 $ 923,110 $ -- $ $ 923,110 -- 1,019,600 1,019,600 -- 3,328,160 3,328,160 -- 6,648,953 6,648,953 -- 8,346,600 8,346,600 470,000 537,577 -- 537,577 530,000 541,803 -- 541,803 989,000 1,016,178 -- 1,016,178 1,000,000 1,197,860 -- 1,197,860 ---------- ----------- ------------ ----------- $4,216,528 $19,343,313 $ $23,559,841 ---------- ----------- ------------ ----------- $ -- $ 5,769,900 $ $ 5,769,900 1,000,000 1,023,190 -- 1,023,190 -- 9,922,600 9,922,600 -- 926,380 926,380 -- 4,551,251 4,551,251 -- 4,636,741 4,636,741 -- 7,882,600 7,882,600 -- 1,178,010 1,178,010 9,000,000 7,579,620 -- 7,579,620 9,655,000 8,013,264 -- 8,013,264 4,000,000 4,623,840 -- 4,623,840 -- 5,449,548 5,449,548 -- 1,207,650 1,207,650 -- 3,626,280 3,626,280 -- 10,106,160 10,106,160
15
Pioneer Pioneer Tax Free Municipal Pioneer Income Fund and Equity Tax Free Pro Forma % of Income Trust Income Fund Combined Pro Forma Principal Principal Pro Forma Principal Combined Amount ($) Amount ($) Adjustment Amount ($) Net Assets - ------------ ----------- ---------- ----------- ---------- California (continued) 10,000,000 10,000,000 Inland Empire Tobacco Securitization Authority California Tobacco, 0.0%, 6/1/36 1,175,000 1,175,000 Lucia Mar University School District, 0.0%, 8/1/20 165,000 165,000 Sacramento California Municipal Utility District, 5.5%, 2/1/11 3,600,000 3,600,000 Saugus California University School District, 0.0%, 8/1/23 1,210,000 1,210,000 Saugus California University School District, 0.0%, 8/1/24 5,000,000 5,000,000 Tobacco Securitization Authority Southern California Tobacco Settlement, 5.125%, 6/1/46 3,000,000 3,000,000 West VY Mission Community College California, 5.0%, 8/1/30 Colorado 1.2% 3,000,000 3,000,000 Colorado Educational & Cultural Facilities Authority Revenue, 5.5%, 6/1/37 (144A) 2,500,000 2,500,000 Colorado Health Facilities Revenue, 5.25%, 6/1/36 10,000 10,000 Colorado Housing Finance Authority, Series A-3, 7.0%, 11/1/16 15,000 15,000 Colorado Housing Finance Authority, Series B-2, 7.45%, 11/1/27 70,000 70,000 Colorado Housing Finance Authority, Series B-3, 6.55%, 5/1/25 3,575,000 3,575,000 Douglas County School District Regiona1, 7.0%, 12/15/13 10,000,000 10,000,000 E-470 Public Highway Authority Colorado, 0.0%, 9/1/37 Connecticut 1.3% 10,000,000 10,000,000 Connecticut State Health & Education, 5.0%, 7/1/42 1,000,000 1,000,000 Connecticut State Health & Education, 5.5%, 7/1/17 1,500,000 1,500,000 Mohegan Tribe Indians Gaming Authority, 5.25%, 1/1/33 (144A) District of Columbia 1.3% 4,000,000 8,825,000 12,825,000 District of Columbia Tobacco Settlement Financing Corp., 6.75%, 5/15/40 Florida 2.8% 1,000,000 1,000,000 Dade County Florida General, 7.7%, 10/1/12 500,000 500,000 Halifax Hospital Medical Center Florida, 5.375%, 6/1/46 1,105,000 1,105,000 Highlands County Health Facilities Authority Revenue, 5.0%, 11/15/24 5,000,000 5,000,000 Highlands County Health Facilities Authority Revenue, 6.0%, 11/15/25 5,435,000 5,435,000 Lee County Industrial Development Authority Revenue, 4.75%, 6/15/14 2,000,000 2,000,000 Lee County Industrial Development Authority Revenue, 5.375%, 6/15/37 585,000 585,000 Madison County First Mortgage Revenue, 6.0%, 7/1/25 1,535,000 1,535,000 Marion County Florida Hospital District Development, 5.0%, 10/1/16 2,025,000 2,025,000 Miami Beach Health Facilities Authority Revenue, 5.375%, 11/15/28 500,000 500,000 Miami Beach Health Facilities Authority Revenue, 6.7%, 11/15/19 1,400,000 1,400,000 Orange County Health Facilities Authority Revenue, 5.5%, 7/1/38 2,000,000 2,000,000 Sarasota County Florida Health, 5.75%, 7/1/45 3,970,000 3,970,000 Tampa-Hillsborough County Expressway Authority Revenue, RIB, 6.379%, 7/1/23 (144A) Pioneer Pioneer Pioneer Tax Free Municipal Municipal Pioneer Income Fund and Equity and Equity Tax Free Pro Forma Income Trust Income Trust Income Fund Combined Principal Market Market Pro Forma Market Amount ($) Value Value Adjustment (a) Value - ------------ ------------ ----------- -------------- ------------ $ -- $ 1,435,000 $ $ 1,435,000 -- 651,667 651,667 -- 170,108 170,108 -- 1,682,568 1,682,568 -- 533,985 533,985 4,215,850 -- 4,215,850 3,136,140 -- 3,136,140 --------- ----------- ----------- ----------- $ $88,322,352 $21,239,914 $67,082,438 --------- ----------- ----------- ----------- 3,000,000 $ 2,755,140 $ -- $ $ 2,755,140 -- 2,449,275 2,449,275 -- 10,314 10,314 -- 15,250 15,250 -- 71,720 71,720 -- 4,259,470 4,259,470 -- 2,052,300 2,052,300 ----------- ----------- --------- ----------- $ 2,755,140 $ 8,858,329 $ $11,613,469 ----------- ----------- --------- ----------- $ -- $10,400,100 $ $10,400,100 -- 1,044,780 1,044,780 1,500,000 1,323,555 -- 1,323,555 ----------- ----------- --------- ----------- $ 1,323,555 $11,444,880 $ $12,768,435 ----------- ----------- --------- ----------- 4,000,000 $ 4,085,800 $ 9,014,296 $ $13,100,096 ----------- ----------- --------- ----------- $ 4,085,800 $ 9,014,296 $ $13,100,096 ----------- ----------- --------- ----------- $ -- $ 1,178,660 $ $ 1,178,660 -- 476,175 476,175 1,105,000 1,107,784 -- 1,107,784 5,000,000 5,578,950 -- 5,578,950 -- 5,255,917 5,255,917 2,000,000 1,704,080 -- 1,704,080 585,000 566,795 -- 566,795 -- 1,595,540 1,595,540 2,025,000 1,814,380 -- 1,814,380 500,000 515,825 -- 515,825 1,400,000 1,230,264 -- 1,230,264 -- 1,806,900 1,806,900 3,970,000 4,645,734 -- 4,645,734 ----------- ----------- --------- ----------- $17,163,812 $10,313,192 $ $27,477,004 ----------- ----------- --------- -----------
16
Pioneer Pioneer Tax Free Municipal Pioneer Income Fund and Equity Tax Free Pro Forma % of Income Trust Income Fund Combined Pro Forma Principal Principal Pro Forma Principal Combined Amount ($) Amount ($) Adjustment Amount ($) Net Assets - ------------ ----------- ---------- ----------- ---------- Georgia 2.5% 9,580,000 9,580,000 Georgia Municipal Electric Authority Power Revenue, RIB, 6.97%, 1/1/20 (144A) 10,000,000 10,000,000 Houston County Georgia Hospital Authority Revenue, 5.0%, 10/1/42 2,500,000 2,500,000 Milledgeville-Baldwin County Development Authority Revenue, 5.625%, 9/1/30 Illinois 5.0% 3,000,000 3,000,000 Chicago Illinois General Obligation, 5.0%, 1/1/28 4,000,000 4,000,000 Chicago Illinois O'Hare International Airport, 5.5%, 12/1/30 170,000 170,000 Chicago Illinois Single Family Mortgage, 6.45%, 9/1/29 495,000 495,000 Chicago Illinois Tax Increment, 5.0%, 11/15/10 10,775,000 10,775,000 Illinois Finance Authority, 5.0%, 5/1/25 4,580,000 4,580,000 Illinois Development Finance Authority Revenue, 5.25%, 10/1/24 5,000,000 5,000,000 Illinois Educational Facilities Authority Revenue, 5.0%, 12/1/38 2,000,000 2,000,000 Illinois Finance Authority Revenue, 5.5%, 8/15/43 2,055,000 2,055,000 Illinois Finance Authority Revenue, 8.245%, 8/15/43 (144A) RIB 5,000,000 5,000,000 Illinois Finance Authority, 5.0%, 4/1/31 5,000,000 5,000,000 Illinois Finance Authority, 5.0%, 4/1/36 1,145,000 1,145,000 Illinois Housing Development Authority Revenue Multi-Family Housing, 7.0%, 7/1/23 20,000,000 20,000,000 Metropolitan Pier & Exposition Authority Illinois Dedicated State Tax, Floating Rate Note, 6/15/39 3,000,000 3,000,000 Will County Illinois Forest Preservation District, 0.0%, 12/1/18 Indiana 4.8% 15,000,000 15,000,000 Hobart Indiana Building Corp., 6.5%, 1/15/29 5,000,000 5,000,000 Indiana Health & Educational Facilities Finance Authority, 5.0%, 2/15/36 5,000,000 5,000,000 10,000,000 Indiana Health & Educational Facilities Finance Authority, 5.0%, 2/15/39 4,135,000 1,250,000 5,385,000 Indiana State Development Finance Authority Revenue, 5.75%, 10/1/11 3,400,000 3,400,000 Indianapolis Local Public Improvement Board Revenue, 6.0%, 1/10/20 1,400,000 1,400,000 Indianapolis Local Public Improvement Board Revenue, 6.75%, 2/1/14 1,000,000 1,000,000 Lawrence Township Metropolitan School District Revenue, 6.75%, 7/5/13 2,570,000 2,570,000 Vigo County Hospital Authority Revenue, 5.8%, 9/1/47 (144A) Iowa 0.4% 4,000,000 4,000,000 Iowa Financing Authority Senior Housing Revenue, 5.625%, 12/1/45 Kansas 0.2% 750,000 750,000 Manhattan Health Care Facilities Revenue, 5.125%, 5/15/37 2,000,000 2,000,000 Manhattan Health Care Facilities Revenue, 5.125%, 5/15/42 Kentucky 0.3% 165,000 165,000 Kentucky Economic Development Finance, 6.25%, 10/1/12 335,000 335,000 Kentucky Economic Development Finance, 6.25%, 10/1/12 2,000,000 2,000,000 Louisville & Jefferson County Kentucky Metro Government Health Systems Revenue, 5.25%, 10/1/36 Pioneer Pioneer Pioneer Tax Free Municipal Municipal Pioneer Income Fund and Equity and Equity Tax Free Pro Forma Income Trust Income Trust Income Fund Combined Principal Market Market Pro Forma Market Amount ($) Value Value Adjustment (a) Value - ------------ ------------ ----------- -------------- ----------- 9,580,000 $11,714,711 $ -- $ $11,714,711 -- 9,431,400 9,431,400 2,500,000 2,842,750 -- 2,842,750 ----------- ----------- --------- ----------- $14,557,461 $ 9,431,400 $ $23,988,861 ----------- ----------- --------- ----------- 3,000,000 $ 3,095,610 $ -- $ $ 3,095,610 -- 3,424,920 3,424,920 -- 172,424 172,424 -- 487,060 487,060 -- 9,995,213 9,995,213 4,580,000 4,621,037 -- 4,621,037 5,000,000 5,125,800 -- 5,125,800 2,000,000 2,242,060 -- 2,242,060 2,055,000 2,900,632 -- 2,900,632 -- 4,692,450 4,692,450 -- 4,609,600 4,609,600 -- 1,470,695 1,470,695 -- 4,295,800 4,295,800 -- 1,855,500 1,855,500 ----------- ----------- --------- ----------- $17,985,139 $31,003,662 $ $48,988,801 ----------- ----------- --------- ----------- $ -- $18,151,050 $ $18,151,050 -- 4,719,000 4,719,000 5,000,000 4,678,450 4,678,450 9,356,900 4,135,000 4,165,020 1,259,075 5,424,095 -- 3,927,272 3,927,272 -- 1,569,498 1,569,498 -- 1,153,490 1,153,490 2,570,000 2,366,482 -- 2,366,482 ----------- ----------- --------- ----------- $11,209,952 $35,457,835 $ $46,667,787 ----------- ----------- --------- ----------- 4,000,000 $ 3,472,520 $ -- $ $ 3,472,520 ----------- ----------- --------- ----------- $ 3,472,520 $ -- $ $ 3,472,520 ----------- ----------- --------- ----------- 750,000 $ 630,060 $ -- $ $ 630,060 2,000,000 1,647,120 -- 1,647,120 ----------- ----------- --------- ----------- $ 2,277,180 $ -- $ $ 2,277,180 ----------- ----------- --------- ----------- $ -- $ 179,695 $ $ 179,695 -- 353,475 353,475 -- 1,939,240 1,939,240 ----------- ----------- --------- ----------- $ -- $ 2,472,410 $ $ 2,472,410 ----------- ----------- --------- -----------
17
Pioneer Pioneer Tax Free Municipal Pioneer Income Fund and Equity Tax Free Pro Forma % of Income Trust Income Fund Combined Pro Forma Principal Principal Pro Forma Principal Combined Amount ($) Amount ($) Adjustment Amount ($) Net Assets - ------------ ----------- ---------- ----------- ----------- Louisiana 3.5% 5,000,000 15,000,000 20,000,000 Louisiana Public Facilities Authority Revenue, 5.5%, 5/15/47 425,000 425,000 Louisiana Public Facilities Authority Revenue, 6.25%, 10/1/11 1,085,000 1,085,000 Louisiana Local Government Environment Community, 5.25%, 12/1/18 5,000,000 5,000,000 St. John Baptist Parish Louisiana Revenue, 5.125%, 6/1/37 8,335,000 8,335,000 Tobacco Settlement Financing Corp., 5.875%, 5/15/39 Maine 0.0% 300,000 300,000 Maine Municipal Bond Bank, 5.0%, 11/1/09 Maryland 1.2% 3,000,000 3,000,000 Frederick County Educational Facilities Revenue, 5.625%, 9/1/38 4,600,000 4,600,000 Maryland Health Department, 4.75% 1/1/13 1,000,000 1,000,000 Maryland State Economic Development Revenue, 5.0%, 12/1/31 1,000,000 1,000,000 Maryland State Economic Development Revenue, Series A, 5.0%, 12/1/16 660,000 660,000 Maryland State Economic Development Revenue, Series B, 5.0%, 12/1/16 2,000,000 2,000,000 Maryland State Health & Higher Educational Facilities Authority Revenue, 5.125%, 7/1/34 Massachusetts 9.5% 16,070,000 16,070,000 Massachusetts Bay Transportation Authority, 4.0%, 7/1/33 4,990,000 4,990,000 Massachusetts Bay Transportation Authority, 5.0%, 7/1/31 4,500,000 4,500,000 Massachusetts Health & Educational Facilities Authority Revenue, 4.625%, 8/15/28 2,000,000 2,000,000 Massachusetts Health & Educational Facilities Authority Revenue, 5.0%, 7/1/33 1,550,000 1,550,000 Massachusetts Health & Educational Facilities Authority Revenue, 5.25%, 7/15/18 6,215,000 6,215,000 Massachusetts Health & Educational Facilities Authority Revenue, 5.25%, 7/1/33 1,600,000 1,600,000 Massachusetts Health & Educational Facilities Authority Revenue, 5.45%, 11/15/23 2,500,000 2,500,000 Massachusetts Health & Educational Facilities Authority Revenue, 5.5%, 7/1/40 2,120,000 2,120,000 Massachusetts Health & Educational Facilities Authority Revenue, 5.625%, 7/1/20 5,290,000 5,290,000 Massachusetts Health & Educational Facilities Authority Revenue, 5.75%, 7/1/32 40,000 40,000 Massachusetts Health & Educational Facilities Authority Revenue, 6.0%, 7/1/18 900,000 1,250,000 2,150,000 Massachusetts Health & Educational Facilities Authority Revenue, 6.25%, 7/1/22 1,145,000 1,145,000 Massachusetts Health & Educational Facilities Authority Revenue, 6.25%, 10/1/31 2,000,000 2,000,000 Massachusetts Health & Educational Facilities Authority Revenue, 6.5%, 7/1/21 2,000,000 2,000,000 Massachusetts Health & Educational Facilities Authority Revenue, 6.625%, 7/1/31 2,750,000 2,750,000 Massachusetts Health & Educational Facilities Authority Revenue, 6.625%, 7/1/32 1,000,000 1,000,000 Massachusetts Health & Educational Facilities Authority Revenue, 6.75%, 7/1/16 8,170,000 8,170,000 Massachusetts State Dedicated Tax, 5.5%, 1/1/29 Pioneer Pioneer Pioneer Tax Free Municipal Municipal Pioneer Income Fund and Equity and Equity Tax Free Pro Forma Income Trust Income Trust Income Fund Combined Principal Market Market Pro Forma Market Amount ($) Value Value Adjustment (a) Value - ------------ ------------ ----------- -------------- ----------- 5,000,000 $ 4,899,500 $14,698,500 -- 421,906 $ $19,598,000 421,906 -- 1,188,878 1,188,878 -- 4,787,600 4,787,600 8,335,000 8,006,184 -- 8,006,184 ----------- ----------- --------- ----------- $12,905,684 $21,096,884 $ $34,002,568 ----------- ----------- --------- ----------- $ -- $ 307,866 $ $ 307,866 ----------- ----------- --------- ----------- $ -- $ 307,866 $ $ 307,866 ----------- ----------- --------- ----------- 3,000,000 $ 3,003,810 $ -- $ $ 3,003,810 -- 4,399,670 4,399,670 1,000,000 870,960 -- 870,960 1,000,000 980,250 -- 980,250 660,000 646,965 -- 646,965 2,000,000 1,984,240 -- 1,984,240 ----------- ----------- --------- ----------- $ 7,486,225 $ 4,399,670 $ $11,885,895 ----------- ----------- --------- ----------- $ -- $14,528,244 $ $14,528,244 -- 5,425,777 5,425,777 4,500,000 4,012,560 -- 4,012,560 2,000,000 2,049,540 -- 2,049,540 1,550,000 1,550,697 -- 1,550,697 -- 7,082,117 7,082,117 1,600,000 1,606,464 -- 1,606,464 -- 2,322,175 2,322,175 2,120,000 2,115,294 -- 2,115,294 -- 5,781,163 5,781,163 -- 42,856 42,856 900,000 923,949 1,283,263 2,207,212 -- 1,187,296 1,187,296 -- 2,086,440 2,086,440 -- 2,070,440 2,070,440 2,750,000 2,846,855 -- 2,846,855 -- 1,062,810 1,062,810 -- 9,296,480 9,296,480
18
Pioneer Pioneer Tax Free Municipal Pioneer Income Fund and Equity Tax Free Pro Forma % of Income Trust Income Fund Combined Pro Forma Principal Principal Pro Forma Principal Combined Amount ($) Amount ($) Adjustment Amount ($) Net Assets - ------------ ----------- ---------- ----------- ----------- Massachusetts (continued) 750,000 750,000 Massachusetts State Development Finance Agency, 4.5%, 9/1/36 1,680,000 1,680,000 Massachusetts State Development Finance Agency, 5.25%, 10/1/29 3,320,000 3,320,000 Massachusetts State Development Finance Agency, 5.25%, 10/1/37 500,000 500,000 Massachusetts State Development Finance Agency, 5.5%, 1/1/35 1,100,000 1,100,000 Massachusetts State Development Finance Agency, 5.625%, 10/1/24 1,000,000 1,000,000 Massachusetts State Development Finance Agency, 5.7%, 10/1/34 5,500,000 5,500,000 Massachusetts State Development Finance Agency, 5.75%, 1/1/42 2,635,000 2,635,000 Massachusetts State Development Finance Agency, 6.25%, 10/15/17 1,500,000 1,500,000 Massachusetts State Development Finance Agency, 6.375%, 7/1/23 16,070,000 16,070,000 Noblesville Independent Revenue, 5.25%, 2/1/30 Michigan 2.0% 1,500,000 1,500,000 John Tolfree Health System, 6.0%, 9/15/23 5,000,000 5,000,000 Macomb County Hospital Finance Authority Revenue, 5.875%, 11/15/34 1,595,000 1,595,000 Meridian Economic Development Corporate Ltd. Obligation Revenue, 5.25%, 7/1/26 3,340,000 3,340,000 Michigan Public Educational Facilities Authority Revenue, 5.875%, 6/1/37 2,000,000 2,000,000 Michigan State Hospital Finance Authority Revenue, 5.25%, 11/15/25 1,000,000 1,000,000 Michigan State Hospital Finance Authority Revenue, 5.5%, 11/15/35 4,000,000 4,000,000 Michigan State Hospital Finance Authority Revenue, 6.0%, 2/1/24 400,000 400,000 Michigan State Trunk Line, 5.5%, 11/1/10 1,500,000 1,500,000 Southfield Michigan Public Schools, 4.5%, 5/1/27 Minnesota 1.3% 5,000,000 5,000,000 Becker Minnesota Pollution Control Revenue Northern States Power "A" Conversions, 8.5%, 4/1/30 2,000,000 2,000,000 Duluth Economic Development Authority Health Care Facilities Revenue, 5.25%, 2/15/28 1,500,000 1,500,000 Duluth Economic Development Authority Health Care Facilities Revenue, 5.25%, 2/15/33 1,000,000 1,000,000 Laurentian Energy Authority Minnesota Cogeneration, 5.0%, 12/1/15 1,000,000 1,000,000 North Oaks Senior Housing Revenue, 6.0%, 10/1/33 1,000,000 1,000,000 North Oaks Senior Housing Revenue, 6.5%, 10/1/47 Mississippi 0.9% 1,800,000 1,800,000 Columbus Mississippi Industrial Development Revenue, 5.9%, 12/1/11 6,000,000 6,000,000 Lowndes County Mississippi Solid Waste Disposal & Pollution Control Revenue, 6.8%, 4/1/22 Pioneer Pioneer Pioneer Tax Free Municipal Municipal Pioneer Income Fund and Equity and Equity Tax Free Pro Forma Income Trust Income Trust Income Fund Combined Principal Market Market Pro Forma Market Amount ($) Value Value Adjustment (a) Value - ------------ ------------ ----------- -------------- ----------- $ -- $ 687,720 $ $ 687,720 -- 1,604,400 1,604,400 -- 3,102,341 3,102,341 500,000 469,950 -- 469,950 1,100,000 1,118,095 -- 1,118,095 1,000,000 1,001,340 -- 1,001,340 -- 6,609,130 6,609,130 -- 2,545,041 2,545,041 -- 1,742,805 1,742,805 -- 6,837,868 6,837,868 ----------- ----------- --------- ----------- $17,694,744 $75,298,366 $ $92,993,110 ----------- ----------- --------- ----------- $ -- $ 1,520,355 $ $ 1,520,355 5,000,000 4,904,900 -- 4,904,900 1,595,000 1,405,626 -- 1,405,626 3,340,000 3,126,307 -- 3,126,307 2,000,000 1,793,320 -- 1,793,320 1,000,000 888,310 -- 888,310 -- 4,001,280 4,001,280 -- 425,572 425,572 -- 1,494,165 1,494,165 ----------- ----------- --------- ----------- $12,118,463 $ 7,441,372 $ $19,559,835 ----------- ----------- --------- ----------- $ -- $ 5,876,400 $ $ 5,876,400 2,000,000 2,009,120 -- 2,009,120 1,500,000 1,493,685 -- 1,493,685 -- 1,013,660 1,013,660 1,000,000 970,570 -- 970,570 1,000,000 1,015,010 -- 1,015,010 ----------- ----------- --------- ----------- $ 5,488,385 $ 6,890,060 $ $12,378,445 ----------- ----------- --------- ----------- $ -- $ 1,831,302 $ $ 1,831,302 -- 6,603,360 6,603,360 ----------- ----------- --------- ----------- $ -- $ 8,434,662 $ $ 8,434,662 ----------- ----------- --------- -----------
19
Pioneer Pioneer Tax Free Municipal Pioneer Income Fund and Equity Tax Free Pro Forma % of Income Trust Income Fund Combined Pro Forma Principal Principal Pro Forma Principal Combined Amount ($) Amount ($) Adjustment Amount ($) Net Assets - ------------ ----------- ---------- ----------- ----------- Missouri 0.2% 295,000 295,000 Missouri State Housing Development Common Mortgage Revenue, Single Family, Series B-2, 6.4%, 3/1/29 1,720,000 1,720,000 Missouri State Health & Educational Authority Health Facilities Revenue, 5.25%, 8/15/28 Montana 0.2% 500,000 500,000 Forsyth Pollution Control Revenue, 5.2%, 5/1/33 1,000,000 1,000,000 Montana Finance Authority Hospital Facilities Revenue, 5.0%, 6/1/24 Nebraska 1.1% 1,648,869 1,648,869 Energy America Nebraska Natural Gas Revenue, 5.45%, 4/15/08 1,325,000 1,325,000 Municipal Energy Agency, 6.0%, 4/1/08 2,050,000 2,050,000 Nebraska Investment Finance Authority Single Family, Floating Rate Note, 3/1/26 4,980,000 4,980,000 Nebraska Public Power District Revenue, 6.375%, 1/1/41 (144A) RIB Nevada 1.1% 10,000,000 10,000,000 Reno Nevada Hospital Revenue, 5.25%, 6/1/41 1,500,000 1,500,000 Henderson Nevada Health Care Facilities Revenue, 5.625%, 7/1/24 New Hampshire 1.6% 1,700,000 1,700,000 New Hampshire Business Finance Authority Revenue, 6.05%, 9/1/29 5,000,000 5,000,000 New Hampshire Health & Education Facilities Authority Revenue, 5.0%, 10/1/17 5,000,000 5,000,000 New Hampshire Health & Education Facilities Authority Revenue, 5.0%, 10/1/32 1,000,000 1,250,000 2,250,000 New Hampshire Health & Education Facilities Authority Revenue, 5.75%, 10/1/31 2,000,000 2,000,000 New Hampshire Health & Education Facilities Authority Revenue, 5.75%, 7/1/22 140,000 140,000 New Hampshire State Housing Finance Authority, 6.125%, 1/1/20 New Jersey 5.2% 1,250,000 1,250,000 Camden County Improvement Authority Revenue, 5.75%, 2/15/34 5,920,000 5,920,000 Garden State Preservation Trust, 10.112%, 11/1/22 (144A) RIB 500,000 500,000 New Jersey Economic Development Authority Revenue, 5.3%, 11/1/26 450,000 450,000 New Jersey Economic Development Authority Revenue, 5.375%, 11/1/36 710,000 710,000 New Jersey Economic Development Authority Revenue, 5.75%, 1/1/25 1,000,000 1,000,000 New Jersey Economic Development Authority Revenue, 5.875%, 1/1/37 5,060,000 5,060,000 New Jersey Economic Development Authority Special Facility Revenue, 7.0%, 11/15/30 2,000,000 2,000,000 New Jersey Health Care Facilities Financing Authority Revenue, 5.0%, 7/1/24 1,000,000 1,000,000 New Jersey Health Care Facilities Financing Authority Revenue, 5.125%, 7/1/14 Pioneer Pioneer Pioneer Tax Free Municipal Municipal Pioneer Income Fund and Equity and Equity Tax Free Pro Forma Income Trust Income Trust Income Fund Combined Principal Market Market Pro Forma Market Amount ($) Value Value Adjustment (a) Value - ------------ ------------ ----------- -------------- ----------- $ -- $ 303,349 $ $ 303,349 1,720,000 1,694,338 -- 1,694,338 ----------- ----------- --------- ----------- $ 1,694,338 $ 303,349 $ $ 1,997,687 ----------- ----------- --------- ----------- $ -- $ 505,890 $ $ 505,890 1,000,000 1,009,240 -- 1,009,240 ----------- ----------- --------- ----------- $ 1,009,240 $ 505,890 $ $ 1,515,130 ----------- ----------- --------- ----------- $ -- $ 1,642,043 $ $ 1,642,043 -- 1,334,514 1,334,514 -- 2,092,558 2,092,558 4,980,000 5,250,812 -- 5,250,812 ----------- ----------- --------- ----------- $ 5,250,812 $ 5,069,115 $ $10,319,927 ----------- ----------- --------- ----------- $ -- $ 9,619,100 $ $ 9,619,100 1,500,000 1,560,765 -- 1,560,765 ----------- ----------- --------- ----------- $ 1,560,765 $ 9,619,100 $ $11,179,865 ----------- ----------- --------- ----------- 1,700,000 $ 1,777,078 $ -- $ $ 1,777,078 -- 4,601,300 4,601,300 -- 4,663,700 4,663,700 1,000,000 1,025,940 1,282,425 2,308,365 -- 2,059,500 2,059,500 -- 143,333 143,333 ----------- ----------- --------- ----------- $ 2,803,018 $12,750,258 $ $15,553,276 ----------- ----------- --------- ----------- 1,250,000 $ 1,216,975 $ -- $ $ 1,216,975 5,920,000 8,568,371 -- 8,568,371 -- 448,720 448,720 -- 392,792 392,792 710,000 684,660 -- 684,660 1,000,000 935,150 -- 935,150 -- 5,091,170 5,091,170 -- 2,019,580 2,019,580 1,000,000 955,540 -- 955,540
20
Pioneer Pioneer Tax Free Municipal Pioneer Income Fund and Equity Tax Free Pro Forma % of Income Trust Income Fund Combined Pro Forma Principal Principal Pro Forma Principal Combined Amount ($) Amount ($) Adjustment Amount ($) Net Assets - ------------ ----------- ---------- ----------- ----------- New Jersey (continued) 4,140,000 4,140,000 New Jersey Health Care Facilities Financing Authority Revenue, 5.25%, 7/1/30 5,000,000 5,000,000 New Jersey Health Care Facilities Financing Authority Revenue, 5.375%, 7/1/33 3,500,000 3,500,000 New Jersey Health Care Facilities Financing Authority Revenue, 7.25%, 7/1/27 9,500,000 9,500,000 Tobacco Settlement Financing Corp., 5.0%, 6/1/41 3,000,000 3,000,000 Tobacco Settlement Financing Corp., 6.25%, 6/1/43 1,000,000 1,000,000 Tobacco Settlement Financing Corp., New Jersey, 6.25%, 6/1/43 5,215,000 5,215,000 Tobacco Settlement Financing Corp., New Jersey, 6.75%, 6/1/39 New Mexico 0.3% 1,000,000 1,000,000 Dona Ana County PILT Revenue, 5.25%, 12/1/25 1,500,000 1,500,000 Farmington New Mexico Hospital Revenue, 5.0%, 6/1/23 New York 4.3% 1,000,000 1,000,000 Albany Individual Development, 6.0%, 7/1/19 2,000,000 2,000,000 Dutchess County Industrial Development Agency Revenue, 7.5%, 3/1/29 400,000 400,000 Metropolitan Transportation Authority New York, 5.5%, 7/1/14 1,700,000 1,700,000 Nassau County Industrial Development Agency, 6.7%, 1/1/43 1,000,000 1,000,000 New York City Industrial Development Agency, 5.0%, 7/1/27 1,000,000 1,000,000 New York City Industrial Development Agency, 5.25%, 7/1/24 2,000,000 2,000,000 New York City Transportation Finance Authority Revenue, Floating Rate Note, 11/1/26 4,400,000 4,400,000 New York State Dorm Authority, 0.0%, 7/1/39 8,465,000 8,465,000 New York State Dorm Authority, 5.0%, 7/1/25 5,515,000 5,515,000 New York State Dorm Authority, 5.24%, 7/1/24 5,000,000 5,000,000 Port Authority of New York & New Jersey Revenue, 5.0%, 9/1/38 1,000,000 1,000,000 Suffolk County Industrial Development Agency Civic Facilities Revenue, 5.5%, 1/1/37 (144A) 4,900,000 4,900,000 Triborough Bridge & Tunnel Authority, 5.25%, 11/15/30 3,000,000 3,000,000 Ulster County Industrial Development Agency Civic Facility Revenue, 6.0%, 9/15/27 North Carolina 0.7% 1,000,000 1,000,000 North Carolina Capital Facilities Finance Agency Student Revenue, 5.0%, 6/1/27 1,000,000 1,000,000 North Carolina Capital Facilities Finance Agency Student Revenue, 5.0%, 6/1/32 2,250,000 2,250,000 North Carolina Capital Facilities Finance, 4.5%, 10/1/26 1,000,000 1,000,000 North Carolina Medical Care Commission Health Care Facilities Revenue, 5.0%, 11/1/23 2,250,000 2,250,000 University North Carolina Revenue, 5.0%, 12/1/36 North Dakota 0.1% 280,000 280,000 North Dakota State Housing Finance Agency Revenue, 5.8%, 7/1/18 575,000 575,000 North Dakota State Housing Finance Agency Revenue, 6.0%, 7/1/20 Pioneer Pioneer Pioneer Tax Free Municipal Municipal Pioneer Income Fund and Equity and Equity Tax Free Pro Forma Income Trust Income Trust Income Fund Combined Principal Market Market Pro Forma Market Amount ($) Value Value Adjustment (a) Value - ------------ ------------ ----------- -------------- ----------- $ -- $ 3,811,988 $ $ 3,811,988 5,000,000 4,848,250 -- 4,848,250 3,500,000 3,534,650 -- 3,534,650 -- 7,922,905 7,922,905 3,000,000 3,413,580 -- 3,413,580 -- 1,137,860 1,137,860 -- 6,061,812 6,061,812 ----------- ----------- --------- ----------- $24,157,176 $26,886,827 $ $51,044,003 ----------- ----------- --------- ----------- 1,000,000 $ 1,002,830 $ -- $ $ 1,002,830 1,500,000 1,500,750 -- 1,500,750 ----------- ----------- --------- ----------- $ 2,503,580 $ -- $ $ 2,503,580 ----------- ----------- --------- ----------- $ -- $ 1,016,820 $ $ 1,016,820 2,000,000 2,121,120 -- 2,121,120 -- 440,532 440,532 1,700,000 1,700,000 -- 1,700,000 1,000,000 1,035,890 -- 1,035,890 1,000,000 1,059,770 -- 1,059,770 -- 2,154,140 2,154,140 -- 3,627,668 3,627,668 -- 9,038,842 9,038,842 -- 6,122,643 6,122,643 5,000,000 5,111,450 -- 5,111,450 1,000,000 867,900 -- 867,900 4,900,000 5,133,877 -- 5,133,877 3,000,000 2,876,040 -- 2,876,040 ----------- ----------- --------- ----------- $19,906,047 $22,400,645 $ $42,306,692 ----------- ----------- --------- ----------- 1,000,000 $ 975,690 $ -- $ $ 975,690 1,000,000 946,050 -- 946,050 -- 1,976,670 1,976,670 1,000,000 985,950 -- 985,950 -- 2,357,460 2,357,460 ----------- ----------- --------- ----------- $ 2,907,690 $ 4,334,130 $ $ 7,241,820 ----------- ----------- --------- ----------- $ -- $ 285,519 $ $ 285,519 -- 582,055 582,055 ----------- ----------- --------- ----------- $ -- $ 867,574 $ $ 867,574 ----------- ----------- --------- -----------
21
Pioneer Pioneer Tax Free Municipal Pioneer Income Fund and Equity Tax Free Pro Forma % of Income Trust Income Fund Combined Pro Forma Principal Principal Pro Forma Principal Combined Amount ($) Amount ($) Adjustment Amount ($) Net Assets - ------------ ----------- ---------- ----------- ----------- Ohio 0.8% 3,000,000 3,000,000 Columbus City School District, 5.0%, 12/1/32 1,500,000 1,500,000 Cuyahoga County Health Care & Independent Living Facilities Revenue, 6.0%, 5/15/37 1,500,000 1,500,000 Cuyahoga County Health Care & Independent Living Facilities Revenue, 6.0%, 5/15/42 1,000,000 1,000,000 Hamilton County Hospital Facilities Revenue, 5.125%, 5/15/28 400,000 400,000 Ohio State Building Authority Revenue, 5.5%, 10/1/11 500,000 500,000 Ohio State Building Authority Revenue, 6.0%, 10/1/08 Oklahoma 0.2% 1,530,000 1,530,000 Moore Oklahoma General Obligation, 5.75%, 4/1/12 Oregon 0.8% 1,165,000 1,165,000 Jackson County School District No. 4, 5.5%, 6/15/17 500,000 500,000 Klamath Falls Inter-Community Hospital Authority Revenue, 6.125%, 9/1/22 2,935,000 2,935,000 Oregon State Housing & Community Services Department Multi-Family Revenue, 6.0%, 7/1/31 1,000,000 1,000,000 Portland Urban Development, 5.75%, 6/15/08 1,650,000 1,650,000 Wasco County School District, 5.5%, 6/15/19 Pennsylvania 3.7% 4,000,000 4,000,000 Allentown Pennsylvania Area Hospital Authority, 6.0%, 11/15/16 1,165,000 1,165,000 Chester County Pennsylvania Health & Education Facility, 5.0%, 11/1/19 1,220,000 1,220,000 Chester County Pennsylvania Health & Education Facility, 5.0%, 11/1/20 1,650,000 1,650,000 Chester County Pennsylvania Health & Education Facility, 5.0%, 11/1/31 1,000,000 1,000,000 Columbia County Pennsylvania Hospital Authority, 5.8%, 6/1/19 1,000,000 1,000,000 Montgomery County Pennsylvania Industrial, 5.0%, 12/1/24 1,000,000 1,000,000 Montgomery County Pennsylvania Industrial, 5.0%, 12/1/30 5,000,000 5,000,000 Pennsylvania State Turnpike Commission Oil Franchise Tax Revenue, 5.0%, 12/1/31 15,000,000 15,000,000 Philadelphia Pennsylvania Hospital, 5.0%, 7/1/34 500,000 500,000 Philadelphia Pennsylvania Parking, 4.875%, 9/1/09 1,315,000 1,315,000 Sayre Health Care Facilities Authority Revenue, 5.875%, 12/1/31 685,000 685,000 Sayre Health Care Facilities Authority Revenue, 5.875%, 12/1/31 250,000 250,000 Sayre Pennsylvania Health Care Facilities Authority, 5.75%, 12/1/21 280,000 280,000 Scranton-Lackawanna Health and Welfare Authority Hospital Revenue, 5.9%, 7/1/08 700,000 700,000 Scranton-Lackawanna Health and Welfare Authority Hospital Revenue, 6.0%, 7/1/09 460,000 460,000 Scranton-Lackawanna Health and Welfare Authority Hospital Revenue, 6.05%, 7/1/10 2,165,000 2,165,000 Swarthmore Borough Authority College Revenue, 5.0%, 9/15/31 Puerto Rico 1.1% 8,305,000 8,305,000 Puerto Rico Electric Power, 0.0%, 7/1/17* 5,000,000 5,000,000 Puerto Rico Public Buildings Authority Revenue, 5.25%, 7/1/33 Pioneer Pioneer Pioneer Tax Free Municipal Municipal Pioneer Income Fund and Equity and Equity Tax Free Pro Forma Income Trust Income Trust Income Fund Combined Principal Market Market Pro Forma Market Amount ($) Value Value Adjustment (a) Value - ------------ ------------ ----------- -------------- ----------- 3,000,000 $ 3,289,680 $ -- $ $ 3,289,680 1,500,000 1,469,460 -- 1,469,460 1,500,000 1,453,275 -- 1,453,275 1,000,000 1,017,600 -- 1,017,600 -- 430,340 430,340 -- 511,130 511,130 ----------- ----------- --------- ----------- $ 7,230,015 $ 941,470 $ $ 8,171,485 ----------- ----------- --------- ----------- $ -- $ 1,637,222 $ $ 1,637,222 ----------- ----------- --------- ----------- $ -- $ 1,637,222 $ $ 1,637,222 ----------- ----------- --------- ----------- $ -- $ 1,254,752 $ $ 1,254,752 -- 548,539 548,539 2,935,000 2,960,476 -- 2,960,476 -- 1,062,640 1,062,640 -- 1,896,939 1,896,939 ----------- ----------- --------- ----------- $ 2,960,476 $ 4,762,870 $ $ 7,723,346 ----------- ----------- --------- ----------- $ -- $ 3,994,240 $ $ 3,994,240 -- 1,184,898 1,184,898 -- 1,235,567 1,235,567 -- 1,576,889 1,576,889 -- 918,590 918,590 -- 943,250 943,250 -- 899,230 899,230 5,000,000 5,442,150 -- 5,442,150 -- 13,275,000 13,275,000 -- 513,220 513,220 1,315,000 1,454,587 -- 1,454,587 685,000 707,043 -- 707,043 -- 271,699 271,699 280,000 280,451 -- 280,451 700,000 703,773 -- 703,773 460,000 462,479 -- 462,479 2,165,000 2,216,462 -- 2,216,462 ----------- ----------- --------- ----------- $11,266,945 $24,812,583 $ $36,079,528 ----------- ----------- --------- ----------- $ -- $ 5,518,091 $ $ 5,518,091 5,000,000 5,000,000 -- 5,000,000 ----------- ----------- --------- ----------- $ 5,000,000 $ 5,518,091 $ $10,518,091 ----------- ----------- --------- -----------
22
Pioneer Pioneer Tax Free Municipal Pioneer Income Fund and Equity Tax Free Pro Forma % of Income Trust Income Fund Combined Pro Forma Principal Principal Pro Forma Principal Combined Amount ($) Amount ($) Adjustment Amount ($) Net Assets - ------------ ----------- ---------- ----------- ---------- Rhode Island 0.8% 250,000 250,000 Rhode Island State Health & Education Facilities Authorities, 6.5%, 8/15/32 480,000 480,000 Rhode Island State Health & Educational Building Corp., 6.375%, 8/15/21 1,640,000 1,640,000 Tobacco Settlement Financing Corp., 6.125%, 6/1/32 3,100,000 2,100,000 5,200,000 Tobacco Settlement Financing Corp., 6.25%, 6/1/42 South Carolina 2.2% 6,000,000 6,000,000 Berkeley County School District Installment Lease, 5.0%, 12/1/28 5,000,000 5,000,000 Florence County Hospital Revenue, 5.25%, 11/1/34 3,500,000 3,500,000 Lexington County Health Services District, Inc., Hospital Revenue, 5.5%, 11/1/32 95,000 95,000 South Carolina Housing Finance & Development Authority Mortgage Revenue, Series A-1, 6.2%, 7/1/09 2,500,000 2,500,000 South Carolina Jobs Economic Development Authority Revenue, 5.5%, 11/15/23 500,000 500,000 South Carolina Jobs Economic Development Authority Revenue, 6.0%, 8/1/13 440,000 440,000 South Carolina Jobs Economic Development Authority Revenue, 6.875%, 8/1/27 2,500,000 2,500,000 Tobacco Settlement Revenue Management, 6.375%, 5/15/30 South Dakota 0.0% 65,000 65,000 South Dakota Conservancy District Revenue, 5.625%, 8/1/17 Tennessee 2.3% 1,570,000 1,570,000 Clarksville Tennessee Water and Gas, 5.15%, 2/1/14 1,000,000 1,000,000 Johnson City Tennessee Health & Education, 5.5%, 7/1/36 2,500,000 1,500,000 4,000,000 Knox County Health Educational & Housing Facilities Board Hospital Revenue, 6.5%, 4/15/31 1,000,000 1,000,000 Knox County Health Facility, 6.375%, 4/15/22 750,000 750,000 Knoxville County Tennessee Health Education & Housing, 7.25%, 1/1/08 750,000 750,000 Knoxville County Tennessee Series A, 5.0%, 5/1/13 1,000,000 1,000,000 Metro Government Nashville/Davidson County Tennessee, 5.5%, 5/15/12 1,000,000 1,000,000 Metro Government Nashville/Davidson County Tennessee, 5.5%, 5/15/14 1,500,000 1,500,000 Metro Government Nashville/Davidson County Tennessee, 6.0%, 12/1/09 1,000,000 1,000,000 Metro Government Nashville/Davidson County Tennessee, 7.5%, 11/15/12 5,960,000 5,960,000 Sumner Court Tennessee Health Educational, 5.5%, 11/1/46 1,000,000 1,000,000 Tennessee County Tennessee General, 5.5%, 4/1/19 550,000 550,000 Williamson County Tennessee General, 5.1%, 3/1/14 500,000 500,000 Williamson County Tennessee General, 6.0%, 3/1/08 Texas 6.9% 3,000,000 3,000,000 Brazos River Authority Pollution Control Revenue, 7.7%, 4/1/33 750,000 750,000 Carroll Independent School District, 6.75%, 8/15/21 850,000 850,000 Carroll Independent School District, 6.75%, 8/15/22 13,885,000 13,885,000 Dallas-Fort Worth Texas International Airport, 6.0%, 11/1/14 1,000,000 1,000,000 Harris County Health Facilities Development Authority, 6.375%, 6/1/29 1,552,000 1,552,000 Houston Housing Financing Corp., 6.25%, 9/20/31 2,885,000 2,885,000 Houston Utility System Revenue, 7.126%, 5/15/24 (144A) RIB Pioneer Pioneer Pioneer Tax Free Municipal Municipal Pioneer Income Fund and Equity and Equity Tax Free Pro Forma Income Trust Income Trust Income Fund Combined Principal Market Market Pro Forma Market Amount ($) Value Value Adjustment (a) Value - ------------ ------------ ------------ -------------- ----------- $ -- $ 284,025 $ $ 284,025 -- 538,992 538,992 1,640,000 1,666,519 -- 1,666,519 3,100,000 3,108,060 2,105,460 5,213,520 ----------- ----------- --------- ----------- $ 4,774,579 $ 2,928,477 $ $ 7,703,056 ----------- ----------- --------- ----------- 6,000,000 $ 5,923,140 $ -- $ $ 5,923,140 5,000,000 5,117,750 -- 5,117,750 3,500,000 3,870,160 -- 3,870,160 -- 95,168 95,168 2,500,000 2,560,900 -- 2,560,900 -- 530,315 530,315 -- 515,068 515,068 -- 2,504,200 2,504,200 ----------- ----------- --------- ----------- $17,471,950 $ 3,644,751 $ $21,116,701 ----------- ----------- --------- ----------- $ -- $ 65,129 $ $ 65,129 ----------- ----------- --------- ----------- $ -- $ 65,129 $ $ 65,129 ----------- ----------- --------- ----------- $ -- $ 1,716,811 $ $ 1,716,811 -- 978,880 978,880 2,500,000 2,554,500 1,532,700 4,087,200 -- 1,020,750 1,020,750 -- 750,000 750,000 -- 753,000 753,000 -- 1,088,550 1,088,550 -- 1,115,420 1,115,420 -- 1,583,160 1,583,160 -- 1,170,090 1,170,090 -- 5,577,070 5,577,070 -- 1,051,270 1,051,270 -- 572,622 572,622 -- 502,480 502,480 ----------- ----------- --------- ----------- $ 2,554,500 $19,412,803 $ $21,967,303 ----------- ----------- --------- ----------- $ -- $ 3,102,810 $ $ 3,102,810 -- 951,308 951,308 -- 1,086,062 1,086,062 -- 13,233,377 13,233,377 -- 1,107,150 1,107,150 1,552,000 1,632,704 -- 1,632,704 2,885,000 3,477,839 -- 3,477,839
23
Pioneer Pioneer Tax Free Municipal Pioneer Income Fund and Equity Tax Free Pro Forma % of Income Trust Income Fund Combined Pro Forma Principal Principal Pro Forma Principal Combined Amount ($) Amount ($) Adjustment Amount ($) Net Assets - ------------ ----------- ---------- ----------- ---------- Texas (continued) 2,750,000 2,750,000 Lower Colorado River Authority, 5.0%, 5/15/31 1,711,000 1,711,000 Panhandle Regional Housing Finance Corp., 6.6%, 7/20/31 3,000,000 3,000,000 Richardson Hospital Authority, 6.0%, 12/1/34 515,000 515,000 San Antonio Texas General, 4.75%, 2/1/19 300,000 300,000 San Felipe Del Rio Texas Conservation, 5.0%, 8/15/12 1,000,000 1,000,000 Seguin Higher Education Facilities Corp. Revenue, 5.0%, 9/1/23 2,310,000 2,310,000 Texas Clear Creek Independent School District General Obligation, 0.0%, 2/1/10 2,050,000 2,050,000 Texas Keller Independent School District General Obligation, 0.0%, 8/15/10 5,500,000 5,500,000 Texas Public Finance Authority Building Revenue, 0.0%, 2/1/08 2,750,000 2,750,000 Texas Public Finance Authority Building Revenue, 0.0%, 2/1/10 1,500,000 1,500,000 Texas State Student Housing Revenue, 6.5%, 9/1/34 3,500,000 3,500,000 Texas State, Floating Rate Note, 9/30/11 1,335,000 1,335,000 Texas Water Development Board, 5.0%, 7/15/26 1,000,000 1,000,000 Texas Water Development Board, 5.0%, 7/15/27 500,000 500,000 Tomball Texas Independent Schools, 5.0%, 2/15/11 3,500,000 3,500,000 Weslaco Health Facilities, 6.25%, 6/1/25 2,000,000 2,000,000 Weslaco Health Facilities, 6.25%, 6/1/32 1,000,000 1,000,000 Whitehouse Texas Independent School District, 4.8%, 2/15/12 3,000,000 3,000,000 Willacy County Local Government Corp. Revenue, 6.0%, 9/1/10 3,000,000 3,000,000 Willacy County Local Government Corp. Revenue, 6.875%, 9/1/28 Utah 0.1% 500,000 500,000 Utah County Utah Charter School Revenue, 5.35%, 7/15/17 Vermont 0.1% 1,295,000 1,295,000 Vermont Educational & Health Buildings Financing Agency Revenue, 5.0%, 7/1/24 Virginia 0.9% 2,500,000 2,500,000 Henrico County Virginia, Floating Rate Note, 8/23/27 1,500,000 1,500,000 Prince William County Industrial Development Hospital Revenue, 5.2%, 10/1/26 3,925,000 3,925,000 Prince William County Industrial Development Hospital Revenue, 5.35%, 10/1/36 Washington 2.6% 1,000,000 1,000,000 Cuyahoga County Ohio Health, 5.75%, 12/1/32 1,095,000 1,095,000 King County Washington Public Hospital District, 5.25%, 12/1/13 300,000 300,000 King County Washington School District No. 415, 5.5%, 6/1/13 3,000,000 3,000,000 King County Washington Sewer Revenue, 5.0%, 1/1/35 1,000,000 1,000,000 Pierce County Washington School District, 4.0%, 12/1/09 500,000 500,000 Renton Washington Water & Sewer, 4.4%, 12/1/15 2,250,000 2,250,000 Snohomish County Public Utility District Revenue, 5.7%, 12/1/11+ 2,500,000 2,500,000 Snohomish County Public Utility District Revenue, 6.8%, 1/1/20 7,000,000 7,000,000 Tobacco Settlement Authority Revenue, 6.625%, 6/1/32 3,500,000 3,500,000 Tobacco Settlement Authority Washington, 6.625%, 6/1/32 2,500,000 2,500,000 Washington State Housing, 5.25%, 1/1/17 Pioneer Pioneer Pioneer Tax Free Municipal Municipal Pioneer Income Fund and Equity and Equity Tax Free Pro Forma Income Trust Income Trust Income Fund Combined Principal Market Market Pro Forma Market Amount ($) Value Value Adjustment (a) Value - ------------ ------------ ----------- -------------- ----------- 2,750,000 $ 2,813,745 $ -- $ $ 2,813,745 1,711,000 1,834,089 -- 1,834,089 3,000,000 3,019,080 -- 3,019,080 -- 521,177 521,177 -- 314,163 314,163 1,000,000 974,490 -- 974,490 -- 2,156,408 2,156,408 -- 1,879,461 1,879,461 -- 5,485,700 5,485,700 -- 2,566,108 2,566,108 1,500,000 1,552,200 -- 1,552,200 -- 4,187,820 4,187,820 -- 1,404,260 1,404,260 -- 1,049,490 1,049,490 -- 526,600 526,600 -- 3,645,985 3,645,985 -- 2,065,900 2,065,900 -- 1,002,145 1,002,145 3,000,000 3,019,710 -- 3,019,710 3,000,000 3,086,220 -- $ 3,086,220 ----------- ----------- --------- ----------- $21,410,077 $46,285,924 $ $67,696,001 ----------- ----------- --------- ----------- $ -- $ 494,115 $ $ 494,115 ----------- ----------- --------- ----------- $ -- $ 494,115 $ $ 494,115 ----------- ----------- --------- ----------- 1,295,000 $ 1,273,581 $ -- $ $ 1,273,581 ----------- ----------- --------- ----------- $ 1,273,581 $ -- $ $ 1,273,581 ----------- ----------- --------- ----------- -- 3,296,600 3,296,600 1,500,000 1,514,160 -- 1,514,160 3,925,000 3,944,429 -- 3,944,429 ----------- ----------- --------- ----------- $ 5,458,589 $ 3,296,600 $ $ 8,755,189 ----------- ----------- --------- ----------- $ -- $ 979,210 $ $ 979,210 -- 1,126,427 1,126,427 -- 331,575 331,575 3,000,000 3,060,660 -- 3,060,660 -- 1,017,350 1,017,350 -- 525,830 525,830 -- 2,455,802 2,455,802 -- 3,051,975 3,051,975 7,000,000 7,141,050 -- 7,141,050 -- 3,570,525 3,570,525 -- 2,449,150 2,449,150 ----------- ----------- --------- ----------- $10,201,710 $15,507,844 $ $25,709,554 ----------- ----------- --------- -----------
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Pioneer Pioneer Tax Free Municipal Pioneer Income Fund and Equity Tax Free Pro Forma % of Income Trust Income Fund Combined Pro Forma Principal Principal Pro Forma Principal Combined Amount ($) Amount ($) Adjustment Amount ($) Net Assets - ------------ ----------- ---------- ----------- ---------- Wisconsin 0.5% 1,430,000 1,430,000 Adams-Friendship School District, 6.5%, 4/1/16 3,500,000 3,500,000 Wisconsin State Health & Educational Facilities Authority Revenue, 5.6%, 2/15/29 TOTAL TAX-EXEMPT OBLIGATIONS Shares --------- COMMON STOCKS 0.2% Energy 0.0% Oil & Gas Drilling 0.0% 19,566 (19,566) -- Diamond Offshore Drilling, Inc. Oil & Gas Storage & Transportation 0.0% 142,876 (142,876) -- Spectra Energy Corp. Total Energy Materials 0.0% Diversified Chemicals 0.0% 94,000 (94,000) -- Olin Corp. Diversified Metals & Mining 0.0% 56,012 (56,012) -- Compass Minerals International, Inc. Total Materials Commercial Services & Supplies 0.0% Commercial Printing 0.0% 79,034 (79,034) -- R.R. Donnelley & Sons Co. Total Commercial Services & Supplies Transportation 0.2% Airlines 0.2% 153,656 153,656 Northwest Airlines* Total Transportation Consumer Durables & Apparel 0.0% Home Furnishings 0.0% 50,000 (50,000) -- Bassett Furniture Industries, Inc. 31,486 (31,486) -- Kimball International, Inc. Total Consumer Durables & Apparel Media 0.0% Movies & Entertainment 0.0% 206,487 (206,487) -- Regal Entertainment Group Publishing 0.0% 229,566 (229,566) -- Idearc, Inc. Total Media Food, Beverage & Tobacco 0.0% Packaged Foods & Meats 0.0% 527,431 (527,431) -- B&G Foods, Inc. 92,828 (92,828) -- Kraft Foods, Inc. Tobacco 0.0% 134,140 (134,140) -- Altria Group, Inc. 172,872 (172,872) -- Loews Corp.--Carolina Group 29,704 (29,704) -- Reynolds American, Inc. Total Food, Beverage & Tobacco Pioneer Pioneer Pioneer Tax Free Municipal Municipal Pioneer Income Fund and Equity and Equity Tax Free Pro Forma Income Trust Income Trust Income Fund Combined Principal Market Market Pro Forma Market Amount ($) Value Value Adjustment (a) Value - ------------ ------------ ----------- -------------- ----------- $ -- $ 1,724,194 $ $ 1,724,194 3,500,000 3,443,580 -- 3,443,580 ------------ ------------ ------------ ------------ $ 3,443,580 $ 1,724,194 $ $ 5,167,774 ------------ ------------ ------------ ------------ $316,583,970 $560,731,963 $ -- $877,315,933 ------------ ------------ ------------ ------------ Shares --------- 19,566 $ 2,778,372 $ -- $ (2,778,372) $ -- ------------ ------------ ------------ ------------ 142,876 $ 3,689,058 $ -- $ (3,689,058) $ -- ------------ ------------ ------------ ------------ $ 6,467,430 $ -- $ (6,467,430) $ -- ------------ ------------ ------------ ------------ 94,000 $ 1,817,020 $ -- $ (1,817,020) $ -- ------------ ------------ ------------ ------------ 56,012 $ 2,296,492 $ -- $ (2,296,492) $ -- ------------ ------------ ------------ ------------ $ 4,113,512 $ -- $ (4,113,512) $ -- ------------ ------------ ------------ ------------ 79,034 $ 2,982,743 $ -- $ (2,982,743) $ -- ------------ ------------ ------------ ------------ $ 2,982,743 $ -- $ (2,982,743) $ -- ------------ ------------ ------------ ------------ $ -- $ 2,229,548 $ -- $ 2,229,548 ------------ ------------ ------------ ------------ $ -- $ 2,229,548 $ -- $ 2,229,548 ------------ ------------ ------------ ------------ 50,000 $ 467,000 $ -- $ (467,000) $ -- 31,486 431,358 -- (431,358) -- ------------ ------------ ------------ ------------ $ 898,358 $ -- $ (898,358) $ -- ------------ ------------ ------------ ------------ 206,487 $ 3,731,220 $ -- $ (3,731,220) $ -- ------------ ------------ ------------ ------------ 229,566 $ 4,031,179 $ -- $ (4,031,179) $ -- ------------ ------------ ------------ ------------ $ 7,762,399 $ -- $ (7,762,399) $ -- ------------ ------------ ------------ ------------ 527,431 $ 5,385,070 $ -- $ (5,385,070) $ -- 92,828 3,028,978 -- (3,028,978) -- ------------ ------------ ------------ ------------ $ 8,414,048 $ -- $ (8,414,048) $ -- ------------ ------------ ------------ ------------ 134,140 $ 10,138,301 $ -- $(10,138,301) $ -- 172,872 14,745,982 -- (14,745,982) -- 29,704 1,959,276 -- (1,959,276) -- ------------ ------------ ------------ ------------ $ 26,843,559 $ -- $(26,843,559) $ -- ------------ ------------ ------------ ------------ $ 35,257,607 $ -- $(35,257,607) $ -- ------------ ------------ ------------ ------------
25
Pioneer Tax Free Pioneer Pioneer Income Fund Municipal Tax Free Pro Forma % of and Equity Income Fund Combined Pro Forma Income Trust Principal Pro Forma Principal Combined Shares Amount ($) Adjustment Amount ($) Net Assets - ------------ ----------- ---------- ----------- ----------- Pharmaceuticals, Biotechnology & Life 0.0% Sciences Pharmaceuticals 0.0% 329,758 (329,758) -- Bristol-Myers Squibb Co. 216,536 (216,536) -- Merck & Co., Inc. Total Pharmaceuticals, Biotechnology & Life Sciences Banks 0.0% Diversified Banks 0.0% 28,642 (28,642) -- Wachovia Corp. Regional Banks 0.0% 81,550 (81,550) -- KeyCorp 67,800 (67,800) -- Regions Financial Corp. Thrifts & Mortgage Finance 0.0% 222,700 (222,700) -- TrustCo Bank Corp., NY Total Banks Diversified Financials 0.0% Other Diversified Financial Services 0.0% 42,500 (42,500) -- Bank of America Corp. Total Diversified Financials Telecommunication Services 0.0% Integrated Telecommunication Services 0.0% 204,553 (204,553) -- AT&T, Inc. 529,946 (529,946) -- Citizens Communications Co. 406,745 (406,745) -- Verizon Communications, Inc. 790,184 (790,184) -- Windstream Corp. Total Telecommunication Services Utilities 0.0% Electric Utilities 0.0% 138,400 (138,400) -- Empire District Electric Co. Gas Utilities 0.0% 81,249 (81,249) -- AGL Resources, Inc. 395,466 (395,466) -- Atmos Energy Corp. Multi-Utilities 0.0% 100,000 (100,000) -- Consolidated Edison, Inc. 285,753 (285,753) -- Duke Energy Corp. 134,112 (134,112) -- NSTAR Total Utilities TOTAL COMMON STOCKS NON-CONVERTIBLE PREFERRED STOCKS 0.0% Energy 0.0% Oil & Gas Exploration & Production- 1.0% 0.0% 49,300 (49,300) -- Apache Corp., Series B, 5.68% Total Energy Automobiles & Components 0.0% Automobile Manufacturers 0.0% 126,542 (126,542) -- Ford Motor Co. Capital Trust II, 6.5% Total Automobiles & Components Pioneer Pioneer Tax Free Pioneer Municipal Pioneer Income Fund Municipal and Equity Tax Free Pro Forma and Equity Income Trust Income Fund Combined Income Trust Market Market Pro Forma Market Shares Value Value Adjustment (a) Value - ------------ ------------ ----------- -------------- ----------- 329,758 $ 8,745,182 $ -- $ (8,745,182) $ -- 216,536 12,582,907 -- (12,582,907) -- ------------ ---------- ------------- ---------- $ 21,328,089 $ -- $ (21,328,089) $ -- ------------ ---------- ------------- ---------- 28,642 $ 1,089,255 $ -- $ (1,089,255) $ -- ------------ ---------- ------------- ---------- 81,550 $ 1,912,347 $ -- $ (1,912,347) $ -- 67,800 1,603,470 -- (1,603,470) -- ------------ ---------- ------------- ---------- $ 3,515,817 $ -- $ (3,515,817) $ -- ------------ ---------- ------------- ---------- 222,700 $ 2,209,184 $ -- $ (2,209,184) $ -- ------------ ---------- ------------- ---------- $ 6,814,256 $ -- $ (6,814,256) $ -- ------------ ---------- ------------- ---------- 42,500 $ 1,753,550 $ -- $ (1,753,550) $ -- ------------ ---------- ------------- ---------- $ 1,753,550 $ -- $ (1,753,550) $ -- ------------ ---------- ------------- ---------- 204,553 $ 8,501,223 $ -- $ (8,501,223) $ -- 529,946 6,746,213 -- (6,746,213) -- 406,745 17,770,689 -- (17,770,689) -- 790,184 10,288,196 -- (10,288,196) -- ------------ ---------- ------------- ---------- $ 43,306,321 $ -- $ (43,306,321) $ -- ------------ ---------- ------------- ---------- 138,400 $ 3,152,752 $ -- $ (3,152,752) $ -- ------------ ---------- ------------- ---------- 81,249 $ 3,058,212 $ -- $ (3,058,212) $ -- 395,466 11,088,867 -- (11,088,867) -- ------------ ---------- ------------- ---------- $ 14,147,079 $ -- $ (14,147,079) $ -- ------------ ---------- ------------- ---------- 100,000 $ 4,885,000 $ -- $ (4,885,000) $ -- 285,753 5,763,638 -- (5,763,638) -- 134,112 4,857,537 -- (4,857,537) -- ------------ ---------- ------------- ---------- $ 15,506,175 $ -- $ (15,506,175) $ -- ------------ ---------- ------------- ---------- $ 32,806,006 $ -- $ (32,806,006) $ -- ------------ ---------- ------------- ---------- $163,490,271 $2,229,548 $(163,490,271) $2,229,548 ------------ ---------- ------------- ---------- 49,300 $ 4,236,719 $ -- $ (4,236,719) $ -- ------------ ---------- ------------- ---------- $ 4,236,719 $ -- $ (4,236,719) $ -- ------------ ---------- ------------- ---------- 126,542 $ 4,144,079 $ -- $ (4,144,079) $ -- ------------ ---------- ------------- ---------- $ 4,144,079 $ -- $ (4,144,079) $ -- ------------ ---------- ------------- ----------
26
Pioneer Tax Free Pioneer Pioneer Income Fund Municipal Tax Free Pro Forma % of and Equity Income Fund Combined Pro Forma Income Trust Principal Pro Forma Principal Combined Shares Amount ($) Adjustment Amount ($) Net Assets - ------------ ----------- ---------- ----------- ---------- Banks 0.0% Diversified Banks 0.0% 105,000 (105,000) -- Bank One Capital VI, 7.2% 120,000 (120,000) -- Barclays Bank Plc, Series 2, 6.625% 120,000 (120,000) -- HSBC Holdings Plc, Series A, 6.2%, 170,579 (170,579) -- Royal Bank of Scotland Group Plc, Series Q, 6.75% 71,000 (71,000) -- Wachovia Preferred Funding Corp., Series A, 7.25% Thrifts & Mortgage Finance 0.0% 56,980 (56,980) -- Countrywide Capital V, 7.0% 171,677 (171,677) -- Fannie Mae, Series N, 6.75% 57,000 (57,000) -- Freddie Mac, 5.81% 39,000 (39,000) -- Freddie Mac, Series F, 5.0% 58,000 (58,000) -- Freddie Mac, Series K, 5.79% Total Banks Diversified Financials 0.0% Other Diversified Financial Services 0.0% 49,000 (49,000) -- ABN Amro Capital Fund Trust VII, 6.08% 120,000 (120,000) -- Bank of America Corp., Series D, 6.204% 120,000 (120,000) -- Deustche Bank Capital Funding Trust VIII, 6.375% 150,000 (150,000) -- JPMorgan Chase Capital Trust XVI, 6.35% Consumer Finance 0.0% 18,000 (18,000) -- MBNA Capital, Series D, 8.125% 71,300 (71,300) -- SLM Holdings Corp., Series A, 6.97% Investment Banking & Brokerage 0.0% 57,000 (57,000) -- Bear Stearns Companies, Inc., Series F, 5.72% 40,000 (40,000) -- Bear Stearns Companies, Inc., Series G, 5.49% 100,000 (100,000) -- Lehman Brothers Holdings, Inc., 6.5% 19,000 (19,000) -- Lehman Brothers Holdings, Inc., Series C, 5.94% 50,800 (50,800) -- Lehman Brothers Holdings, Inc., Series D, 5.67% 65,000 (65,000) -- Merrill Lynch Preferred Capital Trust IV, 7.12% 87,000 (87,000) -- Merrill Lynch Preferred Capital Trust V, 7.28% Total Diversified Financials Insurance 0.0% Life & Health Insurance 0.0% 159,000 (159,000) -- Scottish Re Group, Ltd., 7.25% Property & Casualty Insurance 0.0% 160,000 (160,000) -- ACE, Ltd., Series C, 7.8% 161,000 (161,000) -- Berkley W.R. Capital Trust II, 6.75% Reinsurance 0.0% 158,000 (158,000) -- Renaissance Holdings, Ltd., Series D, 6.6% Total Insurance Pioneer Pioneer Tax Free Pioneer Municipal Pioneer Income Fund Municipal and Equity Tax Free Pro Forma and Equity Income Trust Income Fund Combined Income Trust Market Market Pro Forma Market Shares Value Value Adjustment (a) Value - ------------ ------------ ----------- -------------- ----------- 105,000 $ 2,406,440 $-- $ (2,406,440) $-- 120,000 2,606,400 -- (2,606,400) -- 120,000 2,444,400 -- (2,444,400) -- 170,579 3,551,455 -- (3,551,455) -- 71,000 1,610,990 -- (1,610,990) -- ------------ --- -------------- --- $ 12,619,685 $-- $ (12,619,685) $-- ------------ --- -------------- --- 56,980 $ 635,892 $-- $ (635,892) $-- 171,677 4,077,329 -- (4,077,329) -- 57,000 2,351,250 -- (2,351,250) -- 39,000 1,341,600 -- (1,341,600) -- 58,000 2,328,700 -- (2,328,700) -- ------------ --- -------------- --- $ 10,734,771 $-- $ (10,734,771) $-- ------------ --- -------------- --- $ 23,354,456 $-- $ (23,354,456) $-- ------------ --- -------------- --- 49,000 $ 910,420 $-- $ (910,420) $-- 120,000 2,604,000 -- (2,604,000) -- 120,000 2,520,000 -- (2,520,000) -- 150,000 3,102,000 -- (3,102,000) -- ------------ --- -------------- --- $ 9,136,420 $-- $ (9,136,420) $-- ------------ --- -------------- --- 18,000 $ 445,500 $-- $ (445,500) $-- 71,300 2,879,807 -- (2,879,807) -- ------------ --- -------------- --- $ 3,325,307 $-- $ (3,325,307) $-- ------------ --- -------------- --- 57,000 $ 2,069,100 $-- $ (2,069,100) $-- 40,000 1,432,000 -- (1,432,000) -- 100,000 2,163,000 -- (2,163,000) -- 19,000 793,250 -- (793,250) -- 50,800 1,831,848 -- (1,831,848) -- 65,000 1,422,864 -- (1,422,864) -- 87,000 1,913,130 -- (1,913,130) -- ------------ --- -------------- --- $ 11,625,192 $-- $ (11,625,192) $-- ------------ --- -------------- --- $ 24,086,919 $-- $ (24,086,919) $-- ------------ --- -------------- --- 159,000 $ 1,160,700 $-- $ (1,160,700) $-- ------------ --- -------------- --- 160,000 $ 3,824,000 $-- $ (3,824,000) $-- 161,000 3,330,396 -- (3,330,396) -- ------------ --- -------------- --- $ 7,154,396 $-- $ (7,154,396) $-- ------------ --- -------------- --- 158,000 $ 2,929,320 $-- $ (2,929,320) $-- ------------ --- -------------- --- $ 11,244,416 $-- $ (11,244,416) $-- ------------ --- -------------- ---
27
Pioneer Tax Free Pioneer Pioneer Income Fund Municipal Tax Free Pro Forma % of and Equity Income Fund Combined Pro Forma Income Trust Principal Pro Forma Principal Combined Shares Amount ($) Adjustment Amount ($) Net Assets - ------------ ----------- ---------- ----------- ---------- Real Estate 0.0% Diversification Real Estate Investment Trust 0.0% 32,440 (32,440) -- PS Business Parks, Inc., Series I, 6.875% 13,000 (13,000) -- PS Business Parks, Inc., Series L, 7.6% 119,200 (119,200) -- PS Business Parks, Inc., Series P, 6.7% Industrial Real Estate Investment Trust 0.0% 40,000 (40,000) -- Prologis Trust, Series G, 6.75% Office Real Estate Investment Trust 0.0% 15,000 (15,000) -- Brandywine Realty Trust, Series C, 7.5% 34,500 (34,500) -- Brandywine Realty Trust, Series D, 7.375% Retail Real Estate Investment Trust 0.0% 94,000 (94,000) -- Regency Centers Corp., Series C, 7.45% 53,500 (53,500) -- Regency Centers Corp., Series E, 6.7% Specialized Real Estate Investment Trust 0.0% 118,000 (118,000) -- Public Storage, Inc., Series L, 6.75% Total Real Estate Utilities 0.0% Electric Utilities 0.0% 98,000 (98,000) -- Alabama Power Co., 5.3% 113,000 (113,000) -- Alabama Power Co., 5.83% 78,000 (78,000) -- Interstate Power and Light Co., Series B, 8.375% 40,000 (40,000) -- Mississippi Power Co., 5.25% 7,700 (7,700) -- PPL Electric Utilities Corp., 4.5% 73,000 (73,000) -- Southern California Edison Co., 4.32% 94,000 (94,000) -- Virginia Power Capital Trust II, 7.375% Gas Utilities 0.0% 62,000 (62,000) -- Southern Union Co., Series C, 7.55% Total Utilities TOTAL NON-CONVERTIBLE PREFERRED STOCKS CONVERTIBLE PREFERRED STOCKS 0.0% Capital Goods 0.0% Aerospace & Defense 15,000 (15,000) -- Northrop Grumman Corp., 7.0% Total Capital Goods Commercial Services & Supplies 0.0% Office Services & Supplies 60,000 (60,000) -- Avery Dennison Corp., 7.875% Total Commercial Services & Supplies Diversified Financials 0.0% Other Diversified Financial Services 161,000 (161,000) -- Lazard, Ltd., 6.625% Total Diversified Financials Insurance 0.0% Property & Casualty Insurance 47,919 (47,919) -- XL Capital, Ltd., Class A, 7.0% Total Insurance Pioneer Pioneer Tax Free Pioneer Municipal Pioneer Income Fund Municipal and Equity Tax Free Pro Forma and Equity Income Trust Income Fund Combined Income Trust Market Market Pro Forma Market Shares Value Value Adjustment (a) Value - ------------ ------------ ----------- -------------- ----------- 32,440 $ 622,848 $-- $ (622,848) $-- 13,000 273,520 -- (273,520) -- 119,200 2,260,032 -- (2,260,032) -- ------------ --- ------------ --- $ 3,156,400 $-- $ (3,156,400) $-- ------------ --- ------------ --- 40,000 $ 840,800 $-- $ (840,800) $-- ------------ --- ------------ --- 15,000 $ 306,600 $-- $ (306,600) $-- 34,500 683,100 -- (683,100) -- ------------ --- ------------ --- $ 989,700 $-- $ (989,700) $-- ------------ --- ------------ --- 94,000 $ 2,072,700 $-- $ (2,072,700) $-- 53,500 1,051,810 -- (1,051,810) -- ------------ --- ------------ --- $ 3,124,510 $-- $ (3,124,510) $-- ------------ --- ------------ --- 118,000 $ 2,318,700 $-- $ (2,318,700) $-- ------------ --- ------------ --- $ 10,430,110 $-- $(10,430,110) $-- ------------ --- ------------ --- 98,000 $ 2,067,800 $-- $ (2,067,800) $-- 113,000 2,502,950 -- (2,502,950) -- 78,000 2,320,500 -- (2,320,500) -- 40,000 926,000 -- (926,000) -- 7,700 645,645 -- (645,645) -- 73,000 1,423,500 -- (1,423,500) -- 94,000 2,262,990 -- (2,262,990) -- ------------ --- ------------ --- $ 12,149,385 $-- $(12,149,385) $-- ------------ --- ------------ --- 62,000 $ 1,528,300 $-- $ (1,528,300) $-- ------------ --- ------------ --- $ 13,677,685 $-- $(13,677,685) $-- ------------ --- ------------ --- $ 91,174,384 $-- $(91,174,384) $-- ------------ --- ------------ --- 15,000 $ 2,184,750 $-- $ (2,184,750) $-- ------------ --- ------------ --- $ 2,184,750 $-- $ (2,184,750) $-- ------------ --- ------------ --- 60,000 $ 3,120,000 $-- $ (3,120,000) $-- ------------ --- ------------ --- $ 3,120,000 $-- $ (3,120,000) $-- ------------ --- ------------ --- 161,000 $ 5,615,680 $-- $ (5,615,680) $-- ------------ --- ------------ --- $ 5,615,680 $-- $ (5,615,680) $-- ------------ --- ------------ --- 47,919 $ 911,419 $-- $ (911,419) $-- ------------ --- ------------ --- $ 911,419 $-- $ (911,419) $-- ------------ --- ------------ ---
28
Pioneer Tax Free Pioneer Pioneer Pioneer Income Fund Municipal Municipal Tax Free Pro Forma % of and Equity and Equity Income Fund Combined Pro Forma Income Trust Income Trust Principal Pro Forma Principal Combined Market Shares Amount ($) Adjustment Amount ($) Net Assets Value - ----- ----------- ---------- ----------- ---------- --------------- TOTAL CONVERTIBLE PREFERRED STOCKS $ 11,831,849 --------------- TOTAL INVESTMENTS IN SECURITIES 90.2% $ 583,080,474 --------------- OTHER ASSETS AND LIABILITIES 9.8% $ 6,920,317 --------------- PREFERRED SHARES AT REDEMPTION VALUE, INCLUDING DIVIDENDS PAYABLE 0.0% (176,369,655) --------------- TOTAL NET ASSETS 100.0% $ 413,631,136 --------------- TOTAL INVESTMENT AT COST $ 571,436,247 --------------- * Non-income producing security RIB Residual Interest Bonds (a) All of Pioneer Municipal and Equity Income Trust's non-municipal securities are assumed to be liquidated for cash, with proceeds largely being used to redeem out the preferred shareowners. (b) Reflects costs of the Merger. Pioneer Tax Free Pioneer Pioneer Income Fund Municipal Tax Free Pro Forma and Equity Income Fund Combined Income Trust Market Pro Forma Market Shares Value Adjustment (a) Value - ----- ------------- -------------- --------------- $ -- $ (11,831,849) $ -- ------------ -------------- -------------- $562,961,511 $ (266,496,504) $ 879,545,481 ------------ -------------- -------------- $ (1,238,466) $ 90,126,849 $ 95,603,700(b) ------------ -------------- -------------- -- 176,369,655 -- ------------ -------------- -------------- $561,723,045 $ $ 975,149,181 ------------ -------------- -------------- $562,031,318 $ $1,133,467,565 ----------- -------------- --------------
29 Pro Forma Combined Statement of Assets and Liabilities December 31, 2007 (unaudited)
Pioneer Pioneer Tax Free Pioneer Tax Free Municipal and Pioneer Income Fund Income Fund Equity Income Tax Free Pro Forma Pro Forma Trust Income Fund Adjustments Combined ------------- ------------ --------------- ---------------- ASSETS: Investment in securities, at value (Cost $571,436,247 and $562,031,318, respectively) $583,080,474 $562,961,511 $(266,496,504)(c) $879,545,481 Cash 2,590,966 89,899,891(c) 92,490,857 Receivables - Investment securities sold -- 46,132 46,132 Fund shares sold -- 1,380,533 1,380,533 Dividends and interest 6,076,851 7,194,031 13,270,882 Due from Pioneer Investment Management, Inc. -- -- -- Prepaid expenses 21,525 21,525 Other 9,793 51,920 -- 61,713 ------------ ------------ ------------- ------------ Total assets $591,779,609 $571,634,127 $(176,596,613) $986,817,123 ------------ ------------ ------------- ------------ LIABILITIES: Payables - Investment securities purchased $ 1,137,003 $ 2,442,445 $ $ 3,579,448 Fund shares repurchased -- 1,529,115 1,529,115 Upon return of securities loaned -- -- -- Dividends 1,185,830 1,185,830 Unrealized depreciation on interest rate swaps 226,958 -- (226,958)(c) -- Administration fee payable 32,045 -- 32,045 Due to bank -- 4,640,780 4,640,780 Due to PIMSS and PFD 310,913 62,048 372,961 Accrued expenses 71,899 50,864 205,000(b) 327,763 ------------ ------------ ------------- ------------ Total liabilities $ 1,778,818 $ 9,911,082 $ (21,958) $ 11,667,942 ------------ ------------ ------------- ------------ PREFERRED SHARES AT REDEMPTION VALUE: $25,000 Liquidation value per share applicable to 7,050 shares, including dividends payable of $119,655 $176,369,655 $ -- $(176,369,655) $ -- ------------ ------------ ------------- ------------ NET ASSETS: Paid-in capital $406,036,048 $570,120,050 $ -- $976,156,098 Undistributed/distributions in excess of, net investment income (1,165,172) 284,485 (205,000)(b) (1,085,687) Accumulated net realized gain (loss) on investments and interest rate swaps (2,657,009) (9,611,683) 8,749,550(c) (3,519,142) Net unrealized gain on investments 11,644,227 930,193 (8,976,508)(c) 3,597,912 Net unrealized loss on interest rate swaps (226,958) -- 226,958(c) -- ------------ ------------ ------------- ------------ Total net assets $413,631,136 $561,723,045 $ (205,000) $975,149,181 ------------ ------------ ------------- ------------ NET ASSETS BY CLASS: $413,631,136 $ -- (413,631,136)(a)(b) $ -- ============ ============ ============ Class A $ -- $313,705,643 413,426,136(a)(b) $727,131,779 ============ ============ ============ Class B $ -- $ 14,622,470 $ 14,622,470 ============ ============ ============ Class C $ -- $ 13,580,501 -- $ 13,580,501 ============ ============ ============ Class Y $ -- $219,814,431 -- $219,814,431 ============ ============ ============ OUTSTANDING SHARES: (No par value, unlimited number of shares authorized) 28,706,981 (28,706,981)(a) ============ ============ 37,145,655(a) 65,325,507 Class A -- 28,179,852 ============ ============ ============ -- 1,324,866 Class B -- 1,324,866 ============ ============ ============ -- 1,239,065 Class C -- 1,239,065 ============ ============ ============ -- 19,858,193 Class Y -- 19,858,193 ============ ============ ============ $ -- NET ASSET VALUE PER SHARE: $ 14.41 $ -- ============ ============ ============ $ 11.13 Class A $ -- $ 11.13 ============ ============ ============ $ 11.04 Class B $ -- $ 11.04 ============ ============ ============ $ 10.96 Class C $ -- $ 10.96 ============ ============ ============ $ 11.07 Class Y $ -- $ 11.07 ============ ============ ============ MAXIMUM OFFERING PRICE: Class A $ -- $ 11.65 $ 11.65 ============ ============ ============
(a) Shares of Pioneer Municipal and Equity Income Trust are exchanged for Class A shares of Pioneer Tax Free Income Fund. (b) Reflects one-time cost related to the Merger. (c) All of Pioneer Municipal and Equity Income Trust's non-municipal securities are assumed to be liquidated for cash, with proceeds largely being used to redeem out the preferred shareowners. Remaining proceeds are held as cash. See accompanying notes to pro forma financial statements. 30 Pro Forma Combined Statement of Operations For the Year ended December 31, 2007 (unaudited)
Pioneer Tax Free Tax Free Municipal Pioneer Income Fund Income Fund and Equity Tax Free Pro Forma Pro Forma Income Trust Income Fund Adjustments Combined ------------- ------------- ------------ ------------- INVESTMENT INCOME: Dividends $ 14,353,391 $ -- $ 14,353,391 Interest 19,419,376 30,943,440 50,362,816 ------------- ------------- ------------- Total investment income $ 33,772,767 $ 30,943,440 $ 64,716,207 ------------- ------------- ------------- EXPENSES: Management fees $ 3,774,201 $ 2,985,435 $ (1,718,491)(a) $ 5,041,145 Transfer agent fees 433,901 -- (433,901)(a) -- Class A -- 233,111 397,600(a) 630,711 Class B -- 19,721 -- 19,721 Class C -- 10,786 -- 10,786 Class Y -- 3,597 -- 3,597 Distribution fees Class A -- 833,565 1,152,346(a) 1,985,911 Class B -- 161,084 -- 161,084 Class C -- 136,632 -- 136,632 Administrative fees 498,745 142,272 (395,960)(a) 245,057 Custodian fees 39,602 21,196 60,798 Registration fees 25,447 70,573 96,020 Professional fees 363,119 66,468 (357,832)(b) 71,755 Printing expense 56,967 21,590 (43,557)(b) 35,000 Interest expense -- 4,392 4,392 Auction agent fees 467,965 -- (467,965)(c) -- Pricing fees 19,679 -- (19,679)(c) -- Insurance fees 12,589 -- (12,589)(b) -- Fees and expenses of nonaffiliated trustees 24,684 11,476 (11,160)(b) 25,000 Miscellaneous 19,170 37,032 196,065(b)(d) 252,267 ------------- ------------- ------------ ------------- Total expenses $ 5,736,069 $ 4,758,930 (1,715,123) $ 8,779,876 Less fees paid indirectly (523) (12,492) (13,015) ------------- ------------- ------------ ------------- Net expenses $ 5,735,546 $ 4,746,438 $ (1,715,123) $ 8,766,861 ------------- ------------- ------------ ------------- Net investment income (loss) $ 28,037,221 $ 26,197,002 $ 1,715,123 $ 55,949,346 ------------- ------------- ------------ ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND INTEREST RATE SWAPS: Net realized gain from: Investments $ (2,091,500) $ 1,855,800 $ 8,976,508(e) $ 8,740,808 Interest rate swaps 844,165 (226,958)(e) 617,207 ------------- ------------- ------------ ------------- $ (1,247,335) $ 1,855,800 $ 8,749,550 $ 9,358,015 ------------- ------------- ------------ ------------- Change in net unrealized gain or loss from: Investments $ (38,659,075) $ (35,099,680) $ (8,976,508)(e) $ (82,735,263) Interest rate swaps (1,843,939) $ 226,958(e) (1,616,981) ------------- ------------- ------------ ------------- $ (40,503,014) $ (35,099,680) $ (8,749,550) $ (84,352,244) ------------- ------------- ------------ ------------- Net gain on investments and interest rate swaps $ (41,750,349) $ (33,243,880) $ -- $ (74,994,229) ------------- ------------- ------------ ------------- DIVIDENDS AND DISTRIBUTIONS TO PREFERRED SHAREOWNERS FROM: Net Investment Income $ (7,899,822) $ -- $ 7,899,822(f) $ Net Realized Gains (908,387) -- 908,387(f) -- ------------- ------------- ------------ ------------- Total distributions $ (8,808,209) $ -- 8,808,209 $ -- ------------- ------------- ------------ ------------- Net increase in net assets resulting from operations $ (22,521,337) $ (7,046,878) $ 10,523,332 $ (19,044,883) ============= ============= ============ =============
(a) Expenses and expense limitations conformed to the Pioneer Tax Free Income Fund's contracts with affiliated parties. (b) Reflects reduction in expenses due to elimination of duplicate services. (c) Reflects the elimination of expenses related to preferred shares. (d) Includes costs of the Merger. (e) Represents realized gains triggered from the sale of Pioneer Municipal and Equity Income Trust's non-municipal holdings. (f) Represents the redemption of Pioneer Municipal and Equity Income Trust's Preferred shareowners. See accompanying notes to pro forma financial statements. 31 Notes to Pro Forma Combined Financial Statements December 31, 2007 (unaudited) 1. Description of the Fund Pioneer Tax Free Income Fund (the Fund) is a Delaware statutory trust registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The investment objective of the Fund is to seek as high a level of current income exempt from federal income taxes, as possible consistent with the preservation of capital. The Fund offers four classes of shares designated as Class A, Class B, Class C, and Class Y shares. Each class of shares represents an interest in the same portfolio of investments of the Fund and have equal rights to voting, redemptions, dividends and liquidations, except that each class of shares can bear different transfer agent and distribution fees and has exclusive voting rights with respect to the distribution plan that has been adopted by Class A, Class B and Class C shareowners, respectively. There is no distribution plan for Class Y shares. 2. Basis of Combination The accompanying pro forma combining financial statements, and related notes, are presented to show the effect of the proposed merger of Pioneer Municipal and Equity Income Trust with and in to the Fund (the "Merger"), as if such Merger had taken place as of January 1, 2007. Under the terms of an Agreement and Plan of Merger between these two funds, the combination of the Fund and Pioneer Municipal and Equity Income Trust will be treated as a tax-free business combination and accordingly will be accounted for by a method of accounting for tax-free mergers of investment companies. The Merger will be accomplished by an acquisition of the net assets of Pioneer Municipal and Equity Income Trust in exchange for Class A Shares of the Fund at its net asset value. The accompanying schedules of investments, statements of assets and liabilities and the related statements of operations of the Fund and Pioneer Municipal and Equity Income Trust have been combined as of and for the most recent twelve months ended December 31, 2007. Following the Merger, the Fund will be the accounting survivor. Pioneer Municipal and Equity Income Trust will bear the costs of preparing and printing all documents related to the Merger, as well as its own costs incurred in connection with the merger, including costs associated with redeeming out the preferred shareowners. The Fund will bear its own costs occurred in connection with the Merger. These costs are reflected in the pro forma financial statements. These pro forma financial statements and related notes should be read in conjunction with the financial statements of the Fund and Pioneer Municipal and Equity Income Trust included in their respective annual reports to shareowners dated December 31 and November 30, 2007, respectively. The schedules of investments and the statements of assets and liabilities have been shown to reflect the liquidation of Pioneer Municipal and Equity Income Trust's non-municipal holdings for cash, with proceeds largely being used to fund the redemption of the Preferred Shareowners. The statements of operations reflect the realized gain from the sale of Pioneer Municipal and Equity Income Trust's non-municipal holdings and other adjustments made to expenses for Pioneer affiliate contractual rates and for duplicate services that would not have been incurred if the Merger took place on January 1, 2007. 3. Security Valuation Security transactions are recorded as of trade date. The net asset value of the Fund 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. 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 there are no other readily available valuation methods are valued at their fair values as determined by, or under the direction of the Board of Trustees. The Fund also may use the fair value of a security including a non-U.S. security, when the closing market price on the principal exchange where the security is traded no longer reflects the value of the security. At December 31, 2007, there were no securities fair valued. Discount and premium on debt securities are accreted or amortized, respectively, daily into interest income on a yield-to-maturity basis with a corresponding increase or decrease in the cost basis of the security. Interest income is recorded on the accrual basis. Temporary cash investments are valued at cost which approximates market value. 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 Fund becomes aware of the ex-dividend data in the exercise of reasonable diligence. Dividend and interest income is recorded on the accrual basis. 32 4. Capital Shares The pro forma net asset value per share assumes the issuance of shares of the Fund that would have been issued at December 31, 2007, in connection with the proposed Merger. The number of shares assumed to be issued is equal to the net assets of Pioneer Municipal and Equity Income Trust, as of December 31, 2007, divided by the net asset value the Fund's Class A Shares as of December 31, 2007. The pro forma number of shares outstanding, by class, for the combined Fund consists of the following at December 31, 2007:
- ----------------------------------------------------------------------------------- Shares of Additional Shares The Fund Assumed Issued Total Outstanding Shares Class of Shares Pre-Combination In Merger Post-Combination - ----------------------------------------------------------------------------------- Class A 28,179,852 37,145,655 65,325,507 - ----------------------------------------------------------------------------------- Class B 1,324,866 -- 1,324,866 - ----------------------------------------------------------------------------------- Class C 1,239,065 -- 1,239,065 - ----------------------------------------------------------------------------------- Class Y 19,858,193 -- 19,858,193 - -----------------------------------------------------------------------------------
5. Management Agreement Pioneer Investment Management, Inc., (PIM), a wholly owned indirect subsidiary of UniCredito Italiano, the Fund's investment adviser manages the Fund's portfolio. Management fees are calculated daily at the annual rate of 0.50% of the Fund's average daily net assets up to $250 million; 0.45% of the next $500 million; and 0.40% on assets over $750 million. Prior to January 1, 2008, management fees were calculated daily at the annual rate of 0.50% of the Fund's average daily net assets up to $250 million; 0.48% of the next $50 million; and 0.45% of the excess over $300 million. For the year ended December 31, 2007, the net management fee was equivalent to 0.47% of average net assets. Through September 30, 2011, PIM has agreed not to impose its management fee and to assume operating expenses of the Fund to the extent necessary to limit Class A expenses to 0.89% of the average daily net assets attributable to Class A shares. 6. Federal Income Taxes Each fund has elected to be taxed as a "regulated investment company" under the Internal Revenue Code. After the acquisition, it will continue to be the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The identified cost of investments for these funds is substantially the same for both financial and federal income tax purposes. The cost of investments will remain unchanged for the combined Fund. 33 PART C OTHER INFORMATION PIONEER TAX FREE INCOME FUND ITEM 15. INDEMNIFICATION No change from the information set forth in Item 25 of the most recently filed Registration Statement of Pioneer Tax Free Income Fund (the "Registrant") on Form N-1A under the Securities Act of 1933 and the Investment Company Act of 1940 (File Nos. 2-57653 and 811-02704), as filed with the Securities and Exchange Commission on April 29, 2008 (Accession No. 0000202679-08-000012), which information is incorporated herein by reference. ITEM 16. EXHIBITS (1)(a) Amended and Restated Agreement and Declaration of Trust (**) (1)(b) Establishment and Designation of Class B Shares (1) (1)(c) Establishment and Designation of Class C Shares (2) (1)(d) Establishment and Designation of Class Y Shares (6) (2) Amended and Restated By-Laws (**) (3) Not applicable (4) Form of Agreement and Plan of Merger (*) (5) Reference is made to Exhibits (1) and (2) hereof (6)(a) Amended and Restated Management Contract between the Registrant and Pioneer Investment (**) Management, Inc. (6)(b) Form of Expense Limit Agreement (**) (7)(a) Underwriting Agreement between the Registrant and Pioneer Funds Distributor, (3) Inc. (7)(b) Dealer Sales Agreement (6) (8) Not applicable (9)(a) Custodian Agreement between the Registrant and Brown Brothers Harriman & (5) Co. (9)(b) Amended Appendix A to Custodian Agreement (6) (10)(a) Pioneer Funds Distribution Plan (7) (10)(b) Multi-class Plan Pursuant to Rule 18f-3 (4) (11) Opinion of Counsel (legality of securities being offered) (**) (12) Form of opinion as to tax matters and consent (**) (13)(a) Investment Company Service Agreement between the Registrant and Pioneer Investment (5) Management Shareholder Services, Inc. (13)(b) Amended Exhibit A to Investment Company Service Agreement (5) (13)(c) Amended and Restated Administration Agreement between the Registrant and Pioneer (**) Investment Management, Inc. (14) Consent of Independent Registered Public Accounting Firm (**) (15) Not applicable (16) Power of Attorney (**) (17)(a) Code of Ethics - Pioneer Investment Management, Inc. (4) (17)(b) Code of Ethics - Pioneer Funds (4) (17)(c) Code of Ethics - Pioneer Funds Distributor, Inc. (4) (17)(d) Form of Proxy Card (**) (17)(e) Prospectus for Class A Shares, Class B Shares and Class C Shares of Pioneer Tax (**) Free Income Fund dated May 1, 2008 (as revised May 9, 2008) and Statement of
Additional Information for Class A Shares, Class B Shares, Class C Shares and Class Y Shares of Pioneer Tax Free Income Fund dated May 1, 2008 (17)(f) Annual Report of Pioneer Tax Free Income Fund for the fiscal year ended December 31, 2007 (**) (17)(g) Annual Report of Pioneer Municipal and Equity Income Trust for the fiscal year ended (**) November 30, 2007
(1) Previously filed. Incorporated herein by reference from the exhibits filed with Post-Effective Amendment No. 34 to the Registrant's Registration Statement on Form N-1A (the "Registration Statement") (File Nos. 2-57653; 811-02704) as filed with the Securities and Exchange Commission (the "SEC") on April 26, 1995 (Accession No. 0000202679-95-000010). (2) Previously filed. Incorporated herein by reference from the exhibits filed with Post-Effective Amendment No. 35 to the Registration Statement (File Nos. 2-57653; 811-02704) as filed with the SEC on April 26, 1996 (Accession No. 0000202679-96-000011). (3) Previously filed. Incorporated herein by reference from the exhibits filed with Post-Effective Amendment No. 46 to the Registration Statement (File Nos. 2-57653; 811-02704) as filed with the SEC on May 1, 2002 (Accession No. 0000202679-02-000012). (4) Previously filed. Incorporated herein by reference from the exhibits filed with Post-Effective Amendment No. 51 to the Registration Statement (File Nos. 2-57653; 811-02704) as filed with the SEC on April 29, 2005 (Accession No. 0001016964-05-000189). (5) Previously filed. Incorporated herein by reference from the exhibit filed with Post-Effective Amendment No. 52 to the Registration Statement (File Nos. 2-57653; 811-02704) as filed with the SEC on April 28, 2006 (Accession No. 0000831120-06-000024). (6) Previously filed. Incorporated herein by reference from the exhibits filed with Post-Effective Amendment No. 53 to the Registration Statement (File Nos. 2-57653; 811-02704) as filed with the SEC on April 30, 2007 (Accession No. 0000908996-07-000010) (7) Previously filed. Incorporated herein by reference from the exhibits filed with Post-Effective Amendment No. 54 to the Registration Statement (File Nos. 2-57653; 811-02704) as filed with the SEC on April 29, 2008 (Accession No. 0000202679-08-000012) (*) Attached as Exhibit A to the combined Proxy Statement/Prospectus. (**) Filed herewith. ITEM 17. UNDERTAKINGS. (1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is part of this Registration Statement by any person or party which is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the reoffering prospectus will contain the information called for by the applicable registration form for the reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as part of an amendment to the Registration Statement and will not be used until the amendment is effective, and that, in determining any liability under the Securities Act of 1933, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them. (3) The undersigned Registrant agrees that it shall file a final executed version of the legal and consent opinion as to tax matters as an exhibit to the subsequent post-effective amendment to its registration statement on Form N-14 filed with the SEC upon the closing of the reorganizations contemplated by this Registration Statement on Form N-14. (4) Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. SIGNATURES As required by the Securities Act of 1933, this Registration Statement on Form N-14 has been signed on behalf of the Registrant, in the City of Boston and the Commonwealth of Massachusetts, on the 18th day of June, 2008. PIONEER TAX FREE INCOME FUND By: /s/ Daniel K. Kingsbury ---------------------------------- Name: Daniel K. Kingsbury Title: Trustee and Executive Vice President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ John F. Cogan, Jr.* Chairman of the Board, Trustee and President June 18, 2008 - ----------------------- John F. Cogan, Jr /s/ Mark E. Bradley Chief Financial Officer and Treasurer June 18, 2008 - ------------------- (Principal Financial and Accounting Officer) Mark E. Bradley /s/ Daniel K. Kingsbury Trustee and Executive Vice President June 18, 2008 - ----------------------- Daniel K. Kingsbury /s/ David R. Bock* Trustee June 18, 2008 - ------------------ David R. Bock /s/ Mary K. Bush* Trustee June 18, 2008 - ----------------- Mary K. Bush /s/ Benjamin M. Friedman* Trustee June 18, 2008 - ------------------------- Benjamin M. Friedman /s/ Margaret B.W. Graham* Trustee June 18, 2008 - ------------------------- Margaret B.W. Graham /s/ Thomas J. Perna* Trustee June 18, 2008 - -------------------- Thomas J. Perna /s/ Marguerite A. Piret* Trustee June 18, 2008 - ------------------------ Marguerite A. Piret /s/ John Winthrop* Trustee June 18, 2008 - ------------------ John Winthrop * By: /s/ Daniel K. Kingsbury ----------------------- Daniel K. Kingsbury, Attorney-in-Fact
EXHIBIT INDEX The following exhibits are filed as part of this Registration Statement:
Exhibit No. Description - ----------- ----------- (1)(a) Amended and Restated Agreement and Declaration of Trust (2) Amended and Restated By-Laws (6)(a) Amended and Restated Management Contract between the Registrant and Pioneer Investment Management, Inc. (6)(b) Form of Expense Limit Agreement (11) Opinion of Counsel (legality of securities being offered) (12) Form of opinion as to tax matters and consent (13)(c) Amended and Restated Administration Agreement between the Registrant and Pioneer Investment Management, Inc. (14) Consent of Independent Registered Public Accounting Firm (16) Power of Attorney (17)(d) Form of Proxy Card (17)(e) Prospectus for Class A Shares, Class B Shares and Class C Shares of Pioneer Tax Free Income Fund dated May 1, 2008 (as revised May 9, 2008) and Statement of Additional Information for Class A Shares, Class B Shares, Class C Shares and Class Y Shares of Pioneer Tax Free Income Fund dated May 1, 2008 (17)(f) Annual Report of Pioneer Tax Free Income Fund for the fiscal year ended December 31, 2007 (17)(g) Annual Report of Pioneer Municipal and Equity Income Trust for the fiscal year ended November 30, 2007
EX-99.(1)(A) 3 d23329_ex99-1a.txt AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST OF PIONEER TAX FREE INCOME FUND (a Delaware Statutory Trust) As Amended and Restated as of June 13, 2008 TABLE OF CONTENTS ARTICLE I - Name and Definitions -------------------- Section 1.1 Name..........................................................................1 Section 1.2 Definitions...................................................................1 ARTICLE II - Nature and Purpose of Trust.................................................................4 --------------------------- ARTICLE III -Registered Agent and Registered Office......................................................4 -------------------------------------- ARTICLE IV - Beneficial Interests; Shareholders ---------------------------------- Section 4.1 Shares of Beneficial Interest.................................................4 Section 4.2 Issuance of Shares............................................................4 Section 4.3 Rights of Shareholders........................................................5 Section 4.4 Ownership and Transfer of Shares; Small Accounts..............................5 Section 4.5 Voting by Shareholders........................................................6 Section 4.6 Meetings......................................................................7 Section 4.7 Quorum and Action.............................................................7 Section 4.8 Action by Written Consent in Lieu of Meeting of Shareholders..................7 Section 4.9 Series and Classes of Shares..................................................8 Section 4.10 Disclosure of Shareholder Holdings...........................................10 Section 4.11 Access to Trust Records......................................................11 Section 4.12 Communications with Shareholders.............................................11 ARTICLE V - The Trustees ------------ Section 5.1 Management of the Trust......................................................11 Section 5.2 Qualification and Number.....................................................11 Section 5.3 Term and Election............................................................11 Section 5.4 Resignation, Retirement and Removal..........................................12 Section 5.5 Vacancies....................................................................12 ARTICLE VI - Powers of Trustees ------------------ Section 6.1 General Powers...............................................................12 Section 6.2 Certain Specific Powers......................................................13 Section 6.3 Issuance and Repurchase of Shares............................................16 Section 6.4 Delegation; Committees.......................................................16 Section 6.5 Collection and Payment.......................................................16 Section 6.6 Expenses.....................................................................16 Section 6.7 Manner of Acting.............................................................16 Section 6.8 Bylaws.......................................................................17 Section 6.9 Principal Transactions.......................................................17 Section 6.10 Effect of Trustees' Determination............................................17
-2- ARTICLE VII - Service Providers ----------------- Section 7.1 Investment Adviser and Administrators........................................17 Section 7.2 Underwriting; Transfer Agent; Shareholder Servicing Agent; Custodian ........17 Section 7.3 Parties to Contract..........................................................18 Section 7.4 Further Authority of Trustees................................................18 ARTICLE VIII - Distributions; Redemptions; Determination of Net Asset Value ------------------------------------------------------------ Section 8.1 Distributions................................................................18 Section 8.2 Redemption of Shares.........................................................19 Section 8.3 Redemption Price.............................................................19 Section 8.4 Payment......................................................................19 Section 8.5 Redemption of Shareholder's Interest by Action of Trust......................19 Section 8.6 Suspension of Right of Redemption............................................20 Section 8.7 Determination of Net Asset Value; Valuation of Portfolio Assets.........20 Section 8.8 Constant Net Asset Value.....................................................20 Section 8.9 Reserves.....................................................................20 Section 8.10 Determination by Trustees....................................................21 ARTICLE IX - Limitation of Liability and Indemnification ------------------------------------------- Section 9.1 No Personal Liability of and Indemnification of Shareholders.................21 Section 9.2 Limitation of Liability of Trustees and Others...............................21 Section 9.3 Experts; No Bond or Surety...................................................22 Section 9.4 Liability of Third Persons Dealing with the Trust or Trustees................23 Section 9.5 Indemnification and Advancement of Expenses..................................23 Section 9.6 Further Indemnification......................................................24 Section 9.7 Amendments and Modifications.................................................24 Section 9.8 Derivative Actions...........................................................24 ARTICLE X - Termination; Mergers and Sale of Assets --------------------------------------- Section 10.1 Termination of Trust or Series...............................................27 Section 10.2 Merger and Consolidation.....................................................28 Section 10.3 Sale of Assets; Reorganization...............................................28 Section 10.4 Conversion...................................................................28 Section 10.5 Combination of Classes.......................................................29 ARTICLE XI - Amendments; Filings; Copies; Miscellaneous ------------------------------------------ Section 11.1 Amendments to Declaration and Certificate of Trust...........................29 Section 11.2 Filing of Certificate; Copies of Declaration; Counterparts; Headings.....................................................................29 Section 11.3 Trustees May Resolve Ambiguities.............................................30 Section 11.4 Applicable Law; Forum Selection; Jury Waiver.................................30 Section 11.5 Statutory Trust Only.........................................................31 Section 11.6 Provisions in conflict with Law or Regulations...............................31 Section 11.7 Writings.....................................................................31
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST OF PIONEER TAX FREE INCOME FUND THIS AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST is made as of this 13th day of June, 2008 by the Trustees hereunder. WHEREAS, Pioneer Tax Free Income Fund was established pursuant to an Agreement and Declaration of Trust dated June 16, 1994 (as amended to the date hereof, the "Original Declaration") and the filing of a Certificate of Trust with the Delaware Secretary of State for the purposes of carrying on the business of a management investment company; WHEREAS, the Trustees, pursuant to Section 8, Article IX of the Original Declaration, are authorized to amend the Original Declaration with the vote or consent of the Shareholders as required by such Section; WHEREAS, this Amended and Restated Agreement and Declaration of Trust has been amended in accordance with the provisions of the Original Declaration in effect as of the date hereof; NOW, THEREFORE, the Trustees and any successor Trustees elected or appointed in accordance with Article V hereof hereby declare that they will hold all cash, securities and other assets and properties, which the Trust may from time to time acquire in any manner, IN TRUST, and that they will manage and dispose of the same and manage the affairs and business of the Trust upon the following terms and conditions for the benefit of the holders from time to time of shares of beneficial interest in this Trust as hereinafter set forth. ARTICLE I NAME AND DEFINITIONS Section 1.1. Name. This Trust shall be known as Pioneer Tax Free Income Fund and the Trustees shall conduct the business of the Trust under that name or any other name as they may from time to time determine. Section 1.2. Definitions. Whenever used herein, unless otherwise required by the context or specifically provided, the following terms have the following respective meanings: (a) "Bylaws" means the Bylaws of the Trust referred to in Section 6.8 hereof, as from time to time amended, which Bylaws are expressly incorporated by reference herein as part of the Trust's "governing instrument" within the meaning of the Delaware Act (as defined below). -2- (b) "Certificate of Trust" means the certificate of trust of the Trust, as filed with the Secretary of State of the State of Delaware in accordance with the Delaware Act (as defined below), and as such certificate of trust may be amended or amended and restated from time to time. (c) "Class" means one or more Shares (as defined below) of a Series (as defined below) of the Trust as may be established and designated as a Class from time to time by the Trustees pursuant to Section 4.9(c) hereof. (d) "Code" means the Internal Revenue Code of 1986 (or any successor statute), as amended from time to time, and the rules and regulations thereunder, as adopted or amended from time to time. (e) "Commission" shall have the same meaning given to such term in the 1940 Act. (f) "Complaining Shareholder" shall refer to a Shareholder making a demand or bringing a claim pursuant to Section 9.8 hereof. (g) "Declaration" means this Agreement and Declaration of Trust as amended, supplemented or amended and restated from time to time, which, together with the Bylaws and any designations of Series or Classes made in accordance with Section 4.6(c) hereof, shall constitute the Trust's "governing instrument" within the meaning of the Delaware Act. Reference in this Agreement and Declaration of Trust to "Declaration," "hereof," "herein," and "hereunder" shall be deemed to refer to this Declaration rather than exclusively to the article or section in which such words appear. (h) "Delaware Act" shall refer to the Delaware Statutory Trust Act, as amended from time to time. (i) "He," "Him" and "His" shall include the feminine and neuter, as well as the masculine, genders. (j) "Interested Person" shall have the same meaning given to such term in the 1940 Act. (k) "1940 Act" refers to the Investment Company Act of 1940 (and any successor statute) and the rules thereunder, all as amended from time to time, as may apply to the Trust or any Series or Class thereof, including pursuant to any exemptive, interpretive or other relief or guidance issued by the Commission or the staff of the Commission under such Act. (l) "Outstanding Shares" means those Shares shown from time to time on the books of the Trust or its transfer agent as then issued and outstanding, but shall not -3- include Shares which have been redeemed, repurchased, cancelled or terminated by the Trust. (m) "Person" means and includes natural persons, corporations, partnerships, limited partnerships, business trusts, limited liability partnerships, statutory trusts, limited liability companies, trusts, associations, joint ventures, estates, nominees and any other entity in its own or any representative capacity, whether or not legal entities, and governments and agencies and political subdivisions thereof, in each case whether domestic or foreign. (n) "Prospectus" means the prospectus and statement of additional information with respect to the Trust or one or more Series or Classes thereof as the context shall require, as contained in the most recent effective registration statement filed with the Commission with respect to the Trust or one or more such Series or Classes thereof, as the same may be supplemented or modified from time to time in accordance with the requirements of the federal securities laws. (o) "Series" individually or collectively means each Series of Shares as may be established and designated from time to time by the Trustees pursuant to Section 4.9(c) hereof. (p) "Shareholder" means a record owner of Outstanding Shares. (q) "Shares" means the units of interest into which the beneficial interest in the Trust shall be divided from time to time, including the Shares of any and all Series and Classes which may be established and designated by the Trustees, and includes fractions of Shares as well as whole Shares. (r) "Trust" refers to the Delaware statutory trust established under the Delaware Act by this Declaration and the filing of the Certificate of Trust with the Secretary of State of the State of Delaware. (s) "Trust Property" means any and all property, real or personal, tangible or intangible, which is owned or held by or for the account of the Trust or, if the Trust has established one or more Series, any such Series as the context shall require. (t) "Trustees" means, at any time, the person or persons who have signed this Declaration and all other persons who may from time to time be duly qualified and serving as Trustees in accordance with the provisions of Article V hereof, in each case if they shall at that time continue in office in accordance with the terms hereof, and reference herein to a Trustee or the Trustees shall refer to such person or persons in his capacity or their capacities as Trustees hereunder. -4- ARTICLE II NATURE AND PURPOSE OF TRUST The purpose of the Trust is to engage in, operate and carry on the business of an open-end management investment company through one or more Series, and to do any and all acts or things as are necessary, convenient, appropriate, incidental or customary in connection therewith, both within and without the State of Delaware, and without limiting the foregoing or the other provisions hereof, the Trust may exercise all powers conferred by the laws of the State of Delaware upon a Delaware statutory trust formed pursuant to the Delaware Act. ARTICLE III REGISTERED AGENT AND REGISTERED OFFICE The registered agent and office of the Trust in the State of Delaware are Delaware Corporation Organizers, Inc., 1201 North Market Street, Wilmington, DE 19801. Unless otherwise required by applicable law, the Trust shall at all times maintain at least one resident agent who shall be either a citizen of the State of Delaware who resides in such State or a Delaware corporation. The Trustees may change the registered agent or registered office of the Trust from time to time by making the appropriate filing or filings with the Secretary of State of the State of Delaware. ARTICLE IV BENEFICIAL INTERESTS; SHAREHOLDERS Section 4.1. Shares of Beneficial Interest. The beneficial interest in the Trust shall be divided into such Shares of beneficial interest, of such Series or Classes, and of such designations and par values (if any) and with such rights, preferences, privileges, limitations, restrictions and such other relative terms as shall be determined by the Trustees, from time to time. The number of Shares is unlimited. The Trustees shall have full power and authority to take such action with respect to the Shares as the Trustees may deem desirable. Section 4.2. Issuance of Shares. (a) Shares may be issued from time to time to such Persons (including, without limitation, any Trustee, officer, or agent of the Trust or any Person in which a Trustee, officer or agent of the Trust has an interest) either for cash or for such other consideration (which may be in any one or more instances a certain specified consideration or certain specified considerations) and on such terms as the Trustees, from time to time, may deem advisable, and the Trust may, in connection with an issuance of Shares, acquire other assets (including the acquisition of assets subject to, and in connection with, the assumption of liabilities), and all Shares so issued hereunder, including without limitation Shares issued in connection with a dividend in Shares or a -5- split or reverse split of Shares, shall be fully paid and nonassessable. The Trust shall have the right to refuse to issue Shares to any Person at any time and for any reason or for no reason whatsoever. (b) The Trust may issue Shares in fractional denominations to the same extent as its whole Shares, and Shares in fractional denominations shall be Shares having proportionately to the respective fractions represented thereby all the rights of whole Shares, including, without limitation, the right to vote, the right to receive dividends and distributions and the right to participate upon termination of the Trust. (c) Any Shares issued by the Trust which have been purchased, redeemed or otherwise reacquired by the Trust shall be retired automatically and shall have the status of unissued Shares. Section 4.3. Rights of Shareholders. The ownership of the Trust Property of every description and the right to conduct any business herein described is vested exclusively in the Trust. The Shareholders shall have no right or title in or to the Trust Property or to call for any partition or division of any property, profits, rights or interests of the Trust or any Series thereof and the Shareholders shall have no interest therein other than the beneficial interest conferred by their Shares. The death, incapacity, dissolution, termination, or bankruptcy of a Shareholder during the continuance of the Trust shall neither operate to terminate the Trust or any Series thereof nor entitle the representative of any such Shareholder to an accounting or to take any action in court or elsewhere against the Trust, any Series thereof or the Trustees, but shall entitle such representative only to the rights of said Shareholder under this Declaration. Neither the Trust nor the Trustees, nor any officer, employee or agent of the Trust shall have any power to bind personally any Shareholder, or to call upon any Shareholder for the payment of any sum of money or assessment whatsoever other than such as the Shareholder may at any time personally agree to pay, provided however that any sales loads or charges, redemption fees, account fees or any other fees or charges not prohibited as charges to Shareholders under applicable law shall not be deemed to be an assessment for the purposes of this Declaration. The Shares shall be personal property giving only the rights specifically set forth in this Declaration. The holders of Shares shall not, as such holders, have any right to acquire, purchase or subscribe for any Shares or securities of the Trust that it may hereafter issue or sell, other than such right, if any, as the Trustees may determine. The holders of Shares shall not be entitled to exercise the rights of objecting shareholders and shall have no appraisal rights with respect to their Shares and, except as otherwise determined by the Trustees from time to time, shall have no exchange or conversion rights with respect to their Shares. Every Shareholder, by virtue of purchasing Shares and becoming a Shareholder, shall be held to have expressly assented and agreed to the terms of this Declaration and any other governing instrument and shall be bound thereby. Section 4.4. Ownership and Transfer of Shares; Small Accounts. (a) The ownership and transfer of Shares shall be recorded on the books of the Trust or, if there is a transfer or similar agent with respect to such Shares, on the books and records of such transfer or similar agent with respect to such Shares, which records shall be maintained -6- separately for the Shares of each Series or Class of the Trust. No certificates representing the ownership of Shares shall be issued except as the Trustees may otherwise determine from time to time. The Trustees may make such rules or impose such restrictions as they consider necessary or appropriate for the issuance of Share certificates, transfer of Shares and similar matters. The record books of the Trust, as kept by the Trust or any transfer or similar agent of the Trust, shall be conclusive as to who are the holders of Shares and as to the number of Shares held from time to time by each Shareholder. No Shareholder shall be entitled to receive any payment of a dividend or distribution, or to have notice given to him as provided herein or in the Bylaws, until he has provided such information as shall be required to the Trust or, as applicable, the Trust's transfer or similar agent with respect to his Shares. (b) In the event any certificates representing Outstanding Shares are at any time outstanding, the Trustees may at any time or from time to time determine that Shares shall no longer be represented by certificates, and in connection therewith, upon written notice to any Shareholder holding certificates representing Outstanding Shares, such certificates shall be cancelled, provided that such cancellation shall not affect the ownership by such Shareholder of such Shares, and following such cancellation, ownership and transfer of such Shares shall be recorded by book entry on the books of the Trust or its transfer or similar agent. (c) The Trustees may establish, from time to time, one or more minimum investment amounts for Shareholder accounts, which may differ within and among any Series or Classes, and may impose account fees on (which may be satisfied by involuntarily redeeming the requisite number of Shares in any such account in the amount of such fee), and/or require the involuntary redemption of Shares held in, those accounts the net asset value of which for any reason falls below such established minimum investment amounts, or may authorize the Trust to convert any such Shares in such account to Shares of another Class or Series, or take any other such action with respect to minimum investment amounts as may be deemed necessary or appropriate by the Trustees, in each case upon such terms as shall be established by the Trustees. Section 4.5. Voting by Shareholders. (a) Shareholders shall not have the power to vote on any matter except: (i) for the election or removal of Trustees to the extent and as provided in Article V hereof; and (ii) with respect to such additional matters relating to the Trust as may be required by law or as the Trustees may consider and determine necessary or desirable. (b) As determined by the trustees without the vote or consent of Shareholders, on any matter submitted to a vote of Shareholders either (i) each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote and each fractional Share shall be entitled to a proportionate fractional vote, or (ii) each whole Share or fractional Share outstanding on the record date shall entitle the holder thereof to a number of votes as to any matter on which the Shareholder is entitled to vote equal to the net asset value of the Share or fractional Share in United States dollars determined at the close of business on the record date. Without limiting the power of the Trustees in any -7- way to designate otherwise in accordance with the preceding sentence, the Trustees hereby establish that each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote and each fractional Share shall be entitled to a proportionate fractional vote. There shall be no cumulative voting in the election of Trustees or on any other matter submitted to a vote of the Shareholders. Shares may be voted in person or by proxy. Until Shares of the Trust or any Series or Class are issued, the Trustees may exercise all rights of Shareholders of the Trust or such Series or Class and may take any action required or permitted by law, this Declaration or the Bylaws of the Trust to be taken by Shareholders of the Trust, such Series or Class. (c) On any matter submitted to a vote of the Shareholders of the Trust, all Shares of all Series and Classes then entitled to vote shall be voted together, except that (i) when required by the 1940 Act to be voted by individual Series or Class, Shares shall be voted by individual Series or Class, and (ii) when the Trustees have determined that the matter affects only the interests of Shareholders of one or more Series or Classes, only Shareholders of such one or more Series or Classes shall be entitled to vote thereon. Section 4.6. Meetings. Meetings of the Shareholders of the Trust or any one or more Series or Classes thereof may be called and held from time to time for the purpose of taking action upon any matter requiring the vote or authority of the Shareholders as herein provided or upon any other matter deemed by the Trustees to be necessary or desirable. The Trustees may set in the Bylaws provisions relating to the calling and holding of meetings (including the holding of meetings by electronic or other similar means), notice of meetings, record dates, place of meetings, conduct of meetings, voting by proxy, postponement, adjournment or cancellation of meetings and related matters. Section 4.7. Quorum and Action. (a) The Trustees shall set forth in the Bylaws the quorum required for the transaction of business by the Shareholders at a meeting, which quorum shall in no event be less than Shares representing thirty percent (30%) of the voting power of the Shares entitled to vote at such meeting. If a quorum is present when a duly called and held meeting is convened, the Shareholders present may continue to transact business until adjournment, even though the withdrawal of a number of Shareholders originally present leaves less than the proportion or number otherwise required for a quorum. (b) The Shareholders shall take action by the affirmative vote of the holders of Shares entitled to vote and representing a majority of votes cast at a meeting of Shareholders at which a quorum is present, except in the case of the election of Trustees which shall only require a plurality and except as may be otherwise required by applicable law or any provision of this Declaration or the Bylaws. Section 4.8. Action by Written Consent in Lieu of Meeting of Shareholders. Any action required or permitted to be taken at a meeting of the Shareholders may be taken, if so directed by the Trustees, without a meeting by written action executed by Shareholders, as of a record date specified in accordance with the Bylaws, holding not less than the minimum voting power that would have been necessary to take the action at -8- a meeting, assuming that the Shareholders holding all of the Outstanding Shares entitled to vote on that action were present and voting at that meeting. The written action shall be effective when it has been executed by the requisite number of Shareholders and delivered to the secretary of the Trust, unless a different effective time is provided in the written action. Such a consent may be executed and delivered by electronic means in accordance with any procedures that may be adopted by the Trustees from time to time. Section 4.9. Series and Classes of Shares. (a) Series. The current Series of the Trust are set forth on Schedule A hereto. The Trustees may from time to time authorize the division of Shares into additional Series. The relative rights, preferences, privileges, limitations, restrictions and other relative terms of any Series shall be established and designated by the Trustees, and may be modified by the Trustees from time to time, upon and subject to the following provisions: (i) Subject to variations between Classes of Shares of a Series, all Shares shall be identical except that there may be such variations as shall be fixed and determined by the Trustees from time to time between different Series, including, without limitation, as to qualifications for ownership, minimum purchase amounts, minimum account size, purchase price, fees and expenses, redemptions, conversions and exchanges, and special and relative rights as to dividends and on liquidation, and each Series shall have such business purpose or investment objective as shall be determined by the Trustees. Each Share of a Series shall represent a beneficial interest in the net assets allocated or belonging to such Series only, and such interest shall not extend to the assets of the Trust generally (except to the extent that General Assets (as defined below) are allocated to such Series). All references to Shares in this Declaration shall be deemed to include references to Shares of any or all Series as the context may require. (ii) The number of authorized Shares of each Series and the number of Shares of each Series that may be issued shall be unlimited. The Trustees may divide or combine any issued or unissued Shares of any Series into a greater or lesser number; classify or reclassify any issued or unissued Shares into one or more Series; terminate any one or more Series; change the name of a Series; and take such other action with respect to the Series as the Trustees may deem desirable. (iii) All consideration received by the Trust for the issue or sale of Shares of a particular Series, together with all assets in which such consideration is invested or reinvested, all income, earnings, profits and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be (collectively, the "Assets"), shall irrevocably belong to that Series for all purposes, subject only to the rights of creditors of such Series, and shall be so recorded upon the books of the Trust. -9- Such Assets, together with any General Assets (as hereinafter defined) allocated to that Series as provided in the following sentence, are herein referred to as "Assets belonging to" that Series. In the event that there are any assets, income, earnings, profits or proceeds thereof, funds or payments which are not readily identifiable as Assets belonging to any particular Series (collectively, the "General Assets"), the Trustees shall allocate such General Assets to and among any one or more of the Series created from time to time in such manner and on such basis as they deem fair and equitable; and any General Assets allocated to a particular Series shall be Assets belonging to that Series. Each such allocation by the Trustees shall be conclusive and binding upon the Shareholders of all Series for all purposes. Separate and distinct records shall be maintained for each Series and the Assets belonging to each Series shall be held and accounted for in such separate and distinct records separately from the Assets belonging to all other Series and the General Assets of the Trust not allocated to such Series. (iv) The Assets belonging to a particular Series shall be charged with the debts, liabilities and obligations of the Trust in respect of that Series and with all expenses, costs, charges and reserves attributable to that Series (collectively, the "Liabilities"), which Liabilities shall be recorded upon the books of the Trust. Such Liabilities together with any General Liabilities (as hereinafter defined) allocated to that Series as provided in the following sentence, are herein referred to as "Liabilities belonging to" that Series. In the event there are any debts, liabilities, obligations, expenses, costs, charges or reserves of the Trust that are not readily identifiable as belonging to any particular Series (collectively, the "General Liabilities"), the Trustees shall allocate and charge such General Liabilities to and among any one or more of the Series created from time to time in such manner and on such basis as they deem fair and equitable; and any General Liabilities so allocated to a particular Series shall belong to that Series. Each such allocation by the Trustees shall be conclusive and binding upon all concerned for all purposes. Without limiting the foregoing, but subject to the right of the Trustees to allocate General Liabilities as herein provided, the Liabilities belonging to a particular Series shall be enforceable only against the Assets belonging to such Series and not against the assets of the Trust generally or against the Assets belonging to any other Series, and none of the General Liabilities incurred, contracted for or otherwise existing with respect to the Trust generally or any Liabilities incurred, contracted for or otherwise existing with respect to any other Series shall be enforceable against the Assets belonging to such Series. Notice of this contractual limitation on liabilities among Series shall be set forth in the Certificate of Trust (whether originally or by amendment) as filed or to be filed with the Secretary of State of the State of Delaware pursuant to the Delaware Act, and upon the giving of such notice in the Certificate of Trust, the statutory provisions of ss.3804(a) of the Delaware Act relating to limitations on liabilities among Series (and the statutory effect under ss.3804(a) of setting forth such notice in the Certificate of Trust) shall become applicable to the Trust and each Series. Any Person extending credit to, contracting with or having any claim against any Series may look only to the Assets belonging to that Series to satisfy -10- or enforce any Liability belonging to that Series. No Shareholder or former Shareholder of any Series, in such capacity, shall have a claim on or any right to any Assets belonging to any other Series or the Trust generally. (b) Classes. The current Classes are set forth on Schedule B hereto with respect to those Series identified on such Schedule. The Trustees may from time to time authorize the division of Shares of the Trust or any Series thereof into additional Classes. The relative rights, preferences, privileges, limitations, restrictions and other relative terms of a Class shall be established and designated by the Trustees and may be modified by the Trustees from time to time. All Shares of a Class of a Series shall be identical with each other and with the Shares of each other Class of the same Series except for such variations between Classes as may be authorized by the Trustees from time to time and not prohibited by the 1940 Act, including, without limitation, as to qualifications for ownership, minimum purchase amounts, minimum account size, purchase price, fees and expenses, right of redemption, and the price, terms and manner of redemption, conversion and exchange rights and features and special and relative rights as to dividends and on liquidation. The number of authorized Shares of each Class and the number of Shares of each Class that may be issued shall be unlimited. The Trustees may divide or combine the issued or unissued Shares of any Class into a greater or lesser number; classify or reclassify any issued or unissued Shares of any Class into one or more Classes; combine two or more Classes of a Series into a single Class of such Series; terminate any one or more Classes of Shares; change the name or other designation of a Class; and take such other action with respect to the Classes as the Trustees may deem desirable. To the extent necessary or appropriate to give effect to the preferences and special or relative rights and privileges of any Classes, the Trustees may allocate assets, liabilities, income and expenses of a Series to a particular Class of that Series or apportion the same among two or more Classes of that Series. All references to Shares in this Declaration shall be deemed to include references to Shares of any or all Classes as the context may require. (c) Establishment and Designation of Series and Classes. The establishment and designation of any Series or Class of Shares shall be made either by the vote of a majority of the Trustees or by the execution by a majority of the Trustees of an instrument in each case setting forth such establishment and designation, the effective date of such establishment and designation and the relative rights, preferences, privileges, limitations, restrictions and other relative terms of such Series and/or Class, whether directly in such resolution or instrument or by reference to one or more documents or instruments outside this Declaration and outside the resolutions, as the same may be in effect from time to time, including any Prospectus relating to such Series or Class, and any such resolutions or instruments shall be deemed to be incorporated by reference herein as part of the Trust's "governing instrument" within the meaning of the Delaware Act. Additions or modifications to a designation, including, without limitation, any termination of an existing Series or Class, shall be made in the same manner as is permitted for the establishment and designation of such Series or Class. Section 4.10. Disclosure of Shareholder Holdings. The holders of Shares or other securities of the Trust shall upon demand disclose to the Trust in writing such -11- information with respect to direct and indirect ownership of Shares or other securities of the Trust as the Trustees deem necessary to comply with the provisions of the Code; to comply with the requirements of any other law or regulation; or as the Trustees may otherwise decide, and ownership of Shares may be disclosed by the Trust if so required by applicable law or as the Trustees may otherwise decide. Section 4.11. Access to Trust Records. As provided in Section 3819 of the Delaware Act, Shareholders shall only have such right to inspect the such records, documents, accounts and books of the Trust as may be granted from time to time by the Trustees, and subject to such reasonable standards (including standards governing what information and documents are to be furnished at what time and location and at whose expense as may be established from time to time by the Trustees. Section 4.12. Communications with Shareholders. Any notices, reports, statements, or communications with Shareholders of any kind required under this Declaration, including any such communications with Shareholders or their counsel or other representatives required under Section 9.8 hereof, or otherwise made by the Trust or its agents on behalf of the Trust shall be governed by the provisions pertaining thereto in the Bylaws. ARTICLE V THE TRUSTEES Section 5.1. Management of the Trust. The business and affairs of the Trust shall be managed under the direction of the Trustees, and they shall have all powers necessary and desirable to carry out that responsibility, including, without limitation, those powers described more fully in Article VI hereof. Section 5.2. Qualification and Number. Each Trustee shall be a natural person. A Trustee need not be a citizen of the United States or a resident of the State of Delaware. By a majority vote or consent of the Trustees as may then be in office, the Trustees may from time to time establish the number of Trustees. No decrease in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his term, but the number of Trustees may be decreased in conjunction with the resignation, retirement or removal of a Trustee pursuant to Section 5.4 hereof. Section 5.3. Term and Election. Except as provided in Section 5.4 below, each Trustee shall hold office until the next meeting of Shareholders called for the purpose of considering the election or re-election of such Trustee or of a successor to such Trustee, and until his successor, if any, is elected, qualified and serving as a Trustee hereunder. Any Trustee vacancy may be filled by the affirmative vote or consent of a majority of the Trustees then in office, except as prohibited by the 1940 Act, or, if for any reason there are no Trustees then in office, vacancies may be filled by the officers of the Trust elected pursuant to Section 6.2(b)(iii) hereof, or may be filled in any other manner permitted by the 1940 Act. -12- Section 5.4. Resignation, Retirement and Removal. Any Trustee may resign or retire as a Trustee by an instrument in writing signed by him and delivered or mailed to the Chair, if any, the president or the secretary, and such resignation or retirement shall be effective upon such delivery, or at a later date according to the terms of the instrument. Any Trustee who has attained a mandatory retirement age or term limit established pursuant to, or who is otherwise required to retire in accordance with, any written policy adopted from time to time by at least two-thirds (2/3) of the Trustees shall, automatically and without action of such Trustee or the remaining Trustees, be deemed to have retired in accordance with the terms of such policy, effective as of the date determined in accordance with such policy. Except as aforesaid, any Trustee may be removed from office only (i) by action of at least two-thirds (2/3) of the voting power of the Outstanding Shares, or (ii) by the action of a majority of the remaining Trustees, specifying the date when such removal shall become effective. Except to the extent expressly provided in a written agreement to which the Trust is a party or in a written policy adopted by the Trustees, no resigning, retiring or removed Trustee shall have any right to any compensation for any period following his resignation, retirement or removal, or any right to damages on account of such resignation, retirement or removal. Section 5.5. Vacancies. The death, resignation, retirement, removal, or incapacity of one or more of the Trustees, or all of them, shall not operate to annul the Trust or to revoke any existing agency created pursuant to the terms of this Declaration. Whenever a vacancy in the number of Trustees shall occur, until such vacancy is filled as provided herein, or the number of Trustees as fixed is reduced, the Trustees in office, regardless of their number, shall have all the powers granted to the Trustees, and during the period during which any such vacancy shall occur, only the Trustees then in office shall be counted for the purposes of the existence of a quorum or any action to be taken by such Trustees. ARTICLE VI POWERS OF TRUSTEES Section 6.1. General Powers. The Trustees shall have exclusive and absolute control over the Trust Property and over the business of the Trust but with full powers of delegation, except as may otherwise be expressly prohibited by this Declaration. The Trustees shall have the power to direct the business and affairs of the Trust and carry on the Trust's operations and maintain offices both within and outside the State of Delaware, and to do or authorize all such other things and execute or authorize the execution of all such instruments as they deem necessary, proper or desirable in order to promote the interests of the Trust. With respect to any power or authority of the Trustees hereunder, whether stated or implied, the Trustees shall have all further powers and authority as may be necessary, incidental, relative, conductive, appropriate or desirable for the accomplishment, carrying out or attainment of any action authorized by the Trustees. In construing the provisions of this Declaration, the presumption shall be in favor of a grant of power to the Trustees. Without limiting the foregoing, the Trustees shall have power -13- and authority to operate and carry on the business of an investment company and the Trustees shall exercise all the powers as are necessary, convenient, appropriate, incidental or customary in connection therewith and may exercise all powers which are ordinarily exercised by the trustees of a statutory trust. The enumeration of any specific power herein shall not be construed as limiting the aforesaid general powers. Such powers of the Trustees may be exercised without order of or resort to any court. Whenever in this Declaration the Trustees are given authority to act on behalf of the Trust or to direct, authorize or cause the Trust to take any action, such power and authority shall apply, mutatis mutandis, to any action of the Trust on behalf of any Series or Class, whether or not specific reference is made to Series or Classes. Section 6.2. Certain Specific Powers. (a) Investments. The Trustees shall not in any way be bound or limited by present or future laws, rules, regulations, or customs in regard to investments by fiduciaries, but shall have full authority and power to authorize the Trust to make, invest and reinvest in, to buy or otherwise acquire, to hold, for investment or otherwise, to borrow, to sell, terminate, exercise or otherwise dispose of, to lend or to pledge, to write, enter into, engage, trade or deal in any and all investments or investment strategies as they may deem proper at any time and from time to time to accomplish the purpose of the Trust or any Series thereof. In furtherance of, and in no way limiting, the foregoing, the Trustees shall have power and authority to authorize the Trust: (i) to exercise powers and rights of subscription or otherwise which in any manner arise out of ownership of securities or other assets; (ii) to hold any security or property in a form not indicating any trust, whether in bearer, unregistered or other negotiable form or either in the Trust's name or in the name of a custodian or a nominee or nominees; (iii) to exercise all rights, powers and privileges of ownership or interest in all securities and other assets included in the Trust Property, including the right to vote thereon and otherwise act with respect thereto and to do all acts for the preservation, protection, improvement and enhancement in value of all such assets; (iv) to acquire (by purchase, lease or otherwise) and to hold, use, maintain, develop and dispose of (by sale or otherwise) any property, real or personal, tangible or intangible, including cash, securities, currencies, any commodities, and any interest therein; (v) to borrow money for any purpose and in this connection issue notes or other evidence of indebtedness; (vi) to secure borrowings by mortgaging, pledging or otherwise subjecting as security all or any portion of the Trust Property; -14- (vii) to endorse, guarantee, or undertake the performance of any obligation or engagement of any other Person; (viii) to lend money or any other Trust Property; (ix) to aid by further investment any corporation, company, trust, association or firm, any obligation of or interest in which is included in the Trust Property or in the affairs of which the Trustees have any direct or indirect interest and to do all acts and things designed to protect, preserve, improve or enhance the value of such obligation or interest; (x) to guarantee or become surety on any or all of the contracts, stocks, bonds, notes, debentures and other obligations of any such corporation, company, trust, association or firm; (xi) to consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or issuer, any security or property of which is held in the Trust; (xii) to consent to any contract, lease, mortgage, purchase, or sale of property by such corporation or issuer; (xiii) to pay calls or subscriptions with respect to any security held in the Trust; and (xiv) to join with other security holders in acting through a committee, depositary, voting trustee or otherwise, and in that connection to deposit any security with, or transfer any security to, any such committee, depositary or trustee, and to delegate to them such power and authority with relation to any security (whether or not so deposited or transferred) as the Trustees shall deem proper, and to agree to pay, and to pay, such portion of the expenses and compensation of such committee, depositary or trustee as the Trustees shall deem proper. (b) Additional Powers. The Trustees shall have the power and authority on behalf of the Trust: (i) to employ, engage or contract with, or make payments to, such Persons as the Trustees may deem desirable for the transaction of the business of the Trust or any Series thereof, including, without limitation, any Trustee or officer of the Trust or any firm of which any such Trustee or officer is a member, whether as agents or independent contractors of the Trust or any Series thereof, or as delegates of the Trustees, officers, or any other Person who may be involved with the management of the business affairs of the Trust or any Series thereof, to have such titles, and such rights, powers and duties as the Trustees may determine from time to time, to terminate any such employment, engagement or contract or other -15- relationship, and to delegate to any such Person the supervision of any other Person that has been so employed, engaged or contracted with; (ii) to authorize the Trust to enter into joint ventures, partnerships and any other combinations or associations; (iii) to elect and remove such officers as they consider appropriate, including, without limitation, a president and a secretary; (iv) to authorize the Trust to indemnify any Person with whom the Trust has dealings, including, without limitation, any service provider employed pursuant to Article VII hereof, to such extent as the Trustees shall determine; (v) to authorize the Trust to purchase, and pay for out of Trust Property, (A) insurance policies insuring the Shareholders, Trustees, officers, employees and any other Persons, including, without limitation, any service provider employed pursuant to Article VII hereof, against any or all claims arising by reason of holding any such position or by reason of any action taken or omitted by any such Person in such capacity whether or not the Trust would have the power to indemnify such Person against such liability, (B) insurance for the protection of Trust Property, (C) insurance as may be required by applicable law, or (D) such other insurance as the Trustees shall deem advisable, in each case as the Trustees shall determine; (vi) to authorize the Trust to establish pension, profit-sharing, share purchase, and other retirement, incentive and benefit plans, including the purchasing of life insurance and annuity contracts as a means of providing such retirement and other benefits, for any Trustees, officers, employees and agents of the Trust; (vii) to authorize the Trust to guarantee indebtedness or contractual obligations of others; (viii) to determine and change the fiscal year of the Trust or any Series and the method by which its accounts shall be kept; (ix) to adopt a seal for the Trust, but the absence of such seal shall not impair the validity of any instrument executed on behalf of the Trust; and (x) to engage in any other lawful act or activity in connection with or incidental to any of the powers enumerated in this Declaration, to do everything necessary, suitable or proper for the accomplishment of any purpose or the attainment of any object or the furtherance of any power herein set forth, either alone or in association with others, and to do every other act or thing incidental or appurtenant to or growing out of or connected with the aforesaid business or purposes, objects or powers. -16- (c) The foregoing enumeration of the powers and authority of the Trustees shall be read as broadly and liberally as possible, it being the intent of the foregoing in no way to limit the Trustees' powers and authority. Section 6.3. Issuance and Repurchase of Shares. The Trustees shall have the power to authorize the Trust to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and in any options, warrants or other rights to purchase Shares or any other interests in the Trust other than Shares. Section 6.4. Delegation; Committees. The Trustees shall have power to delegate from time to time to one or more of their number or to officers, employees or agents of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Trustees or otherwise as the Trustees may deem expedient, except to the extent such delegation is prohibited by applicable law. Without limiting the foregoing, and notwithstanding any provisions herein to the contrary, the Trustees may by resolution appoint committees consisting of one or more, but less than the whole number of, Trustees then in office and such other members as the Trustees shall approve, which committees may be empowered to act for and bind the Trustees and the Trust, as if the acts of such committees were the acts of all the Trustees then in office. Section 6.5. Collection and Payment. The Trustees shall have the power to authorize the Trust or its agents to: collect all money or other property due to the Trust; to pay all claims, including taxes, against the Trust Property; to prosecute, defend, arbitrate, compromise or abandon any claims relating to the Trust Property; to foreclose any security interest securing any obligations, by virtue of which any money or other property is owed to the Trust; and to enter into releases, agreements and other instruments; but the Trustees shall have no liability for failing to authorize any of the foregoing. Section 6.6. Expenses. The Trustees shall have the power to authorize the Trust to incur and pay any expenses which, in the opinion of the Trustees, are necessary or incidental to carry out any of the purposes of this Declaration, to pay compensation from the funds of the Trust to themselves as Trustees and to reimburse themselves from the funds of the Trust for their expenses and disbursements. The Trustees shall fix the compensation of all officers, employees and Trustees. Section 6.7. Manner of Acting. Except as otherwise provided herein, under applicable law or in the Bylaws, any action to be taken or determination made by the Trustees may be taken or made by a majority of the Trustees present at a meeting of Trustees (a quorum being present), including any meeting held by means of a conference telephone circuit or similar communications equipment by means of which all persons participating in the meeting can hear each other, or by written consents of a majority of Trustees then in office. Any such action or determination may be made by reference to one or more documents or instruments or policies or procedures outside this Declaration -17- and outside the resolutions of the Trustees. Except as set forth specifically in this Declaration, any action that may be taken by the Trustees may be taken by them in their sole discretion and without the vote or consent of Shareholders. Section 6.8. Bylaws. The Trustees may adopt Bylaws not inconsistent with this Declaration to provide for the conduct of the business of the Trust and shall have the exclusive power to amend or repeal such Bylaws. Section 6.9. Principal Transactions. Except in transactions not permitted by the 1940 Act, the Trustees may authorize the Trust to buy any securities or other assets from or sell or lend any securities or other assets of the Trust to, any affiliate of the Trust or any account managed by an affiliate of the Trust, any Trustee or officer of the Trust or any firm of which any such Trustee or officer is a member acting as principal, or have any such dealings with any service provider employed pursuant to Article VII hereof. Section 6.10. Effect of Trustees' Determination. Any action taken or determination made by or pursuant to the direction of the Trustees in good faith and consistent with the provisions of this Declaration shall be final and conclusive and shall be binding upon the Trust, every holder at any time of Shares and any other Person. ARTICLE VII SERVICE PROVIDERS Section 7.1. Investment Adviser and Administrator. The Trust may enter into contracts with one or more Persons, to act as investment adviser, investment sub-adviser, manager, administrator, sub-administrator or other agent to the Trust or Series, and as such to perform such functions as the Trustees may deem reasonable and proper, including, without limitation, investment advisory, management, research, valuation of assets, clerical and administrative functions, under such terms and conditions, and for such compensation, as the Trustees may deem advisable. The Trustees may also authorize any adviser or sub-adviser to employ one or more sub-advisers from time to time and any administrator to employ one or more sub-administrators from time to time, upon such terms and conditions as shall be approved by the Trustees. Section 7.2. Underwriter; Transfer Agent; Shareholder Servicing Agent; Custodian. The Trust may enter into a contract or contracts with one or more Persons to act as underwriters, distributors or placement agents whereby the Trust may either agree to sell Shares of the Trust or any Series or Class to the other party or parties to the contract or appoint such other party or parties its sales agent or agents for such Shares and with such other provisions as the Trustees may deem reasonable and proper, and the Trust may from time to time enter into transfer agency, sub-transfer agency and/or shareholder servicing contract(s), in each case with such terms and conditions, and providing for such compensation, as the Trustees may deem advisable. -18- All securities and cash of the Trust shall be held pursuant to a written contract or contracts with one or more custodians and subcustodians or shall otherwise be held in accordance with the 1940 Act. Section 7.3. Parties to Contract. Any contract of the character described in this Article VII may be entered into with any Person, including, without limitation, the investment adviser, any investment sub-adviser or an affiliate of the investment adviser or sub-adviser, although one or more of the Trustees, officers, or Shareholders of the Trust may be an officer, director, trustee, shareholder, or member of such other party to the contract, or otherwise interested in such contract, and no such contract shall be invalidated or rendered voidable by reason of the existence of any such relationship, nor shall any Person holding such relationship be liable merely by reason of such relationship for any loss or expense to the Trust under or by reason of said contract or accountable for any profit realized directly or indirectly therefrom, provided that the contract when entered into was not inconsistent with the provisions of this Article VII or the Bylaws. The same Person may be a party to more than one contract entered into pursuant to this Article VII and any individual may be financially interested or otherwise affiliated with Persons who are parties to any or all of the contracts mentioned in this Article VII. Section 7.4. Further Authority of Trustees. The authority of the Trustees hereunder to authorize the Trust to enter into contracts or other agreements or arrangements shall include the authority of the Trustees to modify, amend, waive any provision of, supplement, assign all or a portion of, novate, or terminate such contracts, agreements or arrangements. The enumeration of any specific contracts in this Article VII shall in no way be deemed to limit the power and authority of the Trustees as set forth in Section 6.2 hereof to authorize the Trust to employ, contract with or make payments to such Persons as the Trustees may deem desirable for the transaction of the business of the Trust. ARTICLE VIII DISTRIBUTIONS; REDEMPTIONS; DETERMINATION OF NET ASSET VALUE Section 8.1. Distributions. The Trustees may from time to time declare and authorize the payment of, or may prescribe and set forth in a duly adopted vote or votes of the Trustees, the bases and time or frequency, which may be monthly or otherwise, for the declaration and payment of, such dividends and distributions on Shares of a particular Series or Class thereof as they may deem necessary or desirable, after providing for actual and accrued expenses and liabilities (including such reserves as the Trustees may establish) determined in accordance with good accounting practices. All dividends and distributions on Shares of a particular Series shall be distributed only from the Assets belonging to that Series, as such term is defined in Section 4.9 hereof, and shall be distributed pro rata to the Shareholders of that Series in proportion to the number of Shares of that Series held by such Shareholders at the date and time of record for the payment of such dividends or distributions, subject to any variations with respect to -19- Classes of Shares of such Series, if any, and in a manner consistent with the 1940 Act and the Code. Such distributions may be paid in cash and/or in securities or other property, and the composition of any such distribution shall be determined by the Trustees and may be different among Shareholders (including differences among Shareholders in the same Series or Class). Section 8.2. Redemption of Shares. All shares of the Trust shall be redeemable, at the redemption price determined in the manner set out in this Declaration. The Trust shall redeem the Shares of the Trust or any Series or Class thereof at the price determined as hereinafter set forth, at such offices or agencies and in accordance with such conditions, not inconsistent with the 1940 Act, regarding the redemption of Shares as may be described in the applicable Prospectus. Section 8.3. Redemption Price. Shares of the Trust, or of any Series or Class thereof shall be redeemed at their net asset value determined as set forth in Section 8.7 hereof as of such time or times as the Trustees shall have theretofore prescribed, less such fees and/or charges, if any, as may be established by the Trustees from time to time. Section 8.4. Payment. Payment of the redemption price of Shares of the Trust or any Series or Class thereof shall be made in cash or in property or any combination thereof, out of the assets of the Trust or, as applicable, the Assets belonging to such Series, as such term is defined in Section 4.9 hereof, and the composition of any such payment may be different among Shareholders (including differences among Shareholders in the same Series or Class), at such time and in the manner as may be specified from time to time in the applicable Prospectus. In no event shall the Trust be liable for any delay of any other Person in transferring securities or other property selected for delivery as all or part of any such payment. Section 8.5. Redemption of Shareholder's Interest By Action of Trust. Subject to the provisions of the 1940 Act, the Trust may redeem some or all of the Shares of the Trust or one or more Series or Classes held by any Shareholder for any reason and under terms set by the Trustees, including by way of illustration, for the following reasons: (a) the value of such Shares held by such Shareholder being less than the minimum amount established from time to time by the Trustees; (b) the determination that direct or indirect ownership of Shares by any Person has become concentrated in such Shareholder to any extent that would disqualify that Series as a regulated investment company under the Code; (c) the failure of a Shareholder to supply a tax identification or other identification or if the Trust is unable to verify a Shareholder's identity; (d) the failure of a Shareholder to pay when due for the purchase of Shares issued to such Shareholder; -20- (e) the failure of a Shareholder to meet or maintain the qualifications for ownership of a particular Class or Series of Shares; (f) the payment of account fees or other charges, expenses and/or fees as set by the Trustees, including without limitation any small account fees permitted by Section 4.4 hereof; (g) the determination that ownership of Shares by a particular Shareholder is not in the best interests of the remaining Shareholders of the Trust or applicable Series or Class; (h) the failure of a holder of Shares or other securities of the Trust to comply with a demand pursuant to Section 4.10 hereof; (i) in connection with the termination of any Series or Class of Shares; or (j) when the Trust is requested or compelled to do so by governmental authority or applicable law. Section 8.6. Suspension of Right of Redemption. Notwithstanding the foregoing, the Trust may postpone payment of the redemption price and may suspend the right of the holders of Shares to require the Trust to redeem Shares to the extent permissible under the 1940 Act. Section 8.7. Determination of Net Asset Value; Valuation of Portfolio Assets. The Trustees may from time to time prescribe such bases and times for determining the per Share net asset value of the Shares of the Trust or any Series or Class thereof and may prescribe or approve the procedures and methods for determining the value of portfolio assets as they may deem necessary or desirable. The Trust may suspend the determination of net asset value during any period when it may suspend the right of the holders of Shares to require the Trust to redeem Shares. Section 8.8. Constant Net Asset Value. With respect to any Series that holds itself out as a money market or stable value fund, the Trustees shall have the power to reduce the number of Outstanding Shares of the Series by reducing the number of Shares in the account of each Shareholder on a pro rata basis, or to take such other measures as are not prohibited by the 1940 Act, so as to maintain the net asset value per share of such Series at a constant dollar amount. Section 8.9. Reserves. The Trustees may set apart, from time to time, out of any funds of the Trust or Series or out of funds allocable to a Class thereof a reserve or reserves for any proper purpose, and may abolish any such reserve. -21- Section 8.10. Determination by Trustees. The Trustees may make any determinations they deem necessary with respect to the provisions of this Article VIII, including, but not limited to, the following matters: the amount of the assets, obligations, liabilities and expenses of the Trust; the amount of the net income of the Trust from dividends, capital gains, interest or other sources for any period and the amount of assets at any time legally available for the payment of dividends or distributions; which items are to be treated as income and which as capital; the amount, purpose, time of creation, increase or decrease, alteration or cancellation of any reserves or charges and the propriety thereof (whether or not any obligation or liability for which such reserves or charges were created shall have been paid or discharged); the market value, or any other price to be applied in determining the market value, or the fair value, of any security or other asset owned or held by the Trust; the number of Shares of the Trust issued or issuable; the net asset value per Share; and any of the foregoing matters as it may pertain to any Series or Class. ARTICLE IX LIMITATION OF LIABILITY AND INDEMNIFICATION Section 9.1. No Personal Liability of and Indemnification of Shareholders. No personal liability for any debt, liability or obligation or expense incurred by, contracted for, or otherwise existing with respect to, the Trust or any Series or Class shall attach to any Shareholder or former Shareholder of the Trust. In case any Shareholder or former Shareholder of the Trust shall be held to be personally liable solely by reason of his being or having been a Shareholder and not because of his acts or omissions or for some other reason, the Shareholder or former Shareholder (or his heirs, executors, administrators or other legal representatives or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled out of the assets of the Trust or, if the Trust has more than one Series, the applicable Series, to be held harmless from and indemnified against all loss and expense arising from such liability; provided, however, there shall be no liability or obligation of the Trust or any Series arising hereunder to reimburse any Shareholder for taxes paid by reason of such Shareholder's ownership of any Shares or for losses suffered by reason of any changes in value of any Trust assets. The Trust shall, upon request by the Shareholder or former Shareholder, assume the defense of any claim made against the Shareholder for any act or obligation of the Trust and satisfy any judgment thereon. Section 9.2. Limitation of Liability of Trustees and Others. (a) No Liability to Third Parties. No person who is or has been a Trustee, officer, or employee of the Trust shall be subject to any personal liability whatsoever to any Person, other than the Trust or its Shareholders, in connection with the affairs of the Trust; and all Persons shall look solely to the Trust Property or Property of a Series for satisfaction of claims of any nature arising in connection with the affairs of the Trust or such Series. Every note, bond, contract, instrument, certificate, Share or undertaking and every other act or thing whatsoever executed or done by or on behalf of the Trust or the -22- Trustees or any of them in connection with the Trust shall be conclusively deemed to have been executed or done only in or with respect to their or his capacity as Trustees or Trustee and neither such Trustees or Trustee nor the Shareholders shall be personally liable thereon. All Persons extending credit to, contracting with or having any claim against the Trust or a Series shall look only to the assets of the Trust Property or the Trust Property of such Series for payment under such credit, contract or claim; and neither the Trustees, nor any of the Trust's officers, employees or agents, whether past, present or future, shall be personally liable therefor. (b) Limitation of Liability to Trust and Shareholders. No person who is or has been a Trustee, officer or employee of the Trust shall be liable to the Trust or to any Shareholder for any action or failure to act except for his or her own bad faith, willful misfeasance, gross negligence or reckless disregard of his or her duties involved in the conduct of the individual's office, and for nothing else, and shall not be liable for errors of judgment or mistakes of fact or law. (c) No Liability for Acts of Others. Without limiting the foregoing limitations of liability contained in this Section 9.2, a Trustee shall not be responsible for or liable in any event for any neglect or wrongdoing of any officer, employee, investment adviser, sub-adviser, principal underwriter, custodian or other agent of the Trust, nor shall any Trustee be responsible or liable for the act or omission of any other Trustee (or for the failure to compel in any way any former or acting Trustee to redress any breach of trust), except in the case of such Trustee's own willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. Section 9.3. Experts; No Bond or Surety. The Trustees may rely upon advice of counsel or other experts with respect to the meaning and operation of this Declaration and their duties as Trustees hereunder, and shall be under no liability for any act or omission in accordance with such advice or for merely failing to follow such advice. In discharging their duties, the Trustees, when acting in good faith, shall be entitled to rely upon the books of account of the Trust and upon written reports made to the Trustees by any officer appointed by them, any independent registered public accounting firm and (with respect to the subject matter of the contract involved) any officer, partner or responsible employee of any other party to any contract entered into hereunder. The appointment, designation or identification of a Trustee as chair of the Trustees, a member or chair of a committee of the Trustees, an expert on any topic or in any area (including an audit committee financial expert), or the lead independent Trustee, or any other special appointment, designation or identification of a Trustee, shall not impose on that person any standard of care or liability that is greater than that imposed on that person as a Trustee in the absence of the appointment, designation or identification, and no Trustee who has special skills or expertise, or is appointed, designated or identified as aforesaid, shall be held to a higher standard of care by virtue thereof. In addition, no appointment, designation or identification of a Trustee as aforesaid shall affect in any way that Trustee's rights or entitlement to indemnification or advancement of expenses. The -23- Trustees shall not be required to give any bond as such, nor any surety if a bond is required. Section 9.4. Liability of Third Persons Dealing with the Trust or Trustees. No third Person dealing with the Trust or the Trustees shall be bound to make any inquiry concerning the validity of any transaction made or to be made by the Trust or Trustees or to see to the application of any payments made or property transferred to the Trust or upon its order. Section 9.5. Indemnification and Advancement of Expenses. Subject to the exceptions and limitations contained in this Section 9.5, every person who is, or has been, a Trustee, officer, or employee of the Trust, including persons who serve at the request of the Trust as directors, trustees, officers, employees or agents of another organization in which the Trust has an interest as a shareholder, creditor or otherwise (hereinafter referred to as a "Covered Person"), shall be indemnified by the Trust or the applicable Series to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been such a Trustee, director, officer, employee or agent and against amounts paid or incurred by him in settlement thereof. No indemnification shall be provided hereunder to a Covered Person to the extent such indemnification is prohibited by applicable federal law. The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not affect any other rights to which any Covered Person may now or hereafter be entitled, shall continue as to a person who has ceased to be such a Covered Person and shall inure to the benefit of the heirs, executors and administrators of such a person. Subject to applicable federal law, expenses of preparation and presentation of a defense to any claim, action, suit or proceeding subject to a claim for indemnification under this Section 9.5 shall be advanced by the Trust or the applicable Series prior to final disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined that he is not entitled to indemnification under this Section 9.5. To the extent that any determination is required to be made as to whether a Covered Person engaged in conduct for which indemnification is not provided as described herein, or as to whether there is reason to believe that a Covered Person ultimately will be found entitled to indemnification, the Person or Persons making the determination shall afford the Covered Person a rebuttable presumption that the Covered Person has not engaged in such conduct and that there is reason to believe that the Covered Person ultimately will be found entitled to indemnification. -24- As used in this Section 9.5, the words "claim," "action," "suit" or "proceeding" shall apply to all claims, demands, actions, suits, investigations, regulatory inquiries, proceedings or any other occurrence of a similar nature, whether actual or threatened and whether civil, criminal, administrative or other, including appeals, and the words "liability" and "expenses" shall include without limitation, attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities. Section 9.6. Further Indemnification. Nothing contained herein shall affect any rights to indemnification to which any Covered Person or other Person may be entitled by contract or otherwise under law or prevent the Trust from entering into any contract to provide indemnification to any Covered Person or other Person. Without limiting the foregoing, the Trust may, in connection with the acquisition of assets subject to liabilities pursuant to Section 4.2 hereof or a merger or consolidation pursuant to Section 10.2 hereof, assume the obligation to indemnify any Person including a Covered Person or otherwise contract to provide such indemnification, and such indemnification shall not be subject to the terms of this Article IX. Section 9.7. Amendments and Modifications. Without limiting the provisions of Section 11.1(b) hereof, in no event will any amendment, modification or change to the provisions of this Declaration or the Bylaws adversely affect in any manner the rights of any Covered Person to (a) indemnification under Section 9.5 hereof in connection with any proceeding in which such Covered Person becomes involved as a party or otherwise by virtue of being or having been a Trustee, officer or employee of the Trust or (b) any insurance payments under policies maintained by the Trust, in either case with respect to any act or omission of such Covered Person that occurred or is alleged to have occurred prior to the time such amendment, modification or change to this Declaration or the Bylaws. Section 9.8. Derivative Actions. (a) Subject to the Delaware Act, no Shareholder may bring a derivative or similar action or proceeding in the right of the Trust or any Series to recover a judgment in its favor (a "derivative action") unless each of the following conditions is met: (i) Each Complaining Shareholder was a Shareholder of (A) the Series on behalf of or in the right of which the action is proposed to be brought and (B) a Class of the Series affected by the action or failure to act complained of, to the extent that fewer than all Classes were affected (the "affected Series or Class"), at the time of the action or failure to act complained of, or acquired the Shares afterwards by operation of law from a Person who was a Shareholder at that time; (ii) Each Complaining Shareholder was a Shareholder of the affected Series or Class at the time the demand required by subparagraph (iii) below was made; (iii) Prior to the commencement of such derivative action, the Complaining Shareholders have made a written demand on the Trustees -25- requesting that the Trustees cause the Trust to file the action itself on behalf of the affected Series or Class (a "demand"), which demand (A) shall be executed by or on behalf of no less than three Complaining Shareholders, each of which shall be unaffiliated and unrelated (by blood or by marriage) to any other Complaining Shareholder executing such written demand and (B) shall include at least the following: (1) a detailed description of the action or failure to act complained of, the facts upon which each such allegation is made and the reasonably estimated damages or other relief sought; (2) a statement to the effect that the Complaining Shareholders believe in good faith that they will fairly and adequately represent the interests of similarly situated Shareholders in enforcing the right of the affected Series or Class and an explanation of why the Complaining Shareholders believe that to be the case; (3) a certification that the requirements of subparagraphs (i) and (ii) of this paragraph (a) have been met, as well as information reasonably designed to allow the Trustees to verify that certification; (4) a list of all other derivative or class actions in which any of the Complaining Shareholders is or was a named plaintiff, the court in which such action was filed, the date of filing, the name of all counsel to any plaintiffs and the outcome or current status of such actions; (5) a certification of the number of Shares of the affected Series or Class owned beneficially or of record by each Complaining Shareholder at the time set forth in subparagraphs (i), (ii) and (iii) of this paragraph (a) and an undertaking that each Complaining Shareholder will be a Shareholder of the affected Series or Class as of the commencement of and throughout the derivative action and will notify the Trust in writing of any sale, transfer or other disposition by any of the Complaining Shareholders of any such Shares within three business days thereof; and (6) an acknowledgment of the provisions of paragraphs (e) and (f) of this Section 9.8 below; (iv) Shareholders owning Shares representing at least ten percent (10%) of the voting power of the affected Series or Class must join in initiating the derivative action; and (v) A copy of the proposed derivative complaint must be served on the Trust, assuming the requirements of subparagraphs (i) through (iv) above have already been met and the derivative action has not been barred in accordance with paragraph (c) below. -26- (b) Within 90 calendar days of the receipt of a Shareholder demand submitted in accordance with the requirements above, those Trustees who are independent for purposes of considering the demand or a committee comprised of some or all of such Trustees (the "independent Trustees") will consider, with the assistance of counsel who may be retained by such Trustees on behalf and at the expense of the Trust, the merits of the claim and determine whether maintaining a suit would be in the best interests of the Trust. If, during this 90-day period, those independent Trustees conclude that a determination as to the maintenance of a suit cannot reasonably be made within the 90-day period, those independent Trustees may extend the 90-day period by a period of time that the independent Trustees consider will be sufficient to permit them to make such a determination, not to exceed 60 calendar days from the end of the initial 90-day period (such 90-day period, as may be extended as provided hereunder, the "review period"). Notice of any such decision to extend the review period shall be sent in accordance with the provisions of Section 4.12 hereof to the Complaining Shareholders, or, the Shareholders' counsel if represented by counsel, in writing within five business days of any decision to extend the period. Trustees who are not deemed to be Interested Persons of the Trust are deemed independent for all purposes, including for the purpose of approving or dismissing a derivative action. A Trustee otherwise independent for purposes of considering the demand shall not be considered not to be independent solely by virtue of (i) the fact that such Trustee receives remuneration for his service as a Trustee of the Trust or as a trustee or director of one or more investment companies with the same or an affiliated investment adviser or underwriter, (ii) the amount of such remuneration, (iii) the fact that such Trustee was identified in the demand as a potential defendant or witness, or (iv) the fact that the Trustee approved the act being challenged in the demand if the act resulted in no material personal benefit to the Trustee or, if the Trustee is also a Shareholder, no material personal benefit that is not shared pro rata with other Shareholders. (c) If the demand has been properly made under paragraph (a) of this Section 9.8, and a majority of the independent Trustees have considered the merits of the claim and have determined that maintaining a suit would not be in the best interests of the Trust, the demand shall be rejected and the Complaining Shareholders shall not be permitted to maintain a derivative action unless they first sustain the burden of proof to the court that the decision of the Trustees not to pursue the requested action was not a good faith exercise of their business judgment on behalf of the Trust. If upon such consideration a majority of the independent Trustees determine that such a suit should be maintained, then the appropriate officers of the Trust shall cause the Trust to commence that suit and such suit shall proceed directly rather than derivatively or permit the Complaining Shareholders to proceed derivatively, provided however that any counsel representing the interests of the Trust shall be approved by the Trustees. The Trustees, or the appropriate officers of the Trust, shall inform the Complaining Shareholders of any decision reached under this paragraph (c) by sending in accordance with the provisions of Section 4.12 hereof written notice to each Complaining Shareholder, or the Shareholder's counsel, if represented by counsel, within five business days of such decision having been reached. -27- (d) If notice of a decision has not been sent to the Complaining Shareholders or the Shareholders' counsel within the time permitted by paragraph (c) above, and subparagraphs (i) through (v) of paragraph (a) above have been complied with, the Complaining Shareholders shall not be barred by this Declaration from commencing a derivative action. (e) A Complaining Shareholder whose demand is rejected pursuant to paragraph (c) above shall be responsible for the costs and expenses (including attorneys' fees) incurred by the Trust and/or the affected Series in connection with the Trust's consideration of the demand if a court determines that the demand was made without reasonable cause or for an improper purpose. A Shareholder who commences or maintains a derivative action in violation of this Section 9.8 shall reimburse the Trust and/or the affected Series for the costs and expenses (including attorneys' fees) incurred by the Trust and/or the affected Series in connection with the action if the action is dismissed on the basis of the failure to comply with this Section 9.8. If a court determines that any derivative action has been brought without reasonable cause or for an improper purpose, the costs and expenses (including attorneys' fees) incurred by the Trust and/or the affected Series in connection with the action shall be borne by the Shareholders who commenced the action. (f) The Trust or the affected Series shall be responsible for payment of attorneys' fees and legal expenses incurred by a Complaining Shareholder in any circumstances only if required by law. Neither the Trust nor the affected Series shall be obligated to pay any attorneys' fees so incurred by a Complaining Shareholder other than fees that are reasonable and that do not exceed an amount calculated using reasonable hourly rates. (g) No Shareholder may make demand or commence a derivative action on behalf of any Series of the Trust of which he or she is not a shareholder. ARTICLE X TERMINATION; MERGERS AND SALE OF ASSETS Section 10.1. Termination of Trust or Series. (a) Unless terminated as provided herein, the Trust shall continue without limitation of time. The Trust or any Series of the Trust may be terminated at any time by the Trustees for any reason they deem appropriate, with notice to the Shareholders of the Trust or such Series as the case may be. (b) Upon the requisite action of the Trustees to terminate the Trust or such Series, after paying or otherwise providing for all charges, taxes, expenses and liabilities, whether due or accrued or anticipated, as may be determined by the Trustees and as required by the Delaware Act, which may include the establishment of a liquidating trust or similar vehicle, the Trust shall, in accordance with such procedures as the Trustees consider appropriate, reduce the remaining assets of the Trust or assets of the particular Series thereof to distributable form in cash or other securities, or any combination -28- thereof, and distribute the proceeds to the Shareholders of the Shares of the Trust or such Series in the manner determined by the Trustees, provided that Shareholders of a particular Series shall be entitled to receive a pro rata share of the net assets of such Series only, subject to any variations with respect to Classes of Shares of such Series, if any. Thereupon, the Trust or any affected Series shall terminate, and the Trustees and the Trust shall be discharged of any and all further liabilities and duties relating thereto or arising therefrom, and the right, title, and interest of all parties with respect to the Trust or such Series shall be canceled and discharged. (c) Any Class of the Trust or Series thereof may be terminated by the Trustees as provided in Article IV hereof. (d) Upon termination of the Trust, following completion of winding up of its business, the Trustees (or, if there is no remaining Trustee at that time, any remaining officer of the Trust) shall direct that a Certificate of Cancellation of the Trust be executed and filed with the Secretary of State of the State of Delaware. Section 10.2. Merger and Consolidation. Subject to applicable law, the Trust may merge or consolidate with or into one or more statutory trusts or other business entities or series or classes thereof formed or organized or existing under the laws of Delaware or any other state or the United States or any foreign country or other foreign jurisdiction by the affirmative vote of two-thirds (2/3) of the Trustees. Pursuant to and in accordance with ss.3815(f) of the Delaware Act, and notwithstanding anything to the contrary contained in this Declaration, an agreement of merger or consolidation so approved by the Trustees in accordance with this Section 10.2 may (a) effect any amendment to the governing instrument of the Trust; or (b) effect the adoption of a new governing instrument of the Trust if it is the surviving or resulting trust in the merger or consolidation. Section 10.3. Sale of Assets; Reorganization. The Trustees may authorize the Trust or any Series or Class thereof, to sell, lease, transfer, pledge, exchange, convey or dispose of all or substantially all of the Trust Property (or all or substantially all of the Trust Property allocated or belonging to a particular Series or Class), including its good will, to any one or more business or statutory trusts or other business entities or series or classes thereof (including another Series or Class of the Trust) upon such terms and conditions and for such consideration (which may include the assumption of some or all of the outstanding obligations and liabilities, accrued or contingent, whether known or unknown, of the Trust or such Series or Class) as may be authorized by the Trustees. Without limiting the generality of the foregoing, this provision may be utilized to permit the Trust or any Series or Class thereof to pursue its investment program through one or more subsidiary vehicles or to operate in a master-feeder or fund of funds structure. Section 10.4. Conversion. The Trustees may authorize the creation of one or more statutory trusts to which all or any part of the assets, liabilities, profits, or losses of the Trust or any Series or Class thereof may be transferred and may provide for the -29- conversion of Shares of the Trust or any Series or Class thereof into beneficial interests in any such newly created trust or trusts or any series or classes thereof. Section 10.5. Combination of Classes. The authority of the Trustees under this Article X with respect to the merger, consolidation, sale of assets or reorganization of any Series of the Trust or any Class thereof is in addition to the authority of the Trustees under Section 4.9 hereof to combine two or more Classes of a Series into a single Class. ARTICLE XI AMENDMENTS; FILINGS; MISCELLANEOUS Section 11.1. Amendments to Declaration and Certificate of Trust. (a) The Trustees may by vote of a majority of the Trustees then in office amend or otherwise supplement the Declaration by making an amendment, a Declaration supplemental hereto or an amended and restated Declaration, provided, however, that an amendment to any provision of Article V hereof shall require the vote of two-thirds (2/3) of the Trustees then in office. (b) Notwithstanding anything else herein, any amendment to Section 6.6 which reduces the right of Trustees to receive reasonable compensation or to Article IX which would have the effect of reducing the indemnification or limitation of liability provided thereby to Trustees, officers, employees, and agents of the Trust or to Shareholders or former Shareholders, and any repeal or amendment of this sentence shall each require the affirmative vote of the holders of two-thirds of the Outstanding Shares of the Trust entitled to vote thereon and no such amendment shall affect the right to indemnification of any person who is no longer a Trustee, officer or employee or agent at the time of such amendment. (c) The Trust's Certificate of Trust may be amended at any time for any purpose as the Trustees may determine and such amendment shall be signed by one or more of the Trustees or by an officer of the Trust as duly authorized by vote of a majority of the Trustees then in office. Section 11.2. Filing of Certificate; Copies of Declaration; Counterparts; Headings. Any amendment to the Certificate of Trust shall be filed with the Secretary of State of the State of Delaware. The original or a copy of this instrument and of each amendment and/or restatement hereto shall be kept in the office of the Trust where it may be inspected by any Shareholder. Anyone dealing with the Trust may rely on a certificate by an officer or Trustee of the Trust as to whether or not any such amendments or restatements have been made and as to any matters in connection with the Trust hereunder, and with the same effect as if it were the original, may rely on a copy certified by an officer or Trustee of the Trust to be a copy of this instrument or of any such amendments or restatements. This instrument may be executed in any number of counterparts, each of which shall be deemed an original. Headings are placed herein for -30- convenience of reference only, and in case of any conflict, the text of this instrument, rather than the headings, shall control. Section 11.3. Trustees May Resolve Ambiguities. The Trustees may construe any of the provisions of this Declaration insofar as the same may appear to be ambiguous or inconsistent with any other provisions hereof, and any such construction hereof by the Trustees in good faith shall be conclusive as to the meaning to be given to such provisions. Section 11.4. Applicable Law; Forum Selection; Jury Waiver. (a) The Trust set forth in this instrument is created under and is to be governed by and construed and administered according to the laws of the State of Delaware, without reference to its conflicts of law rules, as a Delaware statutory trust under the Delaware Act, and without limiting the provisions hereof, the Trust specifically reserves the right to exercise any of the powers and privileges afforded to statutory trusts or actions that may be engaged in by statutory trusts under the Delaware Act, and the absence of a specific reference herein to any such power, privilege, or action shall not imply that the Trust may not exercise such power or privilege or take such actions. (b) Notwithstanding the first sentence of Section 11.4(a) hereof, there shall not be applicable to the Trust, the Trustees, or this Declaration any provisions of the laws (statutory or common) of the State of Delaware (other than the Delaware Act) or any other state pertaining to trusts, including by way of illustration and without limitation, laws that relate to or regulate: (i) the filing with any court or governmental body or agency of trustee accounts or schedules of trustee fees and charges; (ii) affirmative requirements to post bonds for trustees, officers, agents, or employees of a trust; (iii) the necessity for obtaining a court or other governmental approval concerning the acquisition, holding, or disposition of real or personal property; (iv) fees or other sums applicable to trustees, officers, agents or employees of a trust; (v) the allocation of receipts and expenditures to income or principal; (vi) restrictions or limitations on the permissible nature, amount, or concentration of trust investments or requirements relating to the titling, storage, or other manner of holding of trust assets; (vii) the establishment of fiduciary or other standards or responsibilities or limitations on the acts or powers or liabilities or authorities and powers of trustees if such laws are inconsistent with the authorities and powers or the limitation on liability of the Trustees set forth or referenced in this Declaration; or (viii) any requirements that a trust have any initial beneficiary or any initial corpus. Section 3540 of Title 12 of the Delaware Code shall not apply to the Trust. (c) No provision of this Declaration shall be effective to require a waiver of compliance with any provision of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended or the 1940 Act, or of any valid rule, regulation or order of the Commission thereunder. (d) Subject to the Delaware Act, any action commenced by a Shareholder, directly or derivatively, against or on behalf of the Trust or a Series or Class thereof, its -31- Trustees, officers, or employees, shall be brought only in the U.S. District Court for the Southern District of New York, or if such action may not be brought in that court, then such action shall be brought in the New York Supreme Court with assignment to the Commercial Division to the extent such assignment is permitted under the Uniform Civil Rules for the Supreme Court, including ss. 202.70 thereof (each, a "Chosen Court"). The Trust, its Trustees, officers, employees and Shareholders (a) waive any objection to venue in either Chosen Court and (b) waive any objection that either Chosen Court is an inconvenient forum. (e) In any action commenced by a Shareholder against the Trust or any Series or Class thereof, its Trustees or officers, or as a derivative action on behalf of the Trust, or any Series or Class thereof there shall be no right to a jury trial. THE RIGHT TO A TRIAL BY JURY IS EXPRESSLY WAIVED TO THE FULLEST EXTENT PERMITTED BY LAW. Section 11.5. Statutory Trust Only. The Trust is not intended to be, shall not be deemed to be, and shall not be treated as, a general or a limited partnership, joint venture, corporation or joint stock company, nor shall the Trustees or Shareholders or any of them for any purpose be deemed to be, or be treated in any way whatsoever as though they were, liable or responsible hereunder as partners or joint venturers. Section 11.6. Provisions in Conflict with Law or Regulations. (a) The provisions of this Declaration are severable, and if the Trustees shall determine, with the advice of counsel, that any such provision, in whole or in part, conflicts with the 1940 Act, the regulated investment company provisions of the Code, and the regulations thereunder, the Delaware Act or with other applicable laws and regulations, the conflicting provision, or the conflicting part or parts thereof, shall be deemed not to constitute a part of this Declaration; provided, however, that such determination shall not affect any of the remaining provisions of this Declaration or render invalid or improper any action taken or omitted prior to such determination. (b) If any provision of this Declaration shall be held invalid or unenforceable, in whole or in part, in any jurisdiction, such invalidity or unenforceability shall attach only to such provision, or such part or parts thereof, in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of this Declaration in any jurisdiction. Section 11.7. Writings. To the fullest extent permitted by applicable law, except as the Trustees may otherwise determine: (a) any requirements in this Declaration or in the Bylaws that any action be taken by means of any writing, including, without limitation, any written instrument, any written consent or any written agreement, shall be deemed to be satisfied by means of any electronic record in such form that is acceptable to the Trustees provided such form is capable of conversion into a written form within a reasonable time; and -32- (b) any requirements in this Declaration or in the Bylaws that any writing be signed shall be deemed to be satisfied by any electronic signature in such form that is acceptable to the Trustees. -33- IN WITNESS WHEREOF, the undersigned, being the Trustees of the Trust, have executed this instrument as of the date first written above. /s/ David R. Bock ----------------- David R. Bock, as Trustee 60 State Street, Boston, Massachusetts 02109 /s/ Mary K. Bush ---------------- Mary K. Bush, as Trustee 60 State Street, Boston, Massachusetts 02109 /s/ John F. Cogan, Jr. ---------------------- John F. Cogan, Jr., as Trustee 60 State Street, Boston, Massachusetts 02109 /s/ Benjamin F. Friedman ------------------------ Benjamin F. Friedman, as Trustee 60 State Street, Boston, Massachusetts 02109 /s/ Margaret B.W. Graham ------------------------ Margaret B.W. Graham, as Trustee 60 State Street, Boston, Massachusetts 02109 /s/ Daniel K. Kingsbury ----------------------- Daniel K. Kingsbury, as Trustee 60 State Street, Boston, Massachusetts 02109 /s/ Thomas J. Perna ------------------- Thomas J. Perna, as Trustee 60 State Street, Boston, Massachusetts 02109 /s/ Marguerite A. Piret ----------------------- Marguerite A. Piret, as Trustee 60 State Street, Boston, Massachusetts 02109 /s/ John Winthrop ----------------- John Winthrop, as Trustee 60 State Street, Boston, Massachusetts 02109 SCHEDULE A Series of Shares of Beneficial Interests (Effective as of June 13, 2008) WHEREAS, the Trustees of the Trust, acting pursuant to the Trust's agreement and declaration of trust as then in effect, have previously established and designated one or more series of shares of beneficial interest in the Trust (each, a "Series") pursuant to one or more designations of series (the "Prior Designations"); WHEREAS, in connection with the adoption of an Amended and Restated Agreement and Declaration of Trust dated as of June 13, 2008 (the "Declaration"), pursuant to Section 4.9(a) of the Declaration, the previously established and designated Series are hereby included on this Schedule A, which Schedule A shall be deemed an amendment and restatement of the Prior Designations. NOW THEREFORE, the following Series of the Trust are established with such relative rights, preferences, privileges, limitations, restrictions and other relative terms as are set forth below: Pioneer Tax Free Income Fund 1. Each Share of each Series is entitled to all the rights and preferences accorded to Shares under the Declaration. 2. The number of authorized Shares of each Series is unlimited. 3. Each Series shall be authorized to hold cash, invest in securities, instruments and other property, use investment techniques, and have such goals or objectives as from time to time described in the prospectus and statement of additional information contained in the Trust's then currently effective registration statement under the Securities Act of 1933 to the extent pertaining to the offering of Shares of the Series, as the same may be amended and supplemented from time to time ("Prospectus"). Each Share of a Series shall represent a beneficial interest in the net assets allocated or belonging to such Series only, and such interest shall not extend to the assets of the Trust generally (except to the extent that General Assets (as defined in the Declaration) are allocated to such Series), and shall be entitled to receive its pro rata share of the net assets of the Series upon liquidation of the Series, all as set forth in Section 4.9 of the Declaration. 4. With respect to each Series, (a) the purchase price of the Shares, (b) fees and expenses, (c) qualifications for ownership, if any, (d) the method of determination of the net asset value of the Shares, (e) minimum purchase amounts, if any, (f) minimum account size, if any, (g) the price, terms and manner of redemption of the Shares, (h) any conversion or exchange feature or privilege, (i) the relative dividend rights, and (j) any other relative rights, preferences, privileges, limitations, restrictions and other relative -2- terms have been established by the Trustees in accordance with the Declaration and are set forth in the Prospectus with respect to such Series. 5. The Trustees may from time to time modify any of the relative rights, preferences, privileges, limitations, restrictions and other relative terms of a Series that have been established by the Trustees or redesignate any of the Series without any action or consent of the Shareholders. 6. The designation of any Series hereby shall not impair the power of the Trustees from time to time to designate additional Series of Shares of the Trust. 7. Capitalized terms not defined herein have the meanings given to such terms in the Declaration. SCHEDULE B Designation of Classes of Shares (Effective as of June 13, 2008) WHEREAS, the Trustees of the Trust, acting pursuant to the Trust's agreement and declaration of trust as then in effect, have previously established and designated one or more series of shares of beneficial interest in the Trust (each, a "Series") and have previously established and designated one or more classes of Shares (each, a "Class") for some or all of the Series pursuant to one or more designations of Classes (the "Prior Designations"); WHEREAS, in connection with the adoption of an Amended and Restated Agreement and Declaration of Trust dated as of June 13, 2008 (the "Declaration"), pursuant to Section 4.9(b) of the Declaration, the previously established and designated Classes are hereby included on this Schedule B, which Schedule B shall be deemed an amendment and restatement of the Prior Designations. NOW THEREFORE, the following Classes as listed below with respect to the identified Series of the Trust are established with such relative rights, preferences, privileges, limitations, restrictions and other relative terms as are set forth below: Series Classes ------ ------- Pioneer Tax Free Income Fund A, B, C, Y 1. Each Share of each Class is entitled to all the rights and preferences accorded to Shares under the Declaration. 2. The number of authorized Shares of each Class is unlimited. 3. All Shares of a Class of a Series shall be identical with each other and with the Shares of each other Class of the same Series except for such variations between Classes as may be authorized by the Trustees from time to time and set forth in the Trust's then currently effective registration statement under the Securities Act of 1933 to the extent pertaining to the offering of Shares of the Class of such Series, as the same may be amended and supplemented from time to time ("Prospectus"). The Trustees may change the name or other designation of a Class; and take such other action with respect to the Classes as the Trustees may deem desirable. 4. With respect to the Shares of a Class of a Series, (a) the time and method of determining the purchase price, (b) the fees and expenses, (c) the qualifications for -2- ownership, if any, (d) minimum purchase amounts, if any, (e) minimum account size, if any, (f) the price, terms and manner of redemption of, (g) any conversion or exchange feature or privilege , (h) the relative dividend rights, and (i) any other relative rights, preferences, privileges, limitations, restrictions and other relative terms have been established by the Trustees in accordance with the Declaration and are set forth in the Prospectus with respect to such Class of such Series. 5. The Trustees may from time to time modify any of the relative rights, preferences, privileges, limitations, restrictions and other relative terms of a Class of a Series that have been established by the Trustees, divide or combine the issued or unissued Shares of any Class of a Series into a greater or lesser number; classify or reclassify any issued or unissued Shares of any Class of a Series into one or more Classes of such Series; combine two or more Classes of a Series into a single Class of such Series; in each case without any action or consent of the Shareholders. 6. The designation of any Class hereby shall not impair the power of the Trustees from time to time to designate additional Classes of Shares of a Series or terminate any one or more Classes of a Series hereby designated. 7. Capitalized terms not defined herein have the meanings given to such terms in the Declaration. EX-99.(2) 4 d23329_ex99-2.txt AMENDED AND RESTATED BY-LAWS OF PIONEER TAX FREE INCOME FUND Dated: June 13, 2008 ARTICLE 1 Declaration of Trust and Principal Office 1.1 Declaration of Trust. These By-laws are adopted pursuant to Section 6.8 of the Amended and Restated Declaration of Trust, as from time to time in effect (the "Declaration"), of Pioneer Tax Free Income Fund, a Delaware statutory trust (the "Trust") and shall be subject to the terms of the Declaration. Any capitalized term not otherwise defined herein shall have the same meaning given to such term in the Declaration. In the event of any inconsistency between the terms of these By-Laws and the terms of the Declaration or of any applicable laws, the terms of the Declaration or of such applicable laws shall control. 1.2 Principal Office of the Trust. The principal office of the Trust is located at 60 State Street, Boston, MA 02109, or such other place as shall be determined by the Trustees from time to time. The Trust may have offices in such other places within or outside the State of Massachusetts or the State of Delaware as the Trustees may from time to time determine. ARTICLE 2 Trustees 2.1 Chair. The Trustees may elect from their own number a Chair to hold office until his or her successor shall have been duly elected and qualified or until his or her earlier death, resignation, removal or disqualification. The Chair (or, if the Chair is unable to attend any such meeting, the Chair's designee) shall preside at all meetings of the Trustees and the Shareholders. The Chair shall have such other duties and powers as the Trustees may from time to time determine. 2.2 Regular Meetings. Regular meetings of the Trustees may be held without call or notice at such places (including for these purposes, by means of conference telephone circuit, video conferencing or similar communications equipment by means of which all persons participating in the meeting can hear each other as provided for in the Declaration) as the Trustees may from time to time determine. 2.3 Special Meetings. Special meetings of the Trustees may be held at any time and at any place (including for these purposes, by means of conference telephone circuit, video conferencing or similar communications equipment by means of which all persons participating in the meeting can hear each other as provided for in the Declaration) designated in the call of the meeting when called by the Chair, the President or the Secretary or by two or more Trustees, sufficient notice thereof as described in Section 2.4 below being given to each Trustee by the Secretary or an Assistant Secretary or by the person calling the meeting. 2.4 Notice of Special Meetings. It shall be sufficient notice to a Trustee of a special meeting to send notice by overnight mail at least two days or by email or facsimile at least one day before the meeting addressed to the Trustee at his or her usual or last known business or residence address, email address or facsimile number as applicable, or to give notice in person or by telephone one day before the meeting. Notice may be sent on the day of the special meeting by email, facsimile or other electronic means, or given by telephone or in person, if under the circumstances the party calling the meeting deems more immediate action to be necessary or appropriate. Notice of a special meeting need not be given to any Trustee if a written waiver of notice, executed by him or her before or after the meeting, is filed with the records of the meeting, or to any Trustee who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him or her. Neither notice of a meeting nor a waiver of a notice need specify the purposes of the meeting. 2.5 Quorum and Manner of Acting. At any meeting of the Trustees a majority of the Trustees then in office shall constitute a quorum. Any meeting may be adjourned from time to time by a majority of the votes cast upon the question, whether or not a quorum is present, and the meeting may be held as adjourned without further notice. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal from the meeting of one or more Trustees if any action taken is approved by at least a majority of the required quorum for that meeting. The Declaration contains further provisions relating to the manner of acting by the Trustees. 2.6 Actions by Consent. If in accordance with the provisions of the Declaration any action is taken by the Trustees by a written consent, such written consents may be executed and delivered in counterparts and by electronic means. The Declaration contains further provisions relating to action by consent of the Trustees. 2.7. Counsel and Experts. The Trustees who are not Interested Persons may, by vote of a majority of such Trustees, at the Trust's expense, hire such employees and retain such counsel, accountants, appraisers or other experts or consultants whose services such Trustees may, in their discretion, determine to be necessary or desirable from time to time, including services to one or more committees established by the Trustees, and may execute any agreements, contracts, instruments or other documents in connection therewith. ARTICLE 3 Committees 3.1 Establishment and Authority. The Declaration contains provisions relating to the establishment of committees by the Trustees. Each committee shall have such powers and authority as shall be authorized by the Trustees, and may fix its own rules and procedures, and adopt its own charter, in each case subject to approval by the Trustees. The Trustees may abolish any such committee at any time in their sole discretion. Any committee to which the Trustees delegate any of their powers shall maintain records of its meetings and shall report its actions to the Trustees. The Trustees shall have the power to rescind any action of any committee, but no such rescission shall have retroactive effect. The Trustees shall have the power at any time to fill vacancies in the committees. The Trustees may designate one or more -2- Trustees as alternate members of any committee who may replace any absent member at any meeting of the committee. 3.2 Quorum; Voting. Unless the specific rules and procedures adopted by a committee in accordance with Section 3.1 provide otherwise, a majority of the members of any committee of the Trustees shall constitute a quorum for the transaction of business, and any action of such a committee may be taken at a meeting by a vote of a majority of the members present (a quorum being present) or evidenced by one or more writings signed by such a majority (which writings may be executed and/or delivered by electronic means). Members of a committee may participate in a meeting of such committee by means of a conference telephone circuit, video conferencing or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time and participation by such means shall constitute presence in person at a meeting. 3.3 Compensation of Members. The chair, if any, and members of any duly appointed committee shall receive such compensation and/or fees and reimbursement for expenses as from time to time may be determined by the Trustees. ARTICLE 4 Officers 4.1 Enumeration; Qualification. The officers of the Trust shall be a President, a Treasurer, a Secretary, a Chief Compliance Officer and such other officers as the Trustees from time to time may in their discretion elect, appoint or authorize in accordance with Section 4.2 below. Any officer of the Trust may but need not be a Trustee or a Shareholder. Any two or more offices, except those of President and Vice-President, may be held by the same person. 4.2 Election. The President, the Treasurer, the Secretary and the Chief Compliance Officer shall be elected or appointed by the Trustees upon the occurrence of a vacancy in any such office. The Chief Compliance Officer shall be elected or appointed by a majority of the Trustees, including a majority of the Trustees who are not interested persons of the Trust within the meaning of the 1940 Act, or otherwise in accordance with Rule 38a-1 (or any successor rule) under the 1940 Act as in effect from time to time ("Rule 38a-1"). Other officers, if any, may be elected or appointed by the Trustees at any time, or the Trustees may delegate to the President the power to appoint such other officers as the Trustees shall at any time or from time to time deem advisable. Vacancies in any such other office may be filled at any time. Each officer shall hold office at the pleasure of the Trustees, provided that any removal of the Chief Compliance Officer shall be in accordance with Rule 38a-1. 4.3 Powers. Subject to the other provisions of these By-Laws, each officer shall have, in addition to the duties and powers herein and in the Declaration set forth, such duties and powers as are commonly incident to the office occupied by him or her as if the Trust were organized as a Delaware corporation and such other duties and powers as the Trustees may from time to time designate. -3- 4.4 President. Unless the Trustees otherwise provide, the President shall be the chief executive officer of the Trust. 4.5 Treasurer. Unless the Trustees provide otherwise, the Treasurer shall be the chief financial and accounting officer of the Trust, and shall, subject to the provisions of the Declaration and to any arrangement made by the Trustees with a custodian, investment adviser or manager, or transfer, shareholder servicing or similar agent, be in charge of the valuable papers, books of account and accounting records of the Trust, and shall have such other duties and powers as may be designated from time to time by the Trustees or by the President. 4.6 Secretary. The Secretary shall record all proceedings of the Shareholders and the Trustees in books to be kept therefor. In the absence of the Secretary from any meeting of the shareholders or Trustees, an Assistant Secretary, or if there be none or if he or she is absent, a temporary Secretary chosen at such meeting shall record the proceedings thereof in the aforesaid books. 4.7 Chief Compliance Officer. The Chief Compliance Officer shall perform the duties and shall have the responsibilities of the chief compliance officer of the Trust, including any such duties and responsibilities imposed by Rule 38a-1, and shall have such other duties and powers as may be designated from time to time by the Trustees. 4.8 Resignations and Removals. Any officer may resign at any time by written instrument signed by him or her and delivered to the Chair, the President or the Secretary or to a meeting of the Trustees. Such resignation shall be effective upon receipt unless specified to be effective at some other time. The Trustees may remove any officer with or without cause. Except to the extent expressly provided in a written agreement with the Trust, no officer resigning and no officer removed shall have any right to any compensation for any period following his or her resignation or removal, or any right to damages on account of such removal. ARTICLE 5 Shareholders 5.1 Meetings. There shall be no annual meetings of Shareholders except as required by law. A meeting of the Shareholders of the Trust or of any Series or Class shall be called by the Secretary whenever ordered by (i) a majority of Trustees then in office, (ii) the Chair or (iii) the President. Meetings of the Shareholders of the Trust or of any Series or Class shall also be called by the Secretary upon the order of the Trustees upon the written request ("Request for Meeting") of the Shareholders holding Shares representing in the aggregate not less than one-third of the voting power of all of the Outstanding Shares entitled to vote on the matters specified in such written request (calculated by assuming that the Shareholders holding all of the Outstanding Shares entitled to vote on such matter were present and voting at a meeting to consider such matter),provided that (1) such Request for Meeting shall include the information described below and (2) the Shareholders requesting such meeting shall have paid to the Trust the reasonably estimated cost of preparing and mailing the notice thereof, which the Secretary shall determine and specify to such Shareholders. No special meeting need be called to consider any matter specified in such Request for Meeting if such matter is substantially the same as a matter voted -4- on at any meeting of the Shareholders during the twelve months preceding the date of such Request for Meeting unless such Request for Meeting is of Shareholders representing in the aggregate at least a majority of the voting power of all of the Outstanding Shares entitled to vote on such matter (calculated by assuming that the Shareholders holding all of the Outstanding Shares entitled to vote on such matter were present and voting at a meeting to consider such matter). If the Secretary fails for more than 30 days to call a special meeting of the Shareholders of the Trust or of any Series or Class, the Trustees, the Chair or the President may, in the name of the Secretary, call the meeting by giving the required notice. If the meeting is a meeting of Shareholders of any Series or Class, but not a meeting of all Shareholders of the Trust, then only a special meeting of Shareholders of such Series or Class need be called and, in such case, only Shareholders of such Series or Class shall be entitled to notice of and to vote at such meeting. The Trustees may determine, or may authorize the officers of the Trust to determine, the date, time and place for any meeting of Shareholders, which place may be within or outside the State of Delaware. Any meeting so called may be postponed or cancelled prior to the meeting (with respect to one or more or all Series or Classes entitled to vote at the meeting) provided that notice of such postponement or cancellation is given to the extent time permits to the Shareholders entitled to vote at the meeting, but only if notice of such meeting had been previously given to such Shareholders. For matters to be properly brought by a Shareholder before a meeting of the Shareholders (including the nomination of Trustees by a Shareholder), the Shareholder must first have given timely written notice of the matters to be brought by the Shareholder before such meeting (an "Advance Notice") to the Secretary. To be timely, an Advance Notice must be delivered to the Secretary not more than 90 days prior to such meeting and not later than the later of (i) 60 days prior to such meeting or (ii) 10 days following the date on which public announcement of the date of such meeting is first made by the Trust. Each Advance Notice or Request for Meeting must contain (1) the name and address of the Shareholder(s) delivering such Advance Notice or Request for Meeting, (2) a statement with respect to the number of Shares of the applicable Series beneficially and/or legally owned by such Shareholder(s), the nature of any such beneficial ownership of such Shares, the beneficial ownership of any such Shares legally held by such Shareholder(s) but beneficially owned by one or more others, and the length of time for which all such Shares have been beneficially and/or legally owned by such Shareholder(s), and (3) a description of the matters to be brought by the Shareholder(s) before such meeting, including, if applicable, information about each nominee for election as a Trustee substantially equivalent to that which would be required in a proxy statement pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Securities and Exchange Commission thereunder, if such matters were to be included in a proxy statement. Whenever a matter is required to be voted by Shareholders of the Trust in the aggregate under the Declaration, the Trust may either hold a meeting of Shareholders of all Series and Classes to vote on such matter, or hold separate meetings of Shareholders of one or more of the -5- individual Series and or Classes to vote on such matter, provided that (i) such separate meetings shall be held within one year of each other and (ii) a quorum of the individual Series and or Classes shall be present at each such separate meeting, and the votes of Shareholders at all such separate meetings shall be aggregated in order to determine if sufficient votes have been cast for such matter to be voted. 5.2 Record Dates. For the purpose of determining the Shareholders of the Trust or any Series or Class of Shares of the Trust who are entitled to vote or act at any meeting or any adjournment or postponement thereof, or who are entitled to receive payment of any dividend or of any other distribution, the Trustees may from time to time fix a time, or may authorize the officers to fix a time, which shall be not more than 120 days before the date set for any meeting of Shareholders (without regard to any adjournments or postponements thereof) or more than 60 days before the date of payment of any dividend or of any other distribution, as the case may be, as the record date for determining the Shareholders of the Trust or such Series or Class having the right to notice of and to vote at such meeting and any adjournment or postponements thereof or the right to receive such dividend or distribution, and in such case only Shareholders on such record date shall have such right notwithstanding any transfer of shares on the books of the Trust after the record date; or without fixing such record date the Trustees may for any such purposes close the register or transfer books for all or part of such period. 5.3 Notice of Meetings. Notice of all meetings of Shareholders and any postponements thereof, stating the time, place and purposes of the meeting, shall be given by the Secretary or the Trustees in accordance with Section 5.9 hereof at least seven days and not more than 120 days before the date for the meeting set forth in such notice, to each Shareholder of record of the applicable Series or Class on the date set in accordance with Section 5.2 hereof. Any adjourned meeting may be held as adjourned without further notice if the date, time and place of the adjourned meeting were announced at the time of the adjournment, even if the date of such adjourned meeting is more than 120 days after the date set for the original meeting. Where separate meetings are held for Shareholders of the individual Series or Class to vote on a matter required to be voted on by Shareholders of the Trust in the aggregate, notice of each such separate meeting shall be provided in the manner described above in this Section. 5.4 Quorum. The holders of Outstanding Shares entitled to vote and present in person or by proxy representing thirty percent (30%) of the voting power of the Trust shall constitute a quorum at any meeting of the Shareholders, except that where pursuant to any provision of law, the Declaration or these By-Laws a vote shall be taken by individual Series or Class then Outstanding Shares entitled to vote and present in person or by proxy representing thirty percent (30%) of the voting power of that Series or Class shall be necessary to constitute a quorum for the transaction of business by that Series or Class. For the purposes of establishing whether a quorum is present, all Shares present and entitled to vote, including abstentions and broker non-votes, shall be counted. 5.5 Adjournments. Any meeting of Shareholders may, by action of the person presiding thereat, be adjourned with respect to one or more matters to be considered at such meeting, if a quorum is not present with respect to such matter; any meeting of Shareholders may, by motion of the person presiding thereat, be adjourned with respect to one or more matters to be -6- considered at such meeting, even if a quorum is present with respect to such matters, when such adjournment is approved by the vote of holders of Shares representing a majority of the voting power of the Shares present and entitled to vote with respect to the matter or matters adjourned. Unless a proxy is otherwise limited in this regard, any Shares present and entitled to vote at a meeting that are represented by broker non-votes, may, at the discretion of the proxies named therein, be voted in favor of such an adjournment. 5.6 Proxies. At any meeting of Shareholders, any holder of Shares entitled to vote thereat may vote by proxy, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Secretary, or with such other officer or agent of the Trust as the Trustees or officers may direct, for verification prior to the time at which such vote shall be taken. In connection with the solicitation of proxies by the Trustees, a Shareholder may give instructions through telephonic or electronic methods of communication or via the Internet for another person to execute his or her proxy, if in each case such method has been authorized by the Trust by its officers, and pursuant in each case to procedures established or approved by the officers of the Trust or agents employed by the Trust for such purpose as reasonably designed to verify that such instructions have been authorized by such Shareholder; and the placing of a Shareholder's name on a proxy pursuant to such instructions shall constitute execution of such proxy by or on behalf of such Shareholder. Proxies may also be submitted via facsimile if such method has been authorized by the Trust by its officers, and pursuant to procedures established or approved by the officers of the Trust or agents employed by the Trust for such purpose. Pursuant to a vote of the Trustees, proxies may be solicited in the name of one or more Trustees and/or one or more of the officers of the Trust. When any Share is held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such Share, but if more than one of them shall be present at such meeting in person or by proxy and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Share, but shall be counted as present at the meeting for all other purposes. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. If the holder of any such Share is a minor or a person of unsound mind, and subject to guardianship or to the legal control of any other person as regards the charge or management of such Share, such Share may be voted by such guardian or such other person appointed or having such control, and such vote may be given in person or by proxy. Unless otherwise specifically limited by their terms, proxies shall entitle the holder thereof to vote at any postponement or adjournment of a meeting, and no proxy shall be valid after eleven months from its date. A Shareholder who has submitted a proxy may revoke or withdraw the proxy with respect to any matter to be considered at a meeting or any adjournment or postponement thereof if such revocation or withdrawal is properly received prior to the vote on that matter, by delivering a duly executed proxy bearing a later date or by attending the meeting or the adjournment or postponement thereof and voting in person on the matter or matters. 5.7 Conduct of Meetings. Meetings of the Shareholders shall be presided over by the Chair, or, if the Chair is not present at the meeting, by another Trustee or officer designated by the Chair, or is there is no such designee present at the meeting, then by the most senior officer of the Trust present at the meeting and such person shall be deemed for all purposes the chairman of the meeting. The chairman of the meeting shall determine the order of business of the meeting and -7- may prescribe such rules, regulations and procedures and take such actions as, in the discretion of such chairman, are appropriate for the proper conduct of the meeting. For any matter to be properly before any meeting of Shareholders, the matter must be either specified in the notice of meeting given by or at the direction of a majority of the Trustees then in office or otherwise brought before the meeting by or at the direction of the chairman of the meeting. With the exception of Shareholder proposals submitted in accordance with the requirements of Rule 14a-8 under the Securities Exchange Act of 1934, as amended, or any successor provisions, only matters proposed by the Trustees may be included in the Trust's proxy materials. The Trustees may from time to time in their discretion provide for procedures by which Shareholders may, prior to any meeting at which Trustees are to be elected, submit the names of potential candidates for Trustee, to be considered by the Trustees, or any proper committee thereof. At all meetings of Shareholders, unless voting is conducted by inspectors, all questions relating to the qualification of voters and the validity of proxies and the acceptance or rejection of votes shall be decided by the chairman of the meeting. 5.8 Inspectors of Election. In advance of any meeting of Shareholders the Trustees, or at any such meeting the Trustees or the chairman of the meeting, may appoint Inspectors of Election to act at the meeting or any adjournment thereof. If any person appointed as inspector fails to appear or fails or refuses to act, the chairman of the meeting may appoint a person to fill the vacancy. Unless otherwise instructed by the Trustees, or by the chairman of the meeting, the Inspectors of Election shall determine the number of Shares outstanding, the Shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies, shall receive votes, ballots or consents, shall hear and determine all challenges and questions in any way arising in connection with the right to vote, shall count and tabulate all votes and consents, determine the results, and do such other acts as may be proper to conduct the election or vote. 5.9 Communications with Shareholders. Any notices, reports, statements or other communications with Shareholders of any kind required under the Declaration, these By-Laws or applicable law may be sent, delivered or made available by mail or other carrier, in person, by email or other electronic communication or by posting on a website or publication or in any other reasonable manner as may be determined by the Trustees if not otherwise prohibited by applicable law, and such communications may be sent, delivered or otherwise made available to Shareholders in accordance with householding or other similar rules under which a single copy of such notice or report may be sent to Shareholders who reside at the same address. No communication need be given to any Shareholder who shall have failed to inform the Trust of the Shareholder's current address and the Trustees may from time to time adopt, or may authorize the officers or agents of the Trust to adopt, procedures or policies with respect to communications to Shareholders that are returned to the Trust or its agents as undeliverable and similar matters. Any Shareholder may waive receipt of any notice or other communication. Communications shall be deemed to have been given at the time when delivered personally or deposited in the mail or with another carrier or sent by any means of written or electronic communication or, where notice is given by posting on a website or by publication, on the date of posting or publication. An affidavit of the mailing or other means of giving any notice of any meeting of Shareholders shall be filed and maintained with the records of the Trust. -8- The foregoing provisions shall apply mutatis mutandis to any communications given to a Shareholder's counsel under Section 9.8 of the Declaration, provided however that communications provided to either a Shareholder or Shareholder's counsel under Section 9.8 may not by made by means of posting on a website or by publication. ARTICLE 6 Shares and Share Certificates 6.1 Share Certificates. Unless the issuance of certificates is authorized by the Trustees, Shares shall be held on the books of the Trust by one or more transfer agents appointed in accordance with Section 7.2 of the Declaration (each, a "Transfer Agent") in uncertificated form, and the record holders of such shares shall be treated for all purposes as Shareholders under the Declaration. The Trustees may at any time authorize the issuance of share certificates for Shares of any Series or Class in such form as the Trustees may prescribe from time to time. Each such certificate shall bear a distinguishing number, shall exhibit the holder's name and the number of whole shares owned by such holder, and shall be signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer. Such signatures may be facsimile, printed or engraved if the certificate is signed by the Transfer Agent with respect to such Shares or by a registrar. In case any officer who has signed or whose facsimile signature has been placed on such certificate shall cease to be such officer before such certificate is issued, it may be issued by the Trust with the same effect as if he were such officer at the time of its issue. 6.2 Share Transfers. Transfers of Shares of the Trust shall be made only on the books of the Trust, as maintained by the Transfer Agent with respect to such Shares, by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Transfer Agent for such Shares and upon surrender of any certificate or certificates representing such Shares, if any, properly endorsed and the payment of all taxes thereon. Except as may be otherwise provided by law or these By-Laws, the person in whose name Shares stand on the books of the Trust shall be deemed the owner thereof for all purposes as regards the Trust; provided that properly documented pledges of Shares as collateral security may be accounted for by the Transfer Agent in accordance with its standard procedures with respect thereto. 6.3 Loss of Certificates. The Transfer Agent for any Series or Class of Shares is authorized to issue and countersign replacement certificates for Shares which have been lost, stolen or destroyed upon receipt of (i) satisfactory proof of such loss, and (ii) surety sufficient to protect the Series or Class from any loss. 6.4. Regulations. The Trustees may make such additional rules and regulations, not inconsistent with these By-Laws, as they may deem expedient concerning the issue, certification, transfer and registration of Shares. ARTICLE 7 Miscellaneous -9- 7.1 Books and Records. The books and records of the Trust and any Series or Classes thereof, including the share ledger or ledgers, may be kept in or outside the State of Delaware at such office or offices of the Trust and/or its agents as may from time to time be determined by the officers of the Trust. 7.2 Access to Book and Records. The Shareholders shall only have such right to inspect the records, documents, accounts and books of the Trust or any Series or Class thereof as may be granted from time to time by the Trustees in their sole discretion. 7.3 Seal. The Trustees may adopt a seal of the Trust which shall be in such form and shall have such inscription thereon as the Trustees may from time to time prescribe, but unless otherwise required by the Trustees, the seal shall not be necessary to be placed on, and its absence shall not impair the validity of, any document, instrument or other paper executed and delivered by or on behalf of the Trust. 7.4 Execution of Papers. All deeds, leases, contracts, notes and other obligations made by the Trustees shall be signed by the President, any Vice President elected by the Trustees, the Treasurer, the Secretary or any other officer elected by the Trustees, except as the Trustees may generally or in particular cases authorize the execution thereof in some other manner, or as otherwise provided in these By-Laws. 7.5 Severability. The provisions of these By-Laws are severable. If the Trustees determine, with the advice of counsel, that any provision hereof conflicts with the 1940 Act, the regulated investment company or other provisions of the Code or with other applicable laws and regulations, the conflicting provision shall be deemed never to have constituted a part of these By-Laws; provided, however, that such determination shall not affect any of the remaining provisions of these By-Laws or render invalid or improper any action taken or omitted prior to such determination. If any provision hereof shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision only in such jurisdiction and shall not affect any other provision of these By-Laws. 7.6 Headings. Headings are placed in these By-Laws for convenience of reference only and in case of any conflict, the text of these By-Laws rather than the headings shall control. ARTICLE 8 Amendments to the Bylaws 8.1 General. These By-Laws may be amended, supplemented, amended and restated, or repealed, in whole or in part, by a majority of the Trustees then in office at any meeting of the Trustees, or by one or more writings signed by such a majority. -10- EX-99.(6)(A) 5 d23329_ex99-6a.txt FORM OF AMENDED AND RESTATED MANAGEMENT AGREEMENT This AMENDED AND RESTATED MANAGEMENT AGREEMENT ("Agreement") is made this __ day of ____________, 2008, by and between Pioneer Tax Free Income Fund (the "Trust"), a Delaware statutory trust, and Pioneer Investment Management, Inc., a Delaware corporation (the "Manager"). WHEREAS, the Trust is registered as a management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); WHEREAS, the Manager is engaged primarily in rendering investment advisory and management services and is registered as an investment adviser under the Investment Advisers Act of 1940, as amended; WHEREAS, the Trust wishes to retain the Manager to provide investment advisory and management services to the Trust with respect to the series of the Trust designated in Appendix A annexed hereto (the "Funds"); and WHEREAS, the Manager is willing to furnish such services on the terms and conditions hereinafter set forth; NOW THEREFORE, in consideration of the promises and mutual covenants herein contained, it is agreed as follows: 1. The Trust hereby appoints the Manager to act as investment adviser of each Fund for the period and on the terms set forth in this Agreement. The Manager accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. 2. (a) Subject to the supervision of the Trust's Board of Trustees (the "Board"), the Manager shall regularly provide each Fund with investment research, advice, management and supervision and shall furnish a continuous investment program for the Fund's portfolio of securities and other investments consistent with the Fund's investment objectives, policies and restrictions, as stated in the Fund's current Prospectus and Statement of Additional Information. The Manager shall determine from time to time what securities and other investments (including, without limitation, repurchase agreements, swap agreements, options, futures and other instruments) will be purchased, retained, sold or exchanged by each Fund and what portion of the assets of the Fund's portfolio will be held in the various securities and other investments in which the Fund invests, and what portion will be held uninvested in cash, and shall implement those decisions (including the execution of investment documentation), all subject to the provisions of the Trust's Declaration of Trust and By-Laws (collectively, the "Governing Documents") and the 1940 Act, as well as the investment objectives, policies and restrictions of the Fund referred to above, and any other specific policies adopted by the Board and disclosed to the Manager. The Manager is authorized as the agent of the Trust to give instructions to the custodian of each Fund as to deliveries of securities and other investments and payments of cash for the account of the Fund. Subject to applicable provisions of the 1940 Act and direction from the Board, the investment program to be provided hereunder may entail the investment of all or substantially all of the assets of any Fund in one or more investment companies. The Manager will place orders pursuant to its investment determinations for each Fund either directly with the issuer or with any broker or dealer, foreign currency dealer, futures commission merchant or others selected by it. Except as described herein, the Manager shall seek overall the best execution available in the selection of brokers or dealers and the placing of orders for each Fund. In assessing the best execution available for any transaction, the Manager may consider factors it deems relevant, including the size and type of the transaction, the nature and character of the markets for the security to be purchased or sold, the execution capabilities and financial condition of the broker or dealer, and the reasonableness of the commission or dealer spread, if any (whether for a specific transaction or on a continuing basis). In connection with the selection of such brokers or dealers and the placing of such orders, subject to applicable law, brokers or dealers may be selected who also provide brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) to the Fund and/or the other accounts over which the Manager or its affiliates exercise investment discretion. The Manager is authorized to pay a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for a Fund which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if the Manager determines in good faith that such amount of commission is reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or in terms of all of the accounts over which the Manager or its affiliates exercise investment discretion. The Manager shall also provide advice and recommendations with respect to other aspects of the business and affairs of each Fund, shall exercise voting rights, rights to consent to corporate action and any other rights pertaining to the Fund's portfolio securities subject to such direction as the Board may provide, and shall perform such other functions of investment management and supervision as may be directed by the Board. Notwithstanding the foregoing, the Manager shall not be deemed to have assumed any duties with respect to, and shall not be responsible for, the distribution of the shares of any Fund, nor shall the Manager be deemed to have assumed or have any responsibility with respect to functions specifically assumed by any administrator, transfer agent, fund accounting agent, custodian, shareholder servicing agent or other agent, in each case employed by the Trust or a Fund to perform such functions. The Manager may execute on behalf of each Fund certain agreements, instruments and documents in connection with the services performed by it under this Agreement. These may include, without limitation, brokerage agreements, clearing agreements, account documentation, futures and options agreements, swap agreements, other investment related agreements, and any other agreements, documents or instruments the Manager believes are appropriate or desirable in performing its duties under this Agreement. (b) Each Fund hereby authorizes any entity or person associated with the Manager which is a member of a national securities exchange to effect any transaction on the exchange for the account of the Fund which is permitted by Section 11(a) of the Exchange Act and Rule 11a2-2(T) thereunder, and each Fund hereby consents to the retention of compensation for such transactions in accordance with Rule 11a2-2(T)(a)(2)(iv). 3. Subject to the Board's approval, the Manager or any Fund may enter into contracts with one or more investment subadvisers, including without limitation, affiliates of the Manager, in which the Manager delegates to such investment subadvisers any or all its duties specified hereunder, on such terms as the Manager determines to be necessary, desirable or appropriate, provided that in each case such contracts are entered into in accordance with and -2- meet all applicable requirements of the 1940 Act. The Trust agrees that the Manager shall not be accountable to the Trust or any Fund or any Fund's shareholders for any loss or other liability relating to specific investments selected by any such subadviser. 4. The Trust shall at all times keep the Manager fully informed with regard to the securities and other investments owned by each Fund, its funds available, or to become available, for investment, and generally as to the condition of its affairs. The Trust shall furnish the Manager with such other documents and information with regard to its affairs as the Manager may from time to time reasonably request. The Manager shall supply the Board and officers of the Trust with such information and reports reasonably required by them and reasonably available to the Manager. 5. (a) Unless maintained by another party on the Fund's behalf, the Manager shall maintain the books and records with respect to each Fund's securities and other transactions and keep the Fund's books of account in accordance with all applicable federal and state laws and regulations. In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Manager hereby agrees that any records that it maintains for each Fund are the property of the Fund, and further agrees to surrender promptly to the Fund any of such records upon the Fund's request. The Manager further agrees to arrange for the preservation of the records required to be maintained by Rule 31a-1 under the 1940 Act for the periods prescribed by Rule 31a-2 under the 1940 Act. (b) The Manager shall furnish, at its expense, all necessary services, facilities, equipment and personnel for performing the Manager's services under this Agreement. Other than as herein specifically indicated, the Manager shall not be responsible for the Trust's or any Fund's ordinary and extraordinary expenses, and the Trust or a Fund shall pay the Trust's or the Fund's ordinary and extraordinary expenses. The Manager may agree to provide to the Funds services other than the services that are provided under this Agreement, on such terms as the Manager and the Trust may agree from time to time, and nothing herein shall preclude payment by the Trust or a Fund of compensation to the Manager for any such services rendered pursuant to a written agreement or agreements approved by the Board. 6. From time to time, the Manager shall authorize and permit certain of its directors, officers and employees, who may be elected as Board members or officers of the Trust, to serve in the capacities in which they are elected. The Manager will pay directly or reimburse the Trust for the compensation (if any) of the Trustees who are affiliated persons of the Manager and all officers of the Trust as such, except as the Board may decide. 7. As compensation for the services performed and the facilities furnished and expenses assumed by the Manager, each Fund shall pay the Manager, as promptly as possible after the last day of each month, a fee, computed daily at an annual rate set forth opposite the Fund's name on Appendix A annexed hereto, based on the Fund's average daily net assets or otherwise as set forth on Appendix A. If this Agreement is terminated with respect to any Fund as of any date not the last day of a month, the fee payable by the Fund shall be paid as promptly as possible after such date of termination and shall be computed on the basis of the period ending on the last business day on which this Agreement is in effect with respect to the Fund subject to a pro rata adjustment based on the number of days elapsed in the current month as a percentage of the total number of days in the month. -3- 8. The Manager assumes no responsibility under this Agreement other than to render the services called for hereunder, in good faith, and shall not be liable for any error of judgment or mistake of law, or for any loss arising out of any investment or for any act or omission in the execution of securities or other transactions for any Fund, provided that nothing in this Agreement shall protect the Manager against any liability to a Fund to which the Manager would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties hereunder. As used in this paragraph 8, the term "Manager" shall include any affiliates of the Manager performing services for the Trust or any Fund pursuant to this Agreement and the partners, shareholders, directors, officers and employees of the Manager and such affiliates. 9. Nothing in this Agreement shall limit or restrict the right of any director, officer, or employee of the Manager who may also be a Trustee, officer, or employee of the Trust or any Fund, to engage in any other business or to devote his time and attention in part to the management or other aspects of any other business, whether of a similar nature or a dissimilar nature, nor to limit or restrict the right of the Manager to engage in any other business or to render services of any kind, including investment advisory and management services, to any other fund, firm, individual or association. If the purchase or sale of securities or other investments consistent with the investment policies of any Fund or one or more other accounts of the Manager is considered at or about the same time, transactions in such securities or other investments will be allocated among the accounts in a manner deemed equitable by the Manager. Such transactions may be combined, in accordance with applicable laws and regulations, and consistent with the Manager's policies and procedures as presented to the Board from time to time. 10. For the purposes of this Agreement, a Fund's "net assets" shall be determined as provided in the Fund's then-current Prospectus and Statement of Additional Information and the terms "assignment," "interested person," and "majority of the outstanding voting securities" shall have the meanings given to them by Section 2(a) of the 1940 Act, and references to the "1940 Act" shall include any rule, regulation or applicable exemptive order of the Securities and Exchange Commission (the "Commission") thereunder and interpretive guidance with respect to the 1940 Act by the Commission or its staff. 11. This Agreement will become effective with respect to each Fund on the date first above written or such later date set forth opposite the Fund's name on Appendix A annexed hereto, provided that it shall have been approved by the Trust's Board and by the shareholders of the Fund in accordance with the requirements of the 1940 Act and, unless sooner terminated as provided herein, will continue in effect for each Fund designated on Appendix A on the date hereof until December 31, 2009, and for each Fund added to Appendix A hereafter, until the date specified in Appendix A. Thereafter, if not terminated, this Agreement shall continue in effect with respect to each Fund, so long as such continuance is specifically approved at least annually (i) by the Board or (ii) by a vote of a majority of the outstanding voting securities of the Fund, provided that in either event the continuance is also approved by a majority of the Trustees who are not interested persons of any party to this Agreement, by vote cast in person at a meeting called for the purpose of voting on such approval. 12. This Agreement is terminable with respect to any Fund without penalty by the Board or by vote of a majority of the outstanding voting securities of the Fund, in each case on -4- not more than 60 days' nor less than 30 days' written notice to the Manager, or by the Manager upon not less than 60 days' written notice to the Trust, and will be terminated upon the mutual written consent of the Manager and the Trust. This Agreement shall terminate automatically in the event of its assignment. This Agreement may be terminated with respect to one or more Funds without affecting the validity of this Agreement with respect to any other Fund designated on Appendix A. 13. The Manager agrees that for services rendered to each Fund, or for any claim by it in connection with services rendered to the Fund, it shall look only to assets of the Fund for satisfaction and that it shall have no claim against the assets of any other portfolios of the Trust. The undersigned officer of the Trust has executed this Agreement not individually, but as an officer under the Trust's Declaration of Trust and the obligations of this Agreement are not binding upon any of the Trustees, officers or shareholders of the Trust individually. 14. The Trust agrees that in the event that none of the Manager or any of its affiliates acts as an investment adviser to a Fund, the name of the Fund will be changed to one that does not contain the name "Pioneer" or otherwise suggest an affiliation with the Manager. 15. No provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, and no material amendment of the Agreement with respect to any Fund shall be effective until approved, if so required by the 1940 Act, by vote of the holders of a majority of that Fund's outstanding voting securities. 16. This Agreement embodies the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof. Should any part of this Agreement be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding on and shall inure to the benefit of the parties hereto and their respective successors. 17. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of The Commonwealth of Massachusetts. 18. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 19. This Agreement amends and restates in its entirety the [management agreements]. [signature page to follow] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers thereunto duly authorized. PIONEER TAX FREE INCOME FUND By: ______________________________________ Name: Title: PIONEER INVESTMENT MANAGEMENT, INC. By: ______________________________________ Name: Title: -6- Appendix A
Fund Effective Date/Initial Term Date Fee - ---- -------------------------------- --- Pioneer Tax Free Income Fund 0.50% of the fund's average daily net assets up to $250 million, 0.45% of the next $500 million and 0.40% on assts over $750 million.
-7- EX-99.(6)(B) 6 d23329_ex99-6b.txt FORM OF EXPENSE LIMIT AGREEMENT Expense Limit Agreement made as of May 1, 2006 and as revised on [ ] between Pioneer Investment Management, Inc. ("PIM"), on behalf of itself and its affiliates, Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") and Pioneer Funds Distributor, Inc. ("PFD"), and each of the Pioneer Funds listed on Annex A, as updated from time to time (each a "Fund"). Whereas PIM, PIMSS and PFD wish to reduce the expenses of each Fund; and Whereas each Fund wishes to have PIM enter into such an agreement. Now therefore the parties agree as follows: SECTION 1 Special Class A Limitations. The expenses attributable to each class of shares of the Funds listed on Annex B, as updated from time to time, shall be reduced, if necessary, so that the Ordinary Operating Expenses (as defined below) of each Fund attributable to such class of shares do not exceed the percentage of average daily net assets attributable to the applicable class of shares of such Fund as set forth on Annex B. This expense limitation shall be effected first by PIMSS waiving transfer agency fees and expenses allocated to the applicable class of shares. If waiving transfer agency fees and expenses alone is not sufficient to achieve the expense limitation reflected in Annex B, PFD shall waive Rule 12b-1 fees attributable to the applicable class of shares. In the event that waiving transfer agency fees and expenses and Rule 12b-1 fees attributable to a class of shares is not sufficient to achieve the expense limitation reflected in Annex B, PIM shall reimburse other expenses or waive other fees ("Fund-Wide Expenses") to the extent necessary to further reduce the expenses attributable to that class of shares to the percentage of average daily net assets reflected in Annex B. In the event that PIM waives or reimburses any Fund-Wide Expenses, PIM also agrees to waive or reimburse the Fund-Wide Expenses attributable to any other authorized class of shares to the same extent that such expenses are reduced for the class of shares that required the reduction of Fund-Wide Expenses. Notwithstanding the foregoing, in the event that pursuant to Section 2, PIM is waiving or reimbursing Fund-Wide Expenses with respect to a class of shares, the expenses of each class of shares shall be limited first by waiving or reimbursing Fund-Wide Expenses to the extent required by Section 2 and then by waiving class specific expenses. SECTION 2 Expense Limitations for Other Funds. PIM agrees to limit the expenses attributable to each class of shares of each Fund listed in Annex C, as updated from time to time, by waiving Fund-Wide Expenses so that the Ordinary Operating Expenses of the Fund listed in Annex C with respect to the class of shares set forth in Annex C do not exceed the percentage of average daily net assets attributable to such class of shares on an annual basis. PIM also agrees to waive Fund-Wide Expenses attributable to any other authorized class of a Fund's shares to the same extent that such expenses are reduced for the class of shares listed in Annex C. In no event shall PFD be required to waive or PIM reimburse any fees payable under a Rule 12b-1 Plan with respect to the Funds listed in Annex C. SECTION 3 Amendment or Termination of Expense Limits. PIM may terminate or modify these expense limitations only in accordance with this Agreement. PIM agrees that the expense limitations set forth in Annex B shall continue in force until the date set forth with respect to each Fund (and class thereof) in Annex B; provided, that Pioneer may extend a date reflected in Annex B from time to time. With respect to the Funds listed in Annex C, PIM shall be entitled to modify or terminate the expense limitation with respect to any fiscal year that commences subsequent to the date this Agreement is executed if, but only if, PIM elects to modify or terminate the expense limitation with respect to such subsequent fiscal year and such election is made prior to the effective date of the Fund's post-effective amendment to its Registration Statement on Form N-1A to incorporate the Fund's financial statements; provided that this Agreement shall remain in effect at all times with respect to a Fund until the Fund's then current prospectus is amended or supplemented to reflect the termination or modification of this Agreement. The election by PIM referred to in the preceding sentence shall not be subject to the approval of a Fund or its Board of Trustees, but PIM shall notify the Board of Trustees in advance of the termination or modification of the expense limitation. SECTION 4 Termination of Expense Reimbursement Provisions. Notwithstanding anything to the contrary in any predecessor to this Agreement, PIM agrees that it shall not be entitled to be reimbursed for any expenses that PIM, PIMSS or PFD has waived or limited. SECTION 5 Ordinary Operating Expenses. For purposes of this Agreement, Ordinary Operating Expenses means all expenses of the Funds other than extraordinary expenses, such as litigation, taxes and brokerage commissions. SECTION 6 Governing Law. This Agreement shall be governed by the laws of the State of Delaware. SECTION 7 Existing Agreements Superseded. In the case of each Fund, to the extent that this Agreement provides for expense limit arrangements for the same classes of the Fund to which an existing expense limit agreement relates (each an "Existing Agreement"), this Agreement shall supersede and replace the Existing Agreement. In witness whereof, the parties hereto have caused this Agreement to be signed as of the [ ] day of [ ], 2008. Each of the Funds Listed on Annex A. By: ----------------------------------- Name: Title: PIONEER INVESTMENT MANAGEMENT, INC. By: ----------------------------------- Name: Title: Annex A ------- Pioneer Tax Free Income Fund
Annex B ------- - --------------------------------------------------------------------------------------------------------------------- Fiscal Regular Year Prospectus Expense Fund Class End Date Limit Expiration - --------------------------------------------------------------------------------------------------------------------- Pioneer Tax Free Income Fund A 12/31 5/1 0.89% [9/__/11] - ---------------------------------------------------------------------------------------------------------------------
Annex C ------- N/A EX-99.(11) 7 d23329_ex99-11.txt Bingham McCutchen LLP One Federal Street Boston, MA 02110 June 18, 2008 Pioneer Tax Free Income Fund 60 State Street Boston, Massachusetts 02109 Ladies and Gentlemen: We have acted as counsel to Pioneer Tax Free Income Fund, a Delaware statutory trust (the "Trust"), on behalf of its series, Pioneer Tax Free Income Fund (the "Surviving Fund"), in connection with the Trust's Registration Statement on Form N-14 to be filed with the Securities and Exchange Commission on or about June 18, 2008 (the "Registration Statement"), with respect to the Surviving Fund's Class A shares of beneficial interest (the "Shares") to be issued in exchange for the common shares of Pioneer Municipal and Equity Income Trust, a series of Pioneer Municipal and Equity Income Trust, a Delaware statutory trust, as described in the Registration Statement (the "Merger"). You have requested that we deliver this opinion to you in connection with the Trust's filing of the Registration Statement. In connection with the furnishing of this opinion, we have examined the following documents: (a) a certificate of the Secretary of the State of Delaware as to the existence of the Trust; (b) a copy, certified by the Secretary of the State of Delaware, of the Trust's Certificate of Trust dated June 20, 1994 filed with the Secretary of State (the "Certificate of Trust"); (c) a certificate executed by the Assistant Secretary of the Trust, certifying as to, and attaching copies of, the Trust's Agreement and Declaration of Trust (the "Declaration"), the Trust's By-Laws (the "By-Laws"), and the resolutions adopted by the Trustees of the Trust at a meeting held on May 22, 2008, authorizing the Merger and the issuance of the Shares on behalf of the Surviving Fund (the "Resolutions"); (d) a printer's proof, received on June 18, 2008, of the Registration Statement; and Pioneer Tax Free Income Fund June 18, 2008 Page 2 (e) a copy of the Agreement and Plan of Merger to be entered into by the Surviving Fund in the form included as Appendix A to the draft Registration Statement referred to in paragraph (d) above (the "Agreement and Plan of Merger"). In such examination, we have assumed the genuineness of all signatures, the conformity to the originals of all of the documents reviewed by us as copies, including conformed copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document. We have assumed that the Registration Statement as filed with the Securities and Exchange Commission will be in substantially the form of the printer's proof referred to in paragraph (d) above, and that the Agreement and Plan of Merger will be duly completed, executed and delivered by the parties thereto in substantially the form of the copy referred to in paragraph (e) above. We have also assumed for the purposes of this opinion that the Declaration, the Certificate of Trust, the Resolutions and the Agreement and Plan of Merger will not have been amended, modified or withdrawn and will be in full force and effect on the date of issuance of such Shares. This opinion is based entirely on our review of the documents listed above and such other documents as we have deemed necessary or appropriate for the purposes of this opinion and such investigation of law as we have deemed necessary or appropriate. We have made no other review or investigation of any kind whatsoever, and we have assumed, without independent inquiry, the accuracy of the information set forth in such documents. This opinion is limited solely to the Delaware Statutory Trust Act (which for this purpose includes applicable provisions of the Delaware Constitution and reported judicial decisions interpreting these laws) to the extent that the same may apply to or govern the transactions referred to herein, and we express no opinion with respect to the laws of any other jurisdiction or to any other laws of the State of Delaware. Further, we express no opinion as to any state or federal securities laws, including the securities laws of the State of Delaware. No opinion is given herein as to the choice of law or internal substantive rules of law which any tribunal may apply to such transaction. In addition, to the extent that the Declaration or the By-Laws refer to, incorporate or require compliance with, the Investment Company Act of 1940, as amended, or any other law or regulation applicable to the Trust, except for the Delaware Statutory Trust Act, as aforesaid, we have assumed compliance by the Trust with such Act and such other laws and regulations. Our opinion below, as it relates to the nonassessability of the shares of the Trust, is qualified to the extent that any shareholder is, was or may become a named Trustee of the Trust. Pioneer Tax Free Income Fund June 18, 2008 Page 3 We understand that all of the foregoing assumptions and limitations are acceptable to you. Based upon and subject to the foregoing, please be advised that it is our opinion that the Shares, when issued and sold in accordance with the Declaration and the Resolutions and for the consideration described in the Agreement and Plan of Merger, will be validly issued, fully paid and nonassessable. This opinion is given as of the date hereof and we assume no obligation to update this opinion to reflect any changes in law or any other facts or circumstances which may hereafter come to our attention. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. Very truly yours, /s/ Bingham McCutchen LLP BINGHAM McCUTCHEN LLP EX-99.(12) 8 d23329_ex99-12.txt FORM OF OPINION OF BINGHAM MCCUTCHEN LLP [ ], 2008 Pioneer Municipal and Equity Income Trust 60 State Street Boston, Massachusetts 02109 Pioneer Tax Free Income Fund 60 State Street Boston, Massachusetts 02109 Ladies and Gentlemen: This opinion is furnished to you pursuant to paragraph 8.5 of the Agreement and Plan of Merger, dated as of [ ], 2008, by and among Pioneer Tax Free Income Fund (the "Surviving Trust"), a Delaware statutory trust, in its individual capacity and on behalf of its series Pioneer Tax Free Income Fund (the "Surviving Fund"), and Pioneer Municipal and Equity Income Trust (the "Merging Trust"), a Delaware statutory trust, in its individual capacity and on behalf of its series Pioneer Municipal and Equity Income Trust (the "Merging Fund") (the "Agreement"). All capitalized terms not otherwise defined herein have the meanings ascribed to them in the Agreement. The Agreement contemplates the merger of the Merging Trust into the Surviving Trust pursuant to the provisions of the Delaware Statutory Trust Act, upon the terms and conditions set forth in the Agreement (the "Merger"), with the consequences described in Section 1.2 of the Agreement. In connection with this opinion we have examined and relied upon the originals or copies, certified or otherwise identified to us to our satisfaction, of the Agreement, the Proxy Statement/Prospectus on Form N-14 filed with the Securities and Exchange Commission on or about [ ], 2008 with respect to the Merger, and related documents (collectively, the "Merger Documents"). In that examination, we have assumed the genuineness of all signatures, the authenticity and completeness of all documents purporting to be originals (whether reviewed by us in original or copy form) and the conformity to the originals of all documents purporting to be copies. As to certain factual matters, we have relied with your consent upon, and our opinion is limited by, the representations of the various parties set forth in the Merger Documents, and in certificates of the Merging Trust and the Surviving Trust dated as of the date hereof and attached hereto (the "Certificates"). Our opinion assumes (i) that all representations set forth in the Merger Documents and in the Certificates will be true and correct in all material respects as of the date of the Merger, and (ii) that the Agreement is Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund [ ], 2008 Page 2 - --------------------------------------- implemented in accordance with its terms and consistent with the representations set forth in the Merger Documents and Certificates. Our opinion is limited solely to the provisions of the Internal Revenue Code as presently in effect (the "Code") and the regulations, rulings, and interpretations thereof in force as of this date. We assume no obligation to update our opinion to reflect any changes in law or in the interpretation thereof that may hereafter occur. On the basis of and subject to the foregoing, we are of the opinion that, for United States federal income tax purposes: 1. The Merger will constitute a "reorganization" within the meaning of Section 368(a) of the Code, and each of the Merging Trust and the Surviving Trust will be a "party to a reorganization" within the meaning of Section 368(b) of the Code. 2. No gain or loss will be recognized by the Merging Trust upon the vesting of the Merging Fund Assets and Merging Fund Liabilities as assets and liabilities of the Surviving Fund or upon the exchange of shares of the Merging Fund into a number of Surviving Fund Shares, including fractional Surviving Fund Shares, except for (A) gain or loss that may be recognized on the transfer of "section 1256 contracts" as defined in Section 1256(b) of the Code, (B) gain that may be recognized on the transfer of stock in a "passive foreign investment company" as defined in Section 1297(a) of the Code, or (C) any other gain that may be required to be recognized as a result of the closing of the Merging Trust's taxable year. 3. The tax basis in the hands of the Surviving Trust of the Merging Fund Assets will be the same as the tax basis of such assets in the hands of the Merging Trust immediately prior to the Merger, increased by the amount of gain (or decreased by the amount of loss), if any, recognized by the Merging Trust on the Merger. 4. The holding periods of the Merging Fund Assets in the hands of the Surviving Trust, other than assets with respect to which gain or loss is required to be recognized, will include in each instance the period during which those assets were held by the Merging Trust. 5. No gain or loss will be recognized by the Surviving Trust upon the vesting of the Merging Fund Assets and Merging Fund Liabilities as assets and liabilities of the Surviving Fund. 6. No gain or loss will be recognized by the shareholders of the Merging Fund on the exchange of all of their Merging Fund Shares for a number of Surviving Fund Shares, including fractional Surviving Fund Shares, as part of the Merger. Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund [ ], 2008 Page 3 - --------------------------------------- 7. The aggregate basis of the Surviving Fund Shares that each Merging Fund Shareholder receives in the Merger will be the same as the aggregate basis of the Merging Fund Shares held immediately prior to the Merger. 8. Each Merging Fund Shareholder's holding period for the Surviving Fund Shares received in the Merger will include the period for which such shareholder held the Merging Fund Shares that were exchanged for such Surviving Fund Shares, provided that the Merging Fund Shareholder held such Merging Fund Shares as capital assets on the Closing Date. This opinion is being delivered solely to you for your use in connection with the referenced transaction, and may not be relied upon by any other person or used for any other purpose. Very truly yours, BINGHAM MCCUTCHEN LLP EX-99.(13) 9 d23329_ex99-13.txt FORM OF AMENDED AND RESTATED ADMINISTRATION AGREEMENT This AMENDED AND RESTATED ADMINISTRATION AGREEMENT ("Agreement") is made this ___ day of _________, 2008, by and between Pioneer Tax Free Income Fund (the "Trust"), a Delaware statutory trust, and Pioneer Investment Management, Inc., a Delaware corporation (the "Administrator"). WHEREAS, the Trust is a registered management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Trust wishes to engage the Administrator to provide certain administrative services to the Trust with respect to the series of the Trust designated in Appendix A annexed hereto from time to time (the "Funds"); and WHEREAS, the Administrator is willing to furnish such services on the terms and conditions hereinafter set forth; NOW THEREFORE, in consideration of the promises and mutual covenants herein contained, it is agreed as follows: 1. The Trust hereby engages the Administrator to perform the administrative services listed on Appendix B annexed hereto (as such Appendix may be revised from time to time by agreement of the parties) with respect to each Fund, except as otherwise provided in Appendix B with respect to accounting services to be provided by third parties to certain Funds, for the period and on the terms set forth in this Agreement. The Administrator accepts such engagement and agrees to render the services herein set forth, for the compensation herein provided. 2. Subject to the direction and control of the Board of Trustees (the Board), the Administrator shall perform the administrative services listed on Appendix B. In no event shall the Administrator be deemed to have assumed any duties with respect to, or be responsible for, the distribution of the shares of any Fund, nor shall the Administrator be deemed to have assumed, or have any responsibility with respect to, functions specifically assumed by any investment adviser, transfer agent, fund accounting agent, custodian, shareholder servicing agent or other agent, in each case employed by the Trust or a Fund to perform such functions. With respect to the legal services listed in Appendix B, it is recognized that such legal services are provided for the benefit of the Funds in conjunction with legal services separately provided to the Funds by their counsel, and nothing in this Agreement shall cause the Administrator to be responsible for the fees and disbursements of counsel to the Funds. 3. Subject to the Board's approval, the Administrator may employ one or more service providers, including affiliates of the Administrator, to provide certain of the services to be provided by the Administrator under this Agreement, by entering into a written agreement with each such entity on such terms as the Administrator determines to be necessary, desirable or appropriate, provided that in each case such contracts are entered into in accordance with all applicable requirements of the 1940 Act. Except as otherwise provided in paragraph 9, the Trust agrees that the Administrator shall not be accountable to the Trust or any Fund or any Fund's 1 shareholders for any loss or other liability arising out of any error or omission by any such service provider. 4. The Trust shall furnish to the Administrator such documents and information as may be necessary or appropriate to enable the Administrator to perform its duties hereunder and with such other documents and information with regard to each Fund's affairs as the Administrator may from time to time reasonably request. 5. In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Administrator hereby agrees that any records that it maintains hereunder for any Fund are the property of the Fund, and further agrees to surrender promptly to the Fund any of such records upon the Fund's request. The Administrator further agrees to arrange for the preservation of any of such records required to be maintained by Rule 31a-1 under the 1940 Act for the periods prescribed by Rule 31a-2 under the 1940 Act. 6. The Administrator shall supply the Board and the officers of the Trust with all information and reports reasonably required by them and reasonably available to the Administrator relating to the services provided by the Administrator hereunder. 7. (a) As compensation for the services performed by the Administrator, each Fund shall pay the Administrator as promptly as possible after the last day of each month, a fee, computed daily at an annual rate set forth opposite the Fund's name on Appendix A annexed hereto, based on the Fund's average daily net assets (or, as indicated on Appendix A, the Fund's average daily managed assets). The Administrator and the Funds agree that the fees payable under this Agreement will be reviewed from time to time. They also will be reviewed should the scope of the Administrator's services provided hereunder be amended by agreement of the parties. In connection with each such review, the Administrator will provide such information as the Trustees reasonably request to evaluate the benefits of this Agreement to the Funds and the fees hereunder, including an analysis of the costs to the Administrator of providing its services. If this Agreement is terminated with respect to any Fund as of any date not the last day of a month, the fee payable by such Fund shall be paid as promptly as possible after such date of termination, and shall be computed on the basis of the period ending on the last business day on which this Agreement is in effect subject to a pro rata adjustment based on the number of days elapsed in the current month as a percentage of the total number of days in the month. (b) The Administrator shall furnish all facilities and personnel necessary for performing the Administrator's services hereunder and shall furnish to the Trust office space in the offices of the Administrator or in such other place as may be agreed upon from time to time. The Administrator shall pay directly or reimburse the Trust for all expenses not hereinafter specifically assumed by the Trust where such expenses are incurred by the Administrator or by the Trust in connection with the management of the affairs of, and the investment and reinvestment of the assets of, the Trust. The Trust, on behalf of each Fund, shall assume and shall pay (i) charges and expenses for fund accounting, pricing and appraisal services and related overhead, including, to the extent such services are performed by personnel of a Fund's investment adviser (the "Manager") or its affiliates, office space and facilities, and personnel compensation, training and benefits; (ii) the charges and expenses of auditors; (iii) the charges and expenses of any investment adviser, administrator, custodian, transfer agent, plan agent, 2 dividend disbursing agent, registrar or any other agent appointed by the Trust; (iv) issue and transfer taxes chargeable to the Trust in connection with securities transactions to which the Trust is a party; (v) insurance premiums, interest charges, any expenses in connection with any preferred shares, dues and fees for membership in trade associations and all taxes and corporate fees payable by the Trust to federal, state or other governmental agencies; (vi) fees and expenses involved in registering and maintaining registrations of the Trust and/or its shares with federal regulatory agencies, state or blue sky securities agencies and foreign jurisdictions, including the preparation of prospectuses and statements of additional information for filing with such regulatory authorities; (vii) all expenses of shareholders' and Board of Trustees' (the "Board", and each Board member, a "Trustee") meetings and of preparing, printing and distributing prospectuses, notices, proxy statements and all reports to shareholders and to governmental agencies; (viii) charges and expenses of legal counsel to the Trust and the Trustees; (ix) any fees paid by the Trust in accordance with Rule 12b-1 promulgated by the Securities and Exchange Commission (the "Commission") pursuant to the 1940 Act; (x) compensation of those Trustees of the Trust who are not affiliated with, or "interested persons" (as defined in the 1940 Act) of, the Manager, the Trust (other than as Trustees), Pioneer Investment Management USA Inc. or Pioneer Funds Distributor, Inc.; (xi) the cost of preparing and printing share certificates; (xii) any fees and other expenses of listing the Trust's shares on the New York Stock Exchange, American Stock Exchange or any other national stock exchange, (xiii) interest on borrowed money, if any; (xiv) fees payable by the Trust under management agreements and under this Agreement; and (xv) extraordinary expenses. The Trust shall also assume and pay any other expense that the Trust, the Manager or any other agent of the Trust may incur not listed above that is approved by the Board (including a majority of the independent Trustees) as being an appropriate expense of the Trust. In addition, the Trust, on behalf of each Fund, agrees to pay all brokers' and underwriting commissions chargeable to the Trust in connection with securities transactions to which the Fund is a party. 8. The Administrator assumes no responsibility under this Agreement other than to render the services called for hereunder, in good faith, and shall not be liable for any error of judgment or mistake of law, or for any act or omission in the performance of the services, provided that nothing in this Agreement shall protect the Administrator against any liability to a Fund to which the Administrator otherwise would be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties hereunder. As used in paragraph 9 and paragraph 10, the term "Administrator" shall include any affiliates of the Administrator performing services for the Trust or any Fund pursuant to this Agreement and the partners, shareholders, directors, officers and employees of the Administrator and such affiliates. 9. Each Fund separately shall indemnify and hold the Administrator harmless from all loss, cost, damage and expense, including reasonable fees and expenses for counsel, incurred by the Administrator resulting from or arising out of the provision of the Administrator's services, provided that this indemnification shall not apply to actions or omissions of the Administrator, its officers or employees resulting from or arising out of its or their own willful misfeasance, bad faith or gross negligence. The Administrator shall indemnify and hold each Fund harmless from all loss, cost, damage and expense, including reasonable fees and expenses for counsel, incurred by a Fund resulting from or arising out of the Administrator's, or its officers' or employees' own willful misfeasance, bad faith or gross negligence. 3 10. Nothing in this Agreement shall limit or restrict the right of any director, officer, or employee of the Administrator who may also be a Trustee, officer, or employee of the Trust or any Fund to engage in any other business or to devote his time and attention in part to the management or other aspects of any other business, whether of a similar nature or a dissimilar nature, nor to limit or restrict the right of the Administrator to engage in any other business or to render services of any kind, including investment advisory and management services, to any other fund, firm, individual or association. 11. For purposes of this Agreement, a Fund's "net assets" shall be determined as provided in the Fund's then-current Prospectus and Statement of Additional Information, and references to the "1940 Act" shall include any rule, regulation or applicable exemptive order of the Securities and Exchange Commission (the "SEC") thereunder and the interpretive guidance with respect to the 1940 Act by the SEC or its staff. "Managed assets" means the total assets of the Trust, including any form of investment leverage, minus all accrued expenses incurred in the normal course of operations, but not excluding any liabilities or obligations attributable to investment leverage obtained through (i) indebtedness of any type (including, without limitation, borrowing through a credit facility or the issuance of debt securities), (ii) the issuance of preferred stock or other similar preference securities, (iii) the reinvestment of collateral received for securities loaned in accordance with the Fund's investment objectives and policies, and/or (iv) any other means. The liquidation preference on any preferred shares is not a liability. 12. This Agreement will become effective with respect to each Fund on the date first above written or such later date set forth opposite the Fund's name on Appendix A annexed hereto, provided that it shall have been approved by the Trust's Board, and, unless sooner terminated as provided herein, will continue in effect for each Fund designated on Appendix A on the date hereof until December 31, 2009, and for each Fund added to Appendix A hereafter, until the date specified in Appendix A. Thereafter, if not terminated, this Agreement shall continue in effect with respect to each Fund for successive one-year terms, so long as each such term is approved by the Board. 13. This Agreement is terminable with respect to any Fund (i) without penalty, by the Board or (ii) by the Administrator upon not less than 90 days' written notice to the Trust. This Agreement may be terminated with respect to one or more Funds without affecting the validity of this Agreement with respect to any other Fund designated on Appendix A. 14. The Administrator agrees that for services rendered to each Fund, or for any claim by it in connection with the services rendered to the Fund under this Agreement, it shall look only to assets of the Fund for satisfaction and that it shall have no claim against the assets of any other portfolios of the Trust. The undersigned officer of the Trust has executed this Agreement not individually, but as an officer under the Trust's Declaration of Trust and the obligations of this Agreement are not binding upon any of the Trustees, officers or shareholders of the Trust individually. 15. No provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. 4 16. This Agreement embodies the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof. Should any part of this Agreement be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding on and shall inure to the benefit of the parties hereto and their respective successors. 17. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of The Commonwealth of Massachusetts. 18. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 19. This Agreement amends and restates in its entirety [administration agreements]. [signature page to follow] 5 IN WITNESS WHEREOF, the parties thereto have caused this Agreement to be executed by their officers thereunto duly authorized. PIONEER TAX FREE INCOME FUND By: -------------------------------- Name: Title: PIONEER INVESTMENT MANAGEMENT, INC. By: -------------------------------- Name: Title: 6 Appendix A
Effective Date/ --------------- Fund Initial Term Date Fee ---- ----------------- --- Pioneer Tax Free Income 0.0225% of average daily net Fund assets
7 Appendix B ADMINISTRATION AGREEMENT Accounting Services(*) Fund Accounting Maintain all accounting records for Funds o Calculate and report daily net asset values per share and yields o Recommend income and capital gains distribution rates o Prepare Funds' financial statements and assist in Fund audits Shareholder Reporting and Audit Liaison o Prepare and file (via EDGAR) shareholder reports required by Rule 30e-1 under the 1940 Act and reports on Forms N-CSR, N-Q and N-SAR as required by Rules 30d-1 and 30b-1 under the 1940 Act o Manage the Funds' audit processes to ensure timely completion of financial statements and shareholder reports o Prepare reports related to advisory contract renewals for the Trustees' review, as well as other materials that any Board may request from time to time o Provide financial information for prospectus updates and other regulatory filings o Prepare and furnish the Funds with performance information (including yield and total return information) calculated in accordance with applicable U.S. securities laws and report to external entities such information Pricing and Corporate Actions o Ensure accuracy and timeliness of prices supplied by external sources to be used in daily valuations of all security positions held by each Fund o Support corporate actions and bankruptcy proof of claim analyses o Validate and communicate class action and bankruptcy proof of claim information o Present periodic valuation reports to Funds' Boards Systems and Administration o Provide direction, supervision and administrative support to all Fund Accounting, Administration and Controllership (FAACS) teams providing Accounting Services hereunder - ---------- (*) Accounting Services marked with an asterisk are not provided to the Funds listed in Appendix A that are marked with an asterisk. 8 o Provide systems support to users of Fund accounting and portfolio pricing software, and manage relationships with applicable software and hardware vendors o Develop and maintain applications and systems interfaces for FAACS teams Controllership Services o Manage Fund expense payment cycles (e.g., timeliness and accuracy of payments, allocation of costs among Funds) o Coordinate and standardize Fund expense accruals and budgeting o Provide expense reports as required o Compile daily reports of shareholder transactions from all sources for entry into Fund books o Provide daily reconciliation of receivable, payable and share accounts between Funds' records and sources of shareholder transactions o Manage the daily process to minimize "as of" gains and losses to Funds o Communicate daily Fund prices o Provide information and consultation on financial matters relating to the Funds including, without limitation, dividend distributions, expense pro formas, expense accruals and other matters Tax Services o Manage the Funds' federal, state and applicable local tax preparation and reporting o Prepare fiscal and excise tax distribution calculations o Prepare and file federal, state and any local income tax returns, including tax return extension requests o Prepare shareholder year-end reporting statements o Provide the appropriate amounts and characterization of distributions declared during the calendar year for Forms 1099 and similar reporting o Periodically review and determine distributions to be paid to shareholders pursuant to Sub Chapter M requirements o Consult with the Funds' Treasurer on various tax issues as they arise and with the Funds' auditors when appropriate 9 ADMINISTRATION AGREEMENT Legal Services Registration Statements, Proxy Statements and Related Securities and Exchange Commission ("SEC") Filings o Maintain SEC filing calendar for the Funds' Registration Statement filings o Prepare and file (via EDGAR) amendments to the Funds' Registration Statements, including preparing prospectuses and statements of additional information (SAIs) o Prepare and file (via EDGAR) supplements to the Funds' prospectuses and registration statements o Prepare and file (via EDGAR) Fund proxy statements; provide consultation on proxy solicitation matters (i.e., with regard to the solicitation and tabulation of proxies in connection with shareholder meetings; the coordination of the printing and distribution of proxy materials, etc.) o Review comments from the SEC on Fund registration statements and proxy statement filings and contribute to the preparation of responses to such comments o Conduct and manage use of software utilized to aid in maintaining content of disclosure in Fund prospectuses and SAIs, including related language database o Prepare and file (via EDGAR) Rule 24f-2 Notices o SEC Electronic Filing (EDGAR) Responsibilities o Maintain and develop enhancements to Pioneer's EDGAR-related systems and procedures, including contingency planning o Maintain EDGAR related databases and document archives o Liaise with third party EDGAR agents when necessary Blue Sky Administration (State Registration) o Principal liaison with Blue Sky vendor (the fees and expenses of which are charged separately to the applicable Funds) o Coordinate SEC filing schedule and Fund documentation with Blue Sky vendor o Monitor status of state filings with Blue Sky vendor o Transfer Agent coordination o Review Blue Sky vendor statements and invoices o Conduct Blue Sky vendor due diligence, as appropriate 10 >> Hiring oversight >> In-person meetings >> Independent audit of services Shareholder Report Review and Support o Review annual and semi-annual shareholder reports, including review of text of footnotes, as well as management's discussion of Fund performance, Trustee and officer background information and other non-financial statement aspects of reports o Provide consulting to FAACS in meeting regulatory requirements applicable to financial statements o With Fund counsel and FAACS, review comments from the SEC on Fund financial statement filings and assist in the preparation of responses to such comments Corporate Secretarial and Governance Matters o Maintain general calendar for Trustee meetings (including meetings of committees of Boards); track items that require annual or other periodic review and/or approval by Trustees; coordinate meeting presentations o Maintain awareness of regulatory changes and track compliance dates with respect thereto o Prepare agenda and background materials for Trustee and Board committee meetings (i.e., memoranda, proposed resolutions), attend meetings, prepare minutes and follow up on matters raised at meetings o Review draft materials and coordinate review by Trustees and external personnel (i.e., Fund counsel and auditors) o Produce and distribute materials to Trustees and other meeting attendees o Oversee vendors and technology that facilitate assembly, production and distribution of Trustee materials o Attend and assist in coordination of shareholder meetings o Monitor fidelity bond and directors' and officers' errors and omissions policies and make required filings with the SEC; act as principal liaison with Funds' insurance carriers and agents; coordinate amendments to and annual renewals of policies and coverage, including completion of materials for Board consideration o Maintain Fund records required by Section 31 of the 1940 Act and the rules thereunder, except those records that are either the responsibility of the Fund's Manager under the management agreements with the Funds or otherwise are maintained by the Funds' other service providers (e.g., subadviser, custodian, transfer agent) o Maintain corporate records on behalf of the Funds, including, but not limited to, copies of minutes, contracts and Trustee meeting materials 11 Miscellaneous Services o Preparation and filing of the Funds' Form N-SAR, Form N-CSR, Form N-Q and Form N-PX filings o Prepare and make Section 16 filings on behalf of the officers and Trustees of the closed-end Funds 12 ADMINISTRATION AGREEMENT Compliance Services o Assist the Funds in responding to routine and non-routine regulatory inquiries, examinations and investigations o Provide consultation on regulatory matters relating to Fund operations and any potential changes in the Funds' investment policies, operations or structure o Develop or assist in developing guidelines and procedures to improve overall compliance by the Funds and their various agents o Oversee implementation and testing of the Funds' compliance-related policies and procedures EX-99.(14) 10 d23329_ex99-14.txt CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the references to our firm under the captions "Financial Highlights" and "Experts" in the Combined Proxy Statement of Pioneer Municipal and Equity Income Trust and Prospectus for Class A shares of Pioneer Tax Free Income Fund ("Combined Proxy Statement and Prospectus"), and to the incorporation by reference of our reports, dated January 23, 2008 and February 19, 2008 on the financial statements and financial highlights of Pioneer Municipal and Equity Income Trust as of November 31, 2007 and Pioneer Tax Free Income Fund as of December 31, 2007, respectively, in the Combined Proxy Statement and Prospectus included in this Registration Statement on Form N-14 of the Pioneer Tax Free Income Fund. We further consent to the reference to us under the heading "Representations and Warranties" (paragraphs 4.1(e) and 4.2(h)) in the Agreement and Plan of Reorganization included as Exhibit A to the Combined Proxy Statement and Prospectus. We also consent to the reference to our firm under the captions "Independent Registered Public Accounting Firm" and "Financial Statements" in the Pioneer Tax Free Income Fund's Class A, Class B, Class C and Class Y shares Statement of Additional Information on Form N-1A, which was filed with the Securities and Exchange Commission on April 29, 2008 in Post-Effective Amendment No. 54 (File No. 2-57653), and is incorporated by reference into the Statement of Additional Information included in this Registration Statement on Form N-14 of Pioneer Tax Free Income Fund. We further consent to the incorporation by reference of our reports, dated January 23, 2008 and February 19, 2008, on each of the financial statements and financial highlights of Pioneer Municipal and Equity Trust and Pioneer Tax Free Income Fund, respectively, included in the Annual Reports to the Shareowners for the years ended November 31, 2007 and December 31, 2007, respectively, which are also incorporated by reference into the Statement of Additional Information included in this Registration Statement on Form N-14 for Pioneer Tax Free Income Fund. /s/ ERNST & YOUNG LLP Boston, Massachusetts June 16, 2008 EX-99.(16) 11 d23329_ex99-16.txt POWER OF ATTORNEY I, the undersigned Trustee of Pioneer Tax Free Income Fund (the "Fund"), hereby constitute and appoint John F. Cogan, Jr., Dorothy E. Bourassa, Daniel K. Kingsbury and Mark E. Bradley, and each of them acting singly, to be my true, sufficient and lawful attorneys, with full power to each of them to sign for me, in my name: (i) the Fund's Registration Statement on Form N-14, and any and all amendments thereto, with respect to the proposed merger of Pioneer Municipal and Equity Income Trust into the Fund, and (ii) any and all other documents and papers relating to such merger, and generally to do all such things in my name and on behalf of me in the capacities indicated to enable the Fund to comply with the Investment Company Act of 1940, as amended, and the Securities Act of 1933, as amended, and thereunder, hereby ratifying and confirming my signature as it may be signed by said attorneys or each of them to the Registration Statement and amendments to said Registration Statement. IN WITNESS WHEREOF, I have hereunder set my hand on this 11th day of June, 2008. /s/ David R. Bock /s/ Daniel K. Kingsbury - ----------------------------- -------------------------- David R. Bock Daniel K. Kingsbury /s/ Mary K. Bush /s/ Thomas J. Perna - ----------------------------- -------------------------- Mary K. Bush Thomas J. Perna /s/ John F. Cogan, Jr. /s/ Marguerite A. Piret - ----------------------------- -------------------------- John F. Cogan, Jr. Marguerite A. Piret /s/ Benjamin M. Friedman /s/ John Winthrop - ----------------------------- -------------------------- Benjamin M. Friedman John Winthrop /s/ Margaret B.W. Graham - ------------------------ Margaret B.W. Graham EX-99.(17)(D) 12 d23329_ex99-17d.txt PIONEER MUNICIPAL AND EQUITY INCOME TRUST SPECIAL MEETING OF SHAREHOLDERS SEPTEMBER 11, 2008 This proxy is solicited on behalf of the Board of Trustees of Pioneer Municipal and Equity Income Trust (the "Fund"). The undersigned hereby appoints John F. Cogan, Jr., Dorothy E. Bourassa and Christopher J. Kelley, each of them (with full powers of substitution) to vote for the undersigned all shares of beneficial interest of the undersigned in the above-referenced Fund at the Special Meeting of Shareholders of the Fund to be held at 2:00 p.m., Eastern time, on September 11, 2008, at the offices of Bingham McCutchen LLP, One Federal Street, Boston, Massachusetts, and any adjournment thereof ("Meeting"), with all the power the undersigned would have if personally present. The shares represented by this proxy will be voted as instructed on the reverse side. Unless instructions to the contrary are given on the reverse or if this proxy is executed but no instruction is given, this proxy shall be deemed to grant authority to vote "FOR" the proposal, with discretionary power to vote upon such other business as may properly come before the Meeting or any adjournment. The proxies intend to vote with management on any such other business properly brought before the Meeting. The undersigned hereby acknowledges receipt of the accompanying Notice of the Special Meeting of Shareholders and combined Proxy Statement and Prospectus. Date: [ ], 2008 YOUR VOTE IS VERY IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. ------------------------------------ ------------------------------------ Signature(s) of Shareholder(s) (Sign in the Box) Note: Please sign exactly as your name appears on this Proxy. When signing as attorney, executor, administrator, trustee or guardian, please give your full title as such. If a corporation or partnership, please sign in full corporate or partnership name by an authorized officer. NOTE: YOUR PROXY CARD IS NOT VALID UNLESS IT IS SIGNED ------------------------------------------------------ YOUR VOTE IS IMPORTANT. PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX BELOW. THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL BELOW IF NO SPECIFICATION IS MADE BELOW. Your Board of Trustees recommends that you vote "FOR" Proposal 1. 1. To approve an Agreement and Plan of Merger between your fund and Pioneer Tax Free Income Fund. Under this Agreement and Plan of Merger, your fund (a closed-end fund) will merge with and into an open-end fund, Pioneer Tax Free Income Fund. Please review the enclosed combined Proxy Statement and Prospectus because it contains important information regarding this proposal. FOR __________ AGAINST __________ ABSTAIN __________ 2. To transact such other business as may properly come before the meeting or and adjournments or postponements thereof. WE NEED YOUR VOTE BEFORE [_________] [__], 2008. PLEASE SIGN AND DATE THE REVERSE SIDE. EX-99.(17)(E) 13 d23329_ex99-17e.txt PIONEER - ------------------------------------------------------------------------------- TAX FREE INCOME FUND Prospectus May 1, 2008 (As revised May 9, 2008) Class A, Class B and Class C Shares Contents - --------------------------------------------------- Basic information about the fund .............. 1 Management .................................... 10 Buying, exchanging and selling shares ......... 12 Dividends, capital gains and taxes ............ 43 Financial highlights .......................... 45
Neither the Securities and Exchange Commission nor any state securities agency has approved or disapproved the [LOGO]PIONEER fund's shares or determined whether this Investments(R) prospectus is accurate or complete. Any representation to the contrary is a crime. - ------------------------------------------------------------------------------- An investment in the fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Contact your investment professional to discuss how the fund fits into your portfolio. - ------------------------------------------------------------------------------- Basic information about the fund Investment objective As high a level of current income exempt from federal income taxes as possible consistent with the preservation of capital. Principal investment strategies Normally, the fund invests at least 80% of its total assets in investment grade securities that provide income that is exempt from regular federal income tax and is not subject to the alternative minimum tax (AMT). These investments include bonds, notes and other debt instruments issued by or on behalf of states, counties, municipalities, territories and possessions of the United States and the District of Columbia and their authorities, political subdivisions, agencies or instrumentalities. The fund may invest in securities of any maturity. The fund may invest 25% or more of its assets in issuers in any one or more states or securities the payments on which are derived from gas, electric, telephone, sewer and water segments of the municipal bond market. The fund may also invest up to 20% of its assets in industrial development bonds. The fund's investments may have fixed or variable principal payments and all types of interest rate payment and reset terms, including fixed rate, inverse floating rate, floating rate, zero coupon, contingent, deferred and payment in kind and auction rate features. The fund's investments may include instruments that allow for balloon payments or negative amortization payments. Such investments permit the borrower to avoid paying currently a portion of the interest accruing on the instrument. While these features make the debt instrument more affordable to the borrower in the near term, they increase the risk that the borrower will be unable to make the resulting higher payment or payments that become due at the maturity of the loan. Pioneer Investment Management, Inc., the fund's investment adviser, considers both broad economic factors and issuer specific factors in selecting a portfolio designed to achieve the fund's investment objective. In assessing the appropriate maturity and rating weighting of the fund's portfolio, Pioneer considers a variety of factors that are expected to influence economic activity and interest rates. These factors include fundamental economic indicators, such as the rates of economic growth and inflation, Federal Reserve monetary policy and the relative value of the U.S. dollar compared to other currencies. Once Pioneer determines the preferable portfolio characteristics, Pioneer selects individual securities based upon the terms of the securities (such as yields compared to U.S. Treasuries or comparable issues), liquidity and rating and issuer diversification. Pioneer also employs fundamental research, an evaluation of the issuer based on its financial statements and operations, to assess an issuer's credit quality, taking into account financial condition, future capital needs and potential for change in rating. 1 Basic information about the fund In making these portfolio decisions, Pioneer relies on the knowledge, experience and judgment of its staff and the staff of its affiliates who have access to a wide variety of research. - ------------------------------------------------------------------------------- Investment grade securities A debt security is considered investment grade if it is: o Rated BBB or higher at the time of purchase by Standard & Poor's Ratings Group; o Rated the equivalent rating by another nationally recognized statistical rating organization; or o Determined to be of equivalent credit quality by Pioneer Securities in the lowest category of investment grade are considered to have speculative characteristics. - ------------------------------------------------------------------------------- Principal risks of investing in the fund You could lose money on your investment in the fund or the fund could underperform other investments if: o Interest rates go up, causing the value of the fund's investments to decline. This is known as interest rate risk (this risk may be greater for securities with longer maturities) o The issuer of a security owned by the fund fails to pay principal and/or interest, otherwise defaults or is perceived to be less creditworthy, the security's credit rating is downgraded, or the credit quality of any underlying assets declines. This is known as credit risk. This risk is greater for high yield securities than for securities of higher credit qality o New federal or state legislation or other developments adversely affects the tax-exempt status of securities held by the fund or the financial ability of municipalities to repay these obligations o The issuer of a security owned by the fund may not be able to make timely payments because of a general economic downturn or increased governmental costs o To the extent the fund concentrates its investments in a single state or securities the payments on which are dependent upon a single industry, the fund will be more susceptible to risks associated with that state or industry o Pioneer is incorrect in its expectation of changes in interest rates or the credit quality of an issuer Although distributions of interest income from the fund's tax-exempt securities are generally exempt from federal income tax, distributions from other sources, including capital gain distributions, and any gains on the sale of your shares, are not. You should consult a tax adviser about whether an alternative minimum tax applies to you and about state and local taxes on your fund distributions. 2 Market segment risks To the extent the fund emphasizes, from time to time, investments in a market segment, the fund will be subject to a greater degree to the risks particular to the industries in that segment, and may experience greater market fluctuation, than a fund without the same focus. 3 Basic information about the fund The fund's past performance The bar chart and table indicate the risks of investing in the fund by showing how the fund has performed in the past. The fund's performance will vary from year to year. The fund's past performance (before and after taxes) does not necessarily indicate how it will perform in the future. As a shareowner, you may lose or make money on your investment. Fund performance The chart shows the year-by-year performance of the fund's Class A shares. Class B and Class C shares will have different performance because they have different expenses. The chart does not reflect any sales charge you may pay when you buy or sell fund shares. Any sales charge will reduce your return. Annual return Class A shares (%) (Year ended December 31) THE TABLE BELOW WAS REPRESENTED BY A BAR GRAPH IN THE PROINTED MATERIAL] '98 6.20 '99 -4.29 '00 11.63 '01 4.13 '02 7.06 '03 5.80 '04 4.76 '05 4.05 '06 5.31 '07 -1.23
The highest calendar quarterly return was 4.84% (09/30/2000 to 12/31/2000) The lowest calendar quarterly return was -3.38% (03/31/2004 to 06/30/2004) 4 Comparison with the Lehman Brothers Municipal Bond Index The table shows the average annual total returns for each class of the fund over time and compares these returns to the returns of the Lehman Brothers Municipal Bond Index. This index is a broad measure of the municipal bond market Unlike the fund, the index is not managed and does not incur fees, expenses or taxes. You cannot invest directly in an index. The table: o Reflects sales charges applicable to the class o Assumes that you sell your shares at the end of the period o Assumes that you reinvest all of your dividends and distributions Average annual total return (%) (for periods ended December 31, 2007)
Since Inception 1 Year 5 Years 10 Years Inception Date - ----------------------------------------------------------------------------------------- Class A 1/18/77 Return before taxes -5.65 2.75 3.78 5.84 - ----------------------------------------------------------------------------------------- Return after taxes on distributions -5.68 2.73 3.66 5.67 - ----------------------------------------------------------------------------------------- Return after taxes on distributions and sale of shares -2.31 2.98 3.82 5.72 - ----------------------------------------------------------------------------------------- Class B 4/28/95 Return before taxes -5.76 2.92 3.47 4.20 - ----------------------------------------------------------------------------------------- Class C+ 1/31/96 Return before taxes -1.97 2.96 3.48 3.80 - ----------------------------------------------------------------------------------------- Lehman Brothers Municipal Bond Index (reflects no deduction for fees, expenses or taxes) 3.36 4.30 5.18 7.49* - -----------------------------------------------------------------------------------------
+ The performance of Class C shares does not reflect the 1% front-end sales charge in effect prior to February 1, 2004. If you paid a 1% sales charge, your returns would be lower than those shown above. * Since December 31, 1979. Index return information is not available for prior periods. Return of the index since the inception of Class B shares: 5.91%. Class C shares: 5.42%. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor's tax situation and may differ from those shown, and the after-tax returns shown are not relevant to investors who hold fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns for Class B and Class C shares will vary from the after-tax returns presented for Class A shares. 5 Basic information about the fund Fees and expenses This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. Shareowner fees
paid directly from your investment Class A Class B Class C - --------------------------------------------------------------------------------------- Maximum sales charge (load) when you buy shares as a percentage of offering price 4.50% None None - --------------------------------------------------------------------------------------- Maximum deferred sales charge (load) as a percent- age of offering price or the amount you receive when you sell shares, whichever is less None(1) 4% 1% - ---------------------------------------------------------------------------------------
Annual fund operating expenses
paid from the assets of the fund as a percentage of average daily net assets Class A Class B Class C - --------------------------------------------------------------------------------------- Management Fee 0.47% 0.47% 0.47% - --------------------------------------------------------------------------------------- Distribution and Service (12b-1) Fee 0.25% 1.00% 1.00% - --------------------------------------------------------------------------------------- Other Expenses 0.12% 0.22% 0.13% - --------------------------------------------------------------------------------------- Total Annual Fund Operating Expenses(2) 0.84% 1.69% 1.60% - ---------------------------------------------------------------------------------------
Example This example helps you compare the cost of investing in the fund with the cost of investing in other mutual funds. It assumes that: a) you invest $10,000 in the fund for the time periods shown, b) you reinvest all dividends and distributions, c) your investment has a 5% return each year and d) the fund's operating expenses remain the same. Although your actual costs may be higher or lower, under these assumptions your costs would be:
If you sell your shares If you do not sell your shares ---------------------------------------- --------------------------------------- Number of years you own your shares ---------------------------------------------------------------------------------- 1 3 5 10 1 3 5 10 - ---------------------------------------------------------------------------------------------- Class A $532 $706 $ 895 $1,440 $532 $706 $895 $1,440 - ---------------------------------------------------------------------------------------------- Class B 572 833 1,018 1,772 172 533 918 1,772 - ---------------------------------------------------------------------------------------------- Class C 263 505 871 1,900 163 505 871 1,900 - ----------------------------------------------------------------------------------------------
1 Class A purchases of $1 million or more and purchases by participants in certain group plans are not subject to an initial sales charge but may be subject to a contingent deferred sales charge of 1%. See "Buying, exchanging and selling shares." 2 Total annual fund operating expenses in the table have not been reduced by any expense offset arrangements. 6 Additional information about investment strategies and risks The following sections provide additional information about the fund's investment strategies and risks. To learn more about these investments and risks, you should obtain and read the statement of additional information (SAI). More on rating criteria For purposes of the fund's credit quality policies, if a security receives different ratings from nationally recognized statistical rating organizations, the fund will use the rating chosen by the portfolio manager as most representative of the security's credit quality. If a rating organization changes the quality rating assigned to one or more of the fund's portfolio securities, or the credit quality deteriorates, Pioneer will consider if any action is appropriate in light of the fund's investment objective and policies. Credit ratings are only the opinions of the companies issuing them and are not absolute guarantees of quality. Taxable investments The fund may invest up to 20% of its net assets in taxable securities of other investment companies, investment grade commercial paper, U.S. government securities, U.S. or foreign bank instruments and repurchase agreements. Below investment grade securities The fund may invest up to 10% of its net assets in debt securities rated below investment grade or, if unrated, of equivalent quality as determined by Pioneer. Debt securities rated below investment grade are commonly referred to as "junk bonds" and are considered speculative. Below investment grade debt 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 quality debt securities. The fund may invest in debt securities rated "D" or better, or comparable unrated securities. Collateralized debt obligations The fund may invest in asset-backed securities issued by special entities, such as trusts, that are backed by a pool of financial assets. The fund may invest in collateralized debt obligations (CDOs), which include collateralized bond obligations (CBOs), collateralized loan obligations (CLOs) and other similarly structured securities. A CDO is a trust backed by a pool of fixed income securities. The trust typically is split into two or more portions, called tranches, which vary in credit quality and yield. Lower tranches pay higher interest rates but represent lower degrees of credit quality and are more sensitive to the rate of defaults in the pool of obligations. The risks of an investment in a CDO depend largely on the type of the underlying obligations (e.g., an underlying obligation may decline in quality or default) and the tranche of the CDO in which the fund invests (e.g., the fund may 7 Basic information about the fund invest in a tranche of CDO that is subordinate to other tranches). Investments in CDOs may be characterized by the fund as illiquid securities, which may be difficult to sell at an advantageous time or price. Inverse floating rate obligations The fund may invest up to 10% of its net assets in inverse floating rate obligations (a type of derivative instrument). Inverse floating rate obligations represent interests in tax-exempt bonds. The interest rate on inverse floating rate obligations will generally decrease as short-term interest rates increase, and increase as short-term rates decrease. Due to their leveraged structure, the sensitivity of the market value of an inverse floating rate obligation to changes in interest rates is generally greater than a comparable long-term bond issued by the same municipality and with similar credit quality, redemption and maturity provisions. Inverse floating rate obligations may be volatile and involve leverage risk. Derivatives The fund may, but is not required to, use futures and options on securities, indices and other derivatives. A derivative is a security or instrument whose value is determined by reference to the value or the change in value of one or more securities, indices or other financial instruments. Although there is no specific limitation on investing in derivatives, the fund does not use derivatives as a primary investment technique and generally limits their use to hedging. However, the fund may use derivatives for a variety of non-principal purposes, including: o As a hedge against adverse changes in the market prices of securities or interest rates o As a substitute for purchasing or selling securities o To increase the fund's return as a non-hedging strategy that may be considered speculative Derivatives may be subject to market risk, interest rate risk and credit risk. The fund's use of certain derivatives may, in some cases, involve forms of financial leverage, which involves risk and may increase the volatility of the fund's net asset value. Even a small investment in derivatives can have a significant impact on the fund's investment exposure to the market prices of securities or interest rates. Therefore, using derivatives can disproportion- ately increase losses and reduce opportunities for gain. If changes in a derivative's value do not correspond to changes in the value of the fund's other investments or do not correlate well with the underlying asset, rate or index, the fund may not fully benefit from or could lose money on the derivative position. In addition, some derivatives involve risk of loss if the issuer of the derivative defaults on its obligation. Certain derivatives may be less liquid. Some derivatives may involve the risk of improper valuation, which may reduce the returns of the fund if it cannot sell or terminate the derivative at an advantageous time or price. The fund will only invest in derivatives to the extent Pioneer believes these investments do not prevent the fund from 8 seeking its investment objective, but derivatives may not perform as intended. Suitable derivatives may not be available in all circumstances or at reasonable prices and may not be used by the fund for a variety of reasons. Cash management and temporary investments Normally, the fund invests substantially all of its assets to meet its investment objective. The fund may invest the remainder of its assets in securities with remaining maturities of less than one year or cash equivalents, or may hold cash. For temporary defensive purposes, including during periods of unusual cash flows, the fund may depart from its principal investment strategies and invest part or all of its assets in these securities or may hold cash. During such periods, the fund may not be able to achieve its investment objective. The fund may adopt a defensive strategy when Pioneer believes securities in which the fund normally invests have extraordinary risks due to political or economic factors and in other extraordinary circumstances. Short-term trading The fund usually does not trade for short-term profits. The fund will sell an investment, however, even if it has only been held for a short time, if it no longer meets the fund's investment criteria. If the fund does a lot of trading, it may incur additional operating expenses, which would reduce performance, and could cause shareowners to incur a higher level of taxable income or capital gains. See "Financial highlights" for actual annual turnover rates. Disclosure of portfolio holdings The fund's policies and procedures with respect to disclosure of the fund's portfolio securities are described in the statement of additional information. 9 Management Pioneer, the fund's investment adviser, selects the fund's investments and oversees the fund's operations. Pioneer is an indirect, wholly owned subsidiary of UniCredito Italiano S.p.A., one of the largest banking groups in Italy. Pioneer is part of the global asset management group providing investment management and financial services to mutual funds, institutional and other clients. As of March 31, 2008, assets under management were approximately $301 billion worldwide, including over $74 billion in assets under management by Pioneer. Investment adviser Pioneer's main office is at 60 State Street, Boston, Massachusetts 02109. The firm's U.S. mutual fund investment history includes creating in 1928 one of the first mutual funds. Portfolio management Day-to-day management of the fund's portfolio is the responsibility of David Eurkus, lead portfolio manager. Mr. Eurkus is supported by Timothy Pynchon, portfolio manager, and the fixed income team. Members of this team manage other Pioneer funds investing primarily in fixed income securities. The portfolio managers and the team also may draw upon the research and investment management expertise of Pioneer's affiliate, Pioneer Investment Management Limited. Mr. Eurkus joined Pioneer as a senior vice president in 2001 and has been an investment professional since 1969. Mr. Pynchon joined Pioneer as a vice president in 2000 and has been an investment professional since 1982. The fund's statement of additional information provides additional information about each portfolio manager's compensation, other accounts managed by the portfolio manager, and each portfolio manager's ownership of shares of the fund. Management fee The fund pays Pioneer a fee for managing the fund and to cover the cost of providing certain services to the fund. Pioneer's annual fee is equal to 0.50% of the fund's average daily net assets up to $250 million, 0.45% of the next $500 million and 0.40% on assets over $750 million. The fee is accrued daily and paid monthly. For the fiscal year ended December 31, 2007, the fund paid management fees equivalent to 0.47% of the fund's average daily net assets. A discussion regarding the basis for the Board of Trustees' approval of the management contract is available in the fund's annual report to shareholders, for the fiscal year ended December 31, 2007. 10 Distributor and transfer agent Pioneer Funds Distributor, Inc. is the fund's distributor. Pioneer Investment Management Shareholder Services, Inc. is the fund's transfer agent. The fund compensates the distributor and transfer agent for their services. The distributor and the transfer agent are affiliates of Pioneer. 11 Buying, exchanging and selling shares Net asset value The fund's net asset value is the value of its securities plus any other assets minus its accrued operating expenses and other liabilities. The fund calculates a net asset value for each class of shares every day the New York Stock Exchange is open when regular trading closes (normally 4:00 p.m. Eastern time). The fund generally values its securities using closing market prices or readily available market quotations. When closing market prices or market quotations are not available or are considered by Pioneer to be unreliable, the fund uses fair value methods to value its securities pursuant to procedures adopted by the Board of Trustees. Valuing securities using fair value methods may cause the net asset value of the fund's shares to differ from the net asset value that would be calculated only using market prices. For market prices and quotations, as well as for some fair value methods, the fund relies upon securities prices provided by pricing services. The fund uses fair value pricing methods for a security, including a non-U.S. security, when Pioneer determines that the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security at the time the fund calculates its net asset value. This may occur for a variety of reasons that affect either the relevant securities markets generally or the specific issuer. For example, with respect to non-U.S. securities held by the fund, developments relating to specific events in the securities markets or the specific issuer may occur between the time the primary market closes and the time the fund determines its net asset value. International securities markets may be open on days when the U.S. markets are closed. For this reason, the values of any international securities owned by the fund could change on a day you cannot buy or sell shares of the fund. Certain types of securities, including those discussed in this paragraph, are priced using fair value pricing methods rather than market prices. The fund uses a pricing matrix to determine the value of fixed income securities that may not trade daily. A pricing matrix is a means of valuing a debt security on the basis of current market prices for other debt securities and historical trading patterns in the market for fixed income securities. The fund values cash equivalent securities with remaining maturities of 60 days or less at amortized cost. To the extent that the fund invests in the shares of other registered open-end investment companies that are not traded on an exchange (mutual funds), such shares are valued at their published net asset values per share as reported by the funds. The prospectuses of these funds explain the circumstances under which the funds will use fair value pricing methods to value their securities and the effects of using the fair value methodology. You buy or sell shares at the share price. When you buy Class A shares, you pay an initial sales charge unless you qualify for a waiver or reduced sales charge. 12 When you sell Class B or Class C shares, you may pay a contingent deferred sales charge depending on how long you have owned your shares. - ------------------------------------------------------------------------------- Share price The net asset value per share calculated on the day of your transaction, adjusted for any applicable sales charge. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Contingent deferred sales charge A sales charge that may be deducted from your sale proceeds. - ------------------------------------------------------------------------------- Choosing a class of shares The fund offers three classes of shares through this prospectus. Each class has different sales charges and expenses, allowing you to choose the class that best meets your needs. Factors you should consider include: o How long you expect to own the shares o The expenses paid by each class o Whether you qualify for any reduction or waiver of sales charges Your investment professional can help you determine which class meets your goals. Your investment firm may receive different compensation depending upon which class you choose. If you are not a U.S. citizen and are purchasing shares outside the U.S., you may pay different sales charges under local laws and business practices. Distribution plan The fund has adopted a distribution plan for each class of shares offered through this prospectus in accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the fund pays distribution and service fees to the distributor. Because these fees are an ongoing expense of the fund, over time they increase the cost of your investment and your shares may cost more than shares that are subject to other types of sales charges. Additional payments to financial intermediaries There are two principal ways you compensate the financial intermediary through which you buy shares of the fund - directly, by the payment of sales commissions, if any; and indirectly, as a result of the fund paying Rule 12b-1 fees. The fund also may pay intermediaries for administrative services and transaction processing. Pioneer and its affiliates may make additional payments to your financial intermediary. These payments by Pioneer may provide your financial intermediary 13 Buying, exchanging and selling shares with an incentive to favor the Pioneer funds over other mutual funds or assist the distributor in its efforts to promote the sale of the fund's shares. Financial intermediaries include broker-dealers, banks (including bank trust departments), registered investment advisers, financial planners, retirement plan administrators and other types of intermediaries. Pioneer makes these additional payments (sometimes referred to as "revenue sharing") to financial intermediaries out of its own assets. Revenue sharing is not an expense of the Pioneer funds. Pioneer may base these payments on a variety of criteria, including the amount of sales or assets of the Pioneer funds attributable to the financial intermediary or as a per transaction fee. Not all financial intermediaries receive additional compensation and the amount of compensation paid varies for each financial intermediary. In certain cases, these payments may be significant. Pioneer determines which firms to support and the extent of the payments it is willing to make, generally choosing firms that have a strong capability to effectively distribute shares of the Pioneer funds and that are willing to cooperate with Pioneer's promotional efforts. Pioneer also may compensate financial intermediaries (in addition to amounts that may be paid by the fund) for providing certain administrative services and transaction processing services. Pioneer may benefit from revenue sharing if the intermediary features the Pioneer funds in its sales system (such as by placing certain Pioneer funds on its preferred fund list or giving access on a preferential basis to members of the financial intermediary's sales force or management). In addition, the financial intermediary may agree to participate in the distributor's marketing efforts (such as by helping to facilitate or provide financial assistance for conferences, seminars or other programs at which Pioneer personnel may make presentations on the Pioneer funds to the intermediary's sales force). To the extent intermediaries sell more shares of the Pioneer funds or retain shares of the Pioneer funds in their clients' accounts, Pioneer receives greater management and other fees due to the increase in the Pioneer funds' assets. The intermediary may earn a profit on these payments to the intermediary if the amount of the payment exceeds the intermediary's costs. The compensation that Pioneer pays to financial intermediaries is discussed in more detail in the fund's statement of additional information. Your inter- mediary may charge you additional fees or commissions other than those disclosed in this prospectus. Intermediaries may categorize and disclose these arrangements differently than the discussion above and in the statement of additional 14 information. You can ask your financial intermediary about any payments it receives from Pioneer or the Pioneer funds, as well as about fees and/or commissions it charges. Pioneer and its affiliates may have other relationships with your financial intermediary relating to the provision of services to the Pioneer funds, such as providing omnibus account services or effecting portfolio transactions for the Pioneer funds. If your intermediary provides these services, Pioneer or the Pioneer funds may compensate the intermediary for these services. In addition, your intermediary may have other relationships with Pioneer or its affiliates that are not related to the Pioneer funds. 15 Buying, exchanging and selling shares Comparing classes of shares
Class A Class B Class C - ---------------------------------------------------------------------------------------------------- Why you might Class A shares may be You may prefer Class B You may prefer Class C prefer each class your best alternative if shares if you do not shares if you do not you prefer to pay an want to pay an initial wish to pay an initial initial sales charge and sales charge, or if you sales charge and you have lower annual plan to hold your invest- would rather pay higher expenses, or if you ment for at least annual expenses qualify for any reduction five years. over time. or waiver of the initial sales charge. - ---------------------------------------------------------------------------------------------------- Initial Up to 4.50% of the None None sales charge offering price, which is reduced or waived for large purchases and certain types of inves- tors. At the time of your purchase, your invest- ment firm may receive a commission from the distributor of up to 4%, declining as the size of your investment increases. - ---------------------------------------------------------------------------------------------------- Contingent None, except in certain Up to 4% is charged if A 1% charge if you sell deferred circumstances when you sell your shares. your shares within one sales charges the initial sales charge The charge is reduced year of purchase. Your is waived. over time and not investment firm may charged after five years. receive a commission Your investment firm from the distributor at may receive a commis- the time of your pur- sion from the distributor chase of up to 1%. at the time of your pur- chase of up to 4%. - ---------------------------------------------------------------------------------------------------- Distribution and 0.25% of average daily 1% of average daily 1% of average daily service fees net assets. net assets. net assets. - ---------------------------------------------------------------------------------------------------- Annual expenses Lower than Class B or Higher than Class A Higher than Class A (including Class C. shares; Class B shares shares; Class C shares distribution and convert to Class A do not convert to any service fees) shares after other class of shares. eight years. You continue to pay higher annual expenses. - ---------------------------------------------------------------------------------------------------- Exchange Class A shares of other Class B shares of other Class C shares of other privilege Pioneer mutual funds. Pioneer mutual funds. Pioneer mutual funds. - ---------------------------------------------------------------------------------------------------- Maximum None $49,999 $999,999 purchase amount (per transaction) - ----------------------------------------------------------------------------------------------------
16 Sales charges: Class A shares You pay the offering price when you buy Class A shares unless you qualify to purchase shares at net asset value. You pay a lower sales charge as the size of your investment increases. You do not pay a sales charge when you reinvest dividends or capital gain distributions paid by the fund. You do not pay a contingent deferred sales charge when you sell shares purchased through reinvestment of dividends or capital gain distributions. - ------------------------------------------------------------------------------- Offering price The net asset value per share plus any initial sales charge. - ------------------------------------------------------------------------------- Sales charges for Class A shares
Sales charge as % of ------------------------ Offering Net amount Amount of purchase price invested - ------------------------------------------------------------ Less than $100,000 4.50 4.71 - ------------------------------------------------------------ $100,000 but less than $250,000 3.50 3.63 - ------------------------------------------------------------ $250,000 but less than $500,000 2.50 2.56 - ------------------------------------------------------------ $500,000 but less than $1 million 2.00 2.04 - ------------------------------------------------------------ $1 million or more -0- -0- - ------------------------------------------------------------
The dollar amount of the sales charge is the difference between the offering price of the shares purchased (based on the applicable sales charge in the table) and the net asset value of those shares. Since the offering price is calculated to two decimal places using standard rounding methodology, the dollar amount of the sales charge as a percentage of the offering price and of the net amount invested for any particular purchase of fund shares may be higher or lower due to rounding. Reduced sales charges You may qualify for a reduced Class A sales charge if you own or are purchasing shares of Pioneer mutual funds. The investment levels required to obtain a reduced sales charge are commonly referred to as "breakpoints." Pioneer offers two principal means of taking advantage of breakpoints in sales charges for aggregate purchases of Class A shares of the Pioneer funds over time if: o The amount of shares you own of the Pioneer funds plus the amount you are investing now is at least $100,000 (Rights of accumulation) o You plan to invest at least $100,000 over the next 13 months (Letter of intent) 17 Buying, exchanging and selling shares Rights of accumulation If you qualify for rights of accumulation, your sales charge will be based on the combined value (at the current offering price) of all your Pioneer mutual fund shares, the shares of your spouse and the shares of any children under the age of 21. Letter of intent You can use a letter of intent to qualify for reduced sales charges in two situations: o If you plan to invest at least $100,000 (excluding any reinvestment of dividends and capital gain distributions) in the fund's Class A shares during the next 13 months o If you include in your letter of intent the value (at the current offering price) of all of your Class A shares of the fund and Class A, Class B or Class C shares of all other Pioneer mutual fund shares held of record in the amount used to determine the applicable sales charge for the fund shares you plan to buy Completing a letter of intent does not obligate you to purchase additional shares, but if you do not buy enough shares to qualify for the projected level of sales charges by the end of the 13-month period (or when you sell your shares, if earlier), the distributor will recalculate your sales charge. You must pay the additional sales charge within 20 days after you are notified of the recalculation or it will be deducted from your account (or your sale proceeds). Any share class for which no sales charge is paid cannot be included under the letter of intent. For more information regarding letters of intent, please contact your investment professional or obtain and read the statement of additional information. 18 Qualifying for a reduced Class A sales charge In calculating your total account value in order to determine whether you have net sales charge breakpoints, you can include your Pioneer mutual fund shares, those of your spouse and the shares of any children under the age of 21. Pioneer will use each fund's current offering price to calculate your total account value. Certain trustees and fiduciaries may also qualify for a reduced sales charge. To receive a reduced sales charge, you or your investment professional must, at the time of purchase, notify the distributor of your eligibility. In order to verify your eligibility for a discount, you may need to provide your investment professional or the fund with information or records, such as account numbers or statements, regarding shares of the fund or other Pioneer mutual funds held in all accounts by you, your spouse or children under the age of 21 with that investment professional or with any other financial intermediary. Eligible accounts may include joint accounts, retirement plan accounts, such as IRA and 401k accounts, and custodial accounts, such as ESA, UGMA and UTMA accounts. It is your responsibility to confirm that your investment professional has notified the distributor of your eligibility for a reduced sales charge at the time of sale. If you or your investment professional do not notify the distributor of your eligibility, you will risk losing the benefits of a reduced sales charge. For this purpose, Pioneer mutual funds include any fund for which the distributor is principal underwriter and, at the distributor's discretion, may include funds organized outside the U.S. and managed by Pioneer or an affiliate. You can locate information regarding the reduction or waiver of sales charges, in a clear and prominent format and free of charge, on Pioneer's website at www.pioneerinvestments.com. The website includes hyperlinks that facilitate access to this information. Class A purchases at a reduced initial sales charge or net asset value are also available to: Group plans if the sponsoring organization: o recommends purchases of Pioneer mutual funds to, o permits solicitation of, or o facilitates purchases by its employees, members or participants. Class A purchases at net asset value You may purchase Class A shares at net asset value (without a sales charge) as follows. If you believe you qualify for any of the Class A sales charge waivers discussed below, contact your investment professional or the distributor. You are required to provide written confirmation of your eligibility. You may not resell these shares except to or on behalf of the fund. 19 Buying, exchanging and selling shares Investments of $1 million or more and certain retirement plans You do not pay a sales charge when you purchase Class A shares if you are investing $1 million or more, are a participant in an employer-sponsored retirement plan with at least $1 million in total plan assets or are a participant in certain employer-sponsored retirement plans with accounts established with Pioneer on or before March 31, 2004 with 100 or more eligible employees or at least $500,000 in total plan assets. However, you may pay a deferred sales charge if you sell your Class A shares within 18 months of purchase. The sales charge is equal to 1% of your investment or your sale proceeds, whichever is less. Class A purchases at net asset value are available to: o Current or former trustees and officers of the fund; o Partners and employees of legal counsel to the fund (at the time of initial share purchase); o Directors, officers, employees or sales representatives of Pioneer and its affiliates (at the time of initial share purchase); o Directors, officers, employees or sales representatives of any subadviser or a predecessor adviser (or their affiliates) to any investment company for which Pioneer serves as investment adviser (at the time of initial share purchase); o Officers, partners, employees or registered representatives of broker-dealers (at the time of initial share purchase) which have entered into sales agreements with the distributor; o Employees of AmSouth Bank (at the time of initial share purchase) investing through an account held with AmSouth Investment Services, Inc.; o Members of the immediate families of any of the persons above; o Any trust, custodian, pension, profit sharing or other benefit plan of the foregoing persons; o Insurance company separate accounts; o Certain wrap accounts for the benefit of clients of investment professionals or other financial intermediaries adhering to standards established by the distributor; o Other funds and accounts for which Pioneer or any of its affiliates serve as investment adviser or manager; o Investors in connection with certain reorganization, liquidation or acquisition transactions involving other investment companies or personal holding companies; o Certain unit investment trusts; o Participants in employer-sponsored retirement plans with at least $1 million in total plan assets; o Participants in employer-sponsored retirement plans with accounts established with Pioneer on or before March 31, 2004 with 100 or more eligible employees or at least $500,000 in total plan assets; o Participants in Optional Retirement Programs if (i) your employer has authorized a limited number of mutual funds to participate in the program, (ii) all 20 participating mutual funds sell shares to program participants at net asset value, (iii) your employer has agreed in writing to facilitate investment in Pioneer mutual funds by program participants and (iv) the program provides for a matching contribution for each participant contribution; o Participants in an employer-sponsored 403(b) plan or employer-sponsored 457 plan if (i) your employer has made special arrangements for your plan to operate as a group through a single broker, dealer or financial intermediary and (ii) all participants in the plan who purchase shares of a Pioneer mutual fund do so through a single broker, dealer or other financial intermediary designated by your employer; o Individuals receiving a distribution consisting of Class Y shares of a Pioneer fund from a trust, fiduciary, custodial or other similar account who purchase Class A shares of the same Pioneer fund within 90 days of the date of the distribution; o Shareholders of record (i.e., not held in the name of your broker or an omnibus account) on the date of the reorganization of a predecessor Safeco fund into a corresponding Pioneer fund, shareholders who owned shares in the name of an omnibus account provider on that date that agrees with the fund to distinguish beneficial holders in the same manner, and retirement plans with assets invested in the predecessor Safeco fund on that date. In addition, Class A shares may be purchased at net asset value through certain mutual fund programs sponsored by qualified intermediaries, such as broker-dealers and investment advisers. In each case, the intermediary has entered into an agreement with Pioneer to include the Pioneer funds in their program without the imposition of a sales charge. The intermediary provides investors participating in the program with additional services, including advisory, asset allocation, recordkeeping or other services. You should ask your investment firm if it offers and you are eligible to participate in such a mutual fund program and whether participation in the program is consistent with your investment goals. The intermediaries sponsoring or participating in these mutual fund programs also may offer their clients other classes of shares of the funds and investors may receive different levels of services or pay different fees depending upon the class of shares included in the program. Investors should consider carefully any separate transaction and other fees charged by these programs in connection with investing in each available share class before selecting a share class. Reinstatement privilege for Class A and Class B shares If you recently sold all or part of your Class A or Class B shares, you may be able to reinvest all or part of your sale proceeds without a sales charge in Class A shares of any Pioneer mutual fund. To qualify for reinstatement: o You must send a written request to the transfer agent no more than 90 days after selling your shares and o The registration of the account in which you reinvest your sale proceeds must be identical to the registration of the account from which you sold your shares. 21 Buying, exchanging and selling shares Your purchases pursuant to the reinstatement privilege are subject to limitations on investor transactions, including the limitation on the purchase of the fund's shares within 30 calendar days of a redemption. See "Excessive trading." When you elect reinstatement, you are subject to the provisions outlined in the selected fund's prospectus, including the fund's minimum investment requirement. Your sale proceeds will be reinvested in shares of the fund at the Class A net asset value per share determined after the transfer agent receives your written request for reinstatement. You may realize a gain or loss for federal income tax purposes as a result of your sale of fund shares, and special tax rules may apply if you elect reinstatement. Consult your tax adviser for more information. Class A shares that are subject to a contingent deferred sales charge Purchases of Class A shares of $1 million or more, or by participants in a group plan which were not subject to an initial sales charge, may be subject to a contingent deferred sales charge upon redemption. A contingent deferred sales charge is payable to the distributor in the event of a share redemption within 18 months following the share purchase at the rate of 1% of the lesser of the value of the shares redeemed (exclusive of reinvested dividend and capital gain distributions) or the total cost of such shares. However, the contingent deferred sales charge is waived for redemptions of Class A shares purchased by an employer-sponsored retirement plan described under Section 401(a), 403(b) or 457 of the Internal Revenue Code that has at least $1 million in total plan assets (or that has 1,000 or more eligible employees for plans with accounts established with Pioneer on or before March 31, 2004). - ------------------------------------------------------------------------------- Contingent deferred sales charge A sales charge that may be deducted from your sale proceeds. - ------------------------------------------------------------------------------- 22 Sales charges: Class B shares You buy Class B shares at net asset value per share without paying an initial sales charge. However, if you sell your Class B shares within five years of purchase, you will pay the distributor a contingent deferred sales charge. The contingent deferred sales charge decreases as the number of years since your purchase increases. Contingent deferred sales charge
On shares sold As a % of before the dollar amount subject end of year to the sales charge - ------------------------------------------------------------------------------- 1 4 - ------------------------------------------------------------------------------- 2 4 - ------------------------------------------------------------------------------- 3 3 - ------------------------------------------------------------------------------- 4 2 - ------------------------------------------------------------------------------- 5 1 - ------------------------------------------------------------------------------- 6+ 0 - -------------------------------------------------------------------------------
Shares purchased prior to December 1, 2004 remain subject to the contingent deferred sales charges in effect at the time you purchased those shares. Shares purchased as part of an exchange or acquired as a result of a reorganization of another fund into the fund remain subject to any contingent deferred sales charge that applied to the shares you originally purchased. Conversion to Class A shares Class B shares automatically convert into Class A shares. This helps you because Class A shares pay lower expenses. Your Class B shares will convert to Class A shares eight years after the date of purchase except that: o Shares purchased by reinvesting dividends and capital gain distributions will convert to Class A shares over time in the same proportion as other shares held in the account o Shares purchased by exchanging shares from another fund will convert on the date that the shares originally acquired would have converted into Class A shares Currently, the Internal Revenue Service permits the conversion of shares to take place without imposing a federal income tax. Conversion may not occur if the Internal Revenue Service deems it a taxable event for federal tax purposes. 23 Buying, exchanging and selling shares - ------------------------------------------------------------------------------- Paying the contingent deferred sales charge (CDSC) Several rules apply for Class B shares so that you pay the lowest possible CDSC. o The CDSC is calculated on the current market value or the original cost of the shares you are selling, whichever is less o You do not pay a CDSC on reinvested dividends or distributions o If you sell only some of your shares, the transfer agent will first sell your shares that are not subject to any CDSC and then the shares that you have owned the longest o You may qualify for a waiver of the CDSC normally charged. See "Waiver or reduction of contingent deferred sales charges" - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Contingent deferred sales charge A sales charge that may be deducted from your sale proceeds. - ------------------------------------------------------------------------------- 24 Sales charges: Class C shares You buy Class C shares at net asset value per share without paying an initial sales charge. However, if you sell your Class C shares within one year of purchase, you will pay the distributor a contingent deferred sales charge of 1% of the current market value or the original cost of the shares you are selling, whichever is less. - ------------------------------------------------------------------------------- Paying the contingent deferred sales charge (CDSC) Several rules apply for Class C shares so that you pay the lowest possible CDSC. o The CDSC is calculated on the current market value or the original cost of the shares you are selling, whichever is less o You do not pay a CDSC on reinvested dividends or distributions o If you sell only some of your shares, the transfer agent will first sell your shares that are not subject to any CDSC and then the shares that you have owned the longest o You may qualify for a waiver of the CDSC normally charged. See "Waiver or reduction of contingent deferred sales charges" - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Contingent deferred sales charge A sales charge that may be deducted from your sale proceeds. - ------------------------------------------------------------------------------- Waiver or reduction of contingent deferred sales charges (CDSC) It is your responsibility to confirm that your investment professional has notified the distributor of your eligibility for a reduced sales charge at the time of sale. If you or your investment professional do not notify the distributor of your eligibility, you will risk losing the benefits of a reduced sales charge. Class A, Class B and Class C shares The distributor may waive or reduce the CDSC for Class A shares that are subject to a CDSC or for Class B or Class C shares if: o The distribution results from the death of all registered account owners or a participant in an employer-sponsored plan. For UGMAs, UTMAs and trust accounts, the waiver applies only upon the death of all beneficial owners; o You become disabled (within the meaning of Section 72 of the Internal Revenue Code) after the purchase of the shares being sold. For UGMAs, UTMAs and trust accounts, the waiver only applies upon the disability of all beneficial owners; o The distribution is made in connection with limited automatic redemptions as described in "Systematic withdrawal plans" (limited in any year to 10% of the value of the account in the fund at the time the withdrawal plan is established); 25 Buying, exchanging and selling shares o The distribution is from any type of IRA, 403(b) or employer-sponsored plan described under Section 401(a) or 457 of the Internal Revenue Code and, in connection with the distribution, one of the following applies: - It is part of a series of substantially equal periodic payments made over the life expectancy of the participant or the joint life expectancy of the participant and his or her beneficiary (limited in any year to 10% of the value of the participant's account at the time the distribution amount is established); - It is a required minimum distribution due to the attainment of age 70 1/2, in which case the distribution amount may exceed 10% (based solely on total plan assets held in Pioneer mutual funds); - It is rolled over to or reinvested in another Pioneer mutual fund in the same class of shares, which will be subject to the CDSC of the shares originally held; or - It is in the form of a loan to a participant in a plan that permits loans (each repayment applied to the purchase of shares will be subject to a CDSC as though a new purchase); o The distribution is to a participant in an employer-sponsored retirement plan described under Section 401(a) of the Internal Revenue Code or to a participant in an employer-sponsored 403(b) plan or employer-sponsored 457 plan if (i) your employer has made special arrangements for your plan to operate as a group through a single broker, dealer or financial intermed- iary and (ii) all participants in the plan who purchase shares of a Pioneer mutual fund do so through a single broker, dealer or other financial inter- mediary designated by your employer and is or is in connection with: - A return of excess employee deferrals or contributions; - A qualifying hardship distribution as described in the Internal Revenue Code. For Class B shares, waiver is granted only on payments of up to 10% of total plan assets held by Pioneer for all participants, reduced by the total of any prior distributions made in that calendar year; - Due to retirement or termination of employment. For Class B shares, waiver is granted only on payments of up to 10% of total plan assets held in a Pioneer mutual fund for all participants, reduced by the total of any prior distributions made in the same calendar year; or - From a qualified defined contribution plan and represents a participant's directed transfer, provided that this privilege has been preauthorized through a prior agreement with the distributor regarding participant directed transfers (not available to Class B shares); o The distribution is made pursuant to the fund's right to liquidate or involuntarily redeem shares in a shareholder's account; or o The selling broker elects, with the distributor's approval, to waive receipt of the commission normally paid at the time of the sale. Please see the fund's statement of additional information for more information regarding reduced sales charges and breakpoints. 26 Opening your account If your shares are held in your investment firm's name, the options and services available to you may be different from those discussed in this prospectus. Ask your investment professional or financial intermediary for more information. If you invest in the fund through investment professionals or other financial intermediaries, including wrap programs and fund supermarkets, additional conditions may apply to your investment in the fund, and the investment professional or intermediary may charge you a transaction-based or other fee for its services. These conditions and fees are in addition to those imposed by the fund and its affiliates. You should ask your investment professional or financial intermediary about its services and any applicable fees. Account options Use your account application to select options and privileges for your account. You can change your selections at any time by sending a completed account options form to the transfer agent. You may be required to obtain a signature guarantee to make certain changes to an existing account. Call or write to the transfer agent for account applications, account options forms and other account information: Pioneer Investment Management Shareholder Services, Inc. P.O. Box 55014 Boston, Massachusetts 02205-5014 Telephone 1-800-225-6292 Telephone transaction privileges If your account is registered in your name, you can buy, exchange or sell fund shares by telephone. If you do not want your account to have telephone transaction privileges, you must indicate that choice on your account application or by writing to the transfer agent. When you request a telephone transaction the transfer agent will try to confirm that the request is genuine. The transfer agent records the call, requires the caller to provide validating information for the account and sends you a written confirmation. The fund may implement other confirmation procedures from time to time. Different procedures may apply if you have a non-U.S. account or if your account is registered in the name of an institution, broker-dealer or other third party. 27 Buying, exchanging and selling shares - ------------------------------------------------------------------------------- By phone If you want to place your telephone transaction by speaking to a shareowner services representative, call 1-800-225-6292 between 8:00 a.m. and 7:00 p.m. Eastern time on any weekday that the New York Stock Exchange is open. You may use FactFone(SM) at any time. - ------------------------------------------------------------------------------- Online transaction privileges If your account is registered in your name, you may be able to buy, exchange or sell fund shares online. Your investment firm may also be able to buy, exchange or sell your fund shares online. To establish online transaction privileges: o For new accounts, complete the online section of the account application o For existing accounts, complete an account options form, write to the transfer agent or complete the online authorization screen at www.pioneerinvestments.com To use online transactions, you must read and agree to the terms of an online transaction agreement available on the Pioneer website. When you or your investment firm requests an online transaction the transfer agent electron- ically records the transaction, requires an authorizing password and sends a written confirmation. The fund may implement other procedures from time to time. Different procedures may apply if you have a non-U.S. account or if your account is registered in the name of an institution, broker-dealer or other third party. You may not be able to use the online transaction privilege for certain types of accounts, including most retirement accounts. 28 General rules on buying, exchanging and selling your fund shares Share price If you place an order to purchase, exchange or sell shares with the transfer agent or an authorized agent by the close of regular trading on the New York Stock Exchange (currently 4:00 p.m. Eastern time), your transaction will be completed at the share price determined as of the close of trading on the New York Stock Exchange on that day. If your order is placed with the transfer agent or an authorized agent after 4:00 p.m., or your order is not in good order, your transaction will be completed at the share price next determined after your order is received in good order by the fund. The authorized agent is responsible for transmitting your order to the fund in a timely manner. - ------------------------------------------------------------------------------- Good order means that: o You have provided adequate instructions o There are no outstanding claims against your account o There are no transaction limitations on your account o If you have any fund share certificates, you submit them and they are signed by each record owner exactly as the shares are registered o Your request includes a signature guarantee if you: - Are selling over $100,000 or exchanging over $500,000 worth of shares - Changed your account registration or address within the last 30 days - Instruct the transfer agent to mail the check to an address different from the one on your account - Want the check paid to someone other than the account's record owner(s) - Are transferring the sale proceeds to a Pioneer mutual fund account with a different registration - ------------------------------------------------------------------------------- Transaction limitations Your transactions are subject to certain limitations, including the limitation on the purchase of the fund's shares within 30 calendar days of a redemption. See "Excessive trading." Buying You may buy fund shares from any investment firm that has a sales agreement with the distributor. You can buy fund shares at the offering price. The distributor may reject any order until it has confirmed the order in writing and received payment. The fund reserves the right to stop offering any class of shares. 29 Buying, exchanging and selling shares You may use securities you own to purchase shares of the fund provided that Pioneer, in its sole discretion, determines that the securities are consistent with the fund's objective and policies and their acquisition is in the best interests of the fund. If the fund accepts your securities, they will be valued for purposes of determining the number of fund shares to be issued to you in the same way the fund will value the securities for purposes of determining its net asset value. For federal income tax purposes, you may be taxed in the same manner as if you sold the securities that you use to purchase fund shares for cash in an amount equal to the value of the fund shares that you purchase. Your broker may also impose a fee in connection with processing your purchase of fund shares with securities. Minimum investment amounts Your initial investment must be at least $1,000. Additional investments must be at least $100 for Class A shares and $500 for Class B or Class C shares. You may qualify for lower initial or subsequent investment minimums if you are opening a retirement plan account, establishing an automatic investment plan or placing your trade through your investment firm. The fund may waive the initial or subsequent investment minimums. Minimum investment amounts may be waived for, among other things, share purchases made through certain mutual fund programs (e.g., asset based fee program accounts) sponsored by qualified intermediaries, such as broker-dealers and investment advisers, that have entered into an agreement with Pioneer. Maximum purchase amounts Purchases of fund shares are limited to $49,999 for Class B shares and $999,999 for Class C shares. These limits are applied on a per transaction basis. Class A shares are not subject to a maximum purchase amount. - ------------------------------------------------------------------------------- Retirement plan accounts You can purchase fund shares through tax-deferred retirement plans for individuals, businesses and tax-exempt organizations. Your initial investment for most types of retirement plan accounts must be at least $250. Additional investments for most types of retirement plans must be at least $100. You may not use the account application accompanying this prospectus to establish a Pioneer retirement plan. You can obtain retirement plan applications from your investment firm or by calling the Retirement Plans Department at 1-800-622-0176. - ------------------------------------------------------------------------------- 30 Identity verification To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. When you open an account, you will need to supply your name, address, date of birth, and other information that will allow the fund to identify you. The fund may close your account if we cannot adequately verify your identity. The redemption price will be the net asset value on the date of redemption. Exchanging You may exchange your shares for shares of the same class of another Pioneer mutual fund. Your exchange request must be for at least $1,000. The fund allows you to exchange your shares at net asset value without charging you either an initial or contingent deferred sales charge at the time of the exchange. Shares you acquire as part of an exchange will continue to be subject to any contingent deferred sales charge that applies to the shares you originally purchased. When you ultimately sell your shares, the date of your original purchase will determine your contingent deferred sales charge. Before you request an exchange, consider each fund's investment objective and policies as described in the fund's prospectus. Selling Your shares will be sold at net asset value per share next calculated after the fund or its authorized agent, such as a broker-dealer, receives your request in good order. If the shares you are selling are subject to a deferred sales charge, it will be deducted from the sale proceeds. The fund generally will send your sale proceeds by check, bank wire or electronic funds transfer. Normally you will be paid within seven days. If you recently sent a check to purchase the shares being sold, the fund may delay payment of the sale proceeds until your check has cleared. This may take up to 10 calendar days from the purchase date. If you are selling shares from a non-retirement account or certain IRAs, you may use any of the methods described below. If you are selling shares from a retirement account other than an IRA, you must make your request in writing. - ------------------------------------------------------------------------------- You may have to pay income taxes on a sale or an exchange. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Consult your investment professional to learn more about buying, exchanging or selling fund shares. - ------------------------------------------------------------------------------- 31 Buying, exchanging and selling shares Buying shares Through your investment firm Normally, your investment firm will send your purchase request to the fund's distributor and/or transfer agent. Consult your investment professional for more information. Your investment firm receives a commission from the distributor, and may receive additional compensation from Pioneer, for your purchase of fund shares. By phone or online You can use the telephone or online purchase privilege if you have an existing non-retirement account. Certain IRAs can use the telephone purchase privilege. If your account is eligible, you can purchase additional fund shares by phone or online if: o You established your bank account of record at least 30 days ago o Your bank information has not changed for at least 30 days o You are not purchasing more than $100,000 worth of shares per account per day o You can provide the proper account identification information When you request a telephone or online purchase, the transfer agent will electronically debit the amount of the purchase from your bank account of record. The transfer agent will purchase fund shares for the amount of the debit at the offering price determined after the transfer agent receives your telephone or online purchase instruction and good funds. It usually takes three business days for the transfer agent to receive notification from your bank that good funds are available in the amount of your investment. In writing, by mail You can purchase fund shares for an existing fund account by mailing a check to the transfer agent. Make your check payable to the fund. Neither initial nor subsequent investments should be made by third party check, travelers check, or credit card check. Your check must be in U.S. dollars and drawn on a U.S. bank. Include in your purchase request the fund's name, the account number and the name or names in the account registration. 32 Exchanging shares Through your investment firm Normally, your investment firm will send your exchange request to the fund's transfer agent. Consult your investment professional for more information about exchanging your shares. By phone or online After you establish an eligible fund account, you can exchange fund shares by phone or online if: o You are exchanging into an existing account or using the exchange to establish a new account, provided the new account has a registration identical to the original account o The fund into which you are exchanging offers the same class of shares o You are not exchanging more than $500,000 worth of shares per account per day o You can provide the proper account identification information In writing, by mail or by fax You can exchange fund shares by mailing or faxing a letter of instruction to the transfer agent. You can exchange fund shares directly through the fund only if your account is registered in your name. However, you may not fax an exchange request for more than $500,000. Include in your letter: o The name, social security number and signature of all registered owners o A signature guarantee for each registered owner if the amount of the exchange is more than $500,000 o The name of the fund out of which you are exchanging and the name of the fund into which you are exchanging o The class of shares you are exchanging o The dollar amount or number of shares you are exchanging 33 Buying, exchanging and selling shares Selling shares Through your investment firm Normally, your investment firm will send your request to sell shares to the fund's transfer agent. Consult your investment professional for more information. The fund has authorized the distributor to act as its agent in the repurchase of fund shares from qualified investment firms. The fund reserves the right to terminate this procedure at any time. By phone or online If you have an eligible non-retirement account, you may sell up to $100,000 per account per day by phone or online. You may sell fund shares held in a retirement plan account by phone only if your account is an eligible IRA (tax penalties may apply). You may not sell your shares by phone or online if you have changed your address (for checks) or your bank information (for wires and transfers) in the last 30 days. You may receive your sale proceeds: o By check, provided the check is made payable exactly as your account is registered o By bank wire or by electronic funds transfer, provided the sale proceeds are being sent to your bank address of record In writing, by mail or by fax You can sell some or all of your fund shares by writing directly to the fund only if your account is registered in your name. Include in your request your name, your social security number, the fund's name, your fund account number, the class of shares to be sold, the dollar amount or number of shares to be sold and any other applicable requirements as described below. The transfer agent will send the sale proceeds to your address of record unless you provide other instructions. Your request must be signed by all registered owners and be in good order. The transfer agent will not process your request until it is received in good order. You may sell up to $100,000 per account per day by fax. 34 How to contact us By phone For information or to request a telephone transaction between 8:00 a.m. and 7:00 p.m. (Eastern time) by speaking with a shareholder services representative call 1-800-225-6292 To request a transaction using FactFone(SM) call 1-800-225-4321 Telecommunications Device for the Deaf (TDD) 1-800-225-1997 By mail Send your written instructions to: Pioneer Investment Management Shareholder Services, Inc. P.O. Box 55014 Boston, Massachusetts 02205-5014 Pioneer website www.pioneerinvestments.com By fax Fax your exchange and sale requests to: 1-800-225-4240 35 Buying, exchanging and selling shares Excessive trading Frequent trading into and out of the fund can disrupt portfolio management strategies, harm fund performance by forcing the fund to hold excess cash or to liquidate certain portfolio securities prematurely and increase expenses for all investors, including long-term investors who do not generate these costs. An investor may use short-term trading as a strategy, for example, if the investor believes that the valuation of the fund's portfolio securities for purposes of calculating its net asset value does not fully reflect the then current fair market value of those holdings. The fund discourages, and does not take any intentional action to accommodate, excessive and short-term trading practices, such as market timing. Although there is no generally applied standard in the marketplace as to what level of trading activity is excessive, we may consider trading in the fund's shares to be excessive for a variety of reasons, such as if: o You sell shares within a short period of time after the shares were purchased; o You make two or more purchases and redemptions within a short period of time; o You enter into a series of transactions that indicate a timing pattern or strategy; or o We reasonably believe that you have engaged in such practices in connection with other mutual funds. The fund's Board of Trustees has adopted policies and procedures with respect to frequent purchases and redemptions of fund shares by fund investors. Pursuant to these policies and procedures, we monitor selected trades on a daily basis in an effort to detect excessive short-term trading. If we determine that an investor or a client of a broker or other intermediary has engaged in excessive short-term trading that we believe may be harmful to the fund, we will ask the investor, broker or other intermediary to cease such activity and we will refuse to process purchase orders (including purchases by exchange) of such investor, broker, other intermediary or accounts that we believe are under their control. In determining whether to take such actions, we seek to act in a manner that is consistent with the best interests of the fund's shareholders. While we use our reasonable efforts to detect excessive trading activity, there can be no assurance that our efforts will be successful or that market timers will not employ tactics designed to evade detection. If we are not successful, your return from an investment in the fund may be adversely affected. Frequently, fund shares are held through omnibus accounts maintained by financial intermediaries such as brokers and retirement plan administrators, where the holdings of multiple shareholders, such as all the clients of a particular broker or other intermediary, are aggregated. Our ability to monitor trading practices by investors purchasing shares through omnibus accounts may be limited and dependent upon the cooperation of the broker or other intermediary in taking steps to limit this type of activity. 36 The fund may reject a purchase or exchange order before its acceptance or the issuance of shares. The fund may also restrict additional purchases or exchanges in an account. Each of these steps may be taken for any transaction, for any reason, without prior notice, including transactions that the fund believes are requested on behalf of market timers. The fund reserves the right to reject any purchase or exchange request by any investor or financial institution if the fund believes that any combination of trading activity in the account or related accounts is potentially disruptive to the fund. A prospective investor whose purchase or exchange order is rejected will not achieve the investment results, whether gain or loss, that would have been realized if the order were accepted and an investment made in the fund. The fund and its shareholders do not incur any gain or loss as a result of a rejected order. The fund may impose further restrictions on trading activities by market timers in the future. To limit the negative effects of excessive trading on the fund, the fund has adopted the following restriction on investor transactions. If an investor redeems $5,000 or more (including redemptions that are a part of an exchange transaction) from the fund, that investor shall be prevented (or "blocked") from purchasing shares of the fund (including purchases that are a part of an exchange transaction) for 30 calendar days after the redemption. This policy does not apply to systematic purchase or withdrawal plan transactions, transactions made through employer-sponsored retirement plans described under Section 401(a), 403(b) or 457 of the Internal Revenue Code or employee benefit plans, scheduled (Internal Revenue Code Section 72(t) election) or mandatory (required minimum distribution) withdrawals from IRAs, rebalancing transactions made through certain asset allocation or "wrap" programs, transactions by insurance company separate accounts or transactions by other funds that invest in the fund. This policy does not apply to purchase or redemption transactions of less than $5,000 or to the Pioneer money market funds. Purchases pursuant to the reinstatement privilege for Class A and Class B shares are subject to this policy. We rely on financial intermediaries that maintain omnibus accounts to apply to their customers either the fund's policy described above or their own policies or restrictions designed to limit excessive trading of fund shares. However, we do not impose this policy at the omnibus account level. Account options See the account application form for more details on each of the following options. Automatic investment plans You can make regular periodic investments in the fund by setting up monthly bank drafts, government allotments, payroll deductions, a Pioneer Investomatic Plan and other similar automatic investment plans. You may use an automatic investment 37 Buying, exchanging and selling shares plan to establish a Class A share account with a small initial investment. If you have a Class B or Class C share account and your balance is at least $1,000, you may establish an automatic investment plan. Pioneer Investomatic Plan If you establish a Pioneer Investomatic Plan, the transfer agent will make a periodic investment in fund shares by means of a preauthorized electronic funds transfer from your bank account. Your plan investments are voluntary. You may discontinue your plan at any time or change the plan's dollar amount, frequency or investment date by calling or writing to the transfer agent. You should allow up to 30 days for the transfer agent to establish your plan. Automatic exchanges You can automatically exchange your fund shares for shares of the same class of another Pioneer mutual fund. The automatic exchange will begin on the day you select when you complete the appropriate section of your account application or an account options form. In order to establish automatic exchange: o You must select exchanges on a monthly or quarterly basis o Both the originating and receiving accounts must have identical registrations o The originating account must have a minimum balance of $5,000 You may have to pay income taxes on an exchange. Distribution options The fund offers three distribution options. Any fund shares you buy by reinvesting distributions will be priced at the applicable net asset value per share. (1) Unless you indicate another option on your account application, any dividends and capital gain distributions paid to you by the fund will automatically be invested in additional fund shares. (2) You may elect to have the amount of any dividends paid to you in cash and any capital gain distributions reinvested in additional shares. (3) You may elect to have the full amount of any dividends and/or capital gain distributions paid to you in cash. Options (2) or (3) are not available to retirement plan accounts or accounts with a current value of less than $500. If your distribution check is returned to the transfer agent or you do not cash the check for six months or more, the transfer agent may reinvest the amount of the check in your account and automatically change the distribution option on your account to option (1) until you request a different option in writing. If the amount of a distribution check would be less than $10, the fund may reinvest the amount in additional shares instead of sending a check. Additional shares of the fund will be purchased at the then current net asset value. 38 Directed dividends You can invest the dividends paid by one of your Pioneer mutual fund accounts in a second Pioneer mutual fund account. The value of your second account must be at least $1,000. You may direct the investment of any amount of dividends. There are no fees or charges for directed dividends. If you have a retirement plan account, you may only direct dividends to accounts with identical registrations. Systematic withdrawal plans When you establish a systematic withdrawal plan for your account, the transfer agent will sell the number of fund shares you specify on a periodic basis and the proceeds will be paid to you or to any person you select. You must obtain a signature guarantee to direct payments to another person after you have established your systematic withdrawal plan. Payments can be made either by check or by electronic transfer to a bank account you designate. To establish a systematic withdrawal plan: o Your account must have a total value of at least $10,000 when you establish your plan o You must request a periodic withdrawal of at least $50 o You may not request a periodic withdrawal of more than 10% of the value of any Class B or Class C share account (valued at the time the plan is implemented) These requirements do not apply to scheduled (Internal Revenue Code Section 72(t) election) or mandatory (required minimum distribution) withdrawals from IRAs and certain retirement plans. Systematic sales of fund shares may be taxable transactions for you. While you are making systematic withdrawals from your account, you may pay unnecessary initial sales charges on additional purchases of Class A shares or contingent deferred sales charges. Direct deposit If you elect to take dividends or dividends and capital gain distributions in cash, or if you establish a systematic withdrawal plan, you may choose to have those cash payments deposited directly into your savings, checking or NOW bank account. Voluntary tax withholding You may have the transfer agent withhold 28% of the dividends and capital gain distributions paid from your fund account (before any reinvestment) and forward the amount withheld to the Internal Revenue Service as a credit against your federal income taxes. Voluntary tax withholding is not available for retirement plan accounts or for accounts subject to backup withholding. 39 Buying, exchanging and selling shares Shareowner services Pioneer website www.pioneerinvestments.com The website includes a full selection of information on mutual fund investing. You can also use the website to get: o Your current account information o Prices, returns and yields of all publicly available Pioneer mutual funds o Prospectuses, statements of additional information and shareowner reports for all the Pioneer mutual funds o A copy of Pioneer's privacy notice If you or your investment firm authorized your account for the online transaction privilege, you may buy, exchange and sell shares online. FactFone(SM) 1-800-225-4321 You can use FactFone(SM) to: o Obtain current information on your Pioneer mutual fund accounts o Inquire about the prices and yields of all publicly available Pioneer mutual funds o Make computer-assisted telephone purchases, exchanges and redemptions for your fund accounts o Request account statements If you plan to use FactFone(SM) to make telephone purchases and redemptions, first you must activate your personal identification number and establish your bank account of record. If your account is registered in the name of a broker-dealer or other third party, you may not be able to use FactFone(SM). Household delivery of fund documents With your consent, Pioneer may send a single proxy statement, prospectus and shareowner report to your residence for you and any other member of your household who has an account with the fund. If you wish to revoke your consent to this practice, you may do so by notifying Pioneer, by phone or in writing (see "How to contact us"). Pioneer will begin mailing separate proxy statements, prospectuses and shareowner reports to you within 30 days after receiving your notice. Confirmation statements The transfer agent maintains an account for each investment firm or individual shareowner and records all account transactions. You will be sent confirmation statements showing the details of your transactions as they occur, except automatic investment plan transactions, which are confirmed quarterly. If you have more than one Pioneer mutual fund account registered in your name, the Pioneer combined account statement will be mailed to you each quarter. 40 Tax information Early each year, the fund will mail you information about the tax status of the dividends and distributions paid to you by the fund. TDD 1-800-225-1997 If you have a hearing disability and access to TDD keyboard equipment, you can contact our telephone representatives with questions about your account by calling our TDD number between 8:30 a.m. and 5:30 p.m. Eastern time any weekday that the New York Stock Exchange is open. Privacy The fund has a policy that protects the privacy of your personal information. A copy of Pioneer's privacy notice was given to you at the time you opened your account. The fund will send you a copy of the privacy notice each year. You may also obtain the privacy notice by calling the transfer agent or through Pioneer's website. Shareowner account policies Signature guarantees and other requirements You are required to obtain a signature guarantee when: o Requesting certain types of exchanges or sales of fund shares o Redeeming shares for which you hold a share certificate o Requesting certain types of changes for your existing account You can obtain a signature guarantee from most broker-dealers, banks, credit unions (if authorized under state law) and federal savings and loan associations. You cannot obtain a signature guarantee from a notary public. The Pioneer funds generally accept only medallion signature guarantees. A medallion signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency, savings association, or other financial institution that is participating in a medallion program recognized by the Securities Transfer Association. Signature guarantees from financial institutions that are not participating in one of these programs are not accepted as medallion signature guarantees. The fund may accept other forms of guarantee from financial intermediaries in limited circumstances. Fiduciaries and corporations are required to submit additional documents to sell fund shares. Minimum account size The fund requires that you maintain a minimum account value of $500. If you hold less than $500 in your account, the fund reserves the right to notify you that it intends to sell your shares and close your account. You will be given 60 days from the date of the notice to make additional investments to avoid having your shares sold. This policy does not apply to certain qualified retirement plan accounts. 41 Buying, exchanging and selling shares Telephone and website access You may have difficulty contacting the fund by telephone or accessing pioneerinvestments.com during times of market volatility or disruption in telephone or Internet service. On New York Stock Exchange holidays or on days when the exchange closes early, Pioneer will adjust the hours for the telephone center and for online transaction processing accordingly. If you are unable to access pioneerinvestments.com or reach the fund by telephone, you should communicate with the fund in writing. Share certificates The fund does not offer share certificates. Shares are electronically recorded. Any existing certificated shares can only be sold by returning your certificate to the transfer agent, along with a letter of instruction or a stock power (a separate written authority transferring ownership) and a signature guarantee. Other policies The fund and the distributor reserve the right to: o reject any purchase or exchange order for any reason, without prior notice o charge a fee for exchanges or to modify, limit or suspend the exchange privilege at any time without notice. The fund will provide 60 days' notice of material amendments to or termination of the exchange privilege o revise, suspend, limit or terminate the account options or services available to shareowners at any time, except as required by the rules of the Securities and Exchange Commission The fund reserves the right to: o suspend transactions in shares when trading on the New York Stock Exchange is closed or restricted, or when the Securities and Exchange Commission determines an emergency or other circumstances exist that make it impracticable for the fund to sell or value its portfolio securities o redeem in kind by delivering to you portfolio securities owned by the fund rather than cash. Securities you receive this way may increase or decrease in value while you hold them and you may incur brokerage and transaction charges and tax liability when you convert the securities to cash o charge transfer, shareholder servicing or similar agent fees, such as an account maintenance fee for small balance accounts, directly to accounts upon at least 30 days' notice. The fund may do this by deducting the fee from your distribution of dividends and/or by redeeming fund shares to the extent necessary to cover the fee 42 Dividends, capital gains and taxes Dividends and capital gains The fund declares dividends daily. The dividends consist of substantially all of the fund's net income (excluding any net capital gains). You begin to earn dividends on the first business day following receipt of payment for shares. You continue to earn dividends up to and including the date of sale. Dividends are normally paid on the last business day of each month. The fund generally pays any distributions of net short- and long-term capital gains in November. The fund may also pay dividends and capital gain distributions at other times if necessary for the fund to avoid U.S. federal income or excise tax. If you invest in the fund shortly before a distribution of net short- or long-term capital gains, generally you will pay a higher price per share and you will pay taxes on the amount of the distribution whether you reinvest the distribution in additional shares or receive it as cash. Taxes For U.S. federal income tax purposes, distributions from the fund's tax-exempt interest income, called "exempt-interest dividends," are exempt from regular federal income tax, but may be subject to state or local income taxes. A portion of these dividends may be tax preference items for purposes of the alternative minimum tax. Distributions from the fund's net capital gains (if any) are considered long-term capital gains and may be taxable to you at reduced rates depending upon their source and other factors. Distributions from the fund's net short-term capital gains are taxable as ordinary income. All other dividends are generally taxable as ordinary income. Since the fund's income is derived from sources that do not pay dividends, it is not expected that any dividends paid by the fund will qualify for either the dividends-received deduction for corporations or the maximum 15% U.S. federal income tax rate available to individuals on "qualified dividend income." Any taxable dividends and distributions are taxable whether you take payment in cash or reinvest them to buy additional fund shares. If the fund declares a taxable dividend in October, November or December, payable to shareholders of record in such a month, but pays it in January of the following year, you will be taxed on the dividend as if you received it in the year in which it was declared. When you sell or exchange fund shares you will generally recognize a capital gain or capital loss in an amount equal to the difference between the net amount of sale proceeds (or, in the case of an exchange, the fair market value of the shares) that you receive and your tax basis for the shares that you sell or exchange. You must provide your social security number or other taxpayer identification number to the fund along with the certifications required by the Internal Revenue Service when you open an account. If you do not or if it is otherwise legally required to do so, the fund will withhold 28% "backup withholding" tax from your 43 Dividends, capital gains and taxes dividends (other than exempt-interest dividends) and distributions, sale proceeds and any other payments to you that are subject to backup withholding. You should ask your tax adviser about any federal and state tax considerations relating to an investment in the fund, including the potential application of the alternative minimum tax to you on the fund's exempt interest dividends and possible state and local income taxation of the fund's exempt-interest dividends and other distributions. You may also consult the fund's statement of additional information for a more detailed discussion of U.S. federal income tax considerations that may affect the fund and its shareowners. - ------------------------------------------------------------------------------- Sales and exchanges may be taxable transactions to shareowners. - ------------------------------------------------------------------------------- 44 Financial highlights The financial highlights table helps you understand the fund's financial performance for the past five years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that you would have earned or lost on an investment in Class A, Class B and Class C shares of the fund (assuming reinvestment of all dividends and distributions). The information below has been audited by Ernst & Young LLP, the fund's independent registered public accounting firm, whose report is included in the fund's annual report along with the fund's financial statements. The annual report is available upon request. 45 Financial highlights Pioneer Tax Free Income Fund Class A shares
Year Ended Year Ended Year Ended Year Ended Year Ended 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 - ------------------------------------------------------------------------------------------------------- $11.75 $11.62 $11.67 $11.70 $11.61 Net asset value, beginning of period --------------------------------------------------------------- Increase (decrease) from investment operations: Net investment income $ 0.46 $ 0.47 $ 0.51 $ 0.56 $ 0.56 Net realized and unrealized gain (loss) on investments (0.60) 0.13 (0.04) (0.02) 0.09 --------------------------------------------------------------- Net increase (decrease) from investment operations $ (0.14) $ 0.60 $ 0.47 $ 0.54 $ 0.65 Distributions to shareowners: Net investment income (0.48 (0.47) (0.52) (0.57) (0.56) -------------------------------------------------------------- Net increase (decrease) in net asset value $ (0.62) $ 0.13 $ (0.05) $ (0.03) $ 0.09 -------------------------------------------------------------- Net asset value, end of period $ 11.13 $ 11.75 $ 11.62 $ 11.67 $ 11.70 ============================================================== Total return* (1.23)% 5.31 % 4.05 % 4.75 % 5.80 % Ratio of net expenses to average net assets+ 0.84 % 0.86 % 0.91 % 0.91 % 0.93 % Ratio of net investment income to average net assets+ 4.05 % 4.08 % 4.36 % 4.88 % 4.88 % Portfolio turnover rate 68 % 66 % 26 % 39 % 80 % Net assets, end of period (in thousands) $313,706 $349,683 $315,855 $307,463 $326,173 Ratios with reductions for fees paid indirectly: Net expenses 0.84 % 0.86 % 0.91 % 0.91 % 0.93 % Net investment income 4.05 % 4.08 % 4.36 % 4.88 % 4.88 % - -------------------------------------------------------------------------------------------------------
* 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. + Ratio with no reduction for fees paid indirectly. 46 Pioneer Tax Free Income Fund Class B shares
Year Ended Year Ended Year Ended Year Ended Year Ended 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 - ------------------------------------------------------------------------------------------------------- $11.65 $11.51 $11.57 $11.59 $11.51 Net asset value, beginning of period -------------------------------------------------------------- Increase (decrease) from investment operations: Net investment income $ 0.36 $ 0.39 $ 0.41 $ 0.48 $ 0.46 Net realized and unrealized gain (loss) on investments (0.59) 0.12 (0.05) (0.02) 0.09 -------------------------------------------------------------- Net increase (decrease) from investment operations $ (0.23) $ 0.51 $ 0.36 $ 0.46 $ 0.55 Distributions to shareowners: Net investment income (0.38) (0.37) (0.42) (0.48) (0.47) -------------------------------------------------------------- Net increase (decrease) in net asset value $ (0.61) $ 0.14 $ (0.06) $ (0.02) $ 0.08 -------------------------------------------------------------- Net asset value, end of period $ 11.04 $ 11.65 $ 11.51 $ 11.57 $ 11.59 ============================================================== Total return* (1.97)% 4.54 % 3.16 % 4.07 % 4.98 % Ratio of net expenses to average net assets+ 1.69 % 1.62 % 1.72 % 1.67 % 1.70 % Ratio of net investment income to average net assets+ 3.21 % 3.33 % 3.51 % 4.12 % 4.10 % Portfolio turnover rate 68 % 66 % 26 % 39 % 80 % Net assets, end of period (in thousands) $14,622 $17,667 $ 21,962 $ 17,285 $20,363 Ratios with reduction for fees paid indirectly: Net expenses 1.69 % 1.62 % 1.72 % 1.67 % 1.70 % Net investment income 3.21 % 3.33 % 3.51 % 4.12 % 4.10 % - -------------------------------------------------------------------------------------------------------
* 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. + Ratio with no reduction for fees paid indirectly. 47 Financial highlights Pioneer Tax Free Income Fund Class C shares
Year Ended Year Ended Year Ended Year Ended Year Ended 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 - ------------------------------------------------------------------------------------------------------- $11.57 $11.44 $11.49 $11.52 $11.44 Net asset value, beginning of period --------------------------------------------------------------- Increase (decrease) from investment operations: Net investment income $ 0.37 $ 0.38 $ 0.41 $ 0.47 $ 0.48 Net realized and unrealized gain (loss) on investments (0.59) 0.13 (0.04) (0.02) 0.08 --------------------------------------------------------------- Net increase (decrease) from investment operations $ (0.22) $ 0.51 $ 0.37 $ 0.45 $ 0.56 Distributions to shareowners: Net investment income (0.39) (0.38) (0.42) (0.48) (0.48) --------------------------------------------------------------- Net increase (decrease) in net asset value $ (0.61) $ 0.13 $ (0.05) $ (0.03) $ 0.08 --------------------------------------------------------------- Net asset value, end of period $ 10.96 $ 11.57 $ 11.44 $ 11.49 $ 11.52 =============================================================== Total return* (1.97) % 4.57 % 3.30 % 4.02 % 5.04 % Ratio of net expenses to average net assets+ 1.60 % 1.61 % 1.64 % 1.64 % 1.66 % Ratio of net investment income to average net assets+ 3.29 % 3.33 % 3.63 % 4.15 % 4.11 % Portfolio turnover rate 68 % 66 % 26 % 39 % 80 % Net assets, end of period (in thousands) $13,581 $12,941 $ 12,054 $ 12,577 $11,266 Ratios with reduction for fees paid indirectly: Net expenses 1.60 % 1.61 % 1.64 % 1.64 % 1.66 % Net investment income 3.29 % 3.33 % 3.63 % 4.15 % 4.11 % - -------------------------------------------------------------------------------------------------------
* 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. + Ratio with no reduction for fees paid indirectly. 48 Notes Notes Notes Notes Pioneer Tax Free Income Fund You can obtain more free information about the fund from your investment firm or by writing to Pioneer Investment Management Shareholder Services, Inc., 60 State Street, Boston, Massachusetts 02109. You may also call 1-800-225-6292. The fund makes available the statement of additional information and shareowner reports, free of charge, on the fund's website at www.pioneerinvestments.com. Shareowner reports Annual and semiannual reports to shareowners, and quarterly reports filed with the Securities and Exchange Commission, provide additional information about the fund's investments. The annual report discusses market conditions and investment strategies that significantly affected the fund's performance during its last fiscal year. Statement of additional information The statement of additional information provides more detailed information about the fund. It is incorporated by reference into this prospectus. Visit our website www.pioneerinvestments.com You can also review and copy the fund's shareowner reports, prospectus and statement of additional information at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Call 1-202-551-8090 for information. The Commission charges a fee for copies. You can get the same information free from the Commission's EDGAR database on the Internet (http://www.sec.gov). You may also e-mail requests for these documents to publicinfo@sec.gov or make a request in writing to the Commission's Public Reference Section, Washington, D.C. 20549-0102. (Investment Company Act file no. 811-02704) [LOGO]PIONEER Investments(R) Pioneer Funds Distributor, Inc. 60 State Street Boston, MA 02109 19290-02-0508 www.pioneerinvestments.com (C)2008 Pioneer Funds Distributor, Inc. Member SIPC PIONEER TAX FREE INCOME FUND 60 State Street Boston, Massachusetts 02109 STATEMENT OF ADDITIONAL INFORMATION Class A, Class B, Class C and Class Y Shares May 1, 2008 This statement of additional information is not a prospectus. It should be read in conjunction with the fund's Class A, Class B and Class C shares prospectus and its Class Y shares prospectus, each dated May 1, 2008, as supplemented or revised from time to time. A copy of each prospectus can be obtained free of charge by calling Shareholder Services at 1-800-225-6292 or by written request to the fund at 60 State Street, Boston, Massachusetts 02109. You can also obtain a copy of each prospectus from our website at: www.pioneerinvestments.com. The fund's financial statements for the fiscal year ended December 31, 2007, including the independent registered public accounting firm's report thereon, are incorporated into this statement of additional information by reference. TABLE OF CONTENTS Page ---- 1. Fund History.................................................................2 2. Investment Policies, Risks and Restrictions..................................2 3. Trustees and Officers.......................................................25 4. Investment Adviser..........................................................34 5. Principal Underwriter and Distribution Plans................................36 6. Shareholder Servicing/Transfer Agent........................................40 7. Custodian...................................................................40 8. Independent Registered Public Accounting Firm...............................40 9. Portfolio Management........................................................40 10. Portfolio Transactions......................................................44 11. Description of Shares.......................................................46 12. Sales Charges...............................................................46
13. Redeeming Shares............................................................54 14. Telephone and Online Transactions...........................................55 15. Pricing of Shares...........................................................57 16. Tax Status..................................................................58 17. Financial Statements........................................................65 18. Annual Fee, Expense and Other Information...................................65 19. Appendix A - Description of Short-Term Debt, Corporate Bond and Preferred Stock Ratings.....................................................70 20. Appendix B - Proxy Voting Policies and Procedures...........................75
1. FUND HISTORY The fund is a diversified open-end management investment company. The fund is a series of Pioneer Tax Free Income Fund (the "Trust").The fund was organized as a Nebraska corporation in 1968 and reorganized as a Delaware statutory trust in June 1994. Prior to December 1, 1993, the fund was called Mutual of Omaha Tax-Free Income Fund, Inc. From December 1, 1993 to June 30, 1994 the fund was called Pioneer Tax-Free Income Fund, Inc. From June 30, 1994 to April 26, 2002, the fund's name was Pioneer Tax-Free Income Fund. Pioneer Investment Management Inc., ("Pioneer") is the fund's investment adviser. 2. INVESTMENT POLICIES, RISKS AND RESTRICTIONS The prospectuses present the investment objective and the principal investment strategies and risks of the fund. This section supplements the disclosure in the fund's prospectuses and provides additional information on the fund's investment policies or restrictions. Restrictions or policies stated as a maximum percentage of the fund's assets are only applied immediately after a portfolio investment to which the policy or restriction is applicable (other than the limitations on borrowing and illiquid securities). Accordingly, any later increase or decrease in a percentage resulting from a change in values, net assets or other circumstances will not be considered in determining whether the investment complies with the fund's restrictions and policies. Debt Securities and Related Investments Debt Securities Rating Criteria Investment grade debt securities are those rated "BBB" or higher by Standard & Poor's Ratings Group ("Standard & Poor's") or the equivalent rating of other nationally recognized statistical rating organizations. Debt securities rated BBB are considered medium grade obligations with speculative characteristics, and adverse economic conditions or changing circumstances may weaken the issuer's ability to pay interest and repay principal. 2 Below investment grade debt securities are those rated "BB" and below by Standard & Poor's or the equivalent rating of other nationally recognized statistical rating organizations. See "Appendix A" for a description of rating categories. The fund may invest in debt securities rated "D" or better, or comparable unrated securities as determined by Pioneer. Below investment grade debt securities or comparable unrated securities are commonly referred to as "junk bonds" and are considered predominantly speculative and may be questionable as to principal and interest payments. Changes in economic conditions are more likely to lead to a weakened capacity to make principal payments and interest payments. The amount of high yield securities outstanding has proliferated as an increasing number of issuers have used high yield securities for corporate financing. An economic downturn could severely affect the ability of highly leveraged issuers to service their debt obligations or to repay their obligations upon maturity. Factors having an adverse impact on the market value of lower quality securities will have an adverse effect on the fund's net asset value to the extent that it invests in such securities. In addition, the fund may incur additional expenses to the extent it is required to seek recovery upon a default in payment of principal or interest on its portfolio holdings. The secondary market for high yield securities may not be as liquid as the secondary market for more highly rated securities, a factor which may have an adverse effect on the fund's ability to dispose of a particular security when necessary to meet its liquidity needs. Under adverse market or economic conditions, the secondary market for high yield securities could contract further, independent of any specific adverse changes in the condition of a particular issuer. As a result, the fund could find it more difficult to sell these securities or may be able to sell the securities only at prices lower than if such securities were widely traded. Prices realized upon the sale of such lower rated or unrated securities, under these circumstances, may be less than the prices used in calculating the fund's net asset value. Since investors generally perceive that there are greater risks associated with lower quality debt securities of the type in which the fund may invest, the yields and prices of such securities may tend to fluctuate more than those for higher rated securities. In the lower quality segments of the debt securities market, changes in perceptions of issuers' creditworthiness tend to occur more frequently and in a more pronounced manner than do changes in higher quality segments of the debt securities market, resulting in greater yield and price volatility. Lower rated and comparable unrated debt securities tend to offer higher yields than higher rated securities with the same maturities because the historical financial condition of the issuers of such securities may not have been as strong as that of other issuers. However, lower rated securities generally involve greater risks of loss of income and principal than higher rated securities. Pioneer will attempt to reduce these risks through portfolio diversification and by analysis of each issuer and its ability to make timely payments of income and principal, as well as broad economic trends and corporate developments. For purposes of the fund's credit quality policies, if a security receives different ratings from nationally recognized statistical rating organizations, the fund will use the rating chosen by the portfolio manager as most representative of the security's credit quality. The ratings of nationally recognized statistical rating organizations represent their opinions as to the quality of the securities that they undertake to rate and may not accurately describe the risk of the security. If a rating organization downgrades the quality rating assigned to one or more of the fund's portfolio securities, Pioneer will consider what actions, if any, are appropriate in light of the fund's investment objectives and policies including selling the downgraded security or purchasing 3 additional investment grade securities of the appropriate credit quality as soon as it is prudent to do so. At December 31, 2007, 28.7% of the fund's total assets were rated BBB (or were of equivalent quality), 1.7% of the fund's total assets were rated BB (or were of equivalent quality), 1.1% of the fund's total assets were rated B (or were of equivalent quality), and 3.0% of the fund's total assets were rated CCC and lower (or were of equivalent quality), 4.3% of the fund's long-term holdings were not rated and cash or cash equivalents represented 0.0% of the fund's long-term holdings. U.S. Government Securities U.S. government securities in which the fund invests include debt obligations of varying maturities issued by the U.S. Treasury or issued or guaranteed by an agency, authority or instrumentality of the U.S. government, including the Federal Housing Administration, Federal Financing Bank, Farmers Home Administration, Export-Import Bank of the U.S., Small Business Administration, Government National Mortgage Association ("GNMA"), General Services Administration, Central Bank for Cooperatives, Federal Farm Credit Banks, Federal Home Loan Banks ("FHLBs"), Federal Home Loan Mortgage Corporation ("FHLMC"), Federal National Mortgage Association ("FNMA"), Maritime Administration, Tennessee Valley Authority, District of Columbia Armory Board, Resolution Trust Corporation and various institutions that previously were or currently are part of the Farm Credit System (which has been undergoing reorganization since 1987). Some U.S. government securities, such as U.S. Treasury bills, Treasury notes and Treasury bonds, which differ only in their interest rates, maturities and times of issuance, are supported by the full faith and credit of the United States. Others are supported by: (i) the right of the issuer to borrow from the U.S. Treasury, such as securities of the FHLBs; (ii) the discretionary authority of the U.S. government to purchase the agency's obligations, such as securities of the FNMA; or (iii) only the credit of the issuer. No assurance can be given that the U.S. government will provide financial support in the future to U.S. government agencies, authorities or instrumentalities that are not supported by the full faith and credit of the United States. Securities guaranteed as to principal and interest by the U.S. government, its agencies, authorities or instrumentalities include: (i) securities for which the payment of principal and interest is backed by an irrevocable letter of credit issued by the U.S. government or any of its agencies, authorities or instrumentalities; and (ii) participations in loans made to non-U.S. governments or other entities that are so guaranteed. The secondary market for certain of these participations is limited and, therefore, may be regarded as illiquid. U.S. government securities may include zero coupon securities that may be purchased when yields are attractive and/or to enhance portfolio liquidity. Zero coupon U.S. government securities are debt obligations that are issued or purchased at a significant discount from face value. The discount approximates the total amount of interest the security will accrue and compound over the period until maturity or the particular interest payment date at a rate of interest reflecting the market rate of the security at the time of issuance. Zero coupon U.S. government securities do not require the periodic payment of interest. These investments benefit the issuer by mitigating its need for cash to meet debt service, but generally require a higher rate of return to attract investors who are willing to defer receipt of cash. These investments may experience greater volatility in market value than U.S. government securities that make regular payments of interest. The fund accrues income on these investments for tax and accounting purposes, which is distributable to shareholders and which, because no cash is received at the time of accrual, may require the liquidation of other portfolio securities to satisfy the fund's distribution obligations, in which case the fund will forgo the purchase of additional income producing assets with these funds. Zero coupon U.S. government securities include STRIPS and CUBES, which are issued by the U.S. 4 Treasury as component parts of U.S. Treasury bonds and represent scheduled interest and principal payments on the bonds. Municipal Obligations The fund may purchase municipal obligations. The term "municipal obligations" generally is understood to include debt obligations issued by municipalities to obtain funds for various public purposes, the income from which is, in the opinion of bond counsel to the issuer, excluded from gross income for U.S. federal income tax purposes. In addition, if the proceeds from private activity bonds are used for the construction, repair or improvement of privately operated industrial or commercial facilities, the interest paid on such bonds may be excluded from gross income for U.S. federal income tax purposes, although current federal tax laws place substantial limitations on the size of these issues. The fund's distributions of any interest it earns on municipal obligations will be taxable to shareholders as ordinary income. The two principal classifications of municipal obligations are "general obligation" and "revenue" bonds. General obligation bonds are secured by the issuer's pledge of its faith, credit, and taxing power for the payment of principal and interest. Revenue bonds are payable from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other specific revenue source, but not from the general taxing power. Sizable investments in these obligations could involve an increased risk to the fund should any of the related facilities experience financial difficulties. Private activity bonds are in most cases revenue bonds and do not generally carry the pledge of the credit of the issuing municipality. There are, of course, variations in the security of municipal obligations, both within a particular classification and between classifications. The fund may invest more than 25% of its total assets in securities the payments on which are derived from gas, electric, telephone, sewer and water segments of the municipal bond market. In view of this, an investment in the fund should be made with an understanding of the characteristics of these economic sectors and the potential risks of such an investment. Sector-wide problems include the effects of fluctuating economic conditions, energy conservation practices on levels of usage, difficulties in obtaining timely and adequate rate relief, compliance with environmental regulations, increasing capital expenditures and uncertainties with respect to fuel availability at reasonable prices. The fund does not consider broader economic sectors of the municipal bond market, such as the utilities sector, to be a single industry but will not purchase securities if more than 25% of its total assets would be invested in any one industry. For purposes of this limitation, Tax-Exempt Bonds, except those issued for the benefit of non-governmental users, are not considered to be part of an industry. The fund may invest 25% or more of its total assets in Tax-Exempt Bonds of issuers in any one state and it may invest up to 20% of its total assets in industrial development bonds. The yields on Tax-Exempt Bonds are dependent on a variety of factors, including general money market conditions, general conditions of the Tax-Exempt Bond market, the size of a particular offering, the maturity of the obligation, and the rating of the issue. The value of outstanding Tax-Exempt Bonds will vary as a result of changing evaluations of the ability of their issuers to meet the interest and principal payments. Such values will also change in response to changes in the interest rates payable on new issues of Tax-Exempt Bonds. Should such interest rates rise, the values of outstanding bonds, including those held in the fund's portfolio, will decline and (if purchased at principal amount) would sell at a discount, and, if such interest rates fall, the values of outstanding bonds will increase and (if purchased at principal amount) would sell at a 5 premium. Changes in the value of the Tax-Exempt Bonds held in the fund's portfolio arising from these or other factors will cause changes in the net asset value per share of the fund. From time to time, proposals have been introduced before Congress for the purpose of restricting or eliminating the U.S. federal income tax exemption for interest on Tax-Exempt Bonds. It can be expected that similar proposals may be introduced in the future. If such a proposal were enacted, the availability of Tax-Exempt Bonds for investment by the fund and the value of the fund's portfolio would be affected. Additionally, the fund would reevaluate its investment objective and policies and consider changes in the structure of the fund. Municipal Lease Obligations Municipal lease obligations or installment purchase contract obligations (collectively, "lease obligations") have special risks not ordinarily associated with other Tax-Exempt Bonds. Although lease obligations do not constitute general obligations of the municipality for which the municipality's taxing power is pledged, a lease obligation ordinarily is backed by the municipality's covenant to budget for, appropriate and make the payments due under the lease obligations. However, certain lease obligations contain "non-appropriation" clauses which provide that the municipality has no obligation to make lease or installment purchase payments in future years unless money is appropriated for such purpose on a yearly basis. In addition to the non-appropriation risk, these securities represent a relatively new type of financing that has not yet developed the depth of marketability associated with more conventional bonds. Although non-appropriation lease obligations are secured by the leased property, disposition of the property in the event of foreclosure might prove difficult. The fund will seek to minimize these risks. In determining the liquidity of municipal lease obligations, Pioneer, under guidelines established by the fund's Board of Trustees, will consider: (1) the essential nature of the leased property; and (2) the likelihood that the municipality will discontinue appropriating funding for the leased property because the property is no longer deemed essential to the operation of the municipality. If leased property is determined not to be essential in nature or if there is a likelihood that the municipality will discontinue appropriating funding, then the following factors will also be considered in determining liquidity: (1) any relevant factors related to the general credit quality of the municipality, which may include: (a) whether the lease can be canceled; (b) what assurance there is that the assets represented by the lease can be sold; (c) the strength of the lessee's general credit (e.g., its debt, administrative, economic and financial characteristics); and (d) the legal recourse in the event of failure to appropriate. (2) any relevant factors related to the marketability of the municipal lease obligation which may include: (a) the frequency of trades and quotes for the obligation; (b) the number of dealers willing to purchase or sell the obligation and the number of other potential purchasers; (c) the willingness of dealers to undertake to make a market in the obligation; and (d) the nature of the marketplace trades, including the time needed to dispose of the obligation, the method of soliciting offers, and the mechanics of transfer. Asset-Backed Securities The fund may invest in asset-backed securities, which are securities that represent a participation in, or are secured by and payable from, a stream of payments generated by particular assets, most 6 often a pool or pools of similar assets (e.g., trade receivables). The credit quality of these securities depends primarily upon the quality of the underlying assets and the level of credit support and/or enhancement provided. The underlying assets (e.g., loans) are subject to prepayments which shorten the securities' weighted average maturity and may lower their return. If the credit support or enhancement is exhausted, losses or delays in payment may result if the required payments of principal and interest are not made. The value of these securities also may change because of changes in the market's perception of the creditworthiness of the servicing agent for the pool, the originator of the pool, or the financial institution or trust providing the credit support or enhancement. There may be no perfected security interest in the collateral that relates to the financial assets that support asset-backed securities. Asset backed securities have many of the same characteristics and risks as the mortgage-backed securities described above. The fund may purchase commercial paper, including asset-backed commercial paper ("ABCP") that is issued by structured investment vehicles or other conduits. These conduits may be sponsored by mortgage companies, investment banking firms, finance companies, hedge funds, private equity firms and special purpose finance entities. ABCP typically refers to a debt security with an original term to maturity of up to 270 days, the payment of which is supported by cash flows from underlying assets, or one or more liquidity or credit support providers, or both. Assets backing ABCP include credit card, car loan and other consumer receivables and home or commercial mortgages, including subprime mortgages. The repayment of ABCP issued by a conduit depends primarily on the cash collections received from the conduit's underlying asset portfolio and the conduit's ability to issue new ABCP. Therefore, there could be losses to a fund investing in ABCP in the event of credit or market value deterioration in the conduit's underlying portfolio, mismatches in the timing of the cash flows of the underlying asset interests and the repayment obligations of maturing ABCP, or the conduit's inability to issue new ABCP. To protect investors from these risks, ABCP programs may be structured with various protections, such as credit enhancement, liquidity support, and commercial paper stop-issuance and wind-down triggers. However there can be no guarantee that these protections will be sufficient to prevent losses to investors in ABCP. Some ABCP programs provide for an extension of the maturity date of the ABCP if, on the related maturity date, the conduit is unable to access sufficient liquidity through the issue of additional ABCP. This may delay the sale of the underlying collateral and a fund may incur a loss if the value of the collateral deteriorates during the extension period. Alternatively, if collateral for ABCP commercial paper deteriorates in value, the collateral may be required to be sold at inopportune times or at prices insufficient to repay the principal and interest on the ABCP. ABCP programs may provide for the issuance of subordinated notes as an additional form of credit enhancement. The subordinated notes are typically of a lower credit quality and have a higher risk of default. A fund purchasing these subordinated notes will therefore have a higher likelihood of loss than investors in the senior notes. Asset-backed securities include collateralized debt obligations ("CDOs"), such as collateralized bond obligations ("CBOs"), collateralized loan obligations ("CLOs") and other similarly structured securities. A CBO is a trust backed by a pool of fixed income securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. CDOs may charge management fees and administrative expenses. 7 The trust is typically split into two or more portions, called tranches, varying in credit quality and yield. The riskiest portion is the "equity" tranche which bears the bulk of defaults from the bonds or loans in the trust and serves to protect the other, more senior tranches from default in all but the most severe circumstances. Since it is partially protected from defaults, a senior tranche from a CBO trust or CLO trust typically have higher ratings and lower yields than their underlying securities, and can be rated investment grade. Despite the protection from the equity tranche, CBO or CLO tranches can experience substantial losses due to actual defaults, increased sensitivity to defaults due to collateral default and the disappearance of protecting tranches, market anticipation of defaults, as well as aversion to CBO or CLO securities as a class. The risks of an investment in a CDO depend largely on the type of the collateral securities and the class of the CDO in which the fund invests. Normally, CBOs, CLOs and other CDOs are privately offered and sold, and thus are not registered under the securities laws. As a result, investments in CDOs may be characterized by the fund as illiquid securities. However, an active dealer market may exist for CDOs allowing a CDO to qualify for Rule 144A treatment. In addition to the normal risks associated with fixed income securities (e.g., interest rate risk and default risk), CDOs carry additional risks including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) the fund may invest in CDOs that are subordinate to other classes; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results. Subordinated Securities The fund may also invest in other types of fixed income securities which are subordinated or "junior" to more senior securities of the issuer, or which represent interests in pools of such subordinated or junior securities. Such securities may include so-called "high yield" or "junk" bonds (i.e., bonds that are rated below investment grade by a rating agency or that are of equivalent quality). Under the terms of subordinated securities, payments that would otherwise be made to their holders may be required to be made to the holders of more senior securities, and/or the subordinated or junior securities may have junior liens, if they have any rights at all, in any collateral (meaning proceeds of the collateral are required to be paid first to the holders of more senior securities). As a result, subordinated or junior securities will be disproportionately adversely affected by a default or even a perceived decline in creditworthiness of the issuer. Structured Securities The fund may invest in structured securities. The value of the principal and/or interest on such securities is determined by reference to changes in the value of specific currencies, interest rates, commodities, indices or other financial indicators (the "Reference") or the relative change in two or more References. The interest rate or the principal amount payable upon maturity or redemption may be increased or decreased depending upon changes in the Reference. The terms of the structured securities may provide in certain circumstances that no principal is due at maturity and, therefore may result in a loss of the fund's investment. Changes in the interest rate or principal payable at maturity may be a multiple of the changes in the value of the Reference. Structured securities are a type of derivative instrument and the payment and credit qualities from these securities derive from the assets embedded in the structure from which they are issued. Structured securities may entail a greater degree of risk than other types of fixed income securities. 8 Inverse Floating Rate Securities. The fund may invest in inverse floating rate obligations. The interest on an inverse floater resets in the opposite direction from the market rate of interest to which the inverse floater is indexed. An inverse floater may be considered to be leveraged to the extent that its interest rate varies by a magnitude that exceeds the magnitude of the change in the index rate of interest. The higher degree of leverage inherent in inverse floaters is associated with greater volatility in their market values. Auction Rate Securities The fund may invest in auction rate securities. Auction rate securities consist of auction rate debt securities and auction rate preferred securities issued by closed-end investment companies. Provided that the auction mechanism is successful, auction rate securities usually permit the holder to sell the securities in an auction at par value at specified intervals. The dividend is reset by "Dutch" auction in which bids are made by broker-dealers and other institutions for a certain amount of securities at a specified minimum yield. The dividend rate set by the auction is the lowest interest or dividend rate that covers all securities offered for sale. While this process is designed to permit auction rate securities to be traded at par value, there is the risk that an auction will fail due to insufficient demand for the securities. With respect to auction rate securities issued by a closed-end fund, the fund will indirectly bear its proportionate share of any management fees paid by the closed-end fund in addition to the advisory fee payable directly by the fund. Zero Coupon and Deferred Interest Bonds Tax-Exempt Bonds in which the fund may invest also include zero coupon bonds and deferred interest bonds. Zero coupon bonds and deferred interest bonds are debt obligations which are issued at a significant discount from face value. While zero coupon bonds do not require the periodic payment of interest, deferred interest bonds provide for a period of delay before the regular payment of interest begins. The discount approximates the total amount of interest the bonds will accrue and compound over the period until maturity or the first interest payment date at a rate of interest reflecting the market rate of the security at the time of issuance. Zero coupon bonds and deferred interest bonds benefit the issuer by mitigating its need for cash to service its debt, but generally require a higher rate of return to attract investors who are willing to defer receipt of such cash. Such investments may experience greater volatility in value than debt obligations which make regular payments of interest. The fund will accrue income on such investments for tax and accounting purposes, which is distributable to shareholders. Since no cash is received at the time of accrual, the fund may be required to liquidate other portfolio securities to satisfy its distribution obligations. Residual Interests in Municipal Securities Certain municipal securities are divided into short-term and long-term components. The short-term component has a long-term maturity, but pays interest at a short-term rate that is reset by means of a "dutch auction" or similar method at specified intervals (typically 35 days). The long-term component or "residual interest" pays interest at a rate that is determined by subtracting the interest paid on the short-term component from the coupon rate on the municipal securities themselves. Consequently, the interest rate paid on residual interests will increase when short-term interest rates are declining and will decrease when short-term interest rates are increasing. This interest rate adjustment formula results in the market value of residual interests being 9 significantly more volatile than that of ordinary municipal securities. In a declining interest rate environment, residual interests can provide the fund with a means of increasing or maintaining the level of tax-exempt interest paid to shareholders. However, because of the market volatility associated with residual interests, the fund will not invest more than 10% of its total assets in residual interests in municipal securities. Commercial Paper and other Short Term Debt Securities The fund invests in short-term debt securities, including commercial paper, which is a short-term unsecured promissory note issued by a U.S. or foreign corporation in order to finance its current operations. The fund may also invest in variable amount master demand notes (which is a type of commercial paper) which represents a direct borrowing arrangement involving periodically fluctuating rates of interest under a letter agreement between a commercial paper issuer and an institutional lender, pursuant to which the lender may determine to invest varying amounts. Transfer of such notes is usually restricted by the issuer, and there is no secondary trading market for such notes. To the extent the fund invests in master demand notes, these investments will be included in the fund's limitation on illiquid securities. Tax-Exempt Commercial Paper These are short-term securities issued by states, municipalities and their agencies. Tax-exempt commercial paper may be structured similarly to put bonds with credit enhancements, long nominal maturities, and mandatory put dates, which are agreed upon by the buyer and the seller at the time of purchase. The put date acts as a maturity date for the security, and generally will be shorter than the maturities of Project Notes, BANs, RANs or TANs. There is a limited secondary market for issues of tax-exempt commercial paper. Bond Anticipation Notes (BANs) These notes are usually general obligations of state and local governmental issuers which are sold to obtain interim financing for projects that will eventually be funded through the sale of long-term debt obligations or bonds. The ability of an issuer to meet the obligations on its BANs is primarily dependent on the issuer's access to the long-term municipal bond market and the likelihood that the proceeds of such bond sales will be used to pay the principal and interest on the BANs. Tax Anticipation Notes (TANs) These notes are issued by state and local governments to finance their current operations. Repayment is generally to be derived from specific future tax revenues. TANs are usually general obligations of the issuer. A weakness in an issuer's capacity to raise taxes due to, among other things, a decline in its tax base or a rise in delinquencies, could adversely affect the issuer's ability to meet its obligations on outstanding TANs. Revenue Anticipation Notes (RANs) These notes are issued by governments or governmental bodies with the expectation that future revenues from a designated source will be used to repay the notes. In general, they also constitute general obligations of the issuer. A decline in the receipt of project revenues, such as anticipated revenues from another level of government, could adversely affect an issuer's ability to meet its obligations on outstanding RANs. In addition, the possibility that the revenues would, when 10 received, be used to meet other obligations could affect the ability of the issuer to pay the principal and interest on RANs. Variable Rate and Floating Rate Demand Instruments The fund may purchase variable and floating rate demand instruments that are tax exempt municipal obligations or other debt securities that possess a floating or variable interest rate adjustment formula. These instruments permit the fund to demand payment of the principal balance plus unpaid accrued interest upon a specified number of days' notice to the issuer or its agent. The demand feature may be backed by a bank letter of credit or guarantee issued with respect to such instrument. The terms of the variable or floating rate demand instruments that the fund may purchase provide that interest rates are adjustable at intervals ranging from daily up to six months, and the adjustments are based upon current market levels, the prime rate of a bank or other appropriate interest rate adjustment index has provided in the respective instruments. Some of these instruments are payable on demand on a daily basis or on not more than seven days' notice. Others, such as instruments with quarterly or semiannual interest rate adjustments, may be put back to the issuer on designated days on not more than thirty days' notice. Still others are automatically called by the issuer unless the fund instructs otherwise. The fund may invest in participation interests in variable or floating rate tax-exempt obligations held by financial institutions (usually commercial banks). These participation interests provide the fund with a specific undivided interest (up to 100%) in the underlying obligation and the right to demand payment of its proportional interest in the unpaid principal balance plus accrued interest from the financial institution upon a specific number of days' notice. In addition, the participation interest generally is backed by an irrevocable letter of credit or guarantee from the institution. The financial institution usually is entitled to a fee for servicing the obligation and providing the letter of credit. Investment Company Securities Other Investment Companies The fund may invest in the securities of other investment companies to the extent that such investments are consistent with the fund's investment objective and policies and permissible under the Investment Company Act of 1940, as amended (the "1940 Act"). Under one provision of the 1940 Act, a fund may not acquire the securities of another investment company if such purchase would result in (i) 3% or more of the total outstanding voting securities of any one investment company being held by the fund, (ii) 5% or more of the fund's total assets being invested in any one investment company, or (iii) 10% or more of the fund's total assets being invested in securities of other investment companies. However, there are several provisions of the 1940 Act and rules thereunder that allow more expansive investment in investment companies. In addition, these limitations do not apply to the purchase of shares of any investment company in connection with a merger, consolidation, reorganization or acquisition of substantially all the assets of another investment company. The fund may also invest without limit in money market funds. 11 The fund, as a holder of the securities of other investment companies, will bear its pro rata portion of the other investment companies' expenses, including advisory fees. These expenses are in addition to the direct expenses of the fund's own operations. Exchange Traded Funds Subject to the limitations on investment in other investment companies, the fund may invest in exchange traded funds (ETFs). ETFs, such as SPDRs, iShares and various country index funds, are funds whose shares are traded on a national exchange or the National Association of Securities Dealers' Automatic Quotation System (NASDAQ). ETFs may be based on underlying equity or fixed income securities. SPDRs, for example, seek to provide investment results that generally correspond to the performance of the component common stocks of the S&P 500. ETFs do not sell individual shares directly to investors and only issue their shares in large blocks known as "creation units." The investor purchasing a creation unit then sells the individual shares on a secondary market. Therefore, the liquidity of ETFs depends on the adequacy of the secondary market. There can be no assurance that an ETF's investment objective will be achieved. ETFs based on an index may not replicate and maintain exactly the composition and relative weightings of securities in the index. ETFs are subject to the risks of investing in the underlying securities. The fund, as a holder of the securities of the ETF, will bear its pro rata portion of the ETF's expenses, including advisory fees. These expenses are in addition to the direct expenses of the fund's own operations. Derivative Instruments Options on Securities and Securities Indices For hedging purposes or to seek to increase total return, the fund may purchase put and call options on any security in which it may invest or options on any securities index based on securities in which it may invest. The fund would also be able to enter into closing sale transactions in order to realize gains or minimize losses on options it has purchased. Writing Call and Put Options on Securities. A call option written by the fund obligates the fund to sell specified securities to the holder of the option at a specified price if the option is exercised at any time before the expiration date. All call options written by the fund are covered, which means that the fund will own the securities subject to the options as long as the options are outstanding, or the fund will use the other methods described below. The fund's purpose in writing covered call options is to realize greater income than would be realized on portfolio securities transactions alone. However, the fund may forgo the opportunity to profit from an increase in the market price of the underlying security. A put option written by the fund would obligate the fund to purchase specified securities from the option holder at a specified price if the option is exercised at any time before the expiration date. All put options written by the fund would be covered, which means that the fund would have segregated assets with a value at least equal to the exercise price of the put option. The purpose of writing such options is to generate additional income for the fund. However, in return for the option premium, the fund accepts the risk that it may be required to purchase the underlying security at a price in excess of its market value at the time of purchase. Call and put options written by the fund will also be considered to be covered to the extent that the fund's liabilities under such options are wholly or partially offset by its rights under call and 12 put options purchased by the fund. In addition, a written call option or put may be covered by entering into an offsetting forward contract and/or by purchasing an offsetting option or any other option which, by virtue of its exercise price or otherwise, reduces the fund's net exposure on its written option position. Writing Call and Put Options on Securities Indices. The fund may also write (sell) covered call and put options on any securities index composed of securities in which it may invest. Options on securities indices are similar to options on securities, except that the exercise of securities index options requires cash payments and does not involve the actual purchase or sale of securities. In addition, securities index options are designed to reflect price fluctuations in a group of securities or segments of the securities market rather than price fluctuations in a single security. The fund may cover call options on a securities index by owning securities whose price changes are expected to be similar to those of the underlying index, or by having an absolute and immediate right to acquire such securities without additional cash consideration (or for additional consideration if cash in such amount is segregated) upon conversion or exchange of other securities in its portfolio. The fund may cover call and put options on a securities index by segregating assets with a value equal to the exercise price. Purchasing Call and Put Options. The fund would normally purchase call options in anticipation of an increase in the market value of securities of the type in which it may invest. The purchase of a call option would entitle the fund, in return for the premium paid, to purchase specified securities at a specified price during the option period. The fund would ordinarily realize a gain if, during the option period, the value of such securities exceeded the sum of the exercise price, the premium paid and transaction costs; otherwise the fund would realize either no gain or a loss on the purchase of the call option. The fund would normally purchase put options in anticipation of a decline in the market value of securities in its portfolio ("protective puts") or in securities in which it may invest. The purchase of a put option would entitle the fund, in exchange for the premium paid, to sell specified securities at a specified price during the option period. The purchase of protective puts is designed to offset or hedge against a decline in the market value of the fund's securities. Put options may also be purchased by the fund for the purpose of affirmatively benefiting from a decline in the price of securities which it does not own. The fund would ordinarily realize a gain if, during the option period, the value of the underlying securities decreased below the exercise price sufficiently to more than cover the premium and transaction costs; otherwise the fund would realize either no gain or a loss on the purchase of the put option. Gains and losses on the purchase of protective put options would tend to be offset by countervailing changes in the value of the underlying portfolio securities. The fund may terminate its obligations under an exchange-traded call or put option by purchasing an option identical to the one it has written. Obligations under over-the-counter options may be terminated only by entering into an offsetting transaction with the counterparty to such option. Such purchases are referred to as "closing purchase transactions." Risks of Trading Options. There is no assurance that a liquid secondary market on an options exchange will exist for any particular exchange-traded option, or at any particular time. If the fund is unable to effect a closing purchase transaction with respect to covered options it has written, the fund will not be able to sell the underlying securities or dispose of its segregated assets until the options expire or are exercised. Similarly, if the fund is unable to effect a closing 13 sale transaction with respect to options it has purchased, it will have to exercise the options in order to realize any profit and will incur transaction costs upon the purchase or sale of underlying securities. Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain options; (ii) restrictions may be imposed by an exchange on opening or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or the Options Clearing Corporation (the "OCC") may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that exchange (or in that class or series of options) would cease to exist, although outstanding options on that exchange, if any, that had been issued by the OCC as a result of trades on that exchange would continue to be exercisable in accordance with their terms. The fund may purchase and sell both options that are traded on U.S and non-U.S.exchanges and options traded over-the-counter with broker-dealers who make markets in these options. The ability to terminate over-the-counter options is more limited than with exchange-traded options and may involve the risk that broker-dealers participating in such transactions will not fulfill their obligations. Until such time as the staff of the SEC changes its position, the fund will treat purchased over-the-counter options and all assets used to cover written over-the-counter options as illiquid securities, except that with respect to options written with primary dealers in U.S. government securities pursuant to an agreement requiring a closing purchase transaction at a formula price, the amount of illiquid securities may be calculated with reference to the formula. Transactions by the fund in options on securities and indices will be subject to limitations established by each of the exchanges, boards of trade or other trading facilities governing the maximum number of options in each class which may be written or purchased by a single investor or group of investors acting in concert. Thus, the number of options which the fund may write or purchase may be affected by options written or purchased by other investment advisory clients of Pioneer. An exchange, board of trade or other trading facility may order the liquidations of positions found to be in excess of these limits, and it may impose certain other sanctions. The writing and purchase of options is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. The successful use of protective puts for hedging purposes depends in part on the ability of Pioneer to predict future price fluctuations and the degree of correlation between the options and securities markets. The hours of trading for options may not conform to the hours during which the underlying securities are traded. To the extent that the options markets close before the markets for the underlying securities, significant price movements can take place in the underlying markets that cannot be reflected in the options markets. In addition to the risks of imperfect correlation between the fund's portfolio and the index underlying the option, the purchase of securities index options involves the risk that the premium and transaction costs paid by the fund in purchasing an option will be lost. This could occur as a result of unanticipated movements in the price of the securities comprising the securities index on which the option is based. 14 Futures Contracts and Options on Futures Contracts To hedge against changes in securities prices or currency exchange rates or to seek to increase total return, the fund may purchase and sell various kinds of futures contracts, and purchase and write (sell) call and put options on any of such futures contracts. The fund may also enter into closing purchase and sale transactions with respect to any of such contracts and options. The futures contracts may be based on various securities (such as U.S. government securities), securities indices, foreign currencies and other financial instruments and indices. The fund will engage in futures and related options transactions for bona fide hedging and non-hedging purposes as described below. All futures contracts entered into by the fund are traded on U.S. exchanges or boards of trade that are licensed and regulated by the Commodity Futures Trading Commission (the "CFTC") or on non-U.S. exchanges. Futures Contracts. A futures contract may generally be described as an agreement between two parties to buy and sell particular financial instruments for an agreed price during a designated month (or to deliver the final cash settlement price, in the case of a contract relating to an index or otherwise not calling for physical delivery at the end of trading in the contract). When interest rates are rising or securities prices are falling, the fund can seek to offset a decline in the value of its current portfolio securities through the sale of futures contracts. When interest rates are falling or securities prices are rising, the fund, through the purchase of futures contracts, can attempt to secure better rates or prices than might later be available in the market when it effects anticipated purchases. Similarly, the fund can sell futures contracts on a specified currency to protect against a decline in the value of such currency and a decline in the value of its portfolio securities which are denominated in such currency. The fund can purchase futures contracts on a foreign currency to establish the price in U.S. dollars of a security denominated in such currency that the fund has acquired or expects to acquire. Positions taken in the futures markets are not normally held to maturity but are instead liquidated through offsetting transactions which may result in a profit or a loss. While futures contracts on securities or currency will usually be liquidated in this manner, the fund may instead make, or take, delivery of the underlying securities or currency whenever it appears economically advantageous to do so. A clearing corporation associated with the exchange on which futures on securities or currency are traded guarantees that, if still open, the sale or purchase will be performed on the settlement date. Hedging Strategies. Hedging, by use of futures contracts, seeks to establish with more certainty the effective price, rate of return and currency exchange rate on portfolio securities and securities that the fund owns or proposes to acquire. The fund may, for example, take a "short" position in the futures market by selling futures contracts in order to hedge against an anticipated rise in interest rates or a decline in market prices or foreign currency rates that would adversely affect the value of the fund's portfolio securities. Such futures contracts may include contracts for the future delivery of securities held by the fund or securities with characteristics similar to those of the fund's portfolio securities. Similarly, the fund may sell futures contracts in a foreign currency in which its portfolio securities are denominated or in one currency to hedge against fluctuations in the value of securities denominated in a different currency if there is an established historical pattern of correlation between the two currencies. If, in the opinion of Pioneer, there is a sufficient degree of correlation between price trends for the fund's portfolio securities and futures contracts based on other financial instruments, securities indices or other indices, the fund may also enter into such futures contracts as part of its hedging strategies. Although under some 15 circumstances prices of securities in the fund's portfolio may be more or less volatile than prices of such futures contracts, Pioneer will attempt to estimate the extent of this volatility difference based on historical patterns and compensate for any such differential by having the fund enter into a greater or lesser number of futures contracts or by attempting to achieve only a partial hedge against price changes affecting the fund's portfolio securities. When hedging of this character is successful, any depreciation in the value of portfolio securities will be substantially offset by appreciation in the value of the futures position. On the other hand, any unanticipated appreciation in the value of the fund's portfolio securities would be substantially offset by a decline in the value of the futures position. On other occasions, the fund may take a "long" position by purchasing futures contracts. This may be done, for example, when the fund anticipates the subsequent purchase of particular securities when it has the necessary cash, but expects the prices or currency exchange rates then available in the applicable market to be less favorable than prices or rates that are currently available. Options on Futures Contracts. The acquisition of put and call options on futures contracts will give the fund the right (but not the obligation) for a specified price to sell or to purchase, respectively, the underlying futures contract at any time during the option period. As the purchaser of an option on a futures contract, the fund obtains the benefit of the futures position if prices move in a favorable direction but limits its risk of loss in the event of an unfavorable price movement to the loss of the premium and transaction costs. The writing of a call option on a futures contract generates a premium which may partially offset a decline in the value of the fund's assets. By writing a call option, the fund becomes obligated, in exchange for the premium, to sell a futures contract (if the option is exercised), which may have a value higher than the exercise price. Conversely, the writing of a put option on a futures contract generates a premium which may partially offset an increase in the price of securities that the fund intends to purchase. However, the fund becomes obligated to purchase a futures contract (if the option is exercised) which may have a value lower than the exercise price. Thus, the loss incurred by the fund in writing options on futures is potentially unlimited and may exceed the amount of the premium received. The fund will incur transaction costs in connection with the writing of options on futures. The holder or writer of an option on a futures contract may terminate its position by selling or purchasing an offsetting option on the same series. There is no guarantee that such closing transactions can be effected. The fund's ability to establish and close out positions on such options will be subject to the development and maintenance of a liquid market. Other Considerations regarding Futures Contracts. The fund will engage in futures contracts and related options transactions only in accordance with CFTC regulations which permit principals of an investment company registered under the 1940 Act to engage in such transactions without registering as commodity pool operators. The fund will engage in transactions in futures contracts and related options only to the extent such transactions are consistent with the requirements of the Internal Revenue Code of 1986, as amended (the "Code"), for maintaining its qualification as a regulated investment company for U.S. federal income tax purposes. 16 Futures contracts and related options involve brokerage costs, require margin deposits and, in the case of contracts and options obligating the fund to purchase securities or currencies, require the fund to segregate assets to cover such contracts and options. While transactions in futures contracts and options on futures may reduce certain risks, such transactions themselves entail certain other risks. Thus, while the fund may benefit from the use of futures and options on futures, unanticipated changes in interest rates, securities prices or currency exchange rates may result in a poorer overall performance for the fund than if it had not entered into any futures contracts or options transactions. In the event of an imperfect correlation between a futures position and a portfolio position which is intended to be protected, the desired protection may not be obtained and the fund may be exposed to risk of loss. It is not possible to hedge fully or perfectly against the effect of currency fluctuations on the value of non-U.S. securities because currency movements impact the value of different securities in differing degrees. Interest Rate Swaps, Collars, Caps and Floors In order to hedge the value of the fund's portfolio against interest rate fluctuations or to enhance the fund's income, the fund may, but is not required to, enter into various interest rate transactions such as interest rate swaps and the purchase or sale of interest rate caps and floors. To the extent that the fund enters into these transactions, the fund expects to do so primarily to preserve a return or spread on a particular investment or portion of its portfolio or to protect against any increase in the price of securities the fund anticipates purchasing at a later date. The fund intends to use these transactions primarily as a hedge and not as a speculative investment. However, the fund also may invest in interest rate swaps to enhance income or to increase the fund's yield, for example, during periods of steep interest rate yield curves (i.e., wide differences between short-term and long-term interest rates). The fund is not required to hedge its portfolio and may choose not to do so. The fund cannot guarantee that any hedging strategies it uses will work. In an interest rate swap, the fund exchanges with another party their respective commitments to pay or receive interest (e.g., an exchange of fixed rate payments for floating rate payments). For example, if the fund holds a debt instrument with an interest rate that is reset only once each year, it may swap the right to receive interest at this fixed rate for the right to receive interest at a rate that is reset every week. This would enable the fund to offset a decline in the value of the debt instrument due to rising interest rates but would also limit its ability to benefit from falling interest rates. Conversely, if the fund holds a debt instrument with an interest rate that is reset every week and it would like to lock in what it believes to be a high interest rate for one year, it may swap the right to receive interest at this variable weekly rate for the right to receive interest at a rate that is fixed for one year. Such a swap would protect the fund from a reduction in yield due to falling interest rates and may permit the fund to enhance its income through the positive differential between one week and one year interest rates, but would preclude it from taking full advantage of rising interest rates. The fund usually will enter into interest rate swaps on a net basis (i.e., the two payment streams are netted out with the fund receiving or paying, as the case may be, only the net amount of the two payments). The net amount of the excess, if any, of the fund's obligations over its entitlements with respect to each interest rate swap will be accrued on a daily basis, and an amount of cash or liquid instruments having an aggregate net asset value at least equal to the accrued excess will be maintained in a segregated account by the fund's custodian. If the interest rate swap transaction is entered into on other than a net basis, the full amount of the fund's 17 obligations will be accrued on a daily basis, and the full amount of the fund's obligations will be maintained in a segregated account by the fund's custodian. The fund also may engage in interest rate transactions in the form of purchasing or selling interest rate caps or floors. The fund will not sell interest rate caps or floors that it does not own. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payments of interest equal to the difference of the index and the predetermined rate on a notional principal amount (i.e., the reference amount with respect to which interest obligations are determined although no actual exchange of principal occurs) from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest at the difference of the index and the predetermined rate on a notional principal amount from the party selling such interest rate floor. The fund will not enter into caps or floors if, on a net basis, the aggregate notional principal amount with respect to such agreements exceeds the net assets of the fund. Typically, the parties with which the fund will enter into interest rate transactions will be broker-dealers and other financial institutions. The fund will not enter into any interest rate swap, cap or floor transaction unless the unsecured senior debt or the claims-paying ability of the other party thereto is rated investment grade quality by at least one nationally recognized statistical rating organization at the time of entering into such transaction or whose creditworthiness is believed by the fund's adviser to be equivalent to such rating. If there is a default by the other party to such a transaction, the fund will have contractual remedies pursuant to the agreements related to the transaction. The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation. As a result, the swap market has become relatively liquid in comparison with other similar instruments traded in the interbank market. Caps and floors, however, are less liquid than swaps. Certain federal income tax requirements may limit the fund's ability to engage in interest rate swaps. Equity Swaps, Caps, Floors and Collars The fund may enter into equity swaps, caps, floors and collars to hedge assets or liabilities or to seek to increase total return. Equity swaps involve the exchange by a fund with another party of their respective commitments to make or receive payments based on notional equity securities. The purchase of an equity cap entitles the purchaser, to the extent that the market value of a specified equity security or benchmark exceeds a predetermined level, to receive payments of a contractually-based amount from the party selling the cap. The purchase of an equity floor entitles the purchaser, to the extent that the market value of a specified equity security or benchmark falls below a predetermined level, to receive payments of a contractually-based amount from the party selling the floor. A collar is a combination of a cap and a floor that preserves a certain return within a predetermined range of values. Investments in swaps, caps, floors and collars are highly specialized activities which involve investment techniques and risks different from those associated with ordinary portfolio transactions. Investments in equity swaps, caps, floors and collars may be considered speculative because they involve significant risk of loss. If Pioneer is incorrect in its forecast of market values, these investments could negatively impact the fund's performance. These investments also are subject to default risk of the counterparty and may be less liquid than other portfolio securities. Moreover, investments in swaps, caps, floors and collars may involve greater transaction costs than investments in other equity securities. 18 Financial Futures and Options Transactions. The Commodity Futures Trading Commission ("CFTC") does not limit futures transactions and options thereon by registered investment companies, provided that the investment manager to the registered investment company claims an exclusion from regulation as a commodity pool operator. The fund is operated by persons who have claimed an exclusion, granted to operators of registered investment companies like the fund, from registration as a "commodity pool operator" with respect to the fund under the Commodity Exchange Act and therefore are not subject to registration or regulation with respect to the fund under the Commodity Exchange Act. As a result, the fund is not restricted in its ability to enter into futures transactions and options thereon under CFTC regulations. The fund however, has policies with respect to futures and options thereon as set forth below. Credit-Linked Notes The fund may invest in credit-linked notes ("CLNs"), which are derivative instruments. A CLN is a synthetic obligation between two or more parties where the payment of principal and/or interest is based on the performance of some obligation (a reference obligation). In addition to credit risk of the reference obligations and interest rate risk, the buyer/seller of the CLN is subject to counterparty risk. Other Investments and Investment Techniques Short-Term Investments For temporary defensive or cash management purposes, the fund may invest in all types of short-term investments including, but not limited to, (a) commercial paper and other short-term commercial obligations; (b) obligations (including certificates of deposit and bankers' acceptances) of banks; (c) obligations issued or guaranteed by a governmental issuer, including governmental agencies or instrumentalities; (d) fixed income securities of non-governmental issuers; and (e) other cash equivalents or cash. Subject to the fund's restrictions regarding investment in non-U.S. securities, these securities may be denominated in any currency. Although these investments generally are rated investment grade or are determined by Pioneer to be of equivalent credit quality, the fund may also invest in these instruments if they are rated below investment grade in accordance with its investment objective, policies and restrictions. Illiquid Securities The fund may invest up to 15% of its net assets in illiquid and other securities that are not readily marketable. If due to subsequent fluctuations in value or any other reasons, the value of the fund's illiquid securities exceeds this percentage limitation, the fund will consider what actions, if any, are necessary to maintain adequate liquidity. Repurchase agreements maturing in more than seven days will be included for purposes of the foregoing limit. Securities subject to restrictions on resale under the Securities Act of 1933, as amended (the "1933 Act"), are considered illiquid unless they are eligible for resale pursuant to Rule 144A or another exemption from the registration requirements of the 1933 Act and are determined to be liquid by Pioneer. Pioneer determines the liquidity of Rule 144A and other restricted securities according to procedures adopted by the Board of Trustees. Under the direction of the Board of Trustees, Pioneer monitors the application of these guidelines and procedures. The inability of the fund to dispose of illiquid investments readily or at reasonable prices could impair the fund's ability to raise cash for redemptions or other purposes. If the fund sold restricted securities other than pursuant to an 19 exception from registration under the 1933 Act such as Rule 144A, it may be deemed to be acting as an underwriter and subject to liability under the 1933 Act. Repurchase Agreements The fund may enter into repurchase agreements with broker-dealers, member banks of the Federal Reserve System and other financial institutions. Repurchase agreements are arrangements under which the fund purchases securities and the seller agrees to repurchase the securities within a specific time and at a specific price. The repurchase price is generally higher than the fund's purchase price, with the difference being income to the fund. Under the direction of the Board of Trustees, Pioneer reviews and monitors the creditworthiness of any institution which enters into a repurchase agreement with the fund. The counterparty's obligations under the repurchase agreement are collateralized with U.S. Treasury and/or agency obligations with a market value of not less than 100% of the obligations, valued daily. Collateral is held by the fund's custodian in a segregated, safekeeping account for the benefit of the fund. Repurchase agreements afford the fund an opportunity to earn income on temporarily available cash at low risk. In the event of commencement of bankruptcy or insolvency proceedings with respect to the seller of the security before repurchase of the security under a repurchase agreement, the fund may encounter delay and incur costs before being able to sell the security. Such a delay may involve loss of interest or a decline in price of the security. If the court characterizes the transaction as a loan and the fund has not perfected a security interest in the security, the fund may be required to return the security to the seller's estate and be treated as an unsecured creditor of the seller. As an unsecured creditor, the fund would be at risk of losing some or all of the principal and interest involved in the transaction. Reverse Repurchase Agreements Reverse purchase agreements involve the sale of U.S. government securities to a bank with an agreement that the fund will buy back the securities at a fixed future date at a fixed price plus an agreed amount of "interest" which may be reflected in the repurchase price. Reverse repurchase agreements are considered to be borrowings by the fund. Reverse repurchase agreements involve the risk that the market value of securities purchased by the fund with proceeds of the transaction may decline below the repurchase price of the securities sold by the fund that it is obligated to repurchase. The fund will also continue to be subject to the risk of a decline in the market value of the securities sold under the agreements because it will reacquire those securities upon effecting their repurchase. To minimize the risk associated with reverse repurchase agreements, the fund will segregate assets in an amount at least equal to the repurchase price of the securities. The fund will enter into reverse repurchase agreements only with banks that are approved in advance as being creditworthy by the Board of Trustees. Asset Segregation The 1940 Act requires that the fund segregate assets in connection with certain types of transactions that may have the effect of leveraging the fund's portfolio. If the fund enters into a transaction requiring segregation, such as a forward commitment, the custodian or Pioneer will segregate liquid assets in an amount required to comply with the 1940 Act. Such segregated assets will be valued at market daily. If the aggregate value of such segregated assets declines below the aggregate value required to satisfy the 1940 Act, additional liquid assets will be segregated. Portfolio Turnover 20 It is the policy of the fund not to engage in trading for short-term profits although portfolio turnover rate is not considered a limiting factor in the execution of investment decisions for the fund. A high rate of portfolio turnover (100% or more) involves correspondingly greater transaction costs which must be borne by the fund and its shareholders. See "Annual Fee, Expense and Other Information" for the fund's annual portfolio turnover rate. Interfund Lending To satisfy redemption requests or to cover unanticipated cash shortfalls, a fund may enter into lending agreements ("Interfund Lending Agreements") under which the fund would lend money and borrow money for temporary purposes directly to and from another Pioneer fund through a credit facility ("Interfund Loan"), subject to meeting the conditions of an SEC exemptive order granted to the funds permitting such interfund lending. All Interfund Loans will consist only of uninvested cash reserves that the fund otherwise would invest in short-term repurchase agreements or other short-term instruments. If a fund has outstanding borrowings, any Interfund Loans to the fund (a) will be at an interest rate equal to or lower than any outstanding bank loan, (b) will be secured at least on an equal priority basis with at least an equivalent percentage of collateral to loan value as any outstanding bank loan that requires collateral, (c) will have a maturity no longer than any outstanding bank loan (and in any event not over seven days) and (d) will provide that, if an event of default occurs under any agreement evidencing an outstanding bank loan to the fund, the event of default will automatically (without need for action or notice by the lending fund) constitute an immediate event of default under the Interfund Lending Agreement entitling the lending fund to call the Interfund Loan (and exercise all rights with respect to any collateral) and that such call will be made if the lending bank exercises its right to call its loan under its agreement with the borrowing fund. A fund may make an unsecured borrowing through the credit facility if its outstanding borrowings from all sources immediately after the interfund borrowing total 10% or less of its total assets; provided, that if the fund has a secured loan outstanding from any other lender, including but not limited to another Pioneer fund, the fund's interfund borrowing will be secured on at least an equal priority basis with at least an equivalent percentage of collateral to loan value as any outstanding loan that requires collateral. If a fund's total outstanding borrowings immediately after an interfund borrowing would be greater than 10% of its total assets, the fund may borrow through the credit facility on a secured basis only. A fund may not borrow through the credit facility nor from any other source if its total outstanding borrowings immediately after the interfund borrowing would be more than 33 1/3% of its total assets. No fund may lend to another fund through the interfund lending credit facility if the loan would cause its aggregate outstanding loans through the credit facility to exceed 15% of the lending fund's net assets at the time of the loan. A fund's Interfund Loans to any one fund shall not exceed 5% of the lending fund's net assets. The duration of Interfund Loans is limited to the time required to receive payment for securities sold, but in no event more than seven days. Loans effected within seven days of each other will be treated as separate loan transactions for purposes of this condition. Each Interfund Loan may be called on one business day's notice by a lending fund and may be repaid on any day by a borrowing fund. The limitations detailed above and the other conditions of the SEC exemptive order permitting interfund lending are designed to minimize the risks associated with interfund lending for both 21 the lending fund and the borrowing fund. However, no borrowing or lending activity is without risk. When a fund borrows money from another fund, there is a risk that the loan could be called on one day's notice or not renewed, in which case the fund may have to borrow from a bank at higher rates if an Interfund Loan were not available from another fund. A delay in repayment to a lending fund could result in a lost opportunity or additional lending costs. When-Issued and Delayed Delivery Securities The fund may purchase securities, including U.S. government securities, on a when-issued basis or may purchase or sell securities for delayed delivery. In such transactions, delivery of the securities occurs beyond the normal settlement period, but no payment or delivery is made by the fund prior to the actual delivery or payment by the other party to the transaction. The fund will not earn income on these securities until delivered. The purchase of securities on a when-issued or delayed delivery basis involves the risk that the value of the securities purchased will decline prior to the settlement date. The sale of securities for delayed delivery involves the risk that the prices available in the market on the delivery date may be greater than those obtained in the sale transaction. The fund's obligations with respect to when-issued and delayed delivery transactions will be fully collateralized by segregating liquid assets with a value equal to the fund's obligations. See "Asset Segregation." Disclosure of Portfolio Holdings The Board of Trustees has adopted policies and procedures relating to disclosure of the fund's portfolio securities. These policies and procedures are designed to provide a framework for disclosing information regarding portfolio holdings, portfolio composition or other portfolio characteristics consistent with applicable federal securities laws and regulations and general principles of fiduciary duty relating to fund shareholders. While Pioneer may manage other separate accounts and unregistered products that have substantially similar investment strategies to those of the fund, and therefore portfolio holdings that may be substantially similar, and in some cases nearly identical, to the fund, these policies and procedures only relate to the disclosure of portfolio information of the fund and the other Pioneer registered management companies. Separate account and unregistered product clients are not subject to these policies and procedures. Separate account and unregistered product clients of Pioneer have access to their portfolio holdings, and prospective clients have access to representative holdings. Generally, Pioneer will make a fund's portfolio information available to the public on a monthly basis with an appropriate delay based upon the nature of the information disclosed. Pioneer normally will publish a fund's full portfolio holdings thirty (30) days after the end of each month (this time period may be different for certain funds). Such information shall be made available on the fund's website (www.pioneerinvestments.com) and may be sent to rating agencies, reporting/news services and financial intermediaries, upon request. In addition, Pioneer generally makes publicly available information regarding a fund's top ten holdings (including the percentage of the fund's assets represented by each security), the percentage breakdown of a fund's investments by country, sector and industry, various volatility measures (such as beta, standard deviation, etc.), market capitalization ranges and other portfolio characteristics (such as alpha, average P/E ratio, etc.) three (3) business days after the end of each month. Pioneer may provide the fund's full portfolio holdings or other information to certain entities prior to the date such information is made public, provided that certain conditions are met. The entities to which such disclosure may be made as of the date of this statement of additional information are rating agencies, plan sponsors, prospective separate account clients and other 22 financial intermediaries (i.e., organizations evaluating the fund for purposes of investment by their clients, such as broker-dealers, investment advisers, banks, insurance companies, financial planning firms, plan sponsors, plan administrators, shareholder servicing organizations and pension consultants). As of the date of this statement of additional information, Pioneer had not provided the fund's portfolio holdings information to any entity prior to the date such information was made public. The third party must agree to a limited use of that information which does not conflict with the interests of the fund's shareholders, to use the information only for that authorized purpose, to keep such information confidential, and not to trade on such information. The Board of Trustees considered the disclosure of portfolio holdings information to these categories of entities to be consistent with the best interests of shareholders in light of the agreement to maintain the confidentiality of such information and only to use such information for the limited and approved purposes. Pioneer's compliance department, the local head of investment management and the global chief investment officer may, but only acting jointly, grant exemptions to this policy. Exemptions may be granted only if these persons determine that providing such information is consistent with the interests of shareholders and the third party agrees to limit the use of such information only for the authorized purpose, to keep such information confidential, and not to trade on such information. Although the Board will periodically be informed of exemptions granted, granting exemptions entails the risk that portfolio holdings information may be provided to entities that use the information in a manner inconsistent with their obligations and the best interests of the fund. Compliance with the fund's portfolio holdings disclosure policy is subject to periodic review by the Board of Trustees, including a review of any potential conflicts of interest in the disclosures made by Pioneer in accordance with the policy or the exceptions permitted under the policy. Any change to the policy to expand the categories of entities to which portfolio holdings may be disclosed or an increase in the purposes for which such disclosure may be made would be subject to approval by the Board of Trustees and, reflected, if material, in a supplement to the fund's statement of additional information. The fund's portfolio holdings disclosure policy is not intended to prevent the disclosure of any and all portfolio information to the fund's service providers who generally need access to such information in the performance of their contractual duties and responsibilities, such as Pioneer, the fund's custodian, fund accounting agent, principal underwriter, investment sub-adviser, if any, independent registered public accounting firm or counsel. In approving the policy, the Board of Trustees considered that the service providers are subject to duties of confidentiality arising under law or contract that provide an adequate safeguard for such information. None of Pioneer, the fund, or any other party receive any compensation or other consideration from any arrangement pertaining to the release of the fund's portfolio holdings information. In addition, the fund makes its portfolio holdings available semi-annually in shareholder reports filed on Form N-CSR and after the first and third fiscal quarters in regulatory filings on Form N-Q. These shareholder reports and regulatory filings are filed with the SEC, as required by the federal securities laws, and are generally available within seventy (70) days after the end of the fund's fiscal quarter. Investment Restrictions Fundamental Investment Restrictions. The fund has adopted certain fundamental investment restrictions which, along with the fund's investment objective, may not be changed without the affirmative vote of the holders of a "majority of the outstanding voting securities" (as defined in 23 the 1940 Act) of the fund. For this purpose, a majority of the outstanding shares of the fund means the vote of the lesser of: 1. 67% or more of the shares represented at a meeting, if the holders of more than 50% of the outstanding shares are present in person or by proxy, or 2. more than 50% of the outstanding shares of the fund. The fund will: Invest at least 80% of its assets in investments the income from which will be exempt from regular federal income tax. The fund may not: 1. Purchase any security (other than obligations of the U.S. government, its agencies or instrumentalities), if as a result: (a) more than 25% of the value of the fund's total assets would then be invested in securities of any single issuer; or (b) as to 75% of the value of the fund's total assets, more than 5% of the value of the fund's total assets would then be invested in securities of any single issuer. For the purpose of this limitation, the fund will regard each state and each political subdivision, agency or instrumentality of such state and each multi-state agency of which such state is a member as a separate issuer; 2. Borrow money, except from a bank for temporary or emergency purposes and not for investment purposes, and then only in an amount not exceeding 5% of the value of the fund's total assets at the time of borrowing; 3. Pledge, mortgage or hypothecate its assets, except that, to secure borrowings permitted by subparagraph (2) above, it may pledge securities having a market value at the time of pledge not exceeding 5% of the value of the fund's total assets; 4. Knowingly purchase or otherwise acquire any securities which are subject to legal or contractual restrictions on resale or which are not readily marketable, or purchase the securities of any other investment company, except that it may make purchases of securities of investment companies in accordance with its investment objective, policies, and restrictions or as part of a merger, consolidation or acquisition of assets; 5. Underwrite any issue of securities, except in connection with the purchase of securities in accordance with its investment objective, policies and limitations, or participate on a joint or joint-and-several basis in any securities trading account; 6. Purchase or sell real estate (or real estate limited partnerships), but this shall not prevent the fund from investing in Tax-Exempt Bonds or other permitted obligations secured by real estate or interests therein; 7. Purchase or sell commodities or commodity contracts except options, financial futures or options on financial futures contracts in accordance with its investment objective, policies, and restrictions, or invest in oil, gas or other mineral leases, exploration or development programs, or write or purchase puts, calls, straddles, spreads or any combination thereof; 24 8. Make loans, except through the purchase of securities, including repurchase agreements, in accordance with its investment objective, policies and limitations; 9. Make short sales of securities or purchase any securities on margin, except for such short-term credits as are necessary for the clearance of transactions and margin payments in connection with options, financial futures contracts and options on financial futures contracts; or 10. Purchase or retain the securities of any issuer other than the securities of the fund, if, to the fund's knowledge, those officers and trustees of the fund, or of the investment adviser or underwriter, who own individually or beneficially more than 1/2 of 1% of the outstanding securities of such issuer together own beneficially more than 5% of such outstanding securities. Non-Fundamental Investment Restrictions. The following restrictions are non-fundamental and may be changed by a vote of the Board of Trustees without approval of shareholders. Statements in italics are not part of the restriction. 1. The fund will not concentrate its assets in the securities of issuers in any one industry except that the fund may invest 25% or more of its assets in issuers in any one or more states or securities the payments on which are derived from gas, electric, telephone, sewer and water segments of the municipal bond market. 2. The fund will not issue senior securities, except as permitted by the 1940 Act and the rules and interpretive positions of the SEC thereunder. Senior securities that the fund may issue in accordance with the 1940 Act include borrowing, futures, when-issued and delayed delivery securities and forward foreign currency exchange transactions. 3. The fund will not purchase securities during the current fiscal year at any time that outstanding borrowings exceed 5% of the fund's total assets. (4) Invest in any investment company in reliance on Section 12(d)(1)(F) of the 1940 Act, which would allow the fund to invest in other investment companies, or in reliance on Section 12(d)(1)(G) of the 1940 Act, which would allow the fund to invest in other Pioneer funds, in each case without being subject to the limitations discussed above under "Other Investment Companies" so long as another investment company invests in the fund in reliance on Section 12(d)(1)(G), such as one of the series of Pioneer Asset Allocation Series. 3. TRUSTEES AND OFFICERS The Board of Trustees provides broad supervision over the fund's affairs. The officers of the fund are responsible for the fund's operations. The Trustees and officers are listed below, together with their principal occupations during the past five years. Trustees who are interested persons of the fund within the meaning of the 1940 Act are referred to as Interested Trustees. Trustees who are not interested persons of the fund are referred to as Independent Trustees. Each of the Trustees (except Mr. Bock) serves as a trustee of each of the 77 U.S. registered investment portfolios for which Pioneer serves as investment adviser (the "Pioneer Funds"). Mr. Bock serves as Trustee of 76 of the 77 Pioneer Funds. The address for all Trustees and all officers of the fund is 60 State Street, Boston, Massachusetts 02109. 25
- -------------------------------------------------------------------------------------------------------------------------- Term of Office Name, Age and Position Held and Length of Principal Occupation During Past Other Directorships Held by Address With the Fund Service Five Years this Trustee - -------------------------------------------------------------------------------------------------------------------------- Interested Trustees: - -------------------------------------------------------------------------------------------------------------------------- John F. Cogan, Chairman of the Trustee since Deputy Chairman and a Director None Jr. (81)* Board, Trustee 1993. Serves of Pioneer Global Asset and President until a Management S.p.A. ("PGAM"); successor Non-Executive Chairman and a trustee is Director of Pioneer Investment elected or Management USA Inc. ("PIM-USA"); earlier Chairman and a Director of retirement or Pioneer; Chairman and Director removal. of Pioneer Institutional Asset Management, Inc. (since 2006); Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; Director of PIOGLOBAL Real Estate Investment Fund (Russia) (until June 2006); Director of Nano-C, Inc. (since 2003); Director of Cole Management Inc. (since 2004); Director of Fiduciary Counseling, Inc.; President and Director of Pioneer Funds Distributor, Inc. ("PFD") (until May 2006); President of all of the Pioneer Funds; and Of Counsel, Wilmer Cutler Pickering Hale and Dorr LLP - --------------------------------------------------------------------------------------------------------------------------
26
- -------------------------------------------------------------------------------------------------------------------------- Independent Trustees: - -------------------------------------------------------------------------------------------------------------------------- David R. Bock (64) Trustee Trustee since Executive Vice President and Director of The Enterprise 2005. Serves Chief Financial Officer, I-trax, Social Investment Company until a Inc. (publicly traded health (privately-held affordable successor care services company) (2004 - housing finance company); trustee is 2007); Partner, Federal City and Director of New York elected or Capital Advisors (boutique Mortgage Trust (publicly earlier merchant bank) (1997 to 2004 and traded mortgage REIT) retirement or 2008 - present); and Executive removal. Vice President and Chief Financial Officer, Pedestal Inc. (internet-based mortgage trading company) (2000-2002) - -------------------------------------------------------------------------------------------------------------------------- Mary K. Bush (60) Trustee Trustee since President, Bush International, Director of Brady 1997. Serves LLC (international financial Corporation (industrial until a advisory firm) identification and successor specialty coated material trustee is products manufacturer); elected or Director of Briggs & earlier Stratton Co. (engine retirement or manufacturer); Director of removal. UAL Corporation (airline holding company) Director of Mantech International Corporation (national security, defense, and intelligence technology firm); and Member, Board of Governors, Investment Company Institute - -------------------------------------------------------------------------------------------------------------------------- Margaret B.W. Graham Trustee Trustee since Founding Director, None (60) 1993. Serves Vice-President and Corporate until a Secretary, The Winthrop Group, successor Inc. (consulting firm); and trustee is Desautels Faculty of Management, elected or McGill University earlier retirement or removal. - --------------------------------------------------------------------------------------------------------------------------
27 - -------------------------------------------------------------------------------------------------------------------------- Thomas J. Perna (57) Trustee Trustee since Private investor (2004 - Director of Quadriserv Inc. 2006. Serves present); and Senior Executive (technology products for until a Vice President, The Bank of New securities lending successor York (financial and securities industry) trustee is services) (1986 - 2004) elected or earlier retirement or removal. - -------------------------------------------------------------------------------------------------------------------------- Marguerite A. Piret Trustee Trustee since President and Chief Executive Director of New America (59) 1993. Serves Officer, Newbury, Piret & High Income Fund, Inc. until a Company, Inc. (investment (closed-end investment successor banking firm) company) trustee is elected or earlier retirement or removal. - -------------------------------------------------------------------------------------------------------------------------- John Winthrop (71) Trustee Trustee since President, John Winthrop & Co., None 1993. Serves Inc. (private investment firm) until a successor trustee is elected or earlier retirement or removal. - -------------------------------------------------------------------------------------------------------------------------- Fund Officers: - -------------------------------------------------------------------------------------------------------------------------- Other Directorships Held by this Officer - --------------------------------------------------------------------------------------------------------------------------
28 - -------------------------------------------------------------------------------------------------------------------------- Daniel K. Executive Vice Since March Director, CEO and President of None Kingsbury (49)* President 2007. Serves at Pioneer Investment Management the discretion USA Inc. (since February 2007); of the Board Director and President of Pioneer Investment Management, Inc. and Pioneer Institutional Asset Management, Inc. (since February 2007); Executive Vice President of all of the Pioneer Funds (since March 2007); Director of Pioneer Global Asset Management S.p.A. (since April 2007); Head of New Markets Division, Pioneer Global Asset Management S.p.A. (2000-2007) - -------------------------------------------------------------------------------------------------------------------------- Dorothy E. Secretary Since 2003. Secretary of PIM-USA; Senior None Bourassa (60) Serves at the Vice President- Legal of discretion of Pioneer; Secretary/Clerk of most the Board of PIM-USA's subsidiaries; and Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003) - -------------------------------------------------------------------------------------------------------------------------- Christopher J. Assistant Since 2003. Associate General Counsel of None Kelley (43) Secretary Serves at the Pioneer since January 2008 and discretion of Assistant Secretary of all of the Board the Pioneer Funds since September 2003; Vice President and Senior Counsel of Pioneer from July 2002 to December 2007 - -------------------------------------------------------------------------------------------------------------------------- Mark E. Bradley Treasurer Since March Vice President-Fund Accounting, None (48) 2008. Serves at Administration and the discretion Controllership Services of of the Board Pioneer; and Treasurer of all of the Pioneer Funds since March 2008; Deputy Treasurer of Pioneer from March 2004 to February 2008; Assistant Treasurer of all of the Pioneer Funds from March 2004 to February 2008; and Treasurer and Senior Vice President, CDC IXIS Asset Management Services from 2002 to 2003 - --------------------------------------------------------------------------------------------------------------------------
29 - -------------------------------------------------------------------------------------------------------------------------- Luis I. Presutti Assistant Since 2000. Assistant Vice President-Fund None (43) Treasurer Serves at the Accounting, Administration and discretion of Controllership Services of the Board Pioneer; and Assistant Treasurer of all of the Pioneer Funds - -------------------------------------------------------------------------------------------------------------------------- Gary Sullivan (50) Assistant Since 2002. Fund Accounting Manager - Fund None Treasurer Serves at the Accounting, Administration and discretion of Controllership Services of the Board Pioneer; and Assistant Treasurer of all of the Pioneer Funds - -------------------------------------------------------------------------------------------------------------------------- Katherine Kim Assistant Since 2003. Fund Administration Manager - None Sullivan (34) Treasurer Serves at the Fund Accounting, Administration discretion of and Controllership Services the Board since June 2003 and Assistant Treasurer of all of the Pioneer Funds since September 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management) - -------------------------------------------------------------------------------------------------------------------------- Teri W. Anderholm Chief Compliance Since January Chief Compliance Officer of None (48) Officer 2007. Serves at Pioneer since December 2006 and the discretion of all the Pioneer Funds since of the Board January 2007; Vice President and Compliance Officer, MFS Investment Management (August 2005 to December 2006); Consultant, Fidelity Investments (February 2005 to July 2005); Independent Consultant (July 1997 to February 2005) - --------------------------------------------------------------------------------------------------------------------------
*Mr. Cogan is an Interested Trustee because he is an officer or director of the fund's investment adviser and certain of its affiliates. The outstanding capital stock of PFD, Pioneer and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. Pioneer, the fund's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. Board Committees During the most recent fiscal year, the Board of Trustees held 7 meetings. Each Trustee attended at least 75% of such meetings. 30 The Board of Trustees has an Audit Committee, an Independent Trustees Committee, a Nominating Committee, a Valuation Committee and a Policy Administration Committee. Committee members are as follows: Audit David R. Bock, Margaret B. W. Graham and Marguerite A. Piret (Chair) Independent Trustees David R. Bock, Mary K. Bush, Margaret B.W. Graham (Chair), Thomas J. Perna, Marguerite A. Piret and John Winthrop Nominating Mary K. Bush, Marguerite A. Piret, and John Winthrop (Chair) Valuation David R. Bock, Margaret B. W. Graham and Marguerite A. Piret (Chair) Policy Administration Mary K. Bush (Chair), Thomas J. Perna and John Winthrop During the most recent fiscal year, the Audit, Independent Trustees, Nominating, Valuation, and Policy Administration Committees held 13, 10, 6, 4 and 5 meetings, respectively. The Board of Trustees has adopted a charter for the Audit Committee. In accordance with its charter, the purposes of the Audit Committee are to: |X| act as a liaison between the fund's independent registered public accounting firm and the full Board of Trustees of the fund; |X| discuss with the fund's independent registered public accounting firm their judgments about the quality of the fund's accounting principles and underlying estimates as applied in the fund's financial reporting; |X| review and assess the renewal materials of all related party contracts and agreements, including management advisory agreements, underwriting contracts, administration agreements, distribution contracts, and transfer agency contracts, among any other instruments and agreements that may be appropriate from time to time; |X| review and approve insurance coverage and allocations of premiums between the management and the fund and among the Pioneer Funds; |X| review and approve expenses under the administration agreement between Pioneer and the fund and allocations of such expenses among the Pioneer Funds; and |X| receive on a periodic basis a formal written statement delineating all relationships between the independent registered public accounting firm and the fund or Pioneer; to actively engage in a dialogue with the independent registered public accounting firm with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent registered public accounting firm; and to recommend that the Trustees take appropriate action in response to the independent registered public accounting firm's report to 31 satisfy itself of the independent registered public accounting firm's independence. The Nominating Committee reviews the qualifications of any candidate recommended by the Independent Trustees to serve as an Independent Trustee and makes a recommendation regarding that person's qualifications. The Committee does not accept nominations from shareholders. The Valuation Committee reviews the valuation assigned to certain securities by Pioneer in accordance with the fund's valuation procedures. The Policy Administration Committee reviews the implementation of certain of the fund's administrative policies and procedures. The Independent Trustees Committee reviews the fund's management contract and other related party contracts annually and is also responsible for any other action required to be taken, under the 1940 Act, by the Independent Trustees acting alone. The Agreement and Declaration of Trust provides that the Trust will indemnify the Trustees and officers against liabilities and expenses incurred in connection with any litigation in which they may be involved because of their offices with the Trust, unless it is determined in the manner specified in the Agreement and Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the Trust or the fund or that such indemnification would relieve any officer or Trustee of any liability to the Trust or the fund or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of his or her duties. Compensation of Officers and Trustees The fund pays no salaries or compensation to any of its officers. The Pioneer Funds, including the fund, compensate their Trustees. The Independent Trustees review and set their compensation annually, taking into consideration the committee and other responsibilities assigned to specific Trustees. The table under "Annual Fees, Expense and Other Information-Compensation of Officers and Trustees" sets forth the compensation paid to each of the Trustees. The compensation paid to the Trustees is then allocated among the funds as follows: o each fund with assets less than $250 million pays each Independent Trustee an annual fee of $1,000. o the remaining compensation of the Independent Trustees is allocated to each fund with assets greater than $250 million based on the fund's net assets. o the Interested Trustees receive an annual fee of $500 from each fund, except in the case of funds with net assets of $50 million or less, which pay each Interested Trustee an annual fee of $200. Pioneer reimburses the funds for the fees paid to the Interested Trustees. See "Compensation of Officers and Trustees" in "Annual Fee, Expense and Other Information." Sales Loads. The fund offers its shares to Trustees and officers of the fund and employees of Pioneer and its affiliates without a sales charge in order to encourage investment in the fund by individuals who are responsible for its management and because the sales to such persons do not entail any sales effort by the fund, brokers or other intermediaries. 32 Other Information Material Relationships of the Independent Trustees. For purposes of the statements below: o the immediate family members of any person are their spouse, children in the person's household (including step and adoptive children) and any dependent of the person. o an entity in a control relationship means any person who controls, is controlled by or is under common control with the named person. For example, UniCredito Italiano is an entity that is in a control relationship with Pioneer. o a related fund is a registered investment company or an entity exempt from the definition of an investment company pursuant to Sections 3(c)(1) or 3(c)(7) of the 1940 Act, for which Pioneer or any of its affiliates act as investment adviser or for which PFD or any of its affiliates act as principal underwriter. For example, the fund's related funds include all of the Pioneer Funds and any non-U.S. funds managed by Pioneer or its affiliates. As of December 31, 2007, none of the Independent Trustees, nor any of their immediate family members, beneficially owned any securities issued by Pioneer, UniCredito Italiano or any other entity in a control relationship to Pioneer or PFD. During the calendar years 2006 and 2007, none of the Independent Trustees, nor any of their immediate family members, had any direct or indirect interest (the value of which exceeded $120,000), whether by contract, arrangement or otherwise, in Pioneer, UniCredito Italiano, or any other entity in a control relationship to Pioneer or PFD. During the calendar years 2006 and 2007, none of the Independent Trustees, nor any of their immediate family members, had an interest in a transaction or a series of transactions in which the aggregate amount involved exceeded $120,000 and to which any of the following were a party (each a "fund related party"): o the fund o an officer of the fund o a related fund o an officer of any related fund o Pioneer o PFD o an officer of Pioneer or PFD o any affiliate of Pioneer or PFD o an officer of any such affiliate During the calendar years 2006 and 2007, none of the Independent Trustees, nor any of their immediate family members, had any relationship (the value of which exceeded $120,000) with any fund related party, including, but not limited to, relationships arising out of (i) the payment for property and services, (ii) the provision of legal services, (iii) the provision of investment banking services (other than as a member of the underwriting syndicate) or (iv) the provision of consulting services. During the calendar years 2006 and 2007, none of the Independent Trustees, nor any of their immediate family members, served as a member of a board of directors on which an officer of any of the following entities also serves as a director: o Pioneer 33 o PFD o UniCredito Italiano o any other entity in a control relationship with Pioneer or PFD None of the fund's Trustees or officers has any arrangement with any other person pursuant to which that Trustee or officer serves on the Board of Trustees. During the calendar years 2006 and 2007, none of the Independent Trustees, nor any of their immediate family members, had any position, including as an officer, employee, director or partner, with any of the following: o the fund o any related fund o Pioneer o PFD o any affiliated person of the fund, Pioneer or PFD o UniCredito Italiano o any other entity in a control relationship to the fund, Pioneer or PFD Share Ownership. See "Annual Fee, Expense and Other Information" for annual information on the ownership of fund shares by the Trustees, the fund's officers and owners in excess of 5% of any class of shares of the fund and a table indicating the value of shares that each Trustee beneficially owns in the fund and in all the Pioneer Funds. Proxy Voting Policies. Information regarding how the fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is publicly available to shareowners without charge at http://www.pioneerinvestments.com and on the SEC's website at http://www.sec.gov. The fund's "Proxy Voting Policies and Procedures" are attached as "Appendix B". 4. INVESTMENT ADVISER The fund has contracted with Pioneer to act as its investment adviser. Pioneer is an indirect, wholly owned subsidiary of UniCredito Italiano. Certain Trustees or officers of the fund are also directors and/or officers of certain of UniCredito Italiano's subsidiaries (see management biographies above). Pioneer has entered into an agreement with its affiliate, Pioneer Investment Management Limited ("PIML"), pursuant to which PIML provides certain services and personnel to Pioneer. As the fund's investment adviser, Pioneer provides the fund with investment research, advice and supervision and furnishes an investment program for the fund consistent with the fund's investment objective and policies, subject to the supervision of the fund's Trustees. Pioneer determines what portfolio securities will be purchased or sold, arranges for the placing of orders for the purchase or sale of portfolio securities, selects brokers or dealers to place those orders, maintains books and records with respect to the fund's securities transactions, and reports to the Trustees on the fund's investments and performance. Under the terms of its management contract with the fund, Pioneer pays all the operating expenses, including executive salaries and the rental of office space, relating to its services for the fund, with the exception of the following, which are to be paid by the fund: (a) charges and expenses for fund accounting, pricing and appraisal services and related overhead, including, to 34 the extent such services are performed by personnel of Pioneer, or its affiliates, office space and facilities and personnel compensation, training and benefits; (b) the charges and expenses of auditors; (c) the charges and expenses of any custodian, transfer agent, plan agent, dividend disbursing agent and registrar appointed by the fund; (d) issue and transfer taxes chargeable to the fund in connection with securities transactions to which the fund is a party; (e) insurance premiums, interest charges, dues and fees for membership in trade associations and all taxes and corporate fees payable by the fund to federal, state or other governmental agencies; (f) fees and expenses involved in registering and maintaining registrations of the fund and/or its shares with federal regulatory agencies, state or blue sky securities agencies and foreign jurisdictions, including the preparation of prospectuses and statements of additional information for filing with such regulatory authorities; (g) all expenses of shareholders' and Trustees' meetings and of preparing, printing and distributing prospectuses, notices, proxy statements and all reports to shareholders and to governmental agencies; (h) charges and expenses of legal counsel to the fund and the Trustees; (i) any distribution fees paid by the fund in accordance with Rule 12b-1 promulgated by the SEC pursuant to the 1940 Act; (j) compensation of Independent Trustees; (k) the cost of preparing and printing share certificates; and (l) interest on borrowed money, if any. In addition, the fund shall pay all brokers' and underwriting commissions chargeable to the fund in connection with securities transactions to which the fund is a party. The Trustees' approval of and the terms, continuance and termination of the management contract are governed by the 1940 Act and the Investment Advisers Act of 1940, as applicable (the "Advisers Act"). Pursuant to the management contract, Pioneer will not be liable for any error of judgment or mistake of law or for any loss sustained by reason of the adoption of any investment policy or the purchase, sale or retention of any securities on the recommendation of Pioneer. Pioneer, however, is not protected against liability by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under the management contract. Either party to the management contract may, without penalty, terminate the management contract by vote of its Board of Trustees or Directors, as the case may be, or by vote of a "majority of the outstanding voting securities" (as defined in the 1940 Act) of the fund or Pioneer, as the case may be, upon sixty (60) days' written notice to the other party. Advisory Fee. As compensation for its management services and expenses incurred, the fund pays Pioneer a fee at the annual rate of 0.50% of the fund's average daily net assets up to $250 million, 0.45% of the next $500 million and 0.40% on assets over $750 million. This fee is computed and accrued daily and paid monthly. See the table in Annual Fee, Expense and Other Information for management fees paid to Pioneer during recently completed fiscal years. Administration Agreement. The fund has entered into an administration agreement with Pioneer pursuant to which certain accounting, administration and legal services are performed by Pioneer and pursuant to which Pioneer receives a fee at the annual rate of 0.0225% of the fund's average daily net assets. See "Annual Fee, Expense and Other Information" for fees the fund paid to Pioneer for administration and related services. Potential Conflicts of Interest. The fund is managed by Pioneer which also serves as investment adviser to other Pioneer mutual funds and other accounts (including separate accounts and unregistered products) with investment objectives identical or similar to those of the fund. Securities frequently meet the investment objectives of the fund, the other Pioneer mutual funds and such other accounts. In such cases, the decision to recommend a purchase to one fund or 35 account rather than another is based on a number of factors. The determining factors in most cases are the amount of securities of the issuer then outstanding, the value of those securities and the market for them. Other factors considered in the investment recommendations include other investments which each fund or account presently has in a particular industry and the availability of investment funds in each fund or account. It is possible that at times identical securities will be held by more than one fund and/or account. However, positions in the same issue may vary and the length of time that any fund or account may choose to hold its investment in the same issue may likewise vary. To the extent that more than one of the Pioneer mutual funds or a private account managed by Pioneer seeks to acquire the same security at about the same time, the fund may not be able to acquire as large a position in such security as it desires or it may have to pay a higher price for the security. Similarly, the fund may not be able to obtain as large an execution of an order to sell or as high a price for any particular portfolio security if Pioneer decides to sell on behalf of another account the same portfolio security at the same time. On the other hand, if the same securities are bought or sold at the same time by more than one fund or account, the resulting participation in volume transactions could produce better executions for the fund. In the event more than one account purchases or sells the same security on a given date, the purchases and sales will normally be made as nearly as practicable on a pro rata basis in proportion to the amounts desired to be purchased or sold by each account. Although the other Pioneer mutual funds may have the same or similar investment objectives and policies as the fund, their portfolios do not generally consist of the same investments as the fund or each other, and their performance results are likely to differ from those of the fund. Personal Securities Transactions. The fund, Pioneer, and PFD have adopted a code of ethics under Rule 17j-1 under the 1940 Act which is applicable to officers, trustees/directors and designated employees of Pioneer and certain of Pioneer's affiliates. The code permits such persons to engage in personal securities transactions for their own accounts, including securities that may be purchased or held by the fund, and is designed to prescribe means reasonably necessary to prevent conflicts of interest from arising in connection with personal securities transactions. The code is on public file with and available from the SEC. 5. PRINCIPAL UNDERWRITER AND DISTRIBUTION PLAN Principal Underwriter PFD, 60 State Street, Boston, Massachusetts 02109, is the principal underwriter for the fund in connection with the continuous offering of its shares. PFD is an indirect wholly owned subsidiary of PIM-USA. The fund entered into an underwriting agreement with PFD which provides that PFD will bear expenses for the distribution of the fund's shares, except for expenses incurred by PFD for which it is reimbursed or compensated by the fund under the distribution plans (discussed below). PFD bears all expenses it incurs in providing services under the underwriting agreement. Such expenses include compensation to its employees and representatives and to securities dealers for distribution-related services performed for the fund. PFD also pays certain expenses in connection with the distribution of the fund's shares, including the cost of preparing, printing and distributing advertising or promotional materials, and the cost of printing and distributing prospectuses and supplements to prospective shareholders. The fund bears the cost of registering 36 its shares under federal and state securities law and the laws of certain non-U.S. countries. Under the underwriting agreement, PFD will use its best efforts in rendering services to the fund. See "Sales Charges" for the schedule of initial sales charge reallowed to dealers as a percentage of the offering price of the fund's Class A shares. See the tables under "Annual Fee, Expense and Other Information" for commissions retained by PFD and reallowed to dealers in connection with PFD's offering of the fund's Class A and Class C shares during recently completed fiscal years. The fund will not generally issue fund shares for consideration other than cash. At the fund's sole discretion, however, it may issue fund shares for consideration other than cash in connection with a bona fide reorganization, statutory merger or other acquisition of portfolio securities. It is the fund's general practice to repurchase its shares of beneficial interest for cash consideration in any amount; however, the redemption price of shares of the fund may, at Pioneer's discretion, be paid in portfolio securities. The fund has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which the fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the fund's net asset value during any 90-day period for any one shareholder. Should the amount of redemptions by any shareholder exceed such limitation, the fund will have the option of redeeming the excess in cash or portfolio securities. In the latter case, the securities are taken at their value employed in determining the fund's net asset value. You may incur additional costs, such as brokerage fees and taxes, and risks, including a decline in the value of the securities you receive, if the fund makes an in-kind distribution. The selection of such securities will be made in such manner as the Board of Trustees deems fair and reasonable; however, the fund will not distribute illiquid securities in kind. Distribution and Service Plans Distribution Plan. The fund has adopted a distribution plan (the "Distribution Plan") pursuant to Rule l2b-1 under the 1940 Act with respect to its Class A, Class B and Class C shares. The fund has not adopted a distribution plan with respect to its Class Y shares. For each Class, fees under the Distribution Plan may be used to make payments to one or more principal underwriters, broker-dealers, financial intermediaries (which may include banks) and other parties that enter into a distribution, selling or service agreement with respect to the shares of such Class (each of the foregoing, a "Service Party"). The fund, its principal underwriter or other parties also may incur expenses in connection with the distribution or marketing and sales of the fund's shares that may be paid or reimbursed by the fund. The aggregate amount in respect of such fees and expenses with respect to each Class shall be the amount calculated at a percentage per annum of the average daily net assets attributable to such Class as set forth below: Class Applicable Percentage Per Annum Class A 0.25% Class B 1.00% Class C 1.00%
Payments are made under the Distribution Plan for distribution services and other activities in respect of the sale of shares of the fund and to make payments for advertising, marketing or other 37 promotional activity, and for preparation, printing, and distribution of prospectuses, statements of additional information and reports for recipients other than regulators and existing shareholders. The fund also may make payments to Service Parties under the Distribution Plan for providing personal service or the maintenance of shareholder accounts. The amounts paid to each recipient may vary based upon certain factors, including, among other things, the levels of sales of fund shares and/or shareholder services provided; provided, however, that the fees paid to a recipient with respect to a particular Class that may be used to cover expenses primarily intended to result in the sale of shares of that Class, or that may be used to cover expenses primarily intended for personal service and/or maintenance of shareholder accounts, may not exceed the maximum amounts, if any, as may from time to time be permitted for such services under the Financial Industry Regulatory Authority ("FINRA") Conduct Rule 2830 or any successor rule, in each case as amended or interpreted by FINRA. The Distribution Plan also provides that the Service Parties may receive all or a portion of any sales charges paid by investors. The Distribution Plan permits the fund to pay fees to the Service Parties as compensation for their services, not as reimbursement for specific expenses incurred. Thus, even if their expenses exceed the fees provided for by the Distribution Plan, the fund will not be obligated to pay more than those fees and, if their expenses are less than the fees paid to them, they will realize a profit. The fund may pay the fees to the Service Parties until the Distribution Plan or any related distribution agreement is terminated or not renewed. In that event, a Service Party's expenses in excess of fees received or accrued through the termination date will be such Service Party's sole responsibility and not obligations of the fund. In their annual consideration of the continuation of the Distribution Plan for the fund, the Trustees will review the Distribution Plan and the expenses for each Class within the fund separately. The Distribution Plan also recognizes that Pioneer, PFD or any other Service Party may make payments for distribution related expenses out of its own resources, including past profits, or payments received from the fund for other purposes, such as management fees, and that the Service Parties may from time to time use their own resources for distribution-related services, in addition to the fees paid under the Distribution Plan. The Distribution Plan specifically provides that, to the extent that such payments might be deemed to be indirect financing of any activity primarily intended to result in the sale of shares of the fund within the context of Rule 12b-1, then the payments are deemed to be authorized by the Distribution Plan but not subject to the maximum amounts set forth above. Under its terms, the Distribution Plan continues in effect for one year and thereafter for successive annual periods, provided such continuance is specifically approved at least annually by vote of the Board, including a majority of the Independent Trustees who have no direct or indirect financial interest in the operation of the Distribution Plan. The Distribution Plan may not be amended to increase materially the amount of the service and distribution fees without shareholder approval, and all material amendments of the Distribution Plan also must be approved by the Trustees, including all of the Independent Trustees, in the manner described above. The Distribution Plan may be terminated with respect to a Class of the fund at any time, without penalty, by vote of a majority of the Independent Trustees or by vote of a majority of the outstanding voting securities of such Class of the fund (as defined in the 1940 Act). See"Annual Fee, Expense and Other Information" for fund expenses under the Distribution Plan paid to PFD for the most recently completed fiscal year. Class B Shares. PFD pays the selling broker-dealer a commission on the sale of Class B shares equal to 3.75% of the amount invested. This commission is paid at the time of sale of the Class B shares. In order to be entitled to a commission, the selling broker-dealer must have entered into a 38 sales agreement with PFD. Since PFD pays commissions to broker-dealers at the time of the sale of Class B shares but only receives compensation for such expenses over time through the distribution fee and CDSC, PFD may finance the payment of commissions to broker-dealers. In order to facilitate such financing, the fund has agreed that the distribution fee attributable to the Class B shares will not be terminated or modified (including a modification in the rules relating to the conversion of Class B shares into Class A shares) with respect to Class B shares (or the assets attributable to the Class B shares): o issued prior to the date of any termination or modification; o attributable to Class B shares issued through one or a series of exchanges of shares of another investment company for which PFD acts as principal underwriter which were initially issued prior to the date of such termination or modification; or o issued as a dividend or distribution upon Class B shares initially issued or attributable to Class B shares issued prior to the date of any such termination or modification. The foregoing limitation does not apply to Class B shares issued after the termination or modification. The foregoing limitation on terminating or modifying the distribution fee attributable to the Class B shares also does not apply to a termination or modification: o to the extent required by a change in the 1940 Act, the rules or regulations under the 1940 Act, the Conduct Rules of FINRA or an order of any court or governmental agency, in each case enacted, issued or promulgated after September 30, 1998; o if the fund (or any successor) terminates the Distribution Plan and all payments under the Distribution Plan and neither the fund (nor any successor) establishes another class of shares which has substantially similar characteristics to the Class B shares of the fund; or o at any time by the Board of Trustees. However, the Board of Trustees may terminate or modify the Class B Plan only if the fund and Pioneer agree that none of the fund, PFD or any of their affiliates will pay, after the date of termination or modification, a service fee with respect to the fund's Class B shares and the termination or modification of the distribution fee applies equally to all Class B shares outstanding from time to time. In the underwriting agreement, the fund agrees that subsequent to the issuance of a Class B share, the fund will not waive or change any CDSC (including a change in the rules applicable to conversion of Class B shares into another class) in respect of such Class B share, except: o as provided in the fund's prospectus or statement of additional information; or o as required by a change in the 1940 Act and the rules and regulations thereunder, the Conduct Rules of FINRA or any order of any court or governmental agency. PFD pays a service fee to broker-dealers at a rate of up to 0.25% of the fund's average daily net assets attributable to Class B shares owned by shareholders for whom that broker-dealer is the holder or dealer of record. This service fee compensates the broker-dealer for providing personal services and/or account maintenance services rendered by the broker-dealer with respect to Class B shares. PFD may from time to time require that dealers, in addition to providing these services, meet certain criteria in order to receive service fees. 39 At the time of the sale of a Class B share, PFD also may advance to the broker-dealer, from PFD's own assets, the first-year service fee payable under the Class B Plan at a rate up to 0.25% of the purchase price of such shares. If such an advance is made, the broker-dealer would not receive any further service fee until the 13th month following the purchase of Class B shares. As compensation for advancing the service fee, PFD may retain the service fee paid by the fund with respect to such shares for the first year after purchase. Class C Shares. PFD will advance to dealers the first-year service fee at a rate equal to 0.25% of the amount invested. As compensation therefor, PFD may retain the service fee paid by the fund with respect to such shares for the first year after purchase. Commencing in the 13th month following the purchase of Class C shares, dealers will become eligible for additional annual distribution fees and service fees of up to 0.75% and 0.25%, respectively, of the net asset value of such shares. Dealers may from time to time be required to meet certain other criteria in order to receive service fees. 6. SHAREHOLDER SERVICING/TRANSFER AGENT The fund has contracted with PIMSS, 60 State Street, Boston, Massachusetts 02109, to act as shareholder servicing and transfer agent for the fund. Under the terms of its contract with the fund, PIMSS services shareholder accounts, and its duties include: (i) processing sales, redemptions and exchanges of shares of the fund; (ii) distributing dividends and capital gains associated with the fund's portfolio; and (iii) maintaining account records and responding to shareholder inquiries. PIMSS receives an annual fee of $27.40 for each shareholder account from the fund as compensation for the services described above. PIMSS is also reimbursed by the fund for its cash out-of-pocket expenditures. The fund may compensate entities which have agreed to provide certain sub-accounting services such as specific transaction processing and recordkeeping services. Any such payments by the fund would be in lieu of the per account fee which would otherwise be paid by the fund to PIMSS. 7. CUSTODIAN Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts 02109, is the custodian of the fund's assets. The custodian's responsibilities include safekeeping and controlling the fund's cash and securities, handling the receipt and delivery of securities, and collecting interest and dividends on the fund's investments. 8. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116-5072, the fund's independent registered public accounting firm, provides audit services, tax return review services, and assistance and consultation with respect to filings with the SEC. 40 9. PORTFOLIO MANAGEMENT Additional Information About the Portfolio Managers Other Accounts Managed by the Portfolio Managers. The table below indicates, for each portfolio manager of the fund, information about the accounts other than the fund over which the portfolio manager has day-to-day investment responsibility. All information on the number of accounts and total assets in the table is as of December 31, 2007. For purposes of the table, "Other Pooled Investment Vehicles" may include investment partnerships, undertakings for collective investments in transferable securities ("UCITS") and other non-U.S. investment funds and group trusts, and "Other Accounts" may include separate accounts for institutions or individuals, insurance company general or separate accounts, pension funds and other similar institutional accounts but generally do not include the portfolio manager's personal investment accounts or those which the manager may be deemed to own beneficially under the code of ethics. Certain funds and other accounts managed by the portfolio manager may have substantially similar investment strategies.
- ----------------------------------------------------------------------------------------------------------------------- Name of Portfolio Type of Account Number of Total Assets Number of Assets Managed Manager Accounts Managed Managed Accounts Managed for which for which Advisory Fee is Advisory Fee is Performance-Based Performance-Based - ----------------------------------------------------------------------------------------------------------------------- David Eurkus Other Registered 6 $2,134,946,000 N/A N/A Investment Companies ------------------------------------------------------------------------------------------------- Other Pooled 0 $0 N/A N/A Investment Vehicles ------------------------------------------------------------------------------------------------- Other Accounts 1 $6,196,000 N/A N/A - -----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- Name of Portfolio Type of Account Number of Total Assets Number of Assets Managed Manager Accounts Managed Managed Accounts Managed for which for which Advisory Fee is Advisory Fee is Performance-Based Performance-Based - ----------------------------------------------------------------------------------------------------------------------- Timothy Pynchon Other Registered 3 $948,106,000 N/A N/A Investment Companies ------------------------------------------------------------------------------------------------- Other Pooled 0 $0 N/A N/A Investment Vehicles -------------------------------------------------------------------------------------------------
41 ------------------------------------------------------------------------------------------------- Other Accounts 0 $0 N/A N/A - -----------------------------------------------------------------------------------------------------------------------
Potential Conflicts of Interest. When a portfolio manager is responsible for the management of more than one account, the potential arises for the portfolio manager to favor one account over another. The principal types of potential conflicts of interest that may arise are discussed below. For the reasons outlined below, Pioneer does not believe that any material conflicts are likely to arise out of a portfolio manager's responsibility for the management of the fund as well as one or more other accounts. Although Pioneer has adopted procedures that it believes are reasonably designed to detect and prevent violations of the federal securities laws and to mitigate the potential for conflicts of interest to affect its portfolio management decisions, there can be no assurance that all conflicts will be identified or that all procedures will be effective in mitigating the potential for such risks. Generally, the risks of such conflicts of interest are increased to the extent that a portfolio manager has a financial incentive to favor one account over another. Pioneer has structured its compensation arrangements in a manner that is intended to limit such potential for conflicts of interest. See "Compensation of Portfolio Managers" below. o A portfolio manager could favor one account over another in allocating new investment opportunities that have limited supply, such as initial public offerings and private placements. If, for example, an initial public offering was expected to appreciate in value significantly shortly after the offering was allocated to a single account, that account may be expected to have better investment performance than other accounts that did not receive an allocation of the initial public offering. Generally, investments for which there is limited availability are allocated based upon a range of factors including available cash and consistency with the accounts' investment objectives and policies. This allocation methodology necessarily involves some subjective elements but is intended over time to treat each client in an equitable and fair manner. Generally, the investment opportunity is allocated among participating accounts on a pro rata basis. Although Pioneer believes that its practices are reasonably designed to treat each client in an equitable and fair manner, there may be instances where a fund may not participate, or may participate to a lesser degree than other clients, in the allocation of an investment opportunity. o A portfolio manager could favor one account over another in the order in which trades for the accounts are placed. If a portfolio manager determines to purchase a security for more than one account in an aggregate amount that may influence the market price of the security, accounts that purchased or sold the security first may receive a more favorable price than accounts that made subsequent transactions. The less liquid the market for the security or the greater the percentage that the proposed aggregate purchases or sales represent of average daily trading volume, the greater the potential for accounts that make subsequent purchases or sales to receive a less favorable price. When a portfolio manager intends to trade the same security on the same day for more than one account, the trades typically are "bunched," which means that the trades for the individual accounts are aggregated and each account receives the same price. There are some types of accounts as to which bunching may not be possible for contractual reasons (such as directed brokerage arrangements). Circumstances may also arise where the trader believes that bunching the orders may not result in the best possible price. Where those accounts or circumstances are involved, Pioneer will place the order in a manner intended to result in as favorable a price as possible for such client. o A portfolio manager could favor an account if the portfolio manager's compensation is tied to the performance of that account to a greater degree than other accounts managed by 42 the portfolio manager. If, for example, the portfolio manager receives a bonus based upon the performance of certain accounts relative to a benchmark while other accounts are disregarded for this purpose, the portfolio manager will have a financial incentive to seek to have the accounts that determine the portfolio manager's bonus achieve the best possible performance to the possible detriment of other accounts. Similarly, if Pioneer receives a performance-based advisory fee, the portfolio manager may favor that account, whether or not the performance of that account directly determines the portfolio manager's compensation. o A portfolio manager could favor an account if the portfolio manager has a beneficial interest in the account, in order to benefit a large client or to compensate a client that had poor returns. For example, if the portfolio manager held an interest in an investment partnership that was one of the accounts managed by the portfolio manager, the portfolio manager would have an economic incentive to favor the account in which the portfolio manager held an interest. o If the different accounts have materially and potentially conflicting investment objectives or strategies, a conflict of interest could arise. For example, if a portfolio manager purchases a security for one account and sells the same security for another account, such trading pattern may disadvantage either the account that is long or short. In making portfolio manager assignments, Pioneer seeks to avoid such potentially conflicting situations. However, where a portfolio manager is responsible for accounts with differing investment objectives and policies, it is possible that the portfolio manager will conclude that it is in the best interest of one account to sell a portfolio security while another account continues to hold or increase the holding in such security. Compensation of Portfolio Managers. Pioneer has adopted a system of compensation for portfolio managers that seeks to align the financial interests of the portfolio managers with those of shareholders of the accounts (including Pioneer funds) the portfolio managers manage, as well as with the financial performance of Pioneer. The compensation program for all Pioneer portfolio managers includes a base salary (determined by the rank and tenure of the employee) and an annual bonus program, as well as customary benefits that are offered generally to all full-time employees. Base compensation is fixed and normally reevaluated on an annual basis. Pioneer seeks to set base compensation at market rates, taking into account the experience and responsibilities of the portfolio manager. The bonus plan is intended to provide a competitive level of annual bonus compensation that is tied to the portfolio manager achieving superior investment performance and align the interests of the investment professional with those of shareholders, as well as with the financial performance of Pioneer. Any bonus under the plan is completely discretionary, with a maximum annual bonus that may be in excess of base salary. The annual bonus is based upon a combination of the following factors: o Quantitative Investment Performance. The quantitative investment performance calculation is based on pre-tax investment performance of all of the accounts managed by the portfolio manager (which includes the fund and any other accounts managed by the portfolio manager) over a one-year period (20% weighting) and four-year period (80% weighting), measured for periods ending on December 31. The accounts, which include the fund, are ranked against a group of mutual funds with similar investment objectives and investment focus (60%) and a broad-based securities market index measuring the performance of the same type of securities in which the accounts invest (40%), which, in the case of the fund, is the Lehman Brothers Municipal Bond Index. As a result of these 43 two benchmarks, the performance of the portfolio manager for compensation purposes is measured against the criteria that are relevant to the portfolio manager's competitive universe. o Qualitative Performance. The qualitative performance component with respect to all of the accounts managed by the portfolio manager includes objectives, such as effectiveness in the areas of teamwork, leadership, communications and marketing, that are mutually established and evaluated by each portfolio manager and management. o Pioneer Results and Business Line Results. Pioneer's financial performance, as well as the investment performance of its investment management group, affect a portfolio manager's actual bonus by a leverage factor of plus or minus (+/-) a predetermined percentage. The quantitative and qualitative performance components comprise 80% and 20%, respectively, of the overall bonus calculation (on a pre-adjustment basis). A portion of the annual bonus is deferred for a specified period and may be invested in one or more Pioneer funds. Certain portfolio managers may participate in other programs designed to reward and retain key contributors. Senior executives or other key employees may be granted performance units based on the stock price performance of UniCredito Italiano and the financial performance of Pioneer Global Asset Management S.p.A., which are affiliates of Pioneer. Portfolio managers also may participate in a deferred compensation program, whereby deferred amounts are invested in one or more Pioneer funds. Share Ownership by Portfolio Managers. The following table indicates as of December 31, 2007 the value, within the indicated range, of shares beneficially owned by the portfolio managers of the fund.
- -------------------------------------------------------------------------------- Name of Portfolio Manager Beneficial Ownership of the Fund* - -------------------------------------------------------------------------------- David Eurkus A - -------------------------------------------------------------------------------- Timothy Pynchon A - --------------------------------------------------------------------------------
*Key to Dollar Ranges A. None B. $1 - $10,000 C. $10,001 - $50,000 D. $50,001 - $100,000 E. $100,001 - $500,000 F. $500,001 - $1,000,000 G. Over $1,000,000 10. PORTFOLIO TRANSACTIONS All orders for the purchase or sale of portfolio securities are placed on behalf of the fund by Pioneer pursuant to authority contained in the fund's management contract. Securities purchased and sold on behalf of the fund normally will be traded in the over-the-counter market on a net basis (i.e. without commission) through dealers acting for their own account and not as brokers or 44 otherwise through transactions directly with the issuer of the instrument. The cost of securities purchased from underwriters includes an underwriter's commission or concession, and the prices at which securities are purchased and sold from and to dealers include a dealer's markup or markdown. Pioneer normally seeks to deal directly with the primary market makers unless, in its opinion, better prices are available elsewhere. Pioneer seeks to obtain overall the best execution on portfolio trades. The price of securities and any commission rate paid are always factors, but frequently not the only factors, in judging best execution. In selecting brokers or dealers, Pioneer considers various relevant factors, including, but not limited to, the size and type of the transaction; the nature and character of the markets for the security to be purchased or sold; the execution efficiency, settlement capability and financial condition of the dealer; the dealer's execution services rendered on a continuing basis; and the reasonableness of any dealer spreads. Transactions in non-U.S. equity securities are executed by broker-dealers in non-U.S. countries in which commission rates may not be negotiable (as such rates are in the U.S.). Pioneer may select broker-dealers that provide brokerage and/or research services to the fund and/or other investment companies or other accounts managed by Pioneer over which it or its affiliates exercise investment discretion. In addition, consistent with Section 28(e) of the Securities Exchange Act of 1934, as amended, if Pioneer determines in good faith that the amount of commissions charged by a broker-dealer is reasonable in relation to the value of the brokerage and research services provided by such broker, the fund may pay commissions to such broker-dealer in an amount greater than the amount another firm may charge. Such services may include advice concerning the value of securities; the advisability of investing in, purchasing or selling securities; the availability of securities or the purchasers or sellers of securities; providing stock quotation services, credit rating service information and comparative fund statistics; furnishing analyses, electronic information services, manuals and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, and performance of accounts and particular investment decisions; and effecting securities transactions and performing functions incidental thereto (such as clearance and settlement). Pioneer maintains a listing of broker-dealers who provide such services on a regular basis. However, because many transactions on behalf of the fund and other investment companies or accounts managed by Pioneer are placed with broker-dealers (including broker-dealers on the listing) without regard to the furnishing of such services, it is not possible to estimate the proportion of such transactions directed to such dealers solely because such services were provided. Pioneer believes that no exact dollar value can be calculated for such services. The research received from broker-dealers may be useful to Pioneer in rendering investment management services to the fund as well as other investment companies or other accounts managed by Pioneer, although not all such research may be useful to the fund. Conversely, such information provided by brokers or dealers who have executed transaction orders on behalf of such other accounts may be useful to Pioneer in carrying out its obligations to the fund. The receipt of such research has not reduced Pioneer's normal independent research activities; however, it enables Pioneer to avoid the additional expenses which might otherwise be incurred if it were to attempt to develop comparable information through its own staff. The fund may participate in third-party brokerage and/or expense offset arrangements to reduce the fund's total operating expenses. Pursuant to third-party brokerage arrangements, the fund may incur lower expenses by directing brokerage to third-party broker-dealers which have agreed to use part of their commission to pay the fund's fees to service providers unaffiliated with Pioneer or other expenses. Since the commissions paid to the third party brokers reflect a commission cost that the fund would generally expect to incur on its brokerage transactions but not necessarily the lowest possible commission, this arrangement is intended to reduce the fund's operating expenses 45 without increasing the cost of its brokerage commissions. Since use of such directed brokerage is subject to the requirement to achieve best execution in connection with the fund's brokerage transactions, there can be no assurance that such arrangements will be utilized. Pursuant to expense offset arrangements, the fund may incur lower transfer agency expenses due to interest earned on cash held with the transfer agent. See "Financial highlights" in the prospectus(es). See the table in "Annual Fee, Expense and Other Information" for aggregate brokerage and underwriting commissions paid by the fund in connection with its portfolio transactions during recently completed fiscal years. The Board of Trustees periodically reviews Pioneer's performance of its responsibilities in connection with the placement of portfolio transactions on behalf of the fund. 11. DESCRIPTION OF SHARES As an open-end management investment company, the fund continuously offers its shares to the public and under normal conditions must redeem its shares upon the demand of any shareholder at the next determined net asset value per share less any applicable CDSC. See "Sales Charges." When issued and paid for in accordance with the terms of the prospectus and statement of additional information, shares of the fund are fully paid and non-assessable. Shares will remain on deposit with the fund's transfer agent and certificates will not normally be issued. The Agreement and Declaration of Trust, dated as of June 16, 1994 (the "Declaration of Trust"), as amended from time to time, permits the Board of Trustees to authorize the issuance of an unlimited number of full and fractional shares of beneficial interest which may be divided into such separate series as the Trustees may establish. Currently, the Trust consists of only one series. The Trustees may, however, establish additional series of shares and may divide or combine the shares into a greater or lesser number of shares without thereby changing the proportionate beneficial interests in the fund. The Declaration of Trust further authorizes the Trustees to classify or reclassify any series of the shares into one or more classes. Pursuant thereto, the Trustees have authorized the issuance of the following classes of shares of the fund, designated as Class A, Class B, Class C, and Class Y. Each share of a class of the fund represents an equal proportionate interest in the assets of the fund allocable to that class. Upon liquidation of the fund, shareholders of each class of the fund are entitled to share pro rata in the fund's net assets allocable to such class available for distribution to shareholders. The Trust reserves the right to create and issue additional series or classes of shares, in which case the shares of each class of a series would participate equally in the earnings, dividends and assets allocable to that class of the particular series. The shares of each class represent an interest in the same portfolio of investments of the fund. Each class has equal rights as to voting, redemption, dividends and liquidation, except that each class bears different distribution and transfer agent fees and may bear other expenses properly attributable to the particular class. Class A, Class B and Class C shareholders have exclusive voting rights with respect to the Rule 12b-1 Plan as applied to that class of shares and adopted by holders of those shares in connection with the distribution of shares. Shareholders are entitled to one vote for each share held and may vote in the election of Trustees and on other matters submitted to a meeting of shareholders. Although Trustees are not elected annually by the shareholders, shareholders have, under certain circumstances, the right to remove one or more Trustees. The fund is not required, and does not intend, to hold annual shareholder meetings although special meetings may be called from time to time, including for the purpose of 46 electing or removing Trustees, changing fundamental investment restrictions or approving a management contract. The shares of each series of the Trust are entitled to vote separately to approve investment advisory agreements or changes in investment restrictions, but shareholders of all series vote together in the election and selection of Trustees and accountants. Shares of all series of the Trust vote together as a class on matters that affect all series of the Trust in substantially the same manner. As to matters affecting a single series or class, shares of such series or class will vote separately. No amendment adversely affecting the rights of shareholders may be made to the Declaration of Trust without the affirmative vote of a majority of the Trust's shares. Shares have no preemptive or conversion rights, except that under certain circumstances Class B shares may convert to Class A shares. As a Delaware statutory trust, the Trust's operations are governed by the Declaration of Trust. A copy of the Trust's Certificate of Trust dated June 16, 1994 as amended, is on file with the office of the Secretary of State of Delaware. Generally, Delaware statutory trust shareholders are not personally liable for obligations of the Delaware statutory trust under Delaware law. The Delaware Statutory Trust Act (the "Delaware Act") provides that a shareholder of a Delaware statutory trust shall be entitled to the same limitation of liability extended to shareholders of private for-profit corporations. The Declaration of Trust expressly provides that the Trust is organized under the Delaware Act and that the Declaration of Trust is to be governed by Delaware law. There is nevertheless a possibility that a Delaware statutory trust, such as the Trust, might become a party to an action in another state whose courts refuse to apply Delaware law, in which case the Trust's shareholders could become subject to personal liability. To guard against this risk, the Declaration of Trust (i) contains an express disclaimer of shareholder liability for acts or obligations of the Trust and provides that notice of such disclaimer may be given in each agreement, obligation or instrument entered into or executed by the Trust or its Trustees, (ii) provides for the indemnification out of Trust property of any shareholders held personally liable for any obligations of the Trust or any series of the Trust and (iii) provides that the Trust shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of the Trust and satisfy any judgment thereon. Thus, the risk of a shareholder incurring financial loss beyond his or her investment because of shareholder liability is limited to circumstances in which all of the following factors are present: (1) a court refused to apply Delaware law; (2) the liability arose under tort law or, if not, no contractual limitation of liability was in effect; and (3) the Trust itself would be unable to meet its obligations. In light of Delaware law, the nature of the Trust's business and the nature of its assets, the risk of personal liability to a fund shareholder is remote. In addition to the requirements under Delaware law, the Declaration of Trust provides that a shareholder of the Trust may bring a derivative action on behalf of the fund only if the following conditions are met: (a) shareholders eligible to bring such derivative action under Delaware law who hold at least 10% of the outstanding shares of the Trust, or 10% of the outstanding shares of the series or class to which such action relates, shall join in the request for the Trustees to commence such action; and (b) the Trustees must be afforded a reasonable amount of time to consider such shareholder request and investigate the basis of such claim. The Trustees shall be entitled to retain counsel or other advisers in considering the merits of the request and shall require an undertaking by the shareholders making such request to reimburse the fund for the expense of any such advisers in the event that the Trustees determine not to bring such action. 47 The Declaration of Trust further provides that the Trust shall indemnify each of its Trustees and officers against liabilities and expenses reasonably incurred by them in connection with, or arising out of, any action, suit or proceeding, threatened against or otherwise involving such Trustee or officer, directly or indirectly, by reason of being or having been a Trustee or officer of the Trust. The Declaration of Trust does not authorize the Trust to indemnify any Trustee or officer against any liability to which he or she would otherwise be subject by reason of or for willful misfeasance, bad faith, gross negligence or reckless disregard of such person's duties. The Declaration of Trust provides that any Trustee who is not an "interested person" of Pioneer shall be considered to be independent for purposes of Delaware law notwithstanding the fact that such Trustee receives compensation for serving as a Trustee of the Trust or other investment companies for which Pioneer acts as investment adviser. 12. SALES CHARGES The fund continuously offers the following classes of shares: Class A, Class B, Class C, and Class Y, as described in the prospectus. The fund offers its shares at a reduced sales charge to investors who meet certain criteria that permit the fund's shares to be sold with low distribution costs. These criteria are described below or in the prospectus. Class A Share Sales Charges You may buy Class A shares at the public offering price, including a sales charge, as follows:
Sales Charge as a % of ---------------------- Offering Net Amount Dealer Amount of Purchase Price Invested Reallowance Less than $100,000 4.50 4.71 4.00 $100,000 but less than $250,000 3.50 3.63 3.00 $250,000 but less than $500,000 2.50 2.56 2.00 $500,000 but less than $1,000,000 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 see below
The schedule of sales charges above is applicable to purchases of Class A shares of the fund by (i) an individual, (ii) an individual and his or her spouse and children under the age of 21 and (iii) a trustee or other fiduciary of a trust estate or fiduciary account or related trusts or accounts including pension, profit-sharing and other employee benefit trusts qualified under Sections 401 or 408 of the Code although more than one beneficiary is involved. The sales charges applicable to a current purchase of Class A shares of the fund by a person listed above is determined by adding the value of shares to be purchased to the aggregate value (at the then current offering price) of shares of any of the other Pioneer mutual funds previously purchased and then owned, provided PFD is notified by such person or his or her broker-dealer each time a purchase is made which would qualify. Pioneer mutual funds include all mutual funds for which PFD serves as principal underwriter. At the sole discretion of PFD, holdings of funds domiciled outside the U.S., but which are managed by affiliates of Pioneer, may be included for this purpose. No sales charge is payable at the time of purchase on investments of $1 million or more, or for purchases by participants in employer-sponsored retirement plans described below subject to a CDSC of 1% which may be imposed in the event of a redemption of Class A shares within 18 48 months of purchase (one year of purchase for shares purchased prior to February 1, 2004). PFD may, in its discretion, pay a commission to broker-dealers who initiate and are responsible for such purchases as follows: Accounts Other than Employer-Sponsored Retirement Plans 1.00% Up to $4 million 0.50% Next $46 million 0.25% Over $50 million Employer-Sponsored Retirement Plans 0.50% Up to $50 million 0.25% Over $50 million These commissions shall not be payable if the purchaser is affiliated with the broker-dealer or if the purchase represents the reinvestment of a redemption made during the previous 12 calendar months. Broker-dealers who receive a commission in connection with Class A share purchases at net asset value by employer-sponsored retirement plans with at least $1 million in total plan assets (or that has 1,000 or more eligible participants for employer-sponsored retirement plans with accounts established with Pioneer on or before March 31, 2004) will be required to return any commissions paid or a pro rata portion thereof if the retirement plan redeems its shares within 18 months of purchase. Letter of Intent ("LOI"). Reduced sales charges are available for purchases of $100,000 or more of Class A shares (excluding any reinvestments of dividends and capital gain distributions) made within a 13-month period pursuant to an LOI which may be established by completing the Letter of Intent section of the Account Application. The reduced sales charge will be the charge that would be applicable to the purchase of the specified amount of Class A shares as if the shares had all been purchased at the same time. A purchase not made pursuant to an LOI may be included if the LOI is submitted to PIMSS within 90 days of such purchase. You may also obtain the reduced sales charge by including the value (at current offering price) of all your Class A shares in the fund and all other Pioneer mutual funds held of record as of the date of your LOI in the amount used to determine the applicable sales charge for the Class A shares to be purchased under the LOI. Five percent of your total intended purchase amount will be held in escrow by PIMSS, registered in your name, until the terms of the LOI are fulfilled. When you sign the Account Application, you agree to irrevocably appoint PIMSS your attorney-in-fact to surrender for redemption any or all shares held in escrow with full power of substitution. An LOI is not a binding obligation upon the investor to purchase, or the fund to sell, the amount specified in the LOI. Any share class for which no sales charge is paid cannot be included under the LOI. If the total purchases, less redemptions, exceed the amount specified under the LOI and are in an amount that would qualify for a further quantity discount, all transactions will be recomputed on the expiration date of the LOI to effect the lower sales charge. Any difference in the sales charge resulting from such recomputation will be either delivered to you in cash or invested in additional shares at the lower sales charge. The dealer, by signing the Account Application, agrees to return to PFD, as part of such retroactive adjustment, the excess of the commission previously reallowed or paid to the dealer over that which is applicable to the actual amount of the total purchases under the LOI. 49 If the total purchases, less redemptions, are less than the amount specified under the LOI, you must remit to PFD any difference between the sales charge on the amount actually purchased and the amount originally specified in the LOI. When the difference is paid, the shares held in escrow will be deposited to your account. If you do not pay the difference in sales charge within 20 days after written request from PFD or your dealer, PIMSS, after receiving instructions from PFD, will redeem the appropriate number of shares held in escrow to realize the difference and release any excess. Class B Shares You may buy Class B shares at the net asset value per share next computed after receipt of a purchase order without the imposition of an initial sales charge; however, Class B shares redeemed within five years of purchase will be subject to a CDSC at the rates shown in the table below. The charge will be assessed on the amount equal to the lesser of the current market value or the original purchase cost of the shares being redeemed. No CDSC will be imposed on increases in account value above the initial purchase price, including shares derived from the reinvestment of dividends or capital gain distributions. The amount of the CDSC, if any, will vary depending on the number of years from the time of purchase until the time of redemption of Class B shares. In processing redemptions of Class B shares, the fund will first redeem shares not subject to any CDSC and then shares held longest during the five-year period. As a result, you will pay the lowest possible CDSC. The CDSC for Class B shares subject to a CDSC upon redemption will be determined as follows:
CDSC as a % of Dollar Year Since Purchase Amount Subject to CDSC First 4.0 Second 4.0 Third 3.0 Fourth 2.0 Fifth 1.0 Sixth and thereafter 0.0
Shares purchased prior to December 1, 2004 remain subject to the contingent deferred sales charges in effect at the time you purchased those shares. Shares purchased as part of an exchange or acquired as a result of a reorganization of another fund into the fund remain subject to any CDSC that applied to the shares you originally purchased. Proceeds from the CDSC are paid to PFD and are used in whole or in part to defray PFD's expenses related to providing distribution-related services to the fund in connection with the sale of Class B shares, including the payment of compensation to broker-dealers. Class B shares will automatically convert into Class A shares eight years after the purchase date, except as noted below. Class B shares acquired by exchange from Class B shares of another Pioneer mutual fund will convert into Class A shares based on the date of the initial purchase and the applicable CDSC. Class B shares acquired through reinvestment of distributions will convert into Class A shares over time in the same proportion as other shares held in the account. For this purpose, Class B shares acquired through reinvestment of distributions will be attributed to particular purchases of Class B shares in accordance with such procedures as the Trustees may 50 determine from time to time. The conversion of Class B shares to Class A shares is subject to the continuing availability of a ruling from the Internal Revenue Service (the "IRS") or an opinion of counsel that such conversions will not constitute taxable events for U.S. federal income tax purposes. The conversion of Class B shares to Class A shares will not occur if such ruling or opinion is not available and, therefore, Class B shares would continue to be subject to higher expenses than Class A shares for an indeterminate period. Class C Shares You may buy Class C shares at net asset value per share next computed after receipt of a purchase order without the imposition of an initial sales charge; however, Class C shares redeemed within one year of purchase will be subject to a CDSC of 1%. The charge will be assessed on the amount equal to the lesser of the current market value or the original purchase cost of the shares being redeemed. No CDSC will be imposed on increases in account value above the initial purchase price, including shares derived from the reinvestment of dividends or capital gain distributions. Class C shares do not convert to any other class of fund shares. In processing redemptions of Class C shares, the fund will first redeem shares not subject to any CDSC and then shares held for the longest period of time during the one-year period. As a result, you will pay the lowest possible CDSC. Proceeds from the CDSC are paid to PFD and are used in whole or in part to defray PFD's expenses related to providing distribution-related services to the fund in connection with the sale of Class C shares, including the payment of compensation to broker-dealers. Class Y Shares No front-end, deferred or asset based sales charges are applicable to Class Y shares. Additional Payments to Financial Intermediaries The financial intermediaries through which shares are purchased may receive all or a portion of the sales charges and Rule 12b-1 fees discussed above. In addition to those payments, Pioneer or one or more of its affiliates (collectively, "Pioneer Affiliates") may make additional payments to financial intermediaries in connection with the promotion and sale of shares of Pioneer funds. Pioneer Affiliates make these payments from their own resources, which include resources that derive from compensation for providing services to the Pioneer funds. These additional payments are described below. The categories described below are not mutually exclusive. The same financial intermediary may receive payments under more than one or all categories. Many financial intermediaries that sell shares of Pioneer funds receive one or more types of these payments. The financial intermediary typically initiates requests for additional compensation. Pioneer negotiates these arrangements individually with financial intermediaries and the amount of payments and the specific arrangements may differ significantly. A financial intermediary also may receive different levels of compensation with respect to sales or assets attributable to different types of clients of the same intermediary or different Pioneer funds. Where services are provided, the costs of providing the services and the overall array of services provided may vary from one financial intermediary to another. Pioneer Affiliates do not make an independent assessment of the cost of providing such services. While the financial intermediaries may request additional compensation from Pioneer to offset costs incurred by the financial intermediary in servicing its clients, the financial intermediary may earn a profit on these payments, since the amount of the payment may exceed the financial intermediary's costs. In this context, "financial 51 intermediary" includes any broker, dealer, bank (including bank trust departments), insurance company, transfer agent, registered investment adviser, financial planner, retirement plan administrator and any other financial intermediary having a selling, administrative and shareholder servicing or similar agreement with a Pioneer Affiliate. A financial intermediary's receipt of additional compensation may create conflicts of interest between the financial intermediary and its clients. Each type of payment discussed below may provide your financial intermediary with an economic incentive to actively promote the Pioneer funds over other mutual funds or cooperate with the distributor's promotional efforts. The receipt of additional compensation for Pioneer Affiliates may be an important consideration in a financial intermediary's willingness to support the sale of the Pioneer funds through the financial intermediary's distribution system. Pioneer Affiliates are motivated to make the payments described above since they promote the sale of Pioneer fund shares and the retention of those investments by clients of financial intermediaries. In certain cases these payments could be significant to the financial intermediary. The financial intermediary may charge additional fees or commissions other than those disclosed in the prospectus. Financial intermediaries may categorize and disclose these arrangements differently than Pioneer Affiliates do. To the extent financial intermediaries sell more shares of the funds or retain shares of the funds in their clients' accounts, Pioneer Affiliates benefit from the incremental management and other fees paid to Pioneer Affiliates by the funds with respect to those assets. Revenue Sharing Payments. Pioneer Affiliates make revenue sharing payments as incentives to certain financial intermediaries to promote and sell shares of Pioneer funds. The benefits Pioneer Affiliates receive when they make these payments include, among other things, entry into or increased visibility in the financial intermediary's sales system, participation by the intermediary in the distributor's marketing efforts (such as helping facilitate or providing financial assistance for conferences, seminars or other programs at which Pioneer personnel may make presentations on the funds to the intermediary's sales force), placement on the financial intermediary's preferred fund list, and access (in some cases, on a preferential basis over other competitors) to individual members of the financial intermediary's sales force or management. Revenue sharing payments are sometimes referred to as "shelf space" payments because the payments compensate the financial intermediary for including Pioneer funds in its fund sales system (on its "shelf space"). Pioneer Affiliates compensate financial intermediaries differently depending typically on the level and/or type of considerations provided by the financial intermediary. The revenue sharing payments Pioneer Affiliates make may be calculated on sales of shares of Pioneer funds ("Sales-Based Payments"); although there is no policy limiting the amount of Sales-Based Payments any one financial intermediary may receive, the total amount of such payments normally does not exceed 0.25% per annum of those assets. Such payments also may be calculated on the average daily net assets of the applicable Pioneer funds attributable to that particular financial intermediary ("Asset-Based Payments"); although there is no policy limiting the amount of Asset-Based Payments any one financial intermediary may receive, the total amount of such payments normally does not exceed 0.15% per annum of those assets. Sales-Based Payments primarily create incentives to make new sales of shares of Pioneer funds and Asset-Based Payments primarily create incentives to retain previously sold shares of Pioneer funds in investor accounts. Pioneer Affiliates may pay a financial intermediary either or both Sales-Based Payments and Asset-Based Payments. Administrative and Processing Support Payments. Pioneer Affiliates also may make payments to certain financial intermediaries that sell Pioneer fund shares for certain administrative services, including record keeping and sub-accounting shareholder accounts, to the 52 extent that the funds do not pay for these costs directly. Pioneer Affiliates also may make payments to certain financial intermediaries that sell Pioneer fund shares in connection with client account maintenance support, statement preparation and transaction processing. The types of payments that Pioneer Affiliates may make under this category include, among others, payment of ticket charges per purchase or exchange order placed by a financial intermediary, payment of networking fees in connection with certain mutual fund trading systems, or one-time payments for ancillary services such as setting up funds on a financial intermediary's mutual fund trading system. Other Payments. From time to time, Pioneer Affiliates, at their expense, may provide additional compensation to financial intermediaries which sell or arrange for the sale of shares of the Pioneer funds. Such compensation provided by Pioneer Affiliates may include financial assistance to financial intermediaries that enable Pioneer Affiliates to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and other employees, client entertainment, client and investor events, and other financial intermediary-sponsored events, and travel expenses, including lodging incurred by registered representatives and other employees in connection with client prospecting, retention and due diligence trips. Other compensation may be offered to the extent not prohibited by federal or state laws or any self-regulatory agency, such as FINRA. Pioneer Affiliates make payments for entertainment events they deem appropriate, subject to Pioneer Affiliates' guidelines and applicable law. These payments may vary depending upon the nature of the event or the relationship. As of January 1, 2008, Pioneer anticipates that the following broker-dealers or their affiliates will receive additional payments as described in the fund's prospectuses and statement of additional information: A.G. Edwards & Sons Inc. ADP Clearing & Outsourcing Services AIG VALIC Ameriprise Financial Services, Inc. AXA Advisors, LLC Bear, Stearns & Co. Inc. Charles Schwab & Co., Inc. Chevy Chase Securities, Inc. Citigroup Global Markets Inc. Commonwealth Financial Network D.A. Davidson & Co. Delaware Distributors, L.P. Edward D. Jones & Co., L.P. Ferris, Baker Watts Inc. Fidelity Brokerage Services LLC First Clearing, LLC First Command Financial Planning, Inc. H&R Block Financial Advisors, Inc. Hartford Securities Distribution Company, Inc. Hewitt Financial Services LLC ING J.J.B. Hilliard, W.L Lyons, Inc. Janney Montgomery Scott LLC Jefferson National Securities Corporation 53 Legend Equities Corporation Lincoln Investment Planning, Inc. Linsco/Private Ledger Corp. McDonald Investments Inc. Merrill Lynch & Co., Inc. Mesirow Financial, Inc. MetLife Securities Inc. Morgan Keegan & Co., Inc. Morgan Stanley & Co., Inc. Mutual of Omaha Investor Services, Inc. Mutual Service Corporation N.I.S. Financial Services, Inc. National Financial Services LLC National Investor Services Corp. Nationwide Securities, Inc. OneAmerica Securities, Inc. Oppenheimer & Co., Inc. Pershing LLC PFS Investments Inc Prudential Financial Primevest Financial Services, Inc. Raymond James Financial Services, Inc. RBC Dain Rauscher Inc. Robert W. Baird & Co., Inc. Scott and Stringfellow, Inc. Scottrade, Inc. Securities America, Inc. Southwest Securities, Inc. Sterne Agee & Leach, Inc. Stifel Nicholas & Company, Inc. Symetra Investment Services, Inc. UnionBanc Investment Services LLC UBS Financial Services Inc. Wachovia Securities Wells Fargo Investments, LLC Please contact your financial intermediary for details about any payments it receives from Pioneer Affiliates or the funds, as well as about fees and/or commissions it charges. 13. REDEEMING SHARES Redemptions may be suspended or payment postponed during any period in which any of the following conditions exist: the New York Stock Exchange (the "Exchange") is closed or trading on the Exchange is restricted; an emergency exists as a result of which disposal by the fund of securities owned by it is not reasonably practicable or it is not reasonably practicable for the fund to fairly determine the value of the net assets of its portfolio; or the SEC, by order, so permits. Redemptions and repurchases are taxable transactions for shareholders that are subject to U.S. federal income tax. The net asset value per share received upon redemption or repurchase may be 54 more or less than the cost of shares to an investor, depending on the market value of the portfolio at the time of redemption or repurchase. Systematic Withdrawal Plan(s) ("SWP") (Class A, B, and C shares). A SWP is designed to provide a convenient method of receiving fixed payments at regular intervals from fund share accounts having a total value of not less than $10,000. You must also be reinvesting all dividends and capital gain distributions to use the SWP option. Periodic payments of $50 or more will be deposited monthly, quarterly, semiannually or annually directly into a bank account designated by the applicant or will be sent by check to the applicant, or any person designated by the applicant. Payments can be made either by check or electronic funds transfer to a bank account designated by you. Withdrawals from Class B and Class C share accounts are limited to 10% of the value of the account at the time the SWP is established. See "Qualifying for a reduced sales charge" in the prospectus. If you direct that withdrawal payments be paid to another person, want to change the bank where payments are sent or designate an address that is different from the account's address of record after you have opened your account, a medallion signature guarantee must accompany your instructions. Withdrawals under the SWP are redemptions that may have tax consequences for you. While you are making systematic withdrawals from your account, you may pay unnecessary initial sales charges on additional purchases of Class A shares or contingent deferred sales charges. SWP redemptions reduce and may ultimately exhaust the number of shares in your account. In addition, the amounts received by a shareholder cannot be considered as yield or income on his or her investment because part of such payments may be a return of his or her investment. A SWP may be terminated at any time (1) by written notice to PIMSS or from PIMSS to the shareholder; (2) upon receipt by PIMSS of appropriate evidence of the shareholder's death; or (3) when all shares in the shareholder's account have been redeemed. You may obtain additional information by calling PIMSS at 1-800-225-6292. Reinstatement Privilege (Class A and Class B Shares). Subject to the provisions outlined in the prospectus, you may reinvest all or part of your sale proceeds from Class A and Class B shares without a sales charge into Class A shares of a Pioneer mutual fund. However, the distributor will not pay your investment firm a commission on any reinvested amount. 14. TELEPHONE AND ONLINE TRANSACTIONS You may purchase, exchange or sell Class A, Class B or Class C shares by telephone or online. Class Y shares may not be purchased by telephone, and Class Y shareowners are not eligible for on line transaction privileges. See the prospectus for more information. For personal assistance, call 1-800-225-6292 between 8:00 a.m. and 7:00 p.m. (Class Y account holders should contact Pioneer's Group Plans Department at 1-800-665-8839 between 9:00 a.m. and 5:30 p.m.) Eastern time on weekdays. Computer-assisted telephone transactions may be available to shareholders who have prerecorded certain bank information (see "FactFone(SM)"). You are strongly urged to consult with your investment professional prior to requesting any telephone or online transaction. 55 Telephone Transaction Privileges. To confirm that each transaction instruction received by telephone is genuine, the fund will record each telephone transaction, require the caller to provide validating information for the account and send you a written confirmation of each telephone transaction. Different procedures may apply to accounts that are registered to non-U.S. citizens or that are held in the name of an institution or in the name of an investment broker-dealer or other third party. If reasonable procedures, such as those described above, are not followed, the fund may be liable for any loss due to unauthorized or fraudulent instructions. The fund may implement other procedures from time to time. In all other cases, neither the fund, PIMSS nor PFD will be responsible for the authenticity of instructions received by telephone; therefore, you bear the risk of loss for unauthorized or fraudulent telephone transactions. Online Transaction Privileges. If your account is registered in your name, you may be able buy, exchange or sell fund shares online. Your investment firm may also be able to buy, exchange or sell your fund shares online. To establish online transaction privileges: o For new accounts, complete the online section of the account application o For existing accounts, complete an account options form, write to the transfer agent or complete the online authorization screen on www.pioneerinvestments.com To use online transactions, you must read and agree to the terms of an online transaction agreement available on the Pioneer website. When you or your investment firm requests an online transaction the transfer agent electronically records the transaction, requires an authorizing password and sends a written confirmation. The fund may implement other procedures from time to time. Different procedures may apply if you have a non-U.S. account or if your account is registered in the name of an institution, broker-dealer or other third party. You may not be able to use the online transaction privilege for certain types of accounts, including most retirement accounts. Telephone and Website Online Access. You may have difficulty contacting the fund by telephone or accessing www.pioneerinvestments.com during times of market volatility or disruption in telephone or Internet services. On Exchange holidays or on days when the Exchange closes early, Pioneer will adjust the hours for the telephone center and for online transaction processing accordingly. If you are unable to access www.pioneerinvestments.com or to reach the fund by telephone, you should communicate with the fund in writing. FactFone(SM). FactFone(SM) is an automated inquiry and telephone transaction system available to Pioneer mutual fund shareholders by dialing 1-800-225-4321. FactFone(SM) allows shareholder access to current information on Pioneer mutual fund accounts and to the prices and yields of all publicly available Pioneer mutual funds. In addition, you may use FactFone(SM) to make computer-assisted telephone purchases, exchanges or redemptions from your Pioneer mutual fund accounts, access your account balances and last three transactions and order a duplicate statement if you have activated your PIN. Telephone purchases or redemptions require the establishment of a bank account of record. Computer-assisted Class Y share telephone purchases, exchanges and redemptions and certain other FactFone(SM) features for Class Y shareholders are not currently available through FactFone(SM). You are strongly urged to consult with your investment professional prior to requesting any telephone transaction. Shareholders whose accounts are registered in the name of a broker-dealer or other third party may not be able to use FactFoneSM. Call PIMSS for assistance. FactFone(SM) allows shareholders to hear the following recorded fund information: 56 o net asset value prices for all Pioneer mutual funds; o annualized 30-day yields on Pioneer's fixed income funds; o annualized 7-day yields and 7-day effective (compound) yields for Pioneer's money market funds; and o dividends and capital gain distributions on all Pioneer mutual funds. Yields are calculated in accordance with SEC mandated standard formulas. All performance numbers communicated through FactFoneSM represent past performance, and figures include the maximum applicable sales charge. A shareholder's actual yield and total return will vary with changing market conditions. The value of each class of shares (except for Pioneer Cash Reserves Fund, Pioneer Institutional Money Market Fund, Pioneer Tax Free Money Market Fund and Pioneer Treasury Reserves Fund, which each seek to maintain a stable $1.00 share price) will also vary, and such shares may be worth more or less at redemption than their original cost. 15. PRICING OF SHARES The net asset value per share of each class of the fund is determined as of the close of regular trading on the Exchange (normally 4:00 p.m. Eastern time) on each day on which the Exchange is open for trading. As of the date of this statement of additional information, the Exchange is open for trading every weekday except for the days the following holidays are observed: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset value per share of each class of the fund is also determined on any other day on which the level of trading in its portfolio securities is sufficiently high that the current net asset value per share might be materially affected by changes in the value of its portfolio securities. The fund is not required to determine its net asset value per share on any day on which no purchase orders in good order for fund shares are received and no shares are tendered and accepted for redemption. Ordinarily, investments in debt securities are valued on the basis of information furnished by a pricing service which utilizes primarily a matrix system (which reflects such factors as security prices, yields, maturities and ratings), supplemented by dealer and exchange quotations. Other securities are valued at the last sale price on the principal exchange or market where they are traded. Cash equivalent securities with remaining maturities of 60 days or less are valued at amortized cost, which is a method of determining a security's fair value. Securities which have not traded on the date of valuation or securities for which sales prices are not generally reported are valued at the mean between the current bid and asked prices. Securities quoted in foreign currencies are converted to U.S. dollars utilizing foreign exchange rates employed by the fund's independent pricing services. Generally, trading in non U.S. securities is substantially completed each day at various times prior to the close of regular trading on the Exchange. The values of such securities used in computing the net asset value of the fund's shares are determined as of such times. Foreign currency exchange rates are also generally determined prior to the close of regular trading on the Exchange. Occasionally, events which 57 affect the values of such securities and such exchange rates may occur between the times at which they are determined and the close of regular trading on the Exchange and will therefore not be reflected in the computation of the fund's net asset value. International securities markets may be open on days when the U.S. markets are closed. For this reason, the value of any international securities owned by the fund could change on a day you cannot buy or sell shares of the fund. When prices determined using the foregoing methods are not available or are considered by Pioneer to be unreliable, the fund uses fair value pricing methods to value its securities in accordance with procedures approved by the fund's trustees. The fund also may use fair value pricing methods to value its securities, including a non-U.S. security, when Pioneer determines that prices determined using the foregoing methods no longer accurately reflect the value of the security due to factors affecting one or more relevant securities markets or the specific issuer. Valuing securities using fair value methods may cause the net asset value of the fund's shares to differ from the net asset value that would be calculated using closing market prices. In connection with making fair value determinations of the value of fixed income securities, the fund may use a pricing matrix. The net asset value per share of each class of the fund is computed by taking the value of all of the fund's assets attributable to a class, less the fund's liabilities attributable to that class, and dividing the result by the number of outstanding shares of that class. For purposes of determining net asset value, expenses of the classes of the fund are accrued daily and taken into account. The fund's maximum offering price per Class A share is determined by adding the maximum sales charge to the net asset value per Class A share. Class B, Class C, and Class Y shares are offered at net asset value without the imposition of an initial sales charge (Class B and Class C shares may be subject to a CDSC). 16. TAX STATUS The fund is treated as a separate entity for U.S. federal income tax purposes. The fund has elected to be treated, and has qualified and intends to continue to qualify each year, as a "regulated investment company" under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), so that it will not pay U.S. federal income tax on income and capital gains distributed to shareholders. In order to qualify as a regulated investment company under Subchapter M of the Code, the fund must, among other things, (i) derive at least 90% of its gross income for each taxable year from dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including gains from options, futures and forward contracts) derived with respect to its business of investing in such stock, securities or currencies, and net income derived from an interest in a qualified publicly traded partnership (as defined in Section 851(h) of the Code) (the "90% income test") and (ii) diversify its holdings so that, at the end of each quarter of each taxable year: (a) at least 50% of the value of the fund's total assets is represented by (1) cash and cash items, U.S. government securities, securities of other regulated investment companies, and (2) other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of the fund's total assets and to not more than 10% of the outstanding voting securities of such issuer and (b) not more than 25% of the value of the fund's total assets is invested in (1) the securities (other than U.S. government securities and securities of other regulated investment companies) of any one issuer, (2) the securities (other than securities of other regulated investment companies) of two or more issuers that the fund controls and that are engaged in the same, similar, or related trades or businesses, or (3) the securities of one or more qualified publicly traded partnerships. 58 For purposes of the 90% income test, the character of income earned by certain entities in which the fund invests that are not treated as corporations for U.S. federal income tax purposes (e.g., partnerships other than certain publicly traded partnerships or trusts that have not elected to be classified as corporations under the "check-the-box" regulations) will generally pass through to the fund. Consequently, in order to qualify as a regulated investment company, the fund may be required to limit its equity investments in such entities that earn fee income, rental income or other nonqualifying income. If the fund qualifies as a regulated investment company and properly distributes to its shareholders each taxable year an amount equal to or exceeding the sum of (i) 90% of its "investment company taxable income" as that term is defined in the Code (which includes, among other things, dividends, taxable interest, and the excess of any net short-term capital gains over net long-term capital losses, as reduced by certain deductible expenses) without regard to the deduction for dividends paid and (ii) 90% of the excess of its gross tax-exempt interest income, if any, over certain disallowed deductions, the fund generally will not be subject to U.S. federal income tax on any income of the fund, including "net capital gain" (the excess of net long-term capital gain over net short-term capital loss), distributed to shareholders. However, if the fund meets such distribution requirements, but chooses to retain some portion of its taxable income or gains, it generally will be subject to U.S. federal income tax at regular corporate rates on the amount retained. The fund may designate certain amounts retained as undistributed net capital gain in a notice to its shareholders, who (i) will be required to include in income for U.S. federal income tax purposes, as long-term capital gain, their proportionate shares of the undistributed amount so designated, (ii) will be entitled to credit their proportionate shares of the income tax paid by the fund on that undistributed amount against their federal income tax liabilities and to claim refunds to the extent such credits exceed their liabilities and (iii) will be entitled to increase their tax basis, for federal income tax purposes, in their shares by an amount equal to the excess of the amount of undistributed net capital gain included in their respective income over their respective income tax credits. The fund intends to distribute at least annually all or substantially all of its investment company taxable income (computed without regard to the dividends-paid deduction), net tax-exempt interest income, and net capital gain. If, for any taxable year, the fund does not qualify as a regulated investment company or does not satisfy the 90% distribution requirement, it will be treated as a U.S. corporation subject to U.S. federal income tax, thereby subjecting any income earned by the fund to tax at the corporate level and to a further tax at the shareholder level when such income is distributed. Under the Code, the fund will be subject to a nondeductible 4% U.S. federal excise tax on a portion of its undistributed taxable ordinary income and capital gain net income if it fails to meet certain distribution requirements with respect to the year ending October 31. The fund intends to make distributions in a timely manner and accordingly does not expect to be subject to the excise tax. The fund declares a dividend from any net investment income each business day. The fund generally pays dividends from any net investment income on the last business day of the month or shortly thereafter. The fund distributes any net short- and long-term capital gains in November. Dividends from income and/or capital gains may also be paid at such other times as may be necessary for the fund to avoid U.S. federal income or excise tax. The fund may from time to time invest a portion of its portfolio in short-term taxable obligations and may engage in transactions generating gain or income that is not tax-exempt, e.g., the fund may purchase and sell non-municipal securities, sell or lend portfolio securities, enter into 59 repurchase agreements, dispose of rights to when-issued securities prior to issuance, acquire any debt obligation at a market discount, acquire certain stripped tax-exempt obligations or their coupons or enter into options and futures transactions. The fund's distributions of such gain or income will not be "exempt-interest dividends," as described below, and accordingly will be taxable. The Code permits tax-exempt interest received by the fund to flow through as tax-exempt "exempt-interest dividends" to the fund's shareholders, provided that the fund qualifies as a regulated investment company and at least 50% of the value of the fund's total assets at the close of each quarter of its taxable year consists of tax-exempt obligations, i.e., obligations that pay interest excluded from gross income under Section 103(a) of the Code. That part of the fund's net investment income which is attributable to interest from tax-exempt obligations and which is distributed to shareholders will be designated by the fund as an "exempt-interest dividend" under the Code. Exempt-interest dividends are excluded from a shareholder's gross income under the Code but are nevertheless required to be reported on the shareholder's U.S. federal income tax return. The percentage of income designated as exempt-interest dividends is applied uniformly to all distributions made during each taxable year and may differ from the percentage of distributions consisting of tax-exempt interest during any particular month. That portion of the fund's dividends and distributions not designated as exempt-interest dividends will be taxable as described below. Exempt-interest dividends derived from interest on certain "private activity bonds" will be items of tax preference, which increase alternative minimum taxable income for individuals or entities that are subject to the U.S. federal alternative minimum tax. All exempt-interest dividends may result in or increase a corporate shareholder's liability for the federal alternative minimum tax. Interest on indebtedness incurred or continued by a shareholder to purchase or carry shares of the fund will not be deductible for U.S. federal income tax purposes to the extent it is deemed under the Code and applicable regulations to relate to exempt-interest dividends received from the fund. The fund may not be an appropriate investment for persons who are "substantial users" of facilities financed by industrial revenue or private activity bonds or persons related to substantial users. Shareholders receiving social security or certain railroad retirement benefits may be subject to U.S. federal income tax on a portion of such benefits as a result of receiving exempt-interest dividends paid by the fund. Unless a shareholder specifies otherwise, all distributions from the fund to that shareholder will be automatically reinvested in additional full and fractional shares of the fund. For U.S. federal income tax purposes, all dividends from the fund, other than exempt-interest dividends, generally are taxable whether a shareholder takes them in cash or reinvests them in additional shares of the fund. In general, assuming that the fund has sufficient earnings and profits, dividends from net investment income that is not tax exempt and from net short-term capital gains are taxable as ordinary income. Since the fund's income is derived primarily from sources that do not pay dividends, it is not expected that any dividends paid by the fund will qualify for either the dividends-received deduction for corporations or the maximum 15% U.S. federal income tax rate available to individual and certain other noncorporate shareholders on qualified dividend income. Distributions by the fund in excess of the fund's current and accumulated earnings and profits will be treated as a return of capital to the extent of (and in reduction of) the shareholder's tax basis in its shares and any such amount in excess of that basis will be treated as gain from the sale of shares, as discussed below. 60 Distributions from net capital gains, if any, that are designated as capital gain dividends by the fund are taxable as long-term capital gains for U.S. federal income tax purposes without regard to the length of time the shareholder has held shares of the fund. Capital gain dividends distributed by the fund to individual and certain other noncorporate shareholders generally will qualify for reduced U.S. federal income tax rates (currently, a maximum rate of 15%, with lower rates applying to taxpayers in the 10% and 15% rate brackets) on long-term capital gains, subject to certain limited exceptions. A shareholder should also be aware that the benefits of the favorable tax rate applicable to long-term capital gains and qualified dividend income may be affected by the application of the alternative minimum tax to individual shareholders. Under current law, the reduced maximum 15% U.S. federal income tax rate on qualified dividend income and long-term capital gains will not apply in taxable years beginning after December 31, 2010. The U.S. federal income tax status of all distributions will be reported to shareholders annually. Although dividends generally will be treated as distributed when paid, any dividend declared by the fund in October, November or December and payable to shareholders of record in such a month that is actually paid during the following January will be treated for U.S. federal income tax purposes as received by shareholders on December 31 of the calendar year in which it was declared. In addition, certain other distributions made after the close of a taxable year of the fund may be "spilled back" and treated for certain purposes as paid by the fund during such taxable year. In such case, shareholders generally will be treated as having received such dividends in the taxable year in which the distributions were actually made. For purposes of calculating the amount of a regulated investment company's undistributed income and gain subject to the 4% excise tax described above, such "spilled back" dividends are treated as paid by the regulated investment company when they are actually paid. For U.S. federal income tax purposes, the fund is permitted to carry forward a net capital loss for any year to offset its capital gains, if any, for up to eight years following the year of the loss. To the extent subsequent capital gains are offset by such losses, they would not result in U.S. federal income tax liability to the fund and may not be distributed as such to shareholders. See "Annual Fee, Expense and Other Information" for the fund's available capital loss carryforwards. The fund may not carry forward any losses other than net capital losses. At the time of an investor's purchase of fund shares, a portion of the purchase price may be attributable to realized or unrealized appreciation in the fund's portfolio or to undistributed capital gains of the fund. Consequently, subsequent distributions by the fund with respect to these shares from such appreciation or gains may be taxable to such investor even if the net asset value of the investor's shares is, as a result of the distributions, reduced below the investor's cost for such shares and the distributions economically represent a return of a portion of the investment. Redemptions and exchanges generally are taxable events for shareholders that are subject to tax. Shareholders should consult their own tax advisers with reference to their individual circumstances to determine whether any particular transaction in fund shares is properly treated as a sale for tax purposes, as the following discussion assumes, and the tax treatment of any gains or losses recognized in such transactions. In general, if fund shares are sold, the shareholder will recognize gain or loss equal to the difference between the amount realized on the sale and the shareholder's adjusted basis in the shares. Such gain or loss generally will be treated as long-term capital gain or loss if the shares were held for more than one year and otherwise generally will be treated as short-term capital gain or loss. Any loss recognized by a shareholder upon the redemption, exchange or other disposition of shares with a tax holding period of six months or less will be disallowed to the extent of any exempt-interest dividends paid with respect to such 61 shares, and any portion of such loss that exceeds the amount disallowed will be treated as a long-term capital loss to the extent of any amounts treated as distributions to the shareholder of long-term capital gain with respect to such shares (including any amounts credited to the shareholder as undistributed capital gains). Losses on redemptions or other dispositions of shares may be disallowed under "wash sale" rules in the event of other investments in the fund (including those made pursuant to reinvestment of dividends and/or capital gain distributions) within a period of 61 days beginning 30 days before and ending 30 days after a redemption or other disposition of shares. In such a case, the disallowed portion of any loss generally would be included in the U.S. federal tax basis of the shares acquired in the other investments. Gain may be increased (or loss reduced) upon a redemption of Class A shares of the fund within 90 days after their purchase followed by any purchase (including purchases by exchange or by reinvestment), without payment of an additional sales charge, of Class A shares of the fund or of another Pioneer fund (or any other shares of a Pioneer fund generally sold subject to a sales charge). Under Treasury regulations, if a shareholder recognizes a loss with respect to fund shares of $2 million or more for an individual shareholder, or $10 million or more for a corporate shareholder, in any single taxable year (or of certain greater amounts over a combination of years), the shareholder must file with the IRS a disclosure statement on Form 8886. Shareholders who own portfolio securities directly are in many cases excepted from this reporting requirement but, under current guidance, shareholders of regulated investment companies are not excepted. A shareholder who fails to make the required disclosure to the IRS may be subject to substantial penalties. The fact that a loss is reportable under these regulations does not affect the legal determination of whether or not the taxpayer's treatment of the loss is proper. Shareholders should consult with their tax advisers to determine the applicability of these regulations in light of their individual circumstances. Shareholders that are exempt from U.S. federal income tax, such as retirement plans that are qualified under Section 401 of the Code, generally are not subject to U.S. federal income tax on otherwise-taxable fund dividends or distributions, or on sales or exchanges of fund shares unless the fund shares are "debt-financed property" within the meaning of the Code. However, in the case of fund shares held through a non-qualified deferred compensation plan, fund dividends and distributions other than tax-exempt dividends received by the plan and sales and exchanges of fund shares by the plan generally are taxable to the employer sponsoring such plan in accordance with the U.S. federal income tax laws that are generally applicable to shareholders receiving such dividends or distributions from regulated investment companies such as the fund. A plan participant whose retirement plan invests in the fund, whether such plan is qualified or not, generally is not taxed on any fund dividends or distributions received by the plan or on sales or exchanges of fund shares by the plan for U.S. federal income tax purposes. However, distributions to plan participants from a retirement plan account generally are taxable as ordinary income, and different tax treatment, including penalties on certain excess contributions and deferrals, certain pre-retirement and post-retirement distributions and certain prohibited transactions, is accorded to accounts maintained as qualified retirement plans. Shareholders should consult their tax advisers for more information. Foreign exchange gains and losses realized by the fund in connection with certain transactions involving foreign currency-denominated debt securities, certain options and futures contracts 62 relating to foreign currency, foreign currency forward contracts, foreign currencies, or payables or receivables denominated in a foreign currency are subject to Section 988 of the Code, which generally causes such gains and losses to be treated as ordinary income and losses and may affect the amount, timing and character of distributions to shareholders. Under Treasury regulations that may be promulgated in the future, any gains from such transactions that are not directly related to the fund's principal business of investing in stock or securities (or its options contracts or futures contracts with respect to stock or securities) may have to be limited in order to enable the fund to satisfy the 90% income test. The fund may invest in or hold debt obligations of issuers not currently paying interest or that are in default. Investments in debt obligations that are at risk of or in default present special tax issues for the fund. Federal income tax rules are not entirely clear about issues such as when the fund may cease to accrue interest, original issue discount or market discount, when and to what extent deductions may be taken for bad debts or worthless securities, how payments received on obligations in default should be allocated between principal and interest and whether certain exchanges of debt obligations in a workout context are taxable. These and other issues will be addressed by the fund, in the event it invests in or holds such securities, in order to seek to ensure that it distributes sufficient income to preserve its status as a regulated investment company and does not become subject to U.S. federal income or excise tax. If the fund invests in certain pay-in-kind securities, zero coupon securities, deferred interest securities or, in general, any other securities with original issue discount (or with market discount if the fund elects to include market discount in income currently), the fund generally must accrue income on such investments for each taxable year, which generally will be prior to the receipt of the corresponding cash payments. However, the fund must distribute to its shareholders, at least annually, all or substantially all of its investment company taxable income (determined without regard to the deduction for dividends paid), including such accrued income, to qualify to be treated as a regulated investment company under the Code and avoid U.S. federal income and excise taxes. Therefore, the fund may have to dispose of its portfolio securities, potentially under disadvantageous circumstances, to generate cash, or may have to borrow the cash, to satisfy distribution requirements. Such a disposition of securities may potentially result in additional taxable gain or loss to the fund. Options written or purchased and futures contracts entered into by the fund on certain securities, indices and foreign currencies, as well as certain forward foreign currency contracts, may cause the fund to recognize gains or losses from marking-to-market even though such options may not have lapsed or been closed out or exercised, or such futures or forward contracts may not have been performed or closed out. The tax rules applicable to these contracts may affect the characterization of some capital gains and losses realized by the fund as long-term or short-term. Certain options, futures and forward contracts relating to foreign currency may be subject to Section 988 of the Code, as described above, and accordingly may produce ordinary income or loss. Additionally, the fund may be required to recognize gain if an option, futures contract, forward contract, short sale or other transaction that is not subject to the mark-to-market rules is treated as a "constructive sale" of an "appreciated financial position" held by the fund under Section 1259 of the Code. Any net mark-to-market gains and/or gains from constructive sales may also have to be distributed to satisfy the distribution requirements referred to above even though the fund may receive no corresponding cash amounts, possibly requiring the disposition of portfolio securities or borrowing to obtain the necessary cash. Such a disposition of securities may potentially result in additional taxable gain or loss to the fund. Losses on certain options, futures or forward contracts and/or offsetting positions (portfolio securities or other positions with respect to which the fund's risk of loss is substantially diminished by one or more options, futures 63 or forward contracts) may also be deferred under the tax straddle rules of the Code, which may also affect the characterization of capital gains or losses from straddle positions and certain successor positions as long-term or short-term. Certain tax elections may be available that would enable the fund to ameliorate some adverse effects of the tax rules described in this paragraph. The tax rules applicable to options, futures, forward contracts and straddles may affect the amount, timing and character of the fund's income and gains or losses and hence of its distributions to shareholders. The fund may be subject to withholding and other taxes imposed by foreign countries, including taxes on interest, dividends and capital gains with respect to its investments in those countries. Any such taxes would, if imposed, reduce the yield on or return from those investments. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes in some cases. The fund does not expect to satisfy the requirements for passing through to its shareholders any share of foreign taxes paid by the fund, with the result that shareholders will not include such taxes in their gross incomes and will not be entitled to a tax deduction or credit for such taxes on their own tax returns. The fund is required to withhold (as "backup withholding") 28% of reportable payments, including dividends (other than exempt-interest dividends), capital gain distributions and the proceeds of redemptions and exchanges or repurchases of fund shares, paid to shareholders who have not complied with certain IRS regulations. In order to avoid this withholding requirement, shareholders, other than certain exempt entities, must certify on their Account Applications, or on separate IRS Forms W-9, that the Social Security Number or other Taxpayer Identification Number they provide is their correct number and that they are not currently subject to backup withholding, or that they are exempt from backup withholding. The fund may nevertheless be required to backup withhold if it receives notice from the IRS or a broker that the number provided is incorrect or backup withholding is applicable as a result of previous underreporting of interest or dividend income. The description of certain federal tax provisions above relates only to U.S. federal income tax consequences for shareholders who are U.S. persons, i.e., generally, U.S. citizens or residents or U.S. corporations, partnerships, trusts or estates, and who are subject to U.S. federal income tax and hold their shares as capital assets. Except as otherwise provided, this description does not address the special tax rules that may be applicable to particular types of investors, such as financial institutions, insurance companies, securities dealers, other regulated investment companies, or tax-exempt or tax-deferred plans, accounts or entities. Investors other than U.S. persons may be subject to different U.S. federal income tax treatment, including a non-resident alien U.S. withholding tax at the rate of 30% or any lower applicable treaty rate on amounts treated as ordinary dividends from the fund or, in certain circumstances, unless an effective IRS Form W-8BEN or other authorized withholding certificate is on file, to backup withholding at the rate of 28% on certain other payments from the fund. Backup withholding will not be applied to payments that have been subject to the 30% (or lower applicable treaty rate) withholding tax on shareholders who are neither citizens nor residents of the United States. Shareholders should consult their own tax advisers on these matters and on state, local, foreign and other applicable tax laws. If, as anticipated, the fund qualifies as a regulated investment company under the Code, it will not be required to pay any Massachusetts income, corporate excise or franchise taxes or any Delaware corporation income tax. 64 The exemption of exempt-interest dividends for U.S. federal income tax purposes does not necessarily result in exemption under the tax laws of any state or local taxing authority, since those laws vary with respect to the taxation of such income. Many states exempt from tax that portion of an exempt-interest dividend which represents interest received by the fund on that state's securities, subject in some cases to compliance with concentration and/or reporting requirements, which the fund makes no commitment to seek to satisfy. However, the fund will report annually to its shareholders the percentage of interest income received by the fund during the preceding year on federally tax-exempt obligations indicating, on a state-by-state basis only, the source of such income. Shareholders of the fund should note that a decision of the United States Supreme Court is currently pending in Department of Revenue of Kentucky v. Davis, a case concerning the validity of statutes that create a state tax exemption for interest from municipal securities. The Kentucky Court of Appeals had held that Kentucky's statute, which provided an exemption for interest earned on municipal securities of Kentucky issuers while taxing interest earned on municipal securities of issuers in other states, violated the Interstate Commerce Clause of the United States Constitution. If the Supreme Court were to adopt the reasoning of the Kentucky Court of Appeals, its decision would affect the state tax status of fund distributions. It is unclear how the Supreme Court's decision will affect the market for municipal securities, but it could adversely affect the value of securities held by the fund, and therefore the value of the fund's shares. Such a decision could also prompt legislation at the state level that might adversely affect the state taxation of fund distributions and the market for municipal securities. Each shareholder is advised to consult his own tax adviser regarding the exemption, if any, of exempt-interest dividends under the state and local tax laws applicable to the shareholder. A state income (and possibly local income and/or intangible property) tax exemption is generally available to the extent the fund's distributions are derived from interest on (or, in the case of intangible property taxes, the value of its assets is attributable to) certain U.S. government obligations, provided in some states that certain thresholds for holdings of such obligations and/or reporting requirements are satisfied. The fund will not seek to satisfy any threshold or reporting requirements that may apply in particular taxing jurisdictions, although the fund may in its sole discretion provide relevant information to shareholders. 17. FINANCIAL STATEMENTS The fund's financial statements and financial highlights for the fiscal year ended December 31, 2007 appearing in the fund's annual report, filed with the SEC on February 28, 2008 (Accession No. 0000276776-08-000025) are incorporated by reference into this statement of additional information. Those financial statements and financial highlights have been audited by Ernst & Young LLP, independent registered public accounting firm, as indicated in their report thereon, and are incorporated herein by reference in reliance upon such report, given on the authority of Ernst & Young LLP as experts in accounting and auditing. The fund's annual report includes the financial statements referenced above and is available without charge upon request by calling Shareholder Services at 1-800-225-6292. 18. ANNUAL FEE, EXPENSE AND OTHER INFORMATION
- ------------------------------------------------------------------------------------ Portfolio Turnover - ------------------------------------------------------------------------------------ The fund's annual portfolio turnover rate for the fiscal years ended December 31, - ------------------------------------------------------------------------------------ 2007 2006 - ------------------------------------------------------------------------------------
65 - ------------------------------------------------------------------------------------ 68% 66% - ------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------- Share Ownership - ----------------------------------------------------------------------------------------------------------------- As of March 31, 2008, the Trustees and officers of the fund owned beneficially in the aggregate less than 1% of the outstanding shares of the fund. The following is a list of the holders of 5% or more of any class of the fund's outstanding shares as of March 31, 2008: - ----------------------------------------------------------------------------------------------------------------- Record Holder Share Class Number of Shares % of Class - ----------------------------------------------------------------------------------------------------------------- NFS LLC FEBO Class A 1,943,842.692 7.14 Regions Bank DBA Kenneburt Co. 250 Riverchase Pkwy., East, Floor 5 Birmingham, AL 35244-1832 - ----------------------------------------------------------------------------------------------------------------- NFS LLC FEBO Class Y 11,090,014.311 62.21 Regions Bank DBA Kenneburt Co. 250 Riverchase Pkwy., East, Floor 5 Birmingham, AL 35244-1832 - ----------------------------------------------------------------------------------------------------------------- NFS LLC FEBO Class Y 3,570,971.460 20.03 Regions Bank DBA Kenneburt Co. 250 Riverchase Pkwy., East, Floor 5 Birmingham, AL 35244-1832 - ----------------------------------------------------------------------------------------------------------------- AmSouth Bancorporation (SERP) Class Y 2,837,888.126 15.91 State Street Bank & Trust Company 125 Sunnyknoll Court, Suite 200 Winston-Salem, NC 27106-5076 - ----------------------------------------------------------------------------------------------------------------- MLPF&S for the sole benefit Class B 189,516.320 14.62 of its customers Class C 349,219.535 29.31 Mutual Fund Administration 4800 Deer Lake Drive, East, 2nd Floor Jacksonville FL 32246-6484 - ----------------------------------------------------------------------------------------------------------------- Citigroup Global Markets, Inc. Class B 149,576.504 11.54 Attn: Peter Booth Class C 150,225.901 12.61 333 West 34th Street, 7th Floor New York NY 10001-2402 - -----------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- Trustee Ownership of Shares of the Fund and Other Pioneer Funds - -------------------------------------------------------------------------------- The following table indicates the value of shares that each Trustee beneficially owned in the fund and Pioneer Funds in the aggregate as of December 31, 2007. Beneficial ownership is determined in accordance with SEC rules. The share value of any closed-end fund is based on its closing market price on December 31, 2007. The share value of any open-end Pioneer Fund is based on the net asset value of the class of shares on December 31, 2007. The dollar ranges in this table are in accordance with SEC requirements. - -------------------------------------------------------------------------------- 66
- --------------------------------------------------------------------------------------------------------------- Aggregate Dollar Range of Equity Securities Dollar Range of in All Registered Investment Companies Equity Securities in Overseen by Trustee in the Pioneer Family of Name of Trustee the Fund Funds - --------------------------------------------------------------------------------------------------------------- Interested Trustees - --------------------------------------------------------------------------------------------------------------- John F. Cogan, Jr. Over $100,000 Over $100,000 - --------------------------------------------------------------------------------------------------------------- Independent Trustees - --------------------------------------------------------------------------------------------------------------- David R. Bock NONE Over $100,000 - --------------------------------------------------------------------------------------------------------------- Mary K. Bush NONE Over $100,000 - --------------------------------------------------------------------------------------------------------------- Margaret B.W. Graham $1 - $10,000 Over $100,000 - --------------------------------------------------------------------------------------------------------------- Thomas J. Perna NONE Over $100,000 - --------------------------------------------------------------------------------------------------------------- Marguerite A. Piret NONE Over $100,000 - --------------------------------------------------------------------------------------------------------------- John Winthrop Over $100,000 Over $100,000 - ---------------------------------------------------------------------------------------------------------------
Compensation of Officers and Trustees The following table sets forth certain information with respect to the compensation of each Trustee of the fund.
Pension or Aggregate Retirement Benefits Total Compensation from Compensation from Accrued as Part of the Fund and Other Pioneer Name of Trustee Fund** Fund Expenses Funds** Interested Trustees: John F. Cogan, Jr.* $ 500.00 $0.00 $ 33,500.00 Independent Trustees: David R. Bock $ 1,963.57 $0.00 $ 162,170.90 Mary K. Bush $ 1,930.94 $0.00 $ 160,250.00 Margaret B.W. Graham $ 2,093.61 $0.00 $ 174,250.00 Thomas J. Perna $ 1,934.52 $0.00 $ 160,574.79 Marguerite A. Piret $ 2,422.63 $0.00 $ 201,750.00 John Winthrop $ 1,931.93 $0.00 $ 160,500.00 ---------- ------------- Total $12,777.22 $0.00 $1,052,995.69
* Under the management contract, Pioneer reimburses the fund for any Interested Trustee fees paid by the fund. ** For the fiscal year ended December 31, 2007. As of December 31, 2007, there are 77 U.S. registered investment portfolios in the Pioneer Family of Funds. Approximate Management Fees the Fund Paid or Owed Pioneer The following table shows the dollar amount of gross investment management fees incurred by the fund, along with the net amount of fees that were paid after applicable fee waivers or expense reimbursements, if any. The data is for the past three fiscal years or shorter period if the fund has been in operation for a shorter period. 67 For the Fiscal Years Ended December 31,
2007 2006 2005 Gross Fee $2,985,435 $3,055,224 $2,087,453 Incurred Net Fee Paid $2,985,435 $3,046,805 $2,087,453
Fees the Fund Paid to Pioneer under the Administration Agreement For the Fiscal Years Ended December 31, 2007 2006 2005 $142,272 $136,252 $83,996
- ------------------------------------------------------------------------------------------------------------- Underwriting Expenses and Commissions - ------------------------------------------------------------------------------------------------------------- For the fiscal years ended December 31, - ------------------------------------------------------------------------------------------------------------- 2007 2006 2005 - ------------------------------------------------------------------------------------------------------------- Approximate Net $29,608 $34,210 $44,797 Underwriting Expenses Retained by PFD - ------------------------------------------------------------------------------------------------------------- Approximate Commissions $143,622 $189,259 $246,315 Reallowed to Dealers (Class A shares) - ------------------------------------------------------------------------------------------------------------- Approximate Commissions $0 $0 $0 Reallowed to Dealers (Class C shares) - ------------------------------------------------------------------------------------------------------------- Approximate Brokerage and $0 $0 $0 Underwriting Commissions (Portfolio Transactions) - -------------------------------------------------------------------------------------------------------------
Fees Paid Under the Distribution Plan
- ----------------------------------------------------------------------------------------- For the Fiscal Year Ended December 31, 2007 - ----------------------------------------------------------------------------------------- Class A Plan Class B Plan Class C Plan - ----------------------------------------------------------------------------------------- $833,565 $161,084 $136,632 - -----------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- Carryover of Distribution Expenses - -------------------------------------------------------------------------------- As of December 31, 2007 the carryover of distribution expenses under the Class A Plan previously in effect was: - -------------------------------------------------------------------------------- 68 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- $0 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CDSCs - -------------------------------------------------------------------------------- During the fiscal year ended December 31, 2007, the following CDSCs were paid to PFD: - -------------------------------------------------------------------------------- $41,902 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Capital Loss Carryforwards as of December 31, 2007 - -------------------------------------------------------------------------------- At December 31, 2007, the fund had the following net capital loss carryforward: - -------------------------------------------------------------------------------- $9,300,052 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Of this, the following amounts will expire as indicated below, if not utilized: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2011 $7,713,482 - -------------------------------------------------------------------------------- 2012 $1,586,570 - --------------------------------------------------------------------------------
69 19. APPENDIX A - DESCRIPTION OF SHORT-TERM DEBT, CORPORATE BOND AND PREFERRED STOCK RATINGS(1) Description of Moody's Investors Service, Inc.'s ("Moody's") Short-Term Prime Ratings: Moody's short-term ratings are opinions of the ability of issuers to honor short-term financial obligations. Ratings may be assigned to issuers, short-term programs or to individual short-term debt instruments. Such obligations generally have an original maturity not exceeding thirteen months, unless explicitly noted. Moody's employs the following designations to indicate the relative repayment ability of rated issuers: P-1: Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations. P-2: Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations. P-3: Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations. NP: Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories. Note: Canadian issuers rated P-1 or P-2 have their short-term ratings enhanced by the senior-most long-term rating of the issuer, its guarantor or support-provider. Description of Moody's Debt Ratings: Aaa: Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk. Aa: Obligations rated Aa are judged to be of high quality and are subject to very low credit risk. A: Obligations rated A are considered upper-medium grade and are subject to low credit risk. Baa: Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics. Ba: Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk. B: Obligations rated B are considered speculative and are subject to high credit risk. - ------------------------ (1)The ratings indicated herein are believed to be the most recent ratings available at the date of this statement of additional information for the securities listed. Ratings are generally given to securities at the time of issuance. While the rating agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings indicated do not necessarily represent ratings which will be given to these securities on the date of the fund's fiscal year-end. 70 Caa: Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk. Ca: Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest. C: Obligations rated C are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest. Note: Moody's appends numerical modifiers "1", "2", and "3" to each generic rating classification from "Aa" through "Caa". The modifier "1" indicates that the obligation ranks in the higher end of its generic rating category; the modifier "2" indicates a mid-range ranking; and the modifier "3" indicates a ranking in the lower end of that generic rating category. Moody's assigns long-term ratings to individual debt securities issued from medium-term note (MTN) programs, in addition to indicating ratings to MTN programs themselves. Notes issued under MTN programs with such indicated ratings are rated at issuance at the rating applicable to all pari passu notes issued under the same program, at the program's relevant indicated rating, provided such notes do not exhibit any of the characteristics listed below: o Notes containing features that link interest or principal to the credit performance of any third party or parties (i.e., credit-linked notes); o Notes allowing for negative coupons, or negative principal; o Notes containing any provision that could obligate the investor to make any additional payments; o Notes containing provisions that subordinate the claim. For notes with any of these characteristics, the rating of the individual note may differ from the indicated rating of the program. Standard & Poor's Short-Term Issue Credit Ratings: A-1: A short-term obligation rated "A-1" is rated in the highest category by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong. A-2: A short-term obligation rated "A-2" is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory. A-3: A short-term obligation rated "A-3" exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. B: A short-term obligation rated "B" is regarded as having significant speculative characteristics. Ratings of "B-1", "B-2", and "B-3" may be assigned to indicate finer distinctions within the "B" category. The obligor currently has the capacity to meet its financial commitment on the 71 obligation; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. B-1: A short-term obligation rated "B-1" is regarded as having significant speculative characteristics, but the obligor has a relatively stronger capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors. B-2: A short-term obligation rated "B-2" is regarded as having significant speculative characteristics, and the obligor has an average speculative-grade capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors. B-3: A short-term obligation rated "B-3" is regarded as having significant speculative characteristics, and the obligor has a relatively weaker capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors. C: A short-term obligation rated "C" is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. D: A short-term obligation rated "D" is in payment default. The "D" rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The "D" rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. Standard & Poor's Long-Term Issue Credit Ratings: Issue credit ratings are based, in varying degrees, on the following considerations: o Likelihood of payment--capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation; o Nature of and provisions of the obligation; o Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights. Issue ratings are an assessment of default risk, but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation may apply when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.) AAA: An obligation rated "AAA" has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong. AA: An obligation rated "AA" differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong. 72 A: An obligation rated "A" is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong. BBB: An obligation rated "BBB" exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. BB, B, CCC, CC, and C: Obligations rated "BB", "B", "CCC", "CC", and "C" are regarded as having significant speculative characteristics. "BB" indicates the least degree of speculation and "C" the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions. BB: An obligation rated "BB" is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. B: An obligation rated "B" is more vulnerable to nonpayment than obligations rated "BB", but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation. CCC: An obligation rated "CCC" is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. CC: An obligation rated "CC" is currently highly vulnerable to nonpayment. C: A subordinated debt or preferred stock obligation rated "C" is currently highly vulnerable to nonpayment. The "C" rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued. A "C" also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying. D: An obligation rated "D" is in payment default. The "D" rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The "D" rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. NR: This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poor's does not rate a particular obligation as a matter of policy. 73 Local Currency and Foreign Currency Risks Country risk considerations are a standard part of Standard & Poor's analysis for credit ratings on any issuer or issue. Currency of repayment is a key factor in this analysis. An obligor's capacity to repay foreign currency obligations may be lower than its capacity to repay obligations in its local currency due to the sovereign government's own relatively lower capacity to repay external versus domestic debt. These sovereign risk considerations are incorporated in the debt ratings assigned to specific issues. Foreign currency issuer ratings are also distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer. 74 20. Appendix B Proxy Voting Policies and Procedures of Pioneer Investment Management, Inc. VERSION DATED July, 2004 Overview Pioneer Investment Management, Inc. ("Pioneer") is a fiduciary that owes each of its client's duties of care and loyalty with respect to all services undertaken on the client's behalf, including proxy voting. When Pioneer has been delegated proxy-voting authority for a client, the duty of care requires Pioneer to monitor corporate events and to vote the proxies. To satisfy its duty of loyalty, Pioneer must place its client's interests ahead of its own and must cast proxy votes in a manner consistent with the best interest of its clients. Pioneer will vote all proxies presented in a timely manner. The Proxy Voting Policies and Procedures are designed to complement Pioneer's investment policies and procedures regarding its general responsibility to monitor the performance and/or corporate events of companies that are issuers of securities held in accounts managed by Pioneer. Pioneer's Proxy Voting Policies summarize Pioneer's position on a number of issues solicited by companies held by Pioneer's clients. The policies are guidelines that provide a general indication on how Pioneer would vote but do not include all potential voting scenarios. Pioneer's Proxy Voting Procedures detail monitoring of voting, exception votes, and review of conflicts of interest and ensure that case-by-case votes are handled within the context of the overall guidelines (i.e. best interest of client). The overriding goal is that all proxies for US and non-US companies that are received promptly will be voted in accordance with Pioneer's policies or specific client instructions. All shares in a company held by Pioneer-managed accounts will be voted alike, unless a client has given us specific voting instructions on an issue or has not delegated authority to us or the Proxy Voting Oversight Group determines that the circumstances justify a different approach. Pioneer does not delegate the authority to vote proxies relating to its clients to any of its affiliates, which include other subsidiaries of UniCredito. Any questions about these policies and procedures should be directed to the Proxy Coordinator. Proxy Voting Procedures Proxy Voting Service Pioneer has engaged an independent proxy voting service to assist in the voting of proxies. The proxy voting service works with custodians to ensure that all proxy materials are received by the custodians and are processed in a timely fashion. To the extent applicable, the proxy voting service votes all proxies in accordance with the proxy voting policies established by Pioneer. The proxy voting service will refer proxy questions to the Proxy Coordinator (described below) for instructions under circumstances where: (1) the application of the proxy voting guidelines is unclear; (2) a particular proxy question is not covered by the guidelines; or (3) the guidelines call for specific instructions on a case-by-case basis. The proxy voting service is also requested to call to the Proxy Coordinator's attention specific proxy questions that, while governed by a 75 guideline, appear to involve unusual or controversial issues. Pioneer reserves the right to attend a meeting in person and may do so when it determines that the company or the matters to be voted on at the meeting are strategically important to its clients. Proxy Coordinator Pioneer's Director of Investment Operations (the "Proxy Coordinator") coordinates the voting, procedures and reporting of proxies on behalf of Pioneer's clients. The Proxy Coordinator will deal directly with the proxy voting service and, in the case of proxy questions referred by the proxy voting service, will solicit voting recommendations and instructions from the Director of Portfolio Management US or, to the extent applicable, investment sub-advisers. The Proxy Coordinator is responsible for ensuring that these questions and referrals are responded to in a timely fashion and for transmitting appropriate voting instructions to the proxy voting service. The Proxy Coordinator is responsible for verifying with the Compliance Department whether Pioneer's voting power is subject to any limitations or guidelines issued by the client (or in the case of an employee benefit plan, the plan's trustee or other fiduciaries). Referral Items From time to time, the proxy voting service will refer proxy questions to the Proxy Coordinator that are described by Pioneer's policy as to be voted on a case-by-case basis, that are not covered by Pioneer's guidelines or where Pioneer's guidelines may be unclear with respect to the matter to be voted on. Under such certain circumstances, the Proxy Coordinator will seek a written voting recommendation from the Director of Portfolio Management US. Any such recommendation will include: (i) the manner in which the proxies should be voted; (ii) the rationale underlying any such decision; and (iii) the disclosure of any contacts or communications made between Pioneer and any outside parties concerning the proxy proposal prior to the time that the voting instructions are provided. In addition, the Proxy Coordinator will ask the Compliance Department to review the question for any actual or apparent conflicts of interest as described below under "Conflicts of Interest." The Compliance Department will provide a "Conflicts of Interest Report," applying the criteria set forth below under "Conflicts of Interest," to the Proxy Coordinator summarizing the results of its review. In the absence of a conflict of interest, the Proxy Coordinator will vote in accordance with the recommendation of the Director of Portfolio Management US. If the matter presents a conflict of interest for Pioneer, then the Proxy Coordinator will refer the matter to the Proxy Voting Oversight Group for a decision. In general, when a conflict of interest is present, Pioneer will vote according to the recommendation of the Director of Portfolio Management US where such recommendation would go against Pioneer's interest or where the conflict is deemed to be immaterial. Pioneer will vote according to the recommendation of its proxy voting service when the conflict is deemed to be material and the Pioneer's internal vote recommendation would favor Pioneer's interest, unless a client specifically requests Pioneer to do otherwise. When making the final determination as to how to vote a proxy, the Proxy Voting Oversight Group will review the report from the Director of Portfolio Management US and the Conflicts of Interest Report issued by the Compliance Department. Conflicts of Interest A conflict of interest occurs when Pioneer's interests interfere, or appear to interfere with the interests of Pioneer's clients. Occasionally, Pioneer may have a conflict that can affect how its votes proxies. The conflict may be actual or perceived and may exist when the matter to be voted on concerns: 76 o An affiliate of Pioneer, such as another company belonging to the UniCredito Italiano S.p.A. banking group (a "UniCredito Affiliate"); o An issuer of a security for which Pioneer acts as a sponsor, advisor, manager, custodian, distributor, underwriter, broker, or other similar capacity (including those securities specifically declared by PGAM to present a conflict of interest for Pioneer); o An issuer of a security for which UniCredito has informed Pioneer that a UniCredito Affiliate acts as a sponsor, advisor, manager, custodian, distributor, underwriter, broker, or other similar capacity; or o A person with whom Pioneer (or any of its affiliates) has an existing, material contract or business relationship that was not entered into in the ordinary course of Pioneer's business. o Pioneer will abstain from voting with respect to companies directly or indirectly owned by UniCredito Italiano Group, unless otherwise directed by a client. In addition, Pioneer will inform PGAM Global Compliance and the PGAM Independent Directors before exercising such rights. Any associate involved in the proxy voting process with knowledge of any apparent or actual conflict of interest must disclose such conflict to the Proxy Coordinator and the Compliance Department. The Compliance Department will review each item referred to Pioneer to determine whether an actual or potential conflict of interest with Pioneer exists in connection with the proposal(s) to be voted upon. The review will be conducted by comparing the apparent parties affected by the proxy proposal being voted upon against the Compliance Department's internal list of interested persons and, for any matches found, evaluating the anticipated magnitude and possible probability of any conflict of interest being present. For each referral item, the determination regarding the presence or absence of any actual or potential conflict of interest will be documented in a Conflicts of Interest Report to the Proxy Coordinator. Securities Lending In conjunction with industry standards Proxies are not available to be voted when the shares are out on loan through either Pioneer's lending program or a client's managed security lending program. However, Pioneer will reserve the right to recall lent securities so that they may be voted according to the Pioneer's instructions. If a portfolio manager would like to vote a block of previously lent shares, the Proxy Coordinator will work with the portfolio manager and Investment Operations to recall the security, to the extent possible, to facilitate the vote on the entire block of shares. Share-Blocking "Share-blocking" is a market practice whereby shares are sent to a custodian (which may be different than the account custodian) for record keeping and voting at the general meeting. The shares are unavailable for sale or delivery until the end of the blocking period (typically the day after general meeting date). Pioneer will vote in those countries with "share-blocking." In the event a manager would like to sell a security with "share-blocking", the Proxy Coordinator will work with the Portfolio Manager and Investment Operations Department to recall the shares (as allowable within the market time-frame and practices) and/or communicate with executing brokerage firm. A list of countries with "share-blocking" is available from the Investment Operations Department upon request. 77 Record Keeping The Proxy Coordinator shall ensure that Pioneer's proxy voting service: o Retains a copy of the proxy statement received (unless the proxy statement is available from the SEC's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system); o Retains a record of the vote cast; o Prepares Form N-PX for filing on behalf of each client that is a registered investment company; and o Is able to promptly provide Pioneer with a copy of the voting record upon its request. The Proxy Coordinator shall ensure that for those votes that may require additional documentation (i.e. conflicts of interest, exception votes and case-by-case votes) the following records are maintained: o A record memorializing the basis for each referral vote cast; o A copy of any document created by Pioneer that was material in making the decision on how to vote the subject proxy; and o A copy of any conflict notice, conflict consent or any other written communication (including emails or other electronic communications) to or from the client (or in the case of an employee benefit plan, the plan's trustee or other fiduciaries) regarding the subject proxy vote cast by, or the vote recommendation of, Pioneer. Pioneer shall maintain the above records in the client's file for a period not less than ten (10) years. Disclosure Pioneer shall take reasonable measures to inform its clients of the process or procedures clients must follow to obtain information regarding how Pioneer voted with respect to assets held in their accounts. In addition, Pioneer shall describe to clients its proxy voting policies and procedures and will furnish a copy of its proxy voting policies and procedures upon request. This information may be provided to clients through Pioneer's Form ADV (Part II) disclosure, by separate notice to the client, or through Pioneer's website. Proxy Voting Oversight Group The members of the Proxy Voting Oversight Group are Pioneer's: Director of Portfolio Management US, Head of Investment Operations, and Director of Compliance. Other members of Pioneer will be invited to attend meetings and otherwise participate as necessary. The Head of Investment Operations will chair the Proxy Voting Oversight Group. The Proxy Voting Oversight Group is responsible for developing, evaluating, and changing (when necessary) Pioneer's Proxy Voting Policies and Procedures. The group meets at least annually to evaluate and review these policies and procedures and the services of its third-party proxy voting service. In addition, the Proxy Voting Oversight Group will meet as necessary to vote on referral items and address other business as necessary. 78 Amendments Pioneer may not amend its Proxy Voting Policies And Procedures without the prior approval of the Proxy Voting Oversight Group and its corporate parent, Pioneer Global Asset Management S.p.A Proxy Voting Policies Pioneer's sole concern in voting proxies is the economic effect of the proposal on the value of portfolio holdings, considering both the short- and long-term impact. In many instances, Pioneer believes that supporting the company's strategy and voting "for" management's proposals builds portfolio value. In other cases, however, proposals set forth by management may have a negative effect on that value, while some shareholder proposals may hold the best prospects for enhancing it. Pioneer monitors developments in the proxy-voting arena and will revise this policy as needed. All proxies that are received promptly will be voted in accordance with the specific policies listed below. All shares in a company held by Pioneer-managed accounts will be voted alike, unless a client has given us specific voting instructions on an issue or has not delegated authority to us. Proxy voting issues will be reviewed by Pioneer's Proxy Voting Oversight Group, which consists of the Director of Portfolio Management US, the Director of Investment Operations (the Proxy Coordinator), and the Director of Compliance. Pioneer has established Proxy Voting Procedures for identifying and reviewing conflicts of interest that may arise in the voting of proxies. Clients may request, at any time, a report on proxy votes for securities held in their portfolios and Pioneer is happy to discuss our proxy votes with company management. Pioneer retains a proxy voting service to provide research on proxy issues and to process proxy votes. Administrative While administrative items appear infrequently in U.S. issuer proxies, they are quite common in non-U.S. proxies. We will generally support these and similar management proposals: o Corporate name change. o A change of corporate headquarters. o Stock exchange listing. o Establishment of time and place of annual meeting. o Adjournment or postponement of annual meeting. o Acceptance/approval of financial statements. o Approval of dividend payments, dividend reinvestment plans and other dividend-related proposals. 79 o Approval of minutes and other formalities. o Authorization of the transferring of reserves and allocation of income. o Amendments to authorized signatories. o Approval of accounting method changes or change in fiscal year-end. o Acceptance of labor agreements. o Appointment of internal auditors. Pioneer will vote on a case-by-case basis on other routine business; however, Pioneer will oppose any routine business proposal if insufficient information is presented in advance to allow Pioneer to judge the merit of the proposal. Pioneer has also instructed its proxy voting service to inform Pioneer of its analysis of any administrative items inconsistent, in its view, with supporting the value of Pioneer portfolio holdings so that Pioneer may consider and vote on those items on a case-by-case basis. Auditors We normally vote for proposals to: o Ratify the auditors. We will consider a vote against if we are concerned about the auditors' independence or their past work for the company. Specifically, we will oppose the ratification of auditors and withhold votes from audit committee members if non-audit fees paid by the company to the auditing firm exceed the sum of audit fees plus audit-related fees plus permissible tax fees according to the disclosure categories proposed by the Securities and Exchange Commission. o Restore shareholder rights to ratify the auditors. We will normally oppose proposals that require companies to: o Seek bids from other auditors. o Rotate auditing firms, except where the rotation is statutorily required or where rotation would demonstrably strengthen financial disclosure. o Indemnify auditors. o Prohibit auditors from engaging in non-audit services for the company. Board of Directors On issues related to the board of directors, Pioneer normally supports management. We will, however, consider a vote against management in instances where corporate performance has been very poor or where the board appears to lack independence. General Board Issues Pioneer will vote for: 80 o Audit, compensation and nominating committees composed of independent directors exclusively. o Indemnification for directors for actions taken in good faith in accordance with the business judgment rule. We will vote against proposals for broader indemnification. o Changes in board size that appear to have a legitimate business purpose and are not primarily for anti-takeover reasons. o Election of an honorary director. We will vote against: o Minimum stock ownership by directors. o Term limits for directors. Companies benefit from experienced directors, and shareholder control is better achieved through annual votes. o Requirements for union or special interest representation on the board. o Requirements to provide two candidates for each board seat. We will vote on a case-by case basis on these issues: o Separate chairman and CEO positions. We will consider voting with shareholders on these issues in cases of poor corporate performance. Elections of Directors In uncontested elections of directors we will vote against: o Individual directors with absenteeism above 25% without valid reason. We support proposals that require disclosure of director attendance. o Insider directors and affiliated outsiders who sit on the audit, compensation, stock option or nominating committees. For the purposes of our policy, we accept the definition of affiliated directors provided by our proxy voting service. We will also vote against: o Directors who have failed to act on a takeover offer where the majority of shareholders have tendered their shares. o Directors who appear to lack independence or are associated with very poor corporate performance. We will vote on a case-by case basis on these issues: o Re-election of directors who have implemented or renewed a dead-hand or modified dead-hand poison pill (a "dead-hand poison pill" is a shareholder rights plan that may be altered only by incumbent or "dead " directors. These plans prevent a potential acquirer from disabling a poison pill by obtaining control of the board through a proxy vote). 81 o Contested election of directors. o Prior to phase-in required by SEC, we would consider supporting election of a majority of independent directors in cases of poor performance. o Mandatory retirement policies. o Directors who have ignored a shareholder proposal that has been approved by shareholders for two consecutive years. Takeover-Related Measures Pioneer is generally opposed to proposals that may discourage takeover attempts. We believe that the potential for a takeover helps ensure that corporate performance remains high. Pioneer will vote for: o Cumulative voting. o Increase ability for shareholders to call special meetings. o Increase ability for shareholders to act by written consent. o Restrictions on the ability to make greenmail payments. o Submitting rights plans to shareholder vote. o Rescinding shareholder rights plans ("poison pills"). o Opting out of the following state takeover statutes: o Control share acquisition statutes, which deny large holders voting rights on holdings over a specified threshold. o Control share cash-out provisions, which require large holders to acquire shares from other holders. o Freeze-out provisions, which impose a waiting period on large holders before they can attempt to gain control. o Stakeholder laws, which permit directors to consider interests of non-shareholder constituencies. o Disgorgement provisions, which require acquirers to disgorge profits on purchases made before gaining control. o Fair price provisions. o Authorization of shareholder rights plans. o Labor protection provisions. 82 o Mandatory classified boards. We will vote on a case-by-case basis on the following issues: o Fair price provisions. We will vote against provisions requiring supermajority votes to approve takeovers. We will also consider voting against proposals that require a supermajority vote to repeal or amend the provision. Finally, we will consider the mechanism used to determine the fair price; we are generally opposed to complicated formulas or requirements to pay a premium. o Opting out of state takeover statutes regarding fair price provisions. We will use the criteria used for fair price provisions in general to determine our vote on this issue. o Proposals that allow shareholders to nominate directors. We will vote against: o Classified boards, except in the case of closed-end mutual funds. o Limiting shareholder ability to remove or appoint directors. We will support proposals to restore shareholder authority in this area. We will review on a case-by-case basis proposals that authorize the board to make interim appointments. o Classes of shares with unequal voting rights. o Supermajority vote requirements. o Severance packages ("golden" and "tin" parachutes). We will support proposals to put these packages to shareholder vote. o Reimbursement of dissident proxy solicitation expenses. While we ordinarily support measures that encourage takeover bids, we believe that management should have full control over corporate funds. o Extension of advance notice requirements for shareholder proposals. o Granting board authority normally retained by shareholders (e.g., amend charter, set board size). o Shareholder rights plans ("poison pills"). These plans generally allow shareholders to buy additional shares at a below-market price in the event of a change in control and may deter some bids. Capital Structure Managements need considerable flexibility in determining the company's financial structure, and Pioneer normally supports managements' proposals in this area. We will, however, reject proposals that impose high barriers to potential takeovers. Pioneer will vote for: o Changes in par value. 83 o Reverse splits, if accompanied by a reduction in number of shares. o Share repurchase programs, if all shareholders may participate on equal terms. o Bond issuance. o Increases in "ordinary" preferred stock. o Proposals to have blank-check common stock placements (other than shares issued in the normal course of business) submitted for shareholder approval. o Cancellation of company treasury shares. We will vote on a case-by-case basis on the following issues: o Reverse splits not accompanied by a reduction in number of shares, considering the risk of delisting. o Increase in authorized common stock. We will make a determination considering, among other factors: o Number of shares currently available for issuance; o Size of requested increase (we would normally approve increases of up to 100% of current authorization); o Proposed use of the additional shares; and o Potential consequences of a failure to increase the number of shares outstanding (e.g., delisting or bankruptcy). o Blank-check preferred. We will normally oppose issuance of a new class of blank-check preferred, but may approve an increase in a class already outstanding if the company has demonstrated that it uses this flexibility appropriately. o Proposals to submit private placements to shareholder vote. o Other financing plans. We will vote against preemptive rights that we believe limit a company's financing flexibility. Compensation Pioneer supports compensation plans that link pay to shareholder returns and believes that management has the best understanding of the level of compensation needed to attract and retain qualified people. At the same time, stock-related compensation plans have a significant economic impact and a direct effect on the balance sheet. Therefore, while we do not want to micromanage a company's compensation programs, we will place limits on the potential dilution these plans may impose. Pioneer will vote for: 84 o 401(k) benefit plans. o Employee stock ownership plans (ESOPs), as long as shares allocated to ESOPs are less than 5% of outstanding shares. Larger blocks of stock in ESOPs can serve as a takeover defense. We will support proposals to submit ESOPs to shareholder vote. o Various issues related to the Omnibus Budget and Reconciliation Act of 1993 (OBRA), including: o Amendments to performance plans to conform with OBRA; o Caps on annual grants or amendments of administrative features; o Adding performance goals; and o Cash or cash-and-stock bonus plans. o Establish a process to link pay, including stock-option grants, to performance, leaving specifics of implementation to the company. o Require that option repricings be submitted to shareholders. o Require the expensing of stock-option awards. o Require reporting of executive retirement benefits (deferred compensation, split-dollar life insurance, SERPs, and pension benefits). o Employee stock purchase plans where the purchase price is equal to at least 85% of the market price, where the offering period is no greater than 27 months and where potential dilution (as defined below) is no greater than 10%. We will vote on a case-by-case basis on the following issues: o Executive and director stock-related compensation plans. We will consider the following factors when reviewing these plans: o The program must be of a reasonable size. We will approve plans where the combined employee and director plans together would generate less than 15% dilution. We will reject plans with 15% or more potential dilution. Dilution = (A + B + C) / (A + B + C + D), where A = Shares reserved for plan/amendment, B = Shares available under continuing plans, C = Shares granted but unexercised and D = Shares outstanding. o The plan must not: o Explicitly permit unlimited option repricing authority or that have repriced in the past without shareholder approval. 85 o Be a self-replenishing "evergreen" plan, plans that grant discount options and tax offset payments. o We are generally in favor of proposals that increase participation beyond executives. o We generally support proposals asking companies to adopt rigorous vesting provisions for stock option plans such as those that vest incrementally over, at least, a three- or four-year period with a pro rata portion of the shares becoming exercisable on an annual basis following grant date. o We generally support proposals asking companies to disclose their window period policies for stock transactions. Window period policies ensure that employees do not exercise options based on insider information contemporaneous with quarterly earnings releases and other material corporate announcements. o We generally support proposals asking companies to adopt stock holding periods for their executives. o All other employee stock purchase plans. o All other compensation-related proposals, including deferred compensation plans, employment agreements, loan guarantee programs and retirement plans. o All other proposals regarding stock compensation plans, including extending the life of a plan, changing vesting restrictions, repricing options, lengthening exercise periods or accelerating distribution of awards and pyramiding and cashless exercise programs. We will vote against: o Pensions for non-employee directors. We believe these retirement plans reduce director objectivity. o Elimination of stock option plans. We will vote on a case-by case basis on these issues: o Limits on executive and director pay. o Stock in lieu of cash compensation for directors. Corporate Governance Pioneer will vote for: o Confidential Voting. o Equal access provisions, which allow shareholders to contribute their opinion to proxy materials. o Proposals requiring directors to disclose their ownership of shares in the company. 86 We will vote on a case-by-case basis on the following issues: o Change in the state of incorporation. We will support reincorporations supported by valid business reasons. We will oppose those that appear to be solely for the purpose of strengthening takeover defenses. o Bundled proposals. We will evaluate the overall impact of the proposal. o Adopting or amending the charter, bylaws or articles of association. o Shareholder appraisal rights, which allow shareholders to demand judicial review of an acquisition price. We will vote against: o Shareholder advisory committees. While management should solicit shareholder input, we prefer to leave the method of doing so to management's discretion. o Limitations on stock ownership or voting rights. o Reduction in share ownership disclosure guidelines. Mergers and Restructurings Pioneer will vote on the following and similar issues on a case-by-case basis: o Mergers and acquisitions. o Corporate restructurings, including spin-offs, liquidations, asset sales, joint ventures, conversions to holding company and conversions to self-managed REIT structure. o Debt restructurings. o Conversion of securities. o Issuance of shares to facilitate a merger. o Private placements, warrants, convertible debentures. o Proposals requiring management to inform shareholders of merger opportunities. We will normally vote against shareholder proposals requiring that the company be put up for sale. Mutual Funds Many of our portfolios may invest in shares of closed-end mutual funds or exchange-traded funds. The non-corporate structure of these investments raises several unique proxy voting issues. Pioneer will vote for: 87 o Establishment of new classes or series of shares. o Establishment of a master-feeder structure. Pioneer will vote on a case-by-case on: o Changes in investment policy. We will normally support changes that do not affect the investment objective or overall risk level of the fund. We will examine more fundamental changes on a case-by-case basis. o Approval of new or amended advisory contracts. o Changes from closed-end to open-end format. o Authorization for, or increase in, preferred shares. o Disposition of assets, termination, liquidation, or mergers. o Classified boards of closed-end mutual funds, but will typically support such proposals. Social Issues Pioneer will abstain on stockholder proposals calling for greater disclosure of corporate activities with regard to social issues. "Social Issues" may generally be described as shareholder proposals for a company to: o Conduct studies regarding certain issues of public concern and interest; o Study the feasibility of the company taking certain actions with regard to such issues; or o Take specific action, including ceasing certain behavior and adopting company standards and principles, in relation to issues of public concern and interest. We believe these issues are important and should receive management attention. Pioneer will vote against proposals calling for substantial changes in the company's business or activities. We will also normally vote against proposals with regard to contributions, believing that management should control the routine disbursement of funds. 88 EX-99.(17)(F) 14 d23329_ex99-17f.txt - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PIONEER ----------------------- TAX FREE INCOME FUND MOMTX Ticker Symbol Annual Report 12/31/07 [LOGO] PIONEER Investments (R) Table of Contents - -------------------------------------------------------------------------------- Letter to Shareowners 2 Portfolio Management Discussion 4 Portfolio Summary 7 Prices and Distributions 8 Performance Update 9 Comparing Ongoing Fund Expenses 13 Schedule of Investments 15 Financial Statements 32 Notes to Financial Statements 40 Report of Independent Registered Public Accounting Firm 46 Approval of Investment Advisory Agreement 47 Trustees, Officers and Service Providers 51
President's Dear Shareowner, - -------------------------------------------------------------------------------- Staying diversified and keeping your portfolio invested in the markets are two general investment principles that have served investors well over time. They were particularly useful guides in the second half of 2007, when an otherwise healthy long-term bull market was buffeted by problems in the financial services industry and the emergence of worries about a slowing economy. After an extended period of steady growth with sustained low unemployment and low inflation, the U.S. economy ran into difficulty as 2007 drew to a close. Problems in the financial system tied to poor practices in the mortgage financing industry and the end of home price appreciation forced investors and bankers to mark down the value of assets on their balance sheets by over one hundred billion dollars. A late-summer credit crunch forced central banks in the United States and Europe to act in the role of "lender of last resort" to keep credit markets functioning. As the repercussions of the credit crunch and falling home prices were felt in the real economy, unemployment rose and consumer confidence fell. Inflation concerns moved to the back burner for the Federal Reserve, which lowered interest rates, first gradually, then more rapidly, as concern grew that falling home prices and disruptions in financial markets posed a significant threat to economic growth. Even against this "wall of worry" backdrop, the performance of major asset classes in 2007 was generally positive. Despite several interim setbacks and poor performance near year-end, the Standard & Poor's 500 Index increased 5% in 2007, the Dow Jones Industrial Average increased 9%, and the NASDAQ Composite Index increased 10%. International developed and emerging markets equities performed even better, reflecting both a weakening U.S. dollar, which boosts returns for U.S. dollar-based investors, and solid local currency returns. The MSCI EAFE Developed Market Index rose 12%, and the MSCI Emerging Markets Index rose 40% over the same period. The U.S. bond market, as measured by the Lehman Aggregate Bond Index, rose 7%, while the U.S. high-yield bond market, as measured by the Merrill Lynch High Yield Bond Master II Index, rose 2%, as higher-coupon yields could not compensate for falling bond prices as credit spreads (differences between yields of higher- and lower-quality bonds) widened during the second half of 2007. 2 Letter Looking forward, a growing number of economists are concerned about a recession. As always, though, emotions can get ahead of reality. Higher mortgage defaults, a spreading of weakness to other consumer sectors or to employment, and the possibility of a liquidity/ credit crunch represent risks to the economy. Conversely, economic growth in the rest of the world remains relatively positive, and a weak U.S. dollar has significantly benefited U.S. companies competing in the global marketplace. While falling risk tolerances may continue to depress asset prices in the short term, equity and corporate bond valuations look reasonable unless the U.S. economy falls into a severe recession. Sudden swings in the markets are always to be expected. The history of the stock market demonstrates that sharp market downturns are frequently followed by strong recoveries, but they are also difficult to time. Just as staying diversified and invested are important investment principles, it is also important to pay attention to asset allocation. As always, we encourage you to work closely with your financial advisor to find the mix of stocks, bonds and money market assets that is best aligned to your particular risk tolerance and investment objective. Respectfully, /s/ Daniel K. Kingsbury Daniel K. Kingsbury President and CEO Pioneer Investment Management USA, Inc. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. 3 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/07 - -------------------------------------------------------------------------------- In the following interview, David Eurkus, the Fund's portfolio manager, discusses some of the factors that had an impact for the past year on the municipal bond market and the Fund. Q: How did the Fund perform in 2007? A: For the 12-month period ended December 31, 2007, the total return on Pioneer Tax Free Income Fund's Class A shares was -1.23% at net asset value. The Fund's benchmark index, the Lehman Brothers Municipal Bond Index, generated a return of 3.36% for the same period, and the average return of the 237 funds in the Lipper General Municipal Debt Funds category was 1.15%. Lipper is an independent monitor of mutual fund performance. The Fund's Class A shares generated a 30-day SEC tax-free yield of 3.84% on December 31, 2007. That translates into a taxable equivalent yield of 5.91%, based on the maximum federal income tax rate of 35%. At the end of the period, the Fund had 205 issues in 42 states, and the average credit quality of the portfolio was AA-. At a time when only the highest quality investments outperformed, the portfolio's below investment-grade and lower-rated investment-grade securities held back returns. Call 1-800-225-6292 or visit www.pioneerinvestments.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: What was the investment environment like during 2007? A: The major event of 2007 was the mid-summer turmoil in the subprime mortgage sector that led to a loss of confidence in the fixed-income markets. As some large financial institutions were forced to take write-downs on their subprime mortgage debt, bond credit agencies became concerned that bond insurers, which insure both taxable and tax-free bonds, would suffer the same fate; that is, they would not have enough capital to cover the defaults on taxable bonds backed by subprime mortgages. In this environment, credit agencies issued warnings to insurers that their 4 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AAA credit quality ratings could be downgraded. The actions of the credit agencies led to a "flight to quality" to the Treasury market and to a significant decline in virtually every other type of fixed-income asset class, including municipal bonds. Q: How did you manage the Fund in this environment? A: As we closed out the fiscal year, 10% of the portfolio was invested in high-yield bonds, which until the latter part of 2007 had been the best-performing area of the municipal bond market. The rest of the portfolio was invested in investment-grade bonds. Throughout the fiscal year, the Fund maintained an emphasis on market sectors that underpin the U.S. economy. Health care (26.9% of net assets), education (10.1% of net assets) and special revenue, or tobacco bonds (10.4% of net assets) were among the largest positions in the portfolio. Nearly all of the Fund's assets were invested in revenue bonds, on which the payment of interest and principal depends on the revenues derived from the particular asset the bond was issued to finance. Only 3.7% of Fund holdings were in general obligation bonds, whose principal and interest are guaranteed by the financial resources and taxing power of the issuing municipality. Q: What affected performance? A: The portfolio's lower-quality investment-grade bonds were instrumental in the underperformance relative to the Lehman Brothers Municipal Bond Index. These included hospital and tobacco bonds, which accounted for about 37% of the Fund's total net assets and which were rated Baa and BBB. On a more positive note, we were able to provide shareholders with a relatively high level of tax-free income by remaining fully invested throughout the 12-month period. Q: What is your outlook for 2008? A: We expect economic growth to weaken over the next several months, with the problems in the housing sector having the biggest negative impact. Because of rising oil prices and an upturn in unemployment, consumer spending is also likely to decline. Given this backdrop, the Federal Reserve seems poised to continue to add more liquidity to the economy through further interest rate 5 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 12/31/07 (continued) - -------------------------------------------------------------------------------- cuts. At the close of 2007, the municipal bond market was at parity with the taxable bond market, which means that high quality municipal bonds were cheap. We are taking advantage of these more attractive valuations of municipal bonds and the opportunity to add value to 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. Investments in the Fund are subject to possible loss due to the financial failure of issuers of underlying securities and their inability to meet their debt obligations. A portion of income may be subject to local, state, federal, and/or alternative minimum tax. Capital gains, if any, are subject to a capital gains tax. At times, the Fund's investments may represent industries or industry sectors that are interrelated or have common risks, making it more susceptible to any economic, political, or regulatory developments or other risks affecting those industries and sectors. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These opinions 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. 6 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- PORTFOLIO SUMMARY 12/31/07 - -------------------------------------------------------------------------------- Portfolio Quality - -------------------------------------------------------------------------------- (As a percentage of total investment portfolio based on S&P ratings)
AAA 38.6% AA 4.5% A 18.3% BBB 28.6% BB & Lower 10.0%
Portfolio Maturity - -------------------------------------------------------------------------------- (Effective life as a percentage of total investment portfolio)
0-1 Year 3.7% 1-3 Years 3.6% 3-6 Years 25.2% 6-8 Years 11.1% 8-10 Years 6.7% 10+ Years 49.7%
10 Largest Holdings* - -------------------------------------------------------------------------------- (As a percentage of debt holdings) 1. Hobart Indiana Building Corp., 6.5%, 1/15/29 3.22% 2. Louisiana Public Facilities Authority, 5.5%, 5/15/47 2.61 3. Massachusetts Bay Transportation Authority, 4.0%, 7/1/33 2.58 4. Philadelphia Pennsylvania Hospital, 5.0%, 7/1/34 2.36 5. Dallas-Fort Worth Texas International Airport, 6.0%, 11/1/14 2.35 6. Connecticut State Health & Educational, 5.0%, 7/1/42 1.85 7. Golden State Tobacco Security Corp., California, 5.125%, 6/1/47 1.80 8. Illinois Finance Authority, 5.0%, 5/1/25 1.78 9. California State Department of Veteran Affairs, 4.6%, 12/1/28 1.76 10. Reno Nevada Hospital Revenue, 5.25%, 6/1/41 1.71
* This list excludes temporary cash investments and derivative investments. The portfolio is actively managed, and current holdings may be different. The holdings listed should not be considered recommendations to buy or sell any security listed. 7 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- PRICES AND DISTRIBUTIONS - -------------------------------------------------------------------------------- Net Asset Value Per Share - --------------------------------------------------------------------------------
Class 12/31/07 12/31/06 - ------- ---------- --------- A $11.13 $11.75 B $11.04 $11.65 C $10.96 $11.57 Y $11.07 $11.69
Distributions Per Share - --------------------------------------------------------------------------------
1/1/07 - 12/31/07 ----------------------------------------------- Net Investment Short-Term Long-Term Class Income Capital Gains Capital Gains - ------- ---------------- --------------- -------------- A $0.4790 $ - $ - B $0.3842 $ - $ - C $0.3860 $ - $ - Y $0.5134 $ - $ -
8 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/07 CLASS A SHARES - -------------------------------------------------------------------------------- Investment Returns - -------------------------------------------------------------------------------- The mountain chart on the right shows the change in value of a $10,000 investment made in Pioneer Tax Free Income Fund at public offering price, compared to that of the Lehman Brothers Municipal Bond Index. [The following data was represented as a mountain chart in the printed material.]
12/97 9,550 10,000 10,145 10,648 12/99 9,709 10,429 10,838 11,648 12/01 11,286 12,245 12,083 13,421 12/03 12,784 14,134 13,392 14,768 12/05 13,935 15,286 14,675 16,026 12/07 14,494 16,564
Average Annual Total Returns (As of December 31, 2007) Net Asset Public Offering Period Value (NAV) Price (POP) 10 Years 4.26% 3.78% 5 Years 3.71 2.75 1 Year -1.23 -5.65 - ------------------------------------------------------------- Expense Ratio (Per prospectus dated May 1, 2007) Gross Net 0.86% 0.86%
Call 1-800-225-6292 or visit www.pioneerinvestments.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. NAV results represent the percent change in net asset value per share. Returns would have been lower had sales charges been reflected. POP returns reflect deduction of maximum 4.5% sales charge. All results are historical and assume the reinvestment of dividends and capital gains. Other share classes are available for which performance and expenses will differ. 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. The performance table and graph do not reflect the deduction of fees and taxes that a shareowner would pay on Fund distributions or the redemption of Fund shares. The Lehman Brothers Municipal Bond Index is a broad measure of the municipal bond market. You cannot invest directly in an Index. 9 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/07 CLASS B SHARES - -------------------------------------------------------------------------------- Investment Returns - -------------------------------------------------------------------------------- The mountain chart on the right shows the change in value of a $10,000 investment made in Pioneer Tax Free Income Fund, compared to that of the Lehman Brothers Municipal Bond Index. [The following data was represented as a mountain chart in the printed material.]
12/97 10,000 10,000 10,542 10,648 12/99 10,014 10,429 11,094 11,648 12/01 11,469 12,245 12,176 13,421 12/03 12,782 14,134 13,302 14,768 12/05 13,723 15,286 14,346 16,026 12/07 14,063 16,564
Average Annual Total Returns (As of December 31, 2007) If If Period Held Redeemed 10 Years 3.47% 3.47% 5 Years 2.92 2.92 1 Year -1.97 -5.76 - ------------------------------------------------------- Expense Ratio (Per prospectus dated May 1, 2007) Gross Net 1.62% 1.62%
Call 1-800-225-6292 or visit www.pioneerinvestments.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. "If Held" results represent the percent change in net asset per share. Returns would have been lower had sales charges been reflected. "If redeemed" returns reflect the deduction of applicable contingent deferred sales charge (CDSC). Effective December 1, 2004, the period during which a CDSC is applied to withdrawals was shortened to 5 years. The maximum CDSC for Class B shares continues to be 4%. For more complete information, please see the prospectus for details. Note: Shares purchased prior to December 1, 2004 remain subject to the CDSC in effect at the time you purchased those shares. For performance information for shares purchased prior to December 1, 2004, please visit www.pioneerinvestments.com/bshares. All results are historical and assume the reinvestment of dividends and capital gains. Other share classes are available for which performance and expenses will differ. 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. The performance table and graph do not reflect the deduction of fees and taxes that a shareowner would pay on Fund distributions or the redemption of Fund shares. The Lehman Brothers Municipal Bond Index is a broad measure of the municipal bond market. You cannot invest directly in an Index. 10 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/07 CLASS C SHARES - -------------------------------------------------------------------------------- Investment Returns - -------------------------------------------------------------------------------- The mountain chart on the right shows the change in value of a $10,000 investment made in Pioneer Tax Free Income Fund, compared to that of the Lehman Brothers Municipal Bond Index. [The following data was represented as a mountain chart in the printed material.]
12/97 10,000 10,000 10,533 10,648 12/99 10,014 10,429 11,075 11,648 12/01 11,450 12,245 12,175 13,421 12/03 12,788 14,134 13,302 14,768 12/05 13,741 15,286 14,369 16,026 12/07 14,085 16,564
Average Annual Total Returns (As of December 31, 2007) If If Period Held Redeemed 10 Years 3.48% 3.48% 5 Years 2.96 2.96 1 Year -1.97 -1.97 - ------------------------------------------------------ Expense Ratio (Per prospectus dated May 1, 2007) Gross Net 1.61% 1.61%
Call 1-800-225-6292 or visit www.pioneerinvestments.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. Class C shares held for less than one year are also subject to a 1% contingent deferred sales charge (CDSC). The performance of Class C shares does not reflect the 1% front-end sales charge in effect prior to February 1, 2004. If you paid a 1% sales charge, your returns would be lower than those shown above. "If Held" results represent the percent change in net asset value per share. Returns would have been lower had sales charges been reflected. All results are historical and assume the reinvestment of dividends and capital gains. Other share classes are available for which performance and expenses will differ. 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. The performance table and graph do not reflect the deduction of fees and taxes that a shareowner would pay on Fund distributions or the redemption of Fund shares. The Lehman Brothers Municipal Bond Index is a broad measure of the municipal bond market. You cannot invest directly in an Index. 11 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 12/31/07 CLASS Y SHARES - -------------------------------------------------------------------------------- Investment Returns - -------------------------------------------------------------------------------- The mountain chart on the right shows the change in value of a $10,000 investment made in Pioneer Tax Free Income Fund, compared to that of the Lehman Brothers Municipal Bond Index. [The following data was represented as a mountain chart in the printed material.]
12/97 10,000 10,000 10,620 10,648 12/99 10,164 10,429 11,346 11,648 12/01 11,815 12,245 12,610 13,421 12/03 13,392 14,134 14,081 14,768 12/05 14,701 15,286 15,537 16,026 12/07 15,391 16,564
Average Annual Total Returns (As of December 31, 2007) If If Period Held Redeemed 10 Years 4.41% 4.41% 5 Years 4.07 4.07 1 Year -0.94 -0.94 - ----------------------------------------------------- Expense Ratio (Per prospectus dated May 1, 2007) Gross Net 0.52% 0.52%
Call 1-800-225-6292 or visit www.pioneerinvestments.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. Performance for periods prior to the inception of Class Y shares reflects the NAV performance of the Fund's Class A shares. The performance does not reflect differences in expenses, including the Rule 12b-1 fees applicable to Class A shares. Since fees for Class A shares are generally higher than those of Class Y shares, the performance shown for Class Y shares prior to its inception would have been higher. Class Y shares are not subject to sales charges and are available for limited groups of eligible investors, including institutional investors. All results are historical and assume the reinvestment of dividends and capital gains. Other share classes are available for which performance and expenses will differ. 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. The performance table and graph do not reflect the deduction of fees and taxes that a shareowner would pay on Fund distributions or the redemption of Fund shares. The Lehman Brothers Municipal Bond Index is a broad measure of the municipal bond market. You cannot invest directly in an Index. 12 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- COMPARING ONGOING FUND EXPENSES - -------------------------------------------------------------------------------- As a shareowner in the Fund, you incur two types of costs: (1) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund 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 Fund 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 Fund'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 Tax Free Income Fund Based on actual returns from July 1, 2007 through December 31, 2007
Share Class A B C Y - ---------------------------------------------------------------------------------------- Beginning Account $1,000.00 $1,000.00 $1,000.00 $1,000.00 Value On 7/1/07 Ending Account Value $ 999.70 $ 995.63 $ 995.63 $1,001.11 On 12/31/07 Expenses Paid During Period* $ 4.23 $ 8.50 $ 8.05 $ 2.72
* Expenses are equal to the Fund's annualized expense ratio of 0.84%, 1.69%, 1.60%, and 0.54%, for Class A, Class B, Class C, and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). 13 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- COMPARING ONGOING FUND EXPENSES (continued) - -------------------------------------------------------------------------------- Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund'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 Fund and other funds. 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 Tax Free Income Fund Based on a hypothetical 5% return per year before expenses, reflect ing the period from July 1, 2007 through December 31, 2007
Share Class A B C Y - ---------------------------------------------------------------------------------------- Beginning Account $1,000.00 $1,000.00 $1,000.00 $1,000.00 Value On 7/1/07 Ending Account Value $1,020.97 $1,016.69 $1,017.14 $1,022.48 On 12/31/07 Expenses Paid During Period* $ 4.28 $ 8.59 $ 8.13 $ 2.75
* Expenses are equal to the Fund's annualized expense ratio of 0.84%, 1.69%, 1.60%, and 0.54%, for Class A, Class B, Class C, and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). 14 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/07 - --------------------------------------------------------------------------------
S&P/ Floating Moody's Rate (b) Ratings Shares (unaudited) (unaudited) Value COMMON STOCKS - 0.4% Transportation - 0.4% Airlines - 0.4% 153,656 Northwest Airlines* $ 2,229,548 ------------ TOTAL COMMON STOCK (Cost $4,839,466) $ 2,229,548 ------------ Principal Amount MUNICIPAL BONDS - 99.8% No State - 0.9% $ 5,000,000 NR/NR Northern Mariana Islands, 5.0%, 6/1/17 $ 4,937,050 ------------ $ 4,937,050 ------------ Alabama - 2.4% 7,500,000 A+/A1 DCH Health Care Authority, 5.125%, 6/1/36 $ 7,318,800 405,000 AAA/Aaa Florence Alabama Water General, 4.4%, 12/1/08 410,229 550,000 AA/Aa2 Hunstville Alabama Electric System, 4.6%, 12/1/09 561,655 1,445,000 AA+/Aa1 Huntsville Alabama General, 4.75%, 11/1/18 1,472,845 1,895,000 AA+/Aa1 Huntsville Alabama, 5.125%, 5/1/20 2,037,599 725,000 AAA/Aaa Madison Alabama Water & Waste Water Board, 4.6%, 12/1/11 752,217 645,000 NR/NR Mobile Alabama Regulation General, 0.0%, 2/15/09 647,522 500,000 NR/Aaa Southeast, Alabama Gas District, 5.3%, 6/1/12 534,450 ------------ $ 13,735,317 ------------ Arizona - 3.4% 1,000,000 AAA/Aaa Maricopa County School District, 7.0%, 7/1/08 $ 1,019,600 10,000,000 AAA/Aaa Phoenix Arizona Civic Corp., 5.50%, 7/1/43* 8,346,600 4,000,000 AAA/Aaa Phoenix Arizona Civic Corp., District Revenue, 0.0%, 7/1/25* 3,328,160
The accompanying notes are an integral part of these financial statements. 15 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/07 (continued) - --------------------------------------------------------------------------------
S&P/ Floating Moody's Principal Rate (b) Ratings Amount (unaudited) (unaudited) Value Arizona - (continued) $ 8,005,000 AAA/Aaa Phoenix Arizona Civic Corp., District Revenue, 0.0%, 7/1/26* $ 6,648,953 ------------ $ 19,343,313 ------------ California - 11.9% 5,000,000 AAA/Aaa Alhambra California Certificates Partnership, 6.75%, 9/1/23 $ 5,769,900 10,000,000 AAA/Aaa California State Department of Veteran Affairs, 4.6%, 12/1/28 9,922,600 1,000,000 AAA/Aaa California State, 4.25%, 8/1/33 926,380 4,875,000 NR/Baa2 California Statewide Communities Development Authority, 5.0%, 5/15/30 4,551,251 5,125,000 NR/Baa2 California Statewide Communities Development Authority, 5.0%, 5/15/38 4,636,741 20,000,000 AAA/Aaa Foothill Eastern Transportation Corridor Agency Toll Road Revenue, 0.0%, 1/1/28* 7,882,600 1,000,000 NR/Aaa Franklin-McKinley California School District, 6.0%, 7/1/16 1,178,010 4,525,000 AAA/Aaa Golden State Tobacco Securitization, 7.8%, 6/1/42 5,449,548 1,000,000 AAA/Aaa Golden State Tobacco Securitization, 7.875%, 6/1/42 1,207,650 3,000,000 AAA/Aaa Golden State Tobacco Securitization, 7.9%, 6/1/42 3,626,280 12,000,000 BBB/Baa3 Golden State Tobacco Security Corp., California, 5.125%, 6/1/47 10,106,160 10,000,000 NR/NR Inland Empire Tobacco Securitization Authority California Tobacco, 0.0%, 6/1/36* 1,435,000 1,175,000 NR/Aaa Lucia Mar University School District, 0.0%, 8/1/20* 651,667 165,000 AAA/Aaa Sacramento California Municipal Util- ity District, 5.5%, 2/1/11 170,108 3,600,000 AAA/Aaa Saugus California University School District, 0.0%, 8/1/23* 1,682,568
16 The accompanying notes are an integral part of these financial statements. Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
S&P/ Floating Moody's Principal Rate (b) Ratings Amount (unaudited) (unaudited) Value California - (continued) $ 1,210,000 AAA/Aaa Saugus California University School District, 0.0%, 8/1/24* $ 533,985 5,000,000 BBB/Baa3 Tobacco Securitization Authority Southern California Tobacco Settle- ment, 5.125%, 6/1/46 4,215,850 3,000,000 AAA/Aaa West VY Mission Community College California, 5.0%, 8/1/30 3,136,140 ------------ $ 67,082,438 ------------ Colorado - 1.6% 2,500,000 A-/A3 Colorado Health Facilities Revenue, 5.25%, 6/1/36 $ 2,449,275 10,000 NR/A2 Colorado Housing Finance Authority, Series A-3, 7.0%, 11/1/16 10,314 15,000 NR/Aa2 Colorado Housing Finance Authority, Series B-2, 7.45%, 11/1/27 15,250 70,000 NR/Aa2 Colorado Housing Finance Authority, Series B-3, 6.55%, 5/1/25 71,720 3,575,000 AAA/Aaa Douglas County School District Regional, 7.0%, 12/15/13 4,259,470 10,000,000 AAA/Aaa E-470 Public Highway Authority Colorado, 0.0%, 9/1/37* 2,052,300 ------------ $ 8,858,329 ------------ Connecticut - 2.0% 1,000,000 AA/NR Connecticut State Health & Education, 5.5%, 7/1/17 $ 1,044,780 10,000,000 AAA/Aaa Connecticut State Health & Educational, 5.0%, 7/1/42 10,400,100 ------------ $ 11,444,880 ------------ District of Columbia - 1.6% 8,825,000 BBB/Baa3 District of Columbia Tobacco Settlement Financing Corp., 6.75%, 5/15/40 $ 9,014,296 ------------ $ 9,014,296 ------------
The accompanying notes are an integral part of these financial statements. 17 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/07 (continued) - --------------------------------------------------------------------------------
S&P/ Floating Moody's Principal Rate (b) Ratings Amount (unaudited) (unaudited) Value Florida - 1.8% $ 1,000,000 AAA/Aaa Dade County Florida General, 7.7%, 10/1/12 $ 1,178,660 500,000 BBB+/NR Halifax Hospital Medical Center Florida, 5.375%, 6/1/46 476,175 5,435,000 BB/NR Lee County Florida Industrial Develop- ment Authority, 4.75%, 6/15/14 5,255,917 1,535,000 NR/A2 Marion County Florida Hospital District Development, 5.0%, 10/1/16 1,595,540 2,000,000 NR/NR Sarasota County Florida Health, 5.75%, 7/1/45 1,806,900 ------------ $ 10,313,192 ------------ Georgia - 1.7% 10,000,000 NR/A2 Houston County Georgia Hospital Authority Revenue, 5.0%, 10/1/42 $ 9,431,400 ------------ $ 9,431,400 ------------ Illinois - 5.5% 495,000 CCC/NR Chicago Illinois Tax Increment, 5.0%, 11/15/10 $ 487,060 4,000,000 NR/CAA1 Chicago Illinois O'Hare International Airport, 5.5%, 12/1/30 3,424,920 170,000 NR/Aaa Chicago Illinois Single Family Mortgage, 6.45%, 9/1/29 172,424 10,775,000 NR/Baa3 Illinois Finance Authority, 5.0%, 5/1/25 9,995,213 5,000,000 NR/Baa1 Illinois Finance Authority, 5.0%, 4/1/31 4,692,450 5,000,000 NR/Baa1 Illinois Finance Authority, 5.0%, 4/1/36 4,609,600 1,145,000 A+/A1 Illinois Housing Development Authority Revenue Multi-Family Housing, 7.0%, 7/1/23 1,470,695 20,000,000 Aaa/AAA Metropolitan Pier & Exposition Authority Illinois Dedicated State Tax, 0.0%, 6/15/39* 4,295,800
18 The accompanying notes are an integral part of these financial statements. Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
S&P/ Floating Moody's Principal Rate (b) Ratings Amount (unaudited) (unaudited) Value Illinois - (continued) $ 3,000,000 AAA/Aaa Will County Illinois Forest Preservation District, 0.0%, 12/1/18* $ 1,855,500 ------------ $ 31,003,662 ------------ Indiana - 6.3% 15,000,000 AAA/Aaa Hobart Indiana Building Corp., 6.5%, 1/15/29 $ 18,151,050 5,000,000 A+/A2 Indiana Health & Educational Facility Authority, 5.0%, 2/15/36 4,719,000 5,000,000 A+/A2 Indiana Health & Educational Facility Authority, 5.0%, 2/15/39 4,678,450 1,250,000 BBB+/Ba1 Indiana State Development Finance, 5.75%, 10/1/11 1,259,075 1,400,000 AA/NR Indianapolis Local Public Improvement Board Board Revenue, 6.75%, 2/1/14 1,569,498 3,400,000 AA/Aa2 Indianapolis Local Public Improvement Board Revenue, 6.0%, 1/10/20 3,927,272 1,000,000 AA/A2 Lawrence Township Metropolitan School District Revenue, 6.75%, 7/5/13 1,153,490 ------------ $ 35,457,835 ------------ Kentucky - 0.4% 165,000 NR/NR Kentucky Economic Development Finance, 6.25%, 10/1/12 $ 179,695 335,000 NR/NR Kentucky Economic Development Finance, 6.25%, 10/1/12 353,475 2,000,000 A-/NR Louisville & Jefferson County Kentucky Metro Government Health Systems Revenue, 5.25%, 10/1/36 1,939,240 ------------ $ 2,472,410 ------------
The accompanying notes are an integral part of these financial statements. 19 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/07 (continued) - --------------------------------------------------------------------------------
S&P/ Floating Moody's Principal Rate (b) Ratings Amount (unaudited) (unaudited) Value Louisiana - 3.8% $ 425,000 NR/NR Louisiana Public Facilities Authority Revenue, 6.25%, 10/1/11 $ 421,906 15,000,000 NR/A3 Louisiana Public Facilities Authority Revenue, 5.5%, 5/15/47 14,698,500 1,085,000 AAA/Aaa Louisiana Local Government Environ- ment Community, 5.25%, 12/1/18 1,188,878 5,000,000 BBB+/Baa1 St. John Baptist Parish Louisiana Revenue, 5.125%, 6/1/37 4,787,600 ------------ $ 21,096,884 ------------ Massachusetts - 13.4% 16,070,000 BBB/NR Massachusetts Bay Transportation Authority, 4.0%, 7/1/33 $ 14,528,244 4,990,000 BBB/NR Massachusetts Bay Transportation Authority, 5.0%, 7/1/31 5,425,777 8,170,000 A+/NR Massachusetts State Dedicated Tax, 5.5%, 1/1/29 9,296,480 750,000 NR/NR Massachusetts State Development Finance Agency, 4.5%, 9/1/36 687,720 1,680,000 AAA/Aaa Massachusetts State Development Finance Agency, 5.25%, 10/1/29 1,604,400 3,320,000 AAA/Aa2 Massachusetts State Development Finance Agency, 5.25%, 10/1/37 3,102,341 16,070,000 AAA/Aaa Noblesville Independent Revenue, 5.25%, 2/1/30 6,837,868 5,500,000 BBB/Baa2 Massachusetts State Development Finance Agency, 5.75%, 1/1/42 6,609,130 2,635,000 BBB/Baa3 Massachusetts State Development Finance Agency, 6.25%, 10/15/17 2,545,041 1,500,000 BBB/Baa2 Massachusetts State Development Finance Agency, 6.375%, 7/1/23 1,742,805 2,000,000 A/NR Massachusetts State Health & Educational Facilities Authority, 6.625%, 7/1/31 2,070,440 2,500,000 BBB-/NR Massachusetts State Health & Educational Facilities Authority, 5.5%, 7/1/40 2,322,175
20 The accompanying notes are an integral part of these financial statements. Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
S&P/ Floating Moody's Principal Rate (b) Ratings Amount (unaudited) (unaudited) Value Massachusetts - (continued) $ 5,090,000 BBB/Baa3 Massachusetts State Health & Educational Facilities Authority, 5.75%, 7/1/32 $ 5,569,173 200,000 BBB+/NR Massachusetts State Health & Educational Facilities Authority, 5.75%, 7/1/32 211,990 40,000 AAA/Aaa Massachusetts State Health & Educational Facilities Authority, 6.0%, 7/1/18 42,856 1,250,000 AA/Aa2 Massachusetts State Health & Educational Facilities Authority, 6.25% 7/1/22 1,283,263 2,000,000 AAA/Aaa Massachusetts State Health & Educational Facilities Authority, 6.5%, 7/1/21 2,086,440 1,000,000 A-/A3 Massachusetts State Health & Educational Facilities Authority, 6.75%, 7/1/16 1,062,810 1,145,000 AA/Aa2 Massachusetts State Health & Educational Facilities Authority, 6.25%, 10/1/31 1,187,296 6,215,000 AA/Aa2 Massachusetts State Health and Educational Facilities Authority, 5.25%, 7/1/33 7,082,117 ------------ $ 75,298,366 ------------ Maryland - 0.8% 4,600,000 NR/NR Maryland Health Department, 4.75% 1/1/13 $ 4,399,670 ------------ $ 4,399,670 ------------ Maine - 0.1% 300,000 AAA/Aaa Maine Municipal Bond Bank, 5.0%, 11/1/09 $ 307,866 ------------ $ 307,866 ------------
The accompanying notes are an integral part of these financial statements. 21 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/07 (continued) - --------------------------------------------------------------------------------
S&P/ Floating Moody's Principal Rate (b) Ratings Amount (unaudited) (unaudited) Value Michigan - 1.3% $ 1,500,000 BBB-/NR John Tolfree Health System, 6.0%, 9/15/23 $ 1,520,355 400,000 AAA/Aaa Michigan State Trunk Line, 5.5%, 11/1/10 425,572 4,000,000 BBB-/Ba1 Michigan State Hospital Finance Authority, 6.0%, 2/1/24 4,001,280 1,500,000 AAA/Aaa Southfield Michigan Public Schools, 4.5%, 5/1/27 1,494,165 ------------ $ 7,441,372 ------------ Minnesota - 1.2% 5,000,000 A/A2 Becker Minnesota Pollution Control Revenue Northern States Power "A" Conversions, 8.5%, 4/1/30 $ 5,876,400 1,000,000 NR/Baa3 Laurentian Energy Authority Minnesota Cogeneration, 5.0%, 12/1/15 1,013,660 ------------ $ 6,890,060 ------------ Missouri - 0.1% 295,000 AAA/NR Missouri State Housing Development Common Mortgage Revenue, Single Family, Series B-2, 6.4%, 3/1/29 $ 303,349 ------------ $ 303,349 ------------ Mississippi - 1.5% 1,800,000 NR/NR Columbus Mississippi Industrial Development Revenue, 5.9%, 12/1/11 $ 1,831,302 6,000,000 BBB/Baa2 Lowndes County Mississippi Solid Waste Disposal & Pollution Control Revenue, 6.8%, 4/1/22 6,603,360 ------------ $ 8,434,662 ------------ Montana - 0.1% 500,000 BBB+/Baa1 Forsyth Pollution Control Revenue, 5.2%, 5/1/33 $ 505,890 ------------ $ 505,890 ------------
22 The accompanying notes are an integral part of these financial statements. Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
S&P/ Floating Moody's Principal Rate (b) Ratings Amount (unaudited) (unaudited) Value North Carolina - 0.8% $ 2,250,000 NR/NR North Carolina Capital Facilities Finance, 4.5%, 10/1/26 $ 1,976,670 2,250,000 AA+/Aa1 University North Carolina Revenues, 5.0%, 12/1/36 2,357,460 ------------ $ 4,334,130 ------------ North Dakota - 0.2% 280,000 NR/Aa1 North Dakota State Housing Finance Agency Revenue, 5.8%, 7/1/18 $ 285,519 575,000 NR/Aa1 North Dakota State Housing Finance Agency Revenue, 6.0%, 7/1/20 582,055 ------------ $ 867,574 ------------ Nebraska - 0.9% 1,648,869 NR/NR Energy America Nebraska Natural Gas Revenue, 5.45%, 4/15/08 $ 1,642,043 1,325,000 AAA/Aaa Municipal Energy Agency, 6.0%, 4/1/08 1,334,514 2,050,000 7.75 AAA/Aaa Nebraska Investment Finance Authority Single Family, Floating Rate Note, 3/1/26 2,092,558 ------------ $ 5,069,115 ------------ New Hampshire - 2.3% 5,000,000 A-/NR New Hampshire Health & Educational Facilities Authority Revenue, 5.0%, 10/1/37 $ 4,601,300 5,000,000 A-/NR New Hampshire Health & Educational Facilities Authority Revenue, 5.0%, 10/1/32 4,663,700 1,250,000 A+/A2 New Hampshire Health & Educational Facilities Authority Revenue, 5.75%, 10/1/31 1,282,425 2,000,000 BBB+/Baa1 New Hampshire Health & Educational Facilities Authority Revenue, 5.75%, 7/1/22 2,059,500 140,000 NR/Aa2 New Hampshire State Housing Finance Authority, 6.125%, 1/1/20 143,333 ------------ $ 12,750,258 ------------
The accompanying notes are an integral part of these financial statements. 23 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/07 (continued) - --------------------------------------------------------------------------------
S&P/ Floating Moody's Principal Rate (b) Ratings Amount (unaudited) (unaudited) Value New Jersey - 4.8% $ 500,000 NR/NR New Jersey Economic Development Authority, 5.3%, 11/1/26 $ 448,720 450,000 NR/NR New Jersey Economic Development Authority, 5.375%, 11/1/36 392,792 5,060,000 B/B3 New Jersey Economic Development Authority Special Facility Revenue, 7.0%, 11/15/30 5,091,170 2,000,000 A+/A2 New Jersey Health Care Facilities Financing Authority, 5.0%, 7/1/24 2,019,580 4,140,000 BBB-/Baa3 New Jersey Health Care Facilities Financing Authority, 5.25%, 7/1/30 3,811,988 1,000,000 AAA/Aaa Tobacco Settlement Financing Corp., New Jersey, 6.25%, 6/1/43 1,137,860 5,215,000 AAA/Aaa Tobacco Settlement Financing Corp., New Jersey, 6.75%, 6/1/39 6,061,812 9,500,000 BBB/Baa3 Tobacco Settlement Financing Corp., 5.0%, 6/1/41 7,922,905 ------------ $ 26,886,827 ------------ Nevada - 1.7% 10,000,000 A-/A3 Reno Nevada Hospital Revenue, 5.25%, 6/1/41 $ 9,619,100 ------------ $ 9,619,100 ------------ New York - 4.0% 1,000,000 NR/Ba2 Albany Individual Development, 6.0%, 7/1/19 $ 1,016,820 400,000 AA-/A1 Metropolitan Transportation Authority New York, 5.5%, 7/1/14 440,532 2,000,000 5.50 AAA/Aa1 New York City Transportation Finance Authority Revenue, Floating Rate Note, 11/1/26 2,154,140 4,400,000 A+/A1 New York State Dorm Authority, 0.0%, 7/1/39* 3,627,668 8,465,000 AAA/Aaa New York State Dorm Authority, 5.0%, 7/1/25 9,038,842
24 The accompanying notes are an integral part of these financial statements. Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
S&P/ Floating Moody's Principal Rate (b) Ratings Amount (unaudited) (unaudited) Value New York - (continued) $ 5,515,000 AAA/Aaa New York State Dorm Authority, 5.25%, 7/1/24 $ 6,122,643 ------------ $ 22,400,645 ------------ Ohio - 0.2% 400,000 AAA/Aaa Ohio State Building Authority Revenue, 5.5%, 10/1/11 $ 430,340 500,000 AA/Aa2 Ohio State Building Authority Revenue, 6.0%, 10/1/08 511,130 ------------ $ 941,470 ------------ Oklahoma - 0.3% 1,530,000 AAA/Aaa Moore Oklahoma General Obligation, 5.75%, 4/1/12 $ 1,637,222 ------------ $ 1,637,222 ------------ Oregon - 0.8% 1,165,000 AAA/Aaa Jackson County School District No. 4, 5.5%, 6/15/17 $ 1,254,752 315,000 BBB/NR Klamath Falls Inter-Community Hospital Authority Revenue, 6.125%, 9/1/22 353,991 185,000 BBB/NR Klamath Falls Inter-Community Hospital Authority Revenue, 6.125%, 9/1/22 194,548 1,000,000 NR/Aaa Portland Urban Development, 5.75%, 6/15/08 1,062,640 1,650,000 AAA/Aaa Wasco County School District, 5.5%, 6/15/19 1,896,939 ------------ $ 4,762,870 ------------ Pennsylvania - 4.4% 4,000,000 BB+/B1 Allentown Pennsylvania Area Hospital Authority, 6.0%, 11/15/16 $ 3,994,240 1,165,000 A-/NR Chester County Pennsylvania Health & Education Faculty, 5.0%, 11/1/19 1,184,898 1,650,000 A-/NR Chester County Pennsylvania Health & Education Faculty, 5.0%, 11/1/31 1,576,889
The accompanying notes are an integral part of these financial statements. 25 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/07 (continued) - --------------------------------------------------------------------------------
S&P/ Floating Moody's Principal Rate (b) Ratings Amount (unaudited) (unaudited) Value Pennsylvania - (continued) $ 1,220,000 A-/NR Chester County Pennsylvania Health & Education Facility, 5.0%, 11/1/20 $ 1,235,567 1,000,000 B/NR Columbia County Pennsylvania Hospital Authority, 5.8%, 6/1/19 918,590 1,000,000 BBB/NR Montgomery County Pennsylvania Industrial, 5.0%, 12/1/24 943,250 1,000,000 BBB/NR Montgomery County Pennsylvania Industrial, 5.0%, 12/1/30 899,230 15,000,000 BBB/Baa3 Philadelphia Pennsylvania Hospital, 5.0%, 7/1/34 13,275,000 500,000 AAA/Aaa Philadelphia Pennsylvania Parking, 4.875%, 9/1/09 513,220 65,000 A/NR Sayre Pennsylvania Health Care Facilities Authority, 5.75%, 12/1/21 67,907 185,000 A/NR Sayre Pennsylvania Health Care Facilities Authority, 5.75%, 12/1/21 203,792 ------------ $ 24,812,583 ------------ Puerto Rico - 1.0% 5,000,000 AAA/Aaa Puerto Rico Electric Power, 0.0%, 7/1/17* $ 3,322,150 3,305,000 AAA/Aaa Puerto Rico Electric Power, 0.0%, 7/1/17* 2,195,941 ------------ $ 5,518,091 ------------ Rhode Island - 0.5% 250,000 A-/A3 Rhode Island State Health & Education Facilities Authorities, 6.5%, 8/15/32 $ 284,025 415,000 A-/A3 Rhode Island State Health & Educational Building Corp., 6.375%, 8/15/21 469,842 65,000 A-/A3 Rhode Island State Health & Educational Building Corp., 6.375%, 8/15/21 69,150
26 The accompanying notes are an integral part of these financial statements. Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
S&P/ Floating Moody's Principal Rate (b) Ratings Amount (unaudited) (unaudited) Value Rhode Island - (continued) $ 2,100,000 BBB/Baa3 Tobacco Settlement Financing Corp., 6.25%, 6/1/42 $ 2,105,460 ------------ $ 2,928,477 ------------ South Carolina - 0.6% 500,000 BBB+/Baa1 SC Jobs Economic Development Authority, 6.0%, 8/1/13 $ 530,315 95,000 NR/Aa2 South Carolina Housing Finance & Development Authority Mortgage Revenue, Series A-1, 6.2%, 7/1/09 95,168 440,000 BBB+/Baa1 South Carolina Jobs Economic, 6.875%, 8/1/27 515,068 2,500,000 BBB/Baa3 Tobacco Settlement Revenue Management, 6.375%, 5/15/30 2,504,200 ------------ $ 3,644,751 ------------ South Dakota - 0.0% 65,000 NR/Aaa South Dakota Conservancy District Revenue, 5.625%, 8/1/17 $ 65,129 ------------ $ 65,129 ------------ Tennessee - 3.5% 1,570,000 NR/Aaa Clarksville Tennessee Water and Gas, 5.15%, 2/1/14 $ 1,716,811 1,000,000 BBB+/Baa1 Johnson City Tennessee Health & Education, 5.5%, 7/1/36 978,880 1,000,000 NR/Ba2 Knox County Health Facility, 6.375%, 4/15/22 1,020,750 1,500,000 NR/Ba2 Knox County Health Facility, 6.5%, 4/15/31 1,532,700 750,000 AA/Aa2 Knoxville County Tennessee Series A, 5.0%, 5/1/13 753,000 750,000 AAA/Aaa Knoxville County Tennessee Health Education & Housing, 7.25%, 1/1/08 750,000 1,000,000 AA/Aa3 Metro Government Nashville/ Davidson County Tennessee, 5.5%, 5/15/12 1,088,550
The accompanying notes are an integral part of these financial statements. 27 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/07 (continued) - --------------------------------------------------------------------------------
S&P/ Floating Moody's Principal Rate (b) Ratings Amount (unaudited) (unaudited) Value Tennessee - (continued) $ 1,000,000 AA/Aa3 Metro Government Nashville/ Davidson County Tennessee, 5.5%, 5/15/14 $ 1,115,420 1,500,000 AA/Aa2 Metro Government Nashville/ Davidson County Tennessee, 6.0%, 12/1/09 1,583,160 1,000,000 AAA/Aaa Metro Government Nashville/ Davidson County Tennessee, 7.5%, 11/15/12 1,170,090 1,000,000 NR/Aaa Tennessee County Tennessee General, 5.5%, 4/1/19 1,051,270 5,960,000 NR/NR Sumner Court Tennessee Health Educational, 5.5%, 11/1/46 5,577,070 550,000 NR/Aa1 Williamson County Tennessee General, 5.1%, 3/1/14 572,622 500,000 NR/Aa1 Williamson County Tennessee General, 6.0%, 3/1/08 502,480 ------------ $ 19,412,803 ------------ Texas - 8.2% 3,000,000 CCC/CAA1 Brazos River Authority Pollution Control Revenue, 7.7%, 4/1/33 $ 3,102,810 750,000 AAA/Aaa Carroll Independent School District, 6.75%, 8/15/21 951,308 850,000 AAA/Aaa Carroll Independent School District, 6.75%, 8/15/22 1,086,062 13,885,000 CCC+/CAA1 Dallas-Fort Worth Texas International Airport, 6.0%, 11/1/14 13,233,377 1,000,000 A/A2 Harris County Health Facilities Development Authority, 6.375%, 6/1/29 1,107,150 10,000 AA+/Aa1 San Antonio Texas General, 4.75%, 2/1/19 10,183 505,000 AA+/Aa1 San Antonio Texas General, 4.75%, 2/1/19 510,994 300,000 AAA/Aaa San Felipe Del Rio Texas Conservation, 5.0%, 8/15/12 314,163
28 The accompanying notes are an integral part of these financial statements. Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
S&P/ Floating Moody's Principal Rate (b) Ratings Amount (unaudited) (unaudited) Value Texas - (continued) $ 2,310,000 AAA/Aaa Texas Clear Creek Independent School District General Obligation, 0.0%, 2/1/10* $ 2,156,408 2,050,000 NR/Aaa Texas Keller Independent School District General Obligation, 0.0%, 8/15/10* 1,879,461 5,500,000 AAA/Aaa Texas Public Finance Authority Building Revenue, 0.0%, 2/1/08* 5,485,700 2,750,000 AAA/Aaa Texas Public Finance Authority Building Revenue, 0.0%, 2/1/10* 2,566,108 3,500,000 6.20 AA/Aa1 Texas State, Floating Rate Note, 9/30/11 4,187,820 1,000,000 AAA/Aaa Texas Water Development Board, 5.0%, 7/15/27 1,049,490 1,335,000 AAA/Aaa Texas Water Development Board 5.0%, 7/15/26 1,404,260 500,000 AAA/Aaa Tomball Texas Independent Schools, 5.0%, 2/15/11 526,600 3,500,000 BBB+/NR Weslaco Health Facilities, 6.25%, 6/1/25 3,645,985 2,000,000 BBB+/NR Weslaco Health Facilities, 6.25%, 6/1/32 2,065,900 980,000 NR/Aaa Whitehouse Texas Independent School District, 4.8%, 2/15/12 982,107 20,000 NR/Aaa Whitehouse Texas Independent School District, 4.8%, 2/15/12 20,038 ------------ $ 46,285,924 ------------ Utah - 0.1% 500,000 NR/NR Utah County Utah Charter School Revenue, 5.35%, 7/15/17 $ 494,115 ------------ $ 494,115 ------------ Virginia - 0.6% 2,500,000 7.32 AAA/Aaa Henrico County Virginia, Floating Rate Note, 8/23/27 $ 3,296,600 ------------ $ 3,296,600 ------------
The accompanying notes are an integral part of these financial statements. 29 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 12/31/07 (continued) - --------------------------------------------------------------------------------
S&P/ Floating Moody's Principal Rate (b) Ratings Amount (unaudited) (unaudited) Value Washington - 2.8% $ 1,000,000 NR/Baa2 Skagit County Washington Public Health, 5.75%, 12/1/32 $ 979,210 1,095,000 AAA/Aaa King County Washington Public Hospital District, 5.25%, 12/1/13 1,126,427 300,000 AAA/Aaa King County Washington School District No. 415, 5.5%, 6/1/13 331,575 1,000,000 NR/Aaa Pierce County Washington School District, 4.0%, 12/1/09 1,017,350 500,000 AAA/Aaa Renton Washington Water & Sewer, 4.4%, 12/1/15 525,830 2,250,000 AAA/Aaa Washington Mukilted School, 5.7%, 12/1/11+ 2,455,802 2,500,000 NR/Aaa Snohomish County Public Utility District Revenue, 6.8%, 1/1/20 3,051,975 3,500,000 BBB/Baa3 Tobacco Settlement Authority Washington, 6.625%, 6/1/32 3,570,525 2,500,000 NR/NR Washington State Housing, 5.25%, 1/1/17 2,449,150 ------------ $ 15,507,844 ------------ Wisconsin - 0.3% 1,430,000 AAA/Aaa Adams-Friendship School District, 6.5%, 4/1/16 $ 1,724,194 ------------ $ 1,724,194 ------------ TOTAL MUNICIPAL BONDS (Cost $557,191,852) $560,731,963 ------------ TOTAL INVESTMENT IN SECURITIES - 100.2% (Cost $562,031,318) (a)(c) $562,961,511 ------------ OTHER ASSETS AND LIABILITIES - (0.2)% $ (1,238,466) ------------ TOTAL NET ASSETS - 100.0% $561,723,045 ============
30 The accompanying notes are an integral part of these financial statements. Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- * Pre-refunded bonds have been collateralized by U.S. Treasury securities which are held in escrow and used to pay principal and interest on the tax-exempt issue and to retire the bonds in full at the earliest refunding date. NR Not rated. + Escrowed to maturity in U.S. Government Securities (a) The concentration of investments by type of obligation/market sector is as follows (unaudited): Insured FGIC 10.7% MBIA 8.2 AmBac 5.4 FSA 3.0 ACA 0.1 ---- 27.4 Escrowed in U.S. Government Securities 4.4 General Obligation 3.7 Revenue Bonds: Health Revenue 26.9 Special Revenue 10.4 Various Revenues 8.9 Pollution Control Revenue 2.9 Transportation Revenue 3.1 Power 0.7 Housing 1.1 Education Revenue 10.1 Water and Sewer 0.4 ----- 100.0% =====
(b) Debt obligation with a variable interest rate. Rate shown is rate at period end (c) At December 31, 2007, the net unrealized gain on investments based on cost for federal income tax purposes of $562,310,165 was as follows: Aggregate gross unrealized gain for all investments in which there is an excess of value over tax cost $19,108,672 Aggregate gross unrealized loss for all investments in which there is an excess of tax cost over value (18,457,326) ----------- Net unrealized gain $ 651,346 ===========
Purchase and sales of securities (excluding temporary cash investments) for the year ended December 31, 2007 aggregated $426,381,692 and $470,722,912, respectively. The accompanying notes are an integral part of these financial statements. 31 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 12/31/07 - -------------------------------------------------------------------------------- ASSETS: Investment in securities, at value (cost $562,031,318) $562,961,511 Receivables - Investment securities sold 46,132 Fund shares sold 1,380,533 Interest 7,194,031 Other 51,920 ------------ Total assets $571,634,127 ------------ LIABILITIES: Payables - Investment securities purchased $ 2,442,445 Fund shares repurchased 1,529,115 Dividends 1,185,830 Due to bank 4,640,780 Due to affiliates 62,048 Accrued expenses 50,864 ------------ Total liabilities $ 9,911,082 ------------ NET ASSETS: Paid-in capital $570,120,050 Undistributed net investment income 284,485 Accumulated net realized loss on investments (9,611,683) Net unrealized gain on investments 930,193 ------------ Total net assets $561,723,045 ============ NET ASSET VALUE PER SHARE: (No par value, unlimited number of shares authorized) Class A (based on $313,705,643/28,179,852 shares) $ 11.13 ============ Class B (based on $14,622,470/1,324,866 shares) $ 11.04 ============ Class C (based on $13,580,501/1,239,065 shares) $ 10.96 ============ Class Y (based on $219,814,431/19,858,193 shares) $ 11.07 ============ MAXIMUM OFFERING PRICE: Class A ($11.13 [divided by] 95.5%) $ 11.65 ============
32 The accompanying notes are an integral part of these financial statements. Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- For the Year Ended 12/31/07 INVESTMENT INCOME: Interest $ 30,943,440 ------------ EXPENSES: Management fees $2,985,435 Transfer agent fees and expenses Class A 233,111 Class B 19,721 Class C 10,786 Class Y 3,597 Distribution fees Class A 833,565 Class B 161,084 Class C 136,632 Administrative reimbursements 142,272 Custodian fees 21,196 Registration fees 70,573 Professional fees 66,468 Printing expense 21,590 Interest expense 4,392 Fees and expenses of nonaffiliated trustees 11,476 Miscellaneous 37,032 ---------- Total expenses $ 4,758,930 Less fees paid indirectly (12,492) ------------ Net expenses $ 4,746,438 ------------ Net investment income $ 26,197,002 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments $ 1,855,800 ------------ Change in net unrealized gain on investments $(35,099,680) ------------ Net loss on investments $(33,243,880) ------------ Net decrease in net assets resulting from operations $ (7,046,878) ============
The accompanying notes are an integral part of these financial statements. 33 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- For the Years Ended 12/31/07 and 12/31/06, respectively
Year Ended Year Ended 12/31/07 12/31/06 FROM OPERATIONS: Net investment income $ 26,197,002 $ 27,174,024 Net realized gain on investments 1,855,800 1,010,751 Change in net unrealized gain (loss) on investments (35,099,680) 5,927,066 -------------- -------------- Net increase (decrease) in net assets resulting from operations $ (7,046,878) $ 34,111,841 -------------- -------------- DISTRIBUTIONS TO SHAREOWNERS: Net investment income: Class A ($0.48 and $0.47 per share, respectively) $ (14,126,381) $ (12,940,338) Class B ($0.38 and $0.37 per share, respectively) (545,848) (681,571) Class C ($0.39 and $0.38 per share, respectively) (467,609) (447,945) Investor Class ($0.00 and $0.48 per share, respectively) - (343,022) Class Y ($0.51 and $0.51 per share, respectively) (11,927,188) (12,697,789) -------------- -------------- Total distributions to shareowners $ (27,067,026) $ (27,110,665) -------------- -------------- FROM FUND SHARE TRANSACTIONS: Net proceeds from sale of shares $ 122,757,979 $ 119,982,240 Reinvestment of distributions 11,216,220 10,962,474 Cost of shares repurchased (195,187,071) (143,799,330) -------------- -------------- Net decrease in net assets resulting from Fund share transactions $ (61,212,872) $ (12,854,616) -------------- -------------- Net decrease in net assets $ (95,326,776) $ (5,853,440) NET ASSETS: Beginning of year 657,049,821 662,903,261 -------------- -------------- End of year $ 561,723,045 $ 657,049,821 ============== ============== Undistributed net investment income $ 284,485 $ 277,072 ============== ==============
34 The accompanying notes are an integral part of these financial statements. Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
'07 Shares '07 Amount '06 Shares '06 Amount CLASS A Shares sold 3,744,108 $ 42,584,681 5,186,888 $ 60,516,604 Reinvestment of distributions 817,381 9,346,227 791,333 9,202,860 Conversion from Investor class shares - - 700,263 8,270,107 Less shares repurchased (6,143,218) (69,857,173) (4,099,369) (47,663,271) ---------- -------------- ---------- ------------- Net increase (decrease) (1,581,729) $ (17,926,265) 2,579,115 $ 30,326,300 ========== ============== ========== ============= CLASS B Shares sold 232,076 $ 2,626,046 363,813 $ 4,159,710 Reinvestment of distributions 26,073 295,815 33,526 386,150 Less shares repurchased (450,067) (5,110,697) (788,524) (9,093,116) ---------- -------------- ---------- ------------- Net decrease (191,918) $ (2,188,836) (391,185) $ (4,547,256) ========== ============== ========== ============= CLASS C Shares sold 444,452 $ 4,991,606 594,551 $ 6,783,020 Reinvestment of distributions 21,984 247,272 20,403 233,660 Less shares repurchased (346,219) (3,863,090) (549,388) (6,309,610) ---------- -------------- ---------- ------------- Net increase 120,217 $ 1,375,788 65,566 $ 707,070 ========== ============== ========== ============= INVESTOR CLASS Shares sold - $ - - $ - Reinvestment of distributions - - 25,352 294,474 Conversion to Class A shares - - (700,155) (8,270,107) Less shares repurchased - - (58,922) (685,604) ---------- -------------- ---------- ------------- Net decrease - $ - (733,725) $ (8,661,237) ========== ============== ========== ============= CLASS Y Shares sold 6,396,471 $ 72,555,646 4,191,432 $ 48,522,906 Reinvestment of distributions 117,279 1,326,906 73,020 845,330 Less shares repurchased (10,334,089) (116,356,111) (6,922,861) (80,047,729) ----------- -------------- ---------- ------------- Net decrease (3,820,339) $ (42,473,559) (2,658,409) $ (30,679,493) ========== ============== ========== =============
The accompanying notes are an integral part of these financial statements. 35 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 CLASS A Net asset value, beginning of period $ 11.75 $ 11.62 $ 11.67 $ 11.70 $ 11.61 ------- -------- -------- -------- -------- Increase (decrease) from investment operations: Net investment income $ 0.46 $ 0.47 $ 0.51 $ 0.56 $ 0.56 Net realized and unrealized gain (loss) on investments (0.60) 0.13 (0.04) (0.02) 0.09 ------- -------- -------- -------- -------- Net increase (decrease) from investment operations $ (0.14) $ 0.60 $ 0.47 $ 0.54 $ 0.65 Distributions to shareowners: Net investment income (0.48) (0.47) (0.52) (0.57) (0.56) ------- -------- -------- -------- -------- Net increase (decrease) in net asset value $ (0.62) $ 0.13 $ (0.05) $ (0.03) $ 0.09 ------- -------- -------- -------- -------- Net asset value, end of period $ 11.13 $ 11.75 $ 11.62 $ 11.67 $ 11.70 ======= ======== ======== ======== ======== Total return* (1.23)% 5.31% 4.05% 4.75% 5.80% Ratio of net expenses to average net assets+ 0.84% 0.86% 0.91% 0.91% 0.93% Ratio of net investment income to average net assets+ 4.05% 4.08% 4.36% 4.88% 4.88% Portfolio turnover rate 68% 66% 26% 39% 80% Net assets, end of period (in thousands) $313,706 $349,683 $315,855 $307,463 $326,173 Ratios with reductions for fees paid indirectly: Net expenses 0.84% 0.86% 0.91% 0.91% 0.93% Net investment income 4.05% 4.08% 4.36% 4.88% 4.88%
* 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. + Ratio with no reduction for fees paid indirectly. 36 The accompanying notes are an integral part of these financial statements. Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 CLASS B Net asset value, beginning of period $ 11.65 $ 11.51 $ 11.57 $ 11.59 $ 11.51 ------- ------- ------- ------- ------- Increase (decrease) from investment operations: Net investment income $ 0.36 $ 0.39 $ 0.41 $ 0.48 $ 0.46 Net realized and unrealized gain (loss) on investments (0.59) 0.12 (0.05) (0.02) 0.09 ------- ------- ------- ------- ------- Net increase (decrease) from investment operations $ (0.23) $ 0.51 $ 0.36 $ 0.46 $ 0.55 Distributions to shareowners: Net investment income (0.38) (0.37) (0.42) (0.48) (0.47) ------- ------- ------- ------- ------- Net increase (decrease) in net asset value $ (0.61) $ 0.14 $ (0.06) $ (0.02) $ 0.08 ------- ------- ------- ------- ------- Net asset value, end of period $ 11.04 $ 11.65 $ 11.51 $ 11.57 $ 11.59 ======= ======= ======= ======= ======= Total return* (1.97)% 4.54% 3.16% 4.07% 4.98% Ratio of net expenses to average net assets+ 1.69% 1.62% 1.72% 1.67% 1.70% Ratio of net investment income to average net assets+ 3.21% 3.33% 3.51% 4.12% 4.10% Portfolio turnover rate 68% 66% 26% 39% 80% Net assets, end of period (in thousands) $14,622 $17,667 $21,962 $17,285 $20,363 Ratios with reduction for fees paid indirectly: Net expenses 1.69% 1.62% 1.72% 1.67% 1.70% Net investment income 3.21% 3.33% 3.51% 4.12% 4.10%
* 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. + Ratio with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 37 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 CLASS C Net asset value, beginning of period $ 11.57 $ 11.44 $ 11.49 $ 11.52 $ 11.44 ------- ------- ------- ------- ------- Increase (decrease) from investment operations: Net investment income $ 0.37 $ 0.38 $ 0.41 $ 0.47 $ 0.48 Net realized and unrealized gain (loss) on investments (0.59) 0.13 (0.04) (0.02) 0.08 ------- ------- ------- ------- ------- Net increase (decrease) from investment operations $ (0.22) $ 0.51 $ 0.37 $ 0.45 $ 0.56 Distributions to shareowners: Net investment income (0.39) (0.38) (0.42) (0.48) (0.48) ------- ------- ------- ------- ------- Net increase (decrease) in net asset value $ (0.61) $ 0.13 $ (0.05) $ (0.03) $ 0.08 ------- ------- ------- ------- ------- Net asset value, end of period $ 10.96 $ 11.57 $ 11.44 $ 11.49 $ 11.52 ======= ======= ======= ======= ======= Total return* (1.97)% 4.57% 3.30% 4.02% 5.04% Ratio of net expenses to average net assets+ 1.60% 1.61% 1.64% 1.64% 1.66% Ratio of net investment income to average net assets+ 3.29% 3.33% 3.63% 4.15% 4.11% Portfolio turnover rate 68% 66% 26% 39% 80% Net assets, end of period (in thousands) $13,581 $12,941 $12,054 $12,577 $11,266 Ratios with reduction for fees paid indirectly: Net expenses 1.60% 1.61% 1.64% 1.64% 1.66% Net investment income 3.29% 3.33% 3.63% 4.15% 4.11%
* 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. + Ratio with no reduction for fees paid indirectly. 38 The accompanying notes are an integral part of these financial statements. Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 CLASS Y Net asset value, beginning of period $ 11.69 $ 11.56 $ 11.61 $ 11.64 $ 11.56 ------- -------- -------- ------- ------- Increase (decrease) from investment operations: Net investment income $ 0.49 $ 0.51 $ 0.54 $ 0.57 $ 0.62 Net realized and unrealized gain (loss) on investments (0.60) 0.13 (0.04) 0.01 0.07 ------- -------- -------- ------- ------- Net increase (decrease) from investment operations $ (0.11) $ 0.64 $ 0.50 $ 0.58 $ 0.69 Distributions to shareowners: Net investment income (0.51) (0.51) (0.55) (0.61) (0.61) ------- -------- -------- ------- ------- Net increase (decrease) in net asset value $ (0.62) $ 0.13 $ (0.05) $ (0.03) $ 0.08 ------- -------- -------- ------- ------- Net asset value, end of period $ 11.07 $ 11.69 $ 11.56 $ 11.61 $ 11.64 ======= ======== ======== ======= ======= Total return* (0.94)% 5.69% 4.40% 5.14% 6.21% Ratio of net expenses to average net assets+ 0.54% 0.52% 0.54% 0.55% 0.57% Ratio of net investment income to average net assets+ 4.35% 4.42% 4.22% 5.26% 5.21% Portfolio turnover rate 68% 66% 26% 39% 80% Net assets, end of period (in thousands) $219,814 $276,760 $304,507 $ 393 $ 1,387 Ratios with reduction for fees paid indirectly: Net expenses 0.54% 0.52% 0.54% 0.55% 0.57% Net investment income 4.35% 4.42% 4.22% 5.26% 5.21%
* 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. + Ratios with no reduction for fees paid indirectly. The accompanying notes are an integral part of these financial statements. 39 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/07 - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies Pioneer Tax Free Income Fund (the Fund) is a Delaware statutory trust registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The investment objective of the Fund is to seek as high a level of current income exempt from federal income taxes, as possible consistent with the preservation of capital. The Fund offers four classes of shares designated as Class A, Class B, Class C, and Class Y shares. As planned on December 10, 2006, Investor Class shares converted to Class A shares. Each class of shares represents an interest in the same portfolio of investments of the Fund and have equal rights to voting, redemptions, dividends and liquidations, except that each class of shares can bear different transfer agent and distribution fees and has exclusive voting rights with respect to the distribution plans that have been adopted by Class A, Class B and Class C shareowners, respectively. There is no distribution plan for Class Y shares. The Fund's financial statements have been prepared in conformity with U.S. generally accepted accounting principles that require the management of the Fund to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses, and gain or loss on investments during the reporting period. Actual results could differ from those estimates. At times, the Fund's investments may represent industries or industry sectors that are interrelated or have common risks, making it more susceptible to any economic, political, or regulatory developments or other risks affecting those industries and sectors. The Fund's prospectuses contain information regarding the Fund's principal risks. Please refer to those documents when considering the Fund's risks. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements, which are consistent with those policies generally accepted in the investment company industry: 40 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A. Security Valuation Security transactions are recorded as of trade date. The net asset value of the Fund 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. 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 there are no other readily available valuation methods are valued at their fair values as determined by, or under the direction of the Board of Trustees. The Fund also may use the fair value of a security including a non-U.S. security, when the closing market price on the principal exchange where the security is traded no longer reflects the value of the security. At December 31, 2007 there were no securities fair valued. Discount and premium on debt securities are accreted or amortized, respectively, daily into interest income on a yield-to-maturity basis with a corresponding increase or decrease in the cost basis of the security. Interest income is recorded on the accrual basis. Temporary cash investments are valued at cost which approximates market value. 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 Fund'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 tax provision is required. Tax years prior to 2004 are closed (not subject to examination by tax authorities) due to the expiration of statute of limitations; all other tax years are open. The amounts and characterizations of distributions to shareowners for financial reporting purposes are determined in accordance with federal income tax rules. Therefore, the sources of the Fund's distributions may be shown in the accompanying financial statements as either from or in excess of net investment income or net 41 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/07 (continued) - -------------------------------------------------------------------------------- realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. At December 31, 2007, the Fund has reclassified $877,437 to decrease accumulated net investment loss and $877,437 to increase accumulated net realized loss on investments. The reclassification has no impact on the net assets of the Fund and presents the Fund's capital accounts on a tax basis. At December 31, 2007, the Fund had a net capital loss carryforward of $9,300,052 of which the following amounts will expire between 2011 and 2012 if not utilized: $7,713,482 in 2011 and $1,586,570 in 2012. The Fund has elected to defer $32,784 of capital losses recognized between November 1, 2007 and December 31, 2007 to its fiscal year ending December 31, 2008. The tax character of distributions paid during the years ended December 31, 2007 and December 31, 2006 was as follows:
2007 2006 - ----------------------------------------------------------- Distributions paid from: Taxable income $ 562,300 $ 667,510 Tax exempt income 26,504,726 26,443,155 ----------- ----------- Total $27,067,026 $27,110,665 ----------- -----------
The following shows the components of distributable earnings on a federal income tax basis at December 31, 2007:
2007 - ----------------------------------------------------------- Undistributed tax-exempt income $ 284,485 Capital loss carry forward (9,300,052) Post-October loss deferral (32,784) Unrealized appreciation 651,346 ---------- Total $8,397,005 ----------
The difference between book basis and tax-basis unrealized appreciation is attributable to the tax deferral of premium and amortization. 42 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- C. Fund Shares The Fund records sales and repurchases of its shares as of trade date. Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Fund and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A., (UniCredito Italiano), earned $29,608 in underwriting commissions on the sale of Class A shares during the year ended December 31, 2007. D. Class Allocations Income, common expenses and realized and unrealized gains and losses are calculated at the Fund level and allocated daily to each class of shares based on the respective percentage of adjusted net assets at the beginning of the day. Distribution fees are calculated based on the average daily net asset value attributable to Class A, Class B and Class C shares of the Fund, respectively (see Note 4). Class Y shares are not subject to a distribution plan. 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). The Fund declares, as daily dividends, substantially all of its 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 to shareowners are recorded as of the ex-dividend date. Distributions paid by the Fund 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 A, Class B, Class C, and Class Y shares can bear different transfer agent and distribution expense rates. 2. Management Agreement Pioneer Investment Management, Inc., (PIM), a wholly owned indirect subsidiary of UniCredito Italiano, the Fund's investment adviser manages the Fund's portfolio. Management fees are calculated daily at the annual rate of 0.50% of the Fund's average daily net assets up to $250 million; 0.48% of the next $50 million; and 0.45% of the excess over $300 million. For the year ended December 31, 2007, the net management fee was equivalent to 0.47% of average net assets. 43 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 12/31/07 (continued) - -------------------------------------------------------------------------------- In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Fund. Included in "Due to Affiliates" reflected on the Statement of Assets and Liabilities is $22,946 in management fees, administrative costs and certain other services payable to PIM at December 31, 2007. 3. Transfer Agent PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides substantially all transfer agent and shareholder services to the Fund at negotiated rates. Included in "Due to Affiliates" reflected on the Statement of Assets and Liabilities is $30,392 in transfer agent fees payable to PIMSS at December 31, 2007. 4. Distribution Plans The Fund adopted a Plan of Distribution with respect to Class A, Class B and Class C shares (Class A Plan, Class B Plan and Class C Plan) in accordance with Rule 12b-1 of the Investment Company Act of 1940. Currently under the Class A Plan, PFD is reimbursed for distribution expenses in an amount up to 0.25% of the average daily net assets attributable to Class A shares. Pursuant to the Class B Plan and the Class C Plan, the Fund pays PFD 1.00% of the average daily net assets attributable to each class of shares. The fee consists of a 0.25% service fee and a 0.75% distribution fee paid as compensation for personal services and/or account maintenance services or distribution services with regard to Class B and Class C shares. Included in "Due to Affiliates" reflected on the Statements of Assets and Liabilities is $8,710 in distribution fees payable to PFD at December 31, 2007. In addition, redemptions of each class of shares (except Class Y shares) may be subject to a contingent deferred sales charge (CDSC). A CDSC of 1.00% may be imposed on redemptions of certain net asset value purchases of Class A shares within 18 months of purchase. Class B shares that are redeemed within five years of purchase are subject to a CDSC at declining rates beginning at 4.00%, based on the lower of cost or market value of shares being redeemed. Redemptions of Class C shares within one year of purchase are subject to a CDSC of 1.00%. Proceeds from the CDSCs are paid to PFD. For the year ended December 31, 2007, CDSCs in the amount of $41,902 were paid to PFD. 44 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 5. Expense Offset Arrangements The Fund has entered into certain expense offset arrangements with PIMSS resulting in a reduction in the Fund's total expenses due to interest earned on cash held by PIMSS. For the year ended December 31, 2007, the Fund's expenses were reduced by $12,492 under such arrangements. 6. Line of Credit Facility The Fund, along with certain other funds in the Pioneer Family of Funds (the Funds), collectively participate in a $200 million committed, unsecured revolving line of credit facility. Borrowings are used solely for temporary or emergency purposes. The Fund may borrow up to the lesser of $200 million or the limits set by its prospectus for borrowings. Interest on collective borrowings is payable at the Federal Funds Rate plus 1/2% on an annualized basis. The Funds pay an annual commitment fee for this facility. The commitment fee is allocated among such Funds based on their respective borrowing limits. For the year ended December 31, 2007, the Fund had no borrowings under this agreement. 7. New Pronouncement In September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures. ADDITIONAL INFORMATION (unaudited) The percentages of the Fund's ordinary income distributions that are exempt from nonresident alien (NRA) tax withholding resulting from qualified interest income and qualified short term gains were 97.33% and 0%, respectively. 45 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Board of Trustees and Shareowners of Pioneer Tax Free Income Fund: We have audited the accompanying statement of assets and liabilities of Pioneer Tax Free Income Fund (the "Fund"), including the schedule of investments, as of December 31, 2007, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2007, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Tax Free Income Fund at December 31, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 19, 2008 46 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- APPROVAL OF INVESTMENT ADVISORY AGREEMENT - -------------------------------------------------------------------------------- Pioneer Investment Management, Inc. (PIM) serves as the Fund's investment adviser pursuant to an investment advisory agreement between PIM and the Fund. The Trustees of the Fund, as required by law, determine annually whether to continue the investment advisory agreement for the Fund. In connection with their most recent consideration of the investment advisory agreement for the Fund, the Trustees received and reviewed a substantial amount of information provided by PIM in response to requests of the independent Trustees and their independent legal counsel. The independent Trustees met on a number of occasions with PIM and also separately with their independent legal counsel to evaluate and discuss the information provided to them by PIM. At a meeting held on November 13, 2007, based on their evaluation of the information provided by PIM, the Trustees, including the independent Trustees voting separately, unanimously approved the continuation of the investment advisory agreement for another year. In considering the continuation of the investment advisory agreement, the Trustees considered various factors that they determined were relevant, including the factors described below. The Trustees did not identify any single factor as the controlling factor in determining to approve the continuation of the agreement. Nature, Extent and Quality of Services The Trustees considered the nature, extent and quality of the services provided by PIM to the Fund, taking into account the investment objective and strategy of the Fund and the information related to the Fund provided to the Trustees at each quarterly meeting. The Trustees reviewed the terms of the investment advisory agreement. The Trustees also reviewed PIM's investment approach for the Fund and its research process. The Trustees considered the resources of PIM and the personnel of PIM who provide investment management services to the Fund. They also considered PIM's compliance and legal resources and personnel. In addition, the Trustees considered the other services that PIM provides to the Fund under the investment advisory agreement and that, as administrator, PIM is responsible for the administration of the Fund's business and other affairs. It was noted that PIM supervises and monitors the performance of the Fund's service providers and provides the Fund with personnel (including officers) as are necessary 47 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- APPROVAL OF INVESTMENT ADVISORY AGREEMENT (continued) - -------------------------------------------------------------------------------- for the Fund's operations. The Trustees considered the fees paid to PIM for the provision of such services. Based on these considerations, the Trustees concluded that the nature, extent and quality of services provided by PIM to the Fund were satisfactory and consistent with the terms of the investment advisory agreement. Performance of the Fund The Trustees considered the performance results of the Fund over various time periods. They reviewed information comparing the Fund's performance with the average performance of its peer group of funds as classified by Morningstar, Inc. (Morningstar), an independent provider of investment company data, and with the performance of the Fund's benchmark index. The Trustees considered that the Fund's annualized total return was in the fourth quintile of its Morningstar category for the one year period ended June 30, 2007 and in the first quintile of its Morningstar category for the three, five and ten year periods ended June 30, 2007. (In all quintile rankings referred to throughout this disclosure, first quintile is most favorable to the Fund's shareowners. Thus, highest relative performance would be first quintile and lowest relative expenses would also be first quintile.) The Trustees also considered that the twelve-month yield of the Fund, before deduction of expenses, exceeded the yield of its benchmark index for the same period. After discussing the reasons for the Fund's short-term underperformance with PIM, the Trustees concluded that the investment performance of the Fund was satisfactory. Management Fee and Expenses The Trustees considered information on the fees and expenses of the Fund in comparison to the management fees of its peer group of funds as classified by Morningstar and the expense ratios of a peer group of funds selected on the basis of criteria determined by the independent Trustees for this purpose using data provided by Strategic Insight Mutual Fund Research and Consulting, LLC (Strategic Insight), an independent third party. The Trustees considered that the Fund's management fee for the twelve months ended June 30, 2007 was in the second quintile relative to the management fees paid by other funds in its peer group Morningstar category for the comparable period. The Trustees also considered that the Fund's expense ratio for the twelve months ended June 30, 2007 was in the fourth quintile relative to its Strategic 48 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Insight peer group. The Trustees noted PIM's agreement to lower its management fee for assets in excess of $250 million effective January 1, 2008 and considered the impact of the lower fee on the Fund's expense ratio. It was noted that PIM did not currently manage any accounts with an investment objective and strategies that were similar to the Fund. The Trustees concluded that the management fee payable by the Fund to PIM was reasonable in relation to the nature and quality of services provided, taking into account the fees charged by other advisers for managing comparable mutual funds with similar strategies and PIM's agreement to lower the management fee for assets in excess of $250 million. The Trustees also concluded that the Fund's expense ratio was reasonable, taking into account the size of the Fund, the quality of services provided by PIM and the investment performance of the Fund. Profitability The Trustees considered information provided by PIM regarding the profitability of PIM with respect to the advisory services provided by PIM to the Fund, including the methodology used by PIM in allocating certain of its costs to the management of the Fund. The Trustees also considered PIM's profit margin in connection with the overall operation of the Fund. They further reviewed the financial results realized by PIM and its affiliates from non-fund businesses. The Trustees considered PIM's profit margins with respect to the Fund in comparison to the limited industry data available and noted that the profitability of any adviser was affected by numerous factors, including its organizational structure and method for allocating expenses. The Trustees recognized that PIM should be entitled to earn a reasonable level of profit for the services provided to the Fund. The Trustees concluded that PIM's profitability with respect to the management of the Fund was not unreasonable. 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 noted PIM's agreement to lower its management fee for assets in excess of $250 million and to add a breakpoint in the management fee for assets in excess of $750 million. The Trustees 49 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- APPROVAL OF INVESTMENT ADVISORY AGREEMENT (continued) - -------------------------------------------------------------------------------- concluded that, because of the breakpoints in the management fee schedule and the reduced fee rates above certain asset levels, any perceived or potential economies of scale would be shared between PIM and the Fund. Other Benefits The Trustees considered the other benefits to PIM from its relationship with the Fund. The Trustees considered that affiliates of PIM serve as the Fund's transfer agent and distributor. The Trustees considered the receipt by PIM and its affiliates of sales loads and payments under Rule 12b-1 plans in respect of the Fund and the other Pioneer funds. The Trustees further considered the intangible benefits to PIM by virtue of its relationship with the Fund and the other Pioneer funds. The Trustees concluded that the receipt of these benefits was reasonable in the context of the overall relationship between PIM and the Fund. Conclusion After consideration of the factors described above as well as other factors, the Trustees, including all of the independent Trustees, concluded that the terms of the investment advisory agreement between PIM and the Fund, including the fees payable thereunder, were fair and reasonable and voted to approve the proposed continuation of the investment advisory agreement for the Fund. 50 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - -------------------------------------------------------------------------------- Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Independent Registered Public Accounting Firm Ernst & Young LLP Principal Underwriter Pioneer Funds Distributor, Inc. Legal Counsel Bingham McCutchen LLP Shareowner Services and Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Trustees and Officers The Board of Trustees provides broad supervision over the Fund's affairs. The officers of the Fund are responsible for the Fund's operations. The Trustees and officers are listed below, together with their principal occupations during the past five years. Trustees who are interested persons of the Fund within the meaning of the 1940 Act are referred to as Interested Trustees. Trustees who are not interested persons of the Fund are referred to as Independent Trustees. Each of the Trustees (except Mr. Bock) serves as a trustee of each of the 77 U.S. registered investment portfolios for which Pioneer serves as investment adviser (the "Pioneer Funds"). Mr. Bock serves as Trustee of 76 of the 77 Pioneer Funds. The address for all Trustees and all officers of the Fund is 60 State Street, Boston, Massachusetts 02109. The Fund's statement of additional information provides more detailed information regarding the Fund's Trustees and is available upon request, without charge, by calling 1-800-225-6292. Proxy Voting Policies and Procedures of the Fund are available without charge, upon request, by calling our toll free number (1-800-225-6292). Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is publicly available to shareowners at www.pioneerinvestments.com and on the SEC's web site at http://www.sec.gov. 51 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
Positions Held Length of Service Name and Age With the Fund and Term of Office John F. Cogan, Jr. (81)* Chairman of the Trustee since 1993. Board, Trustee and Serves until a succes- President sor trustee is elected or earlier retirement or removal. - -------------------------------------------------------------------------------- Other Directorships Held Name and Age Principal Occupation During Past Five Years by this Trustee John F. Cogan, Jr. (81)* Deputy Chairman and a Director of Pioneer Global Asset None Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Chairman and Director of Pioneer Institutional Asset Management, Inc. (since 2006); Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; Direc- tor of PIOGLOBAL Real Estate Investment Fund (Russia) (until June 2006); Director of Nano-C, Inc. (since 2003); Director of Cole Management Inc. (since 2004); Director of Fiduciary Counseling, Inc.; President and Director of Pioneer Funds Distributor, Inc. ("PFD") (until May 2006); President of all of the Pioneer Funds; and Of Counsel, Wilmer Cutler Pickering Hale and Dorr LLP * Mr. Cogan is an Interested Trustee because he is an officer or director of the Fund's investment adviser and certain of its affiliates. - -----------------------------------------------------------------------------------------------------------------
52 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
Positions Held Length of Service Name and Age With the Fund and Term of Office David R. Bock (64) Trustee Trustee since 2005. Serves until a succes- sor trustee is elected or earlier retirement or removal. - -------------------------------------------------------------------------------- Mary K. Bush (59) Trustee Trustee since 1997. Serves until a succes- sor trustee is elected or earlier retirement or removal. - -------------------------------------------------------------------------------- Margaret B.W. Graham (60) Trustee Trustee since 1993. Serves until a succes- sor trustee is elected or earlier retirement or removal. - -------------------------------------------------------------------------------- Other Directorships Held Name and Age Principal Occupation During Past Five Years by this Trustee David R. Bock (64) Executive Vice President and Chief Financial Officer, I-trax, Director of The Enterprise Inc. (publicly traded health care services company) (2004 Social Investment - present); Partner, Federal City Capital Advisors (boutique Company (privately-held merchant bank) (1997 to 2004); and Executive Vice affordable housing President and Chief Financial Officer, Pedestal Inc. finance company); and (internet-based mortgage trading company) (2000 - 2002) Director of New York Mortgage Trust (publicly traded mortgage REIT) - ------------------------------------------------------------------------------------------------------------------------ Mary K. Bush (59) President, Bush International, LLC (international financial Director of Brady Corpora- advisory firm) tion (industrial identifica- tion and specialty coated material products manufacturer); Director of Briggs & Stratton Co. (engine manufacturer); Director of UAL Corpora- tion (airline holding company) Director of Mantech International Corporation (national security, defense, and intelligence technology firm): and Member, Board of Governors, Investment Company Institute - ------------------------------------------------------------------------------------------------------------------------ Margaret B.W. Graham (60) Founding Director, Vice-President and Corporate Secretary, None The Winthrop Group, Inc. (consulting firm); and Desautels Faculty of Management, McGill University - ------------------------------------------------------------------------------------------------------------------------
53 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
Positions Held Length of Service Name and Age With the Fund and Term of Office Thomas J. Perna (57) Trustee Trustee since 2006. Serves until a succes- sor trustee is elected or earlier retirement or removal. - -------------------------------------------------------------------------------- Marguerite A. Piret (59) Trustee Trustee since 1993. Serves until a succes- sor trustee is elected or earlier retirement or removal. - -------------------------------------------------------------------------------- John Winthrop (71) Trustee Trustee since 1993. Serves until a succes- sor trustee is elected or earlier retirement or removal. - -------------------------------------------------------------------------------- Other Directorships Held Name and Age Principal Occupation During Past Five Years by this Trustee Thomas J. Perna (57) Private investor (2004 - present); and Senior Executive Director of Quadriserv Vice President, The Bank of New York (financial and securi- Inc. (technology products ties services) (1986 - 2004) for securities lending industry) - ------------------------------------------------------------------------------------------------------------------------ Marguerite A. Piret (59) President and Chief Executive Officer, Newbury, Piret & Director of New America Company, Inc. (investment banking firm) High Income Fund, Inc. (closed-end investment company) - ------------------------------------------------------------------------------------------------------------------------ John Winthrop (71) President, John Winthrop & Co., Inc. (private investment None firm) - ------------------------------------------------------------------------------------------------------------------------
54 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- FUND OFFICERS - --------------------------------------------------------------------------------
Positions Held Length of Service Name and Age With the Fund and Term of Office Daniel K. Kingsbury (49)* Executive Vice Since March 2007. President Serves at the discre- tion of the Board - -------------------------------------------------------------------------------- Dorothy E. Bourassa (60) Secretary Since 2003. Serves at the discretion of the Board - -------------------------------------------------------------------------------- Christopher J. Kelley (43) Assistant Secretary Since 2003. Serves at the discretion of the Board - -------------------------------------------------------------------------------- Vincent Nave (62) Treasurer Since 2000. Serves at the discretion of the Board - -------------------------------------------------------------------------------- Mark E. Bradley (48) Assistant Treasurer Since 2004. Serves at the discretion of the Board - -------------------------------------------------------------------------------- Luis I. Presutti (42) Assistant Treasurer Since 2000. Serves at the discretion of the Board - -------------------------------------------------------------------------------- Other Directorships Held Name and Age Principal Occupation During Past Five Years by this Officer Daniel K. Kingsbury (49)* Director, CEO and President of Pioneer Investment None Management USA Inc., Pioneer Investment Management, Inc. and Pioneer Institutional Asset Management, Inc. (since March 2007); Executive Vice President of all of the Pioneer Funds (since March 2007); Director of Pioneer Global Asset Management S.p.A. (since March 2007); Head of New Markets Division, Pioneer Global Asset Management S.p.A. (2000 - 2007) - ------------------------------------------------------------------------------------------------------------------- Dorothy E. Bourassa (60) Secretary of PIM-USA; Senior Vice President - Legal of None Pioneer; Secretary/Clerk of most of PIM-USA's subsidiar- ies; and Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003) - ------------------------------------------------------------------------------------------------------------------- Christopher J. Kelley (43) Associate General Counsel of Pioneer since January 2008 None and Assistant Secretary of all of the Pioneer Funds since September 2003; Vice President and Senior Counsel of Pioneer from July 2002 to December 2007 - ------------------------------------------------------------------------------------------------------------------- Vincent Nave (62) Vice President - Fund Accounting, Administration and None Controllership Services of Pioneer; and Treasurer of all of the Pioneer Funds - ------------------------------------------------------------------------------------------------------------------- Mark E. Bradley (48) Deputy Treasurer of Pioneer since 2004 and Assistant None Treasurer of all of the Pioneer Funds since November 2004; Treasurer and Senior Vice President, CDC IXIS Asset Management Services from 2002 to 2003 - ------------------------------------------------------------------------------------------------------------------- Luis I. Presutti (42) Assistant Vice President - Fund Accounting, Administration None and Controllership Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds - -------------------------------------------------------------------------------------------------------------------
55 Pioneer Tax Free Income Fund - -------------------------------------------------------------------------------- FUND OFFICERS - --------------------------------------------------------------------------------
Positions Held Length of Service Name and Age With the Fund and Term of Office Gary Sullivan (49) Assistant Treasurer Since 2002. Serves at the discretion of the Board - -------------------------------------------------------------------------------- Katherine Kim Sullivan (34) Assistant Treasurer Since 2003. Serves at the discretion of the Board - -------------------------------------------------------------------------------- Teri W. Anderholm (48) Chief Compliance Since January 2007. Officer Serves at the discre- tion of the Board - -------------------------------------------------------------------------------- Other Directorships Held Name and Age Principal Occupation During Past Five Years by this Officer Gary Sullivan (49) Fund Accounting Manager - Fund Accounting, Administra- None tion and Controllership Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds - ------------------------------------------------------------------------------------------------------------------------ Katherine Kim Sullivan (34) Fund Administration Manager - Fund Accounting, None Administration and Controllership Services since June 2003 and Assistant Treasureer of all of the Pioneer Funds since September 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 20003 (formerly Deutsche Bank Asset Management) - ------------------------------------------------------------------------------------------------------------------------ Teri W. Anderholm (48) Chief Compliance Officer of Pioneer since December 2006 None and of all the Pioneer Funds since January 2007; Vice President and Compliance Officer, MFS Investment Management (August 2005 to December 2006); Consult- ant, Fidelity Investments (February 2005 to July 2005); Independent Consultant (July 1997 to February 2005) - ------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, Pioneer and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. Pioneer, the Fund's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients. 56 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 57 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 58 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 59 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This page for your notes. 60 - -------------------------------------------------------------------------------- HOW TO CONTACT PIONEER - -------------------------------------------------------------------------------- We are pleased to offer a variety of convenient ways for you to contact us for assistance or information. Call us for: Account Information, including existing accounts, new accounts, prospectuses, applications and service forms 1-800-225-6292 FactFone(SM) for automated fund yields, prices, account information and transactions 1-800-225-4321 Retirement plans information 1-800-622-0176 Telecommunications Device for the Deaf (TDD) 1-800-225-1997 Write to us: PIMSS, Inc. P.O. Box 55014 Boston, Massachusetts 02205-5014 Our toll-free fax 1-800-225-4240 Our internet e-mail address ask.pioneer@pioneerinvestments.com (for general questions about Pioneer only) Visit our web site: www.pioneerinvestments.com Before investing consider the Fund's investment objectives, risks, charges and expenses. Contact your advisor or Pioneer Investments for a prospectus containing this information. Read it carefully. The Fund files a complete schedule of investments with the Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders 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, DC. Information regarding the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330. EX-99.(17)(G) 15 d23329_ex99-17g.txt - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PIONEER ------- MUNICIPAL AND EQUITY INCOME TRUST* PBF Ticker Symbol Annual Report 11/30/07 [LOGO]PIONEER Investments(R) *Effective November 7, 2007, Pioneer Tax Advantaged Balanced Trust was renamed Pioneer Municipal and Equity Income Trust Table of Contents - -------------------------------------------------------------------------------- Letter to Shareowners 2 Portfolio Summary 4 Prices and Distributions 5 Performance Update 6 Portfolio Management Discussion 7 Schedule of Investments 13 Financial Statements 29 Notes to Financial Statements 34 Report of Independent Registered Public Accounting Firm 48 Results of Shareowner Meeting 49 Approval of Investment Advisory Agreement 51 Trustees, Officers and Service Providers 55
President's Dear Shareowner, - -------------------------------------------------------------------------------- In November 2007, Pioneer Tax Advantaged Balanced Trust changed its name to Pioneer Municipal and Equity Income Trust, to more clearly reflect its unique investment strategy and tax benefits. The Board of Trustees believes the new name better suggests the composition of the Trust's underlying portfolio, which combines municipal bonds with qualified dividend-producing equity securities. In addition, the new name may also better indicate the tax advantages provided by the Trust's investment approach. As a shareowner in Pioneer Municipal and Equity Income Trust, you are participating in an innovative investment strategy that has generated an increasing stream of tax-advantaged income. The Trust invests in a combination of municipal bonds and qualified dividend-paying equity securities to generate monthly distributions that have been subject to an average effective regular federal income tax rate of less than 10%. The November distribution and month-end market price, for example, represented a market price distribution rate of 10.01%, which represents a 13.97% market price distribution rate on a tax-equivalent basis. The Trust's late 2007 market value performance was partially the result of a series of actions taken by the Trust's Trustees to increase shareowner value. In June, and again in October, the Trustees approved increases in the Trust's monthly distribution stream totaling 72.9%, compared to the distribution rate paid in June 2007. In part, these increases were achieved through a new level distribution policy that allows the Trust to pay a higher monthly distribution by supplementing earned income from the portfolio with a return of capital. (A return of capital is a distribution that is not derived from income or capital gains earnings from the Trust.) This new policy is designed to provide shareowners with relatively high monthly distributions. The Trust also has applied with the Securities and Exchange Commission for an exemptive order that would allow it to include long-term capital gains in its monthly distributions to shareholders. If approved, the Trust may be able to further increase monthly distributions. Currently, funds may distribute long-term capital gains only once a year, with limited exceptions. In October, the Trustees approved another measure intended to increase the Trust's net asset value and liquidity in the Trust's shares - a share repurchase program. Under this plan, the Trust may purchase up to 10% of its outstanding common shares through November 30, 2008, and 10% of its outstanding common shares annually thereafter. 2 Letter Together, these steps are designed to help increase the value and liquidity of your investment. Thus far, the measures have worked well for the Trust, paving the way for a higher monthly distribution level and improved stock market performance, as the discount of the Trust's share price to net asset value has narrowed from of 13.4% on November 30, 2006 to 9.5% one year later. This narrowing demonstrates enhanced market value to shareowners. We appreciate your interest in Pioneer Municipal and Equity Income Trust. As always, we encourage you to work closely with your financial advisor to find the mix of stocks, bonds and money market assets that is best aligned to your particular risk tolerance and investment objective. Respectfully, /s/Daniel K. Kingsbury Daniel K. Kingsbury President and CEO Pioneer Investment Management USA Inc. There can be no assurance as to whether or when the Securities and Exchange Commission would grant the exemptive order or as to the conditions to which any order would be subject. The Trust's tax-equivalent distribution rate is based on the blended effective tax rate applicable to the Trust's income distributions as of September 30, 2007, assuming the recipient is taxed at the maximum 35% federal personal income tax rate. A portion of the Trust's distributions may be subject to the alternative minimum tax, which would reduce the tax-oriented benefits of the Trust to an investor who is subject to that tax. Any information in this shareowner report regarding market or economic trends or the factors influencing the Trust's historical or future performance are statements of the opinion of Trust 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. Please consider the Trust's investment objectives, risks, charges and expenses. Contact your advisor or Pioneer Investments for a prospectus containing this information. Please read the information carefully. 3 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- PORTFOLIO SUMMARY 11/30/07 - -------------------------------------------------------------------------------- Portfolio Maturity - -------------------------------------------------------------------------------- (As a percentage of total debt holdings) [THE FOLLOWING DATA IS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL] 0-1 Year 3.3% 1-3 Years 4.3% 3-6 Years 43.7% 6-8 Years 7.4% 8-10 Years 1.4% 10+ Years 39.9%
Portfolio Diversification - -------------------------------------------------------------------------------- (As a percentage of total investment portfolio) [THE FOLLOWING DATA IS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL] Tax-Exempt Obligations 53.6% Common Stocks 27.1% Non-Convertible Preferred Stocks 15.9% Convertible Preferred Stocks 2.2% Temporary Cash Investment 1.2%
The portfolio is actively managed, and current holdings may be different. 10 Largest Holdings - -------------------------------------------------------------------------------- (As a percentage of total long-term holdings)* 1. Verizon Communications, Inc. 2.96% 2. Loews Corp. - Carolina Group 2.59 3. Merck & Co., Inc. 2.16 4. Georgia Municipal Electric Authority Power Revenue, RIB, 7.497%, 1/1/20 (144A) 1.97 5. Altria Group, Inc. 1.75 6. Atmos Energy Corp. 1.74 7. Windstream Corp. 1.72 8. Bristol-Myers Squibb Co. 1.64 9. Golden State Tobacco Securitization Corp., RIB, 6.828%, 6/1/45 (144A) 1.48 10. Garden State Preservation Trust, RIB, 10.703%, 11/1/22 (144A) 1.44
* This list excludes temporary cash and derivative instruments. The portfolio is actively managed, and current holdings may be different. The holdings listed should not be considered recommendations to buy or sell any security listed. 4 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- PRICES AND DISTRIBUTIONS - -------------------------------------------------------------------------------- Share Prices and Distributions - --------------------------------------------------------------------------------
Market Price 11/30/07 11/30/06 per Common Share $13.41 $14.00 Net Asset Value per Common Share $14.82 $16.17 Market Discount 9.5% 13.4%
Net Distributions Investment Short-Term Long-Term per Common Share Income Capital Gains Capital Gains (12/1/06 - 11/30/07) $0.8539 $ - $0.0951
Yields - --------------------------------------------------------------------------------
11/30/07 11/30/06 Distribution Yield at Market Price 6.37% 4.77% Distribution Yield at Net Asset Value 5.76% 4.13% 30-Day SEC Yield 11.35% 7.05%
The performance data quoted represents past performance, which is no guarantee of future results. Note: Under generally accepted accounting principles ("GAAP"), the Trust records - ---- income and expense ratably during its fiscal year. The Trust made distributions during its latest fiscal year that were in excess of its income net of its expenses. As required by GAAP, at year end the Trust converts its earnings accounts on its statement of assets and liabilities to tax basis under federal income tax rules. Under those federal tax rules, the $2,324,009 ($0.08 per share) of expenses incurred by the Trust during the fiscal year that is allocated to the production of tax-exempt income is disallowed as a deduction in computing earnings available for distribution. As a result of the foregoing, $2,324,009 of distributions made during the fiscal year ended November 30, 2007 are taxable as ordinary income though on a pure economic basis, since the Trust actually incurred those expenses, $2,324,009 of capital was distributed by the Trust during the year. Under GAAP, due to the conversion of the Trust's capital accounts to tax basis at November 30, 2007, no return of capital is reported in the accompanying financial statements. 5 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- PERFORMANCE UPDATE 11/30/07 - -------------------------------------------------------------------------------- Investment Returns - -------------------------------------------------------------------------------- The mountain chart on the right shows the change in market value, including reinvestment of dividends and distributions, of a $10,000 investment made in common shares of Pioneer Municipal and Equity Income Trust, compared to that of the Lehman Brothers Municipal Bond Index and the S&P 500 Index.
Cumulative Total Returns (As of November 30, 2007) Net Asset Value Market Period (NAV) Price Life-of-Trust (1/30/04) 29.83% 12.23% 1 Year -2.12 2.30
[THE FOLLOWING DATA IS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL] Value of $10,000 Investment Pioneer Municipal and Lehman Brothers Standard & Poor's Equity Income Trust Municipal Bond Index 500 Index 1/04 10,000 10,000 10,000 11/04 8,374 10,263 10,529 11/05 9,008 10,662 11,418 11/06 10,970 11,314 13,041 11/07 11,223 11,621 14,048
Call 1-800-225-6292 or visit www.pioneerinvestments.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. Performance data shown represents past performance. Past performance is no guarantee of future results. Investment return and market price will fluctuate, and your shares may trade below net asset value ("NAV"), due to such factors as interest rate changes, and the perceived credit quality of borrowers. Total investment return does not reflect broker sales charges or commissions. All performance is for common shares of the Trust. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and once issued, shares of closed-end funds are sold in the open market through a stock exchange and frequently trade at prices lower than their NAV. NAV is total assets less total liabilities, which includes preferred shares, divided by the number of common shares outstanding. When NAV is lower than market price, dividends are assumed to be reinvested at the greater of NAV or 95% of the market price. When NAV is higher, dividends are assumed to be reinvested at prices obtained under the Trust's dividend reinvestment plan. The performance table and graph do not reflect the deduction of fees and taxes that a shareowner would pay on Trust distributions or the redemption of Trust shares. Index comparisons begin January 31, 2004. The Lehman Brothers Municipal Bond Index is a broad measure of the municipal bond market. 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 are calculated monthly, assume reinvestment of dividends and, unlike Trust returns, do not reflect any fees, expenses or charges. You cannot invest directly in an index. 6 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 11/30/07 - -------------------------------------------------------------------------------- During the fiscal year ended November 30, 2007, the Trustees voted to change the name of Pioneer Tax Advantaged Balance Trust to Pioneer Municipal and Equity Income Trust, a name that the Trustees believe better reflects the composition of the Trust's underlying portfolio, which combines municipal bonds and qualified dividend-producing equity securities. In June 2007, the Trustees adopted a level-distribution policy, which may include a return of capital component. In the following interview, David Eurkus, who is responsible for the Trust's fixed-income investments, and Walter Hunnewell, Jr., who is responsible for the Trust's equity investments, discuss the Trust's investment strategy and outlook. Q: How did the Trust perform over the 12 months ended November 30, 2007? A: For the 12-month period ended November 30, 2007, Pioneer Municipal and Equity Income Trust returned -2.12% at net asset value and 2.30% at market price. As of November 30, 2007, the Trust was selling at a discount of market price to net asset value of 9.5%. For the same 12-month period, the Lehman Brothers Municipal Bond Index returned 2.71%, and the S&P 500 Index returned 7.72%. Call 1-800-225-6292 or visit www.pioneerinvestments.com for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Q: What was the investment environment like for fixed-income and equity securities during the 12-month period ended November 30, 2007? A: The major event of the year was the mid-summer turmoil in the fixed-income markets, which was triggered by concerns that weakness in the financial sector, which resulted from write-downs of subprime mortgage debt, would spread to the wider economy. In that environment, market participants generally gravitated toward the safest investments and both bonds and stocks declined. 7 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 11/30/07 (continued) - -------------------------------------------------------------------------------- When it appeared that the loss of confidence in debt collateral could result in a credit crunch, the Federal Reserve ("Fed") stepped in and lowered short-term interest rates on two occasions during the fiscal year for a total of three-quarters of a percentage point. (The Fed also trimmed interest rates by one-quarter percentage point on December 11.) The central bank's actions had a calming effect on the financial markets, and fixed-income and equity prices stabilized. While the financial markets were volatile for the remainder of the fiscal year, both bonds and stocks ended the period with positive returns. Q: What were the principal strategies used in managing the Trust during the 12-month period ended November 30, 2007? A: We continued to focus on providing tax-favored income from a mix of about 55% municipal bonds and 45% qualified dividend income (QDI) dividend-paying equity securities during the period. The emphasis of the fixed-income portion of the Trust remained on sectors that underpin the economy, with the largest positions being in bonds related to the health care sector and other various revenue bonds on which the payment of interest and principal depends on revenues generated from the particular asset that the bond was issued to finance. About 22% of the Trust's fixed-income investments were insured as of November 30, 2007, which means that the interest and principal of those AAA-rated securities are guaranteed by private insurance companies. Below investment-grade bonds accounted for almost 19% of the Trust's fixed-income assets as of November 30, 2007. On November 30, 2007, the Trust had 124 fixed-income issues in 38 states, territories and the District of Columbia. The average credit quality of the fixed-income holdings was A as of November 30, 2007, compared with A- on May 31, 2007. In the equity portion of the Trust, the focus continued to be on higher QDI dividend-paying common and preferred equities. At period-end, the split between preferred and common stocks was 40%/60%. Financial companies, which typically pay healthy dividends, accounted for 36% of the equity portion of the Trust. Moreover, approximately three-quarters of the Trust's preferred equities were in the financials sector and, while diversified across many different securities, these holdings, which trade like fixed-income securities, reacted to the late summer tumult in the credit 8 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- markets. Where appropriate, we made some changes to the preferred holdings to strengthen the Trust's portfolio; but our view is that the credit markets dislocation will eventually pass, and the value of the Trust's high-quality, preferred holdings will be recognized. The Trust's common equity holdings in the financial sector have always de-emphasized large, diversified financial institutions. Nonetheless, the nation-wide weakness in real estate values had an adverse effect on many of the Trust's bank holdings, such as KeyCorp, National City, and most notably Washington Mutual. We sold National City late in the period and Washington Mutual shortly after fiscal year end. The utilities sector, at 16% of equities on November 30, 2007, was the next-largest weighting after financials. Telecommunications services (15%), consumer staples (13%) and health care (8%) rounded out the top-five equity sector concentrations at period-end. Among the changes in common equities during the period, we sold Great Plains Energy out of concern for risks related to that company's future capital expenditures. We purchased Diamond Offshore Drilling, a mid- and deep-water oil drilling company with a good historical record of returning cash to shareholders. Another addition was B&G Foods, which manufactures an offering of food products, all with strong regional brand identification. Near period-end we added a convertible preferred of Avery Dennison, a leading manufacturer of pressure-sensitive and office product materials. On November 30, 2007, 28.9% of the Trust was leveraged, which means that the Trust borrowed and invested those funds in high-yielding securities. Short-term rates declined over the fiscal period. However, a rise in short-term rates in the future would add to the Trust's borrowing costs, and the ability to sustain present dividend levels could be affected. Should short-term rates continue to decline, the cost of borrowing would go down, providing the Trust with a modest amount of additional income. Q: What affected the Trust's performance during the 12-month period ended November 30, 2007? A: Remaining fully invested in municipal securities contributed to the Trust's tax-free income and principal appreciation during the period. However, the performance of below investment-grade bonds during the period held back results, as investors sought high quality securities above everything else in response to the 9 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 11/30/07 (continued) - -------------------------------------------------------------------------------- market volatility created by the subprime mortgage debacle. A reduction in investor demand for municipal securities was also a factor in the Trust's underperformance during the period. In the equity portion of the Trust, some of the strongest contributions to absolute performance during the period came from more defensive names in consumer staples, health care and telecommunications. As tobacco litigation risks receded, Carolina Group, the tobacco tracking stock of Lowes, and Altria Group posted total returns of 46% and 27%, respectively, for the period. In health care, Merck added substantially to performance because of good results in the vaccine area, and Bristol-Myers Squibb did well after weathering a patent challenge. In telecommunications, AT&T and Verizon helped boost return. Detractors from returns during the period centered on the Trust's financial holdings. Washington Mutual (-53%) did poorly due to market fears of its subprime mortgage exposure. As noted, the stock was sold shortly after period-end. Preferred holdings Scottish Re Group (-45%) and SLM Holdings (-17%) also held back results, due to concerns with subprime exposure in the companies' investment portfolios and private equity deals in an unfavorable debt market. Both stocks remained in the portfolio at November 30, 2007 because we believe they have the potential to do well in the future and continue to pay their dividends. In the utility sector, Atmos Energy (-17%) lost ground compared to other utility stocks during the period because of its lack of exposure to unregulated power generation. The Trust continued to hold the stock at November 30, 2007 for its dividend and because we believe the company has attractive opportunities in its natural gas pipeline businesses. Q: What is your outlook? A: We expect to see further weakness in the economy and believe that the Fed is likely to continue lowering short-term interest rates well into 2008. A decline in rates would likely enhance the value of the fixed-income securities in the portfolio and would make equities more attractive to investors. In the equity markets, we plan to maintain our focus on preferred and common stocks that emphasize dividend yield. As has always been the case, we will seek diversification and the potential for long-term capital return. 10 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Our view is that when the economy moderates, the credit market concerns that have depressed the Trust's preferred holdings should ease, and we should see some price appreciation. When investing in common equities, we will continue to seek opportunities that strengthen the portfolio and that have the potential to benefit from improving economic growth over the long term. Information regarding the Trust's principal investment risks is contained in the Trust's prospectus. Please refer to those documents when considering the Trust's risks. There can be no assurance as to the portion of the Trust's dividends that will be tax-exempt or tax-qualified. A portion of income may be subject to state, federal, and/or alternative minimum tax. Capital gains, if any, are subject to a capital gains tax. When interest rates rise, the prices of fixed-income securities in the Trust will generally fall. Conversely, when interest rates fall the prices of fixed-income securities in the Trust will generally rise. By concentrating in municipal securities, the portfolio is more susceptible to adverse economic, political or regulatory developments than is a portfolio that invests more broadly. Investments in the Trust are subject to possible loss due to the financial failure of underlying securities and their inability to meet their debt obligations. The Trust may invest in derivative securities, which may include futures and options. These types of instruments can increase price fluctuation. The Trust currently uses leverage through the issuance of preferred shares. The Trust is also authorized to borrow from banks and to issue debt securities, which are other forms of leverage. Leverage creates significant risks, including the risk that the Trust's income or capital appreciation will not be sufficient to cover the cost of leverage, which may adversely affect the return of the holders of common shares. 11 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT DISCUSSION 11/30/07 (continued) - -------------------------------------------------------------------------------- Any information in this shareowner report regarding market or economic trends or the factors influencing the Trust's historical or future performance are statements of the opinion of Trust 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 the market forecasts discussed will be realized. 12 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 11/30/07 - --------------------------------------------------------------------------------
S&P/Moody's Principal Ratings Amount (unaudited) Value TAX EXEMPT OBLIGATIONS - 75.8% of Net Assets Alabama - 1.4% $ 5,000,000 NR/NR Huntsville-Redstone Village Special Care Facilities Financing Authority, 5.5%, 1/1/43 $ 4,475,400 1,500,000 NR/NR Sylacauga Health Care Authority Revenue, 6.0%, 8/1/35 1,477,950 ------------ $ 5,953,350 ------------ Arizona - 1.0% 1,000,000 BBB/Baa1 Maricopa County Hospital Revenue, 5.0%, 4/1/35 $ 939,040 470,000+ NR/Baa3 Pima County Industrial Development Authority, 6.375%, 7/1/31 537,750 530,000 NR/Baa3 Pima County Industrial Development Authority, 6.375%, 7/1/31 547,008 989,000 NR/Baa3 Pima County Industrial Development Authority, 6.75%, 7/1/31 1,023,160 1,000,000+ NR/NR Pima County Industrial Development Authority, 7.5%, 7/1/34 1,199,670 ------------ $ 4,246,628 ------------ California - 5.2% 1,000,000 A/A2 California Health Facilities Authority Revenue, 5.25%, 7/1/23 $ 1,030,230 9,000,000 BBB/Baa3 Golden State Tobacco Securitization Corp., 5.125%, 6/1/47 7,602,390 4,000,000+ AAA/Aaa Golden State Tobacco Securitization Corp., 6.75%, 6/1/39 4,650,360 9,655,000(a) NR/A3 Golden State Tobacco Securitization Corp., RIB, 6.828%, 6/1/45 (144A) 8,815,787 ------------ $ 22,098,767 ------------ Colorado - 0.7% 3,000,000 NR/NR Colorado Educational & Cultural Facilities Authority Revenue, 5.5%, 6/1/37 (144A) $ 2,837,190 ------------ Connecticut - 0.3% 1,500,000 BB/NR Mohegan Tribe Indians Gaming Authority, 5.25%, 1/1/33 (144A) $ 1,374,930 ------------ District of Columbia - 1.0% 4,000,000 BBB/Baa3 District of Columbia Tobacco Settlement Financing Corp., 6.75%, 5/15/40 $ 4,093,760 ------------
The accompanying notes are an integral part of these financial statements. 13 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 11/30/07 (continued) - --------------------------------------------------------------------------------
S&P/Moody's Principal Ratings Amount (unaudited) Value Florida - 4.1% $ 1,105,000 A+/A1 Highlands County Health Facilities Authority Revenue, 5.0%, 11/15/24 $ 1,119,453 5,000,000+ NR/A1 Highlands County Health Facilities Authority Revenue, 6.0%, 11/15/25 5,581,250 2,000,000 BB/NR Lee County Industrial Development Authority Revenue, 5.375%, 6/15/37 1,787,520 585,000 NR/NR Madison County First Mortgage Revenue, 6.0%, 7/1/25 576,477 2,025,000 BB+/NR Miami Beach Health Facilities Authority Revenue, 5.375%, 11/15/28 1,815,129 500,000 BB+/Ba1 Miami Beach Health Facilities Authority Revenue, 6.7%, 11/15/19 523,105 1,400,000 NR/NR Orange County Health Facilities Authority Revenue, 5.5%, 7/1/38 1,300,530 3,970,000(a) NR/Aaa Tampa-Hillsborough County Expressway Authority Revenue, RIB, 7.653%, 7/1/23 (144A) 4,670,268 ------------ $ 17,373,732 ------------ Georgia - 4.1% 9,580,000(a) NR/Aaa Georgia Municipal Electric Authority Power Revenue, RIB, 7.497%, 1/1/20 (144A) $ 11,720,938 2,500,000+ AAA/NR Milledgeville-Baldwin County Development Authority Revenue, 5.5%, 9/1/24 2,822,850 2,500,000+ AAA/NR Milledgeville-Baldwin County Development Authority Revenue, 5.625%, 9/1/30 2,841,525 ------------ $ 17,385,313 ------------ Illinois - 4.1% 3,000,000 AAA/Aaa Chicago Illinois General Obligation, 5.0%, 1/1/28 $ 3,104,790 4,580,000 NR/A3 Illinois Development Finance Authority Revenue, 5.25%, 10/1/24 4,669,173 5,000,000 AA+/Aaa Illinois Educational Facilities Authority Revenue, 5.0%, 12/1/38 5,135,500 2,000,000 AA+/Aa2 Illinois Finance Authority Revenue, 5.5%, 8/15/43 2,091,400 2,055,000(a) NR/Aa2 Illinois Finance Authority Revenue, RIB, 9.313%, 8/15/43 (144A) 2,374,306 ------------ $ 17,375,169 ------------
14 The accompanying notes are an integral part of these financial statements. Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
S&P/Moody's Principal Ratings Amount (unaudited) Value Indiana - 2.7% $5,000,000 A+/A2 Indiana Health & Educational Facilites Financing Authority Hospital Revenue, 5.0%, 2/15/39 $ 4,831,100 4,135,000 BBB+/Ba1 Indiana State Development Finance Authority Revenue, 5.75%, 10/1/11 4,189,913 2,570,000 NR/NR Vigo County Hospital Authority Revenue, 5.8%, 9/1/47 (144A) 2,369,129 ------------ $ 11,390,142 ------------ Iowa - 0.9% 4,000,000 NR/NR Iowa Financing Authority Senior Housing Revenue, 5.625%, 12/1/45 $ 3,670,880 ------------ Kansas - 0.6% 750,000 NR/NR Manhattan Health Care Facilities Revenue, 5.125%, 5/15/37 $ 689,768 2,000,000 NR/NR Manhattan Health Care Facilities Revenue, 5.125%, 5/15/42 1,818,920 ------------ $ 2,508,688 ------------ Louisiana - 3.1% 5,000,000 NR/A3 Louisiana Public Facilities Authority Revenue, 5.5%, 5/15/47 $ 4,978,250 8,335,000 BBB/Baa3 Tobacco Settlement Financing Corp., 5.875%, 5/15/39 8,062,446 ------------ $ 13,040,696 ------------ Maryland - 1.8% 3,000,000 BBB-/Baa3 Frederick County Educational Facilities Revenue, 5.625%, 9/1/38 $ 3,045,270 1,000,000 NR/NR Maryland State Economic Development Revenue, Series A, 5.0%, 12/1/16 978,740 660,000 NR/NR Maryland State Economic Development Revenue, Series B, 5.0%, 12/1/16 645,968 1,000,000 NR/NR Maryland State Economic Development Revenue, 5.0%, 12/1/31 889,930 2,000,000 A/A2 Maryland State Health & Higher Educational Facilities Authority Revenue, 5.125%, 7/1/34 2,013,800 ------------ $ 7,573,708 ------------
The accompanying notes are an integral part of these financial statements. 15 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 11/30/07 (continued) - --------------------------------------------------------------------------------
S&P/Moody's Principal Ratings Amount (unaudited) Value Massachusetts - 4.2% $4,500,000 AA/NR Massachusetts Health & Educational Facilities Authority Revenue, 4.625%, 8/15/28 $ 4,083,705 2,000,000 AA+/Aa1 Massachusetts Health & Educational Facilities Authority Revenue, 5.0%, 7/1/33 2,055,500 1,550,000 BBB-/Baa3 Massachusetts Health & Educational Facilities Authority Revenue, 5.25%, 7/15/18 1,556,309 1,600,000 BBB/NR Massachusetts Health & Educational Facilities Authority Revenue, 5.45%, 11/15/23 1,614,976 2,120,000 BBB/Baa3 Massachusetts Health & Educational Facilities Authority Revenue, 5.625%, 7/1/20 2,148,896 900,000 BBB/Baa3 Massachusetts Health & Educational Facilities Authority Revenue, 6.25%, 7/1/22 947,061 2,750,000 BBB/Baa2 Massachusetts Health & Educational Facilities Authority Revenue, 6.625%, 7/1/32 2,871,523 500,000 BBB-/NR Massachusetts State Development Finance Agency, 5.5%, 1/1/35 488,280 1,100,000 BBB/Baa2 Massachusetts State Development Finance Agency, 5.625%, 10/1/24 1,129,700 1,000,000 BBB/Baa2 Massachusetts State Development Finance Agency, 5.7%, 10/1/34 1,013,910 ------------ $ 17,909,860 ------------ Michigan - 2.9% 5,000,000 BB/NR Macomb County Hospital Finance Authority Revenue, 5.875%, 11/15/34 $ 4,851,900 1,595,000 NR/NR Meridian Economic Development Corporate Ltd. Obligation Revenue, 5.25%, 7/1/26 1,447,048 3,340,000 NR/NR Michigan Public Educational Facilities Authority Revenue, 5.875%, 6/1/37 3,147,416 2,000,000 NR/NR Michigan State Hospital Finance Authority Revenue, 5.25%, 11/15/25 1,934,500 1,000,000 NR/NR Michigan State Hospital Finance Authority Revenue, 5.5%, 11/15/35 961,380 ------------ $ 12,342,244 ------------ Minnesota - 1.3% 2,000,000 A-/NR Duluth Economic Development Authority Health Care Facilities Revenue, 5.25%, 2/15/28 $ 2,019,880 1,500,000 A-/NR Duluth Economic Development Authority Health Care Facilities Revenue, 5.25%, 2/15/33 1,506,180
16 The accompanying notes are an integral part of these financial statements. Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
S&P/Moody's Principal Ratings Amount (unaudited) Value Minnesota - (continued) $ 1,000,000 NR/NR North Oaks Senior Housing Revenue, 6.0%, 10/1/33 $ 1,007,650 1,000,000 NR/NR North Oaks Senior Housing Revenue, 6.5%, 10/1/47 1,030,610 ------------ $ 5,564,320 ------------ Missouri - 0.4% 1,720,000 AA/Aa3 Missouri State Health & Educational Authority Health Facilities Revenue, 5.25%, 8/15/28 $ 1,721,789 ------------ Montana - 0.2% 1,000,000 NR/A3 Montana Finance Authority Hospital Facilities Revenue, 5.0%, 6/1/24 $ 1,012,730 ------------ Nebraska - 1.3% 4,980,000(a) NR/Aaa Nebraska Public Power District Revenue, RIB, 7.645%, 1/1/41 (144A) $ 5,407,931 ------------ Nevada - 0.4% 1,500,000 A/A2 Henderson Nevada Health Care Facilities Revenue, 5.625%, 7/1/24 $ 1,571,685 ------------ New Hampshire - 0.6% 1,700,000+ NR/NR New Hampshire Business Finance Authority Revenue, 6.05%, 9/1/29 $ 1,772,403 1,000,000 A+/A2 New Hampshire Health & Education Facilities Authority Revenue, 5.75%, 10/1/31 1,035,500 ------------ $ 2,807,903 ------------ New Jersey - 5.7% 1,250,000 BBB/Baa3 Camden County Improvement Authority Revenue, 5.75%, 2/15/34 $ 1,277,050 5,920,000(a) NR/Aaa Garden State Preservation Trust, RIB, 10.703%, 11/1/22 (144A) 8,550,730 710,000 NR/NR New Jersey Economic Development Authority Revenue, 5.75%, 1/1/25 709,957 1,000,000 NR/NR New Jersey Economic Development Authority Revenue, 5.875%, 1/1/37 980,140 1,000,000 BB/Ba2 New Jersey Health Care Facilities Financing Authority Revenue, 5.125%, 7/1/14 949,270 5,000,000 BBB/Baa1 New Jersey Health Care Facilities Financing Authority Revenue, 5.375%, 7/1/33 4,941,500 3,500,000 NR/NR New Jersey Health Care Facilities Financing Authority Revenue, 7.25%, 7/1/27 3,555,965
The accompanying notes are an integral part of these financial statements. 17 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 11/30/07 (continued) - --------------------------------------------------------------------------------
S&P/Moody's Principal Ratings Amount (unaudited) Value New Jersey - (continued) $ 3,000,000+ AAA/Aaa Tobacco Settlement Financing Corp., 6.25%, 6/1/43 $ 3,426,120 ------------ $ 24,390,732 ------------ New Mexico - 0.6% 1,000,000 AA/NR Dona Ana County PILT Revenue, 5.25%, 12/1/25 $ 1,009,320 1,500,000 NR/A3 Farmington New Mexico Hospital Revenue, 5.0%, 6/1/23 1,511,580 ------------ $ 2,520,900 ------------ New York - 4.3% 2,000,000 NR/NR Dutchess County Industrial Development Agency Revenue, 7.5%, 3/1/29 $ 2,150,000 1,000,000 NR/Aa1 New York City Industrial Development Agency, 5.0%, 7/1/27 1,038,000 1,000,000 NR/Aa1 New York City Industrial Development Agency, 5.25%, 7/1/24 1,063,380 5,000,000 AA-/A1 Port Authority of New York & New Jersey Revenue, 5.0%, 9/1/38 5,115,750 1,000,000 NR/NR Suffolk County Industrial Development Agency Civic Facilities Revenue, 5.5%, 1/1/37 (144A) 898,750 4,900,000 AAA/Aaa Triborough Bridge & Tunnel Authority, 5.25%, 11/15/30 5,142,305 3,000,000 NR/NR Ulster County Industrial Development Agency Civic Facility Revenue, 6.0%, 9/15/27 2,945,190 ------------ $ 18,353,375 ------------ North Carolina - 0.7% 1,000,000 AA/Aa3 North Carolina Capital Facilities Finance Agency Student Revenue, 5.0%, 6/1/27 $ 990,170 1,000,000 AA/Aa3 North Carolina Capital Facilities Finance Agency Student Revenue, 5.0%, 6/1/32 964,420 1,000,000 NR/NR North Carolina Medical Care Commission Health Care Facilities Revenue, 5.0%, 11/1/23 994,530 ------------ $ 2,949,120 ------------
18 The accompanying notes are an integral part of these financial statements. Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
S&P/Moody's Principal Ratings Amount (unaudited) Value Ohio - 1.7% $ 3,000,000+ AAA/Aaa Columbus City School District, 5.0%, 12/1/32 $ 3,287,100 1,500,000 NR/NR Cuyahoga County Health Care & Independent Living Facilities Revenue, 6.0%, 5/15/37 1,455,630 1,500,000 NR/NR Cuyahoga County Health Care & Independent Living Facilities Revenue, 6.0%, 5/15/42 1,438,980 1,000,000 AAA/Aaa Hamilton County Hospital Facilities Revenue, 5.125%, 5/15/28 1,024,540 ------------ $ 7,206,250 ------------ Oregon - 0.7% 2,935,000 NR/Aaa Oregon State Housing & Community Services Department Multi-Family Revenue, 6.0%, 7/1/31 $ 2,969,251 ------------ Pennsylvania - 2.9% 5,000,000+ AAA/Aaa Pennsylvania State Turnpike Commission Oil Franchise Tax Revenue, 5.0%, 12/1/31 $ 5,436,750 2,315,000+ A/NR Sayre Health Care Facilities Authority Revenue, 5.875%, 12/1/31 2,555,297 685,000 A/NR Sayre Health Care Facilities Authority Revenue, 5.875%, 12/1/31 717,832 280,000 B-/NR Scranton-Lackawanna Health and Welfare Authority Hospital Revenue, 5.9%, 7/1/08 280,846 700,000 B-/NR Scranton-Lackawanna Health and Welfare Authority Hospital Revenue, 6.0%, 7/1/09 706,160 460,000 B-/NR Scranton-Lackawanna Health and Welfare Authority Hospital Revenue, 6.05%, 7/1/10 464,043 2,165,000 AA+/Aaa Swarthmore Borough Authority College Revenue, 5.0%, 9/15/31 2,222,762 ------------ $ 12,383,690 ------------ Puerto Rico - 1.2% 5,000,000 BBB-/Baa3 Puerto Rico Public Buildings Authority Revenue, 5.25%, 7/1/33 $ 5,038,500 ------------ Rhode Island - 1.1% 1,640,000 BBB/Baa3 Tobacco Settlement Financing Corp., 6.125%, 6/1/32 $ 1,667,732 3,100,000 BBB/Baa3 Tobacco Settlement Financing Corp., 6.25%, 6/1/42 3,112,028 ------------ $ 4,779,760 ------------
The accompanying notes are an integral part of these financial statements. 19 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 11/30/07 (continued) - --------------------------------------------------------------------------------
S&P/Moody's Principal Ratings Amount (unaudited) Value South Carolina - 4.1% $ 6,000,000 A-/A3 Berkeley County School District Installment Lease, 5.0%, 12/1/28 $ 6,068,160 5,000,000 AAA/Aaa Florence County Hospital Revenue, 5.25%, 11/1/34 5,142,800 3,500,000+ A+/A2 Lexington County Health Services District, Inc., Hospital Revenue, 5.5%, 11/1/32 3,869,250 2,500,000 A-/A3 South Carolina Jobs Economic Development Authority Revenue, 5.5%, 11/15/23 2,583,025 ------------ $ 17,663,235 ------------ Tennessee - 0.6% 2,500,000 NR/Ba2 Knox County Health Educational & Housing Facilities Board Hospital Revenue, 6.5%, 4/15/31 $ 2,548,450 ------------ Texas - 5.1% 1,552,000 NR/Aaa Houston Housing Financing Corp., 6.25%, 9/20/31 $ 1,643,335 2,885,000(a) NR/Aaa Houston Utility System Revenue, RIB, 8.453%, 5/15/24 (144A) 3,491,542 2,750,000 AAA/Aaa Lower Colorado River Authority, 5.0%, 5/15/31 2,818,310 1,711,000 NR/Aaa Panhandle Regional Housing Finance Corp., 6.6%, 7/20/31 1,846,751 3,000,000 BBB/Baa2 Richardson Hospital Authority, 6.0%, 12/1/34 3,109,890 1,000,000 BBB/NR Seguin Higher Education Facilities Corp. Revenue, 5.0%, 9/1/23 993,460 1,500,000 NR/Baa3 Texas State Student Housing Revenue, 6.5%, 9/1/34 1,565,460 3,000,000 NR/NR Willacy County Local Government Corp. Revenue, 6.0%, 9/1/10 3,054,870 3,000,000 NR/NR Willacy County Local Government Corp. Revenue, 6.875%, 9/1/28 3,160,860 ------------ $ 21,684,478 ------------ Vermont - 0.3% 1,295,000 AA/Aa3 Vermont Educational & Health Buildings Financing Agency Revenue, 5.0%, 7/1/24 $ 1,284,860 ------------
20 The accompanying notes are an integral part of these financial statements. Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
S&P/Moody's Principal Ratings Amount (unaudited) Value Virginia - 1.3% $1,500,000 NR/A3 Prince William County Industrial Development Hospital Revenue, 5.2%, 10/1/26 $ 1,529,865 3,925,000 NR/A3 Prince William County Industrial Development Hospital Revenue, 5.35%, 10/1/36 3,992,000 ------------ $ 5,521,865 ------------ Washington - 2.4% 3,000,000 AAA/Aaa King County Washington Sewer Revenue, 5.0%, 1/1/35 $ 3,080,700 7,000,000 BBB/Baa3 Tobacco Settlement Authority Revenue, 6.625%, 6/1/32 7,153,230 ------------ $ 10,233,930 ------------ Wisconsin - 0.8% 3,500,000 BBB+/NR Wisconsin State Health & Educational Facilities Authority Revenue, 5.6%, 2/15/29 $ 3,518,970 ------------ TOTAL TAX-EXEMPT OBLIGATIONS (Cost $315,754,086) (b) $322,308,781 ------------
Shares COMMON STOCKS - 38.3% of Net Assets Energy - 1.3% Oil & Gas Drilling - 0.5% 19,566 Diamond Offshore Drilling, Inc. $ 2,278,069 ------------ Oil & Gas Storage & Transportation - 0.8% 142,876 Spectra Energy Corp. $ 3,520,465 ------------ Total Energy $ 5,798,534 ------------ Materials - 0.9% Diversified Chemicals - 0.4% 94,000 Olin Corp. $ 1,968,360 ------------ Diversified Metals & Mining - 0.5% 56,012 Compass Minerals International, Inc. $ 2,056,761 ------------ Total Materials $ 4,025,121 ------------ Commercial Services & Supplies - 0.7% Commercial Printing - 0.7% 79,034 R.R. Donnelley & Sons Co. $ 2,897,386 ------------ Total Commercial Services & Supplies $ 2,897,386 ------------
The accompanying notes are an integral part of these financial statements. 21 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 11/30/07 (continued) - --------------------------------------------------------------------------------
Shares Value Consumer Durables & Apparel - 0.2% Home Furnishings - 0.2% 50,000 Bassett Furniture Industries, Inc. $ 445,000 31,486 Kimball International, Inc. 420,023 ------------ Total Consumer Durables & Apparel $ 865,023 ------------ Media - 1.0% Movies & Entertainment - 1.0% 206,487 Regal Entertainment Group $ 4,086,378 ------------ Publishing - 0.0% 9,905 Idearc, Inc. $ 187,403 ------------ Total Media $ 4,273,781 ------------ Food, Beverage & Tobacco - 8.2% Packaged Foods & Meats - 1.7% 357,000 B&G Foods, Inc. $ 3,816,330 92,828 Kraft Foods, Inc. 3,207,207 ------------ $ 7,023,537 ------------ Tobacco - 6.5% 134,140 Altria Group, Inc. $ 10,403,898 172,872 Loews Corp. - Carolina Group 15,376,964 29,704 Reynolds American, Inc. 2,079,874 ------------ $ 27,860,736 ------------ Total Food, Beverage & Tobacco $ 34,884,273 ------------ Pharmaceuticals, Biotechnology & Life Sciences - 5.3% Pharmaceuticals - 5.3% 329,758 Bristol-Myers Squibb Co. $ 9,770,730 216,536 Merck & Co., Inc. 12,853,577 ------------ Total Pharmaceuticals, Biotechnology & Life Sciences $ 22,624,307 ------------ Banks - 2.7% Diversified Banks - 0.3% 28,642 Wachovia Corp. $ 1,231,606 ------------ Regional Banks - 0.9% 81,550 KeyCorp $ 2,148,027 67,800 Regions Financial Corp. 1,791,954 ------------ $ 3,939,981 ------------
22 The accompanying notes are an integral part of these financial statements. Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Thrifts & Mortgage Finance - 1.5% 222,700 TrustCo Bank Corp., NY $ 2,367,301 204,886 Washington Mutual, Inc. 3,995,277 ------------ $ 6,362,578 ------------ Total Banks $ 11,534,165 ------------ Diversified Financials - 0.5% Other Diversified Financial Services - 0.5% 42,500 Bank of America Corp. $ 1,960,525 ------------ Total Diversified Financials $ 1,960,525 ------------ Telecommunication Services - 10.0% Integrated Telecommunication Services - 10.0% 204,553 AT&T, Inc. $ 7,815,970 529,946 Citizens Communications Co. 6,878,699 406,745 Verizon Communications, Inc. 17,575,451 790,184 Windstream Corp. 10,232,883 ------------ Total Telecommunication Services $ 42,503,003 ------------ Utilities - 7.5% Electric Utilities - 0.8% 138,400 Empire District Electric Co. $ 3,188,736 ------------ Gas Utilities - 3.1% 81,249 AGL Resources, Inc. $ 3,012,713 395,466 Atmos Energy Corp. 10,357,255 ------------ $ 13,369,968 ------------ Multi-Utilities - 3.6% 100,000 Consolidated Edison, Inc. $ 4,845,000 285,753 Duke Energy Corp. 5,655,052 134,112 NSTAR 4,693,920 ------------ $ 15,193,972 ------------ Total Utilities $ 31,752,676 ------------ TOTAL COMMON STOCKS (Cost $137,323,387) $163,118,794 ------------ NON-CONVERTIBLE PREFERRED STOCKS - 22.5% of Net Assets Energy - 1.0% Oil & Gas Exploration & Production - 1.0% 49,300 Apache Corp., Series B, 5.68% $ 4,249,044 ------------ Total Energy $ 4,249,044 ------------
The accompanying notes are an integral part of these financial statements. 23 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 11/30/07 (continued) - --------------------------------------------------------------------------------
Shares Value Automobiles & Components - 1.1% Automobile Manufacturers - 1.1% 126,542 Ford Motor Co. Capital Trust II, 6.5% $ 4,439,716 ------------ Total Automobiles & Components $ 4,439,716 ------------ Banks - 5.7% Diversified Banks - 3.1% 105,000 Bank One Capital VI, 7.2% $ 2,548,361 120,000 Barclays Bank Plc, Series 2, 6.625% 2,647,200 120,000 HSBC Holdings Plc, Series A, 6.2%, 2,500,800 170,579 Royal Bank of Scotland Group Plc, Series Q, 6.75% 3,722,034 71,000 Wachovia Preferred Funding Corp., Series A, 7.25% 1,767,900 ------------ $ 13,186,295 ------------ Thrifts & Mortgage Finance - 2.6% 56,980 Countrywide Capital V, 7.0% $ 812,383 171,677 Fannie Mae, Series N, 6.75% 4,034,409 57,000 Freddie Mac, 5.81% 2,422,500 39,000 Freddie Mac, Series F, 5.0% 1,384,500 58,000 Freddie Mac, Series K, 5.79% 2,604,200 ------------ $ 11,257,992 ------------ Total Banks $ 24,444,287 ------------ Diversified Financials - 5.9% Other Diversified Financial Services - 2.2% 49,000 ABN Amro Capital Fund Trust VII, 6.08% $ 968,240 120,000 Bank of America Corp., Series D, 6.204% 2,653,200 120,000 Deustche Bank Capital Funding Trust VIII, 6.375% 2,531,256 150,000 JPMorgan Chase Capital Trust XVI, 6.35% 3,316,500 ------------ $ 9,469,196 ------------ Consumer Finance - 0.8% 18,000 MBNA Capital, Series D, 8.125% $ 441,779 71,300 SLM Holdings Corp., Series A, 6.97% 2,994,600 ------------ $ 3,436,379 ------------ Investment Banking & Brokerage - 2.9% 57,000 Bear Stearns Companies, Inc., Series F, 5.72% $ 2,317,050 40,000 Bear Stearns Companies, Inc., Series G, 5.49% 1,500,000 100,000 Lehman Brothers Holdings, Inc., 6.5% 2,230,000 19,000 Lehman Brothers Holdings, Inc., Series C, 5.94% 836,000 50,800 Lehman Brothers Holdings, Inc., Series D, 5.67% 2,082,800
24 The accompanying notes are an integral part of these financial statements. Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value Investment Banking & Brokerage - (continued) 65,000 Merrill Lynch Preferred Capital Trust IV, 7.12% $ 1,460,993 87,000 Merrill Lynch Preferred Capital Trust V, 7.28% 2,029,710 ------------ $ 12,456,553 ------------ Total Diversified Financials $ 25,362,128 ------------ Insurance - 2.9% Life & Health Insurance - 0.4% 159,000 Scottish Re Group, Ltd., 7.25% $ 1,828,500 ------------ Property & Casualty Insurance - 1.8% 160,000 ACE, Ltd., Series C, 7.8% $ 3,929,600 161,000 Berkley W.R. Capital Trust II, 6.75% 3,446,663 ------------ $ 7,376,263 ------------ Reinsurance - 0.7% 158,000 RenaissanceRE Holdings, Ltd., Series D, 6.6% $ 3,039,920 ------------ Total Insurance $ 12,244,683 ------------ Real Estate - 2.6% Diversification Real Estate Investment Trust - 0.8% 32,440 PS Business Parks, Inc., Series I, 6.875% $ 660,803 13,000 PS Business Parks, Inc., Series L, 7.6% 289,510 119,200 PS Business Parks, Inc., Series P, 6.7% 2,378,040 ------------ $ 3,328,353 ------------ Industrial Real Estate Investment Trust - 0.2% 40,000 Prologis Trust, Series G, 6.75% $ 879,200 ------------ Office Real Estate Investment Trust - 0.2% 15,000 Brandywine Realty Trust, Series C, 7.5% $ 336,750 34,500 Brandywine Realty Trust, Series D, 7.375% 759,000 ------------ $ 1,095,750 ------------ Retail Real Estate Investment Trust - 0.8% 94,000 Regency Centers Corp., Series C, 7.45% $ 2,090,560 53,500 Regency Centers Corp., Series E, 6.7% 1,136,340 ------------ $ 3,226,900 ------------ Specialized Real Estate Investment Trust - 0.6% 118,000 Public Storage, Inc., Series L, 6.75% $ 2,507,500 ------------ Total Real Estate $ 11,037,703 ------------
The accompanying notes are an integral part of these financial statements. 25 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 11/30/07 (continued) - --------------------------------------------------------------------------------
Shares Value Utilities - 3.3% Electric Utilities - 2.9% 98,000 Alabama Power Co., 5.3% $ 2,141,300 113,000 Alabama Power Co., 5.83% 2,683,750 78,000 Interstate Power and Light Co., Series B, 8.375% 2,290,860 40,000 Mississippi Power Co., 5.25% 944,800 7,700 PPL Electric Utilities Corp., 4.5% 627,550 73,000 Southern California Edison Co., 4.32% 1,423,500 94,000 Virginia Power Capital Trust II, 7.375% 2,272,890 ------------ $ 12,384,650 ------------ Gas Utilities - 0.4% 62,000 Southern Union Co., Series C, 7.55% $ 1,541,940 ------------ Total Utilities $ 13,926,590 ------------ TOTAL NON-CONVERTIBLE PREFERRED STOCKS (Cost $111,661,764) $ 95,704,151 ------------ CONVERTIBLE PREFERRED STOCKS - 3.0% of Net Assets Capital Goods - 0.5% Aerospace & Defense - 0.5% 15,000 Northrop Grumman Corp., 7.0% $ 2,169,000 ------------ Total Capital Goods $ 2,169,000 ------------ Commercial Services & Supplies - 0.7% Office Services & Supplies - 0.7% 60,000 Avery Dennison Corp., 7.875% $ 3,078,000 ------------ Total Commercial Services & Supplies $ 3,078,000 ------------ Diversified Financials - 1.6% Other Diversified Financial Services - 1.6% 161,000 Lazard, Ltd., 6.625% $ 6,720,140 ------------ Total Diversified Financials $ 6,720,140 ------------ Insurance - 0.2% Property & Casualty Insurance - 0.2% 47,919 XL Capital, Ltd., Class A, 7.0% $ 1,026,425 ------------ Total Insurance $ 1,026,425 ------------ TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $10,175,221) $ 12,993,565 ------------
26 The accompanying notes are an integral part of these financial statements. Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Shares Value TAX-EXEMPT MONEY MARKET MUTUAL FUND - 1.7% of Net Assets 7,113,990 BlackRock Liquidity Funds MuniFund Portfolio $ 7,113,990 ------------- TOTAL TAX-EXEMPT MONEY MARKET MUTUAL FUND (Cost $7,113,990) $ 7,113,990 ------------- TOTAL INVESTMENTS IN SECURITIES - 141.3% (Cost $582,028,448) (c) $ 601,239,281 ------------- OTHER ASSETS AND LIABILITIES - 0.1% $ 503,046 ------------- PREFERRED SHARES AT REDEMPTION VALUE, INCLUDING DIVIDENDS PAYABLE - (41.4%) $(176,384,031) ------------- NET ASSETS APPLICABLE TO COMMON SHAREOWNERS - 100.0% $ 425,358,296 =============
Portfolio Abbreviations RIB Residual Interest Bonds (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 November 30, 2007, the value of these securities amounted $52,511,501, or 12.3% of total net assets. NR Security not rated by S&P or Moody's. + Prerefunded bonds have been collateralized by U.S. Treasury securities or U.S. Government Agencies, which are held in escrow to pay interest and principal on the tax exempt issue and to retire the bonds in full at the earliest refunding date. (a) The interest rate is subject to change periodically and inversely based upon prevailing market rates. The interest rate shown is the rate at November 30, 2007. (b) The concentration of tax-exempt investments by type of obligation/market sector is as follows: Insured: FSA 6.3% MBIA 5.9 FGIC 4.2 Radian 3.2 AMBAC 2.5 ---- 22.1% General Obligation 3.3 Revenue Bonds: Health Revenue 30.2 Tobacco Revenue 14.8 Development Revenue 9.5 Education Revenue 7.4 Housing Revenue 3.7 Facilities Revenue 3.0 Other Revenue 2.2 School District Revenue 1.8 Transportation Revenue 1.6 Gaming Revenue 0.4 ----- 100.0% =====
The accompanying notes are an integral part of these financial statements. 27 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS 11/30/07 (continued) - -------------------------------------------------------------------------------- (c) At November 30, 2007, the net unrealized gain on investments based on cost for federal income tax purposes of $581,819,322 was as follows: Aggregate gross unrealized gain for all investments in which there is an excess of value over tax cost $47,258,820 Aggregate gross unrealized loss for all investments in which there is an excess of tax cost over value (27,838,861) ----------- Net unrealized gain $19,419,959 ===========
For financial reporting purposes net unrealized gain on investments was $19,210,833 and cost of investments aggregated $582,028,448. Purchases and sales of securities (excluding temporary cash investments) for the year ended November 30, 2007, aggregated $148,315,923 and $145,026,135, respectively. 28 The accompanying notes are an integral part of these financial statements. Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES 11/30/07 - -------------------------------------------------------------------------------- ASSETS: Investments in securities, at value (cost $582,028,448) $601,239,281 Receivables - Investment securities sold 90,000 Dividends and interest 7,006,515 Other 947,330 Unrealized appreciation on interest rate swaps 88,363 Prepaid expenses 21,525 ------------ Total assets $609,393,014 ------------ LIABILITIES: Payables - Investment securities purchased $ 3,045,180 Due to custodian 4,107,437 Due to affiliates 304,839 Administration fee payable 31,248 Accrued expenses 161,983 ------------ Total liabilities $ 7,650,687 ------------ PREFERRED SHARES AT REDEMPTION VALUE: $25,000 liquidation value per share applicable to 7,050 shares, including dividends payable of $134,031 $176,384,031 ------------ NET ASSETS APPLICABLE TO COMMON SHAREOWNERS: Paid-in capital $406,036,048 Undistributed net investment income 23,052 Net unrealized gain on investments 19,210,833 Net unrealized gain on interest rate swaps 88,363 ------------ Net assets applicable to common shareowners $425,358,296 ============ NET ASSET VALUE PER SHARE: No par value, (unlimited number of shares authorized) Based on $425,358,296/28,706,981 common shares $ 14.82 ============
The accompanying notes are an integral part of these financial statements. 29 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- For the Year Ended 11/30/07 INVESTMENT INCOME: Dividends $ 14,388,781 Interest 19,302,540 ------------ $ 33,691,321 ------------ EXPENSES: Management fees $ 3,798,435 Administration fees 500,710 Transfer agent fees and expenses 429,195 Auction agent fees 467,680 Custodian fees 37,368 Registration fees 25,362 Professional fees 363,264 Printing expense 56,861 Trustees' fees 24,305 Pricing fees 19,552 Insurance fees 12,844 Miscellaneous 18,681 ------------ Total expenses $ 5,754,257 Less fees paid indirectly (523) ------------ Net expenses $ 5,753,734 ------------ Net investment income $ 27,937,587 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND INTEREST RATE SWAPS: Net realized gain from: Investments $ 3,226,543 Interest rate swaps 856,816 $ 4,083,359 ------------ ------------ Change in net unrealized gain from: Investments $(33,872,244) Interest rate swaps (1,161,729) $(35,033,973) ------------ ------------ Net loss on investments and interest rate swaps $(30,950,614) ------------ DIVIDENDS AND DISTRIBUTIONS TO PREFERRED SHAREOWNERS FROM: Net investment income $ (7,768,522) Net realized gains (908,387) ------------ Total distributions $ (8,676,909) ------------ Net decrease in net assets applicable to common shareowners resulting from operations $(11,689,936) ============
30 The accompanying notes are an integral part of these financial statements. Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- For the Year Ended 11/30/07 and 11/30/06, respectively
Year Year Ended Ended 11/30/07 11/30/06 FROM OPERATIONS: Net investment income $ 27,937,587 $ 27,998,168 Net realized gain on investments and interest rate swaps 4,083,359 688,474 Change in net unrealized gain on investments and interest rate swaps (35,033,973) 44,563,306 Dividends and distributions to preferred shareowners from: Net investment income (7,768,522) (7,360,344) Net realized gains (908,387) (571,728) ------------- ------------- Net increase (decrease) in net assets applicable to common shareowners $ (11,689,936) $ 65,317,876 ------------- ------------- DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREOWNERS: Net investment income ($0.85 and $0.67 per share, respectively) $ (24,511,851) $ (19,187,745) Net realized gains ($0.10 and $0.08 per share, respectively) (2,731,074) (2,315,448) ------------- ------------- Total distributions to common shareowners $ (27,242,925) $ (21,503,193) ------------- ------------- Net increase (decrease) in net assets applicable to common shareowners $ (38,932,861) $ 43,814,683 NET ASSETS APPLICABLE TO COMMON SHAREOWNERS: Beginning of year 464,291,157 420,476,474 ------------- ------------- End of year $ 425,358,296 $ 464,291,157 ============= ============= Undistributed net investment income $ 23,052 $ 1,185,061 ============= =============
The accompanying notes are an integral part of these financial statements. 31 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Year Year Year 1/30/04(b) Ended Ended Ended to 11/30/07 11/30/06 11/30/05 11/30/04 Per Common Share Operating Performance Net asset value, beginning of period $ 16.17 $ 14.65 $ 14.55 $ 14.33(c) -------- -------- -------- --------- Increase (decrease) from investment operations:(a) Net investment income $ 0.97 $ 0.98 $ 0.95 $ 0.66 Net realized and unrealized gain (loss) on investments and interest rate swaps (1.07) 1.57 0.13 0.27 Dividends and distributions to preferred shareowners from: Net Investment income (0.27) (0.26) (0.19) (0.06) Net realized gain (0.03) (0.02) -(d) - -------- -------- -------- --------- Net increase (decrease) from investment operations $ (0.40) $ 2.27 $ 0.89 $ 0.87 Dividends and distributions to common shareowners from: Net investment income (0.85) (0.67) (0.79) (0.55) Net realized gain (0.10) (0.08) - - Capital charge with respect to issuance of: Common shares - - - (0.03) Preferred shares - - - (0.07) -------- -------- -------- --------- Net increase (decrease) in net asset value $ (1.35) $ 1.52 $ 0.10 $ 0.22 -------- -------- -------- --------- Net asset value, end of period(e) $ 14.82 $ 16.17 $ 14.65 $ 14.55 ======== ======== ======== ======== Market value, end of period(e) $ 13.41 $ 14.00 $ 12.18 $ 12.74 ======== ======== ======== ======== Total return(f) 2.30% 21.79% 1.51% (11.26)% Ratios to average net assets of common shareowners Net expenses(g) 1.26% 1.12% 1.12% 1.04%(h) Net investment income before preferred share dividends 6.12% 6.43% 6.32% 5.69%(h) Preferred share dividends 1.70% 1.69% 1.28% 0.55%(h) Net investment income available to common shareowners 4.25% 4.74% 5.04% 5.14%(h) Portfolio turnover 23% 16% 27% 63% Net assets of common shareowners, end of period (in thousands) $425,358 $464,291 $420,476 $417,789 Preferred shares outstanding (in thousands) $176,250 $176,250 $176,250 $176,250 Asset coverage per preferred share, end of period $ 85,354 $ 90,870 $ 84,651 $ 84,264 Average market value per preferred share $ 25,000 $ 25,000 $ 25,000 $ 25,000 Liquidation value, including dividends payable, per preferred share $ 25,019 $ 25,015 $25,009 $ 25,003 Ratios to average net assets of common shareowners before reimbursement of waivers and reimbursement of expenses Net expenses(g) 1.26% 1.12% 1.12% 1.05%(h) Net investment income before preferred share dividends 6.12% 6.43% 6.32% 5.68%(h) Preferred share dividends 1.70% 1.69% 1.28% 0.55%(h) Net investment income available to common shareowners 4.25% 4.74% 5.04% 5.13%(h)
32 The accompanying notes are an integral part of these financial statements. Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- (a) The per common share data presented above is based upon the average common shares outstanding for the periods presented. (b) Trust shares were first publicly offered on January 28, 2004. (c) Net asset value immediately after the closing of the first public offering was $14.30. (d) Amount is less than $0.01 per common share. (e) Net asset value and market value are published in Barron's on Saturday, The Wall Street Journal on Monday and The New York Times on Monday and Saturday. (f) Total investment return is calculated assuming a purchase of common shares at the current market value on the first day and a sale at the current market value on the last day of the periods reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Trust's dividend reinvestment plan. Total investment return does not reflect brokerage commissions. Total investment return less than a full period is not annualized. Past performance is not a guarantee of future results. (g) Expense ratios do not reflect the effect of dividend payments to preferred shareowners. (h) Annualized. The information above represents the audited operating performance data for a common share outstanding, total investment return, ratios to average net assets of common shareowners and other supplemental data for the periods indicated. This information has been determined based upon financial information provided in the financial statements and market value data for the Trust's common shares. The accompanying notes are an integral part of these financial statements. 33 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 11/30/07 - -------------------------------------------------------------------------------- 1. Organization and Significant Accounting Policies Pioneer Municipal and Equity Income Trust (the Trust) is organized as a Delaware statutory trust and registered as a diversified, closed-end management investment company under the Investment Company Act of 1940. The Trust changed its name from Pioneer Tax Advantaged Balanced Trust effective November 7, 2007. The Trust's investment objective is to provide a high level of total after-tax return, including attractive tax-advantaged income. 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, and the reported amounts of income, expenses and gains and losses on investments during the reporting year. Actual results could differ from those estimates. The Trust may invest in municipal securities with a broad range of maturities and credit ratings, including both investment grade and below investment grade municipal securities. By concentrating in municipal securities, the portfolio is more susceptible to adverse economic, political or regulatory developments than is a portfolio that invests more broadly. Investments in the Trust are subject to possible loss due to the financial failure of underlying securities and their inability to meet their debt obligations. The Trust may also invest in common stocks and preferred securities that pay tax-qualified dividends. In addition, the Trust may invest in other securities, including debt instruments, real estate investment trusts ("REITs") and equity securities, that generate income taxable at ordinary income rates, rather than long-term capital gain rates. There can be no assurance as to the portion of the Trust's dividends that will be tax-exempt or tax-qualified. A portion of income may be subject to state, federal, and/or alternative minimum tax. Capital gains, if any, are subject to a capital gains tax. When interest rates rise, the prices of fixed-income securities in the Trust will generally fall. Conversely, when interest rates fall the prices of fixed-income securities in the Trust will generally rise. The Trust may invest in derivative securities, which may include futures and options. These types of instruments can increase price fluctuation. 34 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Information regarding the Trust's principal risks is contained in the Trust's original offering prospectus, with additional information included in the Trust's shareowner reports. Please refer to those documents when considering the Trust's risks. At times, the Trust's investments may represent industries or industry sectors that are interrelated or have common risks, making it more susceptible to any economic, political, or regulatory developments or other risks affecting those industries and sectors. The following is a summary of significant accounting policies followed by the Trust in preparation of its financial statements, which are consistent with those policies generally accepted in the investment company industry: A. Security Valuation Security transactions are recorded as of trade date. Debt 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. Equity securities are valued at the last sale price on the principal exchange where they are traded. The values of interest rate swaps are determined by obtaining dealer quotations. 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 Trust may also use the fair value of a security, including a non U.S. security, when the closing market price on the principal exchange where the security is traded no longer accurately reflects the value of the security as of the close of the exchange. At November 30, 2007, there were no securities fair valued. Temporary cash investments are valued at cost which approximates market value. 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 Trust becomes aware of the ex-dividend data in the exercise of reasonable diligence. Discount and premium on debt securities are accreted or amortized, respectively, daily, on an effective yield to maturity basis and are included in interest income. Interest income, including income on interest bearing cash accounts, is recorded on an accrual basis. 35 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 11/30/07 (continued) - -------------------------------------------------------------------------------- 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 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 Trust'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 November 30, 2007, the Trust reclassified $3,180,777 to decrease distribution in excess of net investment income, $856,768 to decrease net realized gain on investments and $2,324,009 to decrease paid-in capital. The reclassification has no impact on the net asset value of the Trust and presents the Trust's capital accounts on a tax basis. The tax character of current year distributions paid to common and preferred shareowners for the years ended November 30, 2007 and November 30, 2006 were as follows:
2007 2006 ----------- ----------- Distributions paid from: Tax-Exempt income $15,264,954 $13,521,779 Ordinary income* 17,015,419 13,026,310 Long-term capital gain 3,639,461 2,887,176 ----------- ----------- $35,919,834 $29,435,265 =========== ===========
* Included in the Trust's distributions from 2007 ordinary income is $2,324,009 ($0.08 per common share) in excess of investment company taxable income, which, in accordance with applicable U.S. tax law, is taxable to shareowners as ordinary income distributions. 36 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The following shows the components of distributable earnings on a federal income tax basis at November 30, 2007.
2007 ----------- Undistributed ordinary income $ - Undistributed long-term gains - Dividends payable (134,031) Unrealized appreciation 19,456,279 ----------- Total $19,322,248 ===========
The difference between book basis and tax basis unrealized appreciation is primarily attributable to the difference between book and tax amortization methods for premiums and discounts on fixed income securities and the accounting treatment for swap agreements. C. Automatic Dividend Reinvestment Plan All common shareowners automatically participate in the Automatic Dividend Reinvestment Plan (the "Plan"), under which participants receive all dividends and capital gain distributions (collectively, "dividends") in full and fractional common shares of the Trust in lieu of cash. Shareowners may elect not to participate in the Plan. Shareowners not participating in the Plan receive all dividends and capital gain distributions in cash. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by notifying American Stock Transfer & Trust Company, the agent for shareowners in administering the Plan (the "Plan Agent"), in writing prior to any dividend record date; otherwise such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution. Whenever the Trust declares a dividend on common shares payable in cash, participants in the Plan will receive the equivalent in common shares acquired by the Plan Agent either (i) through receipt of additional unissued but authorized common shares from the Trust or (ii) by purchase of outstanding common shares on the New York Stock Exchange or elsewhere. If, on the payment date for any dividend, the net asset value per common share is equal to or less than the market price per share plus estimated brokerage trading fees ("market premium"), the Plan Agent will invest the 37 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 11/30/07 (continued) - -------------------------------------------------------------------------------- dividend amount in newly issued common shares. The number of newly issued common shares to be credited to each account will be determined by dividing the dollar amount of the dividend by the net asset value per common share on the date the shares are issued, provided that the maximum discount from the then current market price per share on the date of issuance does not exceed 5%. If, on the payment date for any dividend, the net asset value per common share is greater than the market value ("market discount"), the Plan Agent will invest the dividend amount in common shares acquired in open-market purchases. There are no brokerage charges with respect to newly issued common shares. However, each participant will pay a pro rata share of brokerage trading fees incurred with respect to the Plan Agent's open-market purchases. Participating in the Plan does not relieve shareowners from any federal, state or local taxes which may be due on dividends paid in any taxable year. Shareowners holding Plan shares in a brokerage account may not be able to transfer the shares to another broker and continue to participate in the Plan. 2. Management Agreement Pioneer Investment Management, Inc. ("PIM"), a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. ("UniCredito Italiano"), manages the Trust's portfolio. Management fees payable under the Trust's Management Agreement with PIM are calculated daily at the annual rate of 0.60% of the Trust's average daily managed assets. "Managed assets" is the average daily value of the Trust's total assets minus the sum of the Trust's liabilities, which liabilities exclude debt related to leverage, short-term debt and the aggregate liquidation preference of any outstanding preferred shares. Also, PIM agreed for the first three years of the Trust's investment operations (January 28, 2004 - February 1, 2007) to limit the Trust's total annual expenses, excluding offering costs for common and preferred shares, interest expense, the cost of defending or prosecuting any claim or litigation to which the Trust is a party (together with any amount in judgment or settlement), indemnification expenses or taxes incurred due to the failure of the Trust to qualify as a regulated investment company under the Code or any other non-recurring or non-operating expenses, to 0.80% of the Trust's average daily managed assets. The dividend on any preferred shares was not an expense for this purpose. For the year ended November 30, 2007, the Trust's 38 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- expenses were not reduced under such arrangements. For the year ended, November 30, 2007, the net management fee was equivalent to 0.60% of the Trust's average daily managed assets, which was equivalent to 0.83% of the Trust's average daily net assets attributable to common shareowners. As of February 2, 2007, this expense limitation is no longer in effect. In addition, under PIM's management and administration agreements, certain other services and costs are paid by PIM and reimbursed by the Trust. Included in "Due to affiliates" reflected on the Statement of Assets and Liabilities is $304,839 in management costs, administrative costs and certain other fees payable to PIM at November 30, 2007. The Trust has retained Princeton Administrators, LLC, ("Princeton") to provide certain administrative services to the Trust on its behalf. The Trust pays Princeton a monthly fee at an annual rate of 0.07% of the average daily value of the Trust's managed assets up to $500 million and 0.03% for average daily managed assets in excess of $500 million, subject to a minimum monthly fee of $10,000. 3. Transfer Agents Pioneer Investment Management Shareholder Services, Inc. ("PIMSS"), a wholly owned indirect subsidiary of UniCredito Italiano, through a sub-transfer agency agreement with American Stock Transfer & Trust Company, provides substantially all transfer agent and shareowner services related to the Trust's common shares at negotiated rates. Deutsche Bank Trust Company Americas ("Deutsche Bank") is the transfer agent, registrar, dividend paying agent and redemption agent with respect to the Trust's Auction Market Preferred Shares ("AMPS"). The Trust pays Deutsche Bank an annual fee, as is agreed to from time to time by the Trust and Deutsche Bank, for providing such services. 4. Expense Offset Arrangements The Trust has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Trust's custodian expenses. For the year ended November 30, 2007, the Trust expenses were reduced by $523 under such arrangements. 39 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 11/30/07 (continued) - -------------------------------------------------------------------------------- 5. Interest Rate Swaps The Trust may enter into interest rate swap transactions to attempt to protect itself from increasing dividend or interest expense on its leverage resulting from increasing short-term interest rates. The cost of leverage may rise with an increase in interest rates, generally having the effect of lower yields and potentially lower dividends to common shareowners. Interest rate swaps can be used to "lock in" the cost of leverage and reduce the negative impact that rising short-term interest rates would have on the Trust's leveraging costs. An interest rate swap is an agreement between two parties, which involves exchanging a floating rate and fixed rate interest payments for a specified period of time. Interest rate swaps involve the accrual of the net interest payments between the parties on a daily basis, with the net amount recorded within the unrealized appreciation/ depreciation of interest rate swaps on the Statement of Assets and Liabilities. Once the interim payments are settled in cash, at the pre-determined dates specified in the agreement, the net amount is recorded as realized gain or loss from interest rate swaps on the Statement of Operations. During the term of the swap, changes in the value of the swap are recognized as unrealized gains and losses by "marking-to market" the market value of the swap based on values obtained from dealer quotations. When the swap is terminated, the Trust will record a realized gain or loss equal to the difference, if any, between the proceeds from (or cost of) closing the contract and the cost basis of the contract. The Trust is exposed to credit risk in the event of non-performance by the other party to the interest rate swap. However, at November 30, 2007 the Trust does not anticipate non-performance by any counterparty. Risk may also arise with regard to market movements in the value of the swap arrangement that do not exactly offset the changes in the related dividend requirement or interest expense on the Trust's leverage. Under the terms of the agreement entered into by the Trust, the Trust receives a floating rate of interest and pays a fixed rate of interest for the term. Details of the swap agreement outstanding as of November 30, 2007 were as follows:
Termination Notional Unrealized Counterparty Date Amount (000) Fixed Rate Floating Rate Appreciation - ----------------------------------------------------------------------------------------- UBS AG Sept. 1, 2009 $106,000 2.855% 1 month BMA $88,363
40 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 6. Trust Shares There are an unlimited number of common shares of beneficial interest authorized. Of the 28,706,981 common shares of beneficial interest outstanding at November 30, 2007, PIM owned 6,981 shares. During the year ended November 30, 2007 and year ended November 30, 2006, there were no share transactions by the Trust. All reinvested distributions were satisfied with previously issued shares purchased in the open market by the Plan Agent and credited to shareowner accounts. The Trust may classify and reclassify any unissued common shares of beneficial interest into one or more series of preferred shares of beneficial interest. As of November 30, 2007, there were 7,050 AMPS as follows: Series T7-2,350, Series F7-2,350 and Series TH28-2,350. Dividends on Series T7 and Series F7 are cumulative at a rate which is reset every seven days based on the results of an auction. Dividends on Series TH28 are also cumulative at a rate reset every 28 days based on the results of an auction. Dividend rates ranged from 4.00% to 6.20% during the year ended November 30, 2007. The Trust may not declare dividends or make other distributions on its common shares or purchase any such shares if, at the time of the declaration, distribution or purchase, asset coverage with respect to the outstanding preferred shares would be less than 200%. The AMPS are redeemable at the option of the Trust, in whole or in part, on any dividend payment date at $25,000 per share plus any accumulated or unpaid dividends, whether or not declared. The AMPS are also subject to mandatory redemption at $25,000 per share plus any accumulated or unpaid dividends, whether or not declared, if certain requirements relating to the composition of the assets and liabilities of the Trust as set forth in the Agreement and Declaration of Trust are not satisfied. The holders of AMPS have voting rights equal to the holders of the Trust's common shares (one vote per share) and will vote together with holders of the common shares as a single class. However, holders of AMPS are also entitled to elect two of the Trust's Trustees. In addition, the Investment Company Act of 1940, as amended, requires that along with approval by shareowners that might otherwise be required, the approval of the holders of a majority of any outstanding 41 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 11/30/07 (continued) - -------------------------------------------------------------------------------- preferred shares, voting separately as a class, would be required to (a) adopt any plan of reorganization that would adversely affect the preferred shares and (b) take any action requiring a vote of security holders, including, among other things, changes in the Trust's subclassification as a closed-end investment company or changes in its fundamental investment restrictions. 7. New Pronouncements On July 13, 2006, the Financial Accounting Standards Board ("FASB") released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Trust's tax returns to determine whether the tax positions have a "more-likely-than-not" probability of being sustained by the applicable tax authority. Tax positions deemed to not meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the reporting period in which they are realized. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of no later than May 31, 2008. At this time, management is evaluating the implications of FIN 48 and any impact in the financial statements has not yet been determined. In September 2006, Statement of Financial Accounting Standards No. 157 Fair Value Measurements ("SFAS 157") was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. At this time, management is currently evaluating the implications of SFAS 157, and its impact on the Trust's financial statement disclosures, if any, has not yet been determined. 8. Distributions On June 19, 2007, the Trustees of the Trust voted to adopt a level distribution policy. The Trust's level distribution policy is meant to provide investors with a relatively stable monthly distribution out of a combination of current net investment income, short-term gains and paid-in capital beginning with the July 2007 payment. The Trust has applied to the Securities and Exchange Commission for exemptive 42 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- relief to allow the Trust to include long-term capital gains in its monthly distributions. The exact amount of the monthly distributions may be adjusted from time to time by the Trustees to reflect current conditions. However, under the Investment Company Act of 1940, the Trust is required to estimate and indicate the source of each monthly distribution to its shareowners. This estimated source is likely to vary from month to month because it may be materially affected by changes in the cumulative level and composition of the Trust's actual earnings from its investment activities and the level of expenses. Shareowners should understand that distributions from paid-in capital (i.e., return of capital) are not from earnings of the Trust. Such return of capital components of the Trust's monthly distributions do not necessarily reflect the Trust's investment performance and should not be confused with "yield" or "income" of the Trust. At December 31 each year the Trust will determine what portion, if any, of the previously reported distributions from paid-in capital need to be re-characterized for tax purposes as taxable ordinary income and reportable to shareowners and the IRS on Form 1099 DIV. In January 2008, shareowners will receive a Form 1099 DIV, which will show the amount and composition of all 2007 distributions paid to them from the Trust. That form will provide shareowners with information as to the appropriate tax treatment of each component. Subsequent to November 30, 2007, the Board of Trustees of the Trust declared a dividend from undistributed net investment income of $0.112 per common share payable December 20, 2007 to common shareowners of record on December 12, 2007. Subsequent to November 30, 2007, dividends declared and paid on preferred shares totaled $856,810 in aggregate for the three outstanding preferred share series through January 18, 2008. 43 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 11/30/07 (continued) - -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (unaudited) During the 12 month period ended November 30, 2007, (i) there were no material changes in the Trust's investment objective or fundamental policies that were not approved by the shareowners, except that in connection with the Trust's name change, the Board of Trustees approved the adoption by the Trust in accordance with Rule 35d-1 under the Investment Company Act of 1940, as amended, of (a) a new non-fundamental policy that at least 80% of the Trust's assets will be invested in municipal securities and equity securities, and (b) a new fundamental policy that the Trust will attempt to invest its assets so that the income derived from municipal securities that it distributes will be exempt from regular federal income tax, except when investing for "defensive purposes"; (ii) there were no changes in the Trust's charter or By-Laws that would delay or prevent a change in control of the Trust which have not been approved by the shareowners and; (iii) there were no changes in the principal risk factors associated with investment in the Trust. Day-to-day management of the Trust's portfolio of municipal securities is the responsibility of David Eurkus. Mr. Eurkus is supported by the fixed-income team. Members of this team manage other Pioneer funds investing primarily in fixed-income securities. Mr. Eurkus joined Pioneer as a senior vice president in January 2000 and has been an investment professional since 1969. Day-to-day management of the Trust's portfolio of equity securities is the responsibility of Walter Hunnewell, Jr. Mr. Hunnewell is supported by the domestic equity team. Members of this team manage other Pioneer funds investing primarily in U.S. equity securities. Mr. Hunnewell, a vice president, joined Pioneer in August 2001 and has been an investment professional since 1985. The portfolio managers and each team also may draw upon the research and investment management expertise of the global research teams, which provide quantitative and fundamental research on companies and include members from Pioneer's affiliate, Pioneer Investment Management Limited (PIML). Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Trust may purchase, from time to time, its common shares in the open market. CEO CERTIFICATION DISCLOSURE (unaudited) The Trust's Chief Executive Officer has submitted to the New York Stock Exchange the annual CEO certification as required by Section 44 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 303A.12(a) of the NYSE Listed Company Manual. In addition, the Trust has filed with the Securities and Exchange Commission the certification of its Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act. IMPORTANT TAX INFORMATION (unaudited) The following information is provided with respect to the distributions paid by Pioneer Municipal and Equity Income Trust during the taxable year ended November 30, 2007: COMMON SHAREHOLDERS
Qualified Dividends Dividend Received Long-Term Tax-Exempt Income for Deduction for Capital Payable Date(s) Income Individuals + Corporations + Gains - -------------------------------------------------------------------------------- December, 2006 46.33% 79.63% 70.32% None January 2007 33.09% 60.72% 54.16% 13.12% February 2007 - June 2007 55.22% 100% 89.64% None July 2007 - October 2007 46.47% 81.04% 63.44% None November 2007 5.13% 15.86% 11.66% 74.59%
PREFERRED SHAREHOLDERS (Classes T, TH & F)
Qualified Dividends Dividend Received Long-Term Tax-Exempt Income for Deduction for Capital Payable Date(s) Income Individuals + Corporations + Gains - -------------------------------------------------------------------------------- December, 2006 33.09% 60.72% 54.16% None January - June 2007 55.22% 100% 89.64% None July 2007 - November 2007 31.21% 65.70% 48.46% 20.70%
+ Expressed as a percentage of the ordinary income distributions paid. The Trust hereby designates the percentage indicated or the allowable amount by law. 45 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 11/30/07 (continued) - -------------------------------------------------------------------------------- The following summarizes the per share long-term capital distributions paid by the Trust during the year: COMMON SHAREHOLDERS
Long-Term Payable Date Capital Gains - -------------- -------------- 1/12/2007 $0.011562 11/30/2007 $0.083536
PREFERRED SHAREOWNERS
Payable Long-Term Series Date Capital Gains - -------- ------------ -------------- T 1/10/2007 $16.11 T 8/22/2007 $ 0.67 T 8/29/2007 $ 8.87 T 9/05/2007 $ 9.13 T 9/12/2007 $ 9.03 T 9/19/2007 $ 8.83 T 9/26/2007 $ 8.65 T 10/03/2007 $ 7.66 T 10/10/2007 $ 8.04 T 10/17/2007 $ 7.71 T 10/24/2007 $ 6.27 T 10/31/2007 $ 6.98 T 11/07/2007 $ 6.41 T 11/14/2007 $ 6.31 T 11/21/2007 $ 7.38 T 11/28/2007 $ 7.90 H 2/16/2007 $16.46 H 8/31/2007 $ 9.71 H 9/28/2007 $36.90 H 10/26/2007 $37.86 H 11/23/2007 $31.60
46 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PREFERRED SHAREOWNERS (continued)
Payable Long-Term Series Date Capital Gains - ---------------------------------------- F 1/08/2007 $16.31 F 8/27/2007 $ 7.17 F 9/04/2007 $ 9.92 F 9/10/2007 $ 7.84 F 9/17/2007 $ 8.83 F 9/24/2007 $ 8.83 F 10/01/2007 $ 8.82 F 10/09/2007 $ 9.92 F 10/15/2007 $ 6.88 F 10/22/2007 $ 7.43 F 10/29/2007 $ 7.28 F 11/05/2007 $ 7.22 F 11/13/2007 $ 8.15 F 11/19/2007 $ 5.76 F 11/26/2007 $ 7.73
47 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Board of Trustees and Shareowners of Pioneer Municipal and Equity Income Trust: We have audited the accompanying statement of assets and liabilities of Pioneer Municipal and Equity Income Trust (formerly "Pioneer Tax Advantaged Balanced Trust") (the "Trust"), including the schedule of investments, as of November 30, 2007, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Trust's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2007, by correspondence with the custodian and brokers or by other appropriate auditing procedures when replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Pioneer Municipal and Equity Income Trust at November 30, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts January 23, 2008 48 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- RESULTS OF SHAREOWNER MEETING (unaudited) - -------------------------------------------------------------------------------- On June 8, 2007, Pioneer Municipal and Equity Income Trust (formerly, Pioneer Tax Advantaged Balanced Trust) held its annual meeting of shareholders. Proposal 1 - Election of Class III Trustees The Trust's Board of Trustees nominated David R. Bock, Stephen K. West and John F. Cogan, Jr. as Class III Trustees. A shareholder of record nominated Arthur D. Lipson, Robert Ferguson and Matthew Crouse as Class III Trustees. Another shareholder of record nominated Ralph W. Bradshaw, Andrew A. Strauss and Glen Wilcox, Sr. as Class III Trustees. As shown below, owners of the common shares and the preferred shares, voting as a single class, elected Arthur D. Lipson and Robert Ferguson as Class III Trustees to serve for a term expiring on the date on which the annual meeting of shareholders is held in 2010.
Nominee Affirmative Withheld - ------------------------------------------------ David R. Bock* 6,684,183 243,749 Stephen K. West* 6,681,816 246,116 Arthur D. Lipson* 8,632,980 92,712 Robert Ferguson* 8,631,465 94,227 Ralph W. Bradshaw* 80,388 0 Andrew A. Strauss* 80,388 0 John F. Cogan, Jr.** 1,599 17 Matthew S. Crouse** 53 0 Glen Wilcox, Sr.** 0 0
* Designated as trustees to be elected by holders of common and preferred shares, voting together as a single class. ** Designated as the trustee to be elected by holders of preferred shares voting separately. The election of the Trustee designated to be elected by the holders of the Trust's preferred shares was adjourned until July 19, 2007 due to a lack of a quorum. There was also no quorum present at the adjourned annual meeting of shareholders. In light of the limited prospects of obtaining quorum, and the costs associated with the continued solicitation of proxies from holders of preferred shares, 49 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- RESULTS OF SHAREOWNER MEETING (continued) - -------------------------------------------------------------------------------- it was determined that the annual meeting would be adjourned indefinitely as to the remaining proposal. Accordingly, John F. Cogan, Jr. will continue to serve as a Class III Trustee until the next annual meeting of shareholders. Proposal 2A - To adopt a managed distribution policy A shareowner of record submitted Proposal 2A. The Trust's shareowners did not approve Proposal 2A as shown below.
For Against Abstain - ------------------------------------ 5,031,797 7,421,100 3,281,112
Proposal 2B - To change the Trust's investment objective to seek capital appreciation with current income as a secondary objective A shareowner of record submitted Proposal 2B. The Trust's shareowners did not approve Proposal 2B as shown below.
For Against Abstain - ------------------------------------ 3,832,935 8,631,523 3,269,552
50 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- APPROVAL OF INVESTMENT ADVISORY AGREEMENT - -------------------------------------------------------------------------------- Pioneer Investment Management, Inc. ("PIM") serves as the Trust's investment adviser pursuant to an investment advisory agreement between PIM and the Trust. The Trustees of the Trust, as required by law, determine annually whether to continue the investment advisory agreement for the Trust. In connection with their most recent consideration of the investment advisory agreement for the Trust, the Trustees received and reviewed a substantial amount of information provided by PIM in response to requests of the independent Trustees and their independent legal counsel. The independent Trustees met on a number of occasions with PIM and also separately with their independent legal counsel to evaluate and discuss the information provided to them by PIM. At a meeting held on September 17, 2007, based on their evaluation of the information provided by PIM and the sub-adviser, the majority of the Trustees, including the majority of the independent Trustees voting separately, approved the continuation of the investment advisory agreement for another year. In considering the continuation of the investment advisory agreement, the Trustees considered various factors that they determined were relevant, including the factors described below. The Trustees did not identify any single factor as the controlling factor in determining to approve the continuation of the agreements. Nature, Extent and Quality of Services Provided In considering the nature, extent and quality of the services provided by PIM under the investment advisory agreement, the Trustees considered that PIM was responsible for the management of the Trust's operations. The Trustees reviewed the terms of the investment advisory agreement and reviewed information provided by PIM relating to its operations and personnel. They considered that PIM provides day-to-day management of the Trust's portfolio of investments, including making purchases and sales of portfolio securities consistent with the Trust's investment objectives and policies. The Trustees reviewed each portfolio manager's experience and qualifications, as well as PIM's investment approach and research process. The Board considered PIM's resources and personnel, focusing in particular on investment management, legal and compliance resources and personnel. The Trustees also considered that, as administrator, PIM is responsible for the administration of the Trust's business and other affairs. It was noted that PIM supervises and monitors the performance of the Trust's 51 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- APPROVAL OF INVESTMENT ADVISORY AGREEMENT (continued) - -------------------------------------------------------------------------------- service providers and provides the Trust with personnel (including officers) as are necessary for the Trust's operations. The Trustees considered the fees paid to PIM for the provision of such services. Taking all of the foregoing into account, the majority of the Trustees concluded that the nature, extent and quality of services provided to the Trust by PIM are sufficient for renewal of the investment advisory agreement. Performance of the Trust The Trustees reviewed the Trust's investment performance, based on total return, as well as the Trust's performance compared to the performance of both a peer group of funds as classified by Morningstar, Inc. (Morningstar) and an index approved by the independent Trustees for this purpose. The Trust's performance, based upon total return, was in the second quintile of its Morningstar category peer group for the 12 months ended June 30, 2007 and its three year annualized total return as of June 30, 2007 was also in the second quintile of its Morningstar category peer group. The Trustees noted that the yield (gross of expenses) to the Trust's common shareowners exceeded the yield (at June 30, 2007) of the Lehman Municipal Bond Index and the Standard & Poor's Stock 500 Index for the twelve months ended June 30, 2007. The Trustees noted the challenge of selecting a comparable peer group for performance purposes. (In all quintile rankings referred to throughout this disclosure, first quintile is most favorable to the Trust's shareowners. Thus, highest relative performance would be first quintile and lowest relative expenses would also be first quintile.) The majority of Trustees concluded that the performance of the Trust was sufficient for renewal of the investment advisory agreement. Management Fees and Expenses The Trustees considered PIM's fee under the investment advisory agreement relative to the management fees charged by a peer group of funds selected by the independent Trustees for this purpose using data provided by Strategic Insight Mutual Trust Research and Consulting, LLC (Strategic Insight). The Trust's management fee for the 12 months ended June 30, 2007 was in the first quintile, according to Strategic Insight, relative to the management fees paid by the other funds in the peer group for the comparable period. The Trustees also considered the Trust's expense ratio for the 12 months ended June 30, 2007 and expense ratios for the comparable period of the Strategic Insight peer group. The Trust's expense ratio for the 12 months ended 52 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- June 30, 2007 was in the first quintile, according to Strategic Insight, relative to the total expense ratios of the other funds in the peer group for the comparable period. The Trustees noted the challenge of selecting a comparable peer group for expense comparison purposes. The majority of the Trustees concluded that the advisory fee, within the overall context of their deliberations, was reasonable. Profitability The Trustees reviewed information concerning the costs of the services provided to the Trust by PIM, and the profitability to PIM of its advisory and administrative relationship with Trust, along with a description of the methodology used by PIM in preparing the profitability information. The Trustees recognized that PIM should be entitled to earn a reasonable level of profit for the services provided to the Trust, and that it is difficult to make comparisons of profitability from fund advisory and administration contracts. The majority of the Trustees concluded that, taking all of the foregoing into account, they were satisfied that PIM's level of profitability on a pre-tax basis for both advisory services and all services provided to the Trust was not excessive. Economies of Scale The Trustees considered the extent to which PIM may realize economies of scale or other efficiencies in managing and supporting the Trust. Since the Trust is a closed-end fund and its size is relatively stable at an asset level that was anticipated when the management fee was initially set, the majority of the Trustees concluded that economies of scale were not a relevant consideration. Other Benefits The Trustees also considered the character and amount of fees paid by the Trust, other than under the investment advisory agreement, for services provided by PIM and its affiliates. The Trustees further considered the revenues and profitability of PIM's businesses other than the fund business. The Trustees also considered the intangible benefits that accrue to PIM and its affiliates by virtue of its relationship with the Trust and the Pioneer funds as a group. The majority of the Trustees concluded that the other benefits to PIM from its relationship with the Trust were acceptable. 53 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- APPROVAL OF INVESTMENT ADVISORY AGREEMENT (continued) - -------------------------------------------------------------------------------- Conclusion After consideration of the factors described above as well as other factors, the majority of Trustees, including a majority of the independent Trustees, concluded that the investment advisory agreement between PIM and the Trust, including the fees payable thereunder, were fair and reasonable and voted to approve the proposed continuation of the investment advisory agreement for the Trust. 54 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- TRUSTEES, OFFICERS AND SERVICE PROVIDERS - -------------------------------------------------------------------------------- Investment Adviser Pioneer Investment Management, Inc. Custodian Brown Brothers Harriman & Co. Independent Registered Public Accounting Firm Ernst & Young LLP Legal Counsel Bingham McCutchen LLP Transfer Agent Pioneer Investment Management Shareholder Services, Inc. Shareowner Services and Sub-Transfer Agent American Stock Transfer & Trust Company Preferred Share Auction/Transfer Agent and Registrar Deutsche Bank Trust Company Americas Sub-Administrator Princeton Administrators, LLC Trustees and Officers The Board of Trustees provides broad supervision over the Trust's affairs. The officers of the Trust are responsible for the Trust's operations. The Trustees and officers are listed below, together with their principal occupations during the past five years. Trustees who are interested persons of the Trust within the meaning of the 1940 Act are referred to as Interested Trustees. Trustees who are not interested persons of the Trust are referred to as Independent Trustees. Each of the Trustees (except Mr. Kingsbury, Mr. Ferguson and Mr. Lipson) serves as a Trustee of each of the 76 U.S. registered investment portfolios for which Pioneer serves as investment adviser (the "Pioneer Funds"). Mr. Kingsbury serves as Trustee of 33 of the 76 Pioneer Funds. Mr. Ferguson and Mr. Lipson each serve as Trustee of only this fund. The address for all Trustees (except Mr. Ferguson and Mr. Lipson, whose addresses are listed under their names) and all officers of the Trust is 60 State Street, Boston, Massachusetts 02109. Proxy Voting Policies and Procedures of the Trust are available without charge, upon request, by calling our toll free number (1-800-225-6292). Information regarding how the Trust voted proxies relating to portfolio securities during the most recent 12 months ended June 30, 2007 is publicly available to shareowners at pioneerinvestments.com. This information is also available on the Securities and Exchange Commission's web site at http://www.sec.gov. 55 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- INTERESTED TRUSTEES - --------------------------------------------------------------------------------
Position Held Length of Service Name and Age With the Trust and Term of Office John F. Cogan, Jr. (81)* Chairman of the Class III Trustee since Board, Trustee and 2004. Term expires President in 2010. Elected by Preferred Shares only. - -------------------------------------------------------------------------------- Daniel K. Kingsbury (49)* Trustee and Executive Class I Trustee since Vice President 2007. Term expires in 2008. - -------------------------------------------------------------------------------- Other Directorships Held Name and Age Principal Occupation During Past Five Years by this Trustee John F. Cogan, Jr. (81)* Deputy Chairman and a Director of Pioneer Global Asset None Management S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of Pioneer; Chairman and Director of Pioneer Institutional Asset Management, Inc. (since 2006); Director of Pioneer Alternative Investment Management Limited (Dublin); President and a Director of Pioneer Alternative Investment Management (Bermuda) Limited and affiliated funds; Direc- tor of PIOGLOBAL Real Estate Investment Fund (Russia) (until June 2006); Director of Nano-C, Inc. (since 2003); Director of Cole Management Inc. (since 2004); Director of Fiduciary Counseling, Inc.; President and Director of Pioneer Funds Distributor, Inc. ("PFD") (until May 2006); President of all of the Pioneer Funds; and Of Counsel, Wilmer Cutler Pickering Hale and Dorr LLP - ----------------------------------------------------------------------------------------------------------------- Daniel K. Kingsbury (49)* Director, CEO and President of Pioneer Investment None Management USA Inc., Pioneer Investment Management, Inc. and Pioneer Institutional Asset Management, Inc. (since March 2007); Executive Vice President of all of the Pioneer Funds (since March 2007); Director of Pioneer Global Asset Management S.p.A. (since March 2007); Head of New Markets Division, Pioneer Global Asset Management S.p.A. (2000 - 2007) - -----------------------------------------------------------------------------------------------------------------
56 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------
Position Held Length of Service Name, Age and Address With the Trust and Term of Office Mary K. Bush (59) Trustee Class II Trustee since 2003. Term expires in 2009. - -------------------------------------------------------------------------------- Robert Ferguson (51) Trustee Class III Trustee since Benchmark Plus Partners 2007. Term expires 820 A Street in 2010. Suite 700 Tacoma, WA 98402 - -------------------------------------------------------------------------------- Margaret B.W. Graham (60) Trustee Class I Trustee since 2003. Term expires in 2008. - -------------------------------------------------------------------------------- Other Directorships Held Name, Age and Address Principal Occupation During Past Five Years by this Trustee Mary K. Bush (59) President, Bush International, LLC (international financial Director of Brady Corpora- advisory firm) tion (industrial identifica- tion and specialty coated material products manufacturer); Director of Briggs & Stratton Co. (engine manufacturer); Director of UAL Corpora- tion (airline holding company); Director of Mantech International Corporation (national security, defense, and intelligence technology firm): and Member, Board of Governors, Investment Company Institute - ----------------------------------------------------------------------------------------------------------------------- Robert Ferguson (51) Principal, Benchmark Plus Management, L.L.C., (invest- None Benchmark Plus Partners ment advisor) (2003 - present); President, Paradigm 820 A Street Partners NW, Inc. (investment advisor) (1998 - present) Suite 700 Tacoma, WA 98402 - ----------------------------------------------------------------------------------------------------------------------- Margaret B.W. Graham (60) Founding Director, Vice-President and Corporate Secretary, None The Winthrop Group, Inc. (consulting firm); and Desautels Faculty of Management, McGill University - -----------------------------------------------------------------------------------------------------------------------
57 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES
Position Held Length of Service Name, Age and Address With the Trust and Term of Office Arthur D. Lipson (65) Trustee Class III Trustee since Western Investment LLC 2007. Term expires 7050 South Union Park Center in 2010. Suite 590 Midvale, UT 84047 - -------------------------------------------------------------------------------- Thomas J. Perna (57) Trustee Class II Trustee since 2006. Term expires in 2009. - -------------------------------------------------------------------------------- Marguerite A. Piret (59) Trustee Class II Trustee since 2003. Term expires in 2009. Elected by Preferred Shares only. - -------------------------------------------------------------------------------- John Winthrop (71) Trustee Class I Trustee since 2003. Term expires in 2008. - -------------------------------------------------------------------------------- Other Directorships Held Name, Age and Address Principal Occupation During Past Five Years by this Trustee Arthur D. Lipson (65) Manager, Western Investment LLC (investment manage- None Western Investment LLC ment) (1995 - present) 7050 South Union Park Center Suite 590 Midvale, UT 84047 - ------------------------------------------------------------------------------------------------------------------- Thomas J. Perna (57) Private investor (2004 - present); and Senior Executive Director of Quadriserv Vice President, The Bank of New York (financial and Inc. (technology products securities services) (1986 - 2004) for securities lending industry) - ------------------------------------------------------------------------------------------------------------------- Marguerite A. Piret (59) President and Chief Executive Officer, Newbury, Piret & Director of New America Company, Inc. (investment banking firm) High Income Fund, Inc. (closed-end investment company) - ------------------------------------------------------------------------------------------------------------------- John Winthrop (71) President, John Winthrop & Co., Inc. (private invest- None ment firm) - -------------------------------------------------------------------------------------------------------------------
58 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- FUND OFFICERS - --------------------------------------------------------------------------------
Position Held Length of Service Name and Age With the Trust and Term of Office Dorothy E. Bourassa (59) Secretary Since 2003. Serves at the discretion of the Board - -------------------------------------------------------------------------------- Christopher J. Kelley (42) Assistant Secretary Since 2003. Serves at the discretion of the Board - -------------------------------------------------------------------------------- Vincent Nave (62) Treasurer Since 2003. Serves at the discretion of the Board - -------------------------------------------------------------------------------- Mark E. Bradley (48) Assistant Treasurer Since 2004. Serves at the discretion of the Board - -------------------------------------------------------------------------------- Luis I. Presutti (42) Assistant Treasurer Since 2003. Serves at the discretion of the Board - -------------------------------------------------------------------------------- Gary Sullivan (49) Assistant Treasurer Since 2003. Serves at the discretion of the Board - -------------------------------------------------------------------------------- Other Directorships Held Name and Age Principal Occupation During Past Five Years by this Officer Dorothy E. Bourassa (59) Secretary of PIM-USA; Senior Vice President - Legal of None Pioneer; Secretary/Clerk of most of PIM-USA's subsidiar- ies; and Secretary of all of the Pioneer Funds since September 2003 (Assistant Secretary from November 2000 to September 2003) - ------------------------------------------------------------------------------------------------------------------- Christopher J. Kelley (42) Vice President and Senior Counsel of Pioneer since July None 2002 and Assistant Secretary of all of the Pioneer Funds since September 2003; Vice President and Senior Counsel of BISYS Fund Services, Inc. (April 2001 to June 2002); Senior Vice President and Deputy General Counsel of Funds Distributor, Inc. (July 2000 to April 2001) - ------------------------------------------------------------------------------------------------------------------- Vincent Nave (62) Vice President - Fund Accounting, Administration and None Controllership Services of Pioneer; and Treasurer of all of the Pioneer Funds - ------------------------------------------------------------------------------------------------------------------- Mark E. Bradley (48) Deputy Treasurer of Pioneer since 2004 and Assistant None Treasurer of all of the Pioneer Funds since November 2004; Treasurer and Senior Vice President, CDC IXIS Asset Management Services from 2002 to 2003 - ------------------------------------------------------------------------------------------------------------------- Luis I. Presutti (42) Assistant Vice President - Fund Accounting, Administration None and Controllership Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds - ------------------------------------------------------------------------------------------------------------------- Gary Sullivan (49) Fund Accounting Manager - Fund Accounting, Administra- None tion and Controllership Services of Pioneer; and Assistant Treasurer of all of the Pioneer Funds - -------------------------------------------------------------------------------------------------------------------
59 Pioneer Municipal and Equity Income Trust - -------------------------------------------------------------------------------- FUND OFFICERS - --------------------------------------------------------------------------------
Other Directorships Position Held Length of Service Principal Occupation Held by Name and Age With the Trust and Term of Office During Past Five Years this Officer Katherine Kim Sullivan (33) Assistant Treasurer Since 2003. Serves Fund Administration Manager - Fund None at the discretion of Accounting, Administration and the Board Controllership Services since June 2003 and Assistant Treasurer of all of the Pioneer Funds since September 2003; Assistant Vice President - Mutual Fund Operations of State Street Corporation from June 2002 to June 2003 (formerly Deutsche Bank Asset Management) - ------------------------------------------------------------------------------------------------------------------------------------ Teri W. Anderholm (48) Chief Compliance Since January 2007. Chief Compliance Officer of Pioneer None Officer Serves at the discre- since December 2006 and of all the tion of the Board Pioneer Funds since January 2007; Vice President and Compliance Officer, MFS Investment Management (August 2005 to December 2006); Consultant, Fidelity Investments (February 2005 to July 2005); Independent Consultant (July 1997 to February 2005) - ------------------------------------------------------------------------------------------------------------------------------------ * Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are officers or directors of the fund's investment adviser and certain of its affiliates. The outstanding capital stock of PFD, Pioneer and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest banking groups in Italy. Pioneer, the Trust's investment adviser, provides investment management and financial services to mutual funds, institutional and other clients.
60 - -------------------------------------------------------------------------------- HOW TO CONTACT PIONEER - -------------------------------------------------------------------------------- We are pleased to offer a variety of convenient ways for you to contact us for assistance or information. You can call American Stock Transfer & Trust Company (AST) for:
Account Information 1-800-710-0935 Or write to AST: For Write to General inquiries, lost dividend checks, American Stock change of address, lost stock certificates, Transfer & Trust stock transfer Operations Center 6201 15th Ave. Brooklyn, NY 11219 Dividend reinvestment plan (DRIP) American Stock Transfer & Trust Company Wall Street Station P.O. Box 922 New York, NY 10269-0560 Website www.amstock.com
For additional information, please contact your investment advisor or visit our web site www.pioneerinvestments.com. The Trust files a complete statement of investments with the Securities and Exchange Commission for the first and 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, DC. Information regarding the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Trust's Chief Executive Officer is required by the New York Stock Exchange's Listing Standards to file annually with the Exchange a certification that he is not aware of any violation by the Trust of the Exchange's Corporate Governance Standards applicable to the Trust. The Trust has filed such certification. COVER 16 filename16.txt Bingham McCutchen LLP One Federal Street Boston, MA 02110 June 18, 2008 Securities and Exchange Commission Division of Investment Management 100 F Street, N.E. Washington, DC 20549 Re: Pioneer Tax Free Income Fund Registration Statement on Form N-14 (File No. 811-02704) Ladies and Gentlemen: On behalf of our client, Pioneer Tax Free Income Fund, a Delaware statutory trust (the "Fund"), we are hereby filing a combined proxy and registration statement on Form N-14, with exhibits (the "Registration Statement"). The Registration Statement relates to a proposed Agreement and Plan of Merger whereby Pioneer Municipal and Equity Income Trust, a Delaware statutory trust and a closed-end management investment company, will merge with and into the Fund, an open-end management investment company. The Registration Statement is being filed pursuant to Rule 488 under the Securities Act of 1933, as amended. It is proposed that this filing will become effective on July 18, 2008 pursuant to Rule 488. Please call the undersigned at (617) 951-8760 or Jeremy Kantrowitz at (617) 951-8458 with any questions relating to the filing. Sincerely, /s/ Toby R. Serkin Toby R. Serkin -----END PRIVACY-ENHANCED MESSAGE-----