BINGHAM McCUTCHEN LLP
ONE FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
April 8, 2013
VIA EDGAR
Securities and Exchange Commission
Division of Investment Management
100 F Street, NE
Washington, D.C. 20549
Re:Pioneer Form N-14:
Pioneer Independence Fund (File No. 333-187078)
Pioneer Series Trust II (File No. 333-187079)
Pioneer Series Trust III (File No. 333-187077)
Pioneer Value Fund (File No. 333-187076)
Ladies and Gentlemen:
This letter is to respond to comments we received on March 27, 2013 from
Mr. Dominic Minore of the Staff of the Division of Investment Management of the
Securities and Exchange Commission (the "Commission") regarding the combined
information statement and registration statement on Form N-14, with exhibits
(the "Registration Statement"), filed on March 6, 2013 by Pioneer Independence
Fund, Pioneer Series Trust II, Pioneer Series Trust III and Pioneer Value Fund
(each, a "Registrant" and, collectively, the "Registrants") relating to the
reorganization of: (i) Pioneer Research Fund with Pioneer Value Fund,
(ii) Pioneer Disciplined Value Fund with Pioneer Fundamental Value Fund,
(iii) Pioneer Disciplined Growth Fund with Pioneer Independence Fund, and
(iv) Pioneer Select Mid Cap Growth Fund with Pioneer Growth Opportunities Fund
(each, a "Reorganization" and, collectively, the "Reorganizations"). Following
are the Staff's comments and the Registrants' responses thereto:
I. General Comments
1. Comment: The Staff asked that the Registrants provide a letter to the
Commission that includes certain "Tandy" acknowledgments with
the Registrants' response to the Staff's comments.
Response: A Tandy representation letter executed in connection with the
filing of this response is attached hereto as Exhibit B.
2. Comment: The Staff asked the Registrants to confirm that a supplement to
the registration statement on Form N-1A of each Registrant was
filed with the Commission describing the applicable
Reorganization.
Response: The Registrants confirm that a supplement to the registration
statement on Form N-1A of each Registrant was filed with the
Commission describing the applicable Reorganization.
3. Comment: The Staff asked that the Registrants explain in the response
letter why shareholder approval of the Reorganizations is not
required under state law or the Investment Company Act of 1940,
as amended.
Response: Neither applicable state law nor the organizational documents of
the participating funds in each Reorganization require
shareholder approval of the Reorganizations. Similarly,
shareholder approval of the Reorganizations is not required
under the Investment Company Act of 1940, as amended (the "1940
Act").
The Delaware Statutory Trust Act provides that a Delaware
statutory trust's governing instrument may provide for the
taking of any action, including the accomplishment of a merger
or the transfer of assets of any series of the statutory trust,
without the approval of beneficial owners (see Delaware
Statutory Trust Act, Section 3806(b)(3) and (b)(4)). With
respect to each fund participating in a Reorganization, such
fund's declaration of trust gives the fund's Board of Trustees
the authority to merge such fund with another fund and to sell
all of the fund's assets to another fund, in each case without
shareholder approval where shareholder approval is not otherwise
required by the 1940 Act.
Rule 17a-8 under the 1940 Act permits fund reorganizations to be
effected without shareholder approval when: (i) no fundamental
policy of the Merging Company (as defined in Rule 17a-8) is
materially different from a policy of Surviving Company (as
defined in Rule 17a-8); (ii) no advisory contract of the Merging
Company is materially different from an advisory contract of the
Surviving Company; (iii) the non-interested Trustees of the
Merging Company who were elected by its shareholders will
comprise a majority of the non-interested Trustees of the
Surviving Company; and (iv) any distribution fees authorized to
be paid under the Surviving Company's distribution plan are no
greater than the distribution fees authorized to be paid under
the Merging Company's distribution plan. Each Reorganization
meets the conditions of Rule 17a-8.
4. Comment: The Staff noted that the allocation of reorganization expenses
among the participating funds and the funds' investment adviser
is different in each Reorganization. The Staff requested that
the Registrants add disclosure regarding the methodology used to
allocate expenses in each Reorganization and regarding the
Board's considerations in approving such allocations of
reorganization expenses.
Response: The Registrants have added disclosure to address the Staff's
request.
5. Comment: The Staff requested that the Registrants confirm in the response
letter that there are no material differences between the rights
of security holders of the participating funds in each
Reorganization.
Response: The Registrants confirm that there are no material differences
between the rights of security holders of the participating
funds in each Reorganization.
6. Comment: The Staff requested that the Registrants provide an analysis of
the factors considered in determining the performance survivor
of each Reorganization in accordance with the North American
Security Trust no-action letter (1993 SEC No-Act, LEXIS 876
(pub. avail. Aug. 5, 1994)).
2
Response: An analysis of the factors considered in determining the
performance survivor of each Reorganization is attached as
Exhibit A.
7. Comment: The Staff requested that the Registrants make conforming changes
to the extent comments provided with respect to one
Reorganization or section of the Registration Statement apply to
other Reorganizations or sections of the Registration Statement.
Response: The Registrants have made conforming changes to the Registration
Statement to the extent comments provided with respect to one
Reorganization or section of the Registration Statement apply to
other Reorganizations or sections of the Registration Statement.
II.Pioneer Research Fund - Pioneer Value Fund Reorganization
A. General
1. Comment: The Staff requested that the Registrant add disclosure noting
that the funds' investment adviser will benefit from the
reorganization because, as a result of economies of scale, the
adviser's obligation to waive fees and/or reimburse expenses
will be reduced.
Response: The Registrants have added disclosure to address the Staff's
request.
B. Comparison of Fees and Expenses (p. 16)
1. The Staff noted that the pro forma management fee shown for the combined
fund reflects the fee payable if shareholders of Pioneer Value Fund approve
an amended and restated management agreement.
Comment: The Staff requested that the Registrants revise footnote 2 to
disclose (i) the range of highest to lowest management fees that
the combined fund could pay under Pioneer Value Fund's current
management agreement if shareholders of Pioneer Value Fund do
not approve the amended and restated management agreement; and
(ii) the pro forma management fee payable by the combined fund
as a percentage of the combined fund's average daily net assets
if shareholders of Pioneer Value Fund do not approve the amended
and restated management agreement.
Response: The Registrants have not revised footnote 2 to address the
Staff's requests. The Registrants note that if shareholders of
Pioneer Value Fund do not approve the amended and restated
management agreement, the Reorganization would not satisfy the
conditions of Rule 17a-8 under the Investment Company Act of
1940, as amended, and, thus, the Reorganization would not be
consummated in the form described in the Form N-14. If
shareholders of Pioneer Value Fund do not approve the amended
and restated management agreement, the Board of Trustees would
consider what further actions may be appropriate, including
submitting the Reorganization for approval by shareholders of
Pioneer Research Fund.
2. Comment: The Staff requested that the Registrants revise footnote 3
regarding expense limit arrangements to clarify that such
arrangements will extend at least 12 months from the closing
date of the Reorganization. The Staff requested that the
Registrants file expense
3
limit agreements reflecting such arrangements in a
post-effective amendment to the Registration Statement.
Response: The Registrants have revised the disclosure to clarify that the
expense limit arrangements will extend at least 12 months from
the closing date of the Reorganization and confirm that they
will file revised expense limit agreements in a post-effective
amendment to the applicable Registration Statement.
3. Comment: The Staff requested that the Registrants confirm in the response
letter that the adviser has no ability to recoup any amounts
waived or expenses reimbursed under the contractual fee waiver
discussed in footnote 3.
Response: The Registrants confirm that the adviser has no ability to
recoup any amounts waived or expenses reimbursed under the
contractual fee waiver discussed in footnote 3.
C. Comparison of Management Fee (p.22)
1. Comment: The Staff requested that, under the "Combined Fund, Post
Reorganization" heading, the Registrants add an explanation
regarding what will happen if shareholders of Pioneer Value Fund
do not approve the new management fee.
Response: The Registrants have added disclosure to address the Staff's
request.
D. Reasons for the Reorganization (p. 24)
1. Comment: With respect to the disclosure regarding the third Board
consideration, the Staff requested that the Registrants revise
the disclosure to clarify the relevance of the funds' historical
performance to the Board's consideration of the Reorganization.
Response: The Registrants have added disclosure to address the Staff's
request.
2. Comment: With respect to the disclosure regarding the fifth Board
consideration, the Staff requested that the Registrants revise
the disclosure to clarify the extent to which the determination
that Pioneer Research Fund will be the accounting survivor of
the Reorganization will diminish the ability of the combined
fund to utilize tax capital-loss carryforwards.
Response: The Registrants have revised the disclosure to address the
Staff's request.
3. Comment: The Staff requested that, to the extent that material
dispositions of portfolio securities are currently anticipated
in connection with the Reorganization, the Registrants add
disclosure as of a recent date stating the approximate amount of
distributions per share that would result from such
dispositions, and clarify that the Board considered such
dispositions in approving the Reorganization.
Response: The Registrants have added disclosure to address the Staff's
request.
E. Capitalization Table (p. 24)
1. Comment: The Staff requested that the Registrants explain why the net
asset value per share of Pioneer Value Fund is shown as being
the same as the pro forma combined fund net asset
4
value per share, although Pioneer Research Fund is identified as
the accounting survivor of the Reorganization.
Response: The Registrants note that the net asset value per share of the
pro forma combined fund shown in the capitalization table is
shown as being the same as the net asset value per share of
Pioneer Value Fund because Pioneer Value Fund is the legal
entity that will continue following completion of the
Reorganization. Accordingly, in the Reorganization, shareholders
of Pioneer Research Fund will receive shares of Pioneer Value
Fund valued at Pioneer Value Fund's net asset value per share.
2. Comment: The Staff requested that the Registrants confirm that, to the
extent that the expenses of the Pioneer Value Fund shareholder
meeting identified in footnote 1 have a material impact on the
net asset value per share of Pioneer Value Fund or the pro forma
combined fund, such impact is reflected in the pro forma
combined fund net asset value per share.
Response: The Registrants note that the expenses of the shareholder
meeting do not have a material impact on the net asset value per
share of Pioneer Value Fund or the pro forma combined fund.
F. Tax Capital-loss Carryforwards (p. 76)
1. Comment: The Staff requested that the Registrants revise the disclosure
regarding limitations on each combined fund's ability to use tax
capital-loss carryforwards to clarify in plain English the
extent of any limitations resulting from the applicable
Reorganization on the combined fund's use of such carryforwards,
or, if applicable, to clarify that there will be no limitation
on the use carryforwards resulting from the Reorganization.
Response: The Registrants have added disclosure to address the Staff's
request.
G. Terms of Each Agreement and Plan of Reorganization (p. 78)
1. Comment: The Staff requested that the Registrants revise the disclosure
regarding the material provisions of each agreement and plan of
reorganization to clarify that such disclosure discusses the
material provisions of the agreement and plan of reorganization
and, if necessary, to expand the disclosure to ensure that the
material provisions are described.
Response: The Registrants have revised the disclosure to address the
Staff's request.
III.Pioneer Select Mid Cap Growth Fund - Pioneer Growth Opportunities Fund
Reorganization - Pro Forma Financial Statements
1. Comment: The Staff requested that note 3 to the pro forma combined
financial statements regarding security valuation be revised to
disclose the valuation of investments and other financial
instruments by fair value hierarchy levels and any transfers
between levels, and to include any other disclosure required by
ASC 820-10 that is not currently included in the footnotes.
Response: The Registrants have revised the disclosure to address the
Staff's request.
IV.Opinions
5
1. Comment: The Staff noted that the form of legality opinion states that
"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
Reorganization, will be validly issued, fully paid and
nonassessable." The Staff noted that the italicized statement
appears to be inconsistent with Section II.B.3.a. of the Staff
Legal Bulletin No. 19, Legality and Tax Opinions in Registered
Offerings issued by the Division of Corporation Finance of the
Commission (October 14, 2011), which states that the Staff
"considers it inappropriate for counsel to include in its
opinion assumptions that are overly broad, that 'assume away'
the relevant issue or that assume any of the material facts
underlying the opinion or any readily ascertainable facts." The
Staff requested that the opinion be revised to delete the
italicized statement.
Response: The Registrants do not believe that the language referenced by
the Staff represents an assumption. Instead, such language
merely specifies the manner in which shares will be issued and
sold in connection with the Reorganization. Accordingly, the
Registrants respectfully decline to file a revised opinion.
2. Comment: The Staff noted that the form of tax opinion, which is addressed
to each Registrant, states that the 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." The Staff referred to Section
III.D.1. of Staff Legal Bulletin No. 19, which states that "any
language that states or implies that the tax opinion is only for
the benefit of the board or the registrant, or that only the
board or the registrant is entitled to rely on the opinion, is
unacceptable. Investors are entitled to rely on the opinion
expressed." The Staff requested that that the form of opinion be
revised to delete the statement referenced by the Staff or to
revise such statement to make clear that shareholders
participating in the Reorganization are entitled to rely on the
opinion.
Response: The Registrants will file a revised form of tax opinion as an
exhibit to a post-effective amendment to the Registration
Statement.
Please call the undersigned at (617) 951-8458 or Toby Serkin at
(617) 951-8760 with any questions.
Sincerely,
/s/ Jeremy Kantrowitz
Jeremy Kantrowitz
cc: Terrence J. Cullen
Christopher J. Kelley
Roger P. Joseph
Toby R. Serkin
6
Exhibit A
The Staff stated in the North American Security Trust no-action letter (1993
SEC No-Act, LEXIS 876 (pub. avail. Aug. 5, 1994) that in determining the
performance survivor of a reorganization, the funds should compare the
attributes of the participating funds to determine which fund the combined fund
most closely resembles. The no-action letter states that, "among other factors,
funds should compare the various funds' investment advisers, investment
objectives, policies and restrictions, expense structures and expense ratios,
asset size and portfolio composition. These factors are substantially similar
to the factors the staff considers in determining the accounting survivor of a
business combination involving investment companies." The factors listed in the
North American Security Trust no-action letter are also set forth in the AICPA
Accounting and Audit Guide for Investment Companies (the "AICPA Guide"), in
order of relative importance: portfolio management, portfolio composition,
investment objectives, policies and restrictions, expense structures and
expense ratios, and, asset size. Following, for each Reorganization, is a
performance survivor analysis using the factors identified in the North
American Security Trust no-action letter and the AICPA Guide.
The Registrants believe that the most useful factors to consider in the
performance survivor analysis are the factors related to portfolio management
(i.e., portfolio management team, portfolio composition and investment
objectives, policies and restrictions), because these factors provide the best
indication as to which participating fund each combined fund will most closely
resemble. In each case, the respective investment approaches of the funds
involved in the Reorganization are clearly distinguishable. As discussed below,
the proposed performance survivor in each Reorganization is the fund whose
portfolio management team and investment approach will be retained by the
combined fund, and whose portfolio securities will be most closely aligned with
the combined fund's portfolio securities.
I. Pioneer Research Fund - Pioneer Value Fund Reorganization
Following is a performance survivor analysis with respect to the Reorganization
of Pioneer Research Fund and Pioneer Value Fund using the factors identified in
the North American Security Trust no-action letter and the AICPA Guide. The
combined fund following the Reorganization is intended to have all of the
investment characteristics of Pioneer Research Fund. Pioneer Value Fund is
proposed to be the legal survivor in order to simplify the tax analysis and
maximize tax-related benefits for the combined fund. Accordingly, as discussed
below, the performance survivor analysis indicates that Pioneer Research Fund
will be the performance survivor of the Reorganization. In addition, Ernst &
Young LLP, the Registrants' current independent registered public accounting
firm, has indicated to the Registrants that it would consider Pioneer Research
Fund to be the accounting survivor of the Reorganization.
A. Portfolio Management
Pioneer Research Fund: Pioneer Investment Management, Inc. serves as the fund's
investment adviser. Day-to-day management of Pioneer Research Fund currently is
the responsibility of a team of equity analysts that coordinate the fundamental
research on companies provided by Pioneer's research teams, which include
members from Pioneer's affiliate, Pioneer Investment Management Limited.
Members of the team include Paul Cloonan, Bradley Galko, John Peckham, and
James Moynihan. Pioneer Research Fund is managed using a research-based
approach to stock selection based on fundamental and quantitative analysis
provided by Pioneer's research team. The fund compares its performance to the
Standard & Poor's 500 Index. The research team constructs a portfolio that may
include both growth and value stocks and is reflective of overall sector
weightings in the Standard & Poor's 500 Index.
7
Pioneer Value Fund: Pioneer Investment Management, Inc. serves as the fund's
investment adviser. Day-to-day management of Pioneer Value Fund's portfolio
currently is the responsibility of Edward T. Shadek, Jr. and John Peckham.
Pioneer Value Fund is managed using a value-oriented approach based on the
portfolio management team's analysis. The fund compares its performance to the
Russell 1000 Value Index.
Combined Fund: Pioneer Investment Management, Inc. will serve as the combined
fund's investment adviser. Like Pioneer Research Fund, day-to-day management of
the combined fund will be the responsibility of a team of equity analysts that
currently coordinate the fundamental research on companies provided by
Pioneer's research teams, which include members from Pioneer's affiliate,
Pioneer Investment Management Limited. Members of the team will include Paul
Cloonan, Bradley Galko, John Peckham, and James Moynihan. Like Pioneer Research
Fund, the combined fund will be managed using a research-based approach to
stock selection based on fundamental and quantitative analysis provided by
Pioneer's research team. The combined fund will compare its performance to the
Standard & Poor's 500 Index, Pioneer Research Fund's benchmark index.
Conclusion: Since the combined fund will have the same portfolio management
team as Pioneer Research Fund, will be managed with the same investment
approach as Pioneer Research Fund, and will compare its performance to Pioneer
Research Fund's benchmark index, this factor favors Pioneer Research Fund as
the performance survivor.
B. Portfolio Composition
Each fund invests the major portion of its assets in equity securities,
primarily of U.S. issuers. Thus, the portfolio composition of each of Pioneer
Research Fund and Pioneer Value Fund generally is similar. However, as
discussed above, the combined fund will be managed by the investment team that
currently manages Pioneer Research Fund using Pioneer Research Fund's
research-based investment approach, and will have the same investment
objective, investment policies and restrictions as Pioneer Research Fund. The
portfolio securities of the combined fund are expected to be rebalanced such
that they line-up substantially with the portfolio securities of Pioneer
Research Fund (i.e., a combination of growth and value stocks, whereas Pioneer
Value Fund focuses on value stocks). Accordingly, the portfolio composition of
the combined fund is expected to more closely resemble the portfolio
composition of Pioneer Research Fund.
Using a holdings-based analysis, Morningstar categorizes Pioneer Research Fund
as a Large Blend fund, whereas Pioneer Value Fund is categorized as a Large
Value fund.
Conclusion: As noted above, the portfolio composition of the combined fund is
expected to more closely resemble the portfolio composition of Pioneer Research
Fund. Accordingly, this factor favors Pioneer Research Fund as the performance
survivor.
C. Investment Objectives, Policies and Restrictions
Investment Objective
Pioneer Research Fund: The fund's investment objective is long-term capital
growth.
Pioneer Value Fund: The fund's current investment objective is reasonable
income and capital growth; however, shareholders of Pioneer Value Fund are
being asked to approve changing the fund's investment objective to
"long-term capital growth" at a shareholder meeting to be held on May 7,
2013.
8
Combined Fund: If shareholders of Pioneer Value Fund approve the new
investment objective, the combined fund's investment objective will be
changed to long-term capital growth at the time of the Reorganization.
Accordingly, the combined fund will have the same investment objective as
Pioneer Research Fund.
Principal Investment Policies and Restrictions
Pioneer Research Fund: Normally, the fund invests at least 80% of its net
assets (plus the amount of borrowings, if any, from investment purposes) in
equity securities, primarily of U.S. issuers. The fund may invest up to 10%
of its total assets in equity and debt securities of non-U.S. issuers,
including up to 5% of its total assets in the securities of emerging markets
issuers. The fund may invest in debt securities of U.S. and non-U.S.
issuers. Generally, the fund acquires investment grade debt securities, but
the fund may invest up to 5% of its net assets in below investment grade
debt securities, including below investment grade convertible debt
securities. The fund may, but is not required to, use derivatives.
Pioneer Value Fund: The fund seeks to invest in a broad group of carefully
selected, reasonably priced securities rather than in securities whose
prices reflect a premium resulting from their current market popularity. The
fund invests the major portion of its assets in equity securities. The fund
primarily invests in securities of U.S. issuers. The fund may invest up to
25% of its total assets in equity and debt securities of non-U.S. issuers.
The fund will not invest more than 5% of its total assets in securities of
emerging markets issuers. The fund may invest up to 20% of its net assets in
REITs. The fund may invest in debt securities of U.S. and non-U.S. issuers.
The fund may invest up to 5% of its net assets in below investment grade
debt securities, including below investment grade convertible debt
securities. The fund may, but is not required to, use derivatives.
Combined Fund: Pioneer Research Fund and Pioneer Value Fund both invest
primarily in securities of U.S. issuers, but the funds' stated investment
policies and restrictions are somewhat different. The combined fund will
have the same investment policies and restrictions as Pioneer Research Fund:
normally, the combined fund will invest at least 80% of its net assets (plus
the amount of borrowings, if any, from investment purposes) in equity
securities, primarily of U.S. issuers. The combined fund may invest up to
10% of its total assets in equity and debt securities of non-U.S. issuers,
including up to 5% of its total assets in the securities of emerging markets
issuers. The combined fund may invest in debt securities of U.S. and
non-U.S. issuers. Generally, the combined fund will acquire investment grade
debt securities, but the fund may invest up to 5% of its net assets in below
investment grade debt securities, including below investment grade
convertible debt securities. The combined fund may, but is not required to,
use derivatives.
In addition, as noted above, Pioneer Research Fund is managed using a
research-based approach that draws from a wider investment universe (i.e.,
growth and value stocks) than Pioneer Value Fund, and Pioneer Research
Fund's research-based investment approach will be used to manage the
combined fund.
Conclusion: As noted above, the combined fund's investment objective is the
same as Pioneer Research Fund's investment objective. If shareholders of
Pioneer Value Fund approve the new investment objective, Pioneer Value Fund
also will have the same investment objective as the combined fund, but only for
the purpose of facilitating the Reorganization. In addition, as noted above,
the combined fund will have the same investment policies and restrictions as
Pioneer Research Fund, and will be managed using Pioneer Research Fund's
research based investment approach. Accordingly, on balance, this factor favors
Pioneer Research Fund as the performance survivor.
9
D. Expense Structures and Expense Ratios
Management Fees
Pioneer Research Fund: Pioneer Research Fund currently pays Pioneer a
management fee at an annual rate equal to 0.65% of the fund's average daily
net assets up to $1 billion, 0.60% of the next $4 billion and 0.55% on
assets over $5 billion. The fee is accrued daily and paid monthly.
Pioneer Value Fund: Pioneer Value Fund currently pays Pioneer a fee for
managing the fund and to cover the cost of providing certain services to the
fund which varies based on:
. The fund's assets. Pioneer earns an annual basic fee equal to 0.60%
of the fund's average daily net assets up to $5 billion, 0.575% on
the next $5 billion and 0.550% on the excess over $10 billion.
. The fund's performance. The investment performance of the fund is
compared to the Russell 1000 Value Index. The basic fee can increase
or decrease by a maximum of 0.10%, depending on the performance of
the fund's Class A shares relative to the index. The performance
comparison is made for a rolling 36-month period.
For the fiscal year ended September 30, 2012, the fund paid management
fees (excluding waivers and/or assumption of expenses) equivalent to
0.49% of the fund's average daily net assets.
Shareholders of Pioneer Value Fund have been asked to approve an amended and
restated management agreement at a shareholder meeting to be held on May 7,
2013. If shareholders approve the amended and restated management agreement,
the combined fund will pay Pioneer a management fee at an annual rate equal
to 0.50% of the fund's average daily net assets. As previously noted in the
Registrants' response letter, if shareholders of Pioneer Value Fund do not
approve the amended and restated management agreement, the Reorganization
would not satisfy the conditions of Rule 17a-8 under the Investment Company
Act of 1940, as amended, and, thus, the Reorganization would not be
consummated in the form described in the Form N-14.
Sales load structure and Rule 12b-1 plans: The funds have the same sales load
structure and Rule 12b-1 plans.
Other expenses/Total expenses: The administrative service, custody, transfer
agency and other non-management fees that the funds pay are substantially
similar in structure. However, as a general matter, because Pioneer Value Fund
has significantly more assets than Pioneer Research Fund, the other expenses of
the combined fund will more closely resemble Pioneer Value Fund's other
expenses as a percentage of average daily net assets. Accordingly, the total
annual fund operating expenses of Class A, Class C and Class Y shares of the
combined fund will more closely resemble the total annual fund operating
expenses of the corresponding class of Pioneer Value Fund, as shown in the
following table. As shown below, the total annual fund operating expenses of
Class B shares of the combined fund will more closely resemble the total annual
fund operating expenses of Pioneer Research Fund both before and after expense
limitations:
Pioneer Research Fund Pioneer Value Fund Pro Forma Combined Fund
--------------------------- --------------------------- ---------------------------
Total Annual Fund Operating Total Annual Fund Operating Total Annual Fund Operating
Expenses/Net Expenses After Expenses/Net Expenses After Expenses/Net Expenses After
Fee Waiver and Expense Fee Waiver and Expense Fee Waiver and Expense
Limitations Limitations Limitations
--------------------------- --------------------------- ---------------------------
Class A 1.59%/1.25% 0.99%/0.99% 1.00%/1.00%
Class B 2.58%/2.15% 2.65%/2.65% 2.47%/2.15%
Class C 2.31%/2.15% 2.10%/2.10% 2.01%/2.01%
Class Y 1.02%/1.02% 0.61%/0.61% 0.59%/0.59%
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The Registrants note that, except for Class A shares, the expenses of the
combined fund are anticipated to be the same as or lower than the expenses of
the participating funds.
Conclusion: The Registrants acknowledge that, considering the effective
management fee rate paid by Pioneer Value Fund (as a percentage of average
daily net assets) for the fiscal year ended September 30, 2012, the combined
fund's management fee will more closely resemble Pioneer Value Fund's
management fee. However, Pioneer Value Fund currently has a
performance-adjusted management fee that could, after the performance
adjustment, be significantly higher than the combined fund's management fee.
The new "flat" management fee has been proposed for purposes of facilitating
the Reorganization, and would go into effect only for the combined fund
following the closing of the Reorganization. Thus, the combined fund's "flat"
management fee will more closely resemble the management fee of Pioneer
Research Fund, except that it will be lower. The Registrants also acknowledge
that, as a percentage of average daily net assets, the other expenses and total
expenses of the combined fund will more closely resemble Pioneer Value Fund's
current expense ratio because of that fund's current management fee level, the
relative net assets of the funds and the effect of fund size on the funds'
expense ratios. Historically, Pioneer Value Fund's expense ratio has varied
based on the effect of the performance adjustment of the management fee (which
has a range of 20 basis points). The Staff's guidance in the North American
Security Trust no-action letter does not suggest that the combined fund's
expense structure or expense ratios are determinative in identifying the
performance survivor in a reorganization. Rather, expenses are only one of a
number of factors to be weighed.
E. Asset Size
Pioneer Research Fund: As of December 31, 2012, Pioneer Research Fund had
assets of approximately $63 million.
Pioneer Value Fund: As of December 31, 2012, Pioneer Independence Fund had
assets of approximately $1.3 billion.
Conclusion: The Registrants acknowledge that Pioneer Research Fund has
significantly fewer assets than Pioneer Value Fund. However, the Staff's
guidance in the North American Security Trust no-action letter does not suggest
that asset size is determinative in identifying the performance survivor in a
reorganization. Rather, asset size is only one of a number of factors to be
weighed.
F. Overall conclusion.
The Registrants believe that the factors discussed above indicate that the
combined fund will most closely resemble Pioneer Research Fund. In particular,
the Registrants note that Pioneer Research Fund's investment team will manage
the combined fund using Pioneer Research Fund's research-based approach, and
the investment objectives, investment policies and restrictions of the combined
11
fund will be the same as the investment objectives, investment policies and
restrictions of Pioneer Research Fund. The Registrants note that the portfolio
composition of the combined fund is anticipated to more closely resemble the
portfolio composition of Pioneer Research Fund. The Registrants acknowledge
that the expenses ratios of the combined fund may more closely resemble those
of Pioneer Value Fund and that Pioneer Value Fund is significantly larger than
Pioneer Research Fund. Nevertheless, the Registrants believe that, on balance,
the factors discussed above support Pioneer Research Fund as the performance
survivor of the Reorganization.
II. Pioneer Disciplined Value Fund - Pioneer Fundamental Value Fund
Reorganization
Following is a performance survivor analysis with respect to the Reorganization
of Pioneer Disciplined Value Fund and Pioneer Fundamental Value Fund using the
factors identified in the North American Security Trust no-action letter and
the AICPA Guide. The combined fund following the Reorganization is intended to
have all of the investment characteristics of Pioneer Disciplined Value Fund.
Pioneer Fundamental Value Fund is proposed to be the legal survivor in order to
simplify the tax analysis and maximize tax-related benefits for the combined
fund. Accordingly, as discussed below, the performance survivor analysis
indicates that Pioneer Disciplined Value Fund will be the performance survivor
of the Reorganization. In addition, Ernst & Young LLP, the Registrants' current
independent registered public accounting firm, has indicated to the Registrants
that it would consider Pioneer Disciplined Value Fund to be the accounting
survivor of the Reorganization.
A. Portfolio Management
Pioneer Disciplined Value Fund: Pioneer Investment Management, Inc. serves as
the fund's investment adviser. Day-to-day management of Pioneer Disciplined
Value Fund currently is the responsibility of John Peckham. Mr. Peckham is
supported by Ashesh Savla and Brian Popiel. Pioneer Disciplined Value Fund is
managed using a research-based, value-oriented approach to stock selection
based on fundamental and quantitative analysis provided by Pioneer's research
team, considering valuation in terms of such factors as forecasted earnings,
book value, cash flow and sales.
Pioneer Fundamental Value Fund: Pioneer Investment Management, Inc. serves as
the fund's investment adviser. Day-to-day management of Pioneer Fundamental
Value Fund currently is the responsibility of Edward T. Shadek Jr. and John
Peckham. Pioneer Fundamental Value Fund is managed using a classic value
investment process that focuses on identifying companies that management
believes to be undervalued based on the portfolio management team's analysis,
using criteria such as a security's price-earnings ratio. In selecting
investments, the portfolio managers consider a security's potential to provide
current income. From inception through July 2012, the fund was managed by
Cullen Capital Management LLC, the fund's former investment subadviser.
Combined Fund: Pioneer Investment Management, Inc. will be the combined fund's
investment adviser. Like Pioneer Disciplined Value Fund, day-to-day management
of the combined fund will be the responsibility of John Peckham, supported by
Ashesh Savla and Brian Popiel. Like Pioneer Disciplined Value Fund, the
combined fund will be managed using a research-based, value-oriented approach
to stock selection based on fundamental and quantitative analysis provided by
Pioneer's research team.
Conclusion: Since the combined fund will have the same portfolio management
team as Pioneer Disciplined Value Fund and will be managed with the same
investment approach as Pioneer Disciplined Value Fund, this factor favors
Pioneer Disciplined Value Fund as the performance survivor.
12
B. Portfolio Composition
Both Pioneer Disciplined Value Fund and Pioneer Fundamental Value Fund normally
invest primarily in equity securities of U.S. issuers. Thus, the portfolio
composition of each of Pioneer Disciplined Value Fund and Pioneer Fundamental
Value Fund generally is similar. However, as discussed above, the combined fund
will be managed by the investment team that currently manages Pioneer
Disciplined Value Fund using Pioneer Disciplined Value Fund's research-based
investment approach, and will have the same investment objective, investment
policies and restrictions as Pioneer Disciplined Value Fund. The portfolio
securities of the combined fund are expected to be rebalanced such that they
line-up substantially with the portfolio securities of Pioneer Disciplined
Value Fund. Accordingly, the portfolio composition of the combined fund is
expected to more closely resemble the portfolio composition of Pioneer
Disciplined Value Fund.
Conclusion: As noted above, the portfolio composition of the combined fund is
expected to more closely resemble the portfolio composition of Pioneer
Disciplined Value Fund. Accordingly, this factor favors Pioneer Disciplined
Value Fund as the performance survivor.
C. Investment Objectives, Policies and Restrictions
Investment Objective
Pioneer Disciplined Value Fund: The fund's investment objective is long-term
capital growth.
Pioneer Fundamental Value Fund: The fund's investment objective is capital
appreciation. Current income is a secondary objective.
Combined Fund: The combined fund's investment objective is long-term capital
growth.
Principal Investment Policies and Restrictions
Pioneer Disciplined Value Fund: The fund invests primarily in equity
securities of U.S. issuers. The fund may invest in issuers of any market
capitalization. The fund may invest in securities in any industry or market
sector. The fund may invest up to 10% of its total assets in securities of
non-U.S. issuers. The fund will not invest more than 5% of its total assets
in the securities of emerging market issuers. The fund may invest a portion
of its assets not invested in equity securities in debt securities.
Generally the fund may acquire investment grade debt securities that are
issued by both U.S. and non-U.S. corporate and government issuers, but the
fund may invest up to 5% of its net assets in below investment grade debt
securities, including below investment grade convertible debt securities.
The fund may, but is not required to, use derivatives.
Pioneer Fundamental Value Fund: The fund invests primarily in equity
securities. The fund may invest a significant portion of its assets in
equity securities of medium- and large-capitalization companies (generally,
market capitalizations of $1.5 billion or more). The fund may invest up to
30% of its total assets in securities of non-U.S. issuers. Up to 10% of the
fund's total assets may be invested in securities of emerging market
issuers. The fund may invest up to 10% of its total assets in debt
securities of U.S. and non-U.S. issuers. The fund may invest up to 5% of its
net assets in below investment grade debt securities, including below
investment grade convertible debt securities. The fund may, but is not
required to, use derivatives.
Combined Fund: Pioneer Disciplined Value Fund and Pioneer Fundamental Value
Fund both invest primarily in securities of U.S. issuers, but the funds'
stated investment policies and
13
restrictions are somewhat different. The combined fund will have the same
investment policies and restrictions as Pioneer Disciplined Value Fund: the
combined fund may invest in issuers of any market capitalization. The
combined fund may invest in securities in any industry or market sector. The
combined fund may invest up to 10% of its total assets in securities of
non-U.S. issuers. The combined fund may not invest more than 5% of its total
assets in the securities of emerging market issuers. The combined fund may
invest a portion of its assets not invested in equity securities in debt
securities. Generally the combined fund may acquire investment grade debt
securities that are issued by both U.S. and non-U.S. corporate and
government issuers, but the combined fund may invest up to 5% of its net
assets in below investment grade debt securities, including below investment
grade convertible debt securities. The combined fund may, but is not
required to, use derivatives.
In addition, as noted above, Pioneer Disciplined Value Fund is managed using
a more research-based approach than Pioneer Fundamental Value Fund, and
Pioneer Disciplined Value Fund's research-based investment approach will be
used to manage the combined fund.
Conclusion: As noted above, the combined fund will have the same investment
objective, investment policies and restrictions as Pioneer Disciplined Value
Fund, and will be managed using Pioneer Disciplined Value Fund's research based
investment approach. Accordingly, this factor favors Pioneer Disciplined Value
Fund as the performance survivor.
D. Expense Structures and Expense Ratios
Management Fees
Pioneer Disciplined Value Fund: Pioneer Disciplined Value Fund currently
pays Pioneer a management fee at an annual rate equal to 0.65% of the fund's
average daily net assets up to $1 billion, 0.60% of the next $4 billion and
0.55% on assets over $5 billion.
Pioneer Fundamental Value Fund: Pioneer Fundamental Value Fund currently
pays Pioneer a management fee at an annual rate equal to 0.70% of the fund's
average daily net assets up to $1 billion, 0.65% of the next $1 billion,
0.60% of the next $1 billion, 0.55% on the next $4.5 billion, and 0.525% on
assets over $7.5 billion. The fee is accrued daily and paid monthly.
Combined Fund: The combined fund will pay Pioneer a management fee at an
annual rate equal to 0.65% of the fund's average daily net assets up to $1
billion, 0.60% of the next $2 billion, 0.55% of the next 4.5 billion and
0.525% on assets over $7.5 billion. The fee will be accrued daily and paid
monthly.
Sales load structure and Rule 12b-1 plans: The funds have the same sales load
structure and Rule 12b-1 plans.
Other expenses/Total expenses: The administrative service, custody, transfer
agency and other non-management fees that the funds pay are substantially
similar in structure. However, as a general matter, because Pioneer Fundamental
Value Fund has significantly more assets than Pioneer Disciplined Value Fund,
the other expenses of the combined fund will more closely resemble Pioneer
Fundamental Value Fund's other expenses as a percentage of average daily net
assets. Accordingly, the total annual fund operating expenses of Class A, Class
C and Class Y shares of the combined fund will more closely resemble the total
annual fund operating expenses of the corresponding class of Pioneer
Fundamental Value Fund, as shown in the following table:
Pioneer Disciplined Value Pioneer Fundamental Value
Fund Fund Pro Forma Combined Fund
--------------------------- --------------------------- ---------------------------
Total Annual Fund Operating Total Annual Fund Operating Total Annual Fund Operating
Expenses/Net Expenses After Expenses/Net Expenses After Expenses/Net Expenses After
Fee Waiver and Expense Fee Waiver and Expense Fee Waiver and Expense
Limitations Limitations Limitations
--------------------------- --------------------------- ---------------------------
Class A 1.71%/1.25% 1.19%/1.19% 1.14%1.14%
Class C 2.34%/2.15% 1.96%/1.96% 1.92%/1.92%
Class Y 1.03%/0.90% 0.85%/0.85% 0.81%/0.81%
14
The Registrants note that the expenses of the combined fund are anticipated to
be lower than the expenses of the participating funds.
Conclusion: As shown above, the combined fund's management fee most closely
resembles Pioneer Disciplined Value Fund's lower management fee, before
breakpoints at incremental asset levels. Based on assets under management as of
December 31, 2012, the combined fund's management fee as a percentage of
average daily net assets will more closely resemble the management fee of
Pioneer Disciplined Value Fund. On balance, this factor favors Pioneer
Disciplined Value Fund as the performance survivor because, as of December 31,
2012, the combined fund's management fee as a percentage of average daily net
assets will more closely resemble the management fee of Pioneer Disciplined
Value Fund, and because of the similarity of the breakpoint structure of the
combined fund's management fee (for the first $3 billion in assets) to that of
Pioneer Disciplined Value Fund. As noted above, the resemblance of the combined
fund's other expenses and total expenses to those of Pioneer Fundamental Value
Fund as a percentage of average daily net assets is primarily because of the
difference in net assets between the funds.
E. Asset Size
Pioneer Disciplined Value Fund: As of December 31, 2012, Pioneer Disciplined
Growth Fund had assets of approximately $43 million.
Pioneer Fundamental Value Fund: As of December 31, 2012, Pioneer Fundamental
Value Fund had assets of approximately $1.82 billion.
Conclusion: The Registrants acknowledge that Pioneer Disciplined Value Fund has
significantly fewer assets than Pioneer Fundamental Value Fund. However, the
Staff's guidance in the North American Security Trust no-action letter does not
suggest that asset size, by itself, is determinative in identifying the
performance survivor in a reorganization. Rather, asset size is only one of a
number of factors to be weighed.
F. Overall conclusion.
The Registrants believe that the factors discussed above clearly indicate that
the combined fund will most closely resemble Pioneer Disciplined Value Fund. In
particular, the Registrants note that Pioneer Disciplined Value Fund's
investment team will manage the combined fund using Pioneer Disciplined Value
Fund's research-based approach, and the investment objectives, investment
policies and restrictions of the combined fund will be the same as the
investment objectives, investment policies and restrictions of Pioneer
Disciplined Value Fund. The Registrants note that the
15
portfolio composition of the combined fund will more closely resemble the
portfolio composition of Pioneer Disciplined Value Fund. The Registrants also
note that the expense structure of the combined fund more closely resembles the
expense structure of Pioneer Disciplined Value Fund. The Registrants
acknowledge that Pioneer Fundamental Value Fund is significantly larger than
Pioneer Disciplined Value Fund. Nevertheless, the Registrants believe that, on
balance, the factors discussed above support Pioneer Disciplined Value Fund as
the performance survivor of the Reorganization.
III. Pioneer Disciplined Growth Fund - Pioneer Independence Fund Reorganization
Following is a performance survivor analysis with respect to the Reorganization
of Pioneer Disciplined Growth Fund and Pioneer Independence Fund using the
factors identified in the North American Security Trust no-action letter and
the AICPA Guide. The combined fund following the Reorganization is intended to
have all of the investment characteristics of Pioneer Disciplined Growth Fund.
Pioneer Independence Fund is proposed to be the legal survivor in order to
simplify the tax analysis and maximize tax-related benefits for the combined
fund. Accordingly, as discussed below, the performance survivor analysis
indicates that Pioneer Disciplined Growth Fund will be the performance survivor
of the Reorganization. In addition, Ernst & Young LLP, the Registrants' current
independent registered public accounting firm, has indicated to the Registrants
that it would consider Pioneer Disciplined Growth Fund to be the accounting
survivor of the Reorganization.
A. Portfolio Management
Pioneer Disciplined Growth Fund: Pioneer Investment Management, Inc. serves as
the fund's investment adviser. Day-to-day management of Pioneer Disciplined
Growth Fund currently is the responsibility of Paul Cloonan. Mr. Cloonan is
supported by Ashesh Savla and Carol Lintz. Pioneer Disciplined Growth Fund is
managed using a research-based, growth-oriented approach to stock selection
based on fundamental and quantitative analysis provided by Pioneer's research
team.
Pioneer Independence Fund: Pioneer Investment Management, Inc. serves as the
fund's investment adviser. Day-to-day management of Pioneer Independence Fund's
portfolio currently is the responsibility of Andrew Acheson. Pioneer
Independence Fund is managed using a "growth" style of management that seeks to
identify securities issued primarily by U.S. companies with above average
potential for earnings and revenue growth that are also trading at attractive
market valuations, based on the portfolio manager's analysis of company
fundamentals.
Combined Fund: Pioneer Investment Management, Inc. will serve as the combined
fund's investment adviser. Like Pioneer Disciplined Growth Fund, day-to-day
management of the combined fund will be the responsibility of Paul Cloonan.
Mr. Cloonan will be supported by Ashesh Savla and Carol Lintz. Like Pioneer
Disciplined Growth Fund, the combined fund will be managed using a
research-based, growth-oriented approach to stock selection based on
fundamental and quantitative analysis provided by Pioneer's research team.
Conclusion: Since the combined fund will have the same portfolio management
team as Pioneer Disciplined Growth Fund and will be managed with the same
investment approach as Pioneer Disciplined Growth Fund, this factor favors
Pioneer Disciplined Growth Fund as the performance survivor.
B. Portfolio Composition
Both Pioneer Disciplined Growth Fund and Pioneer Independence Fund normally
invest primarily in equity securities of U.S. issuers. Thus, the portfolio
composition of each of Pioneer Disciplined
16
Growth Fund and Pioneer Independence Fund generally is similar. However, as
discussed above, the combined fund will be managed by the investment team that
currently manages Pioneer Disciplined Growth Fund using Pioneer Disciplined
Growth Fund's research-based investment approach, and will have the same
investment objective, investment policies and restrictions as Pioneer
Disciplined Growth Fund. The portfolio securities of the combined fund are
expected to be rebalanced such that they line-up substantially with the
portfolio securities of Pioneer Disciplined Growth Fund. Accordingly, the
portfolio composition of the combined fund is expected to more closely resemble
the portfolio composition of Pioneer Disciplined Growth Fund.
Conclusion: As noted above, the portfolio composition of the combined fund is
expected to more closely resemble the portfolio composition of Pioneer
Disciplined Growth Fund. Accordingly, this factor favors Pioneer Disciplined
Growth Fund as the performance survivor.
C. Investment Objectives, Policies and Restrictions
Investment Objective
Pioneer Disciplined Growth Fund: Pioneer Disciplined Growth Fund's
investment objective is long-term capital growth.
Pioneer Independence Fund: Pioneer Independence Fund's investment objective
is capital growth.
Combined Fund: The combined fund's investment objective is long-term capital
growth.
Principal Investment Policies and Restrictions
Pioneer Disciplined Growth Fund: The fund invests primarily in equity
securities of U.S. issuers. The fund may invest in issuers of any market
capitalization. The fund may invest in securities in any industry or market
sector. The fund may invest up to 10% of its total assets in securities of
non-U.S. issuers. The fund will not invest more than 5% of its total assets
in the securities of emerging market issuers. The fund may invest a portion
of its assets not invested in equity securities in debt securities. The fund
may invest up to 5% of its net assets in below investment grade debt
securities, including below investment grade convertible debt securities.
The fund may, but is not required to, use derivatives.
Pioneer Independence Fund: The fund invests at least 80% of its assets in
equity securities. The fund invests primarily in securities of U.S. issuers.
The fund may invest up to 25% of its total assets in equity and debt
securities of non-U.S. issuers, including up to 10% of its assets in the
securities of emerging markets issuers. The fund may invest up to 20% of its
net assets in REITs. The fund may invest up to 20% of its total assets in
debt securities of U.S. and non-U.S. issuers. The fund may invest up to 5%
of its net assets in below investment grade debt securities, including below
investment grade convertible debt securities. To the extent consistent with
its investment objective, the fund may invest in initial public offerings of
equity securities. The fund may, but is not required to, use derivatives.
Combined Fund: Pioneer Disciplined Growth Fund and Pioneer Independence Fund
have similar, but not identical, investment policies and restrictions. The
combined fund will have the same investment policies and restrictions as
Pioneer Disciplined Growth Fund: the combined fund will invest primarily in
equity securities of U.S. issuers. The combined fund may invest in issuers
of any market capitalization. The combined fund may invest in securities in
any industry
17
or market sector. The fund may invest up to 10% of its total assets in
securities of non-U.S. issuers. The combined fund may not invest more than
5% of its total assets in the securities of emerging market issuers. The
combined fund may invest a portion of its assets not invested in equity
securities in debt securities. The combined fund may invest up to 5% of its
net assets in below investment grade debt securities, including below
investment grade convertible debt securities. The combined fund may, but is
not required to, use derivatives.
In addition, as noted above, Pioneer Disciplined Growth Fund is managed
using a more research-based approach than Pioneer Independence Fund, and
Pioneer Disciplined Growth Fund's research-based investment approach will be
used to manage the combined fund.
Conclusion: As noted above, the combined fund will have the same investment
objective, investment policies and restrictions as Pioneer Disciplined Growth
Fund, and will be managed using Pioneer Disciplined Growth Fund's research
based investment approach. Accordingly, this factor favors Pioneer Disciplined
Growth Fund as the performance survivor.
D. Expense Structures and Expense Ratios
Management Fees
Pioneer Disciplined Growth Fund: Pioneer Disciplined Growth Fund currently
pays Pioneer a management fee at an annual rate equal to 0.65% of the fund's
average daily net assets up to $1 billion, 0.60% of the next $4 billion and
0.55% on assets over $5 billion. The fee is accrued daily and paid monthly.
Pioneer Independence Fund: Pioneer Independence Fund currently pays Pioneer
a management fee at an annual rate equal to 0.65% of the fund's average
daily net assets up to $1 billion and 0.60% of average daily assets over $1
billion. The fee is accrued daily and paid monthly.
Combined Fund: The combined fund will pay Pioneer a management fee at an
annual rate equal to 0.65% of the fund's average daily net assets up to $1
billion, 0.60% of the next $4 billion and 0.55% on assets over $5 billion.
The fee will be accrued daily and paid monthly.
Sales load structure and Rule 12b-1 plans: The funds have the same sales load
structure and Rule 12b-1 plans.
Other expenses/Total expenses: The administrative service, custody, transfer
agency and other non-management fees that the funds pay are substantially
similar in structure. However, as a general matter, because Pioneer
Independence Fund has significantly more assets than Pioneer Disciplined Growth
Fund, the other expenses of the combined fund will more closely resemble
Pioneer Independence Fund's other expenses as a percentage of average daily net
assets. Accordingly, the total annual fund operating expenses of Class A,
Class C and Class Y shares the combined fund will more closely resemble the
total annual fund operating expenses of the corresponding class of Pioneer
Independence Fund before expense limitations, as shown in the following table.
As shown below, after expense limitations, the total annual operating expenses
of Class A and Class C of the combined fund are the same as both Pioneer
Disciplined Growth Fund and Pioneer Independence Fund. After expense
limitations, the total annual operating expenses of Class Y shares of the
combined fund are significantly lower than Class Y shares of both Pioneer
Disciplined Growth Fund and Pioneer Independence Fund.
18
Pioneer Disciplined Growth
Fund Pioneer Independence Fund Pro Forma Combined Fund
--------------------------- --------------------------- ---------------------------
Total Annual Fund Operating Total Annual Fund Operating Total Annual Fund Operating
Expenses/Net Expenses After Expenses/Net Expenses After Expenses/Net Expenses After
Fee Waiver and Expense Fee Waiver and Expense Fee Waiver and Expense
Limitations Limitations Limitations
--------------------------- --------------------------- ---------------------------
Class A 1.48%/1.25% 1.25%/1.25% 1.25%1.25%
Class C 2.41%/2.15% 2.18%/2.15% 2.18%/2.15%
Class Y 1.00%/0.90% 0.89%/0.89% 0.74%/0.74%
The Registrants note that the expenses of the combined fund are anticipated to
be the same as or lower than the expenses of the participating funds.
Conclusion: As shown above, Pioneer Disciplined Growth Fund and Pioneer
Independence Fund have similar management fees, however the breakpoint
structure of the combined fund's management fee most closely resembles Pioneer
Disciplined Growth Fund's management fee. On balance, this factor favors
Pioneer Disciplined Growth Fund as the performance survivor because of the
similarity of the breakpoint structure of the combined fund's management fee to
that of Pioneer Disciplined Growth Fund. As noted above, the resemblance of the
combined fund's other expenses and total expenses to those of Pioneer
Independence Fund as a percentage of average daily net assets is primarily
because of the difference in net assets between the funds.
E. Asset Size
Pioneer Disciplined Growth Fund: As of December 31, 2012, Pioneer Disciplined
Growth Fund had assets of approximately $42 million.
Pioneer Independence Fund: As of December 31, 2012, Pioneer Independence Fund
had assets of approximately $812 million.
Conclusion: The Registrants acknowledge that Pioneer Disciplined Growth Fund
has significantly fewer assets than Pioneer Independence Fund. However, the
Staff's guidance in the North American Security Trust no-action letter does not
suggest that asset size, by itself, is determinative in identifying the
performance survivor in a reorganization. Rather, asset size is only one of a
number of factors to be weighed.
F. Overall conclusion.
The Registrants believe that the factors discussed above clearly indicate that
the combined fund will most closely resemble Pioneer Disciplined Growth Fund.
In particular, the Registrants note that Pioneer Disciplined Growth Fund's
investment team will manage the combined fund using Pioneer Disciplined Growth
Fund's research-based approach, and the investment objectives, investment
policies and restrictions of the combined fund will be the same as the
investment objectives, investment policies and restrictions of Pioneer
Disciplined Growth Fund. The Registrants note that the portfolio composition of
the combined fund is anticipated to more closely resemble the portfolio
composition of Pioneer Disciplined Growth Fund. The Registrants also note that
the expense structure of the combined fund more closely resembles the expense
structure of Pioneer Disciplined Growth Fund. The Registrants acknowledge that
Pioneer Independence Fund is significantly larger
19
than Pioneer Disciplined Growth Fund. Nevertheless, the Registrants believe
that, on balance, the factors discussed above support Pioneer Disciplined
Growth Fund as the performance survivor of the Reorganization.
IV. Pioneer Select Mid Cap Growth Fund - Pioneer Growth Opportunities Fund
Reorganization
Following is a performance survivor analysis with respect to the Reorganization
of Pioneer Select Mid Cap Growth Fund and Pioneer Growth Opportunities Fund
using the factors identified in the North American Security Trust no-action
letter and the AICPA Guide. The combined fund following the Reorganization is
intended to have all of the investment characteristics of Pioneer Select Mid
Cap Growth Fund. Pioneer Growth Opportunities Fund is proposed to be the legal
survivor in order to simplify the tax analysis and maximize tax-related
benefits for the combined fund. Accordingly, as discussed below, the
performance survivor analysis indicates that Pioneer Select Mid Cap Growth Fund
will be the performance survivor of the Reorganization. In addition, Ernst &
Young LLP, the Registrants' current independent registered public accounting
firm, has indicated to the Registrants that it would consider Pioneer Select
Mid Cap Growth Fund to be the accounting survivor of the Reorganization.
A. Portfolio Management
Pioneer Select Mid Cap Growth Fund: Pioneer Investment Management, Inc. serves
as the fund's investment adviser. Day-to-day management of Pioneer Select Mid
Cap Growth Fund currently is the responsibility of Ken Winston. Effective
April 1, 2013, Shaji John and Jon Stephenson were added in support of
Mr. Winston. The portfolio management team is supported by the domestic equity
team at Pioneer. The fund uses a "growth" style of management, employing
quantitative analysis and fundamental research to seek to identify securities
primarily of mid-size companies with above average potential for earnings and
revenue growth that are also trading at attractive market valuations. The fund
compares its performance to the Russell Midcap Growth Index.
Pioneer Growth Opportunities Fund: Pioneer Investment Management, Inc. serves
as the fund's investment adviser. Day-to-day management of Pioneer Growth
Opportunities Fund's portfolio currently is the responsibility of Marco
Pirondini and Shaji John. Brian Stack was the portfolio manager of the fund
from 2008 through March 2013. Effective April 1, 2013, Messrs. Pirondini and
John were appointed to manage the fund's portfolio through the date of the
Reorganization. The fund uses a "growth at a reasonable price" style of
management, employing fundamental research to seek to identify securities
primarily of small-capitalization issuers with above average potential for
earnings and revenue growth that are also trading at attractive market
valuations. The fund compares its performance to the Russell 2000 Growth Index.
Combined Fund: Pioneer Investment Management, Inc. will serve as the combined
fund's investment adviser. Like Pioneer Select Mid Cap Growth Fund, day-to-day
management of the combined fund will be the responsibility of Ken Winston,
Shaji John and Jon Stephenson. The portfolio management team will be supported
by the domestic equity team at Pioneer. Like Pioneer Select Mid Cap Growth
Fund, the combined fund will be managed using a "growth" style of management,
employing quantitative analysis and fundamental research to seek to identify
securities primarily of mid-size companies with above average potential for
earnings and revenue growth that are also trading at attractive market
valuations. Like Pioneer Select Mid Cap Growth Fund, the combined fund will
compare its performance to the Russell Midcap Growth Index.
20
Conclusion: Since the combined fund will have the same portfolio management
teak as Pioneer Select Mid Cap Growth Fund, will be managed with the same
investment approach as Pioneer Select Mid Cap Growth Fund and a focus on
mid-size companies, and will compare its performance to Pioneer Select Mid Cap
Growth Fund's benchmark index, this factor favors Pioneer Select Mid Cap Growth
Fund as the performance survivor.
B. Portfolio Composition
Pioneer Select Mid Cap Growth Fund normally will invest at least 80% of its net
assets in equity securities of mid-size companies, whereas Pioneer Growth
Opportunities Fund may invest a significant portion of its assets in equity
securities of small companies. As noted above, the combined fund will be
managed by the investment team that currently manages Pioneer Select Mid Cap
Growth Fund, and will have the same investment objective, investment policies
and restrictions as Pioneer Select Mid Cap Growth Fund. The portfolio
securities of the combined fund are expected to be rebalanced such that they
line-up substantially with the portfolio securities of Pioneer Select Mid Cap
Growth Fund. Accordingly, the portfolio composition of the combined fund is
expected to more closely resemble the portfolio composition of Pioneer Select
Mid Cap Growth Fund.
Using a holdings-based analysis, Morningstar categorizes Pioneer Select Mid Cap
Growth Fund as a Mid-Cap Growth fund, whereas Pioneer Growth Opportunities Fund
is categorized as a Small Growth fund.
Conclusion: As noted above, the portfolio composition of the combined fund is
expected to more closely resemble the portfolio composition of Pioneer Select
Mid Cap Growth Fund. Accordingly, this factor favors Pioneer Select Mid Cap
Growth Fund as the performance survivor.
C. Investment Objectives, Policies and Restrictions
Investment Objective
Pioneer Select Mid Cap Growth Fund: Pioneer Select Mid Cap Growth Fund's
investment objective is long-term capital growth.
Pioneer Growth Opportunities Fund: Pioneer Growth Opportunities Fund's
investment objective is growth of capital.
Combined Fund: The combined fund's investment objective is long-term capital
growth.
Principal Investment Policies and Restrictions
Pioneer Select Mid Cap Growth Fund: Normally, the fund invests at least 80%
of its net assets (plus the amount of borrowings, if any, for investment
purposes) in equity securities of mid-size companies. Mid-size companies are
those with market values, at the time of investment, that do not exceed the
greater of the market capitalization of the largest company within the
Russell Midcap Growth Index ($24.98 billion as of December 31, 2012) or the
3-year rolling average of the market capitalization of the largest company
within the Russell Midcap Growth Index ($19.85 billion as of December 31,
2012) as measured at the end of the preceding month, and are not less than
the smallest company within the index. The fund may invest up to 20% of its
total assets in debt securities. The fund may invest up to 5% of its net
assets in below investment grade debt securities, including below investment
grade convertible debt securities, issued by both U.S. and non-U.S. issuers.
The fund may invest up to 20% of its net assets in REITs. The fund may invest
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up to 20% of its total assets in equity and debt securities of non-U.S.
issuers. The fund will not invest more than 5% of its total assets in the
securities of emerging markets issuers. The fund may, but is not required
to, use derivatives.
Pioneer Growth Opportunities Fund: fund invests primarily in equity
securities of companies that Pioneer considers to be reasonably priced or
undervalued, with above average growth potential. The fund may invest in
securities of any market capitalization, although the fund may invest a
significant portion of its assets in equity securities of small companies.
The fund defines small companies as those within the market capitalization
range of the Russell 2000 Growth Index (approximately $2.7 million to $3.6
billion as of March 31, 2012). The fund may invest up to 20% of its total
assets in debt securities of U.S. issuers. Generally the fund acquires debt
securities that are investment grade, but the fund may invest up to 5% of
its net assets in below investment grade debt securities and below
investment grade convertible debt securities. The fund may invest up to 20%
of its total assets in securities of non-U.S. issuers, including up to 5% of
its total assets in securities of emerging markets issuers. The fund may,
but is not required to, use derivatives.
Combined Fund: Pioneer Select Mid Cap Growth Fund and Pioneer Growth
Opportunities Fund have different investment policies and restrictions.
Pioneer Select Mid Cap Growth Fund focuses on investing in securities of
mid-size companies, whereas Pioneer Growth Opportunities Fund focuses on
investing in securities of small-size companies. The combined fund will have
the same investment policies and restrictions as Pioneer Select Mid Cap
Growth Fund, and, in particular, will focus on investing in securities of
mid-size companies: normally, the combined fund will invest at least 80% of
its net assets (plus the amount of borrowings, if any, for investment
purposes) in equity securities of mid-size companies. Mid-size companies are
those with market values, at the time of investment, that do not exceed the
greater of the market capitalization of the largest company within the
Russell Midcap Growth Index ($24.98 billion as of December 31, 2012) or the
3-year rolling average of the market capitalization of the largest company
within the Russell Midcap Growth Index ($19.85 billion as of December 31,
2012) as measured at the end of the preceding month, and are not less than
the smallest company within the index. The combined fund may invest up to
20% of its total assets in debt securities. The combined fund may invest up
to 5% of its net assets in below investment grade debt securities, including
below investment grade convertible debt securities, issued by both U.S. and
non-U.S. issuers. The combined fund may invest up to 20% of its net assets
in REITs. The combined fund may invest up to 20% of its total assets in
equity and debt securities of non-U.S. issuers. The combined fund will not
invest more than 5% of its total assets in the securities of emerging
markets issuers. The combined fund may, but is not required to, use
derivatives.
Conclusion: Pioneer Select Mid Cap Growth Fund and Pioneer Growth Opportunities
Fund have similar, but not identical, investment objectives. More importantly,
they have different investment policies and restrictions. As noted above, the
combined fund will have the same investment objective, investment policies and
restrictions as Pioneer Select Mid Cap Growth Fund, and, in particular, will
focus on investing in securities of mid-size companies. Accordingly, this
factor favors Pioneer Select Mid Cap Growth Fund as the performance survivor.
D. Expense Structures and Expense Ratios
Management Fees
Pioneer Select Mid Cap Growth Fund: Pioneer Select Mid Cap Growth Fund
currently pays Pioneer a management fee at an annual rate equal to 0.625% of
the fund's average daily net assets
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up to $500 million, 0.60% of the next $500 million and 0.575% on assets over
$1 billion. The fee is accrued daily and paid monthly.
Pioneer Growth Opportunities Fund: Pioneer Growth Opportunities Fund
currently pays Pioneer a management fee at an annual rate equal to 0.65% of
the fund's average daily net assets. The fee is accrued daily and paid
monthly.
Combined Fund: The combined fund will pay Pioneer a management fee at an
annual rate equal to 0.625% of the fund's average daily net assets up to
$500 million, 0.60% of the next $500 million and 0.575% on assets over
$1 billion. The fee will be accrued daily and paid monthly.
Sales load structure and Rule 12b-1 plans: The funds have the same sales load
structure and Rule 12b-1 plans.
Other expenses/Total expenses: The administrative service, custody, transfer
agency and other non-management fees that the funds pay are substantially
similar in structure. The expense ratios for other expenses of Class A shares
and Class Y shares of the combined fund will more closely resemble the expense
ratio of Class A shares and Class Y shares of Pioneer Select Mid Cap Growth
Fund, respectively. The expense ratio for other expenses of Class C shares of
the combined fund will more closely resemble the expense ratio of Class C
shares of Pioneer Growth Opportunities Fund. Accordingly, as shown in the
following table, the total annual fund operating expenses of Class A and Class
Y shares of the combined fund will more closely resemble the total annual fund
operating expenses of the corresponding class of Pioneer Select Mid Cap Growth
Fund, the total annual fund operating expenses of Class C shares of the
combined fund will more closely the total annual fund operating expenses of
Class C shares of Pioneer Growth Opportunities Fund.
Pioneer Select Mid Cap Pioneer Growth Opportunities
Growth Fund Fund Pro Forma Combined Fund
--------------------------- ---------------------------- ---------------------------
Total Annual Fund Operating Total Annual Fund Operating Total Annual Fund Operating
Expenses Expenses Expenses
--------------------------- ---------------------------- ---------------------------
Class A 1.16% 1.25% 1.16%
Class C 2.16% 2.11% 2.07%
Class Y 0.73% 0.76% 0.69%
The Registrants note that the expenses of the combined fund are anticipated to
be the same as or lower than the expenses of the participating funds.
Conclusion: As shown above, the combined fund's management fee most closely
resembles Pioneer Select Mid Cap Growth Fund's management fee. On balance, the
other expenses and total expenses of the combined fund more closely resemble
those of Pioneer Select Mid Cap Growth Fund. Accordingly, this factor favors
Pioneer Select Mid Cap Growth Fund as the performance survivor.
E. Asset Size
Pioneer Select Mid Cap Growth Fund: As of December 31, 2012, Pioneer
Disciplined Growth Fund had assets of approximately $446 million.
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Pioneer Growth Opportunities Fund: As of December 31, 2012, Pioneer Growth
Opportunities Fund had assets of approximately $514 million.
Conclusion: The net assets of the funds are comparable, although the Pioneer
Growth Opportunities Fund is somewhat larger. However, the Staff's guidance in
the North American Security Trust no-action letter does not suggest that asset
size, by itself, is determinative in identifying the performance survivor in a
reorganization. Rather, asset size is only one of a number of factors to be
weighed.
F. Overall conclusion.
The Registrants believe that the factors discussed above clearly indicate that
the combined fund will most closely resemble Pioneer Select Mid Cap Growth
Fund. In particular, the Registrants note that Pioneer Select Mid Cap Growth
Fund's investment team will manage the combined fund. In addition, the
investment objectives, investment policies and restrictions of the combined
fund will be the same as the investment objectives, investment policies and
restrictions of Pioneer Select Mid Cap Growth Fund, and, in particular, the
combined fund will focus on investing in securities of mid-size companies. The
Registrants note that the portfolio composition of the combined fund is
anticipated to more closely resemble the portfolio composition of Pioneer
Select Mid Cap Growth Fund. The Registrants also note that the expense
structure of the combined fund more closely resembles the expense structure of
Pioneer Select Mid Cap Growth Fund. Accordingly, the Registrants believe that,
on balance, the factors discussed above support Pioneer Select Mid Cap Growth
Fund as the performance survivor of the Reorganization.
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Exhibit B
Tandy Representation Letter
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