As filed with the Securities and Exchange Commission on October 25, 2004
File No. 333-118424
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. 1
Post-Effective Amendment No. ______
(Check appropriate box or boxes)
PIONEER AMERICA INCOME TRUST
(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: David C. Phelan, Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
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.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment, which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall be effective on
such date as the Commission, acting pursuant to Section 8(a), may determine.
COMBINED PROXY STATEMENT OF
SAFECO TAXABLE BOND TRUST
on behalf of its Series:
Safeco Intermediate-Term U.S. Government Fund
Safeco High-Yield Bond Fund
SAFECO TAX-EXEMPT BOND TRUST
on behalf of its Series:
Safeco Intermediate-Term Municipal Bond Fund
Safeco California Tax-Free Income Fund
Safeco Municipal Bond Fund
SAFECO MANAGED BOND TRUST
on behalf of its Series:
Safeco Intermediate-Term Bond Fund
SAFECO MONEY MARKET TRUST
on behalf of its Series:
Safeco Money Market Fund
Safeco Tax-Free Money Market Fund
(each, "your Safeco Fund" and collectively, the "Safeco Funds")
The address and telephone number of each Safeco Fund is:
4854 154th Place N.E., Redmond, WA 98052
1-800-624-5711
PROSPECTUS
FOR INVESTOR CLASS SHARES OF
PIONEER AMERICA INCOME TRUST
PIONEER BOND FUND
PIONEER CALIFORNIA TAX FREE INCOME FUND
PIONEER CASH RESERVES FUND
PIONEER HIGH YIELD FUND
PIONEER MUNICIPAL BOND FUND
PIONEER TAX FREE INCOME FUND
PIONEER TAX FREE MONEY MARKET FUND
(each, a "Pioneer Fund" and collectively, the "Pioneer Funds")
The address and telephone number of each Pioneer Fund is:
60 State Street, Boston, Massachusetts 02109 and 1-800-622-3265 or
1-800-225-6292.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
SCHEDULED FOR DECEMBER 8, 2004
To the Shareholders of the Funds:
A joint special meeting of shareholders (the "Meeting") for each of the
Safeco Funds will be held at the offices of Safeco Mutual Funds, King
Auditorium, 4854 154th Place, N.E., Redmond, WA 98052 on December 8, 2004 at
2:00 p.m., local time, to consider the following:
1. With respect to each Safeco Fund, a proposal to approve an Agreement and
Plan of Reorganization. Under the Agreement and Plan of Reorganization,
your Safeco Fund will transfer all of its assets to an investment company
(each a "Pioneer Fund") managed by Pioneer Investment Management, Inc.
("Pioneer") in exchange for Investor Class shares of the Pioneer Fund. The
Pioneer Fund also will assume your Safeco Fund's liabilities that are
included in the calculation of your Safeco Fund's net assets at the
closing. Generally, each Pioneer Fund is an existing mutual fund with a
substantially similar investment objective and similar investment policies
as your Safeco Fund. In the case of certain Safeco Funds, the Pioneer Fund
is a newly organized mutual fund with a substantially similar investment
objective and similar investment policies as your Safeco Fund. Holders of
all share classes of your Safeco Fund will receive Investor Class shares of
the corresponding Pioneer Fund. Investor Class shares of the applicable
Pioneer Fund will be distributed to shareholders in proportion to the
relative net asset value of their share holdings on the closing date of the
reorganization. Following the reorganization, your Safeco Fund will then be
dissolved. As a result of the reorganization you will become shareholders
of the Pioneer Fund. Your Board of Trustees recommends that you vote FOR
this proposal.
2. With respect to each Safeco Fund, a proposal to approve an interim
investment advisory agreement between your Safeco Fund and Pioneer.
Pioneer has provided advisory services for your Safeco Funds pursuant to
this agreement since August 2, 2004, when the advisory agreement between
your Safeco Fund and Safeco Asset Management Company terminated. Approval
of the interim investment advisory agreement will enable Pioneer to
receive advisory fees currently held in escrow. Your Board of Trustees
recommends that you vote FOR this proposal.
3. Any other business that may properly come before the Meeting.
Shareholders of record as of the close of business on October 8, 2004, 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 card. If shareholders do not return their proxies in
sufficient numbers, your Safeco Fund may be required to make additional
solicitations.
By order of the Boards of
Trustees,
[Name]
[Title]
October , 2004
COMBINED PROXY STATEMENT OF
SAFECO TAXABLE BOND TRUST
on behalf of its Series:
Safeco Intermediate-Term U.S. Government Fund
Safeco High-Yield Bond Fund
SAFECO TAX-EXEMPT BOND TRUST
on behalf of its Series:
Safeco Intermediate-Term Municipal Bond Fund
Safeco California Tax-Free Income Fund
Safeco Municipal Bond Fund
SAFECO MANAGED BOND TRUST
on behalf of its Series:
Safeco Intermediate-Term Bond Fund
SAFECO MONEY MARKET TRUST
on behalf of its Series:
Safeco Money Market Fund
Safeco Tax-Free Money Market Fund
(each, "your Safeco Fund" and collectively, the "Safeco Funds")
The address and telephone number of each Safeco Fund is: 4854 154th Place
N.E., Redmond, WA 98052 1-800-624-5711.
PROSPECTUS
FOR INVESTOR CLASS SHARES OF
PIONEER AMERICA INCOME TRUST
PIONEER BOND FUND
PIONEER CALIFORNIA TAX FREE INCOME FUND
PIONEER CASH RESERVES FUND
PIONEER HIGH YIELD FUND
PIONEER MUNICIPAL BOND FUND
PIONEER TAX FREE INCOME FUND
PIONEER TAX FREE MONEY MARKET FUND
(each, a "Pioneer Fund" and collectively, the "Pioneer Funds")
The address and telephone number of each Pioneer Fund is: 60 State Street,
Boston, Massachusetts 02109 and 1-800-622-3265 or 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 upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
An investment in any Safeco Fund or Pioneer Fund is not a bank deposit and
is not insured or guaranteed by the federal deposit insurance corporation or
any other government agency.
2
This combined proxy statement and prospectus ("Proxy
Statement/Prospectus"), dated October 25, 2004, is being furnished to
shareholders of the series listed above (each a "Safeco Fund") of Safeco
Taxable Bond Trust, Safeco Tax-Exempt Bond Trust, Safeco Money Market Trust and
Safeco Managed Bond Trust (each, a "Safeco Trust," and collectively, the
"Safeco Trusts") in connection with the solicitation by the respective Boards
of Trustees (the "Boards," or the "Trustees") of the Safeco Trusts of proxies
to be used at a joint meeting of shareholders of the Safeco Funds (the
"Meeting") to be held at Safeco Mutual Funds, King Auditorium, 4854 154th
Place, N.E., Redmond, WA 98052 on December 8, 2004 at 2:00 p.m., local time.
The Proxy Statement/Prospectus contains information you should know before
voting on (i) the approval of a proposed Agreement and Plan of Reorganization
(each a "Plan") that provides for the reorganization of each Safeco Fund into a
corresponding Pioneer Fund (each a "Reorganization"), and (ii) the approval of
an interim investment advisory agreement for each Safeco Fund. The following
table indicates (a) the corresponding Pioneer Fund shares that each Safeco Fund
shareholder would receive if each Plan is approved, (b) which Safeco Fund
shareholders may vote on which proposals and (c) on what page of this Proxy
Statement/Prospectus the discussion regarding each proposal begins.
Shareholders of each class of shares of a Safeco Fund will vote together as a
single class on each proposal. Although each Reorganization is similar in
structure, you should read carefully the specific discussion regarding your
Safeco Fund's Reorganization.
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Safeco Fund Pioneer Fund Shareholders Entitled to Vote Page
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Proposal 1(a) Safeco California Pioneer California Safeco California Tax-Free Income Fund shareholders 8
Tax-Free Income Fund Tax Free Income Fund
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Proposal 1(b) Safeco High-Yield Pioneer High Yield Safeco High-Yield Bond Fund shareholders 23
Bond Fund Fund
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Proposal 1(c) Safeco Pioneer Bond Fund Safeco Intermediate-Term Bond Fund shareholders 37
Intermediate-Term
Bond Fund
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Proposal 1(d) Safeco Pioneer Tax Free Safeco Intermediate-Term Municipal Bond Fund 52
Intermediate-Term Income Fund shareholders
Municipal Bond Fund
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Proposal 1(e) Safeco Pioneer America Safeco Intermediate-Term U.S. Government Fund 68
Intermediate-Term Income Trust shareholders
U.S. Government Fund
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Proposal 1(f) Safeco Money Market Pioneer Cash Safeco Money Market Fund shareholders 84
Fund Reserves Fund
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Proposal 1(g) Safeco Municipal Bond Pioneer Municipal Safeco Municipal Bond Fund shareholders 97
Fund Bond Fund
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Proposal 1(h) Safeco Tax-Free Pioneer Tax Free Safeco Tax-Free Money Market Fund shareholders 112
Money Market Fund Money Market Fund
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Proposal 2(a)-(h) Each Fund Not applicable Shareholders of each Fund voting separately 127
as to the proposal that affects their Fund
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Where to Get More Information
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The Safeco Funds' prospectuses dated April 30, 2004, as Available to you free of charge by calling 1-800-624-5711.
supplemented August 2, 2004 and August 3, 2004. Each prospectus, which is also on file with the SEC, is
incorporated by reference into this Proxy Statement/
The Safeco Funds' annual report dated December 31, 2003 Prospectus.
and semiannual report dated June 30, 2004.
Available to you free of charge by calling 1-800-624-5711.
Also on file with the SEC. See "Available Information." These
reports are incorporated by reference into this Proxy
Statement/Prospectus.
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Each Pioneer Fund's current prospectus and each Pioneer Available to you free of charge by calling 1-800-225-6292.
Fund's most recent annual and semiannual reports and These prospectuses and reports are also on file with the SEC.
supplements (as they apply) to shareholders. These prospectuses and reports are incorporated by reference
into this Proxy Statement/Prospectus.
- ----------------------------------------------------------------------------------------------------------------------------
A statement of additional information for this joint Proxy Available to you free of charge by calling 1-800-225-6292.
Statement/Prospectus (the "SAI"), dated October 25, 2004. It Also on file with the SEC. This SAI is incorporated by
contains additional information about your Safeco Funds and reference into this Proxy Statement/Prospectus.
the Pioneer Funds.
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To ask questions about this Proxy Statement/Prospectus. Call your Safeco Fund's toll-free telephone number:
1-800-624-5711.
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3
Background to the Reorganizations
Safeco Asset Management Company ("SAM"), the Safeco Funds' investment
adviser until August 2, 2004, was a subsidiary of Safeco Corporation, a
multi-line insurance company. On August 2, 2004, Symetra Financial Corporation
("Symetra") acquired certain assets from Safeco Corporation, including all of
the capital stock of SAM. While reviewing the operations of SAM in anticipation
of that transaction, Symetra determined that engaging in the business of
investment adviser to the Safeco Funds was not a core business that it intended
to continue. After investigating and discussing several alternatives for
ongoing investment management of the Safeco Funds with the Trustees, Symetra
conducted a search for a new investment adviser for the Safeco Funds.
Ultimately Symetra decided to recommend to the Boards that Pioneer Investment
Management, Inc. ("Pioneer") be hired to manage the Safeco Funds on an interim
basis until the Reorganizations occur and the Safeco Funds be reorganized into
similar mutual funds managed by Pioneer.
The Boards met at a series of meetings in July 2004. At these meetings
your Trustees received and evaluated materials regarding Pioneer and the
Pioneer Funds, including the performance record and expense structure of each
of the Pioneer Funds, the impact of the proposed Reorganizations on the Safeco
Funds' shareholders, and the quality of the services offered by Pioneer. At
these meetings, the Trustees met with representatives of Pioneer. In addition
to these general factors, the Trustees also considered these and other factors
specifically in the context of each Reorganization. On July 30, 2004, the
Boards of Trustees, including all of the Trustees who are not interested
persons of SAM (the "Independent Trustees"), unanimously voted to approve each
of the Reorganizations. In approving the Reorganization, the Board determined
that the Reorganizations were in the best interests of the Safeco Funds'
shareholders and the interests of existing Safeco Funds' shareholders will not
be diluted as a result of the Reorganizations.
Pioneer believes that it can offer favorable long-term investment
performance and enhanced shareholder services to the Safeco Funds'
shareholders. The Reorganizations will, by combining the assets of two mutual
funds and, by being part of a family of funds with greater distribution
capabilities, offer the potential for increased economies of scale. Increased
economies of scale have the potential of benefiting the shareholders of your
Safeco Funds and the Pioneer Funds by spreading fixed costs over a larger asset
base and reducing expenses on a per share basis. There can be no assurance that
such economies of scale will be realized.
Why the Trustees are Recommending the Reorganizations
The Trustees believe that reorganizing your Safeco Fund into a portfolio
with a substantially similar investment objective and similar investment
policies that is part of the Pioneer family of funds offers you potential
benefits. These potential benefits and considerations include:
o SAM, the investment adviser to each of the Safeco Funds until August 2,
2004, was acquired by Symetra. Symetra informed the Board that it was not
interested in continuing to provide investment advisory services to the
Safeco Funds. Therefore, a change in your Safeco Fund's investment adviser
was necessary;
o The track record of Pioneer in managing the Pioneer Funds as compared to
the historical performance of the Safeco Funds;
o The resources of Pioneer, including its infrastructure in shareholder
services;
o The opportunity to be part of a significantly larger family of funds, with
additional product offerings and enhanced shareholder servicing options;
o Pioneer's commitment until December 10, 2006, or such later date that is
the second anniversary of the day on which each Reorganization closes (the
"Closing Date") to limit the total operating expenses of the Investor
Class shares of each Pioneer Fund; and
o Shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary)
and maintain their account may purchase Class A shares of the
corresponding Pioneer Fund through such account in the future or may
exchange those shares for Class A shares of another Pioneer Fund or
purchase Class A share of another Pioneer Fund without paying any sales
charge. Investor Class shares will not be offered after the
Reorganizations.
How Each Reorganization will Work
o Safeco Fund shareholder-directed exchanges and purchases made by check,
ACH, or wire will be accepted up until 1 p.m. (Pacific Time) on Wednesday,
December 8, 2004. Exchange and purchase requests received after this
deadline will be rejected and returned. Purchase and exchange requests
made by Safeco Fund shareholders through financial institutions or
advisers must do so earlier to ensure the trade can be processed within
this deadline. Financial institutions and advisers that trade
electronically (NSCC) with the Safeco Funds can place exchange and
purchase requests up until 1 p.m. (Pacific Time) on Tuesday, December 7,
2004.
4
Exchanges and purchases received after this deadline will be rejected and
returned. The Safeco Funds will not process purchases made via automatic
investment method (AIM) after December 8, 2004. Dividend/capital gain
reinvestment and established systematic exchanges will continue through
December 10, 2004.
o Each Safeco Fund will transfer all of its assets to a corresponding
Pioneer Fund. Each Pioneer Fund will assume the corresponding Safeco
Fund's liabilities that are included in the calculation of such Safeco
Fund's net asset value at the closing of the Reorganization (the "Closing
Date").
o Each Pioneer Fund will issue Investor Class shares to the corresponding
Safeco Fund in amounts equal to the aggregate net asset value of that
Safeco Fund's shares. Shareholders of your Safeco Fund will receive
Investor Class shares of the corresponding Pioneer Fund. These shares will
be distributed to shareholders in proportion to the relative net asset
value of their share holdings on the Closing Date. On the Closing Date,
shareholders will hold the shares of the Pioneer Fund with the same
aggregate net asset value as the shares of your Safeco Fund that you held
immediately prior to the Reorganization.
o Each Safeco Fund will be dissolved after the Closing Date.
o Shares of the Investor Class of a Pioneer Fund will automatically convert
to Class A shares of the Pioneer Fund at the end of the calendar month
that is two years after the Closing Date.
o Pioneer acts as investment adviser to each Pioneer Fund. Until December
10, 2006, or such later date that is the second anniversary of the Closing
Date, Pioneer has agreed to limit each Pioneer Fund's expenses (excluding
extraordinary expenses) for Investor Class shares. Pioneer is not required
to limit any expenses after the second anniversary of the Closing Date.
o The Reorganizations are intended to result in no income, gain or loss
being recognized for federal income tax purposes to any of the Pioneer
Funds, the Safeco Funds or the shareholders of the Safeco Funds.
o In recommending each of the Reorganizations, the Trustees of your Safeco
Fund have determined that the Reorganization is in the best interest of
your Safeco Fund and will not dilute the interests of shareholders of your
Safeco Fund. The Trustees have made that determination on the basis of the
factors listed above and discussed in more detail under each proposal. A
reorganization might not be in the best interest of the shareholders of a
mutual fund if the surviving fund had higher expenses, less experienced
management or the adviser did not have adequate resources to manage the
affairs of the mutual fund.
o If the Reorganizations are approved, the Safeco Trust will file with the
SEC an application for deregistration on Form N-8F under the Investment
Company Act of 1940, as amended (the "Investment Company Act") and will
cease to exist as an investment company after such application is
approved.
Who is Pioneer
Pioneer is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended, and acts as investment adviser to mutual fund
and institutional accounts. Pioneer or its predecessors have been managing
mutual funds since 1928 and at June 30, 2004 had, together with its affiliates,
over $35 billion in assets under management. Pioneer is an indirect,
wholly-owned subsidiary of UniCredito Italiano S.p.A., an Italian Bank.
In addition to the Investor Class shares to be issued in the
Reorganization, each Pioneer Fund also offers Class A shares (subject to an
initial sales load and a Rule 12b-1 Plan), Class B shares (subject to a
contingent deferred sales charge and a Rule 12b-1 Plan), and Class C shares
(subject to a contingent deferred sales charge and a Rule 12b-1 Plan). In
addition, most of the Pioneer Funds also offer Class Y shares (which are an
institutional class of shares and are not subject to a sales charge or a Rule
12b-1 Plan) and Class R shares (which are offered only to certain retirement
plans).
Who Bears the Expenses Associated with the Reorganizations
Pioneer and Symetra will pay all out of pocket expenses of the Safeco
Funds and the Pioneer Funds associated with the Reorganizations, including, but
not limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses
of any proxy solicitation firm retained in connection with the Reorganizations;
(3) the legal fees and expenses incurred by the Safeco Funds in connection with
the Reorganizations; and (4) the Trustee's fees and out of pocket expenses
incurred as a result of the Reorganizations.
5
Will Pioneer and Symetra Benefit from the Reorganizations
Pioneer will benefit from managing a larger pool of assets. Pioneer is
also acquiring certain assets associated with SAM's mutual funds and
institutional account advisory business. In consideration for the acquisition
of these assets and certain covenants from Symetra and SAM, including their
assistance in facilitating the Reorganizations and their obligation to
indemnify Pioneer against certain liabilities, Pioneer has agreed to pay
Symetra up to $30 million. This amount is subject to downward adjustment if the
net assets of the Safeco Funds that approve the Reorganizations (together with
assets in certain other accounts) are less than $2.6 billion. Under this
agreement, Pioneer and Symetra have also agreed, among other things, that (i)
once the Investor Class converts to Class A shares, Pioneer Funds Distributor,
Inc. ("PFD"), the principal underwriter of the Pioneer Funds, shall make
payments to Safeco Securities, Inc. ("Safeco Securities"), the principal
underwriter of the Safeco Funds, pursuant to a Rule 12b-1 plan equal to 0.25%
of the average daily net assets attributable to accounts maintained by former
shareholders of the Safeco Funds; (ii) PFD will make additional continuing
payments out of its own resources to Safeco Securities, following Pioneer's
acquisition of assets from SAM, at an annual rate of 0.05% of the average daily
net assets of any Pioneer Fund held by or for the account of any former
shareholders of the Safeco Funds (including assets invested in any Pioneer Fund
as a result of the Reorganization or otherwise) and, in connection with
purchases of shares of the Pioneer Funds by former shareholders of the Safeco
Funds after the acquisition, PFD will pay out of its own resources to Safeco
Securities an amount equal to 0.20% of the amount of such purchases; and (iii)
Symetra and SAM will be subject to certain non-competition provisions.
Why is an Interim Investment Advisory Agreements being Voted On
Having determined to recommend the Reorganizations, the Trustees elected
to appoint Pioneer as investment adviser to each Safeco Fund until the closing
of the Reorganizations given that Symetra had indicated that it did not wish to
continue to offer investment advisory services to the Safeco Funds.
Under the Investment Company Act, shareholders must approve any new
investment advisory agreement for a Safeco Fund. However, Rule 15a-4 under the
Investment Company Act permits the Board to appoint an adviser on an interim
basis without prior shareholder approval of an investment advisory agreement
with the adviser if the new adviser agrees to provide such services on the same
terms as the previous adviser. An adviser may act on such an interim basis for
a period of 150 days. Because Pioneer will be making the payment to Symetra as
discussed above, any fees that Pioneer would be entitled to under the interim
investment advisory agreement will be held in escrow until shareholder approval
of that agreement is obtained. If shareholders of a Safeco Fund do not approve
the interim investment advisory agreement, Pioneer will not receive the fee
under the current investment advisory agreement with SAM but instead would be
paid a fee based upon Pioneer's cost in managing the Safeco Fund. If the
Reorganizations and the interim investment advisory agreements are not approved
by December 30, 2004, Pioneer will no longer provide advisory services to the
Safeco Funds, unless an extension of the 150 day period is permitted by a rule
or independent position of the staff of the SEC. If both the Reorganization and
appointment of Pioneer are approved, the interim investment advisory agreement
will continue in effect until the closing of the Reorganization.
What Happens if a Reorganization is not Approved
If a Reorganization is not approved by shareholders, the Board will
consider what action to take. Such action could include liquidating the Safeco
Fund or seeking SEC relief to permit Pioneer to serve as investment adviser
beyond the 150-day limitation period.
Who is Eligible to Vote
Shareholders of record on October 8, 2004 are entitled to attend and vote
at the Meeting or any adjournment of the Meeting. On each proposal, all
shareholders of a Safeco Fund, regardless of the class of shares held, will
vote together as a single class. Each share is entitled to one vote. 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 Reorganization and the interim advisory agreement with
Pioneer. If any other business comes before the Meeting, your shares will be
voted at the discretion of the persons named as proxies.
6
TABLE OF CONTENTS
Page
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INTRODUCTION ..................................................................... 3
PROPOSAL 1(a) -- SAFECO CALIFORNIA TAX-FREE INCOME FUND .......................... 8
PROPOSAL 1(b) -- SAFECO HIGH-YIELD BOND FUND ..................................... 23
PROPOSAL 1(c) -- SAFECO INTERMEDIATE-TERM BOND FUND .............................. 37
PROPOSAL 1(d) -- SAFECO INTERMEDIATE-TERM MUNICIPAL BOND FUND .................... 52
PROPOSAL 1(e) -- SAFECO INTERMEDIATE-TERM U.S. GOVERNMENT FUND ................... 68
PROPOSAL 1(f) -- SAFECO MONEY MARKET FUND ........................................ 84
PROPOSAL 1(g) -- SAFECO MUNICIPAL BOND FUND ...................................... 97
PROPOSAL 1(h) -- SAFECO TAX-FREE MONEY MARKET FUND ............................... 112
TERMS OF EACH AGREEMENT AND PLAN OF REORGANIZATION ............................... 125
TAX STATUS OF EACH REORGANIZATION ................................................ 125
PROPOSAL 2(a)-(h) -- APPROVAL OF PIONEER AS INVESTMENT ADVISER FOR EACH FUND ..... 127
VOTING RIGHTS AND REQUIRED VOTE .................................................. 130
ADDITIONAL INFORMATION ABOUT THE PIONEER FUNDS ................................... 130
FINANCIAL HIGHLIGHTS ............................................................. 137
INFORMATION CONCERNING THE MEETING ............................................... 142
OWNERSHIP OF SHARES OF THE FUNDS ................................................. 144
EXPERTS .......................................................................... 149
AVAILABLE INFORMATION ............................................................ 149
EXHIBIT A-1 -- FORM OF AGREEMENTS AND PLANS OF REORGANIZATION (C/D) .............. A-1
EXHIBIT A-2 -- FORM OF AGREEMENTS AND PLANS OF REORGANIZATION (F) ................ A-21
EXHIBIT B -- FORM OF INTERIM ADVISORY AGREEMENT .................................. B-1
EXHIBIT C -- ADDITIONAL INFORMATION REGARDING PIONEER ............................ C-1
EXHIBIT D -- PORTFOLIO MANAGER'S DISCUSSION OF PERFORMANCE ....................... D-1
7
Safeco California Tax-Free Income Fund and
Pioneer California Tax Free Income Fund
PROPOSAL 1(a)
Approval of Agreement and Plan of Reorganization
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 Reorganization attached as EXHIBIT A-2 because they
contain details that are not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco California Tax-Free Income Fund to the Pioneer California
Tax Free Income Fund
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Safeco California Tax-Free Income Fund Pioneer California Tax Free Income Fund
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Business A series of Safeco Tax-Exempt Bond Trust, a A newly organized series of Pioneer Series
diversified open-end management investment Trust II, an open-end management investment
company organized as a Delaware statutory trust. company registered under the Investment
Company Act and organized as a Delaware
statutory trust.
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Net assets as of $82.4 million None. The Pioneer California Tax Free Income
June 30, 2004 Fund is newly organized and does not expect
to commence investment operations until the
Reorganization occurs.
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Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers (until August 2, 2004): Portfolio Managers:
Stephen C. Bauer (since 1983) Day-to-day management of the Fund's
President and Director, SAM portfolio will be the responsibility of a team of
fixed income portfolio managers led by
Mary Metastasio (since 2003) Kenneth J. Taubes.
Vice President, SAM
Mr. Taubes joined Pioneer as a senior vice
Currently Pioneer is investment adviser to president in September 1998 and has been an
Safeco California Tax-Free Income Fund. The investment professional since 1982.
Portfolio Managers of Pioneer California Tax
Fund, as indicated in the next column,
currently manage your Safeco Fund.
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Investment objective Each Fund seeks to provide as high a level of current interest income exempt from federal income
tax and California state personal income tax as is consistent with the relative stability of capital.
The investment objective of each Fund is fundamental and cannot be changed without shareholder
approval.
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8
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Safeco California Tax-Free Income Fund Pioneer California Tax Free Income Fund
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Primary investments To achieve its investment objective, each Fund invests primarily in investment-grade municipal bonds
issued by the state of California or its political subdivisions and having average maturities of 15
years or longer. Under normal circumstances, each Fund invests:
o At least 80% of its assets in securities the interest on which is exempt from federal
income tax and California personal income tax
o At least 65% of its assets in investment-grade municipal bonds with a maturity of more than one year
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Pioneer California Tax Free Income Fund's
investments may have fixed or variable
principal payments and all types of interest
rate payment and reset terms, including
fixed and floating rates, inverse floating
rate, zero coupon, contingent, deferred and
payment in kind and auction rate features.
Pioneer California Tax Free Income Fund
may invest in tax-exempt securities of
issuers located outside the state of
California. The Fund will not invest in
securities the interest on which is a tax
preference item for purposes of the federal
alternative minimum tax.
Pioneer California Tax Free Income Fund
may invest in municipal securities of any
maturity, although under normal
circumstances it is anticipated that the Fund
will generally invest in longer-term
investments. Municipal securities with
longer maturities are generally more volatile
than other fixed income securities with
shorter maturities.
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9
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Safeco California Tax-Free Income Fund Pioneer California Tax Free Income Fund
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Investment strategies When evaluating a bond to buy, SAM considers Pioneer considers both broad economic
among other things: factors and issuer specific factors in selecting
a portfolio designed to achieve the Fund's
o Yield investment objective. In assessing the
o Maturity appropriate maturity and rating weighting of
o Structural features such as an issuer's right the Fund's portfolio, Pioneer considers a
to buy the bond back at a stated price (a variety of factors that are expected to
"call") or the Fund's right to require the influence economic activity and interest rates.
issuer to buy the bond back at a stated price These factors include fundamental economic
(a "put") indicators, such as the rates of economic
o Credit quality (including the underlying rating growth and inflation, Federal Reserve
of insured bonds) monetary policy and the relative value of the
o The project the issuer is financing U.S. dollar compared to other currencies.
o The original offering price
o Any state or local tax exemption Once Pioneer determines the preferable
o The amount of discount off or premium on portfolio characteristics, Pioneer selects
the stated principal amount of the bond individual securities based upon the terms of
represented by the price offered the securities (such as yields compared to
o Whether the bond appears to offer the best U.S. Treasuries or comparable issues),
overall value when compared to other liquidity and rating and issuer diversification.
available bonds
Pioneer also employs due diligence and
SAM historically favored long-term maturity fundamental research, an evaluation of the
bonds in essential services that offer a issuer based on its financial statements and
significant degree of protection against issuer operations, to assess an issuer's credit quality,
repurchase rights prior to maturity and good taking into account financial condition, future
value relative to their peers. SAM may use the capital needs and potential for change in
rating services provided by Moody's, S&P, or rating. In making these portfolio decisions,
Fitch. Bond ratings indicate an issuer's financial Pioneer relies on the knowledge, experience
strength and ability to meet its debt and judgment of its staff who have access to
obligations. a wide variety of research.
Safeco California Tax-Free Income Fund sold
bonds when:
o They become fully valued
o More attractively valued bonds become
available;
o Cash is needed to meet shareholder
redemptions
Because it often takes years for attractive
relative valuations to be recognized by the
municipal securities market, turnover of the
Fund's portfolio can be low.
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10
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Safeco California Tax-Free Income Fund Pioneer California Tax Free Income Fund
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Other investments Safeco California Tax-Free Income Fund will Pioneer California Tax Free Income Fund may
limit its investment in municipal obligations the invest up to 20% of its net assets in securities
interest on which is payable from the revenues of other investment companies, investment
of similar types of projects to less than 25% of grade commercial paper, U.S. government
each Funds' total assets. As a matter of securities, U.S. or foreign bank instruments
operating policy, "similar types of projects" and repurchase agreements.
may include sports, convention or trade show
facilities; airports or mass transportation; Pioneer California Tax Free Income Fund may
sewage or solid waste disposal facilities; or air invest up to 10% of its net assets in debt
and water pollution control projects. securities rated below investment grade or, if
unrated, of equivalent quality as determined
Safeco California Tax-Free Income Fund may by Pioneer. Debt securities rated below
invest in any of the following short-term, investment grade are commonly referred to as
tax-exempt obligations: municipal notes of "junk bonds" and are considered speculative.
issuers rated, at the time of the purchase, Below investment grade debt securities involve
within one of the three highest grades greater risk of loss, are subject to greater
assigned by a nationally recognized statistical price volatility and are less liquid, especially
rating organization ("NRSRO"); unrated during periods of economic uncertainty or
municipal notes offered by issuers having change, than higher quality debt securities.
outstanding municipal bonds rated within one
of the three highest grades assigned by an Pioneer California Tax Free Income Fund may
NRSRO; notes issued by or on behalf of invest up to 10% of its net assets in inverse
municipal issuers that are guaranteed by the floating rate obligations (a type of derivative
U.S. government; tax-exempt commercial paper instrument). Inverse floating rate obligations
assigned one of the two highest grades by an represent interests in tax-exempt bonds. The
NRSRO; certificates of deposit issued by banks interest rate on inverse floating rate
with assets of $1,000,000,000 or more; and obligations will generally decrease as short-
municipal obligations that have a maturity of term interest rates increase, and increase as
one year or less from the date of purchase. short-term rates decrease. Due to their
leveraged structure, the sensitivity of the
Safeco California Tax-Free Income Fund may market value of an inverse floating rate
invest in obligations of the U.S. government, obligation to changes in interest rates is
its agencies or instrumentalities or in qualified generally greater than a comparable long-term
repurchase agreements, the net interest on bond issued by the same municipality and
which is taxable for federal income tax with similar credit quality, redemption and
purposes. maturity provisions. Inverse floating rate
obligations may be volatile and involve
leverage risk.
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Temporary defensive Safeco California Tax-Free Income Fund may Pioneer California Tax Free Income Fund may
strategies hold cash or as a temporary defensive invest all or part of its assets in securities
measure when market conditions so warrant. with remaining maturities of less than one
year, cash equivalents or may hold cash.
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Diversification Each Fund is diversified for the purpose of the Investment Company Act, and each Fund is
subject to diversification requirements under the Internal Revenue Code of 1986, as amended
("the Code").
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Industry concentration Each Fund will not make investments that will result in the concentration (as that term may be
defined in the Investment Company Act, any rule or order thereunder, or SEC staff interpretation
thereof) of its investments in the securities of issuers primarily engaged in the same industry,
provided that this restriction does not limit each Fund from investing in obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
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11
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Safeco California Tax-Free Income Fund Pioneer California Tax Free Income Fund
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Restricted and illiquid If immediately after and as a result of such Pioneer California Tax Free Income Fund will
securities action the value of the following securities, in not invest more than 10% of its net assets in
the aggregate, would exceed 10% of Safeco illiquid and other securities that are not readily
California Tax-Free Income Fund's net assets, marketable. Repurchase agreements maturing
the Fund will not (i) purchase securities for in more than seven days will be included for
which there is no readily available market, (ii) purposes of the foregoing limit. Securities
purchase time deposits maturing in more than subject to restrictions on resale under the
seven days, (iii) purchase over-the-counter 1933 Act, are considered illiquid unless they
(OTC) options or hold assets set aside to cover are eligible for resale pursuant to Rule 144A
OTC options written by the Fund, (iv) enter into or another exemption from the registration
repurchase agreements maturing in more than requirements of the 1933 Act and are
seven days, or (v) invest in interests in real determined to be liquid by Pioneer.
estate investment trusts which are not readily
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
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Borrowing Safeco California Tax-Free Income Fund may Pioneer California Tax Free Income Fund may
borrow money (i) from banks or (ii) by not borrow money, except on a temporary
engaging in reverse repurchase agreements. basis and to the extent permitted by applicable
law, as amended and interpreted or modified
from time to time by any regulatory authority
having jurisdiction. Under current regulatory
requirements, the Fund may: (a) borrow from
banks or through reverse repurchase
agreements in an amount up to 33 1/3% of
the fund's total assets (including the amount
borrowed); (b) borrow up to an additional 5%
of the fund's assets for temporary purposes;
(c) obtain such short-term credits as are
necessary for the clearance of portfolio
transactions; (d) purchase securities on
margin to the extent permitted by applicable
law; and (e) engage in transactions in
mortgage dollar rolls that are accounted for
as financings.
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12
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Safeco California Tax-Free Income Fund Pioneer California Tax Free Income Fund
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Lending Safeco California Tax-Free Income Fund may Pioneer California Tax Free Income Fund may
lend securities to qualified institutional not make loans, except that the Fund may
investors with a value of up to 33% of the (i) lend portfolio securities in accordance with
Fund's total assets. the Fund's investment policies, (ii) enter into
repurchase agreements, (iii) purchase all or
a portion of an issue of publicly distributed
debt securities, bank loan participation
interests, bank certificates of deposit, bankers'
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 Investment Company 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.
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Derivative instruments Safeco California Tax-Free Income Fund may Pioneer California Tax Free Income Fund may
not purchase securities on margin. However, use futures and options on securities, indices
the Fund may (i) obtain short-term credits as and currencies, forward currency exchange
necessary to clear its purchases and sales of contracts and other derivatives. The Fund
securities, and (ii) make margin deposits in does not use derivatives as a primary
connection with its use of financial options and investment technique and generally limits their
futures, forward and spot currency contracts, use to hedging. However, the Fund may use
swap transactions and other financial contracts derivatives for a variety of non-principal
or derivative instruments. purposes, including:
o As a hedge against adverse changes in
stock market prices, interest rates or
currency exchange 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
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Other investment policies and As described above, the Funds have substantially
restrictions similar principal investment strategies and
policies. Certain of the non-principal investment
policies and restrictions are different. For a
more complete discussion of each Fund's other
investment policies and fundamental and non-
fundamental investment restrictions, see the SAI.
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13
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Safeco California Tax-Free Income Fund Pioneer California Tax Free Income Fund
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Buying, Selling and Exchange Shares
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Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer California
of Safeco California Tax-Free Income Fund are Tax Free Income Fund you receive in the
subject to a 4.50% front-end sales charge. Reorganization will not be subject to any
sales charge. Moreover, if you own shares
A contingent deferred sales charge of up to in your own name as of the closing of the
5.00% if you redeem Class B shares within six Reorganization (i.e., not in the name of a
years of purchase. broker or other intermediary) and maintain
your account, you may purchase Class A
A contingent deferred sales charge of up to shares of Pioneer California Tax Free Income
1.00% if you redeem Class C shares within Fund and Class A shares of any fund in the
one year of purchase. Pioneer family of funds through such account
in the future without paying any sales charge.
Purchases of Investor Class shares of the Fund
are not subject to a sales load. Except as described above, Class A shares of
Pioneer California Tax Free Income Fund are
The Fund assesses a mandatory redemption subject to a front-end sales charge of up
fee of 2%, as a percentage of the amount to 4.50%.
redeemed or exchanged, on Class A and
Investor Class shares held less than 30 days.
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Management and other fees Safeco California Tax-Free Income Fund pays Pioneer California Tax Free Income Fund will
an advisory fee on a monthly basis at an pay Pioneer an advisory fee as follows: 0.50%
annual rate as follows: of the fund's average daily net assets on the
first $250 million, 0.45% on assets greater
$0-$250,000,000: 0.50 of 1% than $250 million to $750 million and 0.40%
$250,000,001-$750,000,000: 0.45 of 1% on assets greater than $750 million. The fee is
Over $750,000,00: 0.40 of 1% computed daily and paid monthly.
SAM serves as administrator and fund In addition, the Fund will reimburse Pioneer
accounting agent for Safeco California Tax-Free for certain fund accounting and legal expenses
Income Fund. The Fund pays SAM an incurred on behalf of the Fund and pays a
administrative services fee of 0.05% of the separate shareholder servicing/transfer agency
Fund's average daily net assets up to the first fee to Pioneer Investment Management
$200,000,000 and 0.01% of its net assets Shareholder Services ("PIMSS"), an affiliate of
thereafter, and an accounting fee of 0.04% Pioneer.
of the Fund's average daily net assets up to
the first $200,000,000 and 0.01% of its net Pioneer has agreed until the second
assets thereafter. anniversary of the closing of the
Reorganization to limit the expenses
During its most recent fiscal year, Safeco (excluding extraordinary expenses) of the
California Tax-Free Income Fund paid aggregate Investor Class to 0.63% of the average daily
advisory and administration fees at an average net assets attributable to the Investor Class.
rate of 0.59% of average daily net assets.
The Investor Class shares to be issued in the
SAM had contractually agreed until April 30, Reorganization will convert to Class A shares
2009, to pay certain fund operating expenses after two years. Class A shares will have
(but not all of the operating expenses of the higher expenses per share than Investor Class
Fund) that exceeded the rate of 0.40% per shares due to the Rule 12b-1 Plan. In
annum of the Fund's average daily net assets. addition, although Pioneer has agreed to limit
This arrangement included all Fund operating the expenses attributable to Investor Class
expenses except management fees, Rule 12b-1 shares, Pioneer is not required to limit the
fees, brokerage commissions, interest, and expenses attributable to Class A shares.
extraordinary expenses.
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14
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Safeco California Tax-Free Income Fund Pioneer California Tax Free Income Fund
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Management and other fees In 2003, SAM began voluntarily reimbursing
(continued) the Fund to the extent that its total expenses
exceeded the rate of 0.86% per annum of the
Fund's average daily net assets for Class A
shares, 1.61% per annum for Class B and
Class C shares, and 0.63% per annum for
Investor Class shares.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Class A shares were 1.06%. After giving effect
to the voluntary expense reimbursement, the
operating expenses for Class A shares
were 0.86%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
B shares were 1.76%. After giving effect to
the voluntary expense reimbursement, the
operating expenses for Class B shares
were 1.61%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
C shares, after giving effect to the contractual
expense reimbursement, were 1.90%, and
without giving effect to the expense limitation
were 4.09%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class C shares were 1.61%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Investor Class shares were 0.75%. After giving
effect to the voluntary expense reimbursement,
the operating expenses for Investor Class
shares were 0.63%.
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Distribution and service Investor Class shares of the Pioneer Fund are not subject to a Rule 12b-1 fee. Pioneer Investor
(12b-1) fee Class shares will convert into Class A shares after two years. Class A shares of each Fund are
subject to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
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15
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Safeco California Tax-Free Income Fund Pioneer California Tax Free Income Fund
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Buying shares You may buy shares of Safeco California You may buy shares from any investment firm
Tax-Free Income Fund directly through Safeco that has a sales agreement with PFD, Pioneer
Securities, the Fund's principal underwriter or California Tax Free Income Fund's distributor.
through brokers, registered investment Existing shareholders of Safeco California
advisers, banks and other financial institutions Tax-Free Income Fund who own shares in their
that have entered into selling agreements with own name as of the closing date of the
the Fund's principal underwriter, as described Reorganization and who maintain their
in the Fund's prospectus. accounts may buy shares of any fund in the
Pioneer family of funds through such accounts
Certain account transactions may be done in the future without paying sales charges.
by telephone.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
California Tax Free Income Fund by telephone
or online.
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Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer
acquire through dividend reinvestment or other California Tax Free Income Fund without
fund distributions. incurring any fee on the exchange with the
more than 62 other Pioneer Funds. Your
Certain account transactions may be done by exchange would be for Class A shares, which
telephone. would be subject to a Rule 12b-1 fee. An
exchange generally is treated as a sale and a
new purchase of shares for federal income
tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer California Tax
Free Income Fund for shares of other Pioneer
Funds by telephone or online.
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Selling shares Investor Class shares will be sold at net asset value per share next calculated after the Fund
receives your request in good order.
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You may sell your shares by contacting Safeco Normally, your investment firm will send your
California Tax-Free Income Fund directly in request to sell shares to PIMSS. You can also
writing or by contacting a financial intermediary sell your shares by contacting the Fund directly
as described in the Fund's prospectus. if your account is registered in your name.
If the account is established in the
shareholder's own name, shareholders may
also redeem shares of Pioneer California Tax
Free Income Fund by telephone or online.
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16
Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks. You
could lose money on your investment 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
o The issuer of a security owned by the Fund defaults on its obligation to
pay principal and/or interest or has its credit rating downgraded
o The investment adviser's judgment about the credit quality, attractiveness
or relative value of a particular security proves to be incorrect
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
Investing in mutual fund shares is not the same as making a bank deposit.
Your investment is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. You could lose money by investing
in either Fund.
Past Performance
Set forth below is performance information for Safeco California Tax-Free
Income Fund. The bar charts show how Safeco California Tax-Free Income Fund's
total return (not including any deduction for sales charges) has varied from
year to year for each full calendar year. The tables show average annual total
return (before and after taxes) for Safeco California Tax-Free Income Fund over
time for each class of shares (including deductions for sales charges, if
applicable) compared with a broad-based securities market index. The bar chart
gives an indication of the risks of investing in Safeco California Tax-Free
Income Fund, including the fact that you could incur a loss and experience
volatility of returns year to year. Past performance before and after taxes
does not indicate future results. Because Pioneer California Tax Free Income
Fund is a newly organized mutual fund, it has no past performance.
Safeco California Tax-Free Income Fund -- Investor Class
Calendar Year Total Returns*
[THE FOLLOWING DATA WAS REPRESENTED BY A BAR CHART IN THE PRINTED DOCUMENT.]
'94 -9.20
'95 26.14
'96 2.53
'97 11.55
'98 6.19
'99 -9.18
'00 18.79
'01 4.12
'02 8.76
'03 4.97
* During the period shown in the bar chart, Safeco California Tax-Free Income
Fund's highest quarterly return was 10.59% for the quarter ended March 31,
1995, and the lowest quarterly return was -6.16% for the quarter ended March
31, 1994.
17
Safeco California Tax-Free Income Fund
Average Annual Total Returns as of December 31, 2003
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1 Year 5 Years 10 Years
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Safeco California Tax-Free Income Fund, Class A shares
- ----------------------------------------------------------------------------------------------------
Return Before Taxes 0.05% 3.84% 5.25%
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Return After Taxes on Distributions(1) -0.01% 3.74% 5.07%
- ----------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 1.51% 3.85% 5.07%
- ----------------------------------------------------------------------------------------------------
Safeco California Tax-Free Income Fund, Class B shares
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Return Before Taxes -1.04% 3.68% 5.26%
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Safeco California Tax-Free Income Fund, Class C shares
- ----------------------------------------------------------------------------------------------------
Return Before Taxes 2.97% 4.02% 5.16%
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Safeco California Tax-Free Income Fund, Investor Class shares
- ----------------------------------------------------------------------------------------------------
Return Before Taxes 4.97% 5.10% 5.96%
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Return After Taxes on Distributions(1) 4.91% 5.00% 5.78%
- ----------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 4.87% 4.99% 5.74%
- ----------------------------------------------------------------------------------------------------
Lehman Brothers Long Municipal Bond Index(2)
(reflects no deduction for fees, taxes or expenses) 6.13% 5.95% 6.40%
- ----------------------------------------------------------------------------------------------------
(1) 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 your situation and may
differ from those shown.
(2) The Lehman Brothers Long Municipal Bond Index, an unmanaged index of bonds
with a minimum credit rating of BAA3, issued as part of a deal of at least
$50 million, having an amount of at least $5 million and maturing in 22 or
more years, is for reference only, is not limited to California issuers,
does not mirror the Fund's investments.
The most recent portfolio manager's discussion of the Safeco Fund's
performance is attached as Exhibit D.
18
The Funds' Fees and Expenses
Shareholders of both 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 Fund. The expenses in the tables
appearing below are based on (i) for Safeco California Tax-Free Income Fund,
the expenses of Safeco California Tax-Free Income Fund for the period ended
December 31, 2003 and (ii) for Pioneer California Tax Free Income Fund,
estimated expenses of Pioneer California Tax Free Income Fund. Future expenses
for all share classes may be greater or less.
Pro Forma
Safeco Pioneer
Safeco Safeco Safeco California California
California California California Tax-Free Tax Free
Tax-Free Tax-Free Tax-Free Income Fund Income Fund
Income Fund Income Fund Income Fund Investor Investor
Shareholder transaction fees Class A Class B Class C Class Class(9)
(paid directly from your investment) ------------- ------------- ------------- ------------- ------------
Maximum sales charge (load) when you buy shares
as a percentage of offering price ........................ 4.50%(6) None None None None(1)
Maximum deferred sales charge (load) as a percentage
of purchase price or the amount you receive when you
sell shares, whichever is less ........................... None 5.00%(7) 1.00%(8) None None
Redemption fees for shares held less than 30 days ......... 2.00% None None 2.00% N/A
Wire redemption fee ....................................... $ 20(4) $ 20(4) $ 20(4) $ 20(4) $ 10
Annual low balance fee .................................... $ 12(5) $ 12(5) $ 12(5) $ 12(5) N/A
Annual fund operating expenses (deducted from
fund assets) (as a % of average net assets)
Management fee ............................................ 0.50% 0.50% 0.50% 0.50% 0.50%
Distribution and service (12b-1) fee ...................... 0.25% 1.00% 1.00% None None
Other expenses ............................................ 0.31% 0.26% 2.59% 0.25% 0.26%
Total fund operating expenses ............................. 1.06% 1.76% 4.09% 0.75% 0.76%
Expense reimbursement / reduction ......................... None(2) None(2) 2.19%(2) None(2) 0.13%(3)
Net fund operating expenses ............................... 1.06% 1.76% 1.90% 0.75% 0.63%
- ----------
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer California Tax Free Income Fund through the Reorganization. In
addition, shareholders of your Safeco Fund who own shares in their own name
(i.e., not in the name of a broker or other intermediary) and maintain such
account as of the closing of the Reorganization may purchase Class A shares
of Pioneer California Tax Free Income Fund or of any fund in the Pioneer
family of funds through such account in the future without paying this
sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco
California Tax-Free Income Fund for certain fund operating expenses (but
not all of the operating expenses of the Fund) that exceeded the rate of
0.40% per annum of the Fund's average daily net assets. This arrangement
included all fund operating expenses except management fees, Rule 12b-1
fees, brokerage commissions, interest, and extraordinary expenses. In 2003,
SAM began voluntarily reimbursing the Fund to the extent that its total
expenses exceeded the rate of 0.86% per annum of the Fund's average daily
net assets for Class A shares, 1.61% per annum for Class B and Class C
shares, and 0.63% per annum for Investor Class shares. The above table
reflects "contractual" expense reimbursements from SAM, if any, but does
not reflect "voluntary" expense reimbursements by SAM.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer California
Tax Free Income Fund to 0.63% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once each year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions made in the first twelve months.
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after six years from purchase, and the Class B shares
convert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
19
9 The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares.
The hypothetical example below helps you compare the cost of investing in each
Fund. It assumes that: (a) you invest $10,000 in each Fund for the time periods
shown, (b) you reinvest all dividends and distributions, (c) your investment
has a 5% return each year, (d) each Fund's gross operating expenses remain the
same, (e) the expense limitations are in effect for five years for Safeco
California Tax-Free Income Fund and two years for Pioneer California Tax Free
Income Fund and (f) and the Investor Class shares of Pioneer California
Tax-Free Income Fund convert to Class A shares after two years. The examples
are for comparison purposes only and are not a representation of either Fund's
actual expenses or returns, either past or future.
Example
Safeco California Tax-Free Income Fund
Class A shares
Year 1 ...................... $ 553
Year 3 ...................... $ 772
Year 5 ...................... $1,008
Year 10 ..................... $1,686
Class B shares With redemption Without redemption
Year 1 ...................... $ 679 $ 179
Year 3 ...................... $ 854 $ 554
Year 5 ...................... $1,154 $ 954
Year 10 ..................... $1,719 $1,719
Class C shares With redemption Without redemption
Year 1 ...................... $ 293 $ 193
Year 3 ...................... $ 597 $ 597
Year 5 ...................... $1,026 $1,026
Year 10 ..................... $2,306 $2,306
Investor Class shares
Year 1 ...................... $77
Year 3 ...................... $240
Year 5 ...................... $417
Year 10 ..................... $930
Pro Forma Pioneer California Tax Free Income Fund
Investor Class shares
Year 1 ...................... $ 64
Year 3 ...................... $265
Year 5 ...................... $547
Year 10 ..................... $1,350
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco California Tax-Free Income Fund. The Trustees considered
the following matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Fund until August 2, 2004, was
acquired by Symetra. Symetra informed the Trustees that it did not intend to
continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the resources of Pioneer. At June 30, 2004, Pioneer managed over
62 investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutional and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholder account
20
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market
fund that will be available to your Safeco Fund's shareholders through
exchanges. In addition, Pioneer offers shareholders additional options for
their accounts, including the ability to transact and exchange shares over the
telephone or online and the ability to access account values and transaction
history in all of the shareholder's direct accounts in the Pioneer Funds over
the telephone or online.
Third, Pioneer's commitment until the second anniversary of the
Reorganization to limit the expenses (excluding extraordinary expenses) of the
Investor Class of Pioneer California Tax Free Income Fund to 0.63% of average
daily net assets. This expense ratio is lower than both the gross expenses and
expenses net of expense reimbursement of the Class A shares and lower than the
net expenses of Investor Class shares of your Safeco Fund. Although you will
experience higher expenses once the Investor Class shares convert to Class A
shares after two years, your expenses will remain the same until the second
anniversary of the Reorganization.
Fourth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
Fifth, the Investor Class shares of Pioneer California Tax Free Income
Fund received in the Reorganization will provide Safeco California TF Income
Fund shareholders with exposure to substantially the same investment product as
they currently have.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco
Funds and the Pioneer Funds associated with the Reorganizations, including, but
not limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses
of any proxy solicitation firm retained in connection with the Reorganizations;
(3) the legal fees and expenses incurred by the Safeco Funds in connection with
the Reorganizations; and (4) the Trustee fees and out of pocket expenses
incurred as a result of the Reorganizations.
The Trustees also considered that Pioneer and Symetra will benefit from
the Reorganization. See "Certain Agreements between Pioneer and Symetra."
The Board of Trustees of Pioneer California Tax Free Income Fund also
considered that the Reorganization presents an excellent opportunity for the
Pioneer California Tax Free Income Fund to acquire investment assets without
the obligation to pay commissions or other transaction costs that a fund
normally incurs when purchasing securities. This opportunity provides an
economic benefit to Pioneer California Tax Free Income Fund.
21
CAPITALIZATION
The following table sets forth the capitalization of each Fund, as of
September 30, 2004, and the pro forma capitalization of the combined Fund as of
September 30, 2004.
Pro Forma
Safeco Pioneer Pioneer
California California California
Tax-Free Tax Free Tax Free
Income Fund Income Fund Income Fund
September 30, 2004 September 30, 2004 September 30, 2004
-------------------- -------------------- -------------------
Total Net Assets (in thousands) $99,315 N/A $99,315
Class A shares ................ $ 1,159 N/A N/A
Class B shares ................ $ 495 N/A N/A
Class C shares ................ $ 101 N/A N/A
Investor Class shares . . $97,561 N/A $99,315
Net Asset Value Per Share
Class A shares ................ $ 12.72 N/A N/A
Class B shares ................ $ 12.69 N/A N/A
Class C shares ................ $ 12.69 N/A N/A
Investor Class shares ......... $ 12.71 N/A $ 12.71
Shares Outstanding
Class A shares ................ 91,125 N/A N/A
Class B shares ................ 38,970 N/A N/A
Class C shares ................ 7,980 N/A N/A
Investor Class shares ......... 7,677,020 N/A 7,813,926
It is impossible to predict how many shares of Pioneer California Tax Free
Income Fund will actually be received and distributed by your Safeco Fund on
the Reorganization date. The table should not be relied upon to determine the
amount of Pioneer California Tax-Free Income Fund's shares that will actually
be received and distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund.
Similarly, the Board of Trustees of Pioneer California Tax Free Income Fund,
including its Independent Trustees, approved the Reorganization. They also
determined that the Reorganization is in the best interests of Pioneer
California Tax Free Income Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
22
Safeco High-Yield Bond Fund and
Pioneer High Yield Fund
PROPOSAL 1(b)
Approval of Agreement and Plan of Reorganization
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 Reorganization attached as EXHIBIT A-1 because they
contain details that are not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have a higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco High-Yield Bond Fund to the Pioneer High Yield Fund
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Safeco High-Yield Bond Fund Pioneer High Yield Fund
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Business A series of Safeco Taxable Bond Trust, a A diversified open-end management
diversified open-end management investment investment company registered under the
company organized as a Delaware statutory trust. Investment Company Act and organized as a
Delaware statutory trust.
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Net assets as of $38 million $7,665 million
June 30, 2004
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Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers: Portfolio Managers:
Greg Card (since 2001 and until August 2, Margaret D. Patel (since inception)
2004) Joined Pioneer in 1999
Assistant Vice President, SAM Investment professional for over 25 years
Joined SAM in 2001
Beverly Denny (since July 2003)
Assistant Vice President, SAM
Associated with SAM since 1991
Currently Pioneer is acting as investment
adviser to Safeco High-Yield Bond Fund. The
Portfolio Manager of Pioneer High Yield Fund,
as indicated in the next column, currently
manages your Safeco Fund.
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Investment objective Safeco High-Yield Bond Fund seeks to provide Pioneer High Yield Fund seeks to maximize
a high level of current interest income through total return through a combination of income
the purchase of high-yield debt securities. and capital appreciation.
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Each Fund provides written notice to shareholders at least 60 days prior to any change to its
investment objective as described above.
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23
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Safeco High-Yield Bond Fund Pioneer High Yield Fund
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Primary investments Under normal market conditions, Safeco Under normal market conditions, the Fund
High-Yield Bond Fund invests at least 80% of invests at least 80% of net assets (plus any
net assets (plus any borrowings for investment borrowings for investment purposes) in below
purposes) in high-yield debt securities. investment grade (high yield) debt securities
and preferred stocks.
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Investment strategies Safeco High-Yield Bond Fund uses a "value" Pioneer High Yield Fund uses a "value" style
style of management and seeks to invest in an of management and seeks securities selling at
issuer that is a good value relative to its peers. reasonable prices or substantial discounts to
SAM historically evaluated an issuer's their underlying values and then holds these
creditworthiness, liquidity and prospects for securities for their incremental yields or until
growing earnings and cash flow. the market values reflect their intrinsic values.
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Other investments Safeco High-Yield Bond Fund may invest up to Pioneer High Yield Fund's investments may
20% of its assets in unrated securities. In have fixed or variable principal payments and
addition, the Fund may invest up to 5% of its all types of interest rate and dividend payment
total assets in securities which are in default. and reset terms, including fixed rate,
adjustable rate, zero coupon, contingent,
Safeco High-Yield Bond Fund may invest in deferred, payment in kind and auction rate
restricted securities that are exempt from features. The Fund invests in securities with a
registration requirements and eligible for resale broad range of maturities.
to qualified institutional investors under Rule
144A or Section 4(2). Pioneer High Yield Fund may invest in
mortgage-backed and asset-backed securities.
Safeco High-Yield Bond Fund may invest in To the extent the Fund invests significantly in
Yankee sector debt securities. Yankee debt asset-backed and mortgage-related securities,
securities are securities issued in the U.S. its exposure to prepayment and extension
by foreign issuers. These bonds involve risks may be greater than if it invested in
investment risks that are different from those other fixed income securities.
of domestic issuers.
Pioneer High Yield Fund may invest in
Safeco High-Yield Bond Fund may invest in mortgage derivatives and structured securities.
securities that are direct obligations of the U.S. Mortgage derivatives can become illiquid and
Treasury and supported by the full faith and hard to value in declining markets.
credit of the U.S. government. The Fund may
invest in other U.S. Government Securities, Consistent with its objective, Pioneer High
including (a) securities supported by the full Yield Fund may invest in equity securities
faith and credit of the U.S. government but issued by both U.S. and non-U.S. issuers,
that are not direct obligations of the U.S. including common stocks, depositary receipts,
Treasury, (b) securities that are not supported warrants, rights and other equity interests
by the full faith and credit of the U.S. when Pioneer believes they offer the potential
government but are supported by the issuer's for capital appreciation or to diversity the
ability to borrow from the U.S. Treasury, and Fund's portfolio.
(c) securities supported solely by the
creditworthiness of the issuer. Pioneer High Yield Fund may invest in
securities of Canadian issuers to the same
Safeco High-Yield Bond Fund may invest up to extent as U.S. issuers. The Fund may invest
20% of assets in foreign securities. up to 15% of its total assets in securities of
non-U.S. and non-Canadian issuers, including
debt and equity securities of corporate issuers
and debt securities of government issuers in
developed and emerging markets.
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24
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Safeco High-Yield Bond Fund Pioneer High Yield Fund
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Temporary defensive Safeco High-Yield Bond Fund may hold cash Pioneer High Yield Fund may invest all or part
strategies or invest in high-quality, short-term securities of its assets in securities with remaining
issued by an agency or instrumentality of the maturities of less than one year, cash
U.S. government, high-quality commercial equivalents or may hold cash.
paper, certificates of deposit, shares of no-
load, open-end money market funds, or
repurchase agreements.
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Diversification Each Fund is diversified for the purpose of the Investment Company Act, and each Fund is
subject to diversification requirements under the Code.
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Industry concentration Each Fund may not invest more than 25% of its assets in any one industry.
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Restricted and illiquid If immediately after and as a result of such Pioneer High Yield Fund may not invest more
securities action the value of the following securities, in than 15% of its net assets in securities which
the aggregate, would exceed 15% of Safeco are illiquid and other securities which are not
High-Yield Bond Fund's net assets, the Fund readily marketable.
will not (i) purchase securities for which there
is no readily available market, (ii) purchase
time deposits maturing in more than seven
days, (iii) purchase over-the-counter (OTC)
options or hold assets set aside to cover OTC
options written by the Fund, (iv) enter into
repurchase agreements maturing in more than
seven days, or (v) invest in interests in real
estate investment trusts which are not readily
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
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Borrowing Safeco High-Yield Bond Fund may borrow Pioneer High Yield Fund may not borrow
money (i) from banks or (ii) by engaging in money, except the Fund may: (a) borrow from
reverse repurchase agreements. banks or through reverse repurchase
agreements in an amount up to 33 1/3% of the
Fund's total assets (including the amount
borrowed); (b) to the extent permitted by
applicable law, borrow up to an additional 5%
of the Fund's assets for temporary purposes;
(c) obtain such short-term credits as are
necessary for the clearance of portfolio
transactions; (d) purchase securities on
margin to the extent permitted by applicable
law; and (e) engage in transactions in
mortgage dollar rolls that are accounted for
as financings.
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Lending Safeco High-Yield Bond Fund may lend Pioneer High Yield Fund may lend portfolio
securities to qualified institutional investors securities with a value that may not exceed
with a value of up to 33% of the Fund's total 33 1/3% of the value of its assets.
assets.
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25
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Safeco High-Yield Bond Fund
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Derivative instruments Safeco High-Yield Bond Fund may not Pioneer High Yield Fund may use futures and
purchase securities on margin. However, the options on securities, indices and currencies,
Fund may (i) obtain short-term credits as forward currency exchange contracts and
necessary to clear its purchases and sales of other derivatives. The Fund does not use
securities, and (ii) make margin deposits in derivatives as a primary investment technique
connection with its use of financial options and and generally limits their use to hedging.
futures, forward and spot currency contracts, However, the Fund may use derivatives for a
swap transactions and other financial contracts variety of non-principal purposes, including:
or derivative instruments.
o As a hedge against adverse changes in
stock market prices, interest rates or
currency exchange 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
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Other investment policies As described above, the Funds have substantially similar principal investment strategies and
and restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Fund's other investment policies and fundamental and non-
fundamental investment restrictions, see the SAI.
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Buying, Selling and Exchanging Shares
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Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer High
of Safeco High-Yield Bond Fund are subject to Yield Fund you receive in the Reorganization
a 4.50% front-end sales charge. will not be subject to any sales charge.
Moreover, if you own shares in your own
Contingent deferred sales charge of up to 5% name as of the closing of the Reorganization
if you redeem Class B shares within six years (i.e., not in the name of a broker or other
of purchase. intermediary) and maintain your account, you
may purchase Class A shares of Pioneer High
Contingent deferred sales charge of 1% if you Yield Fund and Class A shares of any fund in
redeem Class C shares within one year of the Pioneer family of funds through such
purchase. account in the future without paying any
sales charge.
Purchases of Investor Class shares of Fund are
not subject to a sales load. Except as described above, Class A shares of
Pioneer High Yield Fund are subject to a
Safeco High-Yield Bond Fund assesses a front-end sales charge of up to 4.50%.
mandatory redemption fee of 2%, as a
percentage of the amount redeemed or
exchanged, on Class A and Investor Class
shares held less than 30 days.
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26
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Safeco High-Yield Bond Fund Pioneer High Yield Fund
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Management and other fees Safeco High-Yield Bond Fund pays an advisory Pioneer High Yield Fund pays Pioneer a
fee on a monthly basis at an annual rate as management fee equal to:
follows:
0.70% of average daily net assets up to
$0-$250,000,000: 0.65 of 1% $500 million;
$250,000,001-$750,000,000: 0.55 of 1% 0.65% of the next $500 million;
Over $750,000,000: 0.50 of 1% 0.60% of the next $4 billion;
0.55% of the next $1 billion;
SAM serves as administrator and fund 0.50% of the next $1 billion;
accounting agent for Safeco High-Yield Bond 0.45% of the next $1 billion;
Fund. The Fund pays SAM an administrative 0.40% of the next $1 billion;
services fee of 0.05% of the Fund's average 0.35% of the next $1 billion; and
daily net assets up to the first $200,000,000 0.30% on assets over $10 billion.
and 0.01% of its net assets thereafter, and an
accounting fee of 0.04% of the Fund's average During its most recent fiscal year, Pioneer
daily net assets up to the first $200,000,000 High Yield Fund paid an advisory fee at
and 0.01% of its net assets thereafter. an average rate of 0.61% of average daily
net assets.
During its most recent fiscal year, Safeco
High-Yield Bond Fund paid aggregate advisory In addition, Pioneer High Yield Fund
and administration fees at an average rate of reimburses Pioneer for certain fund
0.74% of average daily net assets. accounting and legal expenses incurred on
behalf of the Fund and pays a separate
SAM had contractually agreed until April 30, shareholder servicing/transfer agency fee to
2009, to pay certain fund operating expenses PIMSS, an affiliate of Pioneer.
(but not all of the operating expenses of the
Fund) that exceeded the rate of 0.40% per Through October 31, 2005, Pioneer may
annum of the Fund's average daily net assets. recover expenses that it incurred under a prior
This arrangement included all Fund operating expense limitation (within three years of being
expenses except management fees, Rule 12b-1 incurred) from the Fund if the expense ratio of
fees, brokerage commissions, interest, and the Class A shares is less than 1.00%. Each
extraordinary expenses. class will reimburse Pioneer no more than
the amount by which that class' expenses
In 2003, SAM began voluntarily reimbursing were reduced.
the Fund to the extent that its total expenses
exceeded the rate of 1.15% per annum of the For the fiscal year ended October 31, 2003,
Fund's average daily net assets for Class A Pioneer High Yield Fund's total annual
shares, 1.90% per annum for Class B and operating expenses for Class A shares were
Class C shares, and 0.90% per annum for 1.06% of average daily net assets. The Fund
Investor Class shares. currently does not have an expense limitation
for its Class A shares
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
A shares, after giving effect to the contractual
expense limitation were 1.30%, and without
giving effect to the expense limitation, were
1.41%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class A shares were 1.15%.
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27
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Safeco High-Yield Bond Fund Pioneer High Yield Fund
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For the fiscal year ended December 31, 2003, Pioneer has agreed until the second
the Fund's annual operating expenses for Class anniversary of the closing of the
B shares, after giving effect to the contractual Reorganization to limit the expenses
expense limitation were 2.05%, and without (excluding extraordinary expenses) of the
giving effect to the expense limitation, were Investor Class to 0.90% of the average daily
2.88%. After giving effect to the voluntary net assets attributable to the Investor Class.
expense reimbursement, the operating The Investor Class shares to be issued in the
expenses for Class A shares were 1.90%. Reorganization will convert to Class A shares
after two years. Class A shares will have
For the fiscal year ended December 31, 2003, higher expenses per share than Investor Class
the Fund's annual operating expenses for Class shares due to the Rule 12b-1 Plan. In
C shares, after giving effect to the contractual addition, although Pioneer has agreed to limit
expense limitation were 2.05%, and without the expenses attributable to Investor Class
giving effect to the expense limitation, were shares, Pioneer is not required to limit the
2.45%. After giving effect to the voluntary expenses attributable to Class A shares.
expense reimbursement, the operating
expenses for Class A shares were 1.90%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Investor Class shares, after giving effect to the
contractual expense limitation were 1.05%, and
without giving effect to the expense limitation,
were 1.27%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Investor Class shares were 0.90%.
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Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class
(12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject
to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
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Buying shares You may buy shares of Safeco High-Yield Bond You may buy shares from any investment firm
Fund directly through Safeco Securities, the that has a sales agreement with PFD, Pioneer
Fund's principal underwriter or through High Yield Fund's distributor. Existing
brokers, registered investment advisers, banks shareholders of Safeco High-Yield Bond Fund
and other financial institutions that have who own shares in their own name as of the
entered into selling agreements with the Fund's closing date of the Reorganization and who
principal underwriter, as described in the maintain their accounts may buy shares of
Fund's prospectus. any fund in the Pioneer family of funds
through such accounts in the future without
Certain account transactions may be done paying sales charges.
by telephone.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
High Yield Fund by telephone or online.
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28
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Safeco High-Yield Bond Fund Pioneer High Yield Fund
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Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer High
acquire through dividend reinvestment or other Yield Fund without incurring any fee on the
fund distributions or for Class A shares that exchange with the more than 62 other Pioneer
you have exchanged for Class A shares of Funds. Your exchange would be for Class A
another fund. shares, which would be subject to Rule 12b-1
fees. An exchange generally is treated as a
Certain account transactions may be done sale and a new purchase of shares for federal
by telephone. income tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer High Yield
Fund for shares of other Pioneer Funds by
telephone or online.
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Selling shares Each class of shares is sold at the net asset value per share next calculated after the Fund
receives your request in good order.
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You may sell your shares by contacting Safeco Normally, your investment firm will send your
High-Yield Bond Fund directly in writing or by request to sell shares to PIMSS. You can also
contacting a financial intermediary as described sell your shares by contacting the Fund
in the Fund's prospectus. directly if your account is registered in
your name.
If the account is established in the
shareholder's own name, shareholders may
also redeem shares of Pioneer High Yield
Fund by telephone or online.
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Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks. You
could lose money on your investment in either Fund or not make as much as if
you invested elsewhere if:
o Interest rates go up, causing the value of debt securities in the Fund's
portfolio to decline
o The issuer of a security owned by a Fund defaults on its obligation to
pay principal and/or interest or has its credit rating downgraded
o During periods of declining interest rates, the issuer of a security may
exercise its option to prepay principal earlier than scheduled, forcing
the Fund to reinvest in lower yielding securities. This is known as call
or prepayment risk
o During periods of rising interest rates, the average life of certain types
of securities may be extended because of slower than expected principal
payments. This may lock in a below market interest rate, increase the
security's duration (the estimated period until the security is paid in
full) and reduce the value of the security. This is known as extension
risk
o The investment adviser's judgment about the attractiveness, relative value
or potential appreciation of a particular sector, security or investment
strategy proves to be incorrect
o A downturn in equity markets causes the price of convertible securities to
drop even when the prices of below investment grade bonds otherwise would
not go down
Investment in high yield securities involves substantial risk of loss.
High yield securities are considered speculative with respect to the issuer's
ability to pay interest and principal and are susceptible to default or decline
in market value due to adverse economic and business developments. The market
values for high yield securities tend to be very volatile, and these securities
are less liquid than investment grade debt securities. For these reasons, an
investment in either Fund is subject to the following specific risks:
29
o Increased price sensitivity to changing interest rates and deteriorating
economic environment
o Greater risk of loss due to default or declining credit quality
o Adverse company-specific events are more likely to render the issuer
unable to make interest and/or principal payments
o A negative perception of the high yield market develops, depressing the
price and liquidity of high yield securities. This negative perception
could last for a significant period of time
In addition, each Fund holds a material percentage of the outstanding debt
securities of certain high yield issuers, which practice may adversely impact
the liquidity and market value of those investments. Investments in the Funds
are not bank deposits and are not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. You could lose money by
investing in either Fund.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
Past Performance
Set forth below is performance information for each Fund. The bar charts
show how each Fund's total return (not including any deduction for sales
charges) has varied from year to year for each full calendar year. The tables
show average annual total return (before and after taxes) for each Fund over
time for each class of shares (including deductions for sales charges) compared
with a broad-based securities market index. The bar charts give an indication
of the risks of investing in each Fund, including the fact that you could incur
a loss and experience volatility of returns year to year. Past performance
before and after taxes does not indicate future results.
Safeco High-Yield Bond Fund -- Investor Class
Calendar Year Total Returns*
[THE FOLLOWING DATA WAS REPRESENTED BY A BAR CHART IN THE PRINTED DOCUMENT.]
'94 -2.25
'95 15.14
'96 10.39
'97 12.79
'98 4.45
'99 3.74
'00 -5.52
'01 -2.05
'02 -17.47
'03 30.50
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return was 10.53% for the quarter ended June 30, 2003, and the
lowest quarterly return was -12.38% for the quarter ended June 30, 2002.
30
Pioneer High Yield Fund -- Class A shares
Calendar Year Total Returns*
[THE FOLLOWING DATA WAS REPRESENTED BY A BAR CHART IN THE PRINTED DOCUMENT.]
'99 27.06
'00 12.70
'01 16.74
'02 -2.70
'03 32.13
* During the period shown in the bar chart, since the Fund's inception on
February 12, 1998, Pioneer High Yield Fund's highest quarterly return was
11.10% for the quarter ended December 31, 1999, and the lowest quarterly
return was -8.97% for the quarter ended September 30, 2002.
Safeco High-Yield Bond Fund
Average Annual Total Returns for the Period Ended December 31, 2003
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1 Year 5 Years 10 Years
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Safeco High-Yield Bond Fund, Class A shares
- ----------------------------------------------------------------------------------------------------------
Return Before Taxes 24.55% -0.45% 3.65%
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Return After Taxes on Distributions(1) 20.85% -3.67% 0.20%
- ----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 15.68% -2.35% 0.95%
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Safeco High-Yield Bond Fund, Class B shares
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Return Before Taxes 24.21% -0.58% 3.66%
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Safeco High-Yield Bond Fund, Class C shares
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Return Before Taxes 28.35% -0.27% 3.59%
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Safeco High-Yield Bond Fund, Investor Class shares
- ----------------------------------------------------------------------------------------------------------
Return Before Taxes 30.50% 0.67% 4.28%
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Return After Taxes on Distributions(1) 26.51% -2.68% 0.75%
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Return After Taxes on Distributions and Sale of Fund Shares(1) 19.53% -1.49% 1.44%
- ----------------------------------------------------------------------------------------------------------
Merrill Lynch High-Yield Master II Index(2)
(reflects no deduction for fees, expenses or taxes) 28.15% 5.02% 7.05%
- ----------------------------------------------------------------------------------------------------------
(1) 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 your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(2) The Merrill Lynch High-Yield Master II Index, an unmanaged index of
outstanding debt of domestic market issuers rated below investment grade,
but not in default, is for reference only and does not mirror the Fund's
investments.
31
Pioneer High Yield Fund -- Class A shares
Average Annual Total Returns for the Period Ended October 31, 2003
- -----------------------------------------------------------------------------------------------------------
Since
1 Year 5 Years Inception(1)
- -----------------------------------------------------------------------------------------------------------
Pioneer High Yield Fund, Class A shares
- -----------------------------------------------------------------------------------------------------------
Return Before Taxes 26.15% 15.49% 11.71%
- -----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(2) 23.09% 11.39% 7.99%
- -----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(2) 16.78% 10.72% 7.63%
- -----------------------------------------------------------------------------------------------------------
Merrill Lynch High-Yield Master II Index(3)
(reflects no deduction for fees, expenses or taxes) 28.15% 5.02% 4.45%
- -----------------------------------------------------------------------------------------------------------
Merrill Lynch Index of Convertible Bonds(4)
(speculative quality)
(reflects no deduction for fees, expenses or taxes) 35.99% 7.11% 7.17%
- -----------------------------------------------------------------------------------------------------------
(1) The Fund commenced operations on February 12, 1998.
(2) 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 your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(3) The Merrill Lynch High-Yield Master II Index, an unmanaged index of
outstanding debt of domestic market issuers rated below investment grade,
but not in default, is for reference only and does not mirror the Fund's
investments.
(4) The Merrill Lynch Index of Convertible Bonds (Speculative Quality) is a
market capitalization weighted index including mandatory and non-mandatory
domestic corporate convertible securities.
Pioneer High Yield Fund's Investor Class shares will not be outstanding
prior to the closing of the Reorganization and consequently have no performance
history. However, the performance record of the Investor Class would be
modestly higher than the performance of Class A shares due to the lower
expenses applicable to the Investor Class.
The most recent portfolio manager's discussion of each Fund's performance
is attached as Exhibit D.
32
The Funds' Fees and Expenses
Shareholders of both 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 Fund. The expenses in the tables
appearing below are based on (i) for Safeco High-Yield Bond Fund, the expenses
of Safeco High-Yield Bond Fund for the year ended December 31, 2003 and (ii)
for Pioneer High Yield Fund, the expenses of Pioneer High Yield Fund for the
year ended October 31, 2003. Future expenses for all share classes may be
greater or less.
Pro Forma
Pioneer
Safeco Safeco Safeco Safeco High Yield
High-Yield High-Yield High-Yield High-Yield Fund
Bond Fund Bond Fund Bond Fund Bond Fund Investor
Shareholder transaction fees (paid directly from Class A Class B Class C Investor Class Class(9)
your investment) ------------ ------------ --------------- ---------------- -----------
Maximum sales charge (load) when you buy shares
as a percentage of offering price ..................... 4.50%(6) None None None None(1)
Maximum deferred sales charge (load) as a percentage
of purchase price or the amount you receive when you
sell shares, whichever is less ........................ None 5.00%(7) 1.00%(8) None None
Redemption fees for shares held less than 30 days ...... 2.00% None None 2.00% N/A
Wire redemption fee .................................... $ 204 $ 204 $ 204 $ 204 $ 10
Annual low balance fee ................................. $ 125 $ 125 $ 125 $ 125 N/A
Annual fund operating expenses (deducted from
fund assets) (as a % of average net assets)
Management fee ......................................... 0.65% 0.65% 0.65% 0.65% 0.58%
Distribution and service (12b-1) fee ................... 0.25% 1.00% 1.00% None None
Other expenses ......................................... 0.51% 1.23% 0.80% 0.62% 0.38%
Total fund operating expenses .......................... 1.41% 2.88% 2.45% 1.27% 0.96%
Expense reimbursement/reduction ........................ 0.11%(2) 0.83%(2) 0.40%(2) 0.22%(2) 0.06%(3)
Net fund operating expenses ............................ 1.30% 2.05% 2.05% 1.05% 0.90%
- ----------
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer High Yield Fund through the Reorganization. In addition,
shareholders of your Safeco Fund who own shares in their own name (i.e.,
not in the name of a broker or other intermediary) and maintain such
account as of the closing of the Reorganization may purchase Class A shares
of Pioneer High Yield Fund or of any fund in the Pioneer family of funds
through such account in the future without paying this sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco
High-Yield Bond Fund for certain fund operating expenses (but not all of
the operating expenses of the Fund) that exceeded the rate of 0.40% per
annum of the Fund's average daily net assets. This arrangement included all
fund operating expenses except management fees, Rule 12b-1 fees, brokerage
commissions, interest, and extraordinary expenses. In 2003, SAM began
voluntarily reimbursing the Fund to the extent that its total expenses
exceeded the rate of 1.15% per annum of the Fund's average daily net assets
for Class A shares, 1.90% per annum for Class B and Class C shares, and
0.90% per annum for Investor Class shares. The above table reflects
"contractual" expense reimbursements from SAM, if any, but does not reflect
"voluntary" expense reimbursements by SAM.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer High Yield
Fund to 0.90% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once each year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions made in the first twelve months except with
respect to participant-directed redemptions from qualified retirement
plans.
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after six years from purchase, and the Class B shares
convert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
33
(9) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares. Class A shares do not currently have an
expense limitation and may be subject to higher total operating expenses.
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect for five years for
Safeco High-Yield Bond Fund and two years for Pioneer High Yield Fund and (f)
and the Investor Class shares of Pioneer High Yield Fund convert to Class A
shares after two years. The examples are for comparison purposes only and are
not a representation of either Fund's actual expenses or returns, either past
or future.
Example
Safeco High-Yield Bond Fund
Class A shares
Year 1 ...................... $ 576
Year 3 ...................... $ 844
Year 5 ...................... $1,131
Year 10 ..................... $2,014
Class B shares With redemption Without redemption
Year 1 ...................... $ 708 $ 208
Year 3 ...................... $ 943 $ 643
Year 5 ...................... $1,303 $1,103
Year 10 ..................... $2,155 $2,155
Class C shares With redemption Without redemption
Year 1 ...................... $ 308 $ 208
Year 3 ...................... $ 643 $ 643
Year 5 ...................... $1,103 $1,103
Year 10 ..................... $2,613 $2,613
Investor Class shares
Year 1 ...................... $107
Year 3 ...................... $334
Year 5 ...................... $579
Year 10 ..................... $1,425
Pro Forma Pioneer High Yield Fund
Investor Class shares
Year 1 ...................... $ 92
Year 3 ...................... $ 300
Year 5 ...................... $ 539
Year 10 ..................... $1,225
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco High-Yield Bond Fund. The Trustees considered the following
matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Safeco Fund until August 2,
2004, was acquired by Symetra. Symetra informed the Trustees that it did not
intend to continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the investment performance of Pioneer High Yield Fund, which has
one of the best performance records of any mutual fund specializing in high
yield securities. For the one and five year periods ended June 30, 2004, Class
A shares of Pioneer High Yield Fund had an average annual return of 11.63% and
14.31% compared to an average annual return of the Class A shares and Investor
Class shares
34
of 6.42% and 11.67% (one year) and -0.42% and 0.74% (five years), respectively,
during the same period. In addition, the Trustees considered the track record
of Pioneer in managing equity and fixed income mutual funds.
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutional and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholder account
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market
fund that will be available to your Safeco Fund's shareholders through
exchanges. In addition, Pioneer offers shareholders additional options for
their accounts, including the ability to transact and exchange shares over the
telephone or online and the ability to access account values and transaction
history in all of the shareholder's direct accounts in the Pioneer Funds over
the telephone or online.
Fourth, Pioneer High Yield Fund's lower operating expenses and Pioneer's
commitment until the second anniversary of the Reorganization to limit the
expenses (excluding extraordinary expenses) of the Investor Class of Pioneer
High Yield Fund to 0.90% of average daily net assets. The estimated expenses of
the Investor Class shares of Pioneer High Yield Fund are below both the gross
expenses and expenses net of contractual expense reimbursement of each class of
shares of your Safeco Fund. Although you will experience higher expenses once
the Investor Class shares convert to Class A shares after two years, Pioneer
High Yield Fund's Class A expense ratio for the most recent fiscal year was
1.06% of average daily net assets, which was below the net expenses of the
Class A shares of your Safeco Fund and only one basis point above the net
expenses of the Investor Class of your Safeco Fund.
Fifth, the substantially larger size of Pioneer High Yield Fund offers
greater opportunity for diversification of the investment portfolio, which
should help to reduce risks.
Sixth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
Seventh, the Investor Class shares of Pioneer High Yield Fund received in
the Reorganization will provide Safeco High-Yield Bond Fund shareholders with
exposure to substantially the same investment product as they currently have.
Pioneer and Symetra will pay all of out of pocket expenses of the Safeco
Funds and the Pioneer Funds associated with the Reorganizations, including, but
not limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses
of any proxy solicitation firm retained in connection with the Reorganizations;
(3) the legal fees and expenses incurred by the Safeco Funds in connection with
the Reorganizations; and (4) the Trustee fees and out of pocket expenses
incurred as a result of the Reorganizations.
The Trustees considered that Pioneer and Symetra will benefit from the
Reorganization. See "Certain Agreements between Pioneer and Symetra."
The Board of Trustees of Pioneer High Yield Fund also considered that the
Reorganization presents an excellent opportunity for the Pioneer High Yield
Fund to acquire investment assets without the obligation to pay commissions or
other transaction costs that a fund normally incurs when purchasing securities.
This opportunity provides an economic benefit to Pioneer High Yield Fund and
its shareholders.
35
CAPITALIZATION
The following table sets forth the capitalization of each Fund as of
September 30, 2004, and the pro forma capitalization of the combined Fund as of
September 30, 2004.
Safeco Pro Forma
High-Yield Pioneer Pioneer
Bond Fund High Yield Fund High Yield Fund
September 30, 2004 September 30, 2004 September 30, 2004
-------------------- -------------------- -------------------
Total Net Assets (in thousands) $39,683 $7,811,801 $7,851,484
Class A shares ................ $ 1,857 $3,469,718 $3,469,718
Class B shares ................ $ 465 $1,780,040 $1,780,040
Class C shares ................ $ 261 $2,411,841 $2,411,841
Investor Class shares ......... $37,101 N/A $ 39,683
Class Y shares ................ N/A $ 143,957 $ 143,957
Class R shares ................ N/A $ 6,245 $ 6,245
Net Asset Value Per Share
Class A shares ................ $ 5.78 $ 11.72 $ 11.72
Class B shares ................ $ 5.78 $ 11.77 $ 11.77
Class C shares ................ $ 5.79 $ 11.88 $ 11.88
Investor Class shares ......... $ 5.78 N/A $ 11.72
Class Y shares ................ N/A $ 11.69 $ 11.69
Class R shares ................ N/A $ 12.87 $ 12.87
Shares Outstanding
Class A shares ................ 321,002 295,917,476 295,917,476
Class B shares ................ 480,411 151,211,694 151,211,694
Class C shares ................ 45,023 203,097,222 203,097,222
Investor Class shares ......... 6,417,136 N/A 3,385,922
Class Y shares ................ N/A 12,311,037 12,311,037
Class R shares ................ N/A 485,113 485,113
It is impossible to predict how many shares of Pioneer High Yield Fund
will actually be received and distributed by your Safeco Fund on the
Reorganization date. The table should not be relied upon to determine the
amount of Pioneer High Yield Fund's shares that will actually be received and
distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund.
Similarly, the Board of Trustees of Pioneer High Yield Fund, including its
Independent Trustees, approved the Reorganization. They also determined that
the Reorganization is in the best interests of Pioneer High Yield Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
36
Safeco Intermediate-Term Bond Fund and
Pioneer Bond Fund
PROPOSAL 1(c)
Approval of Agreement and Plan of Reorganization
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 Reorganization attached as EXHIBIT A-1 because they
contain details that are not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have a higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco Intermediate-Term Bond Fund to the Pioneer Bond Fund
- ------------------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund Pioneer Bond Fund
- ------------------------------------------------------------------------------------------------------------------------
Business A series of Safeco Managed Bond Trust, a A diversified open-end management
diversified open-end management investment investment company registered under the
company organized as a Delaware statutory Investment Company Act and organized as a
trust. Delaware statutory trust.
- ------------------------------------------------------------------------------------------------------------------------
Net assets as of $10 million $259 million
June 30, 2004
- ------------------------------------------------------------------------------------------------------------------------
Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers (since 2004 and until Portfolio Managers:
August 2, 2004): Day-to-day management of the Fund's
Greg Card portfolio is the responsibility of a team of
Assistant Vice President, SAM fixed income portfolio managers led by
Joined SAM in 2001 Kenneth J. Taubes.
Tim Hokari Mr. Taubes joined Pioneer as a senior vice
Assistant Vice President, SAM president in September 1998 and has been an
Joined SAM in 2000 investment professional since 1982.
Lesley Fox
Assistant Vice President, SAM
Joined SAM in 2000
Nancy McFadden
Fixed Income Analyst, SAM
Joined SAM in 2001
Currently Pioneer is acting as investment
adviser to Safeco Intermediate-Term Bond
Fund. The Portfolio Managers of the Pioneer
Bond Fund, as indicated in the next column,
are currently managing your Safeco Fund.
- ------------------------------------------------------------------------------------------------------------------------
37
- ---------------------------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund Pioneer Bond Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Investment objective Safeco Intermediate-Term Bond Fund seeks a Pioneer Bond Fund seeks current income by
high level of current income as is consistent investing primarily in an investment-grade
with the preservation of capital. portfolio, consistent with capital preservation
and prudent investment risk.
- ---------------------------------------------------------------------------------------------------------------------------------
Each Fund provides written notice to shareholders at least 60 days prior to any change to its
investment objective as described above.
- ---------------------------------------------------------------------------------------------------------------------------------
Primary investments Under normal circumstances, Safeco Under normal market conditions, Pioneer
Intermediate-Term Bond Fund invests at least Bond Fund invests at least 80% of total
80% of net assets (plus any borrowings for assets in:
investment purposes) in bonds, including but
not limited to corporate, government and o Debt securities issued or guaranteed by the
mortgage bonds, most of which will be U.S. government or its agencies and
investment-grade quality, whether rated instrumentalities
or unrated.
o Debt securities, including convertible debt,
The dollar weighted average maturity of Safeco of corporate and other issuers rated at least
Intermediate-Term Bond Fund generally ranges investment grade at the time of investment,
between three and ten years. and comparably rated commercial paper
o Cash and cash equivalents, certificates of
deposit, repurchase agreements maturing in
one week or less and bankers' acceptances
- ---------------------------------------------------------------------------------------------------------------------------------
Investment strategies In managing the portfolio and selecting Pioneer considers both broad economic and
securities, SAM historically considered: issuer specific factors in selecting a portfolio
designed to achieve the fund's investment
o The price of the security relative to its rating objective. In assessing the appropriate
and market sector maturity, rating and sector weighting of the
o Structural features, such as an issuer's right fund's portfolio, Pioneer considers a variety of
to buy the bond back at a stated price or the factors that are expected to influence
Fund's right to require the issuer to buy the economic activity and interest rates. These
bond back at a stated price factors include fundamental economic
o The effect the security might have on indicators, such as the rates of economic
existing diversification of Fund assets and growth and inflation, Federal Reserve
allocation among various market sectors monetary policy and the relative value of the
o The effect the security might have on the U.S. dollar compared to other currencies.
yield and sensitivity to interest rate changes Once Pioneer determines the preferable
of the Fund's overall portfolio portfolio characteristics, it selects individual
securities based upon the terms of the
Safeco Intermediate-Term Bond Fund may securities (such as yields compared to U.S.
engage in short-term trading to achieve Treasuries or comparable issuers), liquidity
its objective. and rating, sector and issuer diversification.
- ---------------------------------------------------------------------------------------------------------------------------------
38
- ---------------------------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund Pioneer Bond Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Other investments Safeco Intermediate-Term Bond Fund may Pioneer Bond Fund may invest up to 20% of
invest up to 20% of its assets in high yield its total assets in debt securities rated below
debt securities rated below investment grade investment grade or, if unrated, of equivalent
("junk" or "high-risk" bonds) and may invest in quality as determined by Pioneer.
Yankee sector bonds and Eurodollar bonds.
Up to 15% of its total assets in equity and
Safeco Intermediate-Term Bond Fund may also debt securities of non-U.S. corporate issuers
invest in mortgage-backed or asset-backed and in debt securities of non-U.S. government
securities. issuers.
Safeco Intermediate-Term Bond Fund may Pioneer Bond Fund will not invest more than
invest up to 20% of assets in foreign securities. 5% of its total assets in the securities of
emerging markets issuers.
Pioneer Bond Fund may invest a substantial
portion of its assets in mortgage-related
securities, which represent interests in pools
of mortgage loans assembled for sale to
investors by various U.S. governmental
agencies, government-related organizations
and private issuers. These investments may
include mortgage-related derivative securities
such as collateralized mortgage obligations.
Pioneer Bond Fund may invest in securities of
Canadian issuers to the same extent as
securities of U.S. issuers.
- ---------------------------------------------------------------------------------------------------------------------------------
Temporary defensive Safeco Intermediate-Term Bond Fund may hold Pioneer Bond Fund may invest all or part of
strategies cash or invest in high-quality, short-term its assets in securities with remaining
securities issued by an agency or maturities of less than one year, cash
instrumentality of the U.S. government, high- equivalents or may hold cash.
quality commercial paper, certificates of
deposit, shares of no-load, open-end money
market funds, or repurchase agreements.
- ---------------------------------------------------------------------------------------------------------------------------------
Diversification Each Fund is diversified for the purpose of the Investment Company Act, and each Fund is
subject to diversification requirements under the Code.
- ---------------------------------------------------------------------------------------------------------------------------------
Industry concentration Each Fund may not invest more than 25% of its assets in any one industry.
- ---------------------------------------------------------------------------------------------------------------------------------
39
- ---------------------------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund Pioneer Bond Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Restricted and illiquid If immediately after and as a result of such Pioneer Bond Fund may not invest more than
securities action the value of the following securities, in 15% of its net assets in securities which are
the aggregate, would exceed 15% of Safeco illiquid and other securities which are not
Intermediate-Term Bond Fund's net assets, the readily marketable.
Fund will not (i) purchase securities for which
there is no readily available market, (ii)
purchase time deposits maturing in more than
seven days, (iii) purchase over-the-counter
(OTC) options or hold assets set aside to cover
OTC options written by the Fund, (iv) enter into
repurchase agreements maturing in more than
seven days, or (v) invest in interests in real
estate investment trusts which are not readily
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
- ---------------------------------------------------------------------------------------------------------------------------------
Borrowing Safeco Intermediate-Term Bond Fund may Pioneer Bond Fund may not borrow money,
borrow money (i) from banks or (ii) by except the Fund may: (a) borrow from banks
engaging in reverse repurchase agreements. or through reverse repurchase agreements in
an amount up to 33 1/3% of the Fund's total
assets (including the amount borrowed); (b)
to the extent permitted by applicable law,
borrow up to an additional 5% of the Fund's
assets for temporary purposes; (c) obtain
such short-term credits as are necessary for
the clearance of portfolio transactions; (d)
purchase securities on margin to the extent
permitted by applicable law; and (e) engage in
transactions in mortgage dollar rolls that are
accounted for as financings.
- ---------------------------------------------------------------------------------------------------------------------------------
Lending Safeco Intermediate-Term Bond Fund may lend Pioneer Bond Fund may lend portfolio
securities to qualified institutional investors securities with a value that may not exceed
with a value of up to 33% of the Fund's total 33 1/3% of the value of its total assets.
assets.
- ---------------------------------------------------------------------------------------------------------------------------------
Derivative instruments Safeco Intermediate-Term Bond Fund may not Pioneer Bond Fund may use futures and
purchase securities on margin. However, the options on securities, indices and currencies,
Fund may (i) obtain short-term credits as forward currency exchange contracts and
necessary to clear its purchases and sales of other derivatives. The Fund does not use
securities, and (ii) make margin deposits in derivatives as a primary investment technique
connection with its use of financial options and and generally limits their use to hedging.
futures, forward and spot currency contracts, However, the Fund may use derivatives for a
swap transactions and other financial contracts variety of non-principal purposes, including:
or derivative instruments.
o As a hedge against adverse changes in
stock market prices, interest rates or
currency exchange 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
- ---------------------------------------------------------------------------------------------------------------------------------
40
- ---------------------------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund Pioneer Bond Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Other investment policies and As described above, the Funds have substantially similar principal investment strategies and
restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Fund's other investment policies and fundamental and non-
fundamental investment restrictions, see the SAI.
- ---------------------------------------------------------------------------------------------------------------------------------
Buying, Selling and Exchanging Shares
- ---------------------------------------------------------------------------------------------------------------------------------
Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer Bond
of Safeco Intermediate-Term Bond Fund are Fund you receive in the Reorganization will
subject to a 3.50% front-end sales charge. not be subject to any sales charge. Moreover,
if you own shares in your own name as of the
Contingent deferred sales charge of up to 4% closing of the Reorganization (i.e., not in the
if you redeem Class B shares within five years name of a broker or other intermediary) and
of purchase. maintain your account, you may purchase
Class A shares of Pioneer Bond Fund and
Contingent deferred sales charge of 1% if you Class A shares of any fund in the Pioneer
redeem Class C shares within one year of family of funds through such account in the
purchase. future without paying any sales charge.
Purchases of Investor Class shares of the Fund Except as described above, Class A shares of
are not subject to a sales load. Pioneer Bond Fund are subject to a front-end
sales charge of up to 4.50%.
The Fund assesses a mandatory redemption
fee of 2%, as a percentage of the amount
redeemed or exchanged, on Class A and
Investor Class shares held less than 30 days.
- ---------------------------------------------------------------------------------------------------------------------------------
41
- ---------------------------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund Pioneer Bond Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Management and other fees Safeco Intermediate-Term Bond Fund pays an Pioneer Bond Fund pays Pioneer a
advisory fee on a monthly basis at an annual management fee equal to 0.50% of the Fund's
rate as follows: average daily net assets.
$0-750,000,000: 0.50 of 1% During its most recent fiscal year, Pioneer
$750,000,001-$1,250,000,000 0.45 of 1% Bond Fund paid an advisory fee at an average
Over $1,250,000,000: 0.40 of 1% rate of 0.50% of average daily net assets.
SAM serves as administrator and fund In addition, the Fund reimburses Pioneer for
accounting agent for Safeco Intermediate- certain fund accounting and legal expenses
Term Bond Fund. The Fund pays SAM an incurred on behalf of the Fund and pays a
administrative services fee of 0.05% of the separate shareholder servicing/transfer agency
Fund's average daily net assets up to the first fee to PIMSS, an affiliate of Pioneer.
$200,000,000 and 0.01% of its net assets
thereafter, and an accounting fee of 0.04% of For the fiscal year ended June 30, 2004, the
the Fund's average daily net assets up to the Fund's total annual operating expenses for
first $200,000,000 and 0.01% of its net assets Class A shares were 1.14% of average daily
thereafter. net asset. The Fund does not currently have
an expense limitation for its Class A shares.
During its most recent fiscal year, Safeco
Intermediate-Term Bond Fund paid aggregate Pioneer has agreed until the second
advisory and administration fees at an average anniversary of the closing of the
rate of 0.59% of average daily net assets. Reorganization to limit the expenses
(excluding extraordinary expenses) of the
SAM had contractually agreed until April 30, Investor Class to 0.74% of the average daily
2009, to pay certain fund operating expenses net assets attributable to the Investor Class.
(but not all of the operating expenses of the
Fund) that exceeded the rate of 0.40% per The Investor Class shares to be issued in the
annum of the Fund's average daily net assets. Reorganization will convert to Class A shares
This arrangement included all Fund operating after two years. Class A shares will have
expenses except management fees, Rule 12b-1 higher expenses per share than Investor Class
fees, brokerage commissions, interest, and shares due to the Rule 12b-1 Plan. In
extraordinary expenses. addition, although Pioneer has agreed to limit
the expenses attributable to Investor Class
In 2003, SAM began voluntarily reimbursing shares, Pioneer is not required to limit the
the Fund to the extent that its total expenses expenses attributable to Class A shares.
exceeded the rate of 0.99% per annum of the
Fund's average daily net assets for Class A
shares, 1.74% per annum for Class B and
Class C shares, and 0.74% per annum for
Investor Class shares.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
A shares, after giving effect to the contractual
expense limitation were 1.15%, and without
giving effect to the expense limitation, were
2.05%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class A shares were 0.99%.
- ---------------------------------------------------------------------------------------------------------------------------------
42
- ---------------------------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund Pioneer Bond Fund
- ---------------------------------------------------------------------------------------------------------------------------------
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
B shares, after giving effect to the contractual
expense limitation were 1.90%, and without
giving effect to the expense limitation, were
2.78%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class B shares were 1.74%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
C shares, after giving effect to the contractual
expense limitation were 1.90%, and without
giving effect to the expense limitation, were
42.54%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class C shares were 1.74%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Investor Class shares, after giving effect to the
contractual expense limitation were 0.90%, and
without giving effect to the expense limitation,
were 1.53% per share. After giving effect to
the voluntary expense reimbursement, the
operating expenses for Investor Class shares
were 0.74%.
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class
(12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject
to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
- ---------------------------------------------------------------------------------------------------------------------------------
Buying shares You may buy shares of Safeco Intermediate- You may buy shares from any investment firm
Term Bond Fund directly through Safeco that has a sales agreement with PFD, Pioneer
Securities or through brokers, registered Bond Fund's distributor. Existing shareholders
investment advisers, banks and other financial of Safeco Intermediate-Term Bond Fund who
institutions that have entered into selling own shares in their own name as of the
agreements with the Fund's principal closing date of the Reorganization and who
underwriter, as described in the Fund's maintain their accounts may buy shares of
prospectus. any fund in the Pioneer family of funds
through such accounts in the future without
Certain account transactions may be done paying sales charges.
by telephone.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
Bond Fund by telephone or online.
- ---------------------------------------------------------------------------------------------------------------------------------
43
- ---------------------------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund Pioneer Bond Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer Bond
acquire through dividend reinvestment or other Fund without incurring any fee on the
fund distributions or for Class A shares that exchange with the more than 62 other Pioneer
you have exchanged for Class A shares of Funds. Your exchange would be for Class A
another fund. shares, which would be subject to Rule 12b-1
fees. An exchange generally is treated as a
Certain account transactions may be done sale and a new purchase of shares for federal
by telephone. income tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer Bond Fund
for shares of other Pioneer Funds by
telephone or online.
- ---------------------------------------------------------------------------------------------------------------------------------
Selling shares Each class of shares will be sold at net asset value per share next calculated after the Fund
receives your request in good order.
- ---------------------------------------------------------------------------------------------------------------------------------
You may sell your shares by contacting Safeco Normally, your investment firm will send your
Intermediate-Term Bond Fund directly in writing request to sell shares to PIMSS. You can also
or by contacting a financial intermediary as sell your shares by contacting the Fund
described in the Fund's prospectus. directly if your account is registered in
your name.
If the account is established in the
shareholder's own name, shareholders may
also redeem shares of Pioneer Bond Fund by
telephone or online.
- ---------------------------------------------------------------------------------------------------------------------------------
Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks. The
market value of fixed income securities tends to be more volatile the longer
the maturity of such security. Since Pioneer Bond Fund may invest in securities
of longer maturity than your Safeco Fund, an investment in Pioneer Bond Fund
may have correspondingly greater risk. You could lose money on your investment
in either Fund or not make as much as if you invested elsewhere if:
o Interest rates go up, causing the value of debt securities in the Fund's
portfolio to decline.
o The issuer of a security owned by a Fund defaults on its obligation to pay
principal and/or interest or has its credit rating downgraded.
o During periods of declining interest rates, the issuer of a security may
exercise its option to prepay principal earlier than scheduled, forcing
the Fund to reinvest in lower yielding securities. This is known as call
or prepayment risk.
o During periods of rising interest rates, the average life of certain types
of securities may be extended because of slower than expected principal
payments. This may lock in a below market interest rate, increase the
security's duration (the estimated period until the security is paid in
full) and reduce the value of the security. This is known as extension
risk.
o The investment adviser's judgment about the attractiveness, relative value
or potential appreciation of a particular sector, security or investment
strategy proves to be incorrect.
o A downturn in equity markets causes the price of convertible securities to
drop even when the prices of below investment grade bonds otherwise would
not go down.
o To the extent that the Fund invests significantly in high yield
securities, its exposure to the credit risks associated with such
securities may be greater, its income and net asset value may be more
volatile, and it may be more difficult to achieve preservation of
principal.
44
Government sponsored entities such as the Federal Home Loan Mortgage
Corporation (Freddie Mac), the Federal National Mortgage Association (FNMA) and
the Federal Home Loan Banks (FHLB), although chartered or sponsored by
Congress, are not funded by congressional appropriations and the debt and
mortgage-backed securities issued by them are neither guaranteed nor issued by
the U.S. government. To the extent the Funds invest significantly in
mortgage-backed securities, its exposure to prepayment and extension risks may
be greater than if it invested in other fixed income securities.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
Past Performance
Set forth below is performance information for each Fund. The bar charts
show how each Fund's total return (not including any deduction for sales
charges) has varied from year to year for each full calendar year. The tables
show average annual total return (before and after taxes) for each Fund over
time for each class of shares (including deductions for sales charges) compared
with a broad-based securities market index. The bar charts give an indication
of the risks of investing in each Fund, including the fact that you could incur
a loss and experience volatility of returns year to year. Past performance
before and after taxes does not indicate future results.
Safeco Intermediate-Term Bond Fund -- Investor Class
Calendar Year Total Returns*
[THE FOLLOWING DATA WAS REPRESENTED BY A BAR CHART IN THE PRINTED DOCUMENT.]
'95 17.35
'96 0.02
'97 8.23
'98 8.43
'99 -3.82
'00 11.57
'01 6.95
'02 7.44
'03 3.56
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return since the Fund's inception on February 28, 1994 was 5.74%
for the quarter ended June 30, 1995, and the lowest quarterly return was
-3.27% for the quarter ended March 31, 1996.
45
Pioneer Bond Fund -- Class A shares
Calendar Year Total Returns*
[THE FOLLOWING DATA WAS REPRESENTED BY A BAR CHART IN THE PRINTED DOCUMENT.]
'94 -4.20
'95 18.16
'96 1.96
'97 9.16
'98 7.69
'99 -3.20
'00 8.45
'01 7.54
'02 8.77
'03 8.85
* During the period shown in the bar chart, Pioneer Bond Fund's highest
quarterly return was 6.11% for the quarter ended June 30, 1995, and the
lowest quarterly return was -3.03% for the quarter ended March 31, 1994.
Safeco Intermediate-Term Bond Fund
Average Annual Total Returns as of December 31, 2003
- ------------------------------------------------------------------------------------------------------------
Since
1 Year 5 Years Inception(1)
- ------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund, Class A shares
- ------------------------------------------------------------------------------------------------------------
Return Before Taxes -0.31% 3.96% 4.95%
- ------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(2) -1.67% 2.01% 2.81%
- ------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(2) -0.21% 2.14% 2.87%
- ------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund, Class B shares
- ------------------------------------------------------------------------------------------------------------
Return Before Taxes -1.33% 3.77% 4.80%
- ------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund, Class C shares
- ------------------------------------------------------------------------------------------------------------
Return Before Taxes 1.47% 3.90% 4.69%
- ------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund, Investor Class shares
- ------------------------------------------------------------------------------------------------------------
Return Before Taxes 3.56% 5.01% 5.58%
- ------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(2) 2.05% 2.94% 3.34%
- ------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and
Sale of Fund Shares(2) 2.30% 2.97% 3.35%
- ------------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index(3)
(reflects no deduction for fees, expenses or taxes) 4.10% 6.62% 7.11%
- ------------------------------------------------------------------------------------------------------------
(1) The Fund commenced operations on February 28, 1994.
(2) 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 your situation and may
differ from those shown. Furthermore, the after-tax
46
returns shown are not relevant to those who hold their shares through
tax-deferred arrangements such as 401(k) plans or IRA accounts, or to
investors that are tax-exempt.
(3) The Lehman Brothers Aggregate Bond Index, an unmanaged index of securities
from the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed
Securities Index, and Asset Backed Securities Index, is for reference only
and does not mirror the Fund's investments.
Pioneer Bond Fund -- Class A shares
Average Annual Total Returns as of December 31, 2003
- ---------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------
Pioneer Bond Fund, Class A shares
- ---------------------------------------------------------------------------------------------------------
Return Before Taxes 6.76% 43.54% 3.50%
- ---------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 5.71% 3.54% 3.53%
- ---------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 2.51% 2.71% 3.11%
- ---------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index(2)
(reflects no deduction for fees, expenses or taxes) 4.10% 6.62% 6.95%
- ---------------------------------------------------------------------------------------------------------
(1) 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 your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(2) The Lehman Brothers Aggregate Bond Index, an unmanaged index of securities
from the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed
Securities Index, and Asset Backed Securities Index, is for reference only
and does not mirror the Fund's investments.
Pioneer Bond Fund's Investor Class shares will not be outstanding prior to
the closing of the Reorganization and consequently have no performance history.
However, the performance record of the Investor Class would be modestly higher
than the performance of Class A, B and C shares due to the lower expenses
applicable to the Investor Class.
The most recent portfolio manager's discussion of each Fund's performance
is attached as Exhibit D.
47
The Funds' Fees and Expenses
Shareholders of both 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 Fund. The expenses in the tables
appearing below are based on (i) for your Safeco Fund, the expenses of your
Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer Bond
Fund, the expenses of Pioneer Bond Fund for the period ended June 30, 2004.
Future expenses for all share classes may be greater or less.
Safeco
Intermediate- Pro Forma
Safeco Safeco Safeco Term Bond Pioneer
Intermediate- Intermediate- Intermediate- Fund Bond Fund
Term Bond Fund Term Bond Fund Term Bond Fund Investor Investor
Shareholder transaction fees Class A Class B Class C Class Class(9)
(paid directly from your investment) --------------- ---------------- ---------------- --------------- ------------
Maximum sales charge (load) when you buy shares
as a percentage of offering price ................... 3.50%(6) None None None None(1)
Maximum deferred sales charge (load) as a percentage
of purchase price or the amount you receive when you
sell shares, whichever is less ...................... None 4.00%(7) 1.00%(8) None None
Redemption fees for shares held less than 30 days .... 2.00% None None 2.00% N/A
Wire redemption fee .................................. $ 204 $ 204 $ 204 $ 204 $ 10
Annual low balance fee ............................... $ 125 $ 125 $ 125 $ 125 N/A
Annual fund operating expenses (deducted from
fund assets) (as a % of average net assets)
Management fee ....................................... 0.50% 0.50% 0.50% 0.50% 0.50%
Distribution and service (12b-1) fee ................. 0.25% 1.00% 1.00% None None
Other expenses ....................................... 1.30% 1.28% 41.04% 1.03% 0.45%
Total fund operating expenses ........................ 2.05% 2.78% 42.54% 1.53% 0.95%
Expense reimbursement/reduction ...................... 0.90%(2) 0.88%(2) 40.64%(2) 0.63%(2) 0.214%(3)
Net fund operating expenses .......................... 1.15% 1.90% 1.90% 0.90% 0.74%
- ----------
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer Bond Fund through the Reorganization. In addition, shareholders of
your Safeco Fund who own shares in their own name (i.e., not in the name of
a broker or other intermediary) and maintain such account as of the closing
of the 59Reorganization may purchase Class A shares of Pioneer Bond Fund or
of any fund in the Pioneer family of funds through such account in the
future without paying this sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco
Intermediate-Term Bond Fund for certain Fund operating expenses (but not
all of the operating expenses of the Fund) that exceeded the rate of 0.40%
per annum of the Fund's average daily net assets. This arrangement included
all fund operating expenses except management fees, Rule 12b-1 fees,
brokerage commissions, interest, and extraordinary expenses. In 2003, SAM
began voluntarily reimbursing the Fund to the extent that its total
expenses exceeded the rate of 0.99% per annum of the Fund's average daily
net assets for Class A shares, 1.74% per annum for Class B and Class C
shares, and 0.74% per annum for Investor Class shares. The above table
reflects "contractual" expense reimbursements from SAM, if any, but does
not reflect "voluntary" expense reimbursements by SAM.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer Bond Fund
to 0.74% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once in year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions made in the first twelve months except with
respect to participant-directed redemptions from qualified retirement
plans.
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after five years from purchase, and the Class B shares
convert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
48
(9) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares.
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect five years Safeco
Intermediate-Term Bond Fund and two years for Pioneer Bond Fund and (f) and the
Investor Class shares of Pioneer Bond Fund convert to Class A shares after two
years. The examples are for comparison purposes only and are not a
representation of either Fund's actual expenses or returns, either past or
future.
Example
Safeco Intermediate-Term Bond Fund
Class A shares
Year 1 .............. $ 463
Year 3 .............. $ 703
Year 5 .............. $ 961
Year 10 ............. $2,247
Class B shares With Redemption Without Redemption
Year 1 .............. $ 593 $ 193
Year 3 .............. $ 797 $ 597
Year 5 .............. $1,126 $1,026
Year 10 ............. $2,389 $2,389
Class C shares With Redemption Without Redemption
Year 1 .............. $ 293 $ 193
Year 3 .............. $ 597 $ 597
Year 5 .............. $1,026 $1,026
Year 10 ............. $2,709 $2,709
Investor Class shares
Year 1 .............. $ 92
Year 3 .............. $ 287
Year 5 .............. $ 498
Year 10 ............. $1,518
Pro Forma Pioneer Bond Fund
Investor Class shares
Year 1 .............. $ 76
Year 3 .............. $ 281
Year 5 .............. $ 548
Year 10 ............. $1,312
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco Intermediate-Term Bond Fund. The Trustees considered the
following matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Safeco Fund until August 2,
2004, was acquired by Symetra. Symetra informed the Trustees that it did not
intend to continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the investment performance of Pioneer Bond Fund, which has
outperformed your Safeco Fund over the most recent one, five and ten year
periods. For the one, five and ten year periods ended June 30, 2004, Class A
shares of Pioneer Bond Fund had an average annual return of 2.98%, 6.70% and
6.72%, respectively, compared to an average annual return of the Class A shares
and Investor Class shares of 3.66% and 0.02% (one year), 4.86% and 5.86% (five
years) and 5.24% and 5.88% (ten years), respectively, during the same period.
In addition, the Trustees considered the track record of Pioneer in managing
equity and fixed income mutual funds.
49
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutional and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholder account
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market
fund that will be available to your Safeco Fund's shareholders through
exchanges. In addition, Pioneer offers shareholders additional options for
their accounts, including the ability to transact and exchange shares over the
telephone or online and the ability to access account values and transaction
history in all of the shareholder's direct accounts in the Pioneer Funds over
the telephone or online.
Fourth, Pioneer Bond Fund's lower gross expenses and Pioneer's commitment
until the second anniversary of the Reorganization to limit the expenses
(excluding extraordinary expenses) of the Investor Class of Pioneer Bond Fund
to 0.74 % of average daily net assets. The gross expense ratio of Pioneer Bond
Fund's Class A shares is lower than the gross expense ratio of each class of
shares of your Safeco Fund. In addition, the net expense ratio of the Investor
Class of Pioneer Bond Fund is lower than the net expenses of the Class A, Class
B and Class C shares of your Safeco Fund and the same as the net expenses of
the Investor Class. Although you will experience higher expenses once the
Investor Class shares convert to Class A shares after two years, your expenses
will remain the same until the second anniversary of the Reorganization.
Fifth, the substantially larger size of Pioneer Bond Fund offers greater
opportunity for diversification of the investment portfolio, which should help
to reduce risks.
Sixth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
Seventh, the Trustees also considered the differences in the investment
policies of the two Funds, particularly Pioneer Bond Fund's ability to invest
in securities with longer maturities than your Safeco Fund. While this may
result in Pioneer Bond Fund having greater volatility of net asset value than
your Safeco Fund, the Trustees believe that the factors in favor of the
Reorganization mitigate this risk.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco
Funds and the Pioneer Funds associated with the Reorganizations, including, but
not limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses
of any proxy solicitation firm retained in connection with the Reorganizations;
(3) the legal fees and expenses incurred by the Safeco Funds in connection with
the Reorganizations; and (4) the Trustee fees and out of pocket expenses
incurred as a result of the Reorganizations.
The Trustees considered that Pioneer and Symetra will benefit from the
Reorganization. See "Certain Agreements between Pioneer and Symetra."
The Board of Trustees of Pioneer Bond Fund also considered that the
Reorganization presents an excellent opportunity for the Pioneer Bond Fund to
acquire investment assets without the obligation to pay commissions or other
transaction costs that a fund normally incurs when purchasing securities. This
opportunity provides an economic benefit to Pioneer Bond Fund and its
shareholders.
50
CAPITALIZATION
The following table sets forth the capitalization of each Fund as of
September 30, 2004, and the pro forma capitalization of the combined Fund as of
September 30, 2004.
Safeco Pro Forma
Intermediate-Term Pioneer Pioneer
Bond Fund Bond Fund Bond Fund
September 30, 2004 September 30, 2004 September 30, 2004
-------------------- -------------------- -------------------
Total Net Assets (in thousands) $9,598 $265,836 $275,434
Class A shares ................ $1,608 $163,765 $163,765
Class B shares ................ $ 604 $ 56,548 $ 56,548
Class C shares ................ $ 99 $ 28,246 $ 28,245
Investor Class shares ......... $7,286 N/A $ 9,598
Class Y shares ................ N/A $ 16,894 $ 16,894
Class R shares ................ N/A $ 383 $ 383
Net Asset Value Per Share
Class A shares ................ $ 8.51 $ 9.36 $ 9.36
Class B shares ................ $ 8.51 $ 9.32 $ 9.32
Class C shares ................ $ 8.51 $ 9.30 $ 9.30
Investor Class shares ......... $ 8.52 N/A $ 9.36
Class Y shares ................ N/A $ 9.30 $ 9.30
Class R shares ................ N/A $ 9.30 $ 9.37
Shares Outstanding
Class A shares ................ 188,948 17,479,859 17,479,859
Class B shares ................ 70,949 6,061,254 6,061,254
Class C shares ................ 11,688 3,036,946 3,036,946
Investor Class shares ......... 854,733 N/A 1,025,427
Class Y shares ................ N/A 16,894,081 16,894,081
Class R shares ................ N/A 383,073 383,073
It is impossible to predict how many shares of Pioneer Bond Fund will
actually be received and distributed by your Safeco Fund on the Reorganization
date. The table should not be relied upon to determine the amount of Pioneer
Bond Fund's shares that will actually be received and distributed.
Board's Evaluation and Recommendation
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund.
Similarly, the Board of Trustees of Pioneer Bond Fund, including its
Independent Trustees, approved the Reorganization. They also determined that
the Reorganization is in the best interests of Pioneer Bond Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
51
Safeco Intermediate-Term Municipal Bond Fund and
Pioneer Tax Free Income Fund
PROPOSAL 1(d)
Approval of Agreement and Plan of Reorganization
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 Agreement and
Plan of Reorganization attached as EXHIBIT A-1 because they contain details that
are not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco Intermediate-Term Municipal Bond Fund to the Pioneer Tax
Free Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term
Municipal Bond Fund Pioneer Tax Free Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Business A series of Safeco Tax-Exempt Bond Trust, a A diversified open-end management
diversified open-end management investment investment company registered under the
company organized as a Delaware statutory Investment Company Act and organized as a
trust. Delaware statutory trust.
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets as of $16.4 million $332 million
June 30, 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers (until August 2, 2004): Portfolio Managers:
Mary Metastasio (since 1996) Day-to-day management of the Fund's
Vice President, SAM portfolio is the responsibility of a team of
fixed income portfolio managers led by
Stephen C. Bauer (since 2003) Kenneth J. Taubes.
President and Director, SAM
Associated with SAM since 1971 Mr. Taubes joined Pioneer as a senior vice
president in September 1998 and has been
Currently Pioneer is acting as investment an investment professional since 1982.
adviser to Safeco Intermediate-Term Municipal
Bond Fund. The Portfolio Managers of the
Pioneer Tax Free Income Fund, as indicated in
the next column, currently manages your
Safeco Fund.
- ------------------------------------------------------------------------------------------------------------------------------------
Investment objective Safeco Intermediate-Term Municipal Bond Fund Pioneer Tax Free Income Fund seeks as high a
seeks to provide a high level of current interest level of current income exempt from federal
income exempt from federal income tax as is income taxes as possible consistent with the
consistent with prudent investment risk. preservation of capital.
- ------------------------------------------------------------------------------------------------------------------------------------
The investment objective of each Fund is fundamental and cannot be changed without
shareholder approval.
- ------------------------------------------------------------------------------------------------------------------------------------
52
- ------------------------------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term
Municipal Bond Fund Pioneer Tax Free Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Primary investments Under normal circumstances, Safeco Normally, Pioneer Tax Free Income Fund
Intermediate-Term Municipal Bond Fund invests invests at least 80% of its total assets in
at least 80% of its net assets (plus any investment grade securities that provide
borrowings for investment purposes) in income that is exempt from regular federal
investment grade municipal bonds with income tax and may not be subject to the
maturities of more than one year and the alternative minimum tax. These investments
interest on which is exempt from federal include bonds, notes and other debt
income tax. instruments issued by or on behalf of states,
counties, municipalities, territories and
Safeco Intermediate-Term Municipal Bond Fund possessions of the United States and the
will not invest in securities the income interest District of Columbia and their authorities,
on which is a tax preference item for purposes political subdivisions, agencies or
of the federal alternative minimum tax. instrumentalities.
Safeco Intermediate-Term Municipal Bond Fund Pioneer Tax Free Income Fund may invest in
will maintain an average dollar-weighted securities the income interest on which is a
maturity of between three and ten years. tax preference item for purposes of the federal
alternative minimum tax.
Pioneer Tax Free Income Fund may invest in
securities of any maturity.
Pioneer Tax Free Income 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.
Pioneer Tax Free Income Fund's investments
may have fixed or variable principal payments
and all types of interest rate payment and
reset terms, including fixed and floating rates,
inverse floating rate, zero coupon, contingent,
deferred and payment in kind and auction
rate features.
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53
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Safeco Intermediate-Term
Municipal Bond Fund Pioneer Tax Free Income Fund
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Investment strategies In managing the portfolio and selecting Pioneer considers both broad economic
securities, SAM historically considered, among factors and issuer-specific factors in selecting
other things: a portfolio designed to achieve Pioneer Tax
Free Income Fund's investment objective. In
o Yield assessing the appropriate maturity and rating
o Maturity weighting of the Fund's portfolio, Pioneer
o Structural features such as an issuer's right considers a variety of factors that are
to buy the bond back at a stated price or expected to influence economic activity
the Fund's right to buy the bond back at a and interest rates. These factors include
stated price fundamental economic indicators such as
o Credit quality (including the underlying the rates of economic growth and inflation,
rating of insured bonds) Federal Reserve monetary policy and the
o The purpose the issuer is financing; relative value of the U.S. dollar compared to
o The original offering price other currencies. Once Pioneer determines
o Any state or local tax exemption the preferable portfolio characteristics, Pioneer
o The amount of discount off or premium on selects individual securities based upon the
the stated principal amount of the bond terms of the securities (such as yields
represented by the price offered compared to U.S. Treasuries or comparable
issues), liquidity and rating and issuer
After evaluating a bond, SAM compared the diversification.
bond to other available bonds, which may have
had different features, and would buy the bond
if it appeared to offer the best relative value.
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54
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Safeco Intermediate-Term
Municipal Bond Fund Pioneer Tax Free Income Fund
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Other investments Safeco Intermediate-Term Municipal Bond Fund Pioneer Tax Free Income Fund may invest up
may invest up to 20% of its assets in unrated to 20% of its assets in industrial development
municipal bonds, as long as the adviser bonds.
determines they are of comparable quality to
investment-grade securities. Unrated securities Pioneer Tax Free Income Fund may invest up
are not necessarily lower in quality than rated to 20% of its net assets in securities of other
securities but may not be as attractive to as investment companies, investment grade
many investors as rated securities. commercial paper, U.S. government securities,
U.S. or foreign bank instruments and
Safeco Intermediate-Term Municipal Bond Fund repurchase agreements.
will invest no more than 33% of its total assets
in municipal bonds rated in the fourth highest Pioneer Tax Free Income Fund may invest up
grade (or in comparable unrated bonds subject to 10% of its net assets in debt securities
to the 20% limit). Such bonds are of medium rated below investment grade or, if unrated, of
grade, have speculative characteristics, and are equivalent quality as determined by Pioneer.
more likely to have a weakened capacity to make Debt securities rated below investment grade
principal and interest payments under changing are commonly referred to as "junk bonds" and
economic conditions or upon deterioration in the are considered speculative. Below investment
financial condition of the issuer. grade debt securities involve greater risk of
loss, are subject to greater price volatility and
Safeco Intermediate-Term Municipal Bond Fund are less liquid, especially during periods of
will not hold more than 5% of its net assets economic uncertainty or change, than higher
in below investment-grade securities or, if quality debt securities.
unrated, in securities that cease to be
comparable to a rated investment-grade Pioneer Tax Free Income Fund may invest up
security (such below investment-grade to 10% of its net assets in inverse floating
securities are commonly referred to as "high rate obligations (a type of derivative
yield" or "junk" bonds). instrument). Inverse floating rate obligations
represent interests in tax-exempt bonds.
Safeco Intermediate-Term Municipal Bond The interest rate on inverse floating rate
Fund may invest up to 20% of assets in obligations will generally decrease as short-
foreign securities. term interest rates increase, and increase as
short-term rates decrease. Inverse floating
rate obligations may be volatile and involve
leverage risk.
Pioneer Tax Free Income Fund's investments
may have fixed or variable principal payments
and all types of interest rate payment and
reset terms, including fixed and floating rates,
inverse floating rate, zero coupon, contingent,
deferred and payment in kind and auction
rate features.
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Temporary defensive Safeco Intermediate-Term Municipal Bond Fund Pioneer Tax Free Income Fund may invest
strategies may hold cash or invest in high-quality, short- all or part of its assets in securities with
term securities issued by an agency or remaining maturities of less than one year,
instrumentality of the U.S. government, high- cash equivalents or may hold cash.
quality commercial paper, certificates of
deposit, shares of no-load, open-end money
market funds, or repurchase agreements.
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55
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Safeco Intermediate-Term
Municipal Bond Fund Pioneer Tax Free Income Fund
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Diversification Each Fund is diversified for the purpose of the Investment Company Act, and each Fund is
subject to diversification requirements under the Code.
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Industry concentration Safeco Intermediate-Term Municipal Bond Fund Pioneer Tax Free Income Fund may invest
may not invest more than 25% of its assets in 25% or more of its assets in issuers in any
any one industry. 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.
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Restricted and If immediately after and as a result of such Pioneer Tax Free Income Fund will not invest
illiquid securities action the value of the following securities, in more than 10% of its net assets in illiquid
the aggregate, would exceed 15% of Safeco and other securities that are not readily
Intermediate-Term Municipal Bond Fund's net marketable. Repurchase agreements maturing
assets, the Fund will not (i) purchase securities in more than seven days will be included for
for which there is no readily available market, purposes of the foregoing limit. Securities
(ii) purchase time deposits maturing in more subject to restrictions on resale under the
than seven days, (iii) purchase over-the- 1933 Act are considered illiquid unless they
counter (OTC) options or hold assets set aside are eligible for resale pursuant to Rule 144A
to cover OTC options written by the Fund, (iv) or another exemption from the registration
enter into repurchase agreements maturing in requirements of the 1933 Act and are
more than seven days, or (v) invest in interests determined to be liquid by Pioneer.
in real estate investment trusts which are not
readily marketable or interests in real estate
limited partnerships which are not listed or
traded on the NASDAQ Stock Market.
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Borrowing Safeco Intermediate-Term Municipal Bond Fund Pioneer Tax Free Income Fund may not
may borrow money (i) from banks or (ii) by borrow money, except from a bank for
engaging in reverse repurchase agreements. 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.
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Lending Safeco Intermediate-Term Municipal Bond Fund Pioneer Tax Free Income Fund may not
may lend securities to qualified institutional make loans, except through the purchase of
investors with a value of up to 33% of the securities, including repurchase agreements,
Fund's total assets. in accordance with its investment objective,
policies and limitations.
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56
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Safeco Intermediate-Term
Municipal Bond Fund Pioneer Tax Free Income Fund
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Derivative instruments Safeco Intermediate-Term Municipal Bond Fund Pioneer Tax Free Income Fund may use
may not purchase securities on margin. futures and options on securities, indices and
However, the Fund may (i) obtain short-term currencies, forward currency exchange
credits as necessary to clear its purchases and contracts and other derivatives. The Fund
sales of securities, and (ii) make margin does not use derivatives as a primary
deposits in connection with its use of financial investment technique and generally limits their
options and futures, forward and spot currency use to hedging. However, the Fund may use
contracts, swap transactions and other derivatives for a variety of non-principal
financial contracts or derivative instruments. purposes, including:
o As a hedge against adverse changes in
stock market prices, interest rates or
currency exchange 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
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Other investment policies and As described above, the Funds have substantially similar principal investment strategies and
restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Fund's other investment policies and fundamental and non-
fundamental investment restrictions, see the SAI.
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Buying, Selling and Exchanging Shares
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Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer Tax Free
of the Fund are subject to a 3.50% front-end Income Fund you receive in the Reorganization
sales charge. will not be subject to any sales charge.
Moreover, if you own shares in your own
Contingent deferred sales charge of up to 4% name as of the closing of the Reorganization
if you redeem Class B shares within five years (i.e., not in the name of a broker or other
of purchase. intermediary) and maintain your account, you
may purchase Class A shares of Pioneer Tax
Contingent deferred sales charge of 1% if you Free Income Fund and Class A shares of any
redeem Class C shares within one year of fund in the Pioneer family of funds through
purchase. such account in the future without paying any
sales charge.
Purchases of Investor Class shares of the Fund
are not subject to a sales load. Except as described above, Class A shares of
Pioneer Tax Free Income Fund are subject to a
The Fund assesses a mandatory redemption front-end sales charge of up to 4.50%.
fee of 2%, as a percentage of the amount
redeemed or exchanged, on Class A and
Investor Class shares held less than 30 days.
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57
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Safeco Intermediate-Term
Municipal Bond Fund Pioneer Tax Free Income Fund
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Management and other fees Safeco Intermediate-Term Municipal Bond Fund Pioneer Tax Free Income Fund pays Pioneer
pays an advisory fee on a monthly basis at an a management fee equal to:
annual rate as follows:
0.50% of average daily net assets up to
$0-$250,000,000: 0.50 of 1% $250 million;
$250,000,001-$750,000,000: 0.45 of 1% 0.48% of the next $50 million; and
Over $750,000,000: 0.40 of 1% 0.45% on assets over $300 million.
SAM serves as administrator and fund During its most recent fiscal year, Pioneer
accounting agent for the Fund. The Fund pays Tax Free Income Fund paid an advisory fee
SAM an administrative services fee of 0.05% at an average rate of 0.49% of average daily
of the Fund's average daily net assets up to the net assets.
first $200,000,000 and 0.01% of its net assets
thereafter, and an accounting fee of 0.04% of In addition, the Fund reimburses Pioneer for
the Fund's average daily net assets up to the certain fund accounting and legal expenses
first $200,000,000 and 0.01% of its net incurred on behalf of the Fund and pays a
assets thereafter. separate shareholder servicing/transfer agency
fee to PIMSS, an affiliate of Pioneer.
During its most recent fiscal year, Safeco
Intermediate-Term Municipal Bond Fund paid For the fiscal year ended December 31, 2003,
aggregate advisory and administration fees at the Fund's total annual operating expenses for
an average rate of 0.59% of average daily Class A shares were 0.93% of average daily
net assets. net assets. The Fund currently does not have
an expense limitation for its Class A shares.
SAM had contractually agreed until April 30,
2009, to pay certain Fund operating expenses Pioneer has agreed until the second
(but not all of the operating expenses of the anniversary of the closing of the
Fund) that exceeded the rate of 0.40% per Reorganization to limit the expenses
annum of the Fund's average daily net assets. (excluding extraordinary expenses) of the
This arrangement included all Fund operating Investor Class to 0.70% of the average daily
expenses except management fees, Rule 12b-1 net assets attributable to the Investor Class.
fees, brokerage commissions, interest, and
extraordinary expenses. The Investor Class shares to be issued in the
Reorganization will convert to Class A shares
In 2003, SAM began voluntarily reimbursing after two years. Class A shares will have
the Fund to the extent that its total expenses higher expenses per share than Investor
exceeded the rate of 0.85% per annum of the Class shares due to the Rule 12b-1 Plan. In
Fund's average daily net assets for Class A addition, although Pioneer has agreed to limit
shares, 1.60% per annum for Class B and the expenses attributable to Investor Class
Class C shares, and 0.70% per annum for shares, Pioneer is not required to limit the
Investor Class shares. expenses attributable to Class A shares.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
A shares, after giving effect to the contractual
expense limitation were 1.15%, and without
giving effect to the expense limitation, were
7.70%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class A shares were 0.85%.
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58
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Safeco Intermediate-Term
Municipal Bond Fund Pioneer Tax Free Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Management and other fees For the fiscal year ended December 31, 2003,
(continued) the Fund's annual operating expenses for Class
B shares, after giving effect to the contractual
expense limitation were 1.90%, and without
giving effect to the expense limitation, were
16.43%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class B shares were 1.60%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
C shares, after giving effect to the contractual
expense limitation were 1.90%, and without
giving effect to the expense limitation, were
20.82%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class C shares were 1.60%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Investor Class shares, after giving effect to the
contractual expense limitation were 0.90%, and
without giving effect to the expense limitation,
were 1.04%. After giving effect to the voluntary
expense reimbursement, the operating expenses
for Investor Class shares were 0.70%.
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Distribution and service Each class of shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class
(12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject
to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
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Buying shares You may buy shares of Safeco Intermediate- You may buy shares from any investment firm
Term Municipal Bond Fund directly through that has a sales agreement with PFD, Pioneer
Safeco Securities, the Fund's principal Tax Free Income Fund's distributor. Existing
underwriter or through brokers, registered shareholders of Safeco Intermediate-Term
investment advisers, banks and other financial Municipal Bond Fund who own shares in
institutions that have entered into selling their own name as of the closing date of
agreements with the Fund's principal the Reorganization and who maintain their
underwriter, as described in the Fund's accounts may buy shares of any fund in
prospectus. the Pioneer family of funds through such
accounts in the future without paying
Certain account transactions may be done sales charges.
by telephone.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer Tax
Free Income Fund by telephone or online.
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59
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Safeco Intermediate-Term
Municipal Bond Fund Pioneer Tax Free Income Fund
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Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer Tax Free
acquire through dividend reinvestment or other Income Fund without incurring any fee on the
Fund distributions or for Class A shares that exchange with the more than 62 other Pioneer
you have exchanged for Class A shares of Funds. Your exchange would be for Class A
another fund. shares, which would be subject to Rule 12b-1
fees. An exchange generally is treated as a
Certain account transactions may be done sale and a new purchase of shares for federal
by telephone. income tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer Tax Free
Income Fund for shares of other Pioneer
Funds by telephone or online.
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Selling shares Each class of shares will be sold at net asset value per share next calculated after the Fund
receives your request in good order.
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You may sell your shares by contacting Safeco Normally, your investment firm will send
Intermediate-Term Municipal Bond Fund your request to sell shares to PIMSS. You
directly in writing or by contacting a financial can also sell your shares by contacting the
intermediary as described in the Fund's Fund directly if your account is registered in
prospectus. your name.
If the account is established in the shareholder's
own name, shareholders may also redeem
shares of Pioneer Tax Free Income Fund by
telephone or online.
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Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks. The
market value of a fixed income security tends to be more volatile the longer
the maturity of such security. Since Pioneer Tax Free Income Fund can invest in
securities of longer maturity than your Safeco Fund, an investment in Pioneer
Tax Free Income Fund may have correspondingly greater risks. You could lose
money on your investment in either Fund or not make as much as if you invested
elsewhere if:
o Interest rates go up, causing the value of debt securities in the Fund's
portfolio to decline
o The issuer of a security owned by the Fund defaults on its obligation to
pay principal and/or interest or has its credit rating downgraded
o New federal or state legislation 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 The Fund's investment adviser is incorrect in its expectation of changes
in interest rates or the credit quality of an issuer
Although distributions of interest income from the Funds' tax-exempt
securities are generally exempt from regular 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 Fund
distributions.
60
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
Past Performance
Set forth below is performance information for each Fund. The bar charts
show how each Fund's total return (not including any deduction for sales
charges) has varied from year to year for each full calendar year. The tables
show average annual total return (before and after taxes) for each Fund over
time for each class of shares (including deductions for sales charges) compared
with a broad-based securities market index. The bar charts give an indication
of the risks of investing in each Fund, including the fact that you could incur
a loss and experience volatility of returns year to year. Past performance
before and after taxes does not indicate future results.
Safeco Intermediate-Term Municipal Bond Fund -- Investor Class
Calendar year total returns*
[THE FOLLOWING DATA WAS REPRESENTED BY A BAR CHART IN THE PRINTED DOCUMENT.]
'94 -5.62
'95 15.22
'96 3.75
'97 7.50
'98 5.33
'99 -0.84
'00 7.44
'01 4.53
'02 8.89
'03 4.78
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return was 6.25% for the quarter ended March 31, 1995, and the
lowest quarterly return was -4.47% for the quarter ended March 31, 1994.
61
Pioneer Tax Free Income Fund -- Class A shares
Calendar Year Total Returns*
[THE FOLLOWING DATA WAS REPRESENTED BY A BAR CHART IN THE PRINTED DOCUMENT.]
'94 -6.38
'95 16.83
'96 3.57
'97 8.94
'98 6.20
'99 -4.29
'00 11.63
'01 4.13
'02 7.07
'03 5.80
* During the period shown in the bar chart, Pioneer Tax Free Income Fund's
highest quarterly return was 7.11% for the quarter ended March 31, 1995,
and the lowest quarterly return was -5.87% for the quarter ended March 31,
1994.
Safeco Intermediate-Term Municipal Bond Fund
Average Annual Total Returns as of December 31, 2003
- ---------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Municipal Bond Fund, Class A shares
- ---------------------------------------------------------------------------------------------------
Return Before Taxes 0.94% 4.12% 4.57%
- ---------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 0.85% 4.01% 4.51%
- ---------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and
Sale of Fund Shares(1) 1.95% 4.05% 4.49%
- ---------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Municipal Bond Fund, Class B shares
- ---------------------------------------------------------------------------------------------------
Return Before Taxes -0.11% 4.56% 4.87%
- ---------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Municipal Bond Fund, Class C shares
- ---------------------------------------------------------------------------------------------------
Return Before Taxes 2.89% 4.73% 4.87%
- ---------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Municipal Bond Fund, Investor Class shares
- ---------------------------------------------------------------------------------------------------
Return Before Taxes 4.78% 4.91% 4.96%
- ---------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 4.69% 4.79% 4.90%
- ---------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and
Sale of Fund Shares1 4.56% 4.75% 4.84%
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Lehman Brothers 7-Year Municipal Bond Index(2)
(reflects no deduction for fees, expenses or taxes) 5.45% 5.92% 5.86%
- ---------------------------------------------------------------------------------------------------
(1) 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 your situation and may
differ from those shown.
(2) The Lehman Brothers 7-Year Municipal Bond Index, an unmanaged index of
bonds rated BAA3 or above, issued as part of a deal of at least $50
million, having an amount of at least $5 million and maturing in six or
more years, is for reference only and does not mirror the Fund's
investments.
62
Pioneer Tax Free Income Fund -- Class A shares
Average Annual Total Returns as of December 31, 2003
- ---------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------
Pioneer Tax Free Income Fund, Class A shares
- ---------------------------------------------------------------------------------------------------
Return Before Taxes 1.01% 3.77% 4.66%
- ---------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 1.02% 3.66% 4.43%
- ---------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and
Sale of Fund Shares(1) 2.30% 3.83% 4.55%
- ---------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index(2)
(reflects no deduction for fees, expenses or taxes) 5.31% 5.83% 6.03%
- ---------------------------------------------------------------------------------------------------
(1) 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 your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(2) The Lehman Brothers Aggregate Bond Index, an unmanaged measure of
approximately 15,000 municipal bonds with a minimum credit rating of BBB,
and that were a part of at least a $50 million issuance made within the
past fives years and have a maturity of at least two years, is for
reference only and does not mirror the Fund's investments.
Pioneer Tax Free Income Fund's Investor Class shares will not be
outstanding prior to the closing of the Reorganization and consequently have no
performance history. However, the performance record of the Investor Class
would be modestly higher than the performance of Class A shares due to the
lower expenses applicable to the Investor Class shares.
The most recent portfolio manager's discussion of each Fund's performance
is attached as Exhibit D.
63
The Funds' Fees and Expenses
Shareholders of both 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 Fund. The expenses in the tables
appearing below are based on (i) for your Safeco Fund, the expenses of your
Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer Tax
Free Income Fund, the expenses of Pioneer Tax Free Income Fund for the period
ended December 31, 2003. Future expenses for all share classes may be greater
or less.
Safeco Safeco Safeco Safeco Pro Forma
Intermediate- Intermediate- Intermediate- Intermediate- Pioneer Tax
Term Muni Term Muni Term Muni Term Muni Free Income
Bond Fund Bond Fund Bond Fund Bond Fund Fund Investor
Shareholder transaction fees Class A Class B Class C Investor Class Class(9)
(paid directly from your investment) -------------- ------------- -------------- -------------- -------------
Maximum sales charge (load) when you buy shares as a
percentage of offering price ............................ 3.50%(6) None None None None(1)
Maximum deferred sales charge (load) as a percentage of
purchase price or the amount you receive when you sell
shares, whichever is less ............................... None 4.00%(7) 1.00%(8) None None
Redemption fees for shares held less than 30 days ........ 2.00% None None 2.00% N/A
Wire redemption fee ...................................... $ 204 $ 204 $ 204 $ 204 $ 10
Annual low balance fee ................................... $ 125 $ 125 $ 125 $ 125 N/A
Annual fund operating expenses (deducted from fund assets)
(as a % of average net assets)
Management fee ........................................... 0.50% 0.50% 0.50% 0.50% 0.49%
Distribution and service (12b-1) fee ..................... 0.25% 1.00% 1.00% None None
Other expenses ........................................... 6.95% 14.93% 19.32% 0.54% 0.20%
Total fund operating expenses ............................ 7.70% 16.43% 20.82% 1.04% 0.69%
Expense reimbursement/reduction .......................... 6.55%(2) 14.53%(2) 18.92%(2) 0.14%(2) None(3)
Net fund operating expenses .............................. 1.15% 1.90% 1.90% 0.90% 0.69%
- ----------
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer Tax Free Income Fund through the Reorganization. In addition,
shareholders of your Safeco Fund who own shares in their own name (i.e.,
not in the name of a broker or other intermediary) and maintain such
account as of the closing of the Reorganization may purchase Class A shares
of Pioneer Tax Free Income Fund or of any fund in the Pioneer family of
funds through such account in the future without paying this sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco
Intermediate-Term Municipal Bond Fund for certain operating expenses (but
not all of the operating expenses of the Fund) that exceeded the rate of
0.40% per annum of the Fund's average daily net assets. This arrangement
included all Fund operating expenses except management fees, Rule 12b-1
fees, brokerage commissions, interest, and extraordinary expenses. In 2003,
SAM began voluntarily reimbursing the Fund to the extent that its total
expenses exceeded the rate of 0.85% per annum of the Fund's average daily
net assets for Class A shares, 1.60% per annum for Class B and Class C
shares, and 0.70% per annum for Investor Class shares. The above table
reflects "contractual" expense reimbursements from SAM, if any, but does
not reflect "voluntary" expense reimbursements by SAM.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer Tax Free
Income Fund to 0.70% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once in year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions made in the first twelve months except with
respect to participant-directed redemptions from qualified retirement
plans.
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after five years from purchase, and the Class B shares
convert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
(9) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit
64
the expenses attributable to Investor Class shares, Pioneer is not required
to limit the expenses attributable to Class A shares. Class A shares do not
currently have an expense limitation and may be subject to higher total
operating expenses.
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect for five years for
Safeco Intermediate-Term Municipal Bond Fund and two years for Pioneer Tax Free
Income Fund and (f) and the Investor Class shares of Pioneer Tax Free Income
Fund convert to Class A shares after two years. The examples are for comparison
purposes only and are not a representation of either Fund's actual expenses or
returns, either past or future.
Example
Safeco Intermediate-Term Municipal Bond Fund
Class A shares
Year 1 .............. $ 463
Year 3 .............. $ 703
Year 5 .............. $ 961
Year 10 ............. $1,804
Class B shares With redemption Without redemption
Year 1 .............. $ 593 $ 193
Year 3 .............. $ 797 $ 597
Year 5 .............. $1,126 $1,026
Year 10 ............. $1,971 $1,971
Class C shares With redemption Without redemption
Year 1 .............. $ 293 $ 193
Year 3 .............. $ 597 $ 597
Year 5 .............. $1,026 $1,026
Year 10 ............. $2,477 $2,477
Investor Class shares
Year 1 .............. $ 92
Year 3 .............. $ 287
Year 5 .............. $ 498
Year 10 ............. $1,200
Pro Forma Pioneer Tax Free Income Fund
Investor Class shares
Year 1 .............. $ 71
Year 3 .............. $ 246
Year 5 .............. $ 460
Year 10 ............. $1,079
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco Intermediate-Term Municipal Bond Fund. The Trustees
considered the following matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Fund until August 2, 2004, was
acquired by Symetra. Symetra informed the Trustees that it did not intend to
continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the historical investment performance of Pioneer Tax Free Income
Safeco Fund and your Safeco Fund are comparable. For the one, five and ten year
periods ended June 30, 2004, Class A shares of Pioneer Tax Free Income Fund had
an average annual return of 1.55%, 4.84% and 5.53%, respectively, compared to
an average annual return of the Class A shares and Investor Class shares of
- -3.82% and -0.27% (one year), 4.13% and 4.94% (five years) and 4.84% and 5.25%
(ten years), respectively, during the same period. In addition, the Trustees
considered the track record of Pioneer in managing equity and fixed income
mutual funds.
65
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutional and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholder account
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market
fund that will be available to your Safeco Fund's shareholders through
exchanges. In addition, Pioneer offers shareholders additional options for
their accounts, including the ability to transact and exchange shares over the
telephone or online and the ability to access account values and transaction
history in all of the shareholder's direct accounts in the Pioneer Funds over
the telephone or online.
Fourth, Pioneer Tax Free Income Fund's lower operating expenses and
Pioneer's commitment until the second anniversary of the Reorganization to
limit the expenses (excluding extraordinary expenses) of the Investor Class of
Pioneer Tax Free Income Fund to 0.70% of average daily net assets. The
estimated expenses of the Investor Class shares of Pioneer Tax Free Income Fund
are below both the gross expenses and expenses net of expense reimbursement of
each class of shares of your Safeco Fund. Although you will experience higher
expenses once the Investor Class shares convert to Class A shares after two
years, your expenses will remain the same until the second anniversary of the
Reorganization.
Fifth, the substantially larger size of Pioneer Tax Free Income Fund
offers greater opportunity for diversification of the investment portfolio,
which should help to reduce risks.
Sixth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
Seventh, the Trustees also considered the differences in the investment
policies of the two Funds, particularly Pioneer Tax Free Income Fund's ability
to invest in securities with longer maturities than your Safeco Fund. While
this may result in Pioneer Tax Free Income Fund having greater volatility of
net asset value than your Safeco Fund, the Trustees believe that the factors in
favor of the Reorganization mitigate this risk.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco
Funds and the Pioneer Funds associated with the Reorganizations, including, but
not limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses
of any proxy solicitation firm retained in connection with the Reorganizations;
(3) the legal fees and expenses incurred by the Safeco Funds in connection with
the Reorganizations; and (4) the Trustee fees and out of pocket expenses
incurred as a result of the Reorganizations.
The Trustees considered that Pioneer and Symetra will benefit from the
Reorganization. See "Certain Agreements between Pioneer and Symetra."
The Board of Trustees of Pioneer Tax Free Income Fund also considered that
the Reorganization presents an excellent opportunity for the Pioneer Tax Free
Income Fund to acquire investment assets without the obligation to pay
commissions or other transaction costs that a fund normally incurs when
purchasing securities. This opportunity provides an economic benefit to Pioneer
Tax Free Income Fund and its shareholders.
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CAPITALIZATION
The following table sets forth the capitalization of each Fund, as of
September 30, 2004, and the pro forma capitalization of the combined Fund as of
September 30, 2004.
Safeco
Intermediate-Term Pro Forma
Municipal Pioneer Tax Free Pioneer Tax Free
Bond Fund Income Fund Income Fund
September 30, 2004 September 30, 2004 September 30, 2004
-------------------- -------------------- -------------------
Total Net Assets (in thousands) $11,586 $338,100 $349,686
Class A shares ................ $ 333 $305,872 $305,872
Class B shares ................ $ 155 $ 17,626 $ 17,626
Class C shares ................ $ 109 $ 12,109 $ 12,109
Investor Class shares ......... $10,988 N/A $ 11,586
Class Y shares ................ N/A $ 2,494 $ 2,494
Net Asset Value Per Share
Class A shares ................ $ 11.04 $ 11.56 $ 11.56
Class B shares ................ $ 11.03 $ 11.45 $ 11.45
Class C shares ................ $ 11.03 $ 11.38 $ 11.56
Investor Class shares ......... $ 11.04 N/A $ 11.56
Class Y shares ................ N/A $ 11.50 $ 11.50
Shares Outstanding
Class A shares ................ 30,165 26,462,402 26,462,402
Class B shares ................ 14,074 1,538,772 1,538,772
Class C shares ................ 9,874 1,063,730 1,063,730
Investor Class shares ......... 995,214 N/A 1,002,249
Class Y shares ................ N/A 216,854 216,854
It is impossible to predict how many shares of Pioneer Tax Free Income
Fund will actually be received and distributed by your Safeco Fund on the
Reorganization date. The table should not be relied upon to determine the
amount of Pioneer Tax Free Income Fund's shares that will actually be received
and distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund.
Similarly, the Board of Trustees of Pioneer Tax Free Income Fund, including its
Independent Trustees, approved the Reorganization. They also determined that
the Reorganization is in the best interests of Pioneer Tax Free Income Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
67
Safeco Intermediate-Term U.S. Government Fund and
Pioneer America Income Trust
PROPOSAL 1(e)
Approval of Agreement and Plan of Reorganization
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 Reorganization attached as EXHIBIT A-1 because they
contain details that are not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco Intermediate-Term U.S. Government Fund to the Pioneer
America Income Trust
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Safeco Intermediate-Term
U.S. Government Fund Pioneer America Income Trust
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Business A series of Safeco Taxable Bond Trust, a A diversified open-end management
diversified open-end management investment investment company registered under the
company organized as a Delaware statutory Investment Company Act and organized as a
trust. Massachusetts business trust.
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Net assets as of $67 million $204 million
June 30, 2004
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Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers (since 2003 and until Portfolio Manager:
August 2, 2004): Day-to-day management of the Fund's
Paul Stevenson portfolio is the responsibility of a team of
CFA, Vice President, SAM fixed income portfolio managers led by
Joined SAM in 1988 Kenneth J. Taubes.
Tim Hokari Mr. Taubes joined Pioneer as a senior vice
Assistant Vice President, SAM president in September 1998 and has been
Joined SAM in 2000 an investment professional since 1982.
Lesley Fox
Assistant Vice President, SAM
Joined SAM in 2000
Currently Pioneer is acting as investment
adviser to Safeco Intermediate-Term U.S.
Government Fund. The Portfolio Manager of
the Pioneer America Income Trust, as indicated
in the next column, currently manages your
Safeco Fund.
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Safeco Intermediate-Term
U.S. Government Fund Pioneer America Income Trust
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Investment objective Safeco Intermediate-Term U.S. Government Pioneer America Income Trust seeks as high
Fund seeks as high a level of current income a level of current income as is consistent with
as is consistent with the preservation of capital the preservation of capital and prudent
by investing in securities issued or guaranteed investment risk.
by the U.S. government or its agencies or
instrumentalities.
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Each Fund provides written notice to shareholders at least 60 days prior to any change to its
investment objective as described above.
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Primary investments Under normal circumstances, Safeco Pioneer America Income Trust invests
Intermediate-Term U.S. Government Fund exclusively in securities that are backed by the
invests at least 80% of its net assets (plus any full faith and credit of the U.S. government,
borrowings for investment purposes) in and repurchase agreements and "when-
securities issued or guaranteed by the U.S. issued" commitments with respect to these
government or its agencies and securities. These securities include:
instrumentalities.
o U.S. Treasury obligations, which differ only
U.S. government securities in which Safeco in their interest rates, maturities and times
Intermediate-Term U.S. Government Fund of issuance, including U.S. Treasury bills
invests include, but are not limited to: (maturities of one year or less), U.S.
Treasury notes (maturities of one to 10
o Mortgage-related securities backed by pools years), and U.S. Treasury bonds (generally
of mortgages, including modified pass- maturities greater than 10 years)
through certificates and collateralized o Obligations issued by or guaranteed as to
mortgage obligations issued by the principal and interest by the U.S. Treasury
Government National Mortgage Association and certain agencies and instrumentalities
(GNMA), the Federal Home Loan Mortgage of the U.S. government, such as
Corporation (FHLMC), and the Federal Government National Mortgage Association
National Mortgage Association (FNMA) (GNMA) certificates and Federal Housing
o U.S. Treasury bills, notes, bonds, and Administration (FHA) debentures, for which
interest or principal components of Separate the U.S. Treasury unconditionally guarantees
Trading Registered Interest and Principal payment of principal and interest
Securities (STRIPS)
o Other U.S. government securities guaranteed Pioneer America Income Trust's investments
by the full faith of the U.S. government but may have all types of interest repayment and
not direct obligations of the U.S. Treasury. reset terms, including fixed rate, adjustable
o Government-sponsored agency securities rate, zero coupon, contingent, deferred,
o Securities issued by the Tennessee Valley payment-in-kind and auction rate features.
Authority
Pioneer America Income Trust may invest in
The average dollar weighted maturity of Safeco securities of any maturity. Although the
Intermediate-Term U.S. Government Fund will average dollar weighted maturity of the Fund's
generally range between three and ten years, portfolio may vary significantly, it generally
although the maturity of individual securities will not exceed 20 years.
may be out of that range.
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69
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Safeco Intermediate-Term
U.S. Government Fund Pioneer America Income Trust
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Investment strategies The decision to buy or sell securities in Safeco Pioneer considers both broad economic
Intermediate-Term U.S. Government Fund factors and issuer-specific factors in selecting
generally falls into one or more of the a portfolio designed to achieve the Fund's
following categories: investment objective.
o To move in or out of various sectors based In assessing the appropriate maturity and
upon their relative values rating weighting of Pioneer America Income
o To reduce the Fund's investments in sectors Trust's portfolio, Pioneer considers a variety
viewed as overhauled, which increasing the of factors that are expected to influence
Fund's investment in undervalued sectors economic activity and interest rates. These
o To realign the overall maturity of duration of factors include fundamental economic
the Fund's portfolio indicators such as the rates of economic
o To raise cash to meet shareholder growth and inflation, Federal Reserve
redemptions monetary policy and the relative value of the
U.S. dollar compared to other currencies.
With each buy/sell decision, SAM also Once Pioneer determines the preferable
considered the effect the transaction may have portfolio characteristics, Pioneer selects
on the performance of Safeco Intermediate- individual securities based upon the terms of
Term U.S. Government Fund's portfolio as the securities (such as yields compared to
a whole. U.S. Treasuries or comparable issues), and
sector diversification.
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Other investments Safeco Intermediate-Term U.S. Government Pioneer America Income Trust may invest
Fund may invest in mortgage-backed or asset- in mortgage-backed securities issued by
backed securities. agencies or instrumentalities of the U.S.
government. These securities represent direct
Safeco Intermediate-Term U.S. Government or indirect participation in, or are collateralized
Fund may purchase "when-issued" or "delayed- by and payable from, mortgage loans secured
delivery" securities, and may purchase or sell by real estate.
securities on a "forward commitment" basis.
Pioneer America Income Trust may purchase
Safeco Intermediate-Term U.S. Government and sell securities, including GNMA
Fund may invest up to 20% of assets in certificates, on a when-issued or delayed
foreign securities. delivery basis. The Fund may engage in these
transactions when it believes they would result
in a favorable price and yield for the security
being purchased or sold.
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Temporary defensive Safeco Intermediate-Term U.S. Government Pioneer America Income Trust may invest all
strategies Fund may hold cash or invest in high-quality, or part of its assets in securities with
short-term securities issued by an agency or remaining maturities of less than one year,
instrumentality of the U.S. government, high- cash equivalents or may hold cash.
quality commercial paper, certificates of
deposit, shares of no-load, open-end money
market funds, or repurchase agreements.
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Diversification Each Fund is diversified for the purpose of the Investment Company Act, and each Fund is
subject to diversification requirements under the Code.
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Industry concentration Safeco Intermediate-Term U.S. Government Pioneer America Income Trust does not have
Fund may not invest more than 25% of its a policy against industry concentration.
assets in any one industry.
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70
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Safeco Intermediate-Term
U.S. Government Fund Pioneer America Income Trust
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Restricted and illiquid If immediately after and as a result of such Pioneer America Income Trust will not invest
securities action the value of the following securities, in more than 15% of its net assets in illiquid
the aggregate, would exceed 15% of Safeco and other securities that are not readily
Intermediate-Term U.S. Government Fund's net marketable. Repurchase agreements maturing
assets, the Fund will not (i) purchase securities in more than seven days will be included for
for which there is no readily available market, purposes of the foregoing limit. Securities
(ii) purchase time deposits maturing in more subject to restrictions on resale under the
than seven days, (iii) purchase over-the- 1933 Act are considered illiquid unless they
counter (OTC) options or hold assets set aside are eligible for resale pursuant to Rule 144A
to cover OTC options written by the Fund, (iv) or another exemption from the registration
enter into repurchase agreements maturing in requirements of the 1933 Act and are
more than seven days, or (v) invest in interests determined to be liquid by Pioneer.
in real estate investment trusts which are not
readily marketable or interests in real estate
limited partnerships which are not listed or
traded on the NASDAQ Stock Market.
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Borrowing Safeco Intermediate-Term U.S. Government Pioneer America Income Trust may not
Fund may borrow money (i) from banks or (ii) borrow money, except from banks to meet
by engaging in reverse repurchase agreements. redemptions in amounts not exceeding 331/3%
(taken at the lower of cost or current value) of
its total assets (including the amount
borrowed). The Fund does not intend to
borrow money during the coming year, and
will do so only as a temporary measure for
extraordinary purposes or to facilitate
redemptions. The Fund will not purchase
securities while any borrowings are
outstanding.
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Lending Safeco Intermediate-Term U.S. Government Pioneer America Income Trust may not make
Fund may lend securities to qualified loans, except through the purchase of
institutional investors with a value of up to securities, including repurchase agreements,
33% of the Fund's total assets. in accordance with its investment objective,
policies and limitations.
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Derivative instruments Safeco Intermediate-Term U.S. Government Pioneer America Income Trust may not
Fund may not purchase securities on margin. purchase securities on margin.
However, the Fund may (i) obtain short-term
credits as necessary to clear its purchases and
sales of securities, and (ii) make margin
deposits in connection with its use of financial
options and futures, forward and spot currency
contracts, swap transactions and other
financial contracts or derivative instruments.
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Other investment policies As described above, the Funds have substantially similar principal investment strategies and
and restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Fund's other investment policies and fundamental and non-
fundamental investment restrictions, see the SAI.
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71
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Safeco Intermediate-Term
U.S. Government Fund Pioneer America Income Trust
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Buying, Selling and Exchanging Shares
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Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer America
of the Fund are subject to a 3.50% front-end Income Trust you receive in the
sales charge. Reorganization will not be subject to any sales
charge. Moreover, if you own shares in your
Contingent deferred sales charge of up to 4% own name as of the closing of the
if you redeem Class B shares within five years Reorganization (i.e., not in the name of a
of purchase. broker or other intermediary) and maintain
your account, you may purchase Class A
Contingent deferred sales charge of 1% if you shares of Pioneer America Income Trust and
redeem Class C shares within one year of Class A shares of any fund in the Pioneer
purchase. family of funds through such account in the
future without paying any sales charge.
Purchases of Investor Class shares of the Fund
are not subject to a sales load. Except as described above, Class A shares of
Pioneer America Income Trust are subject to a
Safeco Intermediate-Term U.S. Government front-end sales charge of up to 4.50%.
Fund assesses a mandatory redemption fee of
2%, as a percentage of the amount redeemed
or exchanged, on Class A and Investor Class
shares held less than 30 days.
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72
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Safeco Intermediate-Term
U.S. Government Fund Pioneer America Income Trust
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Management and other fees Safeco Intermediate-Term U.S. Government Pioneer America Income Trust pays Pioneer a
Fund pays an advisory fee on a monthly basis management fee equal to 0.50% of the Fund's
at an annual rate as follows: average daily net assets.
$0-$250,000,000: 0.55 of 1%
$250,000,001-$750,000,000: 0.50 of 1% During its most recent fiscal year, Pioneer
$750,000,001-$1,250,000,000: 0.45 of 1% America Income Trust paid an advisory fee at
Over $1,250,000,000: 0.40 of 1% an average rate of 0.50% of average daily
net assets.
SAM serves as administrator and fund
accounting agent for Safeco Intermediate-Term In addition, the Fund reimburses Pioneer for
U.S. Government Fund. The Fund pays SAM an certain fund accounting and legal expenses
administrative services fee of 0.05% of the incurred on behalf of the Fund and pays a
Fund's average daily net assets up to the first separate shareholder servicing/transfer agency
$200,000,000 and 0.01% of its net assets fee to PIMSS, an affiliate of Pioneer.
thereafter, and an accounting fee of 0.04% of
the Fund's average daily net assets up to the For the fiscal year ended December 31, 2003,
first $200,000,000 and 0.01% of its net assets the Fund's total annual operating expenses for
thereafter. Class A shares were 1.12% of average daily
net assets. The Fund does not currently have
During its most recent fiscal year, Safeco an expense limitation for its Class A shares.
Intermediate-Term U.S. Government Fund paid
aggregate advisory and administration fees at Pioneer has agreed until the second
an average rate of 0.64%of average daily anniversary of the closing of the
net assets. Reorganization to limit the expenses
(excluding extraordinary expenses) of the
SAM had contractually agreed until April Investor Class to 0.74% of the average daily
30,2009, to pay certain Fund operating net assets attributable to the Investor Class.
expenses (but not all of the operating expenses
of the Fund) that exceeded the rate of 0.40% The Investor Class shares to be issued in the
per annum of the Fund's average daily net Reorganization will convert to Class A shares
assets. This arrangement included all Fund after two years. Class A shares will have
operating expenses except management fees, higher expenses per share than Investor
Rule 12b-1 fees, brokerage commissions, Class shares due to the Rule 12b-1 Plan. In
interest, and extraordinary expenses. addition, although Pioneer has agreed to limit
the expenses attributable to Investor Class
In 2003, SAM began voluntarily reimbursing shares, Pioneer is not required to limit the
the Fund to the extent that its total expenses expenses attributable to Class A shares.
exceeded the rate of 0.99% per annum of the
Fund's average daily net assets for Class A
shares, 1.74% per annum of Class B and Class
C shares, and 0.74% per annum for Investor
Class shares.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
A shares, after giving effect to the contractual
expense limitation were 1.20%, and without
giving effect to the expense limitation, were
1.31%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class A shares were 0.99%.
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73
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Safeco Intermediate-Term
U.S. Government Fund Pioneer America Income Trust
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Management and other fees For the fiscal year ended December 31, 2003,
(continued) the Fund's annual operating expenses for Class
B shares, after giving effect to the contractual
expense limitation were 1.95%, and without
giving effect to the expense limitation, were
2.10%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class B shares were 1.74%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
C shares, after giving effect to the contractual
expense limitation were 1.95%, and without
giving effect to the expense limitation, were
43.56%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class C shares were 1.74%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Investor Class shares were 0.94% per share.
After giving effect to the voluntary expense
reimbursement, the operating expenses for
Investor Class shares were 0.74%.
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Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class
(12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject
to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
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Buying shares You may buy shares of Safeco Intermediate- You may buy shares from any investment firm
Term U.S. Government Fund directly through that has a sales agreement with PFD, Pioneer
Safeco Securities, the Fund's principal America Income Trust's distributor. Existing
underwriter or through brokers, registered shareholders of Safeco Intermediate-Term U.S.
investment advisers, banks and other financial Government Fund who own shares in their
institutions that have entered into selling own name as of the closing date of the
agreements with the Fund's principal Reorganization and who maintain their
underwriter, as described in the Fund's accounts may buy shares of any fund in the
prospectus. Pioneer family of funds through such
accounts in the future without paying sales
Certain account transactions may be done charges.
by telephone.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
America Income Trust by telephone or online.
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74
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Safeco Intermediate-Term
U.S. Government Fund Pioneer America Income Trust
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Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer America
acquire through dividend reinvestment or other Income Trust without incurring any fee on the
Fund distributions or for Class A shares that exchange with the more than 62 other Pioneer
you have exchanged for Class A shares of Funds. Your exchange would be for Class A
another fund. shares, which would be subject to a Rule
12b-1 fee. An exchange generally is treated
Certain account transactions may be done as a sale and a new purchase of shares for
by telephone. federal income tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer America
Income Trust for shares of other Pioneer
Funds by telephone or online.
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Selling shares Each class of shares will be sold at net asset value per share next calculated after the Fund
receives your request in good order.
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You may sell your shares by contacting Safeco Normally, your investment firm will send
Intermediate-Term U.S. Government Fund your request to sell shares to PIMSS. You
directly in writing or by contacting a financial can also sell your shares by contacting the
intermediary as described in the Fund's Fund directly if your account is registered in
prospectus. your name.
If the account is established in the shareholder's
own name, shareholders may also redeem
shares of Pioneer America Income Trust by
telephone or online.
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Comparison of Principal Risks of Investing in the Funds
While each Fund has a similar investment objective, primary investment
policies and strategies, there are differences which affect the risk of each
Fund. The market value of fixed income securities tends to be more volatile the
greater the maturity of the security. Pioneer America Income Trust can invest
in securities of greater average maturity than your Safeco Fund and
consequently may have greater risk. However, your Safeco Fund may invest in
U.S. government securities that are not backed by the full faith and credit of
the U.S. Treasury, and consequently have an element of credit risk that is not
present in Pioneer America Income Trust. Generally, however, the Funds are
subject to the same principal risks. You could lose money on your investment in
either Fund or not make as much as if you invested elsewhere if:
o Interest rates go up, causing the value of debt securities in the
Fund's portfolio to decline
o During periods of declining interest rates, the issuer of a security
may exercise its option to prepay principal earlier than scheduled,
forcing the Fund to reinvest in lower yielding securities. This is
known as call or prepayment risk
o During periods of rising interest rates, the average life of certain
types of securities may be extended because of slower than expected
principal payments. This may lock in a below market interest rate,
increase the security's duration (the estimated period until the
security is paid in full) and reduce the value of the security. This
is known as extension risk
o Pioneer's judgment about the attractiveness, relative value or
potential appreciation of a particular sector, security or investment
strategy proves to be incorrect
To the extent the Fund invests significantly in mortgage-backed
securities, its exposure to prepayment and extension risks may be greater than
other investments in fixed income securities.
Although mortgage pools issued by U.S. agencies are guaranteed with
respect to payments of principal and interest, such guarantee does not apply to
losses resulting from declines in the market value of such securities.
75
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
Past Performance
Set forth below is performance information for each Fund. The bar charts
show how each Fund's total return (not including any deduction for sales
charges) has varied from year to year for each full calendar year. The tables
show average annual total return (before and after taxes) for each Fund over
time for each class of shares (including deductions for sales charges) compared
with a broad-based securities market index. The bar charts give an indication
of the risks of investing in each Fund, including the fact that you could incur
a loss and experience volatility of returns year to year. Past performance
before and after taxes does not indicate future results.
Safeco Intermediate-Term U.S. Government Fund -- Investor Class
Calendar Year Total Returns*
[THE FOLLOWING WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
'94 -4.27%
'95 15.48
'96 3.98
'97 8.97
'98 6.84
'99 0.16
'00 9.50
'01 7.29
'02 9.84
'03 1.40
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return was 4.79% for the quarter ended March 31, 1995, and the
lowest quarterly return was -3.58% for the quarter ended March 31, 1994.
76
Pioneer America Income Trust -- Class A shares
Calendar Year Total Returns*
[THE FOLLOWING WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
'94 -3.97%
'95 16.07
'96 2.29
'97 8.51
'98 7.78
'99 -2.52
'00 11.58
'01 5.92
'02 9.78
'03 1.47
* During the period shown in the bar chart, the Fund's highest quarterly return
was 4.72% for the quarter ended June 30, 1995, and the lowest quarterly
return was -3.14% for the quarter ended March 31, 1994.
Safeco Intermediate-Term U.S. Government Fund
Average Annual Total Returns as of December 31, 2003
- -----------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term U.S. Government Fund, Class A shares
- -----------------------------------------------------------------------------------------------------------
Return Before Taxes -2.41% 4.60% 5.30%
- -----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) -3.81% 2.47% 2.93%
- -----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) -1.57% 2.58% 2.99%
- -----------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term U.S. Government Fund, Class B shares
- -----------------------------------------------------------------------------------------------------------
Return Before Taxes -3.50% 4.62% 5.39%
- -----------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term U.S. Government Fund, Class C shares
- -----------------------------------------------------------------------------------------------------------
Return Before Taxes -0.49% 4.81% 5.40%
- -----------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term U.S. Government Fund, Investor Class shares
- -----------------------------------------------------------------------------------------------------------
Return Before Taxes 1.40% 5.56% 5.78%
- -----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions1 -0.14% 3.34% 3.36%
- -----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 0.91% 3.34% 3.39%
- -----------------------------------------------------------------------------------------------------------
Lehman Brothers Intermediate Government Index(2)
(reflects no deduction for fees, expenses or taxes) 2.30% 6.16% 6.33%
- -----------------------------------------------------------------------------------------------------------
Merrill Lynch U.S. Treasury/Agency Master Index(2)
(reflects no deduction for fees, expenses or taxes) 2.36% 6.22% 6.71%
- -----------------------------------------------------------------------------------------------------------
(1) 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 your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
77
(2) The Lehman Brothers Intermediate Government Index, an unmanaged index
comprised of U.S. Treasury and U .S. agency issues from its more
comprehensive U.S. Aggregate Index, excluding maturities below one year and
above 9.9 years, and the Merrill Lynch U.S. Treasury/Agency Master Index,
an unmanaged index of U.S. Treasury and U.S. agency securities, are for
reference only and do not mirror the Fund's investments.
Pioneer America Income Trust -- Class A shares
Average Annual Total Returns as of December 31, 2003
- -----------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------
Pioneer America Income Trust, Class A shares
- -----------------------------------------------------------------------------------------------------------
Return Before Taxes -3.06% 4.14% 5.04%
- -----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) -4.61% 2.05% 2.65%
- -----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) -2.00% 2.20% 2.75%
- -----------------------------------------------------------------------------------------------------------
Lehman Brothers Government Bond Index(2)
(reflects no deduction for fees, expenses or taxes) 2.36% 6.26% 6.72%
- -----------------------------------------------------------------------------------------------------------
Lehman Brothers Fixed Rate Mortgage-Backed Securities Index(2)
(reflects no deduction for fees, expenses or taxes) 3.05% 6.55% 6.89%
- -----------------------------------------------------------------------------------------------------------
(1) 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 your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(2) The Lehman Brothers Government Bond Index, an unmanaged measure of the
performance of U.S. Treasury debt, all publicly issued debt of U.S.
government agencies and quasi-federal corporations, and corporate debt
guaranteed by the U.S. government, and the Lehman Brothers Fixed Rate
Mortgage-Backed Securities Index, an unmanaged index including 15- and
30-year fixed rate securities backed by mortgage pools of the GNMA, FHLMC
and FNMA, are for reference only and do not mirror the Fund's investments.
Pioneer America Income Trust's Investor Class shares will not be
outstanding prior to the closing of the Reorganization and consequently have no
performance history. However, the performance record of the Investor Class
would be modestly higher than the performance of Class A shares due to the
lower expenses applicable to the Investor Class.
The most recent portfolio manager's discussion of each Fund's performance
is attached as Exhibit D.
78
The Funds' Fees and Expenses
Shareholders of both 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 Fund. The expenses in the tables
appearing below are based on (i) for your Safeco Fund, the expenses of your
Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer America
Income Trust, the expenses of Pioneer America Income Trust for the period ended
December 31, 2003. Future expenses for all share classes may be greater or
less.
Safeco
Safeco Safeco Safeco Intermediate- Pro Forma
Intermediate- Intermediate- Intermediate- Term U.S. Pioneer
Term U.S. Term U.S. Term U.S. Government America
Government Government Government Fund Income Trust
Fund Fund Fund Investor Investor
Shareholder transaction fees Class A Class B Class C Class Class(9)
(paid directly from your investment) --------------- -------------- ------------ ------------ -----------
Maximum sales charge (load) when you
buy shares as a percentage of
offering price ............................. 3.50%(6) None None None None(1)
Maximum deferred sales charge (load)
as a percentage of purchase price or
the amount you receive when you sell
shares, whichever is less .......................... None 4.00%(7) 1.00%(8) None None
Redemption fees for shares held less than 30 days ... 2.00% None None 2.00% N/A
Wire redemption fee ................................. $204 $20(4) $20(4) $20(4) $10
Annual low balance fee .............................. $125 $12(5) $12(5) $12(5) N/A
Annual fund operating expenses
(deducted from fund assets)
(as a % of average net assets)
Management fee ...................................... 0.55% 0.55% 0.55% 0.55% 0.50%
Distribution and service (12b-1) fee ................ 0.25% 1.00% 1.00% None None
Other expenses ...................................... 0.51% 0.55% 42.01% 0.39% 0.35%
Total fund operating expenses ....................... 1.31% 2.10% 43.56% 0.94% 0.85%
Expense reimbursement/reduction ..................... 0.11%(2) 0.15%(2) 41.61%(2) N/A 0.11%(3)
Net fund operating expenses ......................... 1.20% 1.95% 1.95% 0.94% 0.74%
- ----------
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer America Income Trust through the Reorganization. In addition,
shareholders of your Safeco Fund who own shares in their own name (i.e.,
not in the name of a broker or other intermediary) and maintain such
account as of the closing of the Reorganization may purchase Class A shares
of Pioneer America Income Trust or of any fund in the Pioneer family of
funds through such account in the future without paying this sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco
Intermediate-Term U.S. Government Bond Fund for certain Fund operating
expenses (but not all of the operating expenses of the Fund) that exceeded
the rate of 0.40% per annum of the Fund's average daily net assets. This
arrangement included all Fund operating expenses except management fees,
Rule 12b-1 fees, brokerage commissions, interest, and extraordinary
expenses. In 2003, SAM began voluntarily reimbursing the Fund to the extent
that its total expenses exceeded the rate of 0.99% per annum of the Fund's
average daily net assets for Class A shares, 1.74% per annum for Class B
and Class C shares, and 0.74% per annum for Investor Class shares. The
above table reflects "contractual" expense reimbursements from SAM, if any,
but does not reflect "voluntary" expense reimbursements by SAM.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer America
Income Trust to 0.74% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once in year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions made in the first twelve months except with
respect to participant-directed redemptions from qualified retirement
plans.
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after five years from purchase, and the Class B shares
convert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
79
(9) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares.
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect for five years for
Safeco Intermediate-Term U.S. Government Fund and two years for Pioneer America
Income Trust and (f) and the Investor Class shares of Pioneer America Income
Trust convert to Class A shares after two years. The examples are for
comparison purposes only and are not a representation of either Fund's actual
expenses or returns, either past or future.
Example
Safeco Intermediate-Term U.S. Government Fund
Class A shares
Year 1 .............. $468
Year 3 .............. $718
Year 5 .............. $987
Year 10 ............. $1,822
Class B shares With redemption Without redemption
Year 1 .............. $ 598 $ 198
Year 3 .............. $ 812 $ 612
Year 5 .............. $1,152 $1,052
Year 10 ............. $1,974 $1,974
Class C shares With redemption Without redemption
Year 1 .............. $ 298 $ 198
Year 3 .............. $ 612 $ 612
Year 5 .............. $1,052 $1,052
Year 10 ............. $2,399 $2,399
Investor Class shares
Year 1 .............. $96
Year 3 .............. $300
Year 5 .............. $520
Year 10 ............. $1,155
Pro Forma Pioneer America Income Trust
Investor Class shares
Year 1 .............. $76
Year 3 .............. $284
Year 5 .............. $558
Year 10 ............. $1,341
80
COMPARISON OF DELAWARE STATUTORY TRUST AND MASSACHUSETTS BUSINESS TRUST
Characteristics of Safeco Intermediate-Term U.S. Government Trust (a series of
a Delaware statutory trust)
o GOVERNANCE AND MANAGEMENT. Safeco Intermediate-Term U.S. Government Fund
is a series of the Safeco Taxable Bond Trust, a Delaware statutory trust.
The governing instrument of Safeco Taxable Bond Trust is its Trust
Instrument (the "Trust Instrument"). The Trustees of the Safeco Taxable
Bond Trust are responsible for the management and supervision of Safeco
Intermediate-Term U.S. Government Fund.
o SHARE CAPITAL AND CLASSES. The Trust Instrument of Safeco Taxable Bond
Trust permits the Trustees to issue an unlimited number of full and
fractional shares of beneficial interest of Safeco Intermediate-Term U.S.
Government Fund without par value. As of the date of this Proxy
Statement/Prospectus, the Trustees have authorized shares of Safeco
Intermediate-Term U.S. Government Fund and have authorized the issuance of
four classes of shares of Safeco Intermediate-Term U.S. Government Fund,
designated as Class A, Class B, Class C and Investor Class shares. The
shares of each class of Safeco Intermediate-Term U.S. Government Fund
represent an equal proportionate interest in the aggregate net assets
attributable to that class of the Fund. Holders of each class of shares
have certain exclusive voting rights on matters relating to their
respective distribution plans. The different classes of Safeco
Intermediate-Term U.S. Government Fund may bear different expenses
relating to the cost of holding shareholder meetings necessitated by the
exclusive voting rights of any class of shares. In the event of
liquidation, shareholders of each class are entitled to share pro rata in
the net assets of their Fund available for distribution to these
shareholders. Shares of each class entitle their holders to one vote per
share, are freely transferable and have no preemptive, subscription or
conversion rights.
o MEETINGS. Under Delaware law, Safeco Taxable Bond Trust is not required to
hold annual shareholder meetings for any Fund. Unless otherwise required
by the Investment Company Act, the Fund has no intention of holding annual
meetings of shareholders. Pursuant to the Trust Instrument, shareholders
have power to vote only on certain matters, including (a) the election and
removal of Trustees; (b) approval of any investment management agreement;
(c) termination of the Safeco Taxable Bond Trust; (d) certain amendments
to the Trust Instrument; and (e) such additional matters relating to the
Trust as may be required by law or as the Trustees may consider desirable.
o LIABILITY OF SHAREHOLDERS. Delaware law affords shareholders of a Delaware
statutory trust with the same protections afforded stockholders of a
Delaware corporation, which means shareholders are not generally subject
to liability for the debts or obligations of the statutory trust unless
the entity's trust instrument provides otherwise. The Trust Instrument of
the Safeco Taxable Bond Trust contains an express disclaimer of
shareholder liability for acts, obligations or affairs of Safeco
Intermediate-Term U.S. Government Fund and provides for indemnification
out of the Fund's assets for all losses and expenses of any shareholder
held personally liable for reason of being or having been a shareholder.
Characteristics of Pioneer America Income Trust (a Massachusetts business
trust)
o GOVERNANCE AND MANAGEMENT. Pioneer America Income Trust is a Massachusetts
business trust. The governing instrument of Pioneer America Income Trust
is its Agreement and Declaration of Trust ("Declaration of Trust"). The
business of Pioneer America Income Trust is managed under the direction of
its Board of Trustees. The Trustees, in addition to viewing the actions of
the Pioneer America Income Trust's investment adviser, decide upon matters
of general policy at their regular meetings. The officers of Pioneer
America Income Trust supervise its business operations.
o SHARES AND CLASSES. Pioneer America Income Trust is authorized to issue
shares of beneficial interest and to increase or decrease the aggregate
number of shares of beneficial interest or the number of shares of any
class that the Fund has authority to issue. Each share is entitled to one
vote on all questions relating to the Fund, and each share is entitled to
participate equally in dividends and capital gains distributions and in
the residual assets of the respective class in the event of liquidation.
o MEETINGS. Under Massachusetts law, Pioneer America Income Trust, as a
registered open-end investment company, is not required to hold annual
shareholder meetings. Unless otherwise required by the Investment Company
Act, the Pioneer America Income Trust has no intention of holding annual
meetings of shareholders. Pursuant to the Declaration of Trust, special
meetings of shareholders may be called at any time by the Chairman,
President or by the Board of Trustees or by the secretary upon the written
request of shareholders entitled to cast at least 25% of the votes
entitled to be cast at such meeting, provided that such request shall
state the purposes of such meeting and the matters proposed to be acted
on.
o LIABILITY OF SHAREHOLDERS. Shareholders of a Massachusetts business trust
may, under certain circumstances, be held personally liable for the
obligations of the trust. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the
Pioneer America Income Trust or any series of the Pioneer America Income
Trust and provides
81
that notice of such disclaimer may be given in each agreement, obligation
or instrument entered into or executed by the Pioneer America Income Trust
or its Trustees. Moreover, the Declaration of Trust provides for the
indemnification out of Pioneer America Income Trust property of any
shareholders held personally liable for any obligations of the Pioneer
America Income Trust or any series of the Pioneer America Income Trust.
The Declaration of Trust also provides that the Pioneer America Income
Trust shall, upon request, assume the defense of any claim made against
any shareholder for any act or obligation of the Pioneer America Income
Trust and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss beyond his or her investment because of
shareholder liability would be limited to circumstances in which the fund
itself will be unable to meet its obligations. In light of the nature of
the Pioneer America Income Trust's business and the nature and amount of
its assets, the possibility of the Pioneer America Income Trust's
liabilities exceeding its assets, and therefore a shareholder's risk of
personal liability, is remote.
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco Intermediate-Term U.S. Government Fund. The Trustees
considered the following matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Safeco Fund until August 2,
2004, was acquired by Symetra. Symetra informed the Trustees that it did not
intend to continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the performance of Pioneer America Income Trust is generally
consistent with the historical investment performance of your Safeco Fund. For
the one, five and ten year periods ended June 30, 2004, Class A shares of
Pioneer America Income Trust had an average annual return of -0.37%, 5.64%, and
5.97%, respectively, compared to an average annual return of the Class A shares
and Investor Class shares of -4.56% and -0.73% (one year), 4.73% and 5.73% (five
years) and 5.79% and 6.29% (ten years), respectively, during the same period.
In addition, the Trustees considered the track record of Pioneer in managing
equity and fixed income mutual funds.
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutional and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholder account
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market
fund that will be available to your Safeco Fund's shareholders through
exchanges. In addition, Pioneer offers shareholders additional options for
their accounts, including the ability to transact and exchange shares over the
telephone or online and the ability to access account values and transaction
history in all of the shareholder's direct accounts in the Pioneer Funds over
the telephone or online.
Fourth, Pioneer America Income Trust's lower operating expenses and
Pioneer's commitment until the second anniversary of the Reorganization to
limit the expenses (excluding extraordinary expenses) of the Investor Class of
Pioneer America Income Trust to 0.74% of average daily net assets. The
estimated expenses of the Investor Class of Pioneer America Income Trust are
below both the gross expenses and expenses net of contractual expense
reimbursement of the end class of shares of your Safeco Fund. Although you will
experience higher expenses once the Investor Class shares convert to Class A
shares after two years, based upon the Class A expense ratio of Pioneer America
Income Trust for the most recent fiscal year, Pioneer America Income Trust's
expenses were lower than the gross and net expense ratio of each class of
shares of your Safeco Fund. While there are some differences between the
policies of the two Funds, the Trustees believe that the two Funds represent
substantially equivalent investments.
Fifth, the substantially larger size of Pioneer America Income Trust
offers greater opportunity for diversification of the investment portfolio,
which should help to reduce risks.
Sixth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
Seventh, the Investor Class shares of Pioneer America Income Trust
received in the Reorganization will provide Safeco Intermediate-Term U.S.
Government Fund shareholders with exposure to substantially the same investment
product as they currently have.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco
Funds and the Pioneer Funds associated with the Reorganizations, including, but
not limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the
82
Reorganizations; (2) the fees and expenses of any proxy solicitation firm
retained in connection with the Reorganizations; (3) the legal fees and
expenses incurred by the Safeco Funds in connection with the Reorganizations;
and (4) the Trustee fees and out of pocket expenses incurred as a result of the
Reorganizations.
The Trustees considered that Pioneer and Symetra will benefit from the
Reorganization. See "Certain Agreements between Pioneer and Symetra."
The Board of Trustees of Pioneer America Income Trust also considered that
the Reorganization presents an excellent opportunity for the Pioneer America
Income Trust to acquire investment assets without the obligation to pay
commissions or other transaction costs that a fund normally incurs when
purchasing securities. This opportunity provides an economic benefit to Pioneer
America Income Trust and its shareholders.
CAPITALIZATION
The following table sets forth the capitalization of each Fund, and the pro
forma combined Fund as of June 30, 2004.
Safeco
Intermediate- Pro Forma
Term U.S. Pioneer America Pioneer America
Government Fund Income Trust Income Trust
June 30, 2004 June 30, 2004 June 30, 2004
----------------- ----------------- ----------------
Total Net Assets (in thousands) $ 66,742 $ 204,736 $ 271,478
Class A shares ............... $ 5,109 $ 129,465 $ 129,465
Class B shares ............... $ 2,338 $ 44,300 $ 44,300
Class C shares ............... $ 97 $ 30,487 $ 30,487
Investor Class shares ........ $ 59,198 N/A $ 66,742
Class R shares ............... N/A $ 484 $ 484
Net Asset Value Per Share
Class A shares ............... $ 9.41 $ 9.72 $ 9.72
Class B shares ............... $ 9.42 $ 9.66 $ 9.66
Class C shares ............... $ 9.42 $ 9.69 $ 9.69
Investor Class shares ........ $ 9.41 N/A $ 9.72
Class R shares ............... N/A $ 9.82 $ 9.82
Shares Outstanding
Class A shares ............... 542,858 13,322,479 13,322,479
Class B shares ............... 248,086 4,585,782 4,585,782
Class C shares ............... 10,304 3,147,571 3,147,571
Investor Class shares ........ 6,290,727 N/A 6,866,461
Class R shares ............... N/A 49,339 49,339
It is impossible to predict how many shares of Pioneer America Income
Trust will actually be received and distributed by your Safeco Fund on the
Reorganization date. The table should not be relied upon to determine the
amount of Pioneer America Income Trust's shares that will actually be received
and distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund.
Similarly, the Board of Trustees of Pioneer America Income Trust, including its
Independent Trustees, approved the Reorganization. They also determined that
the Reorganization is in the best interests of Pioneer America Income Trust.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
83
Safeco Money Market Fund and
Pioneer Cash Reserves Fund
PROPOSAL 1(f)
Approval of Agreement and Plan of Reorganization
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 Reorganization attached as EXHIBIT A-1 because they
contain details that are not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco Money Market Fund to the Pioneer Cash Reserves Fund
- ----------------------------------------------------------------------------------------------------------------------------
Safeco Money Market Fund Pioneer Cash Reserves Fund
- ----------------------------------------------------------------------------------------------------------------------------
Business A series of Safeco Money Market Trust, a A series of Pioneer Money Market Trust, a
diversified open-end management investment diversified open-end management investment
company organized as a Delaware statutory company registered under the Investment
trust. Company Act and organized as a Delaware
statutory trust.
- ----------------------------------------------------------------------------------------------------------------------------
Net assets as of $286 million $510 million
June 30, 2004
- ----------------------------------------------------------------------------------------------------------------------------
Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers Portfolio Manager:
Lesley Fox (since 2000 and until August 2, Day-to-day management of the Fund's
2004) Assistant Vice President, SAM portfolio is the responsibility of a team of
Joined SAM in 2000 fixed income portfolio managers led by
Kenneth J. Taubes.
Cathleen Beauchamp (since 2003 until
July 31, 2004) Mr. Taubes, a senior vice president, joined
CFA Pioneer in 1998 and has been an investment
professional since 1982.
Currently Pioneer is acting as investment
adviser to the Safeco Money Market Fund. The
Portfolio Manager of the Pioneer Cash
Reserves Fund, as indicated in the next
column, currently manages your Safeco Fund.
- ----------------------------------------------------------------------------------------------------------------------------
84
- -----------------------------------------------------------------------------------------------------------------------------------
Safeco Money Market Fund Pioneer Cash Reserves Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Investment objective Safeco Money Market Fund seeks as high a Safeco Money Market Fund seeks high current
level of current income as is consistent with income, preservation of capital and liquidity
the preservation of capital and liquidity through through investments in high-quality short-term
investment in high-quality money market securities.
instruments maturing in 13 months or less.
The investment objective of the Fund may not
Safeco Money Market Fund provides written be changed without the affirmative vote of the
notice to shareholders at least 60 days prior to holders of a "majority of the outstanding
any change to its investment objective as voting securities" (as defined in the
described above. Investment Company Act) of the Fund.
- -----------------------------------------------------------------------------------------------------------------------------------
Primary investments To achieve its investment objective, Safeco Safeco Money Market Fund seeks to maintain
Money Market Fund will purchase only high- a constant net asset value of $1.00 per share
quality securities with remaining maturities of by investing in high-quality, U.S. dollar
397 days or less. The Fund will maintain a denominated money market securities,
dollar-weighted average portfolio maturity of including those issued by:
no more than 90 days.
o U.S. and foreign banks
o U.S. and foreign corporate issuers
o The U.S. government and its agencies and
instrumentalities
o Foreign governments
o Multinational organizations such as the
World Bank
Safeco Money Market Fund invests exclusively
in securities with a maximum remaining
maturity of 397 days and maintains a dollar-
weighted average portfolio maturity of 90 days
or less.
Safeco Money Market Fund's investments may
have fixed, floating or variable interest rates.
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Investment strategies When evaluating a security to buy, SAM In selecting Safeco Money Market Fund's
historically considered, among other things: portfolio, Pioneer complies with the rating,
maturity and diversification requirements
o Yield applicable to money market funds. Within
o Maturity those factors, Pioneer's assessment of broad
o Issuer credit quality economic factors that are expected to affect
o Relative value compared with other economic activity and interest rates influence
alternatives its securities selection.
Safeco Money Market Fund may sell a
security if:
o The adviser becomes concerned about the
issuer's creditworthiness
o A more attractive alternative is available
o Cash is needed to meet shareholder
redemptions
After evaluating a bond, SAM compared the
bond to other available bonds, which may have
different features, and would buy the bond if it
appeared to offer the best relative value.
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85
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Safeco Money Market Fund Pioneer Cash Reserves Fund
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Other investments Safeco Money Market Fund will limit its Safeco Money Market Fund may invest
investment in municipal obligations the interest more than 25% of its total assets in U.S.
on which is payable from the revenues of government securities and obligations of U.S.
similar types of projects to less than 25% of banks. The Fund may invest in any money
the Fund's total assets. As a matter of market instrument that is a permissible
operating policy, "similar types of projects" investment for a money market fun under the
may include sports, convention or trade show rules of the SEC, including commercial paper,
facilities; airports or mass transportation; certificates of deposit, time deposits, bankers'
sewage or solid waste disposal facilities; or air acceptances, mortgage-backed and asset-
and water pollution control projects. backed securities, repurchase agreements,
municipal obligations and other short-term
Safeco Money Market Fund will limit its debt securities.
investment in securities whose issuers are
located in the same state to less than 25% of Safeco Money Market Fund invests in U.S.
the Fund's total assets. government obligations and money market
securities rated in one of the two highest
Safeco Money Market Fund may invest up to rating categories for short-term debt by a
25% of its total assets in the "first tier nationally recognized statistical rating
securities" of a single issuer for up to three organization or, if unrated, determined to be
business days after purchase. First tier of equivalent credit quality by Pioneer.
securities are securities (1) rated in the highest
short-term category by two nationally
recognized statistical rating organizations
(NRSROs); (2) rated in the highest short-term
rating category by a single NRSRO if only that
NRSRO has assigned the securities a short-
term rating; or (3) unrated, but determined by
SAM to be of comparable quality.
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Temporary defensive Safeco Money Market Fund may hold cash or Safeco Money Market Fund may invest all or
strategies invest in high-quality, short-term securities part of its assets in securities with remaining
issued by an agency or instrumentality of the maturities of less than one year, cash
U.S. government, high-quality commercial equivalents or may hold cash.
paper, certificates of deposit, shares of no-
load, open-end money market funds, or
repurchase agreements as a temporary
defensive measure when market conditions
so warrant.
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Diversification Each Fund is diversified for the purpose of the Investment Company Act, and each Fund is
subject to diversification requirements under the Code.
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86
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Safeco Money Market Fund Pioneer Cash Reserves Fund
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Industry concentration Safeco Money Market Fund will not make Safeco Money Market Fund will not
investments that will result in the concentration concentrate its assets in the securities of
(as defined in the Investment Company Act, issuers in any one industry except with
any rule or order there under, or SEC staff respect to investments in obligations of (a)
interpretation thereof) of its investments in the the U.S. government, its agencies, authorities
securities of issuers primarily engaged in the or instrumentalities and (b) domestic banks,
same industry, provided that this restriction purchase any security if, as a result (i) more
does not limit the Fund from investing in than 5% of the assets of the Fund would be in
obligations issued or guaranteed by the U.S. the securities of any one issuer, or (ii) more
government, its agencies or instrumentalities, than 25% of its assets would be in a
or certain bank instruments issued by particular industry.
domestic banks.
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Restricted and illiquid If immediately after and as a result of such Safeco Money Market Fund will not invest
securities action the value of the following securities, in more than 10% of its net assets in illiquid
the aggregate, would exceed 10% of the Fund's and other securities that are not readily
net assets, the Fund will not (i) purchase marketable. Repurchase agreements maturing
securities for which there is no readily in more than seven days will be included for
available market, (ii) purchase time deposits purposes of the foregoing limit. Securities
maturing in more than seven days, (iii) subject to restrictions on resale under the
purchase over-the-counter (OTC) options or 1933 Act are considered illiquid unless they
hold assets set aside to cover OTC options are eligible for resale pursuant to Rule 144A
written by the Fund, (iv) enter into repurchase or another exemption from the registration
agreements maturing in more than seven days, requirements of the 1933 Act and are
or (v) invest in interests in real estate determined to be liquid by Pioneer.
investment trusts which are not readily
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
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Borrowing Safeco Money Market Fund may borrow money Safeco Money Market Fund may not borrow
(i) from banks or (ii) by engaging in reverse money, except from banks for extraordinary
repurchase agreements. purposes or to meet redemptions in amounts
not exceeding 331/3% of its total assets
(including the amount borrowed). The Fund
does not intend to borrow money during the
coming year.
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Lending Safeco Money Market Fund may lend securities Safeco Money Market Fund may not make
to qualified institutional investors with a value loans to any person, except by (a) the
of up to 33% of the Fund's total assets. purchase of a debt obligation in which the
Fund is permitted to invest and (b) engaging
in repurchase agreements.
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Derivative instruments Safeco Money Market Fund may not purchase Safeco Money Market Fund may not purchase
securities on margin. However, the Fund may securities on margin.
(i) obtain short-term credits as necessary to
clear its purchases and sales of securities, and
(ii) make margin deposits in connection with
its use of financial options and futures,
forward and spot currency contracts, swap
transactions and other financial contracts or
derivative instruments.
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87
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Safeco Money Market Fund Pioneer Cash Reserves Fund
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Other investment policies and As described above, the Funds have substantially similar principal investment strategies and
restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Fund's other investment policies and fundamental and non-
fundamental investment restrictions, see the SAI.
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Buying, Selling and Exchanging Shares
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Sales charges Purchases of Class A shares of Safeco Money The Investor Class shares of Pioneer Cash
Market Fund are not subject to a sales load. Reserves Fund you receive in the
Reorganization will not be subject to any sales
A contingent deferred sales charge may apply charge. Moreover, if you own shares in your
if you redeem Class B shares that were own name as of the closing of the
purchased by exchange from another fund. Reorganization (i.e., not in the name of a
broker or other intermediary) and maintain
A contingent deferred sales charge of 1% if your account, you may purchase Class A
you redeem Class C shares within one year of shares of Pioneer Cash Reserves Fund and
purchase, and the shares were purchased by Class A shares of any fund in the Pioneer
exchange from another fund. family of funds through such account in the
future without paying any sales charge.
Purchases of Investor Class shares of the Fund
are not subject to a sales load. Except as described above, Class A shares of
Pioneer Cash Reserves Fund are not subject
to a front-end sales charge.
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88
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Safeco Money Market Fund Pioneer Cash Reserves Fund
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Management and other fees Safeco Money Market Fund pays an advisory Pioneer Cash Reserves Fund pays Pioneer a
fee on a monthly basis at an annual rate as management fee equal to 0.40% of the Fund's
follows: average daily net assets.
$0-$250,000,000: 0.50 of 1% During its most recent fiscal year, Pioneer
$250,000,001-$750,000,000: 0.45 of 1% Cash Reserves Fund paid an advisory fee at
$750,000,001-$1,250,000,000: 0.40 of 1% an average rate of 0.40% of average daily
Over $1,250,000,000: 0.35 of 1% net assets.
SAM serves as administrator and fund In addition, the Fund reimburses Pioneer for
accounting agent for Safeco Money Market certain fund accounting and legal expenses
Fund. The Fund pays SAM an administrative incurred on behalf of the Fund and pays a
services fee of 0.05% of the Fund's average separate shareholder servicing/transfer agency
daily net assets up to the first $200,000,000 fee to PIMSS, an affiliate of Pioneer.
and 0.01% of its net assets thereafter, and an
accounting fee of 0.04% of the Fund's average For the fiscal year ended December 31, 2003,
daily net assets up to the first $200,000,000 the Fund's total annual operating expenses for
and 0.01% of its net assets thereafter. Class A shares were 1.06% of average daily
net assets. The Fund does not currently have
During its most recent fiscal year, Safeco an expense limitation for its Class A shares.
Money Market Fund paid aggregate advisory
and administration fees at an average rate of Pioneer has agreed until the second
0.53% of average daily net assets. anniversary of the closing of the
Reorganization to limit the expenses
SAM had contractually agreed until April 30, (excluding extraordinary expenses) of the
2009, to pay certain Fund operating expenses Investor Class to 0.71% of the average daily
(but not all of the operating expenses of the net assets attributable to the Investor Class.
Fund) that exceeded the rate of 0.30% per
annum of the Fund's average daily net assets. The Investor Class shares to be issued in the
This arrangement included all Fund operating Reorganization will convert to Class A shares
expenses except management fees, Rule 12b-1 after two years. Class A shares will have
fees, brokerage commissions, interest, and higher expenses per share than Investor Class
extraordinary expenses. shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit
For the fiscal year ended December 31, 2003, the expenses attributable to Investor Class
the Fund's annual operating expenses for Class shares, Pioneer is not required to limit the
A shares, after giving effect to the expense expenses attributable to Class A shares.
limitation were 0.78%, and without giving
effect to the expense limitation, were 0.98%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
B shares, after giving effect to the expense
limitation were 0.78%, and without giving
effect to the expense limitation, were 1.17%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
C shares, after giving effect to the expense
limitation were 0.78%, and without giving
effect to the expense limitation, were 1.01%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Investor Class shares were 0.67%.
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89
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Safeco Money Market Fund Pioneer Cash Reserves Fund
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Distribution and service Class A shares of Safeco Money Market Fund Class A shares of Pioneer Cash Reserves Fund
(12b-1) fee are not currently subject to a Rule 12b-1 fee. are subject to a Rule 12b-1 fee equal to
0.15% annually of average daily net assets.
--------------------------------------------------------------------------------------------------------
Investor Class shares of the Pioneer Fund are not subject to a Rule 12b-1 fee. Pioneer Investor
Class shares will convert into Class A shares after two years.
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Buying shares You may buy shares of the Fund directly You may buy shares from any investment firm
through Safeco Securities or through brokers, that has a sales agreement with PFD, Pioneer
registered investment advisers, banks and Cash Reserves Fund's distributor. Existing
other financial institutions that have entered shareholders of Safeco Money Market Fund
into selling agreements with the Fund's who own shares in their own name as of the
principal underwriter, as described in the closing date of the Reorganization and who
Fund's prospectus. maintain their accounts may buy shares of
any fund in the Pioneer family of funds
Certain account transactions may be done by through such accounts in the future without
telephone. paying sales charges.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
Cash Reserves Fund by telephone or online.
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Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer Cash
acquire through dividend reinvestment or other Reserves Fund without incurring any fee on
Fund distributions or for Class A shares that the exchange with the more than 62 other
you have exchanged for Class A shares of Pioneer Funds. Your exchange would be for
another fund. Class A shares, which is subject to Rule
12b-1 fees. An exchange generally is treated
Certain account transactions may be done by as a sale and a new purchase of shares for
telephone. federal income tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer Cash
Reserves Fund for shares of other Pioneer
Funds by telephone or online.
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Selling shares Each class of shares will be sold at net asset value per share next calculated after the Fund
receives your request in good order.
--------------------------------------------------------------------------------------------------------
You may sell your shares by contacting Safeco Normally, your investment firm will send your
Money Market Fund directly in writing or by request to sell shares to PIMSS. You can
contacting a financial intermediary as described also sell your shares by contacting the Fund
in the Fund's prospectus. directly if your account is registered in
your name.
If the account is established in the
shareholder's own name, shareholders may
also redeem shares of Pioneer Cash Reserves
Fund by telephone or online. After the
Reorganization, Investor Class shares will not
be entitled to check writing privileges, and you
should no longer write checks issued by your
Safeco Fund.
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90
Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks.
Even though the Funds seek to maintain a $1 share price, you could lose money
on your investment or the Fund could fail to generate high current income if:
o Interest rates go up, causing the value of the Fund's investments to
decline
o The issuer of a security owned by the Fund defaults on its obligation
to pay principal and/or interest or has its credit rating downgraded
o The investment adviser's judgment about the credit quality,
attractiveness or relative value of a particular security proves to be
incorrect
Investing in non-U.S. issuers may involve unique risks compared to
investing in securities of U.S. issuers. These risks may include:
o Inadequate financial information
o Smaller, less liquid and more volatile markets
o Political and economic upheavals
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
Past Performance
Set forth below is performance information for each Fund. The bar charts
show how each Fund's total return (not including any deduction for sales
charges) has varied from year to year for each full calendar year. The tables
show average annual total return for each Fund over time for each class of
shares (including deductions for sales charges) compared with a broad-based
securities market index. The bar charts give an indication of the risks of
investing in each Fund, including the fact that you could incur a loss and
experience volatility of returns year to year. Past performance before and
after taxes does not indicate future results.
Safeco Money Market Fund -- Investor Class
Calendar Year Total Returns*
[THE FOLLOWING WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
'94 3.53%
'95 5.28
'96 4.75
'97 4.93
'98 5.08
'99 4.65
'00 5.90
'01 3.75
'02 1.32
'03 0.65
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return was 1.52% for the quarter ended December 31, 2000, and the
lowest quarterly return was 0.13% for the quarter ended September 30, 2003.
91
Pioneer Cash Reserves Fund -- Class A shares
Calendar Year Total Returns*
[THE FOLLOWING WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
'94 3.57%
'95 5.17
'96 4.65
'97 4.78
'98 4.84
'99 4.23
'00 5.53
'01 3.29
'02 1.15
'03 0.26
* During the period shown in the bar chart, Pioneer Cash Reserves Fund's
highest quarterly return was 1.45% for the quarter ended December 31, 2000,
and the lowest quarterly return was 0.01% for the quarter ended December
31, 2003.
Safeco Money Market Fund
Average Annual Total Returns as of December 31, 2003
- ----------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- ----------------------------------------------------------------------------------------
Safeco Money Market Fund, Class A shares 0.55% 3.20% 3.95%
- ----------------------------------------------------------------------------------------
Safeco Money Market Fund, Class B shares 0.55% 3.21% 3.93%
- ----------------------------------------------------------------------------------------
Safeco Money Market Fund, Class C shares 0.55% 3.20% 3.93%
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Safeco Money Market Fund, Investor Class shares 0.65% 3.24% 3.97%
- ----------------------------------------------------------------------------------------
Pioneer Cash Reserves Fund -- Class A shares
Average Annual Total Returns as of December 31, 2003
- ----------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- ----------------------------------------------------------------------------------------
Pioneer Cash Reserves Fund, Class A shares 0.26% 2.88% 3.74%
- ----------------------------------------------------------------------------------------
90-day U.S. Treasury Bill
(reflects no deduction for taxes) 1.03% 3.34% 4.18%
- ----------------------------------------------------------------------------------------
Pioneer Cash Reserves Fund's Investor Class shares will not be outstanding
prior to the closing of the Reorganization and consequently have no performance
history. However, the performance record of the Investor Class would be
modestly higher than the performance of Class A, B and C shares due to the
lower expenses applicable to the Investor Class.
The most recent portfolio manager's discussion of each Fund's performance
is attached as Exhibit D.
92
The Funds' Fees and Expenses
Shareholders of both 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 Fund. The expenses in the tables
appearing below are based on (i) for your Safeco Fund, the expenses of your
Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer Cash
Reserves Fund, the expenses of Pioneer Cash Reserves Fund for the period ended
December 31, 2003. Future expenses for all share classes may be greater or
less.
Pro Forma
Safeco Money Safeco Money Safeco Money Safeco Money Pioneer Cash
Market Fund Market Fund Market Fund Market Fund Reserves Fund
Shareowner transaction fees Class A Class B Class C Investor Class Investor Class(8)
(paid directly from your investment) ------------ ------------ ------------ -------------- ---------------
Maximum sales charge (load) when you buy shares as a
percentage of offering price ......................... None None None None None(1)
Maximum deferred sales charge (load) as a percentage of
purchase price or the amount you receive when you sell
shares, whichever is less ............................ None None(6) None(7) None None
Redemption fees for shares held less than 30 days ..... None None None None N/A
Wire redemption fee ................................... $ 20(4) $ 20(4) $ 20(4) $ 20(4) $ 10
Annual low balance fee ................................ $ 12(5) $ 12(5) $ 12(5) $ 125 N/A
Annual fund operating expenses (deducted from fund
assets) (as a % of average net assets)
Management fee ........................................ 0.48% 0.48% 0.48% 0.48% 0.40%
Distribution and service (12b-1) fee .................. None None None None None
Other expenses ........................................ 0.50% 0.69% 0.53% 0.19% 0.41%
Total fund operating expenses ......................... 0.98% 1.17% 1.01% 0.67% 0.81%
Expense reimbursement/reduction ....................... 0.20%(2) 0.39%(2) 0.23%(2) N/A 0.10%(3)
Net fund operating expenses ........................... 0.78% 0.78% 0.78% 0.67% 0.71%
- ----------
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer Cash Reserves Fund through the Reorganization. In addition,
shareholders of your Safeco Fund who own shares in their own name (i.e.,
not in the name of a broker or other intermediary) and maintain such
account as of the closing of the Reorganization may purchase Class A shares
of Pioneer Cash Reserves Fund or of any fund in the Pioneer family of funds
through such account in the future without paying this sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco Money
Market Fund for certain Fund operating expenses (but not all of the
operating expenses of the Fund) that exceeded the rate of 0.30% per annum
of the Fund's average daily net assets. This arrangement included all Fund
operating expenses except management fees, Rule 12b-1 fees, brokerage
commissions, interest, and extraordinary expenses.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer Cash
Reserves Fund to 0.71% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once in year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) A contingent deferred sales charge may apply if you redeem Class B shares
of your Safeco Fund that were purchased by exchange from another fund.
(7) A 1.00% contingent deferred sales charge may apply if, within the first
twelve months of the initial purchase, you redeem Class C shares that were
purchased by exchange from another fund
(8) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares. Class A shares do not currently have an
expense limitation and may be subject to higher total operating expenses.
93
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect for five years for
Safeco Money Market Fund and two years for Pioneer Cash Reserves Fund and (f)
and the Investor Class shares of Pioneer Cash Reserves Fund convert to Class A
shares after two years. The examples are for comparison purposes only and are
not a representation of either Fund's actual expenses or returns, either past
or future.
Example
Safeco Money Market Fund
Class A shares
Year 1 ...................... $ 80
Year 3 ...................... $ 249
Year 5 ...................... $ 433
Year 10 ..................... $1,099
Class B shares
Year 1 ...................... $ 80
Year 3 ...................... $ 249
Year 5 ...................... $ 433
Year 10 ..................... $1,122
Class C shares
Year 1 ...................... $ 80
Year 3 ...................... $ 249
Year 5 ...................... $ 433
Year 10 ..................... $1,119
Investor Class shares
Year 1 ...................... $ 68
Year 3 ...................... $ 214
Year 5 ...................... $ 373
Year 10 ..................... $ 835
Pro Forma Pioneer Cash Reserves Fund
Investor Class shares
Year 1 ...................... $ 73
Year 3 ...................... $ 257
Year 5 ...................... $ 488
Year 10 ..................... $1,151
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco Money Market Fund. The Trustees considered the following
matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Safeco Fund until August 2,
2004, was acquired by Symetra. Symetra informed the Trustees that it did not
intend to continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the investment performance of Pioneer Cash Reserves Fund is
comparable to the historical investment performance of your Safeco Fund. For
the one, five and ten year periods ended June 30, 2004, Class A shares of
Pioneer Cash Reserves Fund had an average annual return of 0.12%, 2.50%, and
3.60%, respectively, compared to an average annual return of the Class A shares
and Investor Class shares of 0.42% and 0.51% (one year), 2.82% and 2.86% (five
years), and 3.82% and 3.85% (ten years) respectively, during the same period.
In addition, the Trustees considered the track record of Pioneer in managing
equity and fixed income mutual funds.
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutional and other
clients. As of June 30, 2004,
94
assets under management of UniCredito Italiano S.p.A. were approximately $151
billion worldwide. Shareholders of your Safeco Fund would become part of a
significantly larger family of funds that offers a more diverse array of
investment options and enhanced shareholders account options. The Pioneer
family of mutual funds offers over 62 funds, including domestic and
international equity and fixed income funds and a money market fund that will
be available to your Safeco Fund's shareholders through exchanges. In addition,
Pioneer offers shareholders additional options for their accounts, including
the ability to transact and exchange shares over the telephone or online and
the ability to access account values and transaction history in all of the
shareholder's direct accounts in the Pioneer Funds over the telephone or
online.
Fourth, Pioneer's commitment until the second anniversary of the
Reorganization to limit the expenses (excluding extraordinary expenses) of the
Investor Class of Pioneer Cash Reserves Fund to 0.71% of average daily net
assets. Although you will experience higher expenses once the Investor Class
shares convert to Class A shares after two years, your expenses will remain the
same until the second anniversary of the Reorganization.
Fifth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
Sixth, the Investor Class shares of Pioneer Cash Reserves Fund received in
the Reorganization will provide Safeco Money Market Fund shareholders with
exposure to substantially the same investment product as they currently have.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco
Funds and the Pioneer Funds associated with the Reorganizations, including, but
not limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses
of any proxy solicitation firm retained in connection with the Reorganizations;
(3) the legal fees and expenses incurred by the Safeco Funds in connection with
the Reorganizations; and (4) the Trustee fees and out of pocket expenses
incurred as a result of the Reorganizations.
The Trustees considered that Pioneer and Symetra will benefit from the
Reorganization. See "Certain Agreements between Pioneer and Symetra."
The Board of Trustees of Pioneer Cash Reserves Fund also considered that
the Reorganization presents an excellent opportunity for the Pioneer Cash
Reserves Fund to acquire investment assets without the obligation to pay
commissions or other transaction costs that a fund normally incurs when
purchasing securities. This opportunity provides an economic benefit to Pioneer
Cash Reserves Fund and its shareholders.
95
CAPITALIZATION
The following table sets forth the capitalization of each Fund, as of June
30, 2004, and the pro forma combined Fund as of June 30, 2004.
Pro Forma
Safeco Money Pioneer Cash Pioneer Cash
Market Fund Reserves Fund Reserves Fund
June 30, 2004 June 30, 2004 June 30, 2004
--------------- --------------- --------------
Total Net Assets (in thousands) ......... 286,380 509,605 795,985
Class A shares ......................... 5,488 301,140 301,140
Class B shares ......................... 1,194 89,406 89,406
Class C shares ......................... 124 118,820 118,820
Investor Class shares .................. 279,574 N/A 286,380
Class R shares ......................... N/A 239 239
Net Asset Value Per Share
Class A shares ......................... $1.00 $1.00 $1.00
Class B shares ......................... $1.00 $1.00 $1.00
Class C shares ......................... $1.00 $1.00 $1.00
Investor Class shares .................. $1.00 N/A $1.00
Class R shares ......................... N/A $1.00 $1.00
Shares Outstanding
Class A shares ......................... 588,000 301,284,833 301,284,833
Class B shares ......................... 1,194,000 89,371,274 89,371,274
Class C shares ......................... 124,000 118,809,103 118,809,103
Investor Class shares .................. 279,574,000 N/A 286,380,000
Class R shares ......................... N/A 239,463 239,463
It is impossible to predict how many shares of Pioneer Cash Reserves Fund
will actually be received and distributed by your Safeco Fund on the
Reorganization date. The table should not be relied upon to determine the
amount of Pioneer Cash Reserves Fund's shares that will actually be received
and distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund.
Similarly, the Board of Trustees of Pioneer Cash Reserves Fund, including its
Independent Trustees, approved the Reorganization. They also determined that
the Reorganization is in the best interests of Pioneer Cash Reserves Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
96
Safeco Municipal Bond Fund and
Pioneer Municipal Bond Fund
PROPOSAL 1(g)
Approval of Agreement and Plan of Reorganization
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 Reorganization attached as EXHIBIT A-2 because they
contain details that are not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco Municipal Bond Fund to the Pioneer Municipal Bond Fund
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Safeco Municipal Bond Fund Pioneer Municipal Bond Fund
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Business A series of Safeco Tax-Exempt Bond Trust, a A newly organized diversified open-end
diversified open-end management investment management investment company registered
company organized as a Delaware statutory under the Investment Company Act and
trust. organized as a Delaware statutory trust.
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Net assets as of $550 million None. Pioneer Municipal Bond Fund is newly
June 30, 2004 organized and does not expect to commence
investment operations until the Reorganization
occurs.
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Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers: Portfolio Managers:
Stephen C. Bauer (since 1981 and until Day-to-day management of Pioneer Municipal
August 2, 2004) Bond Fund's portfolio is the responsibility of a
President and Director, SAM team of fixed income portfolio managers led
by Kenneth J. Taubes.
Mary Metastasio (since 2003 and until
July 31, 2004) Mr. Taubes joined Pioneer as a senior vice
president in September 1998 and has been an
Currently Pioneer is acting as investment investment professional since 1982.
adviser to Safeco Municipal Bond Fund. The
Portfolio Manager of the Pioneer Municipal
Bond Fund, as indicated in the next column,
currently manages your Safeco Fund.
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Investment objective Each Fund seeks to provide as high a level of current interest income exempt from federal
income tax as is consistent with the relative stability of capital.
The investment objective of each Fund is fundamental and cannot be changed without
shareholder approval.
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97
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Safeco Municipal Bond Fund Pioneer Municipal Bond Fund
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Primary investments During normal market conditions, Safeco Normally, Pioneer Municipal Bond Fund
Municipal Bond Fund will not invest less than invests at least 80% of its net assets in
80% of its net assets in obligations the interest investment grade municipal bonds with a
on which is exempt from federal income tax. maturity of more than one year, that
provide income that is exempt from federal
To achieve its investment objective, Safeco income tax.
Municipal Bond Fund invests primarily in
municipal bonds rated investment grade or Pioneer Municipal Bond Fund's investments
better with average maturities of 15 years include bonds, notes and other debt
or longer. instruments issued by or on behalf of
states, counties, municipalities, territories
Under normal circumstances, Safeco Municipal and possessions of the United States and
Bond Fund invests: the District of Columbia and their
authorities, political subdivisions, agencies
o at least 80% of its assets in investment- or instrumentalities.
grade municipal bonds with a maturity of
more than one year and the interest on Pioneer Municipal Bond Fund's investments
which is exempt from federal income tax; may have fixed or variable principal
and payments and all types of interest rate
payment and reset terms, including fixed
o up to 20% of its assets in unrated municipal and floating rates, inverse floating rate, zero
bonds, as long as the adviser determines coupon, contingent, deferred and payment
they are of comparable quality to in kind and auction rate features.
investment-grade securities.
Pioneer Municipal Bond Fund may invest in
municipal securities of any maturity,
although under normal circumstances it is
anticipated that the Fund will generally
invest in longer-term investments. Municipal
securities with longer maturities are
generally more volatile than other fixed
income securities with shorter maturities.
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Each Fund will not invest in securities the interest on which is a tax preference item for
purposes of the federal alternative minimum tax.
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98
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Safeco Municipal Bond Fund Pioneer Municipal Bond Fund
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Investment strategies When evaluating a bond to buy, SAM Pioneer considers both broad economic
historically considered among other things: factors and issuer specific factors in selecting
a portfolio designed to achieve Pioneer
o Yield Municipal Bond Fund's investment objective.
o Maturity In assessing the appropriate maturity and
o Structural features such as an issuer's right rating weighting of the Fund's portfolio,
to buy the bond back at a stated price (a Pioneer considers a variety of factors that are
"call") or the Fund's right to require the expected to influence economic activity and
issuer to buy the bond back at a stated price interest rates. These factors include
(a "put") fundamental economic indicators, such as the
o Credit quality (including the underlying rating rates of economic growth and inflation,
of insured bonds) Federal Reserve monetary policy and the
o The project the issuer is financing relative value of the U.S. dollar compared to
o The original offering price other currencies.
o Any state or local tax exemption
o The amount of discount off or premium on Once Pioneer determines the preferable
the stated principal amount of the bond portfolio characteristics, Pioneer selects
represented by the price offered individual securities based upon the terms of
the securities (such as yields compared to
SAM may have used the rating services U.S. Treasuries or comparable issues),
provided by Moody's, S&P, or Fitch. Bond liquidity and rating and issuer diversification.
ratings indicate an issuer's financial strength
and ability to meet its debt obligations. Pioneer also employs due diligence and
fundamental research, an evaluation of the
Safeco Municipal Bond Fund may sell bonds issuer based on its financial statements and
when: operations, to assess an issuer's credit
quality, taking into account financial condition,
o They become fully valued future capital needs and potential for change
o More attractively valued bonds become in rating.
available
o Cash is needed to meet shareholder In making these portfolio decisions, Pioneer
redemptions relies on the knowledge, experience and
judgment of its staff who have access to a
Because it often takes years for attractive wide variety of research.
relative valuations to be recognized by the
municipal securities market, turnover of the
Fund's portfolio can be low.
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99
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Safeco Municipal Bond Fund Pioneer Municipal Bond Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Other investments Safeco Municipal Bond Fund will limit its At times, more than 25% of Pioneer Municipal
investment in municipal obligations the interest Bond Fund's assets may be invested in the
on which is payable from the revenues of same market segment, such as financials. To
similar types of projects less than 25% of each the extent the Fund emphasizes investments in
Funds' total assets. As a matter of operating a market segment, the Fund will be subject to
policy, "similar types of projects" may include a greater degree to the risks particular to the
sports, convention or trade show facilities; industries in that segment, and may
airports or mass transportation; sewage or experience greater market fluctuation, than a
solid waste disposal facilities; or air and water fund without the same focus. For example,
pollution control projects. industries in the financial segment, such as
banks, insurance companies, broker-dealers
Safeco Municipal Bond Fund may invest in any and REITs, may be sensitive to changes
of the following short-term, tax-exempt in interest rates and general economic
obligations: municipal notes of issuers rated, at activity and are subject to extensive
the time of the purchase, within one of the government regulation.
three highest grades assigned by a nationally
recognized statistical rating organization Pioneer Municipal Bond Fund may invest up
("NRSRO"); unrated municipal notes offered by to 10% of its net assets in debt securities
issuers having outstanding municipal bonds rated below investment grade or, if unrated, of
rated within one of the three highest grades equivalent quality as determined by Pioneer.
assigned by an NRSRO; notes issued by or on Debt securities rated below investment grade
behalf of municipal issuers that are guaranteed are commonly referred to as "junk bonds" and
by the U.S. government; tax-exempt are considered speculative. Below investment
commercial paper assigned one of the two grade debt securities involve greater risk of
highest grades by an NRSRO; certificates of loss, are subject to greater price volatility and
deposit issued by banks with assets of are less liquid, especially during periods of
$1,000,000,000 or more; and municipal economic uncertainty or change, than higher
obligations that have a maturity of one year or quality debt securities.
less from the date of purchase.
Pioneer Municipal Bond 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.
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100
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Safeco Municipal Bond Fund Pioneer Municipal Bond Fund
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Each Fund may invest in obligations of the U.S. government, its agencies or instrumentalities
or in qualified repurchase agreements, the net interest on which is taxable for federal income
tax purposes.
Each Fund will limit its investment in securities whose issuers are located in the same state to
less than 25% of each Fund's total assets.
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Temporary defensive Safeco Municipal Bond Fund may hold cash or Pioneer Municipal Bond Fund may invest all or
strategies as a temporary defensive measure when part of its assets in securities with remaining
market conditions so warrant. maturities of less than one year, cash
equivalents or may hold cash.
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Diversification Each Fund is diversified for the purpose of the Investment Company Act, and each Fund is
subject to diversification requirements under the Code.
- -----------------------------------------------------------------------------------------------------------------------------------
Industry concentration Each Fund will not make investments that will result in the concentration (as that term may be
defined in the Investment Company Act, any rule or order thereunder, or SEC staff interpretation
thereof) of its investments in the securities of issuers primarily engaged in the same industry,
provided that this restriction does not limit each Fund from investing in obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
- -----------------------------------------------------------------------------------------------------------------------------------
Restricted and illiquid If immediately after and as a result of such Pioneer Municipal Bond Fund will not invest
securities action the value of the following securities, in more than 10% of its net assets in illiquid
the aggregate, would exceed 10% of Safeco and other securities that are not readily
Municipal Bond Fund's net assets, the Fund marketable. Repurchase agreements maturing
will not (i) purchase securities for which there in more than seven days will be included for
is no readily available market, (ii) purchase purposes of the foregoing limit. Securities
time deposits maturing in more than seven subject to restrictions on resale under the
days, (iii) purchase over-the-counter (OTC) 1933 Act, are considered illiquid unless they
options or hold assets set aside to cover OTC are eligible for resale pursuant to Rule 144A
options written by the Fund, (iv) enter into or another exemption from the registration
repurchase agreements maturing in more than requirements of the 1933 Act and are
seven days, or (v) invest in interests in real determined to be liquid by Pioneer.
estate investment trusts which are not readily
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
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101
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Safeco Municipal Bond Fund Pioneer Municipal Bond Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Borrowing Safeco Municipal Bond Fund may borrow Pioneer Municipal Bond Fund may not borrow
money (i) from banks or (ii) by engaging in money, except on a temporary basis and to
reverse repurchase agreements. the extent permitted by applicable law, as
amended and interpreted or modified from
time to time by any regulatory authority
having jurisdiction.
Under current regulatory requirements,
Pioneer Municipal Bond Fund may: (a) borrow
from banks or through reverse repurchase
agreements in an amount up to 33 1/3% of the
fund's total assets (including the amount
borrowed); (b) borrow up to an additional 5%
of the fund's assets for temporary purposes;
(c) obtain such short-term credits as are
necessary for the clearance of portfolio
transactions; (d) purchase securities on
margin to the extent permitted by applicable
law; and (e) engage in transactions in
mortgage dollar rolls that are accounted for
as financings.
- -----------------------------------------------------------------------------------------------------------------------------------
Lending Safeco Municipal Bond Fund may lend Pioneer Municipal Bond Fund may not make
securities to qualified institutional investors loans, except that the Fund may (i) lend
with a value of up to 33% of the Fund's total portfolio securities in accordance with the
assets. Fund's investment policies, (ii) enter into
repurchase agreements, (iii) purchase all or a
portion of an issue of publicly distributed debt
securities, bank loan participation interests,
bank certificates of deposit, bankers'
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 Investment Company 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.
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102
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Safeco Municipal Bond Fund Pioneer Municipal Bond Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Derivative instruments Safeco Municipal Bond Fund may not purchase Pioneer Municipal Bond Fund may use futures
securities on margin. However, the Fund may and options on securities, indices and
(i) obtain short-term credits as necessary to currencies, forward currency exchange
clear its purchases and sales of securities, and contracts and other derivatives. The Fund
(ii) make margin deposits in connection with does not use derivatives as a primary
its use of financial options and futures, investment technique and generally limits their
forward and spot currency contracts, swap use to hedging. However, the Fund may use
transactions and other financial contracts or derivatives for a variety of non-principal
derivative instruments. purposes, including:
o As a hedge against adverse changes in
stock market prices, interest rates or
currency exchange 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
- -----------------------------------------------------------------------------------------------------------------------------------
Other investment policies and As described above, the Funds have substantially similar principal investment strategies and
restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Fund's other investment policies and fundamental and non-
fundamental investment restrictions, see the SAI.
- -----------------------------------------------------------------------------------------------------------------------------------
Buying, Selling and Exchanging Shares
- -----------------------------------------------------------------------------------------------------------------------------------
Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer
of Safeco Municipal Bond Fund are subject to Municipal Bond Fund you receive in the
a 4.50% front-end sales charge. Reorganization will not be subject to any sales
charge. Moreover, if you own shares in your
A contingent deferred sales charge of up to own name as of the closing of the
5.00% if you redeem Class B shares within six Reorganization (i.e., not in the name of a
years of purchase. broker or other intermediary) and maintain
your account, you may purchase Class A
A contingent deferred sales charge of up to shares of Pioneer Municipal Bond Fund and
1.00% if you redeem Class C shares within Class A shares of any fund in the Pioneer
one year of purchase. family of funds through such account in the
future without paying any sales charge.
Purchases of Investor Class shares of the Fund
are not subject to a sales load. Except as described above, Class A shares of
Pioneer Municipal Bond Fund are subject to a
The Fund assesses a mandatory redemption front-end sales charge of up to 4.50%.
fee of 2%, as a percentage of the amount
redeemed or exchanged, on Class A and
Investor Class shares held less than 30 days.
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103
- -----------------------------------------------------------------------------------------------------------------------------------
Safeco Municipal Bond Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Management and other fees Safeco Municipal Bond Fund pays an advisory Pioneer Municipal Bond Fund pays Pioneer a
fee on a monthly basis at an annual rate as management monthly fee at an annual rate
follows: equal to the Fund's average daily net assets as
follows:
$0-$250,000,000: 0.50 of 1%
$250,000,001-$750,000,000: 0.45 of 1% $0-$250,000,000: 0.50%
Over $750,000,000: 0.40 of 1% $ 250,000,001-$750,000,000: 0.45%
Over $750,000,000: 0.40%
SAM serves as administrator and fund
accounting agent for the Fund. The Fund pays In addition, the Fund reimburses Pioneer for
SAM an administrative services fee of 0.05% certain fund accounting and legal expenses
of the Fund's average daily net assets up to the incurred on behalf of the Fund and pays a
first $200,000,000 and 0.01% of its net assets separate shareholder servicing/transfer agency
thereafter, and an accounting fee of 0.04% of fee to PIMSS, an affiliate of Pioneer.
the Fund's average daily net assets up to the
first $200,000,000 and 0.01% of its net assets Pioneer has agreed until the second
thereafter. anniversary of the closing of the
Reorganization to limit the expenses
During its most recent fiscal year, Safeco (excluding extraordinary expenses) of the
Municipal Bond Fund paid aggregate advisory Investor Class to 0.62% of the average daily
and administration fees at an average rate of net assets attributable to the Investor Class.
0.51% of average daily net assets.
The Investor Class shares to be issued in the
SAM had contractually agreed until April 30, Reorganization will convert to Class A shares
2009, to pay certain fund operating expenses after two years. Class A shares will have
(but not all of the operating expenses of the higher expenses per share than Investor Class
Fund) that exceeded the rate of 0.40% per shares due to the Rule 12b-1 Plan.
annum of the Fund's average daily net assets.
This arrangement included all fund operating
expenses except management fees, Rule 12b-1
fees, brokerage commissions, interest, and
extraordinary expenses.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
A shares were 0.87%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
B shares were 1.66%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
C shares, after giving effect to the expense
limitation were 1.87%, and without given effect
to the expense limitation, were 43.13%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Investor Class shares were 0.61%.
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Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class
(12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject
to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
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104
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Safeco Municipal Bond Fund Pioneer Municipal Bond Fund
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Buying shares You may buy shares of Safeco Municipal Bond You may buy shares from any investment firm
Fund directly through Safeco Securities or that has a sales agreement with PFD, Pioneer
through brokers, registered investment Municipal Bond Fund's distributor. Existing
advisers, banks and other financial institutions shareholders of Safeco Municipal Bond Fund
that have entered into selling agreements with who own shares in their own name as of the
the Fund's principal underwriter, as described closing date of the Reorganization and who
in the Fund's prospectus. maintain their accounts may buy shares of
any fund in the Pioneer family of funds
Certain account transactions may be done by through such accounts in the future without
telephone. paying sales charges.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
Municipal Bond Fund by telephone or online.
- -----------------------------------------------------------------------------------------------------------------------------------
Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer
acquire through dividend reinvestment or other Municipal Bond Fund without incurring any fee
fund distributions. on the exchange with the more than 62 other
Pioneer Funds. Your exchange would be for
Certain account transactions may be done by Class A shares, which is subject to Rule
telephone.
12b-1 fees. An exchange generally is treated
as a sale and a new purchase of shares for
federal income tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer Municipal
Bond Fund for shares of other Pioneer Funds
by telephone or online.
- -----------------------------------------------------------------------------------------------------------------------------------
Selling shares Investor Class shares will be sold at net asset value per share next calculated after the Fund
receives your request in good order.
-------------------------------------------------------------------------------------------------------------
You may sell your shares by contacting Safeco Normally, your investment firm will send your
Municipal Bond Fund directly in writing or by request to sell shares to PIMSS. You can
contacting a financial intermediary as described also sell your shares by contacting the Fund
in the Fund's prospectus. directly if your account is registered in
your name.
If the account is established in the
shareholder's own name, shareholders may
also redeem shares of Pioneer Municipal Bond
Fund by telephone or online.
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Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks.
Even though each Fund seeks to maintain a $1 share price, you could lose money
on your investment or the Fund could fail to generate high current income if:
o Interest rates go up, causing the value of the Fund's investments to
decline
o The issuer of a security owned by the Fund defaults on its obligation
to pay principal and/or interest or has its credit rating downgraded
105
o The investment adviser's judgment about the credit quality,
attractiveness or relative value of a particular security proves to be
incorrect
o New federal or state legislation adversely affects the tax-exempt
status of securities held by the fund or the financial ability of
municipalities to repay these obligations
Investing in mutual fund shares is not the same as making a bank deposit.
Your investment is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. You could lose money by investing
in either Fund.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
Past Performance
Set forth below is performance information for Safeco Municipal Bond Fund.
The bar chart shows how Safeco Municipal Bond Fund's total return (not
including any deduction for sales charges) has varied from year to year for
each full calendar year. The tables show average annual total return (before
and after taxes) for Safeco Municipal Bond Fund over time for each class of
shares (including deductions for sales charges) compared with a broad-based
securities market index. Past performance before and after taxes does not
indicate future results. The bar chart gives an indication of the risks of
investing in the Safeco Municipal Bond Fund, including the fact that you could
incur a loss and experience volatility of returns year to year. Pioneer
Municipal Bond Fund has not commenced investment operations.
Safeco Municipal Bond Fund -- Investor Class
Calendar Year Total Returns*
[THE FOLLOWING WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
'94 -8.25%
'95 21.48
'96 3.18
'97 10.68
'98 6.35
'99 -6.18
'00 14.17
'01 5.30
'02 10.33
'03 5.96
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return was 8.82% for the quarter ended March 31, 1995, and the
lowest quarterly return was -6.77% for the quarter ended March 31, 1994.
106
Safeco Municipal Bond Fund
Average Annual Total Returns as of December 31, 2003
- ----------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- ----------------------------------------------------------------------------------------------
Safeco Municipal Bond Fund, Class A shares
- ----------------------------------------------------------------------------------------------
Return Before Taxes 0.91% 4.38% 5.20%
- ----------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 0.65% 4.24% 5.07%
- ----------------------------------------------------------------------------------------------
Return After Taxes on Distributions and
Sale of Fund Shares(1) 2.24% 4.34% 5.09%
- ----------------------------------------------------------------------------------------------
Safeco Municipal Bond Fund, Class B shares
- ----------------------------------------------------------------------------------------------
Return Before Taxes -0.07% 4.21% 5.23%
- ----------------------------------------------------------------------------------------------
Safeco Municipal Bond Fund, Class C shares
- ----------------------------------------------------------------------------------------------
Return Before Taxes 3.89% 4.54% 5.13%
- ----------------------------------------------------------------------------------------------
Safeco Municipal Bond Fund, Investor Class shares
- ----------------------------------------------------------------------------------------------
Return Before Taxes 5.96% 5.69% 5.97%
- ----------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 5.68% 5.55% 5.83%
- ----------------------------------------------------------------------------------------------
Return After Taxes on Distributions and
Sale of Fund Shares(1) 5.70% 5.53% 5.81%
- ----------------------------------------------------------------------------------------------
Lehman Brothers Long Municipal Bond Index(2)
(reflects no deduction for fees, expenses or taxes) 6.13% 5.95% 6.40%
- ----------------------------------------------------------------------------------------------
(1) 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 your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(2) The Lehman Brothers Long Municipal Bond Index, an unmanaged index of bonds
with a minimum credit rating of BAA3 issued as part of a deal of at least
$50 million, having an amount of at least $5 million and maturing in 22 or
more years, is for reference only and does not mirror the Fund's
investments.
The most recent portfolio manager's discussion of Safeco Fund's
performance is attached as Exhibit D.
107
The Funds' Fees and Expenses
Shareholders of both 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 Fund. The expenses in the tables
appearing below are based on (i) for your Safeco Fund, the expenses of your
Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer
Municipal Bond Fund, the expenses of Pioneer Municipal Bond Fund for the period
ended December 31, 2003. Future estimated expenses for all share classes may be
greater or less.
Pro Forma
Safeco Safeco Safeco Safeco Pioneer
Municipal Municipal Municipal Municipal Municipal
Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund
Shareholder transaction fees Class A Class B Class C Investor Class Investor Class(9)
(paid directly from your investment) ---------- --------- --------- -------------- -----------------
Maximum sales charge (load) when you buy shares as a
percentage of offering price ............................. 4.50%(6) None None None None(1)
Maximum deferred sales charge (load) as a percentage of
purchase price or the amount you receive when you sell
shares, whichever is less ................................ None 5.00%(7) 1.00%(8) None None
Redemption fees for shares held less than 30 days ......... 2.00% None None 2.00% N/A
Wire redemption fee ....................................... $20(4) $20(4) $20(4) $20(4) $10
Annual low balance fee .................................... $12(5) $12(5) $12(5) $12(5) N/A
Annual fund operating expenses (deducted from
fund assets) (as a % of average net assets)
Management fee ............................................ 0.47% 0.47% 0.47% 0.47% 0.50%
Distribution and service (12b-1) fee ...................... 0.25% 1.00% 1.00% None None
Other expenses ............................................ 0.15% 0.19% 41.66% 0.14% 0.19%
Total fund operating expenses ............................. 0.87% 1.66% 43.13% 0.61% 0.69%
Expense reimbursement/reduction ........................... None(2) None(2) 41.26%(2) None(2) 0.07%(3)
Net fund operating expenses ............................... 0.87% 1.66% 1.87% 0.61% 0.62%
- ----------
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer Municipal Bond Fund through the Reorganization. In addition,
shareholders of your Safeco Fund who own shares in their own name (i.e.,
not in the name of a broker or other intermediary) and maintain such
account as of the closing of the Reorganization may purchase Class A shares
of Pioneer Municipal Bond Fund or of any fund in the Pioneer family of
funds through such account in the future without paying this sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco
Municipal Bond Fund for certain Fund operating expenses (but not all of the
operating expenses of the Fund) that exceeded the rate of 0.40% per annum
of the Fund's average daily net assets. This arrangement included all fund
operating expenses except management fees, Rule 12b-1 fees, brokerage
commissions, interest, and extraordinary expenses.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer Municipal
Bond Fund to 0.62% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once each year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions made in the first twelve months except with
respect to participant-directed redemptions from qualified retirement
plans.
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after six years from purchase, and the Class B shares
convert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
(9) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares.
108
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect for five years for
Safeco Municipal Bond Fund and two years for Pioneer Municipal Bond Fund and
(f) and the Investor Class shares of Pioneer Municipal Bond Fund convert to
Class A shares after two years. The examples are for comparison purposes only
and are not a representation of either Fund's actual expenses or returns,
either past or future.
Example
Safeco Municipal Bond Fund
Class A shares
Year 1 ...................... $535
Year 3 ...................... $715
Year 5 ...................... $911
Year 10 ..................... $1,474
Class B shares With redemption Without redemption
Year 1 ...................... $ 669 $ 169
Year 3 ...................... $ 823 $ 523
Year 5 ...................... $1,102 $ 902
Year 10 ..................... $1,561 $1,561
Class C shares With redemption Without redemption
Year 1 ...................... $ 290 $ 190
Year 3 ...................... $ 588 $ 588
Year 5 ...................... $1,011 $1,011
Year 10 ..................... $2,190 $2,190
Investor Class shares
Year 1 ...................... $62
Year 3 ...................... $226
Year 5 ...................... $32
Year 10 ..................... $1,025
Pro Forma Pioneer Municipal Bond Fund
Investor Class shares
Year 1 ...................... $63
Year 3 ...................... $255
Year 5 ...................... $521
Year 10 ..................... $1,281
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco Municipal Bond Fund. The Trustees considered the following
matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Fund until August 2, 2004, was
acquired by Symetra. Symetra informed the Trustees that it did not intend to
continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the significant experience and resources of Pioneer in managing
portfolios of tax exempt securities. At September 30, 2004, Pioneer Managed
Portfolio of tax exempt securities with total assets of approximately $ 1.5
billion.
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups
109
in Italy, providing investment management and financial services to mutual
funds, institutional and other clients. As of June 30, 2004, assets under
management of UniCredito Italiano S.p.A. were approximately $151 billion
worldwide. Shareholders of your Safeco Fund would become part of a
significantly larger family of funds that offers a more diverse array of
investment options and enhanced shareholder account options. The Pioneer family
of mutual funds offers over 62 funds, including domestic and international
equity and fixed income funds and a money market fund that will be available to
your Safeco Fund's shareholders through exchanges. In addition, Pioneer offers
shareholders additional options for their accounts, including the ability to
transact and exchange shares over the telephone or online and the ability to
access account values and transaction history in all of the shareholder's
direct accounts in the Pioneer Funds over the telephone or online.
Fourth, Pioneer's commitment until the second anniversary of the
Reorganization to limit the expenses (excluding extraordinary expenses) of the
Investor Class of Pioneer Municipal Bond Fund to 0.62% of average daily net
assets. This expense ratio is lower than both the gross expenses and expenses
net of expense reimbursement of the Class A shares. Although you will experience
higher expenses once the Investor Class shares convert to Class A shares after
two years, your expenses will remain the same until the second anniversary of
the Reorganization.
Fifth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
Sixth, the Investor Class shares of Pioneer Municipal Bond Fund received
in the Reorganization will provide Safeco Municipal Bond Fund shareholders with
exposure to substantially the same investment product as they currently have.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco
Funds and the Pioneer Funds associated with the Reorganizations, including, but
not limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses
of any proxy solicitation firm retained in connection with the Reorganizations;
(3) the legal fees and expenses incurred by the Safeco Funds in connection with
the Reorganizations; and (4) the Trustee fees and out of pocket expenses
incurred as a result of the Reorganizations.
The Trustees considered that Pioneer and Symetra will benefit from the
Reorganization. See "Certain Agreements between Pioneer and Symetra."
The Board of Trustees of Pioneer Municipal Bond Fund also considered that
the Reorganization presents an excellent opportunity for the Pioneer Municipal
Bond Fund to acquire investment assets without the obligation to pay
commissions or other transaction costs that a fund normally incurs when
purchasing securities. This opportunity provides an economic benefit to Pioneer
Municipal Bond Fund and its shareholders.
110
CAPITALIZATION
The following table sets forth the capitalization of each Fund, as of
September 30, 2004, and the pro forma combined Fund as of September 30, 2004.
Safeco Pro Forma
Municipal Pioneer Municipal Pioneer Municipal
Bond Fund Bond Fund Bond Fund
September 30, 2004 September 30, 2004 September 30, 2004
------------------- ------------------ ------------------
Total Net Assets (in thousands) ......... $538,962 N/A $538,962
Class A shares ......................... $ 8,028 N/A N/A
Class B shares ......................... $ 2,639 N/A N/A
Class C shares ......................... $ 160 N/A N/A
Investor Class shares .................. $528,134 N/A $538,962
Net Asset Value Per Share
Class A shares ......................... $ 14.40 N/A N/A
Class B shares ......................... $ 14.36 N/A N/A
Class C shares ......................... $ 14.36 N/A N/A
Investor Class shares .................. $ 14.38 N/A $ 14.38
Shares Outstanding
Class A shares ......................... 557,381 N/A N/A
Class B shares ......................... 183,755 N/A N/A
Class C shares ......................... 11,125 N/A N/A
Investor Class shares .................. 36,719,082 N/A 37,479,972
It is impossible to predict how many shares of Pioneer Municipal Bond Fund
will actually be received and distributed by your Safeco Fund on the
Reorganization date. The table should not be relied upon to determine the
amount of Pioneer Municipal Bond Fund's shares that will actually be received
and distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund.
Similarly, the Board of Trustees of Pioneer Municipal Bond Fund, including its
Independent Trustees, approved the Reorganization. They also determined that
the Reorganization is in the best interests of Pioneer Municipal Bond Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
111
Safeco Tax-Free Money Market Fund and
Pioneer Tax Free Money Market Fund
PROPOSAL 1(h)
Approval of Agreement and Plan of Reorganization
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 Reorganization attached as EXHIBIT A-2 because they
contain details that are not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
112
Comparison of Safeco Tax-Free Money Market Fund to the Pioneer Tax Free Money
Market Fund
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Safeco Tax-Free Money Market Fund Pioneer Tax Free Money Market Fund
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Business A series of Safeco Money Market Trust, a A newly organized diversified open-end
diversified open-end management investment management investment company registered
company organized as a Delaware statutory under the Investment Company Act and
trust. organized as a Delaware statutory trust.
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Net assets as of $61 million None. The Pioneer Tax Free Money Market
June 30, 2004 Fund is newly organized and does not expect
to commence investment operations until the
Reorganization occurs.
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Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers: Portfolio Manager:
Mary Metastasio (since 1987 and until Day-to-day management of the Fund's
August 2, 2004) portfolio is the responsibility of a team of
fixed income portfolio managers led by
Stephen C. Bauer, CFA (since 2003 and until Kenneth J. Taubes.
August 2, 2004)
Mr. Taubes joined Pioneer as a senior vice
Currently Pioneer is acting as investment president in 1998 and has been an investment
adviser to Safeco Tax-Free Money Market Fund. professional since 1982.
The Portfolio Managers of the Pioneer Tax Free
Money Market Fund, as indicated in the next
column, currently manages your Safeco Fund.
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Investment objective Each Fund seeks to provide as high a level of current income exempt from federal income tax
as is consistent with a portfolio of high-quality, short-term municipal obligations selected on the
basis of liquidity and preservation of capital.
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Safeco Tax-Free Money Market Fund provides Pioneer Tax Free Money Market Fund's
written notice to shareholders at least 60 days investment policy of investing at least 80% of
prior to any change to its investment objective its net assets in high quality, money market
as described above. securities that pay interest that is exempt from
federal income tax is fundamental and may
not be changed without shareholder approval.
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113
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Safeco Tax-Free Money Market Fund Pioneer Tax Free Money Market Fund
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Primary investments To achieve its investment objective, Safeco Pioneer Tax Free Money Market Fund seeks
Tax-Free Money Market Fund will purchase to maintain a constant net asset value of
only high-quality securities having minimal $1.00 per share by investing, under normal
credit risk with remaining maturities of 397 circumstances, at least 80% of its net assets
days or less. in high-quality, money market securities that
pay interest that is exempt from federal
income tax. 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.
Pioneer Tax Free Money Market Fund invests
exclusively in securities with a maximum
remaining maturity of 397 days and maintains
a dollar-weighted average portfolio maturity of
90 days or less. The Fund's investments may
have fixed, floating or variable interest rates.
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Investment strategies Safeco Tax-Free Money Market Fund may Pioneer Tax Free Money Market Fund may
purchase only high-quality securities that the invest in any money market instrument that is
investment adviser believes present minimal a permissible investment for a money market
credit risks. To be considered high quality, a fund under the rules of the SEC. The Fund
security must be rated, or the issuer must invests in money market securities rated in
have received a rating for a comparable short- one of the two highest rating categories for
term security, in accordance with applicable short-term debt by a NRSRO or, if unrated,
rules, in one of the two highest categories for determined to be of equivalent credit quality
short-term securities by at least two nationally by Pioneer.
recognized statistical rating organizations
("NRSRO") (or by one, if one rating service In selecting Pioneer Tax Free Money Market
has rated the security); or, if unrated, the Fund's portfolio, Pioneer complies with the
security must be judged by the investment rating, maturity and diversification
adviser to be of equivalent quality. requirements applicable to money market
funds. Within those limits, Pioneer's
Safeco Tax-Free Money Market Fund may assessment of broad economic factors that
invest in: are expected to affect economic activity and
interest rates influence its securities selection.
o Variable and floating rate instruments that Pioneer also employs due diligence and
change interest rates periodically to keep fundamental research, an evaluation of the
their market value near par. Municipal notes issuer based on its financial statements and
that have a maturity of one year or less from operations, to assess an issuer's credit quality.
the date of purchase
o Put bonds, which allow the holder to redeem
the issue on specified dates before maturity
and receive full face value
o Tax-exempt commercial paper
o Restricted securities that are exempt from
registration requirements and eligible for
resale to qualified institutional investors,
such as mutual funds under Rule 144A of
Section 4(2)
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114
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Safeco Tax-Free Money Market Fund Pioneer Tax Free Money Market Fund
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Other investments Safeco Tax-Free Money Market Fund will limit Pioneer Tax Free Money Market Fund may
its investment in municipal obligations the invest up to 20% of its net assets in U.S.
interest on which is payable from the revenues dollar denominated securities issued by
of similar types of projects to less than 25% of non-U.S. entities, such as non-U.S. banks and
the Fund's total assets. As a matter of corporate issuers.
operating policy, "similar types of projects"
may include sports, convention or trade show Pioneer Tax Free Money Market Fund will not
facilities; airports or mass transportation; invest in securities whose interest is subject
sewage or solid waste disposal facilities; to the alternative minimum tax.
or airand water pollution control projects.
Safeco Tax-Free Money Market Fund may
invest in any of the following types of short-
term, tax-exempt obligations: municipal notes
of issuers rated, at the time of purchase, within
one of the three highest grades assigned by a
NRSRO; unrated municipal notes offered by
issuers having outstanding municipal bonds
rated within one of the three highest grades
assigned by an NRSRO; notes issued by or on
behalf of municipal issuers that are guaranteed
by the U.S. government; tax-exempt
commercial paper assigned one of the two
highest grades by an NRSRO; certificates of
deposit issued by banks with assets of
$1,000,000,000 or more; and municipal
obligations that have a maturity of one year or
less from the date of purchase.
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Each Fund may invest up to 25% of its total assets in the "first tier securities" of a single issuer
for up to three business days after purchase. First tier securities are securities (1) rated in the
highest short-term category by two NRSROs; (2) rated in the highest short-term rating category
by a single NRSRO if only that NRSRO has assigned the securities a short-term rating; or (3)
unrated, but determined by the adviser to be of comparable quality.
Each Fund may not invest more than 5% of its total assets in second tier securities. In addition,
the each Fund may not invest more than 1% of its total assets or $1 million (whichever is
greater) in the second tier securities of a single issuer.
Each Fund will limit its investment in securities whose issuers are located in the same state to
less than 25% of the Fund's total assets.
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Temporary defensive Safeco Tax-Free Money Market Fund may hold Pioneer Tax Free Money Market Fund may
strategies cash or invest in high-quality, short-term invest all or part of its assets in securities
securities issued by an agency or with remaining maturities of less than one
instrumentality of the U.S. government, high- year, cash equivalents or may hold cash.
quality commercial paper, certificates of
deposit, shares of no-load, open-end money
market funds, or repurchase agreements as a
temporary defensive measure when market
conditions so warrant.
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Diversification Each Fund is diversified for the purpose of the Investment Company Act, and each Fund is
subject to diversification requirements under the Code.
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115
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Safeco Tax-Free Money Market Fund Pioneer Tax Free Money Market Fund
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Industry concentration Each Fund will not make investments that will result in the concentration (as that term may be
defined in the Investment Company Act, any rule or order thereunder, or SEC staff interpretation
thereof) of its investments in the securities of issuers primarily engaged in the same industry,
provided that this restriction does not limit the Fund from investing in obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities, or governmental issuers of
special or general tax-exempt securities, or certain bank instruments issued by domestic banks.
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Restricted and illiquid If immediately after and as a result of such Pioneer Tax Free Money Market Fund will not
securities action the value of the following securities, in invest more than 10% of its net assets in
the aggregate, would exceed 10% of Safeco illiquid and other securities that are not readily
Tax-Free Money Market Fund's net assets, the marketable. Repurchase agreements maturing
Fund will not (i) purchase securities for which in more than seven days will be included for
there is no readily available market, (ii) purposes of the foregoing limit. Securities
purchase time deposits maturing in more than subject to restrictions on resale under the
seven days, (iii) purchase over-the-counter 1933 Act, are considered illiquid unless they
(OTC) options or hold assets set aside to cover are eligible for resale pursuant to Rule 144A
OTC options written by the Fund, (iv) enter into or another exemption from the registration
repurchase agreements maturing in more than requirements of the 1933 Act and are
seven days, or (v) invest in interests in real determined to be liquid by Pioneer.
estate investment trusts which are not readily
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
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Borrowing Safeco Tax-Free Money Market Fund may Pioneer Tax Free Money Market Fund may not
borrow money (i) from banks or (ii) by borrow money, except on a temporary basis
engaging in reverse repurchase agreements. and to the extent permitted by applicable law,
as amended and interpreted or modified from
time to time by any regulatory authority
having jurisdiction. Under current regulatory
requirements, the Fund may: (a) borrow from
banks or through reverse repurchase
agreements in an amount up to 33 1/3% of the
Fund's total assets (including the amount
borrowed); (b) borrow up to an additional 5%
of the Fund's assets for temporary purposes;
(c) obtain such short-term credits as are
necessary for the clearance of portfolio
transactions; (d) purchase securities on
margin to the extent permitted by applicable
law; and (e) engage in transactions in
mortgage dollar rolls that are accounted for
as financings.
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116
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Safeco Tax-Free Money Market Fund Pioneer Tax Free Money Market Fund
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Lending Safeco Tax-Free Money Market Fund may lend Pioneer Tax Free Money Market Fund may not
securities to qualified institutional investors make loans, except that the Fund may (i) lend
with a value of up to 33% of the Fund's portfolio securities in accordance with the
total assets. Fund's investment policies, (ii) enter into
repurchase agreements, (iii) purchase all or a
portion of an issue of publicly distributed debt
securities, bank loan participation interests,
bank certificates of deposit, bankers'
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 Investment Company 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.
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Derivative instruments Safeco Tax-Free Money Market Fund may not Pioneer Tax Free Money Market Fund may use
purchase securities on margin. However, the futures and options on securities, indices and
Fund may (i) obtain short-term credits as currencies, forward currency exchange
necessary to clear its purchases and sales of contracts and other derivatives. The Fund
securities, and (ii) make margin deposits in does not use derivatives as a primary
connection with its use of financial options and investment technique and generally limits their
futures, forward and spot currency contracts, use to hedging. However, the Fund may use
swap transactions and other financial contracts derivatives for a variety of non-principal
or derivative instruments. purposes, including:
o As a hedge against adverse changes in
stock market prices, interest rates or
currency exchange 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
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117
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Safeco Tax-Free Money Market Fund Pioneer Tax Free Money Market Fund
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Other investment policies and As described above, the Funds have substantially similar principal investment strategies and
restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Fund's other investment policies and fundamental and non-
fundamental investment restrictions, see the SAI.
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Buying, Selling and Exchanging Shares
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Sales charges Purchases of Investor Class shares of Safeco The Investor Class shares of Pioneer Tax Free
Tax-Free Money Market Fund are not subject to Money Market Fund you receive in the
a sales load. Reorganization will not be subject to any sales
charge. Moreover, if you own shares in your
own name as of the closing of the
Reorganization (i.e., not in the name of a
broker or other intermediary) and maintain
your account, you may purchase Class A
shares of Pioneer Tax Free Money Market
Fund and Class A shares of any fund in the
Pioneer family of funds through such account
in the future without paying any sales charge.
In general, Class A shares of Pioneer Tax Free
Money Market Fund are not subject to a
front-end sales charge.
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118
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Safeco Tax-Free Money Market Fund Pioneer Tax Free Money Market Fund
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Management and other fees Safeco Tax-Free Money Market Fund pays Pioneer Tax Free Money Market Fund pays
advisory fee on a monthly basis at an annual Pioneer a management fee equal to 0.40% of
rate as follows: the Fund's average daily net assets.
$0-$250,000,000: 0.50 of 1%
$250,000,001-$750,000,000: 0.45 of 1% In addition, Pioneer Tax Free Money Market
$750,000,001-$1,250,000,000: 0.40 of 1% Fund reimburses Pioneer for certain
Over $1,250,000,000: 0.35 of 1% fund accounting and legal expenses incurred
on behalf of the Fund and pays a separate
SAM serves as administrator and fund shareholder servicing/transfer agency fee to
accounting agent for Safeco Tax-Free Money PIMSS, an affiliate of Pioneer.
Market Fund. The Fund pays SAM an
administrative services fee of 0.05% of the Pioneer has agreed until the second
Fund's average daily net assets up to the first anniversary of the closing of the
$200,000,000 and 0.01% of its net assets Reorganization to limit the ordinary expenses
thereafter, and an accounting fee of 0.04% of (excluding extraordinary expenses) of the
the Fund's average daily net assets up to the Investor Class to 0.65% of the average daily
first $200,000,000 and 0.01% of its net assets net assets attributable to the Investor Class.
thereafter.
The Investor Class shares to be issued in the
During its most recent fiscal year, Safeco Reorganization will convert to Class A shares
Tax-Free Money Market Fund paid aggregate after two years. Class A shares will have
advisory and administration fees at an average higher expenses per share than Investor Class
rate of 0.59% of average daily net assets. shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit
SAM had contractually agreed until April 30, the expenses attributable to Investor Class
2009, to pay certain Fund operating expenses shares, Pioneer is not required to limit the
(but not all of the operating expenses of the expenses attributable to Class A shares.
Fund) that exceeded the rate of 0.30% per
annum of the Fund's average daily net assets.
This arrangement included all fund operating
expenses except management fees, Rule 12b-1
fees, brokerage commissions, interest, and
extraordinary expenses.
Beginning in 2003, SAM began voluntarily
reimbursing the fund for all expenses that
exceeded 0.65% of average daily net assets.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Investor Class shares, after giving effect to the
voluntary reimbursement were 0.65%, and
without giving effect to the expense limitation,
were 0.74%.
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Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class
(12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject
to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
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119
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Safeco Tax-Free Money Market Fund Pioneer Tax Free Money Market Fund
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Buying shares You may buy shares of Safeco Tax-Free Money You may buy shares from any investment firm
Market Fund directly through Safeco Securities, that has a sales agreement with PFD. Existing
or through brokers, registered investment shareholders of Safeco Tax-Free Money
advisers, banks and other financial institutions Market Fund who own shares in their own
that have entered into selling agreements with name as of the closing date of the
the Fund's principal underwriter, as described Reorganization and who maintain their
in the Fund's prospectus. accounts may buy shares of any fund in
the Pioneer family of funds through such
Certain account transactions may be done by accounts in the future without paying
telephone sales charges.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
Tax Free Money Market Fund by telephone
or online.
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Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer Tax Free
acquire through dividend reinvestment or other Money Market Fund without incurring any fee
fund distributions. on the exchange with the more than 62 other
Pioneer Funds. Your exchange would be for
Certain account transactions may be done Class A shares, which would be subject to a
by telephone. Rule 12b-1 fee. An exchange generally is
treated as a sale and a new purchase of
shares for federal income tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer Tax Free
Money Market Fund for shares of other
Pioneer Funds by telephone or online.
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Selling shares Investor Class shares will be sold at net asset value per share next calculated after the Fund
receives your request in good order.
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You may sell your shares by contacting Safeco Normally, your investment firm will send your
Tax-Free Money Market Fund directly in writing request to sell shares to PIMSS. You can also
or by contacting a financial intermediary as sell your shares by contacting the Fund
described in the Fund's prospectus. directly if your account is registered in
your name.
If the account is established in the
shareholder's own name, shareholders may
also redeem shares of Pioneer Tax Free
Money Market Fund by telephone or online.
After the closing of the Reorganization,
Investor Class shares will not be entitled to
check writing privileges and you may not write
checks issued by your Safeco Fund.
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Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks.
Even though each Fund seeks to maintain a $1 share price, you could lose money
on your investment or either Fund could fail to generate high current income
if:
120
o Interest rates go up, causing the value of the Fund's investments to
decline
o The issuer of a security owned by the Fund defaults on its obligation
to pay principal and/or interest or has its credit rating downgraded
o The investment adviser's judgment about the credit quality,
attractiveness or relative value of a particular security proves to be
incorrect
Past Performance
Set forth below is performance information for Safeco Tax-Free Money
Market Fund. The bar chart shows how Safeco Tax-Free Money Market Fund's total
return has varied from year to year for each full calendar year. The table
shows average annual total return for Safeco Tax-Free Money Market Fund over
time for Investor Class shares. The bar chart gives an indication of the risks
of investing in Safeco Tax-Free Money Market Fund, including the fact that you
could incur a loss and experience volatility of returns year to year. Past
performance does not indicate future results. Pioneer Tax Free Money Market
Fund has not commenced investment operations.
Safeco Tax-Free Money Market Fund -- Investor Class
Calendar Year Total Returns*
[THE FOLLOWING WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
'94 2.45%
'95 3.54
'96 3.07
'97 3.12
'98 3.07
'99 2.77
'00 3.52
'01 2.34
'02 0.97
'03 0.51
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return was 0.94% for the quarter ended June 30, 2000, and the
lowest quarterly return was 0.10% for the quarter ended September 30, 2003.
Safeco Tax-Free Money Market Fund
Average Annual Total Returns as of December 31, 2003
- ---------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------
Safeco Tax-Free Money Market Fund, Investor Class shares 0.51% 2.02% 2.53%
- ---------------------------------------------------------------------------------------------------
The most recent portfolio manager's discussion of the Safeco Fund's
performance is attached as Exhibit D.
121
The Funds' Fees and Expenses
Shareholders of both Funds pay various fees and expenses, either directly
or indirectly. The table below shows the fees and expenses that you would pay
if you were to buy and hold shares of each Fund. The expenses in the table
appearing below are based on (i) for your Safeco Fund, the expenses of your
Safeco Fund for its fiscal year ended December 31, 2003 and (ii) for the
Pioneer Tax Free Money Market Fund, the estimated annual expenses of the
Pioneer Tax Free Money Market Fund. The Pioneer Tax Free Money Market Fund's
actual expenses may be greater or less.
Pro Forma
Safeco Tax- Pioneer Tax
Free Money Free Money
Market Fund Market Fund
Investor Class Investor Class(6)
Shareowner transaction fees (paid directly from your investment) ---------------- ------------------
Maximum sales charge (load) when you buy shares as a percentage of offering price ........ None None(1)
Maximum deferred sales charge (load) as a percentage of purchase price or the amount you
receive when you sell shares, whichever is less ......................................... None None
Redemption fees for shares held less than 30 days ........................................ None None
Wire redemption fee ...................................................................... $ 20(4) $ 10
Annual low balance fee ................................................................... $ 12(5) N/A
Annual fund operating expenses (deducted from fund assets)
(as a % of average net assets)
Management fee ........................................................................... 0.50% 0.40%
Distribution and service (12b-1) fee ..................................................... None None
Other expenses ........................................................................... 0.24% 0.41%
Total fund operating expenses ............................................................ 0.74% 0.81%
Expense reimbursement/reduction .......................................................... N/A(2) 0.16%(3)
Net fund operating expenses .............................................................. 0.74% 0.65%
- ----------
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer Tax Free Money Market Fund through the Reorganization. In addition,
shareholders of your Safeco Fund who own shares in their own name (i.e.,
not in the name of a broker or other intermediary) and maintain such
account as of the closing of the Reorganization may purchase Class A shares
of Pioneer Tax Free Money Market Fund or of any fund in the Pioneer family
of funds through such account in the future without paying this sales
charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco
Tax-Free Money Market Fund for certain Fund operating expenses (but not all
of the operating expenses of the Fund) that exceeded the rate of 0.30% per
annum of the Fund's average daily net assets. This arrangement included all
Fund operating expenses except management fees, Rule 12b-1 fees, brokerage
commissions, interest, and extraordinary expenses. In 2003, SAM began
voluntarily reimbursing the Fund to the extent that its total expenses
exceeded the rate of 0.65% per annum of the Fund's average daily net assets
for the Investor Class shares. The above table reflects "contractual"
expense reimbursements from SAM, if any, but does not reflect "voluntary"
expense reimbursements by SAM.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer Tax Free
Money Market Fund to 0.65% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once in year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares.
122
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect for five years for
Safeco Tax-Free Money Market Fund and two years for Pioneer Tax Free Money
Market Fund and (f) and the Investor Class shares of Pioneer Tax Free Money
Market Fund convert to Class A shares after two years. The examples are for
comparison purposes only and are not a representation of either Fund's actual
expenses or returns, either past or future.
Example
Safeco Tax-Free Money Market Fund
Investor Class shares
Year 1 ............................. $ 76
Year 3 ............................. $ 237
Year 5 ............................. $ 411
Year 10 ............................ $ 918
Pro Forma Pioneer Tax Free Money Market Fund
Investor Class shares
Year 1 ............................. $ 66
Year 3 ............................. $ 262
Year 5 ............................. $ 530
Year 10 ............................ $1,296
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco Tax-Free Money Market Fund. The Trustees considered the
following matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Safeco Fund until August 2,
2004, was acquired by Symetra. Symetra informed the Trustees that it did not
intend to continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the resources of Pioneer. At June 30, 2004, Pioneer managed over
62 investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutional and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholder account
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market
fund that will be available to your Safeco Fund's shareholders through
exchanges. In addition, Pioneer offers shareholders additional options for
their accounts, including the ability to transact and exchange shares over the
telephone or online and the ability to access account values and transaction
history in all of the shareholder's direct accounts in the Pioneer Funds over
the telephone or online.
Third, Pioneer has experience in managing many other money market and tax
free portfolios. At September 30, 2004, Pioneer managed portfolios investing in
tax exempt securities with aggregate assets of $1.5 billion and money market
portfolios with assets of $531 million.
Fourth, Pioneer and its affiliates have greater potential for increasing
the size of your Safeco Fund due to Pioneer's experience in distributing mutual
funds through a broader range of distribution channels than currently available
to your Safeco Fund. Over the long-term, if this potential for a larger asset
base is realized, it is expected to increase the portfolio management options
available to the Fund.
Fifth, Pioneer's commitment until the second anniversary of the
Reorganization to limit the expenses (excluding extraordinary expenses) of the
Investor Class of Pioneer Tax Free Money Market Fund to 0.65% of average daily
net assets. This expense ratio is no higher than both the gross expenses and
expenses net of expense reimbursement of the Investor Class shares of your
Safeco Fund. Although you will experience higher expenses once the Investor
Class shares convert to Class A shares after two years, your expenses will
remain the same until the second anniversary of the Reorganization.
Sixth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account
123
in the future or may exchange those shares for Class A shares of another
Pioneer Fund or purchase Class A share of another Pioneer Fund without paying
any sales charge.
Seventh, the Investor Class shares of Pioneer Tax Free Money Market Fund
received in the Reorganization will provide Safeco Tax-Free Money Market Fund
shareholders with exposure to substantially the same investment product as they
currently have.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco
Funds and the Pioneer Funds associated with the Reorganizations, including, but
not limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses
of any proxy solicitation firm retained in connection with the Reorganizations;
(3) the legal fees and expenses incurred by the Safeco Funds in connection with
the Reorganizations; and (4) the Trustee fees and out of pocket expenses
incurred as a result of the Reorganizations.
The Trustees considered that Pioneer and Symetra will benefit from the
Reorganization. See "Certain Agreements between Pioneer and Symetra."
The Board of Trustees of Pioneer Tax Free Money Market Fund also
considered that the Reorganization presents an excellent opportunity for the
Pioneer Tax Free Money Market Fund to acquire investment assets without the
obligation to pay commissions or other transaction costs that a fund normally
incurs when purchasing securities.
This opportunity provides an economic benefit to Pioneer Tax Free Money
Market Fund and its shareholders.
CAPITALIZATION
The following table sets forth the capitalization of each Fund, as of
September 30, 2004, and pro forma combined Fund as of September 30, 2004.
Pioneer Tax Pro Forma
Safeco Tax-Free Free Money Pioneer Tax Free
Money Market Fund Market Fund Money Market Fund
September 30, 2004 September 30, 2004 September 30, 2004
-------------------- -------------------- -------------------
Total Net Assets (in thousands)
Investor Class shares ......... $53,351 N/A $53,351
Net Asset Value Per Share
Investor Class shares ......... $ 1.00 N/A $ 1.00
Shares Outstanding
Investor Class shares ......... 53,351,000 N/A 53,351,000
It is impossible to predict how many shares of Pioneer Tax Free Money
Market Fund will actually be received and distributed by your Safeco Fund on
the Reorganization date. The table should not be relied upon to determine the
amount of Pioneer Tax Free Money Market Fund's shares that will actually be
received and distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund.
Similarly, the Board of Trustees of Pioneer Tax Free Money Market Fund,
including its Independent Trustees, approved the Reorganization. They also
determined that the Reorganization is in the best interests of Pioneer Tax Free
Money Market Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
124
TERMS OF EACH AGREEMENT AND PLAN OF REORGANIZATION
The Reorganizations
o Each Reorganization is scheduled to occur at 4:00 p.m., Eastern time,
on December 10, 2004, unless your Safeco Fund and the corresponding
Pioneer Fund agree in writing to a later date. Your Safeco Fund will
transfer all of its assets to the corresponding Pioneer Fund. The
corresponding Pioneer Fund will assume your Safeco Fund's liabilities
that are included in the calculation of your Safeco Fund's net asset
value on the Closing Date. The net asset value of both Funds will be
computed as of 4:00 p.m., Eastern time, on the Closing Date.
o Each corresponding Pioneer Fund will issue to the corresponding Safeco
Fund Investor Class shares with an aggregate net asset value equal to
the net assets attributable to the corresponding Safeco Fund's shares.
These shares will immediately be distributed to your Safeco Fund's
shareholders in proportion to the relative net asset value of their
holdings of your Safeco Fund's shares on the Closing Date. As a
result, each Safeco Fund's shareholders will end up as Investor Class
shareholders of the corresponding Pioneer Fund.
o After the distribution of shares, your Safeco Fund will be liquidated
and dissolved.
o Each Reorganization is intended to result in no income, gain or loss
being recognized for federal income tax purposes and will not take
place unless both Funds receive a satisfactory opinion concerning the
tax consequences of the Reorganization from Wilmer Cutler Pickering
Hale and Dorr LLP, counsel to the Pioneer Funds.
Agreement and Plan of Reorganization
The shareholders of each Safeco Fund are being asked to approve an
Agreement and Plan of Reorganization, substantially in the form attached as
EXHIBIT A-1 or A-2 (each, a "Plan"). The description of the Plan contained
herein is qualified in its entirety by the attached copies, as appropriate.
Conditions to Closing each Reorganization. The obligation of each Pioneer
Fund to consummate each Reorganization is subject to the satisfaction of
certain conditions, including your Safeco Fund's performance of all of its
obligations under the Plan, the receipt of certain documents and financial
statements from your Safeco Fund and the receipt of all consents, orders and
permits necessary to consummate the Reorganization (see Sections 7 and 8 of the
Plan).
The obligations of both Funds are subject to the approval of the Plan by
the necessary vote of the outstanding shares of your Safeco Fund, in accordance
with the provisions of your Trust's trust instrument and by-laws. The Funds'
obligations are also subject to the receipt of a favorable opinion of Wilmer
Cutler Pickering Hale and Dorr LLP as to the federal income tax consequences of
each Reorganization. (See Section 8.5 of the Plan).
Termination of Agreement. The Board of either a Safeco Trust or the
corresponding Pioneer Fund may terminate the Plan (even if the shareholders of
your Safeco Fund have already approved it) at any time before the
Reorganization Date, if that Board believes in good faith that proceeding with
the Reorganization would no longer be in the best interests of shareholders.
TAX STATUS OF EACH REORGANIZATION
Each Reorganization is intended to result in no income, gain or loss being
recognized for United States federal income tax purposes and will not take
place unless both Funds involved in the Reorganization receive a satisfactory
opinion from Wilmer Cutler Pickering Hale and Dorr LLP, counsel to the Pioneer
Funds, substantially to the effect that each Reorganization will be a
"reorganization" within the meaning of Section 368(a) of the Code.
As a result, for federal income tax purposes:
o No gain or loss will be recognized by your Safeco Fund upon (1) the
transfer of all of its assets to the Pioneer Fund as described in this
Proxy Statement /Prospectus or (2) the distribution by your Safeco
Fund of Pioneer Fund shares to your Safeco Fund's shareholders;
o No gain or loss will be recognized by the Pioneer Fund upon the
receipt of your Safeco Fund's assets solely in exchange for the
issuance of Pioneer Fund shares to your Safeco Fund and the assumption
of your Safeco Fund's liabilities by the corresponding Pioneer Fund;
125
o The basis of the assets of your Safeco Fund acquired by the
corresponding Pioneer Fund will be the same as the basis of those
assets in the hands of your Safeco Fund immediately before the
transfer;
o The tax holding period of the assets of your Safeco Fund in the hands
of the corresponding Pioneer Fund will include your Safeco Fund's tax
holding period for those assets;
o You will not recognize gain or loss upon the exchange of your shares
of your Safeco Fund solely for the Pioneer Fund shares as part of the
Reorganization;
o The basis of the Pioneer Fund shares received by you in the
Reorganization will be the same as the basis of your shares of your
Safeco Fund surrendered in exchange; and
o The tax holding period of the Pioneer Fund shares you receive will
include the tax holding period of the shares of your Safeco Fund
surrendered in the exchange, provided that you held the shares of your
Safeco Fund as capital assets on the date of the exchange.
In rendering such opinions, counsel shall rely upon, among other things,
reasonable assumptions as well as representations of your Safeco Fund and the
Pioneer Fund (see the annexes to the Plan).
No tax ruling has been or will be received from the Internal Revenue
Service ("IRS") in connection with the Reorganizations. 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.
You should consult your tax adviser for the particular tax consequences to
you of the Reorganization, including the applicability of any state, local or
foreign tax laws.
126
PROPOSALS 2(a)-(h)
APPROVAL OF INTERIM INVESTMENT ADVISORY AGREEMENT WITH PIONEER
Background
Having determined to recommend the Reorganizations, the Trustees appointed
Pioneer as investment adviser to each Safeco Fund commencing August 2, 2004,
until the closing of the Reorganizations given that Symetra had indicated that
it did not wish to continue to offer investment advisory services to the Safeco
Funds.
Interim Investment Advisory Agreement
Under the Investment Company Act, shareholders must approve any new
investment advisory agreement for the Funds. However, Rule 15a-4 under the
Investment Company Act permits your Trustees to appoint an adviser on an
interim basis without prior shareholder approval if the new adviser agrees to
provide such services on the same terms as the previous adviser and approves
the investment advisory agreement with that adviser. An adviser may manage on
such an interim basis for a period 150 days. Because Pioneer will be making the
payment to Symetra discussed under "Background to the Reorganizations," any
fees that Pioneer would be entitled to under the interim investment advisory
agreement will be held in escrow by the Fund until shareholder approval of the
agreement is obtained. If shareholders of a Safeco Fund do not approve the
interim investment advisory agreement, Pioneer will not receive the fee under
the current investment advisory agreement with SAM but instead will be paid a
fee based upon Pioneer's cost in managing the Fund. During this period prior to
the meeting, the Funds will be managed as separate Fund and will not be
combined with a Pioneer Fund. During this period, you also will not be able to
exchange your shares in a Fund for shares of a Pioneer Fund. If the appointment
of Pioneer as interim investment adviser is not approved by December 30, 2004,
Pioneer will no longer provide advisory services to the Funds, unless an
extension of the 150 day period is permitted by a rule or independent position
of the staff of the SEC.
Reasons for Approving the Interim Investment Advisory Agreement and
Board's Recommendation
The Trustees recommend that the shareholders of the Safeco Funds approve
the interim investment advisory agreements. In determining to appoint Pioneer
as investment adviser on an interim basis, the Trustees considered many of the
same factors on which the recommendation to approve the Reorganizations are
based. These factors include:
o SAM, the investment adviser to the Safeco Funds until August 2, 2004,
was acquired by Symetra. Symetra informed the Trustees that it was not
interested in continuing to provide investment advisory services to
the Safeco Funds. Consequently, a change in your Safeco Fund's
investment adviser was necessary.
o The resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in
assets. Pioneer is part of the global asset management group of
UniCredito Italiano S.p.A., one of the largest banking groups in
Italy, providing investment management and financial services to
mutual funds, institutions, and other clients. As of June 30, 2004,
assets under management of UniCredito Italiano S.p.A. were
approximately $151 billion worldwide.
o The track record of Pioneer in managing other investment companies
with similar strategies.
o Pioneer's willingness to proceed with the Reorganization and to limit
expenses of the Portfolios as discussed above.
o Pioneer's investment process, style and philosophy with respect to
equity and fixed income investing.
o Pioneer's willingness to act as investment adviser to each of the
Funds.
o Pioneer's investment process, style and philosophy with respect to
equity and fixed income investing.
o The expertise and experience of Kenneth Taubes as portfolio manager of
several of Pioneer's bond funds and the head of fixed income
investments at Pioneer.
o Pioneer's willingness to act as investment adviser to each of the
Funds.
Safeco Advisory Agreement
The following is a summary of the material terms of the Safeco Advisory
Agreement. The Safeco Fund's Advisory Agreement with SAM terminated on August
2, 2004.
Services. Under the terms of the Safeco Advisory Agreement, SAM managed
the Funds' investments, subject to the supervision of the Board. At its
expense, SAM provided office space and all necessary office facilities,
equipment and personnel for managing the investments of the Funds.
127
Compensation. As compensation under the Safeco Advisory Agreement, each
Safeco Fund paid SAM a monthly advisory fee at an annual rate as listed in the
below table of the Fund's average daily net assets calculated each business day
and paid monthly, as listed in the table below. In addition, SAM had
contractually agreed to reimburse each Fund to the extent a Fund's total annual
expenses during any of the Fund's fiscal years, exceed 0.40% (0.30% for Safeco
Money Market Fund and Safeco Tax-Free Money Market Fund) of its average daily
net asset value in such year. This arrangement included all Fund operating
expenses except management fees, Rule 12b-1 fees, brokerage commissions,
interest, and extraordinary expenses.
- -----------------------------------------------------------------------------------------
Fund Net Assets Annual Fee
- -----------------------------------------------------------------------------------------
SAFECO CALIFORNIA TAX-FREE INCOME FUND, $0-$250,000,000 0.50 of 1%
SAFECO INTERMEDIATE-TERM $250,000,001-$750,000,000 0.45 of 1%
MUNICIPAL BOND FUND, Over $750,000,000 0.40 of 1%
SAFECOMUNICIPAL BOND FUND
- -----------------------------------------------------------------------------------------
SAFECO HIGH-YIELD BOND FUND $0-$250,000,000 0.65 of 1%
$250,000,00-$750,000,000 0.55 of 1%
Over $750,000,000 0.50 of 1%
- -----------------------------------------------------------------------------------------
SAFECO INTERMEDIATE-TERM BOND FUND $0-$750,000,000 0.50 of 1%
$750,000,001-$1,250,000,000 0.45 of 1%
Over $1,250,000,000 0.40 of 1%
- -----------------------------------------------------------------------------------------
SAFECO INTERMEDIATE-TERM $0-$250,000,000 0.55 of 1%
U.S. GOVERNMENT FUND $250,000,001-$750,000,000 0.50 of 1%
$750,000,001-$1,250,000,000 0.45 of 1%
Over $1,250,000,000 0.40 of 1%
- -----------------------------------------------------------------------------------------
SAFECO MONEY MARKET FUND, $0-$250,000,000 0.50 of 1%
SAFECO TAX-FREE MONEY MARKET FUND $250,000,001-$750,000,000 0.45 of 1%
$750,000,001-$1,250,000,000 0.40 of 1%
Over $1,250,000,000 0.35 of 1%
- -----------------------------------------------------------------------------------------
In addition to the management fee, your Safeco Fund paid SAM, in its
capacity as administrator and fund accounting agent an administrative services
fee of 0.05% of your Safeco Fund's average daily net assets up to the first
$200,000,000 and 0.01%, of its net assets thereafter, and an accounting fee of
0.04% of the Fund's average daily net assets up to the first $200,000,000 and
0.01% of its net assets thereafter.
128
The table below shows gross advisory fees paid by each Fund and any
expense reimbursements by SAM during the fiscal year ended December 31, 2003:
(In Thousands)
SAFECO CALIFORNIA TAX-FREE INCOME FUND
Advisory Fee ................................ $ 458
Reimbursement ............................... $ 109
SAFECO HIGH-YIELD BOND FUND
Advisory Fee ................................ $ 266
Reimbursement ............................... $ 152
SAFECO INTERMEDIATE-TERM BOND FUND
Advisory Fee ................................ $ 52
Reimbursement ............................... $ 99
SAFECO INTERMEDIATE-TERM MUNICIPAL BOND FUND
Advisory Fee ................................ $ 84
Reimbursement ............................... $ 103
SAFECO INTERMEDIATE-TERM U.S. GOVERNMENT FUND
Advisory Fee ................................ $ 332
Reimbursement ............................... $ 135
SAFECO MONEY MARKET FUND
Advisory Fee ................................ $1,960
Reimbursement ............................... $ 32
SAFECO MUNICIPAL BOND FUND
Advisory Fee ................................ $2,720
Reimbursement ............................... $ 10
SAFECO TAX-FREE MONEY MARKET FUND
Advisory Fee ................................ $ 364
Reimbursement ............................... $ 70
Limitation of Liability. The Safeco Advisory Agreement provided that SAM
shall not be subject to liability to the Funds or to any shareholder of the
Funds for any loss suffered by a Fund or its shareholders from or as a
consequence of any act or omission of SAM, or of any of the partners, employees
or agents of SAM in connection with or pursuant to the Agreement, except by
reason of willful misfeasance, bad faith or gross negligence on the part of SAM
in the performance of its duties or by reason of reckless disregard by SAM of
its obligations and duties under the Agreement.
129
VOTING RIGHTS AND REQUIRED VOTE
Each share of your Safeco Fund is entitled to one vote and each fractional
share shall be entitled to a proportionate fractional vote. A quorum is
required to conduct business at the Meeting. With respect to each Safeco Fund,
the presence in person or by proxy of one-third of the outstanding shares of a
Safeco Fund entitled to cast votes at the Meeting will constitute a quorum with
respect to that Safeco Fund. A favorable vote of a "majority of the outstanding
voting securities" of the applicable Fund is required to approve each Proposal.
Under the Investment Company Act, the vote of a majority of the outstanding
voting securities means the affirmative vote of the lesser of (i) 67% or more
of the shares of the applicable Safeco Fund represented at the meeting, if at
least 50% of all outstanding shares of the Safeco Fund are represented at the
meeting, or (ii) 50% or more of the outstanding shares of the Safeco Fund
entitled to vote at the meeting.
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Quorum Voting
- ------------------------------------------------------------------------------------------------------------------------------------
In General All shares "present" in person or by proxy are Shares "present" in person will be voted in
counted towards a quorum. person at the Meeting. Shares present by
proxy will be voted in accordance with
instructions.
- ------------------------------------------------------------------------------------------------------------------------------------
Broker Non-Vote (where the Considered "present" at Meeting for purposes Broker non-votes do not count as a vote "for"
underlying holder has not of quorum. and effectively result in a vote "against"
voted and the broker does not Proposals 1(a)-(h), and Proposal 2(a)-(h) if
have discretionary authority to less than 50% of the outstanding shares are
vote the shares) present at the Meeting
- ------------------------------------------------------------------------------------------------------------------------------------
Proxy with No Voting Considered "present" at Meeting for purposes Voted "for" the proposal.
Instruction (other than Broker of quorum.
Non-Vote)
- ------------------------------------------------------------------------------------------------------------------------------------
Vote to Abstain Considered "present" at Meeting for purposes Abstentions do not constitute a vote "for" and
of quorum. effectively result in a vote "against" Proposals
1(a)-(h), and Proposal 2(a)-(h) if less than
50% of the outstanding shares are present at
the Meeting.
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT THE PIONEER FUNDS
Investment Adviser
Pioneer serves as the investment adviser to each Pioneer Fund. 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 June 30, 2004, assets under management
were approximately $150 billion worldwide, including over $35 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 the Pioneer Funds is responsible for overseeing
the performance of each of Pioneer Fund's investment adviser and subadviser, if
any, and determining whether to approve and renew the fund's investment
advisory agreement and the subadvisory agreements.
Pioneer has received an order (the "Exemptive Order") from the SEC that
permits Pioneer, subject to the approval of the Pioneer Funds' Board of
Trustees, to hire and terminate a subadviser or to materially modify an
existing subadvisory agreement for a Pioneer 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
SEC adopts a rule that would supersede the Exemptive Order, Pioneer and the
Pioneer Funds intend to rely on such rule to permit Pioneer, subject to the
approval of the Pioneer Funds' Board of Trustees and any other applicable
conditions of the rule, to hire and terminate a subadviser or to materially
modify an existing subadvisory agreement for a Pioneer Fund without shareholder
approval.
130
Buying, Exchanging and Selling Shares of the Pioneer Funds
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).
Each Pioneer Fund generally values its portfolio 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, a Pioneer Fund may use a security's fair value. Fair value is
the valuation of a security determined on the basis of factors other than
market value in accordance with procedures approved by the Pioneer Funds'
Trustees. Each Pioneer Fund also may use the fair value of 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 due to factors affecting one or more
relevant securities markets or the specific issuer. The use of fair value
pricing by a Pioneer Fund may cause the net asset value of its shares to differ
from the net asset value that would be calculated using closing market prices.
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 a
Pioneer Fund could change on a day you cannot buy or sell shares of the fund.
Each Pioneer Fund may use a pricing service or a pricing matrix to value some
of its assets. Debt 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.
To the extent a Pioneer Fund invests in securities of non-U.S. issuers, the
markets for these securities generally close prior to the time the fund
determines its net asset value. However, the value of these securities continues
to be influenced by changes in the global markets. Consequently, the fund's
Trustees have determined to use the fair value of these securities as of the
time the fund determines its net asset value, based upon data from a pricing
service. On a daily basis, the pricing service recommends changes, based upon a
proprietary model, to the closing market prices of each non-U.S. security held
by the fund to reflect the security's fair value at the time the fund determines
its net asset value. The fund applies these recommendations in accordance with
procedures approved by the Trustees. A security's fair value determined in this
manner may differ from the security's closing market price on the date the fund
determines its net asset value or the opening price of the security on the next
business day. The fund's use of this method may significantly affect its net
asset value compared to the net asset value that would have been determined
using closing market prices. The fund also may take other factors influencing
specific markets or issuers into consideration in determining the fair value of
a non-U.S. security.
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. The Class A shares of the Pioneer Funds you receive in the
Reorganizations will not be subject to any sales charge. Moreover, if you own
shares in your own name as of the closing of the Reorganizations (i.e., not in
the name of a broker or other intermediary) and maintain your account, you may
purchase additional Class A shares of the corresponding Pioneer Fund through
such account in the future or may exchange those shares for Class A shares of
another Pioneer Fund without paying any sales charge.
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
described herein or in the Pioneer Fund's prospectus. Ask your investment
professional for more information.
If you invest in a Pioneer 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 the Pioneer 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 Pioneer Funds' 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 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 the personal identification number for the
account and sends you a written confirmation. Each Pioneer
131
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. 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 Pioneer 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.pioneerfunds.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 Pioneer Funds 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. If you place an order with your investment firm before the
New York Stock Exchange closes and your investment firm submits the order to
PFD prior to PFD's close of business (usually 5:30 p.m. Eastern time), your
share price will be calculated that day. Otherwise, your price per share will
be calculated at the close of the New York Stock Exchange after the distributor
receives your order. Your investment firm is responsible for submitting your
order to the distributor.
Buying Pioneer Fund Shares. You may buy shares of each Pioneer Fund from
any investment firm that has a sales agreement with PFD. If you do not have an
investment firm, please call 1-800-225-6292 for information on how to locate an
investment professional in your area.
You can buy shares of the Pioneer Funds 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.
Minimum Investment Amounts. Your initial investment 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 Reorganization.
Exchanging Pioneer Fund Shares. You may exchange your shares in a Pioneer
Fund for shares of the same class of another Pioneer mutual fund. Your exchange
request must be for at least $1,000 unless the fund you are exchanging into has
a different minimum. Each Pioneer 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 policy as described in each fund's prospectus.
Selling Pioneer Fund Shares. Your shares will be sold at net asset value
per share next calculated after the Pioneer Fund, or authorized agent, and 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. Each Pioneer 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 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.
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
132
o Your request includes a signature guarantee if you:
o Are selling over $100,000 or exchanging over $500,000 worth of shares
o Changed your account registration or address within the last 30 days
o Instruct the transfer agent to mail the check to an address different
from the one on your account
o Want the check paid to someone other than the account owner(s)
o Are transferring the sale proceeds to a Pioneer mutual fund account
with a different registration
Buying, Exchanging and Selling Pioneer Fund Shares
- --------------------------------------------------------------------------------------------------
Buying Shares
- --------------------------------------------------------------------------------------------------
Through Normally, your investment firm will send your purchase request
your investment to the Pioneer Funds' transfer agent. Consult your investment
firm professional for more information. Your investment firm may
receive a commission from the distributor for your purchase of
fund shares. The distributor or its affiliates may pay additional
compensation, out of their own assets, to certain investment
firms or their affiliates based on objective criteria established by
the distributor.
By phone or online You can use the telephone or online purchase privilege if you
have an existing non-retirement account or certain IRAs. You can
purchase additional fund shares by phone 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 $25,000 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
Pioneer 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, You can purchase Pioneer Fund shares for an existing fund
by mail or by fax account by mailing a check to the transfer agent. Make your
check payable to the Pioneer Fund. Neither initial nor subsequent
investments should be made by third party 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.
- --------------------------------------------------------------------------------------------------
Exchanging Shares
- --------------------------------------------------------------------------------------------------
Through Normally, your investment firm will send your exchange request to
your investment the Pioneer Fund's transfer agent. Consult your investment
firm professional for more information about exchanging your
shares.
By phone or online After you establish your Pioneer 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, You can exchange fund shares by mailing or faxing a letter of
by mail or by fax instruction to the transfer agent. You can exchange Pioneer Fund
shares directly through the Pioneer 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 your are exchanging
133
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Selling Shares
- --------------------------------------------------------------------------------
Normally, your investment firm will send your request to sell
shares to the Pioneer Funds' transfer agent. Consult your
investment professional for more information. Each Pioneer Fund
has authorized PFD to act as its agent in the repurchase of
Pioneer Fund shares from qualified investment firms. Each Pioneer
Fund reserves the right to terminate this procedure at any time.
You may sell up to $100,000 per account per day by phone or
online. You may sell Pioneer 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
You can sell some or all of your Pioneer Fund shares by writing
directly to the 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 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. You may not sell more than $100,000 per
account per day by fax.
- --------------------------------------------------------------------------------
How to contact Pioneer
- --------------------------------------------------------------------------------
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
By fax
Fax your exchange and sale requests to:
1-800-225-4240
Exchange Privilege
You may make up to four exchange redemptions of $25,000 or
more per account per calendar year.
Excessive Trading
The fund discourages excessive and/or trading practices, such as
market timing, that may disrupt portfolio management strategies
and harm fund request until it is received in performance. These
practices consist of:
o Selling shares purchased within the preceding 90 days;
o Two or more purchases and redemptions in any 90-day period;
or
o Any other series of transactions indicative of a timing pattern
If we identify an account that engages in such activity, the fund
and the distributor reserve the right to refuse or restrict any
purchase order (including exchanges) for that account and other
accounts under common ownership or control.
- --------------------------------------------------------------------------------
Pioneer Fund Shareholder Account Policies
Signature Guarantees and Other Requirements. 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 under state law) and federal savings and loan
associations. You cannot obtain a signature guarantee from a notary public. All
Pioneer Funds 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. Fiduciaries and corporations are required to submit additional
documents to sell Pioneer Fund shares.
Exchange Limitation. ou may only make up to four exchange redemptions of
$25,000 or more per account per calendar year out of a fund. Each fund's
exchange limitation is intended to discourage short-term trading in fund
shares. Short-term trading can increase the expenses incurred by the fund and
make portfolio management less efficient. In determining whether the exchange
redemption limit has been reached, Pioneer may aggregate a series of exchanges
(each valued at less than $25,000) and/or fund accounts that appear to be under
common ownership or control. Pioneer may view accounts for which one person
gives instructions or accounts that act on advice provided by a single source
to be under common control.
The exchange limitation does not apply to automatic exchange transactions
or to exchanges made by participants in employer-sponsored retirement plans
qualified under Section 401(a) of the IRC. While financial intermediaries that
maintain omnibus accounts that
134
invest in the fund are requested to apply the exchange limitation policy to
shareholders who hold shares through such accounts, we do not impose the
exchange limitation policy at the level of the omnibus account and are not able
to monitor compliance by the financial intermediary with this policy.
Excessive Trading. The fund discourages excessive and short-term trading
practices, such as market timing, that may disrupt portfolio management
strategies and harm fund performance. 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 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 is indicative of a timing
pattern or strategy; or
o We reasonably believe that you have engaged in such practices in
connection with other mutual funds.
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 has engaged in excessive short-term trading that we believe may be
harmful to the fund, we will ask the investor or broker to cease such activity
and we will refuse to process purchase orders (including purchases by exchange)
of such investor, broker 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. We also limit
the number of exchanges of $25,000 or more in any calendar year.
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. 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, are
aggregated. Our ability to monitor trading practices by investors purchasing
shares through omnibus accounts is limited and dependent upon the cooperation
of the financial intermediary in observing the fund's policies.
Minimum Account Size. Each Pioneer Fund requires that you maintain a
minimum account value of $500. If you hold less than the minimum in your
account because you have sold or exchanged some of your shares, the Pioneer
Fund will notify you of its intent to sell your shares and close your account.
You may avoid this by increasing the value of your account to at least the
minimum within six months of the notice from the fund.
Telephone Access. You may have difficulty contacting the Pioneer Fund by
telephone during times of market volatility or disruption in telephone service.
If you are unable to reach the Pioneer Fund by telephone, you should
communicate with the fund in writing.
Share Certificates. Normally, your shares will remain on deposit with the
transfer agent and certificates will not be issued. If you are legally required
to obtain a certificate, you may request one for your Class A shares only. A
fee may be charged for this service. Any share certificates of the Safeco Funds
outstanding at the Closing of the Reorganization will be deemed to be cancelled
and will no longer represent shares of the Funds.
Other Policies. Each Pioneer Fund may suspend transactions in shares when
trading on the New York Stock Exchange is closed or restricted, when an
emergency exists that makes it impracticable, as determined by the SEC, for the
fund to sell or value its portfolio securities or with the permission of the
SEC.
Each Pioneer Fund or PFD may revise, suspend or terminate the account
options and services available to shareholders at any time.
Each Pioneer Fund reserves the right to redeem in kind by delivering
portfolio securities to a redeeming shareholder, provided that the Pioneer Fund
must pay redemptions in cash if a shareholder's aggregate redemptions in a 90
day period are less than $250,000 or 1% of the fund's net assets.
Dividends and Capital Gains
Each Pioneer Fund generally pays any distributions of net short- and
long-term capital gains and dividends from any net investment income at least
annually.
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 the 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.
135
Taxes
For U.S. federal income tax purposes, distributions from each Pioneer
Fund's net long-term capital gains (if any) are considered long-term capital
gains and may be taxable to you at different maximum rates depending upon their
source and other factors. Distributions from each Pioneer Fund's net short-term
capital gains and dividends from net investment income (other than
exempt-interest dividends, as described below) are taxable as ordinary income.
Since each Pioneer Fund's income is derived primarily from sources that do not
pay "qualified dividend income," taxable dividends from each such fund
generally will not qualify for taxation at the maximum 15% U.S. federal income
tax rate available to individuals on qualified dividend income. For the Pioneer
Tax Free Income Fund, Pioneer Municipal Bond Fund, Pioneer Tax Free Money
Market Fund, and Pioneer California Tax Free Income Fund, dividends from each
such fund's tax-exempt interest, called "exempt-interest dividends," are exempt
from regular federal income tax.
When you sell or exchange Pioneer 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. In January of each year each Pioneer Fund will mail to
you information about your dividends, distributions and any shares you sold in
the previous calendar year.
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 Pioneer Fund will withhold 28% "backup
withholding" tax from your dividends (other than exempt-interest dividends) and
distributions, sale proceeds and any other payments to you.
You should ask your tax adviser about any federal, state and foreign tax
considerations, including possible additional withholding taxes for non-U.S.
shareholders. You may also consult the "Tax Status" section of each Pioneer
Fund's statement of additional information for a more detailed discussion of
U.S. federal income tax considerations, including qualified dividend income
considerations that may affect the Pioneer Fund and its shareholders.
Pioneer Funds' Class A Rule 12b-1 Plans
As described above, each Pioneer Fund has adopted a Rule 12b-1 plan for
its Class A shares (the "Class A Plans" or the "Plans"). Because the 12b-1 fees
payable under each Plan are an ongoing expense, over time they may increase the
cost of your investment and your shares may cost more than shares that are not
subject to a distribution or service fee or sales charge.
COMPENSATION AND SERVICES. Each Class A Plan is a reimbursement plan, and
distribution expenses of PFD are expected to substantially exceed the
distribution fees paid by the fund in a given year. Pursuant to each Class A
Plan the fund reimburses PFD for its actual expenditures to finance any
activity primarily intended to result in the sale of Class A shares or to
provide services to holders of Class A shares, provided the categories of
expenses for which reimbursement is made are approved by the Board of Trustees.
The expenses of the fund pursuant to the Class A Plan are accrued daily at a
rate which may not exceed the annual rate of 0.25% of the fund's average daily
net assets attributable to Class A shares.
TRUSTEE APPROVAL AND OVERSIGHT. Each Plan was last approved by the Board
of Trustees of each Pioneer Fund, including a majority of the independent
Trustees, by votes cast in person at meetings called for the purpose of voting
on the Plan on December 6, 2003. Pursuant to the Plan, at least quarterly, PFD
will provide each fund with a written report of the amounts expended under the
Plan and the purpose for which these expenditures were made. The Trustees
review these reports on a quarterly basis to determine their continued
appropriateness.
TERM, TERMINATION AND AMENDMENT. Each Plan's adoption, terms, continuance
and termination are governed by Rule 12b-1 under the Investment Company Act.
The Board of Trustees believes that there is a reasonable likelihood that the
Plans will benefit each fund and its current and future shareholders. The Plans
may not be amended to increase materially the annual percentage limitation of
average net assets which may be spent for the services described therein
without approval of the shareholders of the fund affected thereby, and material
amendments of the Plans must also be approved by the Trustees as provided in
Rule 12b-1.
136
FINANCIAL HIGHLIGHTS
The following tables show the financial performance of each Pioneer Fund
for the past five fiscal years and, if applicable, for any recent semiannual
period (or the period during which each Pioneer Fund has been in operation, if
less than five years). Certain information reflects financial results for a
single Pioneer Fund share. "Total return" shows how much an investment in a
Pioneer Fund would have increased or decreased during each period, assuming you
had reinvested all dividends and other distributions. In the case of each
Pioneer Fund, each fiscal year ended on or after the fiscal year ended June 30,
2002 has been audited by Ernst & Young LLP, each Pioneer Fund's independent
registered public accounting firm, as stated in their reports incorporated by
reference in this registration statement. For fiscal years prior to the fiscal
year ended June 30,2002, the financial statements of each Pioneer Fund were
audited by Arthur Anderson LLP. The information for any semi-annual period has
not been audited.
PIONEER HIGH YIELD FUND
FINANCIAL HIGHLIGHTS
Six Months
Ended Year Year Year Year Year
4/30/04 Ended Ended Ended Ended Ended
CLASS A (Unaudited) 10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
- -------- ------------ ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period ............ $ 11.59 $ 9.14 $ 10.41 $ 11.35 $ 9.65 $ 8.50
---------- ---------- ---------- -------- ------- --------
Increase (decrease) from investment operations:
Net investment income .......................... $ 0.35 $ 0.80 $ 0.96 $ 1.08 $ 0.96 $ 0.70
Net realized and unrealized gain (loss)
on investments .............................. 0.17 2.45 (1.24) (0.62) 1.94 1.14
---------- ---------- ---------- -------- ------- --------
Net increase (decrease) from investment
Operations .................................. $ 0.52 $ 3.25 $ (0.28) $ 0.46 $ 2.90 $ 1.84
Distributions to shareholders:
Net investment income .......................... (0.37) (0.79) (0.99) (1.06) (1.05) (0.69)
Net realized gain .............................. (0.01) (0.01) -- (0.34) (0.15) --
---------- ---------- ---------- -------- ------- --------
Net increase (decrease) in net asset value ..... $ 0.14 $ 2.45 $ (1.27) $ (0.94) $ 1.70 $ 1.15
---------- ---------- ---------- -------- ------- --------
Net asset value, end of period .................. $ 11.73 $ 11.59 $ 9.14 $ 10.41 $ 11.35 $ 9.65
---------- ---------- ---------- -------- ------- --------
Total return* ................................... 4.43% 36.83% (3.43)% 4.32% 31.12% 22.20%
========== ========== ========== ======== ======= ========
Ratio of net expenses to average net assets ..... 1.02%**+ 1.06% 1.03%+ 0.96%+ 0.95%+ 1.90%
Ratio of net investment income to average
net assets ................................... 5.87%**+ 7.30%+ 9.20%+ 9.54%+ 8.96%+ 7.13%
Portfolio turnover rate ........................ 54%** 38% 29% 24% 57% 64%
Net assets, end of period (in thousands) ....... $3,660,416 $3,268,359 $1,260,074 $345,825 $57,592 $ 7,591
Ratios with no waiver of management fees by
PIM and no reduction for fees paid indirectly:
Net expenses ................................... 1.02%** 1.06%+ 1.10% 1.24% 1.94% 3.67%
Net investment income .......................... 5.87%** 7.30% 9.13% 9.26% 7.97% 5.36%
Ratios with waiver of management fees by PIM
and reduction for fees paid indirectly:
Net expenses ................................... 1.02%** 1.06% 1.03% 0.93% 0.88% 1.90%
Net investment income .......................... 5.87%** 7.30% 9.20% 9.57% 9.03% 7.13%
- ----------
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of each period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
137
PIONEER BOND FUND
FINANCIAL HIGHLIGHTS
Year
Ended Year Year Year Year
6/30/04 Ended Ended Ended Ended
CLASS A (Unaudited) 6/30/03 6/30/02(a) 6/30/01 6/30/00
- ------- ----------- -------- ---------- -------- ----------
Net asset value, beginning of period ...................... $ 9.41 $ 8.89 $ 8.78 $ 8.47 $ 8.94
--------- -------- -------- ------- --------
Increase from investment operations:
Net investment income .................................... $ 0.41 $ 0.45 $ 0.52 $ 0.57 $ 0.58
Net realized and unrealized gain (loss) on investments ... (0.14) 0.53 0.13 0.31 (0.47)
--------- -------- -------- ------- ---------
Net increase from investment operations .................. $ 0.27 $ 0.98 $ 0.65 $ 0.88 $ 0.11
Distributions to shareholders:
Net investment income .................................... (0.50) (0.46) (0.54) (0.57) (0.58)
--------- -------- --------- ------- ---------
Net increase (decrease) in net asset value ............... $ (0.23) $ 0.52 $ 0.11 $ 0.31 (0.47)
--------- -------- --------- -------- ---------
Net asset value, end of period ........................... $ 9.18 $ 9.41 $ 8.89 $ 8.78 $ 8.47
========= ======== ========= ======== =========
Total return* ............................................. 2.98% 11.38 7.58% 10.70% 1.30%
Ratio of net expenses to average net assets+ .............. 1.14%(b) 1.20 1.16% 1.21% 1.18%
Ratio of net investment income to average net assets+ ..... 4.42%(b) 5.02 5.79% 6.53% 6.68%
Portfolio turnover rate ................................... 63% 48 59% 43% 60%
Net assets, end of period (in thousands) .................. $ 160,421 $183,338 $143,713 $98,004 $102,349
Ratios with reductions for fees paid indirectly:
Net expenses ............................................. 1.14%(b) 1.20 1.16% 1.18% 1.15%
Net investment income .................................... 4.42%(b) 5.02 5.79% 6.56% 6.71%
- ----------
* 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.
(a) As a result of a change in accounting principle, the effect due to
mandatory accretion of discounts and amortization of premiums on debt
securities resulted in a reduction of net investment income of $0.02 per
share, an increase in net realized and unrealized gain (loss) on
investments of $0.02 per share, and the ratio of net investment income to
average net assets decreased by 0.18%.
(b) Ratios include the revision of estimate for printing expenses.
138
PIONEER TAX FREE INCOME FUND
FINANCIAL HIGHLIGHTS
Six Months
Ended Year Year Year Year Year
6/30/04 Ended Ended Ended Ended Ended
CLASS A (Unaudited) 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99
- ------- ------------ ----------- ---------- ----------- ---------- ---------
Net asset value, beginning of period .................. $ 11.70 $ 11.61 $ 11.47 $ 11.70 $ 10.98 $ 12.02
-------- -------- -------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income ................................ $ 0.28 $ 0.56 $ 0.56 $ 0.53 $ 0.52 $ 0.51
Net realized and unrealized gain (loss) on investments (0.47) 0.09 0.23 (0.05) 0.72 (1.02)
-------- -------- -------- -------- -------- --------
Net increase (decrease) from investment operations ... $ (0.19) $ 0.65 $ 0.79 $ 0.48 $ 1.24 $ (0.51)
Distributions to shareholders:
Net investment income ................................ (0.27) (0.56) (0.57) (0.53) (0.52) (0.51)
In excess of net investment income ................... -- -- -- -- 0.00(a) --
Net realized gain .................................... -- -- (0.08) (0.18) -- (0.02)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in net asset value ............ $ (0.46) $ 0.09 $ 0.14 $ (0.23) $ 0.72 $ (1.04)
Net asset value, end of period ........................ $ 11.24 $ 11.70 $ 11.61 $ 11.47 $ 11.70 $ 10.98
======== ======== ======== ======== ======== ========
Total return* ......................................... (1.65)% 5.80% 7.07% 4.13% 11.63% (4.29%)
Ratio of net expenses to average net assets+ .......... 0.91%** 0.93% 0.93% 0.92% 0.95% 0.93%
Ratio of net investment income to average net assets+ . 4.95% 4.88% 4.83% 4.49% 4.62% 4.43%
Portfolio turnover rate ............................... 49%** 80% 161% 92% 14% 24%
Net assets, end of period (in thousands) .............. $301,732 $326,173 $343,872 $333,867 $341,179 $368,559
Ratios with reductions for fees paid indirectly:
Net expenses ......................................... 0.91%** 0.93% 0.92% 0.91% 0.91% 0.92%
Net investment income ................................ 4.95%** 4.88% 4.84% 4.50% 4.66% 4.44%
- ----------
(a) Amount rounds to less than one cent per share
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, 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.
** Annualized.
139
PIONEER AMERICA INCOME TRUST
FINANCIAL HIGHLIGHTS
Six Months
Ended Year Year Year Year Year
6/30/04 Ended Ended Ended Ended Ended
CLASS A (Unaudited) 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99
- ------- ------------- ----------- ---------- ----------- --------- ----------
Net asset value, beginning of period ...................... $ 9.95 $ 10.27 $ 9.79 $ 9.76 $ 9.30 $ 10.10
-------- -------- -------- -------- ------- --------
Increase from investment operations:
Net investment income .................................... $ 0.19 $ 0.28 $ 0.40 $ 0.52 $ 0.58 $ 0.55
Net realized and unrealized gain (loss) on investments ... (0.20) (0.13) 0.54 0.05 0.46 (0.80)
-------- -------- -------- -------- ------- --------
Net increase (decrease) from investment operations ....... $ (0.01) $ 0.15 $ 0.94 $ 0.57 $ 1.04 $ (0.25)
Distributions to shareholders:
Net investment income .................................... (0.22) (0.47) (0.46) (0.51) (0.58) (0.55)
Net realized gain ........................................ -- -- -- (0.03) -- --
-------- -------- -------- -------- ------- --------
Net increase (decrease) in net asset value ............... $ (0.23) $ (0.32) $ 0.48 $ 0.03 $ 0.46 $ (0.80)
-------- -------- -------- -------- ------- --------
Net asset value, end of period ........................... $ 9.72 $ 9.95 $ 10.27 $ 9.79 $ 9.76 $ 9.30
======== ======== ======== ======== ======= ========
Total return* ............................................. (0.14)% 1.47% 9.78% 5.92% 11.58% (2.52)%
Ratio of net expenses to average net assets+ .............. 1.17%** 1.10% 1.00% 1.01% 1.04% 1.01%
Ratio of net investment income to average net assets+ ..... 4.05%** 2.85% 4.17% 5.14% 6.09% 5.63%
Portfolio turnover rate ................................... 32%** 66% 76% 72% 56% 72%
Net assets, end of period (in thousands) .................. $129,465 $153,939 $164,393 $115,998 $96,068 $111,262
Ratios with no waiver of management fees by PIM and no
reductions for fees paid indirectly:
Net expenses ............................................. 1.17%** 1.12% 1.08% 1.12% 1.16% 1.14%
Net investment income ..................................... 4.05%** 2.83% 4.09% 5.03% 5.97% 5.50%
Ratios with waiver of management fees by PIM and reductions
for fees paid indirectly:
Net expenses ............................................. 1.17%** 1.10% 1.00% 1.00% 1.00% 1.00%
Net investment income .................................... 4.05%** 2.85% 4.18% 5.15% 6.13% 5.64%
- ----------
* 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.
(a) On January 1, 2001, the Trust began accreting discounts and amortizing
premiums on debt securities. The effect of this change for the year ended
December 31, 2001, was to decrease net investment income by $0.02 per
share, increase net realized and unrealized gain (loss) by $0.02 per share
and decrease the ratio of net investment income to average net assets
assuming waiver of management fees by PIM and reduction for fees paid
indirectly from 5.35% to 5.15%. Per share ratios and supplemental data for
periods prior to January 1, 2001, have not been restated to reflect this
change in presentation.
** Annualized.
140
PIONEER CASH RESERVES FUND
FINANCIAL HIGHLIGHTS
Six Months
Ended Year Year Year Year Year
6/30/04 Ended Ended Ended Ended Ended
CLASS A (Unaudited) 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99
- -------- ----------- ---------- ----------- ----------- ----------- ---------
Net asset value, beginning of period ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income ..................................... $ 0.001 $ 0.003 $ 0.01 $ 0.03 $ 0.05 $ 0.04
Distributions to shareholders:
Net investment income ..................................... (0.03) (0.003) (0.01) (0.03) (0.05) (0.04)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Total return* .............................................. 0.09% 0.26% 1.15% 3.29% 5.53% 4.23%
Ratio of net expenses to average net assets ................ 0.98%** 1.00% 0.76% 0.93% 1.02% 1.01%
Ratio of net investment income to average net assets ....... 0.19%** 0.26% 1.18% 2.89% 5.36% 4.11%
-------- -------- -------- -------- -------- --------
Net assets, end of period (in thousands) ................... $301,139 $227,052 $268,861 $493,871 $242,861 $287,126
======== ======== ======== ======== ======== ========
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reductions for fees paid indirectly:
Net expenses .............................................. 0.98%** 1.06% 0.93% 0.94% 1.02% 1.01%
Net investment income ..................................... 0.19%** 0.20% 1.01% 2.88% 5.36% 4.11%
Ratios with waiver of management fees and assumption of
expenses by PIM and reductions for fees paid indirectly:
Net expenses .............................................. 0.98%** 0.99% 0.75% 0.89% 0.94% 0.95%
Net investment income ..................................... 0.19%** 0.27% 1.19% 2.93% 5.44% 4.17%
- ----------
* 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.
** Annualized.
141
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 and officers of
your Safeco Fund or by its affiliates, including personnel of your Safeco
Fund's transfer agent, Pioneer Funds' investment adviser, Pioneer, Pioneer
Funds' transfer agent, PIMSS, or by broker-dealer firms. Georgeson Shareholder
Communications Corporation, 17 State Street, New York, NY 10004 has been
retained to provide proxy solicitation services to the Funds at a cost of
approximately $30,000. Pioneer and Symetra will bear the cost of such
solicitation.
Revoking Proxies
A Safeco Fund shareholder signing and returning a proxy has the power to
revoke it at any time before it is exercised:
o by filing a written notice of revocation with your Safeco Fund's
transfer agent, Safeco Services Corporation, at 4854 154th Place,
N.E., Redmond, WA 98052, or
o by returning a duly executed proxy with a later date before the time
of the Meeting, or
o if a shareholder has executed a proxy but is present at the Meeting
and wishes to vote in person, by notifying the secretary of your
Safeco 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 and Quorum
Only shareholders of record on October 8, 2004 (the "record date") are
entitled to notice of and to vote at the Meetings. As of the record date, the
following number of shares of each Safeco Fund were outstanding.
Shares Outstanding
Safeco Fund (as of October 8, 2004)
- ------------ ------------------------
Safeco California Tax-Free Income Fund ................ 7,787,094.598
Safeco High-Yield Bond Fund ........................... 6,824,746.096
Safeco Intermediate-Term Bond Fund .................... 1,108,689.158
Safeco Intermediate-Term Municipal Bond Fund .......... 1,047,405.901
Safeco Intermediate-Term U.S. Government Fund ......... 5,981,137.025
Safeco Money Market Fund .............................. 185,097,462.781
Safeco Municipal Bond Fund ............................ 37,390,239.812
Safeco Tax-Free Money Market Fund ..................... 52,150,057.170
Other Business
Your Safeco Fund's Board of Trustees knows of no business to be presented
for consideration at the Meetings other than Proposals 1(a)-(h) and 2(a)-(h).
If other business is properly brought before a Meeting, proxies will be voted
according to the best judgment of the persons named as proxies.
Adjournments
If, by the time scheduled for a Meeting, a quorum of shareholders of a
Fund is not present or if a quorum is present but sufficient votes "for" the
proposals have not been received, the persons named as proxies may propose the
Meeting with respect to one or more of the Funds 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 for that Fund without further notice. Any such
adjournment will require the affirmative vote of a majority of the votes cast
on the question 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. They will
vote against such adjournment those proxies required to be voted against the
proposal. Broker non-votes will be disregarded in the vote for adjournment. If
the adjournment requires setting a new record date or the adjournment is for
more than 120 days of the original Meeting (in which case the Board of Trustees
of your Safeco Fund will set a new record date), your Safeco Fund will give
notice of the adjourned meeting to its shareholders.
142
Telephone Voting
In addition to soliciting proxies by mail, by fax or in person, your
Safeco Fund may also arrange to have votes recorded by telephone by officers
and employees of your Safeco Fund or by personnel of the adviser or transfer
agent or a third party solicitation firm. The telephone voting procedure is
designed to verify a shareholder's identity, to allow a shareholder to
authorize the voting of shares in accordance with the shareholder's
instructions and to confirm that the voting instructions have been properly
recorded. If these procedures were subject to a successful legal challenge,
these telephone votes would not be counted at the Meeting. Your Safeco Fund has
not obtained an opinion of counsel about telephone voting, but is currently not
aware of any challenge.
o A shareholder will be called on a recorded line at the telephone
number in the Fund's account records and will be asked to provide the
shareholder's social security number or other identifying information.
o The shareholder will then be given an opportunity to authorize proxies
to vote his or her shares at the Meeting in accordance with the
shareholder's instructions.
o To ensure that the shareholder's instructions have been recorded
correctly, the shareholder will also receive a confirmation of the
voting instructions by mail.
o A toll-free number will be available in case the voting information
contained in the confirmation is incorrect.
o If the shareholder decides after voting by telephone to attend the
Meeting, the shareholder can revoke the proxy at that time and vote
the shares at the Meeting.
Internet Voting
You will also have the opportunity to submit your voting instructions via
the Internet by utilizing a program provided through a vendor. Voting via the
Internet will not affect your right to vote in person if you decide to attend
the Meeting. Do not mail the proxy card if you are voting via the Internet. To
vote via the Internet, you will need the "control number" that appears on your
proxy card. These Internet voting procedures are designed to authenticate
shareholder identities, to allow shareholders give their voting instructions,
and to confirm that shareholders instructions have been recorded properly. If
you are voting via the Internet you should understand that there may be costs
associated with electronic access, such as usage charges from Internet access
providers and telephone companies, that must be borne by you.
o Read the Proxy Statement/Prospectus and have your proxy card at hand.
o Go to the Web site listed on your proxy card.
o Enter control number found on your proxy card.
o Follow the simple instructions on the Web site. Please call
[ ] us at [1-800 ] if you have any problems.
o To insure that your instructions have been recorded correctly you will
receive a confirmation of your voting instructions immediately after
your submission and also by e-mail if chosen.
Shareholders' Proposals
Your Safeco 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 shareholders desiring to present a proposal for consideration at
the next meeting for shareholders must submit the proposal in writing, so that
it is received by the your Safeco Fund to Safeco Mutual Funds, Attention Legal
Department, 4854 154th Place, N.E., Redmond, WA 98052 within a reasonable time
before any meeting. If the reorganization is completed, your Safeco Fund will
not hold another shareholder meeting.
Appraisal Rights
If the Reorganization of your Safeco Fund is approved at the Meeting,
shareholders of your Safeco Fund will not have the right to dissent and obtain
payment of the fair value of their shares because the exercise of appraisal
rights is subject to the forward pricing requirements of Rule 22c-1 under the
Investment Company Act, which supersede state law. Shareholders of your Safeco
Funds, however, have the right to redeem their Fund shares until the closing
date of the Reorganizations. After the Reorganization, shareholders of your
Safeco Funds will hold shares of the Pioneer Funds which may also be redeemed
at net asset value without being subject to deferred sales charges.
143
OWNERSHIP OF SHARES OF THE SAFECO FUNDS
To the knowledge of your Safeco Fund, as of September 30, 2004, the
following persons owned of record or beneficially 5% or more of the outstanding
shares of each of the Safeco Funds.
- ----------------------------------------------------------------------------------------------------------------
Safeco Fund Shareholder Name and Address Percentage Owned
- ----------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term U.S. Charles Schwab & Co. Inc. 5.64%
Government Fund Exclusive Benefit of Its Customers
Attn: Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122
- ----------------------------------------------------------------------------------------------------------------
Safeco Municipal Bond Fund Charles Schwab & Co. Inc. 7.39%
Exclusive Benefit of Its Customers
Attn: Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122
- ----------------------------------------------------------------------------------------------------------------
Safeco Money Market Fund The Williams Companies, Inc. 9.29%
ATTN: Lenore Dubaldo
One Williams Center
Tulsa, OK 74172-0140
- ----------------------------------------------------------------------------------------------------------------
Pacificare Health Systems, Inc. 7.56%
5995 Plaza Drive
Cypress, CA 90630
- ----------------------------------------------------------------------------------------------------------------
Service Corporation International 6.33%
1929 Allen Parkway
Houston, TX 77019
- ----------------------------------------------------------------------------------------------------------------
Safeco California Tax-Free Income Fund Charles Schwab & Co. Inc. 17.11%
Exclusive Benefit of Its Customers
Attn: Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122
- ----------------------------------------------------------------------------------------------------------------
FTC & Co. 16.41%
Attn: Datalynx-House Acct
PO Box 173736
Denver, CO 80217-3736
- ----------------------------------------------------------------------------------------------------------------
Safeco High-Yield Bond Fund Charles Schwab & Co. Inc. 13.17%
Exclusive Benefit of Its Customers
Attn: Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122
- ----------------------------------------------------------------------------------------------------------------
Safeco High-Yield Bond Fund Wells Fargo & Company 9.06%
420 Montgomery Street
San Francisco, California 94163
- ----------------------------------------------------------------------------------------------------------------
Safeco High-Yield Bond Fund National Financial Services Corp. 8.06%
for the Exclusive Benefit of Our Customers
Attn.: Mutual Funds Dept. 5th Fl.
200 Liberty St., 1 World Financial Center
New York, NY 10281-1003
- ----------------------------------------------------------------------------------------------------------------
144
- ----------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund Symetra Asset Management Co.
4854 154th Place NE
Redmond, WA 98052 41.17%
- ----------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Municipal William A. Helsell 13.64%
Bond Fund 10653 Culpepper Ct. N.W.
Seattle, WA 98177-5319
- ----------------------------------------------------------------------------------------------------------------
Charles Schwab & Co. Inc. 12.44%
Exclusive Benefit of Its Customers
Attn: Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122
- ----------------------------------------------------------------------------------------------------------------
Howard C. Lincoln 7.79%
6 Holly Hill Drive
Mercer Island, WA 98040-5326
- ----------------------------------------------------------------------------------------------------------------
As of December 31, 2003, the Trustees and officers of your Safeco Fund, as
a group, owned in the aggregate less than 1% of the outstanding shares of your
Safeco Fund.
145
OWNERSHIP OF SHARES OF THE PIONEER FUNDS
To the knowledge of your Pioneer Fund, as of September 30, 2004, the
following persons owned of record or beneficially 5% or more of the outstanding
shares of each of the Pioneer Funds.
- -------------------------------------------------------------------------------------------------------
Actual Percentage
Fund/Class Shareholder Name and Address Owned
- -------------------------------------------------------------------------------------------------------
Pioneer High Yield Fund
- -------------------------------------------------------------------------------------------------------
Class A shares MLPFS For The Sole Benefit of its Customers 10.68%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- -------------------------------------------------------------------------------------------------------
Charles Schwab & Co. Inc. 13.65%
Special Custody Account for the benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
- -------------------------------------------------------------------------------------------------------
Class B shares MLPFS For The Sole Benefit of its Customers 21.59%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- -------------------------------------------------------------------------------------------------------
Citigroup Global Markets Inc. 11.01%
333 West 34th St., 7th Fl.
New York, NY 10001-2402
- -------------------------------------------------------------------------------------------------------
Class C shares Citigroup Global Markets Inc. 13.50%
333 West 34th St., 7th Fl.
New York, NY 10001-2402
- -------------------------------------------------------------------------------------------------------
MLPFS For The Sole Benefit of its Customers 28.64%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- -------------------------------------------------------------------------------------------------------
Class R Shares ING National Trust, Trustee 28.45%
Agreement and Aetna 403(b)(7)
Custodial Acct 3/26/97 Trustee for Thomas J. Botticelli
DTD 4/22/96
151 Farmington Avenue -- TN41
Hartford, CT 06156-0001
- -------------------------------------------------------------------------------------------------------
MLPFS For The Sole Benefit of its Customers 14.50%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- -------------------------------------------------------------------------------------------------------
Aetna Life Insurance & Annuity Co. 37.73%
151 Farmington Avenue -- TN41
Hartford, CT 06156-0001
- -------------------------------------------------------------------------------------------------------
Class Y Shares National investor Services 5.06%
FBO 097-50000-19
55 Water Street, 32nd Floor
New York, NY 10041-3299
- -------------------------------------------------------------------------------------------------------
146
- -------------------------------------------------------------------------------------------------------
Actual Percentage
Fund/Class Shareholder Name and Address Owned
- -------------------------------------------------------------------------------------------------------
Pioneer Bond Fund
- -------------------------------------------------------------------------------------------------------
Class B shares MLPFS For The Sole Benefit of its Customers 11.05%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- -------------------------------------------------------------------------------------------------------
Class C shares MLPFS For The Sole Benefit of its Customers 14.54%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- -------------------------------------------------------------------------------------------------------
Citigroup Global Markets Inc. 5.96%
333 West 34th St., 7th Fl.
New York, NY 10001-2402
- -------------------------------------------------------------------------------------------------------
Class R Shares MLPFS For The Sole Benefit of its Customers 69.32%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- -------------------------------------------------------------------------------------------------------
MCB Trust Services Cust. FBO Bach Petroleum Retirement 6.01%
700 17th St., Ste 300
Denver, CO 80202-3531
- -------------------------------------------------------------------------------------------------------
MCB Trust Services Cust. FBO 21.66%
United Construction Trades & Industrial Employee
International Union 401(k)
700 17th St., Ste 300
Denver, CO 80202-3531
- -------------------------------------------------------------------------------------------------------
Class Y Shares First Command Bank 68.15%
Attn: Trust Dept.
P.O. Box 90101-2075
- -------------------------------------------------------------------------------------------------------
MLPFS For The Sole Benefit of its Customers 17.10%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- -------------------------------------------------------------------------------------------------------
Pioneer Tax Free Income Fund
- -------------------------------------------------------------------------------------------------------
Class B shares Citigroup Global Markets Inc. 10.77%
333 West 34th St., 7th Fl.
New York, NY 10001-2402
- -------------------------------------------------------------------------------------------------------
MLPFS For The Sole Benefit of its Customers 18.84%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- -------------------------------------------------------------------------------------------------------
Class C shares MLPFS For The Sole Benefit of its Customers 21.24%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- -------------------------------------------------------------------------------------------------------
Citigroup Global Markets Inc. 12.42%
333 West 34th St., 7th Fl.
New York, NY 10001-2402
- -------------------------------------------------------------------------------------------------------
147
- -------------------------------------------------------------------------------------------------------
Actual Percentage
Fund/Class Shareholder Name and Address Owned
- -------------------------------------------------------------------------------------------------------
Class Y Shares John F. Cogan Jr. 5.42%
C/O Hale and Dorr
60 State street
Boston, MA 02109-1800
- -------------------------------------------------------------------------------------------------------
First Command Bank 94.57%
Attn: Trust Dept.
P.O. Box 90101-2075
- -------------------------------------------------------------------------------------------------------
Pioneer America Income Trust
- -------------------------------------------------------------------------------------------------------
Class B shares MLPFS For The Sole Benefit of its Customers 13.28%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- -------------------------------------------------------------------------------------------------------
Class C shares MLPFS For The Sole Benefit of its Customers 25.75%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- -------------------------------------------------------------------------------------------------------
Citigroup Global Markets Inc. 8.40%
333 West 34th St., 7th Fl.
New York, NY 10001-2402
- -------------------------------------------------------------------------------------------------------
Class R Shares MCB Trust Services Cust. FBO 17.84%
Skyland Automotive Inc.
700 17th St., Ste 300
Denver, CO 80202-3531
- -------------------------------------------------------------------------------------------------------
MCB Trust Services Cust. FBO Big Boy 401(k) Plan & Trust 33.73%
700 17th St., Ste 300
Denver, CO 80202-3531
- -------------------------------------------------------------------------------------------------------
MCB Trust Services Cust. FBO 9.85%
United Construction Trades & Industrial Employee
International Union 401(k)
700 17th St., Ste 300
Denver, CO 80202-3531
- -------------------------------------------------------------------------------------------------------
MCB Trust Services Cust. FBO 7.04%
Telecommunications Asset Management
700 17th St., Ste 300
Denver, CO 80202-3531
- -------------------------------------------------------------------------------------------------------
MCB Trust Services Cust. FBO 9.58%
Citizens Bank of Hartville Retirement Savings Plan
700 17th St., Ste 300
Denver, CO 80202-3531
- -------------------------------------------------------------------------------------------------------
MCB Trust Services Cust. FBO 8.92%
Foxcor, Inc.
401(k) Profit Sharing Plan
700 17th St., Ste 300
Denver, CO 80202-3531
- -------------------------------------------------------------------------------------------------------
148
- -------------------------------------------------------------------------------------------------------
Actual Percentage
Fund/Class Shareholder Name and Address Owned
- -------------------------------------------------------------------------------------------------------
Pioneer Cash Reserves Fund
- -------------------------------------------------------------------------------------------------------
Class C shares Citigroup Global Markets Inc. 6.21%
333 West 34th St., 7th Fl.
New York, NY 10001-2402
- -------------------------------------------------------------------------------------------------------
Class R Shares Linda Bryant, Garry M. Floeter & Thomas Polite TTEES 38.69%
o/The CHC Mechanical Contractors Inc. P/S/P DTD/4/1/82
347 E Stevens St.
Cookeville, TN 38501-3541
- -------------------------------------------------------------------------------------------------------
MCB Trust Services Cust. FBO Big Boy 401(K) Plan & Trust 47.05%
700 17th St., Ste 300
Denver, CO 80202-3531
- -------------------------------------------------------------------------------------------------------
Carn & Co USI FBO 8.23%
Global Power System LLC/Fleet Supply Warehouse LLC PSP
Attn: Mutual Funds -- Star
PO Box 96211
Washington D.C. 20090-6211
- -------------------------------------------------------------------------------------------------------
Class Y Shares Pioneer Funds Distributor, Inc. 100%
60 State Street
Boston, MA 02109-1800
- -------------------------------------------------------------------------------------------------------
MCB Trust Services Cust. FBO 21.88%
AM-Liner Savings & Retirement
700 17th St., Ste 300
Denver, CO 80202-3531
- -------------------------------------------------------------------------------------------------------
As of December 31, 2003, the Trustees and officers of each Pioneer Fund
owned less than 1% of the outstanding shares of each Pioneer Fund.
EXPERTS
Safeco Funds
The financial statements and financial highlights of each Safeco Fund
incorporated by reference in the respective Safeco Trust's Annual Report for
the most recent fiscal year, 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 herein by
reference in reliance on such reports given on the authority of such firm as
experts in accounting and auditing.
Pioneer Funds
The financial statements and financial highlights of each Pioneer Fund
incorporated by reference in the respective Pioneer Fund's Annual Report for
the most recent fiscal year, 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 herein by
reference in reliance on such reports given the authority of such firm as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Safeco Funds and the Pioneer Funds are subject to the informational
requirements of the Securities Exchange Act of 1934 and the Investment Company
Act and file reports, proxy statements and other information with the SEC.
These reports, proxy statements and other information filed by the Funds can be
inspected and copied (for a duplication fee) at the public reference facilities
of the SEC at 450 Fifth Street, N.W., Washington, D.C. Copies of these
materials can also be obtained by mail from the Public Reference Section of the
SEC at 450 Fifth Street, N.W., 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.
149
Exhibit A-1 -- Form of Agreement and Plan of Reorganization (C/D Reorganization)
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made this
day of , 2004, by and between [Pioneer Trust], a [Delaware statutory]
[Massachusetts business] trust (the "Acquiring Trust"), on behalf of its series
[name of Pioneer Fund] (the "Acquiring Fund"), with its principal place of
business at 60 State Street, Boston, Massachusetts 02109, and [Safeco Trust], a
Delaware statutory trust (the "Safeco Trust"), on behalf of its series [name of
Safeco Fund] (the "Acquired Fund"), with its principal place of business at
5069 154th Place N.E., Redmond, Washington 98052. The Acquiring Fund and the
Acquired Fund are sometimes referred to collectively herein as the "Funds" and
individually as a "Fund."
This Agreement is intended to be and is adopted as a plan of a
"reorganization" as defined in Section 368(a)(1)(C/D) of the United States
Internal Revenue Code of 1986, as amended (the "Code") and the Treasury
Regulations thereunder. The reorganization (the "Reorganization") will consist
of (1) the transfer of all of the assets of the Acquired Fund to the Acquiring
Fund in exchange solely for (A) the issuance of Investor Class shares of
beneficial interest of the Acquiring Fund (collectively, the "Acquiring Fund
Shares" and each, an "Acquiring Fund Share") to the Acquired Fund, and (B) the
assumption by the Acquiring Fund of the liabilities of the Acquired Fund that
are included in the calculation of net asset value ("NAV") on the closing date
of the Reorganization (the "Closing Date") (collectively, the "Assumed
Liabilities"), and (2) the distribution by the Acquired Fund, on or promptly
after the Closing Date as provided herein, of the Acquiring Fund Shares to the
shareholders of the Acquired Fund in liquidation and dissolution of the
Acquired Fund, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, the Acquiring Trust and the Safeco Trust are each registered
investment companies classified as management companies of the open-end type.
WHEREAS, the Acquiring Fund is authorized to issue shares of beneficial
interest.
WHEREAS, the Board of Trustees of the Safeco Trust and the Board of
Trustees of the Acquiring Trust have determined that the Reorganization is in
the best interests of the Acquired Fund shareholders and the Acquiring 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. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND ASSUMPTION OF THE ASSUMED LIABILITIES; LIQUIDATION AND
TERMINATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Acquired Fund will
transfer all of its assets as set forth in Paragraph 1.2 (the "Acquired
Assets") to the Acquiring Fund free and clear of all liens and encumbrances
(other than those arising under the Securities Act of 1933, as amended (the
"Securities Act"), liens for taxes not yet due and contractual restrictions on
the transfer of the Acquired Assets) and the Acquiring Fund agrees in exchange
therefor: (i) to issue to the Acquired Fund the number of Acquiring Fund
Shares, including fractional Acquiring Fund Shares, with an aggregate NAV equal
to the NAV of the Acquired Fund, as determined in the manner set forth in
Paragraphs 2.1 and 2.2; and (ii) to assume the Assumed Liabilities. Such
transactions shall take place at the Closing (as defined in Paragraph 3.1
below).
1.2(a) The Acquired Assets shall consist of all of the Acquired Fund's
property, including, without limitation, all portfolio securities and
instruments, dividends and interest receivables, cash, goodwill, contractual
rights of the Acquired Fund or the Safeco Trust in respect of the Acquired
Fund, all other intangible property owned by the Acquired Fund, originals or
copies of all books and records of the Acquired Fund, and all other assets of
the Acquired Fund on the Closing Date. The Acquiring Fund shall also be
entitled to receive (or, to the extent agreed upon between the Safeco Trust and
the Acquiring Trust, be provided access to) copies of all records that the
Safeco Trust 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 Acquired Fund.
(b) The Acquired Fund has provided the Acquiring Fund with a list of all
of the Acquired Fund's securities and other assets as of the date of execution
of this Agreement, and the Acquiring Fund has provided the Acquired Fund with a
copy of the current fundamental investment policies and restrictions and fair
value procedures applicable to the Acquiring Fund. The Acquired Fund reserves
the right to sell any of such securities or other assets before the Closing
Date (except to the extent sales may be limited by representations of the
Acquired Fund contained herein and made in connection with the issuance of the
tax opinion provided for in Paragraph 8.5 hereof).
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1.3 The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations that are or will become due prior to the Closing.
1.4 On or as soon after the Closing Date as is conveniently practicable
(the "Liquidation Date"), the Safeco Trust shall liquidate the Acquired Fund
and distribute pro rata to its shareholders of record, determined as of the
close of regular trading on the New York Stock Exchange on the Closing Date
(the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by the
Acquired Fund pursuant to Paragraph 1.1 hereof. Each Acquired Fund Shareholder
shall receive such number of Acquiring Fund Shares that have an aggregate NAV
equal to the aggregate NAV of the shares of beneficial interest of the Acquired
Fund (the "Acquired Fund Shares") held of record by such Acquired Fund
Shareholder on the Closing Date. Such liquidation and distribution will be
accomplished by the Safeco Trust instructing the Acquiring Trust to transfer
the Acquiring Fund Shares then credited to the account of the Acquired Fund on
the books of the Acquiring Fund to open accounts on the share records of the
Acquiring Fund established and maintained by the Acquiring Fund's transfer
agent in the names of the Acquired Fund Shareholders and representing the
respective pro rata number of the Acquiring Fund Shares due the Acquired Fund
Shareholders. The Safeco Trust shall promptly provide the Acquiring Trust with
evidence of such liquidation and distribution. All issued and outstanding
Acquired Fund Shares will simultaneously be cancelled on the books of the
Acquired Fund, and the Acquired Fund will be dissolved. The Acquiring Fund
shall not issue certificates representing the Acquiring Fund Shares in
connection with such exchange.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent for its Investor Class shares. Any certificates
representing ownership of Acquired Fund Shares that remain outstanding on the
Closing Date shall be deemed to be cancelled and shall no longer evidence
ownership of Acquired Fund Shares.
1.6 Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
name other than the registered holder of the Acquired Fund Shares on the books
of the Acquired Fund as of that time shall, as a condition of such issuance and
transfer, be paid by the person to whom such Acquiring Fund Shares are to be
issued and transferred.
1.7 Any reporting responsibility of the Safeco Trust with respect to the
Acquired Fund for taxable periods ending on or before the Closing Date,
including, but not limited to, the responsibility for filing of regulatory
reports, Tax Returns (as defined in Paragraph 4.1), or other documents with the
Commission, any state securities commissions, and any federal, state or local
tax authorities or any other relevant regulatory authority, is and shall remain
the responsibility of the Safeco Trust.
2. VALUATION
2.1 The NAV of the Acquiring Fund Shares and the NAV of the Acquired Fund
shall, in each case, be determined as of the close of business (4:00 p.m.,
Boston time) on the Closing Date (the "Valuation Time"). The NAV of each
Acquiring Fund Share shall be computed by Pioneer Investment Management, Inc.
(the "Acquiring Fund Adviser") in the manner set forth in the Acquiring Fund's
Declaration of Trust (the "Declaration"), or By-Laws, and the Acquiring Fund's
then-current prospectus and statement of additional information. The NAV of the
Acquired Fund shall be computed by Safeco Asset Management, Inc. (the "Acquired
Fund Administrator") by calculating the value of the Acquired Assets and by
subtracting therefrom the amount of the liabilities of the Acquired Fund on the
Closing Date included on the Statement of Assets and Liabilities of the
Acquired Fund delivered pursuant to Paragraph 5.7 (the "Statement of Assets and
Liabilities"), said assets and liabilities to be valued in the manner set forth
in the Acquired Fund's then current prospectus and statement of additional
information. The Acquiring Fund Adviser shall confirm to the Acquiring Fund the
NAV of the Acquired Fund.
2.2 The number of Acquiring Fund Shares to be issued (including fractional
shares, if any) in exchange for the Acquired Assets and the assumption of the
Assumed Liabilities shall be determined by the Acquiring Fund Adviser by
dividing the NAV of the Acquired Fund, as determined in accordance with
Paragraph 2.1, by the NAV of each Acquiring Fund Share, as determined in
accordance with Paragraph 2.1.
2.3 The Acquiring Fund and the Acquired Fund shall cause the Acquiring
Fund Adviser and the Acquired Fund Administrator, respectively, to deliver a
copy of its valuation report to the other party at Closing. All computations of
value shall be made by the Acquiring Fund Adviser and the Acquired Fund
Administrator in accordance with its regular practice as pricing agent for the
Acquiring Fund and the Acquired Fund, respectively.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be December 8, 2004, or such later date as the
parties may agree to in writing. All acts necessary to consummation the
Reorganization (the "Closing") shall be deemed to take place simultaneously as
of 5:00 p.m. (Eastern time) on the Closing Date unless otherwise provided. The
Closing shall be held at the offices of Wilmer Cutler Pickering Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts, or at such other place as the
parties may agree.
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3.2 Portfolio securities that are held other than in book-entry form in
the name of State Street Bank and Trust Company (the "Acquired Fund Custodian")
as record holder for the Acquired Fund shall be presented by the Acquired Fund
to Brown Brothers Harriman & Co. (the "Acquiring Fund Custodian") for
examination no later than three business days preceding the Closing Date. Such
portfolio securities shall be delivered by the Acquired Fund to the Acquiring
Fund Custodian for the account of the Acquiring 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 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 Acquired Fund Custodian in book-entry form on behalf of the Acquired
Fund shall be delivered by the Acquired Fund Custodian through the Depository
Trust Company to the Acquiring Fund Custodian and by the Acquiring Fund
Custodian recording the beneficial ownership thereof by the Acquiring Fund on
the Acquiring Fund Custodian's records. Any cash shall be delivered by the
Acquired Fund Custodian transmitting immediately available funds by wire
transfer to the Acquiring Fund Custodian the cash balances maintained by the
Acquired Fund Custodian and the Acquiring Fund Custodian crediting such amount
to the account of the Acquiring Fund.
3.3 The Acquiring Fund Custodian shall deliver within one business day
after the Closing a certificate of an authorized officer stating that: (a) the
Acquired Assets have been delivered in proper form to the Acquiring 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 delivery of portfolio
securities as part of the Acquired 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 Acquiring Fund Shares or the Acquired Fund pursuant
to Paragraph 2.1 is impracticable, 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 Acquired 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 Acquired Fund
Shareholders and the number and percentage ownership of outstanding Acquired
Fund Shares owned by each Acquired Fund Shareholder as of the Valuation Time,
certified by the President or a Secretary of the Safeco Trust and its
Treasurer, Secretary or other authorized officer (the "Shareholder List") as
being an accurate record of the information (a) provided by the Acquired Fund
Shareholders, (b) provided by the Acquired Fund Custodian, or (c) derived from
the Safeco Trust's records by such officers or one of the Safeco Trust's
service providers. The Acquiring Fund shall issue and deliver to the Acquired
Fund a confirmation evidencing the Acquiring Fund Shares to be credited on the
Closing Date, or provide evidence satisfactory to the Acquired Fund that such
Acquiring Fund Shares have been credited to the Acquired Fund's account on the
books of the Acquiring 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 hereto, the Safeco Trust, on
behalf of the Acquired Fund, represents, warrants and covenants to the
Acquiring 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 Acquired Fund is a series of the Safeco Trust. The Safeco
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 Acquired Fund's
shareholders, to perform its obligations under this Agreement. The Acquired
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 Safeco Trust and the Acquired
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 Safeco 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 Safeco Trust is not in violation of, and the execution and
delivery of this Agreement and the performance of its obligations under
this Agreement in respect of the Acquired Fund will not result in a
violation of, any provision of the Safeco Trust's Trust Instrument or
By-Laws or any material agreement, indenture, instrument, contract, lease
or other undertaking with respect to the Acquired Fund to which the Safeco
Trust is a party or by which the Acquired 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 Acquired Fund or any of the Acquired
Fund's properties or assets. The Acquired Fund knows of no facts which
might form the basis for the institution of such proceedings. Neither the
Safeco Trust nor the Acquired Fund is
A-3
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
Acquired Fund's business or its ability to consummate the transactions
contemplated herein or would be binding upon the Acquiring Fund as the
successor to the Acquired Fund;
(e) The Acquired Fund has no material contracts or other commitments
(other than this Agreement or agreements for the purchase and sale of
securities entered into in the ordinary course of business and consistent
with its obligations under this Agreement) which will not be terminated at
or prior to the Closing Date and no such termination will result in
liability to the Acquired Fund (or the Acquiring Fund);
(f) The statement of assets and liabilities of the Acquired Fund, and
the related statements of income and changes in NAV, as of and for the
fiscal year ended December 31, 2003, 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 Acquired 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 Acquired 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 Acquired Fund as of such date and the results of
its operations for the period then ended. Except for the Assumed
Liabilities, the Acquired 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 Acquired Fund has been
disclosed or is required to be disclosed in the Acquired Fund's reports on
Form N-CSR to enable the chief executive officer and chief financial
officer or other officers of the Acquired Fund to make the certifications
required by the Sarbanes-Oxley Act, and no deficiency, weakness, fraud,
change, event or other factor exists that will be required to be disclosed
in the Acquiring Fund's Form N-CSR after the Closing Date;
(g) Since December 31, 2003, except as specifically disclosed in the
Acquired 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, 2004, there has not been any material adverse change
in the Acquired Fund's financial condition, assets, liabilities, business
or prospects, or any incurrence by the Acquired 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 (g) (but not
for any other purpose of this Agreement), a decline in NAV per Acquired
Fund Share arising out of its normal investment operations or a decline in
market values of securities in the Acquired Fund's portfolio or a decline
in net assets of the Acquired Fund as a result of redemptions shall not
constitute a material adverse change;
(h) (A) For each taxable year of its operation since its inception,
the Acquired Fund has met, and for the current taxable year it will meet,
the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company. The Acquired Fund will qualify
as such as of the Closing Date and will satisfy the diversification
requirements of Section 851(b)(3) of the Code without regard to the last
sentence of Section 851(d) of the Code. The Acquired Fund has not taken any
action, caused any action to be taken or caused any action to fail to be
taken which action or failure could cause the Acquired Fund to fail to
qualify as a regulated investment company under the Code;
(B) Within the times and in the manner prescribed by law, the
Acquired Fund has properly filed on a timely basis all Tax Returns (as
defined below) that it was required to file, and all such Tax Returns
were complete and accurate in all respects. The Acquired Fund has not
been informed by any jurisdiction that the jurisdiction believes that
the Acquired Fund was required to file any Tax Return that was not
filed; and the Acquired Fund does not know of any basis upon which a
jurisdiction could assert such a position;
(C) The Acquired Fund has timely paid, in the manner prescribed
by law, all Taxes (as defined below), which were due and payable or
which were claimed to be due;
(D) All Tax Returns filed by the Acquired Fund constitute
complete and accurate reports of the respective Tax liabilities and
all attributes of the Acquired Fund or, in the case of information
returns and payee statements, the amounts required to be reported, and
accurately set forth all items required to be included or reflected in
such returns;
(E) The Acquired Fund has not waived or extended any applicable
statute of limitations relating to the assessment or collection of
Taxes;
(F) The Acquired Fund has not been notified that any examinations
of the Tax Returns of the Acquired Fund are currently in progress or
threatened, and no deficiencies have been asserted or assessed against
the Acquired Fund as a result of any audit
A-4
by the Internal Revenue Service or any state, local or foreign taxing
authority, and, to its knowledge, no such deficiency has been proposed
or threatened;
(G) The Acquired Fund has no actual or potential liability for
any Tax obligation of any taxpayer other than itself. The Acquired
Fund is not and has never been a member of a group of corporations
with which it has filed (or been required to file) consolidated,
combined or unitary Tax Returns. The Acquired Fund is not a party to
any Tax allocation, sharing, or indemnification agreement;
(H) The unpaid Taxes of the Acquired Fund for tax periods through
the Closing Date do not exceed the accruals and reserves for Taxes
(excluding accruals and reserves for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on
the Statement of Assets and Liabilities, rather than in any notes
thereto (the "Tax Reserves"). All Taxes that the Acquired Fund is or
was required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been timely paid to the
proper governmental agency;
(I) The Acquired Fund has delivered to the Acquiring Fund or made
available to the Acquiring Fund complete and accurate copies of all
Tax Returns of the Acquired Fund, together with all related
examination reports and statements of deficiency for all periods not
closed under the applicable statutes of limitations and complete and
correct copies of all private letter rulings, revenue agent reports,
information document requests, notices of proposed deficiencies,
deficiency notices, protests, petitions, closing agreements,
settlement agreements, pending ruling requests and any similar
documents submitted by, received by or agreed to by or on behalf of
the Acquired Fund. The Acquired Fund has disclosed on its federal
income Tax Returns all positions taken therein that could give rise to
a substantial understatement of federal income Tax within the meaning
of Section 6662 of the Code;
(J) The Acquired Fund has not undergone, has not agreed to
undergo, and is not required to undergo (nor will it be required as a
result of the transactions contemplated in this Agreement to undergo)
a change in its method of accounting resulting in an adjustment to its
taxable income pursuant to Section 481 of the Code. The Acquired Fund
will not be required to include any item of income in, or exclude any
item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any (i)
change in method of accounting for a taxable period ending on or prior
to the Closing Date under Section 481(c) of the Code (or any
corresponding or similar provision of state, local or foreign income
Tax law); (ii) "closing agreement" as described in Section 7121 of the
Code (or any corresponding or similar provision of state, local or
foreign income Tax law) executed on or prior to the Closing Date;
(iii) installment sale or open transaction disposition made on or
prior to the Closing Date; or (iv) prepaid amount received on or prior
to the Closing Date;
(K) The Acquired Fund has not taken or agreed to take any action,
and is not aware of any agreement, plan or other circumstance, that is
inconsistent with the representations set forth in Annex B;
(L) There are (and as of immediately following the Closing there
will be) no liens on the assets of the Acquired Fund relating to or
attributable to Taxes, except for Taxes not yet due and payable;
(M) The Tax bases of the assets of the Acquired Fund are
accurately reflected on the Acquired Fund's Tax books and records;
(N) The Acquired Fund has not incurred (or been allocated) an
"overall foreign loss" as defined in Section 904(f)(2) of the Code
which has not been previously recaptured in full as provided in
Sections 904(f)(2) and/or 904(f)(3) of the Code;
(O) The Acquired Fund is not a party to a gain recognition
agreement under Section 367 of the Code;
(P) The Acquired Fund does not own any interest in an entity that
is characterized as a partnership for income tax purposes;
(Q) The Acquired Fund's Tax attributes are not limited under the
Code (including but not limited to any capital loss carry forward
limitations under Sections 382 or 383 of the Code and the Treasury
Regulations thereunder) or comparable provisions of state law, except
as set forth on Schedule 4.1; and
(R) For purposes of this Agreement, "Taxes" or "Tax" shall mean
all taxes, charges, fees, levies or other similar assessments or
liabilities, including without limitation income, gross receipts, ad
valorem, premium, value-added, excise, real property, personal
property, sales, use, transfer, withholding, employment, unemployment,
insurance, social security, business license, business organization,
environmental, workers compensation, payroll, profits, license, lease,
service, service use, severance, stamp, occupation, windfall profits,
customs, duties, franchise and other taxes imposed by the United
States of America or any state, local or foreign government, or any
agency thereof, or other political subdivision of the United States or
any such government,
A-5
and any interest, fines, penalties, assessments or additions to tax
resulting from, attributable to or incurred in connection with any tax
or any contest or dispute thereof; and "Tax Returns" shall mean all
reports, returns, declarations, statements or other information
required to be supplied to a governmental or regulatory authority or
agency, or to any other person, in connection with Taxes and any
associated schedules or work papers produced in connection with such
items;
(i) All issued and outstanding Acquired Fund Shares are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and nonassessable by the Acquired Fund. All of the issued and outstanding
Acquired 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 Acquiring Fund pursuant to Paragraph 3.5 hereof. The Acquired Fund does
not have outstanding any options, warrants or other rights to subscribe for
or purchase any Acquired Fund Shares, nor is there outstanding any security
convertible into any Acquired Fund Shares;
(j) At the Closing Date, the Acquired Fund will have good and
marketable title to the Acquired Assets, and full right, power and
authority to sell, assign, transfer and deliver the Acquired Assets to the
Acquiring Fund, and, upon delivery and payment for the Acquired Assets, the
Acquiring Fund will acquire 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 Safeco Trust has the trust power and authority 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 Safeco Trust's Board of Trustees, and,
subject to the approval of the Acquired Fund's shareholders, assuming due
authorization, execution and delivery by the Acquiring Fund, this Agreement
will constitute a valid and binding obligation of the Acquired 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 Acquired Fund to the
Acquiring 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 Acquired Fund shall be accurate and
complete 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 Acquiring 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 Acquired Fund to the
Acquiring 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 Safeco Trust or the Acquired Fund of
the transactions contemplated by this Agreement;
(o) All of the issued and outstanding Acquired Fund Shares have been
offered for sale and sold in conformity with all applicable federal and
state securities laws, except as may have been previously disclosed in
writing to the Acquiring Fund;
(p) The prospectus and statement of additional information of the
Acquired Fund and any amendments or supplements thereto, furnished to the
Acquiring 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 misleading;
(q) The Acquired Fund currently complies in all material respects
with, and since its organization has complied 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 Acquired Fund currently complies in all material respects with, and
since its organization has complied in all material respects with, all
investment objectives, policies, guidelines and restrictions and any
compliance procedures established by the Safeco Trust with respect to the
Acquired Fund. All advertising and sales material used by the Acquired Fund
complies in all material respects with and has complied 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 National Association of
Securities Dealers, Inc. (the "NASD") 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, the NASD or any state securities authorities by the Acquired
Fund have been duly filed and have been
A-6
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 Acquired Fund nor, to the knowledge of the Acquired
Fund, any "affiliated person" of the Acquired 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 Acquired Fund, has any affiliated
person of the Acquired 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 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 Safeco Trust
on behalf of the Acquired Fund to the Acquiring Trust and Wilmer Cutler
Pickering Hale and Dorr LLP at the Closing pursuant to Paragraph 7.4 (the
"Acquired Fund 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 Schedule 4.2 hereto, the Acquiring Trust, on
behalf of the Acquiring Fund, represents, warrants and covenants to the
Acquired 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 Acquiring Fund is a series of the Acquiring Trust. The
Acquiring Trust is a [statutory][business] trust duly organized, validly
existing and in good standing under the laws of the [State of
Delaware][Commonwealth of Massachusetts]. The Acquiring Trust has the power
to own all of its properties and assets and to perform the obligations
under this Agreement. The Acquiring 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 Acquiring Trust and the Acquiring 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 Acquiring 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 Acquiring 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 Acquiring 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;
(d) The Registration Statement, the Proxy Statement and statement of
additional information with respect to the Acquiring 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 Acquired Fund for inclusion therein, as covered by the
Acquired Fund's warranty in Paragraph 4.1(m) 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 Acquired Fund for
inclusion therein, as covered by the Acquired Fund's warranty in Paragraph
4.1(m) 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;
(e) The Acquiring Trust is not in violation of, and the execution and
delivery of this Agreement and performance of its obligations under this
Agreement will not result in a violation of, any provisions of the
Declaration of Trust or by-laws of the Acquiring Trust or any material
agreement, indenture, instrument, contract, lease or other undertaking with
respect to the Acquiring Fund to which the Acquiring Trust is a party or by
which the Acquiring Fund or any of its assets is bound;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or threatened
against the Acquiring Fund or any of the Acquiring Fund's properties or
assets. The Acquiring Fund knows of no facts which might form the basis for
the institution of such proceedings. Neither the Acquiring Trust nor the
Acquiring Fund is a party to
A-7
or subject to the provisions of any order, decree or judgment of any court
or governmental body which materially adversely affects the Acquiring
Fund's business or its ability to consummate the transactions contemplated
herein;
(g) The statement of assets and liabilities of the Acquiring Fund, and
the related statements of income and changes in NAV, as of and for the
fiscal year ended [most recent fiscal year end] 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 Acquiring 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 Acquiring Fund as
of the date thereof are disclosed therein;
(h) Since [most recent fiscal year end], except as specifically
disclosed in the Acquiring 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 [ ], there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities,
business or prospects, or any incurrence by the Acquiring 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 (h) (but not for any other purpose of this Agreement), a
decline in NAV per Acquiring Fund Share arising out of its normal
investment operations or a decline in market values of securities in the
Acquiring Fund's portfolio or a decline in net assets of the Acquiring Fund
as a result of redemptions shall not constitute a material adverse change;
(i) (A) For each taxable year of its operation since its inception,
the Acquiring Fund has met, and for the current taxable year it will meet,
the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and will qualify as such as of
the Closing Date and will satisfy the diversification requirements of
Section 851(b)(3) of the Code without regard to the last sentence of
Section 851(d) of the Code. The Acquiring Fund has not taken any action,
caused any action to be taken or caused any action to fail to be taken
which action or failure could cause the Acquiring Fund to fail to qualify
as a regulated investment company under the Code;
(B) Within the times and in the manner prescribed by law, the
Acquiring Fund has properly filed on a timely basis all Tax Returns
that it was required to file, and all such Tax Returns were complete
and accurate in all respects. The Acquiring Fund has not been informed
by any jurisdiction that the jurisdiction believes that the Acquiring
Fund was required to file any Tax Return that was not filed; and the
Acquiring Fund does not know of any basis upon which a jurisdiction
could assert such a position;
(C) The Acquiring Fund has timely paid, in the manner prescribed
by law, all Taxes that were due and payable or that were claimed to be
due;
(D) All Tax Returns filed by the Acquiring Fund constitute
complete and accurate reports of the respective liabilities for Taxes
and all attributes of the Acquiring Fund or, in the case of
information returns and payee statements, the amounts required to be
reported, and accurately set forth all items required to be included
or reflected in such returns;
(E) The Acquiring Fund has not waived or extended any applicable
statute of limitations relating to the assessment or collection of
Taxes;
(F) The Acquiring Fund has not been notified that any
examinations of the Tax Returns of the Acquiring Fund are currently in
progress or threatened, and no deficiencies have been asserted or
assessed against the Acquiring Fund as a result of any audit by the
Internal Revenue Service or any state, local or foreign taxing
authority, and, to its knowledge, no such deficiency has been proposed
or threatened;
(G) The Acquiring Fund has no actual or potential liability for
any Tax obligation of any taxpayer other than itself. The Acquiring
Fund is not and has never been a member of a group of corporations
with which it has filed (or been required to file) consolidated,
combined or unitary Tax Returns. The Acquiring Fund is not a party to
any Tax allocation, sharing, or indemnification agreement;
(H) The Acquiring Trust has delivered to Safeco Trust or made
available to Safeco Trust complete and accurate copies of all Tax
Returns of the Acquiring Fund, together with all related examination
reports and statements of deficiency for all periods not closed under
the applicable statutes of limitations and complete and correct copies
of all private letter rulings, revenue agent reports, information
document requests, notices of proposed deficiencies, deficiency
notices, protests, petitions, closing agreements, settlement
agreements, pending ruling requests and any similar documents
submitted by, received by or agreed to by or on behalf of the
Acquiring Fund. The Acquiring Fund has disclosed on its federal income
Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of
Section 6662 of the Code;
(I) The Acquiring Fund has not undergone, has not agreed to
undergo, and is not required to undergo (nor will it be required as a
result of the transactions contemplated in this Agreement to undergo)
a change in its method of accounting resulting in
A-8
an adjustment to its taxable income pursuant to Section 481 of the
Code. The Acquiring Fund will not be required to include any item of
income in, or exclude any item of deduction from, taxable income for
any taxable period (or portion thereof) ending after the Closing Date
as a result of any (i) change in method of accounting for a taxable
period ending on or prior to the Closing Date under Section 481(c) of
the Code (or any corresponding or similar provision of state, local or
foreign income Tax law); (ii) "closing agreement" as described in
Section 7121 of the Code (or any corresponding or similar provision of
state, local or foreign income Tax law) executed on or prior to the
Closing Date; (iii) installment sale or open transaction disposition
made on or prior to the Closing Date; or (iv) prepaid amount received
on or prior to the Closing Date;
(J) The Acquiring Fund has not taken or agreed to take any
action, and is not aware of any agreement, plan or other circumstance,
that is inconsistent with the representations set forth in Annex A;
(K) The Acquiring Fund has not incurred (or been allocated) an
"overall foreign loss" as defined in Section 904(f)(2) of the Code
which has not been previously recaptured in full as provided in
Sections 904(f)(2) and/or 904(f)(3) of the Code;
(L) The Acquiring Fund is not a party to a gain recognition
agreement under Section 367 of the Code;
(M) The Acquiring Fund's Tax attributes are not limited under the
Code (including but not limited to any capital loss carry forward
limitations under Sections 382 or 383 of the Code and the Treasury
Regulations thereunder) or comparable provisions of state law, except
as set forth on Schedule 4.2;
(j) The Acquiring Fund currently complies, and at all times since its
organization has complied, 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 Acquiring Fund
currently complies in all material respects with, and since its
organization has complied in all material respects with, all investment
objectives, policies, guidelines and restrictions and any compliance
procedures established by the Acquiring Trust with respect to the Acquiring
Fund. All advertising and sales material used by the Acquiring Fund
complies in all material respects with and has complied 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 NASD 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, the NASD or any state securities authorities by the
Acquiring Fund 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;
(k) The authorized capital of the Acquiring Fund consists of an
unlimited number of shares of beneficial interest, no par value per share.
As of the Closing Date, the Acquiring Fund will be authorized to issue an
unlimited number of shares of beneficial interest, no par value per share.
The Acquiring Fund Shares to be issued and delivered to the Acquired Fund
for the account of the Acquired 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 duly and validly issued, fully paid and
non-assessable. The Acquiring Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any Acquiring Fund
shares, nor is there outstanding any security convertible into any
Acquiring Fund shares;
(l) The Acquiring Trust has the trust power and authority 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 Acquiring Trust's Board of Trustees,
and, assuming due authorization, execution and delivery by the Acquired
Fund, this Agreement will constitute a valid and binding obligation of the
Acquiring 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;
(m) The information to be furnished in writing by the Acquiring Fund
or the Acquiring 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;
(n) 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 Acquiring Fund, except for the registration of the
Acquiring Fund Shares under the Securities Act and the Investment Company
Act;
A-9
(o) All of the issued and outstanding Acquiring Fund Shares have been
offered for sale and sold in conformity with all applicable federal and
state securities laws, except as may have been previously disclosed in
writing to the Acquired Fund;
(p) The prospectus and statement of additional information of the
Acquiring Fund and any amendments or supplements thereto, furnished to the
Acquired 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 misleading;
(q) Neither the Acquiring Fund nor, to the knowledge of the Acquiring
Fund, any "affiliated person" of the Acquiring 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 Acquiring Fund, has any
affiliated person of the Acquiring 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
(r) The tax representation certificate to be delivered by the
Acquiring Trust on behalf of the Acquiring Fund to the Safeco Trust and
Wilmer Cutler Pickering Hale and Dorr LLP at Closing pursuant to Section
6.3 (the "Acquiring Fund 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
5.1 The Acquired Fund will operate the Acquired Fund's business in the
ordinary course of business between the date hereof and the Closing Date. It is
understood that such ordinary course of business will include the declaration
and payment of customary dividends and other distributions and any other
dividends and other distributions necessary or advisable (except to the extent
dividends or other distributions that are not customary may be limited by
representations made in connection with the issuance of the tax opinion
described in Paragraph 8.5 hereof), in each case payable either in cash or in
additional shares.
5.2 The Safeco Trust will call a special meeting of the Acquired Fund's
shareholders to consider approval of this Agreement and act upon the matters
set forth in the Proxy Statement.
5.3 The Acquiring 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 Safeco Trust will provide the Acquiring 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.
5.4 The Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired by the Acquired Fund for the purpose of
making any distribution thereof other than in accordance with the terms of this
Agreement.
5.5 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requires concerning the beneficial
ownership of the Acquired Fund Shares.
5.6 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.
5.7 The Acquired Fund shall furnish to the Acquiring Fund on the Closing
Date a Statement of Assets and Liabilities of the Acquired Fund as of the
Closing Date setting forth the NAV (as computed pursuant to Paragraph 2.1) of
the Acquired Fund as of the Valuation Time, which statement shall be prepared
in accordance with GAAP consistently applied and certified by the Safeco
Trust's Treasurer or Assistant Treasurer. As promptly as practicable, but in
any case within 30 days after the Closing Date, the Safeco Trust shall furnish
to the Acquiring Trust, in such form as is reasonably satisfactory to the
Acquiring Trust, a statement of the earnings and profits of the Acquired Fund
for federal income tax purposes, and of any capital loss carryovers and other
items that will be carried over to the Acquiring Fund under the Code, and which
statement will be certified by the Treasurer of the Safeco Trust.
5.8 Neither Fund shall take any action that is inconsistent with the
representations set forth in, with respect to the Acquired Fund, the Acquired
Fund Tax Representation Certificate and, with respect to the Acquiring Fund,
the Acquiring Fund Tax Representation Certificate.
5.9 From and after the date of this Agreement and until the Closing Date,
each of the Funds and the Safeco Trust and the Acquiring Trust shall use its
commercially reasonable efforts to cause the Reorganization to qualify, and
will not knowingly take any action, cause any action to be taken, fail to take
any action or cause any action to fail to be taken, which action or failure to
act could prevent the
A-10
Reorganization from qualifying, as a reorganization under the provisions of
Section 368(a) of the Code. The parties hereby adopt this Agreement as a "plan
of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the income tax regulations promulgated under the Code. 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)(1)[insert (C) or (D), as applicable] of the Code and shall not take any
position inconsistent with such treatment.
5.10 From and after the date of this Agreement and through the time of the
Closing, each Fund shall use its commercially reasonable efforts to cause it to
qualify, and will not knowingly take any action, cause any action to be taken,
fail to take any action or cause any action to fail to be taken, which action
or failure to act could prevent it from qualifying as a regulated investment
company under the provisions of Subchapter M of the Code.
5.11 Each Fund shall prepare, or cause to be prepared, all of its Tax
Returns for taxable periods that end on or before the Closing Date and shall
timely file, or cause to be timely filed, all such Tax Returns. Each Fund shall
make any payments of Taxes required to be made by it with respect to any such
Tax Returns.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to complete the transactions provided
for herein shall be, at its election, subject to the performance by the
Acquiring 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 Acquired Fund in writing:
6.1 All representations and warranties by the Acquiring Trust on behalf of
the Acquiring Fund contained in this Agreement shall be true and correct 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 Acquiring Trust shall have delivered to the Safeco Trust on the
Closing Date a certificate of the Acquiring Trust on behalf of the Acquiring
Fund executed in its name by its President or Vice President and its Treasurer
or Assistant Treasurer, in form and substance satisfactory to the Safeco Trust
and dated as of the Closing Date, to the effect that the representations and
warranties of the Acquiring Trust made in this Agreement are true and correct
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
Safeco Trust shall reasonably request;
6.3 The Acquiring Trust on behalf of the Acquiring Fund shall have
delivered to the Safeco Trust and Wilmer Cutler Pickering Hale and Dorr LLP an
Acquiring Fund Tax Representation Certificate, satisfactory to the Safeco Trust
and Wilmer Cutler Pickering Hale and Dorr LLP, substantially in the form
attached to this Agreement as Annex A, concerning certain tax-related matters
with respect to the Acquiring Fund;
6.4 With respect to the Acquiring Fund, the Board of Trustees of the
Acquiring Trust shall have determined that the Reorganization is in the best
interests of the Acquiring Fund and, based upon such determination, shall have
approved this Agreement and the transactions contemplated hereby; and
6.5 The Safeco Trust shall have received at the Closing a favorable
opinion as to the due authorization of this Agreement by the Acquiring Trust
and related matters of Wilmer Cutler Pickering Hale and Dorr LLP, dated as of
the Closing Date, in a form reasonably satisfactory to the Safeco Trust.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be, at its election, subject to the performance by
the Acquired 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 Acquiring Fund in writing:
7.1 All representations and warranties of the Safeco Trust on behalf of
the Acquired Fund contained in this Agreement shall be true and correct 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 Safeco Trust shall have delivered to the Acquiring Fund the
Statement of Assets and Liabilities of the Acquired Fund pursuant to Paragraph
5.7, 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 Safeco Trust's Treasurer or Assistant Treasurer;
A-11
7.3 The Safeco Trust shall have delivered to the Acquiring Trust on the
Closing Date a certificate of the Safeco Trust on behalf of the Acquired 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
Acquiring Trust and dated as of the Closing Date, to the effect that the
representations and warranties of the Safeco Trust contained in this Agreement
are true and correct 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 Acquiring Trust shall reasonably request;
7.4 The Safeco Trust on behalf of the Acquired Fund shall have delivered
to the Acquiring Trust and Wilmer Cutler Pickering Hale and Dorr LLP an
Acquired Fund Tax Representation Certificate, satisfactory to the Acquiring
Trust and Wilmer Cutler Pickering Hale and Dorr LLP, substantially in the form
attached to this Agreement as Annex B, concerning certain tax-related matters
with respect to the Acquired Fund;
7.5 The Acquiring Trust shall have received at the Closing a favorable
opinion as to the due authorization of this Agreement by the Safeco Trust and
related matters of Kirkpatrick & Lockhart LLP, dated as of the Closing Date, in
a form reasonably satisfactory to Acquiring Trust; and
7.6 With respect to the Acquired Fund, the Board of Trustees of the Safeco
Trust shall have determined that the Reorganization is in the best interests of
the Acquired 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 shall have
been approved by the requisite vote of the Acquired Fund's shareholders in
accordance with the provisions of the Safeco Trust's Trust Instrument and
By-Laws, and certified copies of the resolutions evidencing such approval by
the Acquired Fund's shareholders shall have been delivered by the Acquired Fund
to the Acquiring 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 Acquiring Trust'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, threatened or contemplated
under the Securities Act;
8.5 The parties shall have received an opinion of Wilmer Cutler Pickering
Hale and Dorr LLP, satisfactory to the Safeco Trust and the Acquiring Trust and
subject to customary assumptions and qualifications, substantially to the
effect that for federal income tax purposes the acquisition by the Acquiring
Fund of the Acquired Assets solely in exchange for the issuance of Acquiring
Fund Shares to the Acquired Fund and the assumption of the Assumed Liabilities
by the Acquiring Fund, followed by the distribution by the Acquired Fund, in
liquidation of the Acquired Fund, of Acquiring Fund Shares to the Acquired Fund
Shareholders in exchange for their Acquired Fund Shares and the termination of
the Acquired Fund, will constitute a "reorganization" within the meaning of
Section 368(a) of the Code;
8.6 The Acquired Fund shall have distributed to its shareholders, in a
distribution or distributions qualifying for the deduction for dividends paid
under Section 561 of the Code, 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) for its taxable year ending on the Closing Date, 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 for its taxable year ending on the Closing Date,
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, for its taxable year ending on the Closing Date; and
A-12
8.7 The Acquiring Trust shall have made a distribution of capital gains to
its shareholders in November 2004 in accordance with its normal practices and,
unless the Acquiring Fund distributes income monthly, the dividend distribution
that the Acquiring Fund normally would make in December of 2004 shall have been
made to shareholders of record prior to the Closing.
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.
9.2 The parties have been informed by Symetra Financial Corporation and
the Acquiring Fund Adviser -- and the parties have entered into this Agreement
in reliance on such information -- that such non-parties will pay all expenses
of the Funds associated with the Reorganization, including, the expenses
associated with the preparation, printing and mailing of any and all
shareholder notices, communications, proxy statements, and necessary filings
with the SEC or any other governmental authority in connection with the
transactions contemplated by this Agreement and the legal and Trustees' fees
and expenses incurred in connection with the Reorganization. Except for the
foregoing, the Acquiring Fund and the Acquired Fund shall each bear its own
expenses in connection with the transactions contemplated by this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Trust and the Safeco Trust 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 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
Acquiring Trust and Safeco Trust. In addition, either party may at its option
terminate this Agreement at or prior to the Closing Date:
(a) because of a material breach by the other of any representation,
warranty, covenant or agreement contained herein to be performed at or
prior to the Closing Date;
(b) because of a condition herein expressed to be precedent to the
obligations of the terminating party which has not been met and which
reasonably appears will not or cannot be met;
(c) by resolution of the Acquiring 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
Acquiring Fund's shareholders;
(d) by resolution of the Safeco 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
Acquired Fund's shareholders; or
(e) if the transactions contemplated by this Agreement shall not have
occurred on or prior to December 31, 2004 or such other date as the parties
may mutually agree upon in writing.
11.2 In the event of any such termination, there shall be no liability for
damages on the part of the Acquiring Fund, the Acquiring Trust, the Safeco
Trust or the Acquired Fund, or the trustees or officers of the Safeco Trust, or
the Acquiring 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 Safeco
Trust and the Acquiring Trust; provided, however, that following the meeting of
the Acquired Fund's shareholders called by the Safeco Trust pursuant to
Paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions regarding the method for determining the number of
Acquiring Fund Shares to be received by the Acquired Fund Shareholders under
this Agreement to their detriment without their further approval; provided that
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
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the Acquired Fund, c/o
Symetra Financial Corporation, 5069 154th Place,
A-13
N.E., Seattle, Washington 98052, Attention: Roger F. Harbin, with copies to R.
Darrell Mounts, Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W.,
Second Floor, Washington, DC 20036-1221, and to the Acquiring Fund, c/o Pioneer
Investment Management, Inc., 60 State Street, Boston, Massachusetts 02109,
Attention: Dorothy E. Bourassa, Esq., with copies to Wilmer Cutler Pickering
Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, Attention:
David C. Phelan.
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.
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 Acquiring Trust
and the Safeco 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 Acquiring Fund or the Acquired Fund, as the
case may be, as provided in the trust instruments of the Acquiring Trust and
the Instrument of Trust of the Safeco Trust, respectively. The execution and
delivery of this Agreement have been authorized by the trustees of the
Acquiring Trust and of the Safeco Trust and this Agreement has been executed by
authorized officers of the Acquiring Trust and the Safeco 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 Acquiring Fund and the Acquired Fund, as the case
may be, as provided in the trust instruments of the Acquiring Trust and the
Instrument of Trust of the Safeco Trust, respectively.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed as of the date first set forth above by its President or Vice
President and attested by its Secretary or Assistant Secretary.
Attest: [SAFECO TRUST] on behalf of
[SAFECO FUND]
By: _________________________________ By: _________________________________
Name: Name:
Title: Secretary Title: President
Attest: [PIONEER TRUST] on behalf of
[PIONEER FUND]
By: _________________________________ By: _________________________________
Name: Name:
Title: Secretary Title:
A-14
Annex A
TAX REPRESENTATION CERTIFICATE OF
[PIONEER TRUST] ON BEHALF OF [PIONEER FUND]
This certificate is being delivered in connection with the transactions to
be effected pursuant to the Agreement and Plan of Reorganization made as of
_____________________, 2004 between [Pioneer Trust], a [Delaware statutory]
[Massachusetts business] trust ("Acquiring Trust"), on behalf of its series
[Pioneer Fund] ("Acquiring Fund"), and [Safeco Trust], a Delaware statutory
trust, on behalf of its series [Safeco Fund] ("Acquired Fund") (the
"Agreement"). Pursuant to the Agreement, Acquiring Fund will acquire all of the
assets of Acquired Fund in exchange solely for (i) the assumption by Acquiring
Fund of the Assumed Liabilities of Acquired Fund and (ii) the issuance of
Investor Class shares of beneficial interest of Acquiring Fund (the "Acquiring
Fund Shares") to Acquired Fund, followed by the distribution by Acquired Fund,
in liquidation of Acquired Fund, of the Acquiring Fund Shares to the
shareholders of Acquired Fund and the termination of Acquired Fund (the
foregoing together constituting the "transaction").
The undersigned officer of Acquiring Trust, after consulting with its
counsel, auditors and tax advisers regarding the meaning of and factual support
for the following representations on behalf of Acquiring Fund, hereby certifies
and represents that the following statements are true, complete and correct and
will be true, complete and correct on the date of the transaction and
thereafter as relevant. Unless otherwise indicated, all capitalized terms used
but not defined herein shall have the meanings ascribed to them in the
Agreement.
1. Acquiring Fund is a series of Acquiring Trust, [a statutory] [business]
trust organized under the laws of the [State of Delaware] [Commonwealth of
Massachusetts], and Acquiring Fund is, and has been at all times, treated as a
separate corporation for federal tax purposes.
2. Neither Acquiring Fund nor any person "related" to Acquiring Fund (as
defined in Treasury Regulation Section 1.368-1(e)(3)), nor any partnership of
which Acquiring Fund or any such related person is a partner, has any plan or
intention to redeem or otherwise acquire any of the Acquiring Fund Shares
received by shareholders of Acquired Fund in the transaction except in the
ordinary course of Acquiring Fund's business in connection with its legal
obligation under Section 22(e) of the Investment Company Act of 1940, as
amended (the "1940 Act"), as a series of a registered open-end investment
company to redeem its own shares.
3. After the transaction, Acquiring Fund will continue the historic
business (as defined in Treasury Regulation Section 1.368-1(d)(2)) of Acquired
Fund or will use a significant portion of the historic business assets (as
defined in Treasury Regulation Section 1.368-1(d)(3)) acquired from Acquired
Fund in a business.
4. Acquiring Fund has no plan or intention to sell or otherwise dispose of
any assets of Acquired Fund acquired in the transaction, except for
dispositions made in the ordinary course of its business or to maintain its
qualification as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code").
5. Any expenses of Acquired Fund incurred in connection with the
transaction which are paid or assumed by Acquiring Fund will be expenses of
Acquired Fund solely and directly related to the transaction in accordance with
Rev. Rul. 73-54, 1973-1 C.B. 187. Acquiring Fund will not pay or assume the
expenses, if any, incurred by any Acquired Fund Shareholders in connection with
the transaction.
6. There is no, and never has been any, indebtedness between Acquiring Fund
and Acquired Fund.
7. Acquiring Fund has properly elected to be a regulated investment
company under Subchapter M of the Code, has qualified for the special tax
treatment afforded regulated investment companies under the Code for each
taxable year since inception and qualifies for such treatment as of the time of
the Closing.
8. Acquiring Fund meets the requirements of an "investment company" in
Section 368(a)(2)(F) of the Code.
9. Acquiring Fund is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
10. Acquiring Fund does not now own and has never owned, directly or
indirectly, any shares of Acquired Fund.
11. As of the date of the transaction, the fair market value of the
Acquiring Fund Shares issued to Acquired Fund will be approximately equal to
the fair market value of the Acquired Assets minus the Assumed Liabilities.
Acquiring Fund will not furnish any consideration in connection with the
acquisition of the Acquired Assets other than the assumption of the Assumed
Liabilities and the issuance of such Acquiring Fund Shares.
A-15
12. Acquired Fund Shareholders [will/will not] be in control (within the
meaning of Sections 368(a)(2)(H)(i) and 304(c)(1) of the Code) of Acquiring
Fund after the transaction.
13. The transaction is being undertaken for valid and substantial business
purposes, including facilitating Acquired Fund's becoming a member of the
Pioneer family of mutual funds, which, in the long term, is intended to result
in lower expenses and increased assets.
14. No Acquired Fund shareholder is acting as agent for Acquiring Fund in
connection with the transaction or approval thereof. Acquiring Fund will not
reimburse any Acquired Fund shareholder for Acquired Fund Shares such
shareholder may have purchased or for other obligations such shareholder may
have incurred.
15. Acquiring Fund has no outstanding warrants, options, convertible
securities or any other type of right pursuant to which any person could
acquire stock in Acquiring Fund.
* * * * *
A-16
The undersigned officer of Acquiring Trust is authorized to make all of
the representations set forth herein, and the undersigned is authorized to
execute this certificate on behalf of Acquiring Fund. The undersigned
recognizes that Wilmer Cutler Pickering Hale and Dorr LLP will rely upon the
foregoing representations in evaluating the United States federal income tax
consequences of the transaction and rendering its opinion pursuant to Section
8.5 of the Agreement. If, prior to the date of the transaction, any of the
representations set forth herein ceases to be accurate, the undersigned agrees
to deliver immediately to Wilmer Cutler Pickering Hale and Dorr LLP a written
notice to that effect.
[PIONEER TRUST] on behalf of [Pioneer Fund]
By: ___________________________________
Name: _______________________________
Title: ______________________________
Dated: ______________, 2004
A-17
Annex B
TAX REPRESENTATION CERTIFICATE OF
[SAFECO TRUST]
ON BEHALF OF [SAFECO FUND]
This certificate is being delivered in connection with the transactions to
be effected pursuant to the Agreement and Plan of Reorganization made as of ,
2004 between [Pioneer Trust], a [Delaware statutory] [Massachusetts business]
trust, on behalf of its series [Pioneer Fund] ("Acquiring Fund"), and [Safeco
Trust], a Delaware statutory trust ("Safeco Trust"), on behalf of its series
[Safeco Fund] ("Acquired Fund") (the "Agreement"). Pursuant to the Agreement,
Acquiring Fund will acquire all of the assets of Acquired Fund in exchange
solely for (i) the assumption by Acquiring Fund of the Assumed Liabilities of
Acquired Fund and (ii) the issuance of Investor Class shares of beneficial
interest of Acquiring Fund (the "Acquiring Fund Shares") to Acquired Fund,
followed by the distribution by Acquired Fund, in liquidation of Acquired Fund,
of the Acquiring Fund Shares to the shareholders of Acquired Fund and the
termination of Acquired Fund (the foregoing together constituting the
"transaction").
The undersigned officer of Safeco Trust, after consulting with its
counsel, auditors and tax advisers regarding the meaning of and factual support
for the following representations, on behalf of Acquired Fund, hereby certifies
and represents that the following statements are true, complete and correct and
will be true, complete and correct on the date of the transaction and
thereafter as relevant. Unless otherwise indicated, all capitalized terms used
but not defined herein shall have the meanings ascribed to them in the
Agreement.
1. Acquired Fund is a series of Safeco Trust, a statutory trust organized
under the laws of the State of Delaware, and Acquired Fund is, and has been at
all times, treated as a separate corporation for federal tax purposes.
2. As of the date of the transaction, the fair market value of the
Acquiring Fund Shares received by each shareholder that holds shares of
Acquired Fund (the "Acquired Fund Shares") will be approximately equal to the
fair market value of the Acquired Fund Shares with respect to which such
Acquiring Fund Shares are received, and the aggregate consideration received by
Acquired Fund shareholders in exchange for their Acquired Fund Shares will be
approximately equal to the fair market value of all of the outstanding Acquired
Fund Shares immediately prior to the transaction. No property other than
Acquiring Fund Shares will be distributed to shareholders of Acquired Fund in
exchange for their Acquired Fund Shares, nor will any such shareholder receive
cash or other property as part of the transaction.
3. Neither Acquired Fund nor any person "related" to Acquired Fund (as
defined in Treasury Regulation Section 1.368-1(e)(3)), nor any partnership in
which Acquired Fund or any such related person is a partner, has redeemed,
acquired or otherwise made any distributions with respect to any shares of
Acquired Fund as part of the transaction, or otherwise pursuant to a plan of
which the transaction is a part, other than redemptions and distributions made
in the ordinary course of Acquired Fund's business as a series of an open-end
investment company. To the best knowledge of management of Acquired Fund, there
is no plan or intention on the part of the shareholders of Acquired Fund to
engage in any transaction with Acquired Fund, Acquiring Fund, or any person
treated as related to Acquired Fund or Acquiring Fund under Treasury Regulation
Section 1.368-1(e)(3) or any partnership in which Acquired Fund, Acquiring
Fund, or any person treated as related to Acquired Fund or Acquiring Fund under
Treasury Regulation Section 1.368-1(e)(3) is a partner involving the sale,
redemption or exchange of any of the Acquired Fund Shares or any of the
Acquiring Fund Shares to be received in the transaction, as the case may be,
other than in the ordinary course of Acquired Fund's business as a series of an
open-end investment company.
4. Pursuant to the transaction, Acquired Fund will transfer to Acquiring
Fund, and Acquiring Fund will acquire, at least 90% of the fair market value of
the net assets, and at least 70% of the fair market value of the gross assets,
Acquired Fund held immediately before the transaction. For the purposes of the
foregoing, any amounts Acquired Fund uses to pay its transaction expenses and
to make redemptions and distributions immediately before the transaction
(except (a) redemptions in the ordinary course of its business required by
section 22(e) of the Investment Company Act and (b) regular, normal dividend
distributions made to conform to its policy of distributing all or
substantially all of its income and gains to avoid the obligation to pay
federal income tax and/or the excise tax under Section 4982 of the Code) will
be included as assets it held immediately before the transaction.
5. As of the date of the transaction, the fair market value of the
Acquiring Fund Shares issued to Acquired Fund will be approximately equal to
the fair market value of the Acquired Assets minus the Assumed Liabilities.
Acquired Fund will not receive any consideration from Acquiring Fund in
connection with the acquisition of the Acquired Assets other than the
assumption of the Assumed Liabilities and the issuance of such Acquiring Fund
Shares.
6. The Assumed Liabilities assumed by Acquiring Fund plus the Assumed
Liabilities, if any, to which the transferred assets are subject were incurred
by Acquired Fund in the ordinary course of its business. Acquired Fund is not
aware of any liabilities of any kind other than the Assumed Liabilities.
A-18
7. As of the Closing Date, the adjusted basis and fair market value of the
Acquired Assets will equal or exceed the Assumed Liabilities for purposes of
Section 357(d) of the Code.
8. Acquired Fund currently conducts its historic business within the
meaning of Treasury Regulation Section 1.368-1(d)(2), which provides that, in
general, a corporation's historic business is the business it has conducted
most recently, but does not include a business that the corporation enters into
as part of a plan of reorganization. All of the assets held by Acquired Fund as
of the opening of business on August 2, 2004 (the date the Acquiring Fund
Adviser became investment adviser to Acquired Fund) were Acquired Fund's
historic business assets within the meaning of Treasury Regulation Section
1.368-1(d)(3) (which provides that a corporation's historic business assets are
the assets used in its historic business).
9. Acquired Fund will distribute to its shareholders the Acquiring Fund
Shares it receives pursuant to the transaction, and its other properties, if
any, and will be liquidated promptly thereafter.
10. The expenses of Acquired Fund incurred by it in connection with the
transaction will be only such expenses that are solely and directly related to
the transaction in accordance with Rev. Rul. 73-54, 1973-1 C.B. 187. Acquired
Fund will not pay any expenses incurred by its shareholders in connection with
the transaction.
11. There is no, and never has been any, indebtedness between Acquiring
Fund and Acquired Fund.
12. Acquired Fund has properly elected to be a regulated investment
company under Subchapter M of the Code, has qualified for the special tax
treatment afforded regulated investment companies under Subchapter M of the
Code for each taxable year since inception, and qualifies for such treatment as
of the time of the Closing.
13. Acquired Fund meets the requirements of an "investment company" in
Section 368(a)(2)(F) of the Code.
14. Acquired Fund is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
15. Acquired Fund does not pay compensation to any shareholder-employee.
16. Acquired Fund shareholders will not have dissenters' or appraisal
rights in the transaction.
17. The transaction is being undertaken for valid and substantial business
purposes, including facilitating Acquired Fund's becoming a member of the
Pioneer family of material funds, which, in the long term, is intended to
result in lower expenses and increased assets.
18. Acquired Fund has no outstanding warrants, options, convertible
securities or any other type of right pursuant to which any person could
acquire stock in Acquired Fund.
* * * * *
A-19
The undersigned officer of Safeco Trust is authorized to make all of the
representations set forth herein, and the undersigned is authorized to execute
this certificate on behalf of Acquired Fund. The undersigned recognizes that
Wilmer Cutler Pickering Hale and Dorr LLP will rely upon the foregoing
representations in evaluating the United States federal income tax consequences
of the transaction and rendering its opinion pursuant to Section 8.5 of the
Agreement. If, prior to the date of the transaction, any of the representations
set forth herein ceases to be accurate, the undersigned agrees to deliver
immediately to Wilmer Cutler Pickering Hale and Dorr LLP a written notice to
that effect.
SAFECO TRUST, on behalf of SAFECO FUND
By: ___________________________________
Name: _______________________________
Title: ______________________________
A-20
Exhibit A-2 -- Form of Agreement and Plan of Reorganization (F Reorganization)
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made this
day of , 2004, by and between [Pioneer Trust], a [Delaware
statutory][Massachusetts business] trust (the "Acquiring Trust"), on behalf of
its series [name of Pioneer Fund] (the "Acquiring Fund"), with its principal
place of business at 60 State Street, Boston, Massachusetts 02109, and [Safeco
Trust], a Delaware statutory trust (the "Safeco Trust"), on behalf of its
series [name of Safeco Fund] (the "Acquired Fund"), with its principal place of
business at 5069 154th Place N.E., Redmond, Washington 98052. The Acquiring
Fund and the Acquired Fund are sometimes referred to collectively herein as the
"Funds" and individually as a "Fund."
This Agreement is intended to be and is adopted as a plan of a
"reorganization" as defined in Section 368(a)(1)(F) of the United States
Internal Revenue Code of 1986, as amended (the "Code") and the Treasury
Regulations thereunder. The reorganization (the "Reorganization") will consist
of (1) the transfer of all of the assets of the Acquired Fund to the Acquiring
Fund in exchange solely for (A) the issuance of Investor Class shares of
beneficial interest of the Acquiring Fund (collectively, the "Acquiring Fund
Shares" and each, an "Acquiring Fund Share") to the Acquired Fund, and (B) the
assumption by the Acquiring Fund of the liabilities of the Acquired Fund
(collectively, the "Assumed Liabilities"), and (2) the distribution by the
Acquired Fund, on or promptly after the closing date of the Reorganization (the
"Closing Date") as provided herein, of the Acquiring Fund Shares to the
shareholders of the Acquired Fund in liquidation and dissolution of the
Acquired Fund, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, the Acquiring Trust and the Safeco Trust are each registered
investment companies classified as management companies of the open-end type.
WHEREAS, the Acquiring Fund is authorized to issue shares of beneficial
interest.
WHEREAS, the Board of Trustees of the Safeco Trust has determined that the
Reorganization is in the best interests of the Acquired Fund shareholders 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. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND ASSUMPTION OF THE ASSUMED LIABILITIES; LIQUIDATION AND
TERMINATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Acquired Fund will
transfer all of its assets as set forth in Paragraph 1.2 (the "Acquired
Assets") to the Acquiring Fund free and clear of all liens and encumbrances
(other than those arising under the Securities Act of 1933, as amended (the
"Securities Act"), liens for taxes not yet due and contractual restrictions on
the transfer of the Acquired Assets) and the Acquiring Fund agrees in exchange
therefor: (i) to issue to the Acquired Fund the number of Acquiring Fund
Shares, including fractional Acquiring Fund Shares, with an aggregate net asset
value ("NAV") equal to the NAV of the Acquired Fund, as determined in the
manner set forth in Paragraphs 2.1 and 2.2; and (ii) to assume the Assumed
Liabilities. Such transactions shall take place at the Closing (as defined in
Paragraph 3.1 below).
1.2 (a) The Acquired Assets shall consist of all of the Acquired Fund's
property, including, without limitation, all portfolio securities and
instruments, dividends and interest receivables, cash, goodwill, contractual
rights of the Acquired Fund or the Safeco Trust in respect of the Acquired
Fund, all other intangible property owned by the Acquired Fund, originals or
copies of all books and records of the Acquired Fund, and all other assets of
the Acquired Fund on the Closing Date. The Acquiring Fund shall also be
entitled to receive (or, to the extent agreed upon between the Safeco Trust and
the Acquiring Trust, be provided access to) copies of all records that the
Safeco Trust 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 Acquired Fund.
(b) The Acquired Fund has provided the Acquiring Fund with a list of
all of the Acquired Fund's securities and other assets as of the date of
execution of this Agreement, and the Acquiring Fund has provided the Acquired
Fund with a copy of the current fundamental investment policies and restrictions
and fair value procedures applicable to the Acquiring Fund. The Acquired Fund
reserves the right to sell any of such securities or other assets before the
Closing Date (except to the extent sales may be limited by representations of
the Acquired Fund contained herein and made in connection with the issuance of
the tax opinion provided for in Paragraph 8.5 hereof).
1.3 The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations that are or will become due prior to the Closing.
A-21
1.4 On or as soon after the Closing Date as is conveniently practicable
(the "Liquidation Date"), the Safeco Trust shall liquidate the Acquired Fund
and distribute pro rata to its shareholders of record, determined as of the
close of regular trading on the New York Stock Exchange on the Closing Date
(the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by the
Acquired Fund pursuant to Paragraph 1.1 hereof. Each Acquired Fund Shareholder
shall receive the number of Acquiring Fund Shares that have an aggregate NAV
equal to the aggregate NAV of the shares of beneficial interest of the Acquired
Fund ("Acquired Fund Shares") held of record by such Acquired Fund Shareholder
on the Closing Date. Such liquidation and distribution will be accomplished by
the Safeco Trust instructing the Acquiring Trust to transfer the Acquiring Fund
Shares then credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share records of the Acquiring Fund
established and maintained by the Acquiring Fund's transfer agent in the names
of the Acquired Fund Shareholders and representing the respective pro rata
number of the Acquiring Fund Shares due the Acquired Fund Shareholders. The
Safeco Trust shall promptly provide the Acquiring Trust with evidence of such
liquidation and distribution. All issued and outstanding Acquired Fund Shares
will simultaneously be cancelled on the books of the Acquired Fund, and the
Acquired Fund will be dissolved. The Acquiring Fund shall not issue
certificates representing the Acquiring Fund Shares in connection with such
exchange.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent for its Investor Class shares. Any certificates
representing ownership of Acquired Fund Shares that remain outstanding on the
Closing Date shall be deemed to be cancelled and shall no longer evidence
ownership of Acquired Fund Shares.
1.6 Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
name other than the registered holder of the Acquired Fund Shares on the books
of the Acquired Fund as of that time shall, as a condition of such issuance and
transfer, be paid by the person to whom such Acquiring Fund Shares are to be
issued and transferred.
1.7 Any reporting responsibility of the Safeco Trust with respect to the
Acquired Fund for taxable periods ending on or before the Closing Date,
including, but not limited to, the responsibility for filing of regulatory
reports, Tax Returns (as defined in Paragraph 4.1), or other documents with the
Commission, any state securities commissions, and any federal, state or local
tax authorities or any other relevant regulatory authority, is and shall remain
the responsibility of the Safeco Trust.
2. VALUATION
2.1 The NAV of the Acquiring Fund Shares and the NAV of the Acquired Fund
shall, in each case, be determined as of the close of business (4:00 p.m.,
Boston time) on the Closing Date (the "Valuation Time"). The NAV of each
Acquiring Fund Share shall be computed by Pioneer Investment Management, Inc.
(the "Acquiring Fund Adviser") in the manner set forth in the Acquiring Fund's
Declaration of Trust (the "Declaration"), or By-Laws, and the Acquiring Fund's
then-current prospectus and statement of additional information. The NAV of the
Acquired Fund and of each Institutional Class shares thereof shall be computed
by Safeco Asset Management, Inc. (the "Acquired Fund Administrator") by
calculating the value of the Acquired Assets and by subtracting therefrom the
amount of the liabilities of the Acquired Fund on the Closing Date included on
the Statement of Assets and Liabilities of the Acquired Fund delivered pursuant
to Paragraph 5.7 (the "Statement of Assets and Liabilities"), said assets and
liabilities to be valued in the manner set forth in the Acquired Fund's then
current prospectus and statement of additional information. Pioneer Investment
Management, Inc. (the "Acquiring Fund Adviser") shall confirm to the Acquiring
Fund the NAV of the Acquired Fund.
2.2 The number of Acquiring Fund Shares to be issued (including fractional
shares, if any) in exchange for the Acquired Assets and the assumption of the
Assumed Liabilities shall be determined by Pioneer Investment Management, Inc.
(the "Acquiring Fund Adviser") by dividing the NAV of the Acquired Fund, as
determined in accordance with Paragraph 2.1, by the NAV of each Acquiring Fund
Share, as determined in accordance with Paragraph 2.1.
2.3 The Acquired Fund shall cause the Acquired Fund Administrator to
deliver a copy of its valuation report to the Acquiring Fund at Closing. All
computations of value shall be made by the Acquired Fund Administrator in
accordance with its regular practice as pricing agent for the Acquired Fund.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be December 8, 2004, or such later date as the
parties may agree to in writing. All acts necessary to consummation the
Reorganization (the "Closing") shall be deemed to take place simultaneously as
of 5:00 p.m. (Eastern time) on the Closing Date unless otherwise provided. The
Closing shall be held at the offices of Wilmer Cutler Pickering Hale and Dorr
LLP, 60 State 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 State Street Bank and Trust Company (the "Acquired Fund Custodian")
as record holder for the Acquired Fund shall be presented by the Acquired Fund
to Brown Brothers Harriman & Co.
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(the "Acquiring Fund Custodian") for examination no later than three business
days preceding the Closing Date. Such portfolio securities shall be delivered
by the Acquired Fund to the Acquiring Fund Custodian for the account of the
Acquiring 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 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 Acquired Fund Custodian in
book-entry form on behalf of the Acquired Fund shall be delivered by the
Acquired Fund Custodian through the Depository Trust Company to the Acquiring
Fund Custodian and by the Acquiring Fund Custodian recording the beneficial
ownership thereof by the Acquiring Fund on the Acquiring Fund Custodian's
records. Any cash shall be delivered by the Acquired Fund Custodian
transmitting immediately available funds by wire transfer to the Acquiring Fund
Custodian the cash balances maintained by the Acquired Fund Custodian and the
Acquiring Fund Custodian crediting such amount to the account of the Acquiring
Fund.
3.3 The Acquiring Fund Custodian shall deliver within one business day
after the Closing a certificate of an authorized officer stating that: (a) the
Acquired Assets have been delivered in proper form to the Acquiring 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 delivery of portfolio
securities as part of the Acquired 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 Acquired Fund pursuant to Paragraph 2.1 is
impracticable, 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 Acquired 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 Acquired Fund
Shareholders and the number and percentage ownership of outstanding Acquired
Fund Shares owned by each Acquired Fund Shareholder as of the Valuation Time,
certified by the President or a Secretary of the Safeco Trust and its
Treasurer, Secretary or other authorized officer (the "Shareholder List") as
being an accurate record of the information (a) provided by the Acquired Fund
Shareholders, (b) provided by the Acquired Fund Custodian, or (c) derived from
the Safeco Trust's records by such officers or one of the Safeco Trust's
service providers. The Acquiring Fund shall issue and deliver to the Acquired
Fund a confirmation evidencing the Acquiring Fund Shares to be credited on the
Closing Date, or provide evidence satisfactory to the Acquired Fund that such
Acquiring Fund Shares have been credited to the Acquired Fund's account on the
books of the Acquiring 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 hereto, the Safeco Trust, on
behalf of the Acquired Fund, represents, warrants and covenants to the
Acquiring 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 Acquired Fund is a series of the Safeco Trust. The Safeco
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 Acquired Fund's
shareholders, to perform its obligations under this Agreement. The Acquired
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 Safeco Trust and the Acquired
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 Safeco 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 Safeco Trust is not in violation of, and the execution and
delivery of this Agreement and the performance of its obligations under
this Agreement in respect of the Acquired Fund will not result in a
violation of, any provision of the Safeco Trust's Trust Instrument or
By-Laws or any material agreement, indenture, instrument, contract, lease
or other undertaking with respect to the Acquired Fund to which the Safeco
Trust is a party or by which the Acquired 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 Acquired Fund or any of the Acquired
Fund's properties or assets. The Acquired Fund knows of no facts which
might form the basis for the institution of such proceedings. Neither the
Safeco Trust nor the Acquired 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 Acquired Fund's business or its
ability to consummate the transactions contemplated herein or would be
binding upon the Acquiring Fund as the successor to the Acquired Fund;
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(e) The Acquired Fund has no material contracts or other commitments
(other than this Agreement or agreements for the purchase and sale of
securities entered into in the ordinary course of business and consistent
with its obligations under this Agreement) which will not be terminated at
or prior to the Closing Date and no such termination will result in
liability to the Acquired Fund (or the Acquiring Fund);
(f) The statement of assets and liabilities of the Acquired Fund, and
the related statements of income and changes in NAV, as of and for the
fiscal year ended December 31, 2003 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
Acquired 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 Acquired 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 Acquired Fund as of such date and the results of
its operations for the period then ended. Except for the Assumed
Liabilities, the Acquired 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 Acquired Fund has been
disclosed or is required to be disclosed in the Acquired Fund's reports on
Form N-CSR to enable the chief executive officer and chief financial
officer or other officers of the Acquired Fund to make the certifications
required by the Sarbanes-Oxley Act, and no deficiency, weakness, fraud,
change, event or other factor exists that will be required to be disclosed
in the Acquiring Fund's Form N-CSR after the Closing Date;
(g) Since December 31, 2003, except as specifically disclosed in the
Acquired 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, 2004, there has not been any material adverse change
in the Acquired Fund's financial condition, assets, liabilities, business
or prospects, or any incurrence by the Acquired 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 (g) (but not
for any other purpose of this Agreement), a decline in NAV per Acquired
Fund Share arising out of its normal investment operations or a decline in
market values of securities in the Acquired Fund's portfolio or a decline
in net assets of the Acquired Fund as a result of redemptions shall not
constitute a material adverse change;
(h) (A) For each taxable year of its operation since its inception,
the Acquired Fund has met, and for the current taxable year it will meet,
the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and will qualify as such as of
the Closing Date and will satisfy the diversification requirements of
Section 851(b)(3) of the Code without regard to the last sentence of
Section 851(d) of the Code. The Acquired Fund has not taken any action,
caused any action to be taken or caused any action to fail to be taken
which action or failure could cause the Acquired Fund to fail to qualify as
a regulated investment company under the Code;
(B) Within the times and in the manner prescribed by law, the
Acquired Fund has properly filed on a timely basis all Tax Returns (as
defined below) that it was required to file, and all such Tax Returns
were complete and accurate in all respects. The Acquired Fund has not
been informed by any jurisdiction that the jurisdiction believes that
the Acquired Fund was required to file any Tax Return that was not
filed; and the Acquired Fund does not know of any basis upon which a
jurisdiction could assert such a position;
(C) The Acquired Fund has timely paid, in the manner prescribed
by law, all Taxes (as defined below), which were due and payable or
which were claimed to be due;
(D) All Tax Returns filed by the Acquired Fund constitute
complete and accurate reports of the respective Tax liabilities and
all attributes of the Acquired Fund or, in the case of information
returns and payee statements, the amounts required to be reported, and
accurately set forth all items required to be included or reflected in
such returns;
(E) The Acquired Fund has not waived or extended any applicable
statute of limitations relating to the assessment or collection of
Taxes;
(F) The Acquired Fund has not been notified that any examinations
of the Tax Returns of the Acquired Fund are currently in progress or
threatened, and no deficiencies have been asserted or assessed against
the Acquired Fund as a result of any audit by the Internal Revenue
Service or any state, local or foreign taxing authority, and, to its
knowledge, no such deficiency has been proposed or threatened;
(G) The Acquired Fund has no actual or potential liability for
any Tax obligation of any taxpayer other than itself. The Acquired
Fund is not and has never been a member of a group of corporations
with which it has filed (or been required to file) consolidated,
combined or unitary Tax Returns. The Acquired Fund is not a party to
any Tax allocation, sharing, or indemnification agreement;
A-24
(H) The unpaid Taxes of the Acquired Fund for tax periods through
the Closing Date do not exceed the accruals and reserves for Taxes
(excluding accruals and reserves for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on
the Statement of Assets and Liabilities, rather than in any notes
thereto (the "Tax Reserves"). All Taxes that the Acquired Fund is or
was required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been timely paid to the
proper governmental agency;
(I) The Acquired Fund has delivered to the Acquiring Fund or made
available to the Acquiring Fund complete and accurate copies of all
Tax Returns of the Acquired Fund, together with all related
examination reports and statements of deficiency for all periods not
closed under the applicable statutes of limitations and complete and
correct copies of all private letter rulings, revenue agent reports,
information document requests, notices of proposed deficiencies,
deficiency notices, protests, petitions, closing agreements,
settlement agreements, pending ruling requests and any similar
documents submitted by, received by or agreed to by or on behalf of
the Acquired Fund. The Acquired Fund has disclosed on its federal
income Tax Returns all positions taken therein that could give rise to
a substantial understatement of federal income Tax within the meaning
of Section 6662 of the Code;
(J) The Acquired Fund has not undergone, has not agreed to
undergo, and is not required to undergo (nor will it be required as a
result of the transactions contemplated in this Agreement to undergo)
a change in its method of accounting resulting in an adjustment to its
taxable income pursuant to Section 481 of the Code. The Acquired Fund
will not be required to include any item of income in, or exclude any
item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any (i)
change in method of accounting for a taxable period ending on or prior
to the Closing Date under Section 481(c) of the Code (or any
corresponding or similar provision of state, local or foreign income
Tax law); (ii) "closing agreement" as described in Section 7121 of the
Code (or any corresponding or similar provision of state, local or
foreign income Tax law) executed on or prior to the Closing Date;
(iii) installment sale or open transaction disposition made on or
prior to the Closing Date; or (iv) prepaid amount received on or prior
to the Closing Date;
(K) The Acquired Fund has not taken or agreed to take any action,
and is not aware of any agreement, plan or other circumstance, that is
inconsistent with the representations set forth in Annex B;
(L) There are (and as of immediately following the Closing there
will be) no liens on the assets of the Acquired Fund relating to or
attributable to Taxes, except for Taxes not yet due and payable;
(M) The Tax bases of the assets of the Acquired Fund are
accurately reflected on the Acquired Fund's Tax books and records;
(N) The Acquired Fund has not incurred (or been allocated) an
"overall foreign loss" as defined in Section 904(f)(2) of the Code
which has not been previously recaptured in full as provided in
Sections 904(f)(2) and/or 904(f)(3) of the Code;
(O) The Acquired Fund is not a party to a gain recognition
agreement under Section 367 of the Code;
(P) The Acquired Fund does not own any interest in an entity that
is characterized as a partnership for income tax purposes;
(Q) The Acquired Fund's Tax attributes are not limited under the
Code (including but not limited to any capital loss carry forward
limitations under Sections 382 or 383 of the Code and the Treasury
Regulations thereunder) or comparable provisions of state law, except
as set forth on Schedule 4.1; and
(R) For purposes of this Agreement, "Taxes" or "Tax" shall mean
all taxes, charges, fees, levies or other similar assessments or
liabilities, including without limitation income, gross receipts, ad
valorem, premium, value-added, excise, real property, personal
property, sales, use, transfer, withholding, employment, unemployment,
insurance, social security, business license, business organization,
environmental, workers compensation, payroll, profits, license, lease,
service, service use, severance, stamp, occupation, windfall profits,
customs, duties, franchise and other taxes imposed by the United
States of America or any state, local or foreign government, or any
agency thereof, or other political subdivision of the United States or
any such government, and any interest, fines, penalties, assessments
or additions to tax resulting from, attributable to or incurred in
connection with any tax or any contest or dispute thereof; and "Tax
Returns" shall mean all reports, returns, declarations, statements or
other information required to be supplied to a governmental or
regulatory authority or agency, or to any other person, in connection
with Taxes and any associated schedules or work papers produced in
connection with such items;
(i) All issued and outstanding Acquired Fund Shares are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and nonassessable by the Acquired Fund. All of the issued and outstanding
Acquired 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 Acquiring Fund pursuant to
A-25
Paragraph 3.5 hereof. The Acquired Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any Acquired
Fund Shares, nor is there outstanding any security convertible into any
Acquired Fund Shares;
(j) At the Closing Date, the Acquired Fund will have good and
marketable title to the Acquired Assets, and full right, power and
authority to sell, assign, transfer and deliver the Acquired Assets to the
Acquiring Fund, and, upon delivery and payment for the Acquired Assets, the
Acquiring Fund will acquire 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 Safeco Trust has the trust power and authority 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 Safeco Trust's Board of Trustees, and,
subject to the approval of the Acquired Fund's shareholders, assuming due
authorization, execution and delivery by the Acquiring Fund, this Agreement
will constitute a valid and binding obligation of the Acquired 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 Acquired Fund to the
Acquiring 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 Acquired Fund shall be accurate and
complete 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 Acquiring 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 Acquired Fund to the
Acquiring 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 Safeco Trust or the Acquired Fund of
the transactions contemplated by this Agreement;
(o) All of the issued and outstanding Acquired Fund Shares have been
offered for sale and sold in conformity with all applicable federal and
state securities laws, except as may have been previously disclosed in
writing to the Acquiring Fund;
(p) The prospectus and statement of additional information of the
Acquired Fund, and any amendments or supplements thereto, furnished to the
Acquiring 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 misleading;
(q) The Acquired Fund currently complies in all material respects
with, and since its organization has complied 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 Acquired Fund currently complies in all material respects with, and
since its organization has complied in all material respects with, all
investment objectives, policies, guidelines and restrictions and any
compliance procedures established by the Safeco Trust with respect to the
Acquired Fund. All advertising and sales material used by the Acquired Fund
complies in all material respects with and has complied 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 National Association of
Securities Dealers, Inc. (the "NASD") 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, the NASD or any state securities authorities by the Acquired
Fund 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) The Acquired Fund has previously provided to the Acquiring Fund
(and at the Closing will provide an update through the Closing Date of such
information) data which supports a calculation of the Acquired Fund's total
return for all periods since the
A-26
organization of the Acquired Fund. Such data has been prepared in
accordance in all material respects with the requirements of the Investment
Company Act and the regulations thereunder and the rules of the NASD;
(s) Neither the Acquired Fund nor, to the knowledge of the Acquired
Fund, any "affiliated person" of the Acquired 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 Acquired Fund, has any affiliated
person of the Acquired 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 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
(t) The tax representation certificate to be delivered by Safeco Trust
on behalf of the Acquired Fund to the Acquiring Trust and Wilmer Cutler
Pickering Hale and Dorr LLP at the Closing pursuant to Paragraph 7.4 (the
"Acquired Fund 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 Schedule 4.2 hereto, the Acquiring Trust, on
behalf of the Acquiring Fund, represents, warrants and covenants to the
Acquired 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 Acquiring Fund is a series of the Acquiring Trust. The
Acquiring Fund has not commenced operations and will not do so until the
Closing. The Acquiring Trust is a [statutory][business] trust duly
organized, validly existing and in good standing under the laws of the
[State of Delaware][Commonwealth of Massachusetts]. The Acquiring Trust has
the power to own all of its properties and assets and to perform the
obligations under this Agreement. The Acquiring 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 Acquiring Trust and the Acquiring 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 Acquiring 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 Acquiring 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 Acquiring 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;
(d) The Registration Statement, the Proxy Statement and statement of
additional information with respect to the Acquiring Fund, each dated [ ],
2004, 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 Acquired Fund for inclusion therein, as
covered by the Acquired Fund's warranty in Paragraph 4.1(m) 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 Acquired
Fund for inclusion therein, as covered by the Acquired Fund's warranty in
Paragraph 4.1(m) 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;
(e) The Acquiring Trust is not in violation of, and the execution and
delivery of this Agreement and performance of its obligations under this
Agreement will not result in a violation of, any provisions of the
Declaration of Trust or by-laws of the Acquiring Trust or any material
agreement, indenture, instrument, contract, lease or other undertaking with
respect to the Acquiring Fund to which the Acquiring Trust is a party or by
which the Acquiring Fund or any of its assets is bound;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or threatened
against the Acquiring Fund or any of the Acquiring Fund's properties or
assets. The Acquiring Fund knows of no facts which might form the basis for
the institution of such proceedings. Neither the Acquiring Trust nor the
Acquiring 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 Acquiring Fund's business or its ability to
consummate the transactions contemplated herein;
A-27
(g) The Acquiring Fund has no actual or potential liability for any
Tax obligation of any taxpayer other than itself. Acquiring Fund is not and
has never been a member of a group of corporations with which it has filed
(or been required to file) consolidated, combined or unitary Tax Returns.
The Acquiring Fund is not a party to any Tax allocation, sharing, or
indemnification agreement;
(h) The Acquiring Fund has not taken or agreed to take any action, and
is not aware of any agreement, plan or other circumstance, that is
inconsistent with the representations set forth in Annex A;
(i) The Acquiring Fund currently complies, and at all times since its
organization has complied, 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 Acquiring Fund
currently complies in all material respects with, and since its
organization has complied in all material respects with, all investment
objectives, policies, guidelines and restrictions and any compliance
procedures established by the Acquiring Trust with respect to the Acquiring
Fund. All advertising and sales material used by the Acquiring Fund
complies in all material respects with and has complied 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 NASD 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, the NASD or any state securities authorities by the
Acquiring Fund 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;
(j) The authorized capital of the Acquiring Fund consists of an
unlimited number of shares of beneficial interest, no par value per share.
As of the Closing Date, the Acquiring Fund will be authorized to issue an
unlimited number of shares of beneficial interest, no par value per share.
The Acquiring Fund Shares to be issued and delivered to the Acquired Fund
for the account of the Acquired 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 duly and validly issued, fully paid and
non-assessable. The Acquiring Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any Acquiring Fund
shares, nor is there outstanding any security convertible into any
Acquiring Fund shares, nor will the Acquiring Fund have any issued or
outstanding shares on or before the Closing Date other than those issued to
Acquiring Fund Adviser or one of its affiliates, which shares shall be
redeemed, for an amount equal to the price paid therefor, at or before the
Closing;
(k) The Acquiring Trust has the trust power and authority 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 Acquiring Trust's Board of Trustees,
and, assuming due authorization, execution and delivery by the Acquired
Fund, this Agreement will constitute a valid and binding obligation of the
Acquiring 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 in writing by the Acquiring Fund
or the Acquiring 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;
(m) 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 Acquiring Fund, except for the registration of the
Acquiring Fund Shares under the Securities Act and the Investment Company
Act;
(n) The prospectus and statement of additional information of the
Acquiring Fund, and any amendments or supplements thereto, furnished to the
Acquired 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 misleading;
(o) Neither the Acquiring Fund nor, to the knowledge of the Acquiring
Fund, any "affiliated person" of the Acquiring Fund has been convicted of
any felony or misdemeanor, described in Section 9(a)(1) of the Investment
Company Act, nor, to the knowledge
A-28
of the Acquiring Fund, has any affiliated person of the Acquiring 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
(p) The tax representation certificate to be delivered by the
Acquiring Trust on behalf of the Acquiring Fund to the Safeco Trust and
Wilmer Cutler Pickering Hale and Dorr LLP at Closing pursuant to Section
6.3 (the "Acquiring Fund 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
5.1 The Acquired Fund will operate the Acquired Fund's business in the
ordinary course of business between the date hereof and the Closing Date. It is
understood that such ordinary course of business will include the declaration
and payment of customary dividends and other distributions and any other
dividends and other distributions necessary or advisable (except to the extent
dividends or other distributions that are not customary may be limited by
representations made in connection with the issuance of the tax opinion
described in Paragraph 8.5 hereof), in each case payable either in cash or in
additional shares.
5.2 The Safeco Trust will call a special meeting of the Acquired Fund's
shareholders to consider approval of this Agreement and act upon the matters
set forth in the Proxy Statement.
5.3 The Acquiring 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 Safeco Trust will provide the Acquiring 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.
5.4 The Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired by the Acquired Fund for the purpose of
making any distribution thereof other than in accordance with the terms of this
Agreement.
5.5 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requires concerning the beneficial
ownership of the Acquired Fund Shares.
5.6 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.
5.7 The Acquired Fund shall furnish to the Acquiring Fund on the Closing
Date a Statement of Assets and Liabilities of the Acquired Fund as of the
Closing Date setting forth the NAV of the Acquired Fund as of the Valuation
Time, which statement shall be prepared in accordance with GAAP consistently
applied and certified by the Safeco Trust's Treasurer or Assistant Treasurer.
As promptly as practicable, but in any case within 30 days after the Closing
Date, the Safeco Trust shall furnish to the Acquiring Trust, in such form as is
reasonably satisfactory to the Acquiring Trust, a statement of the earnings and
profits of the Acquired Fund for federal income tax purposes, and of any
capital loss carryovers and other items that will be carried over to the
Acquiring Fund under the Code, and which statement will be certified by the
Treasurer of the Safeco Trust.
5.8 Neither Fund shall take any action that is inconsistent with the
representations set forth in, with respect to the Acquired Fund, the Acquired
Fund Tax Representation Certificate and, with respect to the Acquiring Fund,
the Acquiring Fund Tax Representation Certificate.
5.9 From and after the date of this Agreement and until the Closing Date,
each of the Funds and the Safeco Trust and the Acquiring Trust shall use its
commercially reasonable efforts to cause the Reorganization to qualify, and
will not knowingly take any action, cause any action to be taken, fail to take
any action or cause any action to fail to be taken, which action or failure to
act could prevent the Reorganization from qualifying, as a reorganization under
the provisions of Section 368(a) of the Code. The parties hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the income tax regulations promulgated under the
Code. 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)(1)(F) of the Code and shall not take any position
inconsistent with such treatment.
5.10 From and after the date of this Agreement and through the time of the
Closing, each Fund shall use its commercially reasonable efforts to cause it to
qualify, and will not knowingly take any action, cause any action to be taken,
fail to take any action or cause any action
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to fail to be taken, which action or failure to act could prevent it from
qualifying, as a regulated investment company under the provisions of
Subchapter M of the Code.
5.11 The Acquired Fund shall prepare, or cause to be prepared, all Tax
Returns of the Acquired Fund for taxable periods that end on or before the
Closing Date and shall timely file, or cause to be timely filed, all such Tax
Returns. The Acquired Fund shall make any payments of Taxes required to be made
by such Fund with respect to any such Tax Returns.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to complete the transactions provided
for herein shall be, at its election, subject to the performance by the
Acquiring 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 Acquired Fund in writing:
6.1 All representations and warranties by the Acquiring Trust on behalf of
the Acquiring Fund contained in this Agreement shall be true and correct 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 Acquiring Trust shall have delivered to the Safeco Trust on the
Closing Date a certificate of the Acquiring Trust on behalf of the Acquiring
Fund executed in its name by its President or Vice President and its Treasurer
or Assistant Treasurer, in form and substance satisfactory to the Safeco Trust
and dated as of the Closing Date, to the effect that the representations and
warranties of the Acquiring Trust made in this Agreement are true and correct
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
Safeco Trust shall reasonably request;
6.3 The Acquiring Trust on behalf of the Acquiring Fund shall have
delivered to the Safeco Trust and Wilmer Cutler Pickering Hale and Dorr LLP an
Acquiring Fund Tax Representation Certificate, satisfactory to the Safeco Trust
and Wilmer Cutler Pickering Hale and Dorr LLP, substantially in the form
attached to this Agreement as Annex A, concerning certain tax-related matters
with respect to the Acquiring Fund;
6.4 With respect to the Acquiring Fund, the Board of Trustees of the
Acquiring Trust shall have determined that the Reorganization is in the best
interests of the Acquiring Fund and, based upon such determination, shall have
approved this Agreement and the transactions contemplated hereby; and
6.5 The Safeco Trust shall have received at the Closing a favorable
opinion as to the due authorization of this Agreement by the Acquiring Trust
and related matters of Wilmer Cutler Pickering Hale and Dorr LLP, dated as of
the Closing Date, in a form reasonably satisfactory to the Safeco Trust.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be, at its election, subject to the performance by
the Acquired 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 Acquiring Fund in writing:
7.1 All representations and warranties of the Safeco Trust on behalf of
the Acquired Fund contained in this Agreement shall be true and correct 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 Safeco Trust shall have delivered to the Acquiring Fund the
Statement of Assets and Liabilities of the Acquired Fund pursuant to Paragraph
5.7, 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 Safeco Trust's Treasurer or Assistant Treasurer;
7.3 The Safeco Trust shall have delivered to the Acquiring Trust on the
Closing Date a certificate of the Safeco Trust on behalf of the Acquired 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
Acquiring Trust and dated as of the Closing Date, to the effect that the
representations and warranties of the Safeco Trust contained in this Agreement
are true and correct 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 Acquiring Trust shall reasonably request;
7.4 The Safeco Trust on behalf of the Acquired Fund shall have delivered
to the Acquiring Trust and Wilmer Cutler Pickering Hale and Dorr LLP an
Acquired Fund Tax Representation Certificate, satisfactory to the Acquiring
Trust and Wilmer Cutler Pickering Hale and
A-30
Dorr LLP, substantially in the form attached to this Agreement as Annex B,
concerning certain tax-related matters with respect to the Acquired Fund;
7.5 The Acquiring Trust shall have received at the Closing a favorable
opinion as to the due authorization of this Agreement by the Safeco Trust and
related matters of Kirkpatrick & Lockhart LLP, dated as of the Closing Date, in
a form reasonably satisfactory to the Acquiring Trust; and
7.6 With respect to the Acquired Fund, the Board of Trustees of the Safeco
Trust shall have determined that the Reorganization is in the best interests of
the Acquired 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 shall have
been approved by the requisite vote of the Acquired Fund's shareholders in
accordance with the provisions of the Safeco Trust's Trust Instrument and
By-Laws, and certified copies of the resolutions evidencing such approval by
the Acquired Fund's shareholders shall have been delivered by the Acquired Fund
to the Acquiring 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 Acquiring Trust'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, threatened or contemplated
under the Securities Act; and
8.5 The parties shall have received an opinion of Wilmer Cutler Pickering
Hale and Dorr LLP, satisfactory to the Safeco Trust and the Acquiring Trust and
subject to customary assumptions and qualifications, substantially to the
effect that for federal income tax purposes the acquisition by the Acquiring
Fund of the Acquired Assets solely in exchange for the issuance of Acquiring
Fund Shares to the Acquired Fund and the assumption of the Assumed Liabilities
by the Acquiring Fund, followed by the distribution by the Acquired Fund, in
liquidation of the Acquired Fund, of Acquiring Fund Shares to the Acquired Fund
Shareholders in exchange for their Acquired Fund Shares and the termination of
the Acquired Fund, will constitute a "reorganization" within the meaning of
Section 368(a) of the Code
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.
9.2 The parties have been informed by Symetra Financial Corporation and
the Acquiring Fund Adviser -- and the parties have entered into this Agreement
in reliance on such information -- that such non-parties will pay all expenses
of the Funds associated with the Reorganization, including the expenses
associated with the preparation, printing and mailing of any and all
shareholder notices, communications, proxy statements, and necessary filings
with the SEC or any other governmental authority in connection with the
transactions contemplated by this Agreement and the legal and Trustees' fees
and expenses incurred in connection with the Reorganization. Except for the
foregoing, the Acquiring Fund and the Acquired Fund shall each bear its own
expenses in connection with the transactions contemplated by this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Trust and the Safeco Trust each agree 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.
A-31
10.2 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
Acquiring Trust and the Safeco Trust. In addition, either party may at its
option terminate this Agreement at or prior to the Closing Date:
(a) because of a material breach by the other of any representation,
warranty, covenant or agreement contained herein to be performed
at or prior to the Closing Date;
(b) because of a condition herein expressed to be precedent to the
obligations of the terminating party which has not been met and
which reasonably appears will not or cannot be met;
(c) by resolution of the Acquiring 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 Acquiring Fund's shareholders;
(d) by resolution of the Safeco 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 Acquired Fund's shareholders; or
(e) if the transactions contemplated by this Agreement shall not have
occurred on or prior to December 31, 2004 or such other date as
the parties may mutually agree upon in writing.
11.2 In the event of any such termination, there shall be no liability for
damages on the part of the Acquiring Fund, the Acquiring Trust, the Safeco
Trust or the Acquired Fund, or the trustees or officers of the Safeco Trust, or
the Acquiring 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 Safeco
Trust and the Acquiring Trust; provided, however, that following the meeting of
the Acquired Fund's shareholders called by the Safeco Trust pursuant to
Paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions regarding the method for determining the number of
Acquiring Fund Shares to be received by the Acquired Fund Shareholders under
this Agreement to their detriment without their further approval; provided that
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
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the Acquired Fund, c/o
Symetra Financial Corporation, 5069 154th Place, N.E., Seattle, Washington
98052, Attention: Roger F. Harbin, with copies to R. Darrell Mounts,
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second Floor,
Washington, DC 20036-1221, and to the Acquiring Fund, c/o Pioneer Investment
Management, Inc., 60 State Street, Boston, Massachusetts 02109, Attention:
Dorothy E. Bourassa, Esq., with copies to Wilmer Cutler Pickering Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, Attention: David C. Phelan.
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.
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.
A-32
14.5 It is expressly agreed that the obligations of the Acquiring Trust
and the Safeco 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 Acquiring Fund or the Acquired Fund, as the
case may be, as provided in the trust instruments of the Acquiring Trust and
the Instrument of Trust of the Safeco Trust, respectively. The execution and
delivery of this Agreement have been authorized by the trustees of the
Acquiring Trust and of the Safeco Trust and this Agreement has been executed by
authorized officers of the Acquiring Trust and the Safeco 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 Acquiring Fund and the Acquired Fund, as the case
may be, as provided in the trust instruments of the Acquiring Trust and the
Instrument of Trust of the Safeco Trust, respectively.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed as of the date first set forth above by its President or Vice
President and attested by its Secretary or Assistant Secretary.
Attest: [SAFECO TRUST]
on behalf of
[SAFECO FUND]
By: _________________________________ By: _________________________________
Name: Name:
Title: Secretary Title: President
Attest: [PIONEER TRUST]
on behalf of
[PIONEER FUND]
By: _________________________________ By: _________________________________
Name: Name:
Title: Title:
A-33
Annex A
TAX REPRESENTATION CERTIFICATE OF
[PIONEER TRUST ON BEHALF OF PIONEER FUND]
This certificate is being delivered in connection with the transactions to
be effected pursuant to the Agreement and Plan of Reorganization made as of
_______ , 2004 between [Pioneer Trust], a [Delaware statutory][Massachusetts
business] trust (the "Acquiring Trust"), on behalf of its series [Pioneer Fund]
("Acquiring Fund"), and [Safeco Trust], a Delaware statutory trust, on behalf
of its series [Safeco Fund] ("Acquired Fund") (the "Agreement"). Pursuant to
the Agreement, Acquiring Fund will acquire all of the assets of Acquired Fund
in exchange solely for (i) the assumption by Acquiring Fund of the Assumed
Liabilities of Acquired Fund, and (ii) the issuance of Investor Class shares of
beneficial interest of Acquiring Fund (the "Acquiring Fund Shares") to Acquired
Fund, followed by the distribution by Acquired Fund, in liquidation of Acquired
Fund, of the Acquiring Fund Shares to the shareholders of Acquired Fund and the
termination of Acquired Fund (the foregoing together constituting the
"transaction").
The undersigned officer of Acquiring Trust, after consulting with its
counsel, auditors and tax advisers regarding the meaning of and factual support
for the following representations, on behalf of Acquiring Fund, hereby
certifies and represents that the following statements are true, complete and
correct and will be true, complete and correct on the date of the transaction
and thereafter as relevant. Unless otherwise indicated, all capitalized terms
used but not defined herein shall have the meanings ascribed to them in the
Agreement.
1. Acquiring Fund is a series of Acquiring Trust, a [statutory][business]
trust established under the laws of the [State of Delaware][Commonwealth of
Massachusetts], and Acquiring Fund will be treated after the Closing as a
separate corporation for federal tax purposes. Acquiring Fund was newly
organized solely for the purpose of effecting the transaction and continuing
thereafter to operate as a regulated investment company. Prior to the
transaction, Acquiring Fund did not and will not engage in any business
activities. There shall be no shares of Acquiring Fund issued and outstanding
prior to the Closing Date other than those issued to Pioneer Investment
Management, Inc. or one of its affiliates in connection with the creation of
Acquiring Fund, which shares shall be redeemed, for an amount equal to the
price paid therefor, at or before the Closing.
2. Neither Acquiring Fund nor any person "related" to Acquiring Fund (as
defined in Treasury Regulation Section 1.368-1(e)(3)), nor any partnership of
which Acquiring Fund or any such related person is a partner, has any plan or
intention to redeem or otherwise acquire any of the Acquiring Fund Shares
received by shareholders of Acquired Fund in the transaction except in the
ordinary course of Acquiring Fund's business in connection with its legal
obligation under Section 22(e) of the Investment Company Act of 1940, as
amended (the "1940 Act"), as a series of a registered open-end investment
company to redeem its own shares.
3. After the transaction, Acquiring Fund will continue the historic
business (as defined in Treasury Regulation Section 1.368-1(d)(2)) of Acquired
Fund or will use a significant portion of the historic business assets (as
defined in Treasury Regulation Section 1.368-1(d)(3)) of Acquired Fund in a
business.
4. Acquiring Fund has no plan or intention to sell or otherwise dispose of
any assets of Acquired Fund acquired in the transaction, except for
dispositions made in the ordinary course of its business or to maintain its
qualification as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code").
5. Any expenses of Acquired Fund incurred in connection with the
transaction which are paid or assumed by Acquiring Fund will be expenses of
Acquired Fund solely and directly related to the transaction in accordance with
Rev. Rul. 73 54, 1973 1 C.B. 187. Acquiring Fund will not pay or assume the
expenses, if any, incurred by any Acquired Fund Shareholders in connection with
the transaction.
6. There is no, and never has been any, indebtedness between Acquiring Fund
and Acquired Fund.
7. Acquiring Fund will qualify for the special tax treatment afforded
regulated investment companies under Subchapter M of the Code for all taxable
years ending after the date of the transaction.
8. Acquiring Fund meets the requirements of an "investment company" in
Section 368(a)(2)(F) of the Code.
9. Acquiring Fund is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
10. Acquiring Fund does not now own and has never owned, directly or
indirectly, any shares of Acquired Fund.
11. As of the date of the transaction, the fair market value of the
Acquiring Fund Shares issued to Acquired Fund will be approximately equal to
the fair market value of the Acquired Assets minus the Assumed Liabilities.
Acquiring Fund will not furnish any consideration
A-34
in connection with the acquisition of the Acquired Assets other than the
assumption of the Assumed Liabilities and the issuance of such Acquiring Fund
Shares.
12. Immediately following the transaction, the Acquired Fund Shareholders
will own all of the outstanding Acquiring Fund Shares and will own such shares
solely by reason of their ownership of the Acquired Fund Shares immediately
prior to the transaction. Acquiring Fund has no plan or intention to issue as
part of the transaction any shares of Acquiring Fund other than the Acquiring
Fund Shares issued in exchange for the Acquired Assets.
13. The transaction is being undertaken for valid and substantial business
purposes, including facilitating Acquired Fund's becoming a member of the
Pioneer family of mutual funds, which, in the long term, is intended to result
in lower expenses and increased assets.
14. No Acquired Fund shareholder is acting as agent for Acquiring Fund in
connection with the transaction or approval thereof. Acquiring Fund will not
reimburse any Acquired Fund shareholder for Acquired Fund Shares such
shareholder may have purchased or for other obligations such shareholder may
have incurred.
15. Acquiring Fund has no outstanding warrants, options, convertible
securities or any other type of right pursuant to which any person could
acquire stock in Acquiring Fund.
* * * * *
The undersigned officer of Acquiring Trust is authorized to make all of
the representations set forth herein, and the undersigned is authorized to
execute this certificate on behalf of Acquiring Fund. The undersigned
recognizes that Wilmer Cutler Pickering Hale and Dorr LLP will rely upon the
foregoing representations in evaluating the United States federal income tax
consequences of the transaction and rendering its opinion pursuant to Section
8.5 of the Agreement. If, prior to the date of the transaction, any of the
representations set forth herein ceases to be accurate, the undersigned agrees
to deliver immediately to Wilmer Cutler Pickering Hale and Dorr LLP a written
notice to that effect.
[PIONEER TRUST], on
behalf of [Pioneer Fund]
By: ___________________________________
Name: _______________________________
Title: ______________________________
Dated: ______________, 2004
A-35
:
Annex B
TAX REPRESENTATION CERTIFICATE OF
[SAFECO TRUST]
ON BEHALF OF [SAFECO FUND]
This certificate is being delivered in connection with the transactions to
be effected pursuant to the Agreement and Plan of Reorganization made as of
_______________________ , 2004 between [Pioneer Trust], a [Delaware statutory]
[Massachusetts business] trust, on behalf of its series [Pioneer Fund]
("Acquiring Fund"), and [Safeco Trust], a Delaware statutory trust ("Safeco
Trust"), on behalf of its series [Safeco Fund] ("Acquired Fund") (the
"Agreement"). Pursuant to the Agreement, Acquiring Fund will acquire all of the
assets of Acquired Fund in exchange solely for (i) the assumption by Acquiring
Fund of the Assumed Liabilities of Acquired Fund and (ii) the issuance of
Investor Class shares of beneficial interest of Acquiring Fund (the "Acquiring
Fund Shares") to Acquired Fund, followed by the distribution by Acquired Fund,
in liquidation of Acquired Fund, of the Acquiring Fund Shares to the
shareholders of Acquired Fund and the termination of Acquired Fund (the
foregoing together constituting the "transaction").
The undersigned officer of Safeco Trust, after consulting with its
counsel, auditors and tax advisers regarding the meaning of and factual support
for the following representations, on behalf of Acquired Fund, hereby certifies
and represents that the following statements are true, complete and correct and
will be true, complete and correct on the date of the transaction and
thereafter as relevant. Unless otherwise indicated, all capitalized terms used
but not defined herein shall have the meanings ascribed to them in the
Agreement.
1. Acquired Fund is a series of Safeco Trust, a statutory trust organized
under the laws of the State of Delaware, and Acquired Fund is, and has been at
all times, treated as a separate corporation for federal tax purposes.
2. As of the date of the transaction, the fair market value of the
Acquiring Fund Shares received by each shareholder that holds shares of
Acquired Fund (the "Acquired Fund Shares") will be approximately equal to the
fair market value of the Acquired Fund Shares with respect to which such
Acquiring Fund Shares are received, and the aggregate consideration received by
Acquired Fund shareholders in exchange for their Acquired Fund Shares will be
approximately equal to the fair market value of all of the outstanding Acquired
Fund Shares immediately prior to the transaction. No property other than
Acquiring Fund Shares will be distributed to shareholders of Acquired Fund in
exchange for their Acquired Fund Shares, nor will any such shareholder receive
cash or other property as part of the transaction.
3. Neither Acquired Fund nor any person "related" to Acquired Fund (as
defined in Treasury Regulation Section 1.368-1(e)(3)), nor any partnership in
which Acquired Fund or any such related person is a partner, has redeemed,
acquired or otherwise made any distributions with respect to any shares of
Acquired Fund as part of the transaction, or otherwise pursuant to a plan of
which the transaction is a part, other than redemptions and distributions made
in the ordinary course of Acquired Fund's business as a series of an open-end
investment company. To the best knowledge of management of Acquired Fund, there
is no plan or intention on the part of the shareholders of Acquired Fund to
engage in any transaction with Acquired Fund, Acquiring Fund, or any person
treated as related to Acquired Fund or Acquiring Fund under Treasury Regulation
Section 1.368-1(e)(3) or any partnership in which Acquired Fund, Acquiring
Fund, or any person treated as related to Acquired Fund or Acquiring Fund under
Treasury Regulation Section 1.368-1(e)(3) is a partner involving the sale,
redemption or exchange of any of the Acquired Fund Shares or any of the
Acquiring Fund Shares to be received in the transaction, as the case may be,
other than in the ordinary course of Acquired Fund's business as a series of an
open-end investment company.
4. In the transaction, Acquired Fund will transfer its assets to Acquiring
Fund, which will assume the Assumed Liabilities, such that immediately
following the transfer, Acquiring Fund will possess all of the same assets and
liabilities as were possessed by Acquired Fund immediately prior to the
transaction, except for assets used to pay expenses incurred in connection with
the transaction and assets distributed to shareholders in redemption of their
shares immediately preceding, or in contemplation of, the transaction (other
than redemptions and distributions made in the ordinary course of Acquired
Fund's business as an open-end investment company) which assets constitute less
than 1% of the net assets of Acquired Fund.
5. As of the date of the transaction, the fair market value of the
Acquiring Fund Shares issued to Acquired Fund will be approximately equal to
the fair market value of the Acquired Assets minus the Assumed Liabilities.
Acquired Fund will not receive any consideration from Acquiring Fund in
connection with the acquisition of the Acquired Assets other than the
assumption of the Assumed Liabilities and the issuance of such Acquiring Fund
Shares.
A-36
6. The Assumed Liabilities assumed by Acquiring Fund plus the Assumed
Liabilities, if any, to which the transferred assets are subject were incurred
by Acquired Fund in the ordinary course of its business. Acquired Fund is not
aware of any liabilities of any kind other than the Assumed Liabilities.
7. As of the Closing Date, the adjusted basis and the fair market value of
the Acquired Assets will equal or exceed the Assumed Liabilities for purposes
of Section 357(d) of the Code.
8. Acquired Fund currently conducts its historic business within the
meaning of Treasury Regulation Section 1.368-1(d)(2), which provides that, in
general, a corporation's historic business is the business it has conducted
most recently, but does not include a business that the corporation enters into
as part of a plan of reorganization. All of the assets of the Acquired Fund
held by Acquiring Fund as of the opening of business on August 2, 2004 (the
date the Acquiring Fund Adviser became the investment adviser to Acquired Fund)
were Acquired Fund's historic business assets within the meaning of Treasury
Regulation Section 1.368-1(d)(3) (which provides that a corporation's historic
business assets are the assets used in its historic business).
9. Acquired Fund will distribute to its shareholders the Acquiring Fund
Shares it receives pursuant to the transaction, and its other properties, if
any, and will be liquidated promptly thereafter.
10. The expenses of Acquired Fund incurred by it in connection with the
transaction, if any, will be only such expenses that are solely and directly
related to the transaction in accordance with Rev. Rul. 73-54, 1973-1 C.B. 187.
Acquired Fund will not pay any expenses incurred by its shareholders in
connection with the transaction.
11. There is no, and never has been any, indebtedness between Acquiring
Fund and Acquired Fund.
12. Acquired Fund has properly elected to be a regulated investment
company under Subchapter M of the Code, has qualified for the special tax
treatment afforded regulated investment companies under Subchapter M of the
Code for each taxable year since inception, and qualifies for such treatment as
of the time of the Closing.
13. Acquired Fund meets the requirements of an "investment company" in
Section 368(a)(2)(F) of the Code.
14. Acquired Fund is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
15. Acquired Fund does not pay compensation to any shareholder-employee.
16. Immediately following the transaction, the Acquired Fund Shareholders
will own all of the outstanding Acquiring Fund Shares and will own such shares
solely by reason of their ownership of the Acquired Fund Shares immediately
prior to the transaction.
17. Acquired Fund shareholders will not have dissenters' or appraisal
rights in the transaction.
18. The transaction is being undertaken for valid and substantial business
purposes, including facilitating Acquired Fund's becoming a member of the
Pioneer family of mutual funds, which, in the long term, is intended to result
in lower expenses and increased assets.
19. Acquired Fund has no outstanding warrants, options, convertible
securities or any other type of right pursuant to which any person could
acquire stock in Acquired Fund.
* * * * *
A-37
The undersigned officer of the Safeco Trust is authorized to make all of
the representations set forth herein, and the undersigned is authorized to
execute this certificate on behalf of Acquired Fund. The undersigned recognizes
that Wilmer Cutler Pickering Hale and Dorr LLP will rely upon the foregoing
representations in evaluating the United States federal income tax consequences
of the transaction and rendering its opinion pursuant to Section 8.5 of the
Agreement. If, prior to the date of the transaction, any of the representations
set forth herein ceases to be accurate, the undersigned agrees to deliver
immediately to Wilmer Cutler Pickering Hale and Dorr LLP a written notice to
that effect.
[SAFECO TRUST], on
behalf of [SAFECO FUND]
By: __________________________________
Name: ______________________________
Title: _____________________________
A-38
Exhibit B -- Form of Interim Advisory Agreement
AGREEMENT dated as of August 2, 2004, between Pioneer Investment
Management, Inc. ("Pioneer"), a Delaware corporation and a member of the
UniCreditio Italiano Banking Group, Register of Banking Groups, and [SAFECO
TRUST], a Delaware statutory trust (the "Trust"), on behalf of its series
[SAFECO FUNDS] (the "Fund").
Whereas, Safeco Asset Management Company has acted as investment adviser to
the Fund pursuant to an Investment Advisory Agreement dated (the "Prior
Agreement").
Whereas, the Prior Agreement has been approved by the Board of Trustees of
the Trust and the shareholders of the Fund.
Whereas, the Prior Agreement is being terminated as a result of
assignment.
Whereas, the Board of Trustees has determined to appoint Pioneer as
investment adviser to the Fund.
Whereas, this Agreement is being entered into in reliance upon Rule 15a-4
under the Investment Company Act of 1940, as amended (the "Investment Company
Act").
Now therefore the Trust and Pioneer agree as follow:
Section 1. The Trust appoints Pioneer as investment adviser of the Funds
for the period and on the terms set forth herein. Pioneer accepts such
appointment.
Section 2. Pioneer and the Trust, on behalf of the Fund, hereby agree that
the provisions of the Prior Agreement (other than as to the term of the Prior
Agreement, the identity of the Adviser and the use of the "Safeco" name) are
incorporated herein by reference and made a part hereof as if references to the
Adviser were to Pioneer. Without limiting the forgoing, Pioneer shall be
entitled to the fee for its services provided for in the Prior Agreement from
(but exclusive of) the date hereof until the termination of this Agreement,
except as provided in Section 3 below.
Section 3. In the event that this Agreement is not approved by a majority
of the Trust's outstanding voting securities (as such term is used in the
Investment Company Act), Pioneer shall be entitled to a fee equal to the cost
to Pioneer of performing its services under this Agreement in lieu of the fee
provided for in Section 2. For purposes of this Agreement, Pioneer's costs in
providing the services under this Agreement shall be equal to the pro rata
portion of Pioneer's expenses for the term of this Agreement attributable to
its investment company advisory business, calculated as follows: Pioneer cost
in providing investment advisory services to its investment companies of the
same type (i.e., domestic equity, international, fixed income, money market)
multiplied by a fraction the numerator of which shall be the average daily net
assets of the Fund during the term of this Agreement and the denominator of
which shall be the average month end net assets under Pioneer's management of
all of its investment company clients.
Section 4. The compensation earned by Pioneer under Section 2 of this
Agreement shall be held in an interest bearing escrow account with the Fund's
custodian. If a majority of the outstanding voting securities approves this
Agreement prior to the end of its term, the amount in the escrow account
(including any interest earned) shall be paid to Pioneer. If a majority of the
outstanding voting securities do not approve this Agreement prior to the end of
its term, Pioneer shall be entitled to be paid, out of the escrow account the
lesser of (i) the amount in the escrow account (including any interest earned
on that amount while in escrow) and (ii) the fee provided for in Section 3
(plus any interest on that amount while in escrow), with any remaining amount
in the escrow account being returned to the Fund.
Section 5. This Agreement shall become effective on August 2, 2004. Unless
terminated as provided below, this Agreement shall remain in full force and
effect until the earliest of (i) the closing of the reorganization of the Fund
into [name of Pioneer Fund], (ii) approval of a Management Contract between the
Fund and Pioneer and (iii) a date that is the later of 150 days after the date
of the termination of the Prior Agreement or such later date as may be
consistent with a rule or interpretive position (formal or informal) of the
staff of the Securities and Exchange Commission. This Agreement may be
terminated at any time without payment of penalty by vote of the Trustees of
the Trust or by vote of a majority of the outstanding voting securities of the
Fund. Pioneer may terminate this Agreement at any time without payment of any
penalty on not less than 60 days written notice to the Fund. This Agreement
shall automatically terminate upon its assignment as defined in the Investment
Company Act.
B-1
In witness whereof, the parties hereto have executed this Agreement as the 2nd
day of August 2004.
[SAFECO TRUST]
--------------
---------------------------------------
By: -----------------------------------
Its: ----------------------------------
PIONEER INVESTMENT MANAGEMENT, INC.
---------------------------------------
By: -----------------------------------
Its: ----------------------------------
B-2
Exhibit C -- Additional Information Pertaining to Pioneer
---------------------------------------------------------
PORTFOLIO TRANSACTION POLICIES
All orders for the purchase or sale of portfolio securities are placed on
behalf of each fund by Pioneer pursuant to authority contained in the fund's
management contract. Pioneer seeks to obtain 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 a fund and/or other investment companies or other accounts managed
by Pioneer. In addition, consistent with Section 28(e) of the Exchange Act, 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 a 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 any of the funds as well as other
investment companies or other accounts managed by Pioneer, although not all
such research may be useful to any of the funds. 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 any of the funds. 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.
In circumstances where two or more broker-dealers offer comparable prices
and executions, preference may be given to a broker-dealer which has sold
shares of a fund as well as shares of other investment companies managed by
Pioneer. This policy does not imply a commitment to execute all portfolio
transactions through all broker-dealers that sell shares of the fund.
None of the funds used any brokers affiliated with Pioneer during its most
recently completed fiscal year in connection with its portfolio transactions.
SIMILAR FUNDS
Pioneer serves as the investment adviser to each fund in the Pioneer
Family of Funds. The following table identifies other funds in the Pioneer
Family of Funds that have similar investment objectives to the Funds described
in this Proxy Statement/Prospectus and provides other information regarding the
similar funds.
C-1
- ------------------------------------------------------------------------------------------------------------------------
Net assets of Fund Management fee rate
Pioneer Fund (as of September 30, 2004) (as a percentage of average daily net assets)
- ------------------------------------------------------------------------------------------------------------------------
Pioneer America Income Trust $ 199,641,365 0.50%
- ------------------------------------------------------------------------------------------------------------------------
Pioneer Bond Fund $ 265,835,916 0.50%
- ------------------------------------------------------------------------------------------------------------------------
Pioneer Cash Reserves Fund $ 478,165,700 0.40%
- ------------------------------------------------------------------------------------------------------------------------
Pioneer Global High Yield Fund $ 145,376,065 0.70% of the Funds average net assets up to $500
million, 0.65% of the next $500 million and 0.60%
of the excess over $1 billion.
- ------------------------------------------------------------------------------------------------------------------------
Pioneer High Yield Fund $7,811,801,182 0.70% of the Funds average net assets up to $500
million, 0.65% of the next $500 million and 0.60%
of the excess over $1 billion.
- ------------------------------------------------------------------------------------------------------------------------
Pioneer Short Term Income Fund $ 12,321,110 0.40%
- ------------------------------------------------------------------------------------------------------------------------
Pioneer Strategic Income Fund $ 572,112,159 0.60% of the Funds average net assets up to $1
billion, 0.55% of the next $9 billion; and 0.50% of
the excess over $10 billion.
- ------------------------------------------------------------------------------------------------------------------------
Pioneer Tax Free Income Fund $ 338,100,498 0.50% of the Funds average net assets up to $250
million, 0.48% of the next $50 million; and 0.45%
of the excess over $300 million.
- ------------------------------------------------------------------------------------------------------------------------
Pioneer Variable Contracts Trust
- ------------------------------------------------------------------------------------------------------------------------
Pioneer America Income VCT $ 44,418,013 0.55%
Portfolio
- ------------------------------------------------------------------------------------------------------------------------
Pioneer High Yield VCT Portfolio $ 109,597,617 0.65%
- ------------------------------------------------------------------------------------------------------------------------
Pioneer Money Market VCT Portfolio $ 30,622,262 0.50%
- ------------------------------------------------------------------------------------------------------------------------
Pioneer Strategic Income VCT $ 38,535,065 0.65%
Portfolio
- ------------------------------------------------------------------------------------------------------------------------
C-2
Exhibit D -- Portfolio Manager's Discussion of Performance
Report From the Fund Managers
Safeco California Tax-Free Income Fund
As of June 30, 2004
How did the Fund perform?
Though it posted an overall negative return, the Safeco California
Tax-Free Income Fund outperformed its benchmark index, the Lehman Brothers Long
Municipal Bond Index, for the six-month period ending June 30, 2004.
What factors impacted the Fund's performance?
After a first quarter market rally, then sell-off, the first half ended
with long-term bond yields rising about 50 basis points during the second
quarter. The impetus for this change was more news demonstrating a stronger
economy and an increasing threat of renewed inflation, which in turn could
inspire the Federal Reserve to increase short-term yields at a faster pace than
expected. With a longer average maturity than most of its peers, the Fund
performed relatively poorly as bond prices declined sharply.
What changes did you make to the Fund and why?
Transactions for the period included two small sales of Los Angeles DWAP
4.25 '34 to retail customers at aggressive prices, and a tax swap. We sold San
Jose Airport 5 '32 and bought Orange County Sanitary District 5 '33 in order to
realize a small loss, which can be used to offset gains for tax purposes.
Stephen Bauer -- Portfolio Manager
Mary Metastasio -- Portfolio Manager
D-1
Performance Overview & Highlights
Safeco California Tax-Free Income Fund
(Unaudited)
INVESTOR CLASS
Average Annual Total Return
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year
- --------------------------------------------------------------------------------------------------
Safeco California Tax-Free Income Fund (0.90)% (0.30)% 5.57% 6.58%
Lehman Brothers Long Municipal Bond Index (1.26)% 0.53% 6.04% 7.08%
Lipper, Inc. (California Municipal Bond Funds) (0.96)% 0.23% 4.74% 5.71%
* Not annualized.
Performance does not reflect the deduction for taxes that a shareholder would
pay on Fund distributions or the redemption of Fund shares.
- ---------------------------------------------------------------------------------------------------
<Graphic omitted>
The performance graph compares a hypothetical $10,000 investment in the
Investor Class to a hypothetical investment in a relevant market index. The
index is unmanaged and includes no operating expenses or transaction costs.
Past performance is not predictive of future results. Principal value may
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost.
Current Yield (30 day) ............ 4.51%
Weighted Average Maturity ......... 24.76 years
Percent of
TOP FIVE TYPE OF BONDS Net Assets
- ------------------------ -----------
Hospital 18.6%
Lease Rental 10.2
University Revenue 9.8
Utilities (Water) 9.1
Percent of
TOP FIVE HOLDINGS Net Assets
- ---------------------------------------------------------------------
Alameda Corridor Transportation Authority Revenue 5.8%
California Health Facilities Financing Authority Health
Facility Revenue (Cedars Sinai Medical Center) 5.8
Duarte California Certificates of Participation (City of
Hope Medical Center) 5.6
San Joaquin Hills Transportation Corridor Agency
Senior Lien Toll Road Revenue 5.2
State of California General Obligation Bonds 5.0
CREDIT RATING DISTRIBUTION AS A PERCENT OF NET ASSETS
- --------------------------------------------------------------------------------
[THE FOLLOWING WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
AAA: 40.2%
AA: 4.2%
A: 16.3%
BBB: 27.5%
Cash & Other: 6.6%
D-2
Report From the Fund Managers
Safeco High-Yield Bond Fund
As of June 30, 2004
How did the Fund perform?
Year-to-date performance of the fund has exceeded both the benchmark, the
Merrill Lynch High-Yield Master II Index, and the high-yield peer median.
What Factors impacted the Fund's performance?
Our credit selection and overweight in CCC-rated bonds largely accounted
for the Fund's good relative performance during the first half of the year. We
likely removed the overweight in CCC too soon and missed the rally during the
last part of the second quarter.
Nine of our holdings announced refinancing and/or tenders, which provided
a positive "pop" to returns reflecting our credit picks. Two negative credit
events were Pegasus Satellite, which deteriorated quickly, and in MCI stock we
received in exchange for WorldCom bonds. The latter declined as short-term
bankruptcy investors sold the stock and long-term holders have been slow to add
positions in a difficult sector.
What changes did you make to the Fund and why?
The number of overall holdings has been reduced to a more manageable
level, between 100 and 120 positions. Diversification remained strong as we
trimmed larger holdings and selectively added to several top-25 positions. No
bond exceeds 2% of assets and we continue to reduce the percentage of our asset
level in the top 10.
We continue to overweight industrial and cyclical sectors, underweight
defensive sectors and BB-rated credits, and maintain a shorter duration versus
our benchmark. Our overall yield-to-maturity and coupon return to shareholders
are close to or exceed the benchmark. We achieve this by holding high coupon
"cushion" bonds likely to be called in the near term.
High-yield bonds, especially those rated BB, will be hurt as Treasury
rates rise at this point in the cycle. The effort to counteract rising interest
rates is three-fold. First, underweighting BB-rated issues and slightly shorten
the duration. Second, adding adjustable rate bonds to offset the Federal
Reserve rate increases. Finally, identifying near-term credit upgrade
candidates not fully reflected in the market. The latter is admittedly
difficult in this fairly valued market.
Gregory Card, CFA -- Portfolio Manager
Beverly R. Denny, CFA -- Portfolio Manager
D-3
Performance Overview & Highlights
Safeco High-Yield Bond Fund
(Unaudited)
INVESTOR CLASS
- ------------------------------------------------------------------------------------------
Average Annual Total Return
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year
- ------------------------------------------------------------------------------------------
Safeco High-Yield Bond Fund 1.44% 11.67% 0.74% 4.60%
Merrill Lynch High-Yield Master II Index 1.36% 10.19% 4.79% 7.50%
Lipper, Inc. (High Current Yield Funds) 1.15% 9.63% 3.48% 5.45%
* Not annualized.
Performance does not reflect the deduction for taxes that a shareholder would pay on Fund
distributions or the redemption of
Fund shares.
<GRAPHIC OMITTED>
The performance graph compares a hypothetical $10,000 investment in the
Investor Class to a hypothetical investment in a relevant market index. The
index is unmanaged and includes no operating expenses or transaction costs.
Past performance is not predictive of future results. Principal value may
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost.
Current Yield (30-day) ............ 6.93%
Weighted Average Maturity ......... 5.33 years
Percent of
TOP FIVE INDUSTRIES Net Assets
- ---------------------------------------- -----------
Integrated Telecommunications Services 6.0%
Metal & Glass Containers 5.8
Specialty Stores 4.5
Auto Parts & Equipment 4.0
Electric Utilities 3.7
Percent of
TOP FIVE HOLDINGS Net Assets
- -------------------------------------------- -----------
Champion Enterprises, Inc.
(Homebuilding) 1.6%
LCI International, Inc.
(Integrated Telecommunications Services) 1.6
Cogentrix Energy Inc.
(Multi-Utilities & Unregulated Power) 1.4
Graham Packaging Co., Inc.
(Paper Packaging) 1.4
AMF Bowling Worldwide, Inc.
(Leisure Facilities) 1.2
TOP FIVE PURCHASES Cost
For the Period Ended June 30, 2004 (000's)
- ------------------------------------------------- --------
Interface, Inc. $1,000
AMF Bowling Worldwide Inc. 650
Petro Stopping Centers, LP 513
BCP Caylux Holdings Luembourg SCA 508
American Casino & Entertainment Properties, LLC 500
TOP FIVE SALES Proceeds
For the Period Ended June 30, 2004 (000's)
- ------------------------------------ ---------
Interface, Inc. $598
Schuler Homes, Inc. 583
Nalco Co. 527
NRG Energy, Inc. 526
Petrozuata Finance, Inc. 524
CREDIT RATING DISTRIBUTION AS A PERCENT OF NET ASSETS
- --------------------------------------------------------------------------------
[THE FOLLOWING WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Corporate Bonds - CCC: 14.0%
Not Rated: 3.0%
Common Stock: 1.9%
Preferred Stock: 2.3%
Commercial Paper: 9.5%
Cash & Other: 4.8%
Corporate Bonds - BBB: 0.9%
Corporate Bonds - BB: 10.4%
Corporate Bonds - B: 53.2%
D-4
Report From the Fund Managers
Safeco Intermediate-Term Bond Fund
As of June 30, 2004
How did the Fund perform?
The Safeco Intermediate-Term Bond Fund slightly outperformed its benchmark
index, the Lehman Aggregate Bond Index, for the six-month period ending June
30, 2004.
What factors impacted the Fund's performance?
While interest rates declined in the first quarter, they rose sharply
during the second. The Fund benefited its relatively short duration and 10.5%
underweight holdings in Treasury securities, which underperformed the most of
any sector. However, the fund was hurt by its 6.4% underweight in mortgage
securities, the best-performing sector of the second quarter.
The Federal Reserve increased the Fed Funds rate to 1.25% from 1.00% on
June 30; the first rate change in a year. We believe that the Fed will continue
to raise rates through year-end and into 2005, most likely in 25 basis points
steps. The Fed appears to be focused on inflation and employment so we expect
the bond market will be very sensitive to both data releases. Any unanticipated
strength or weakness in either could cause yields to gyrate in either direction
although we believe the overall trend should be up. In this scenario the Fund,
with its shorter duration versus the peer group, should perform well.
What changes did you make to the Fund and why?
Early in the year we restructured the maturity profile of our Treasury
exposure, laddering holdings across the entire yield curve and selecting
specific positions with the highest yield per unit of duration risk. We also
increased our exposure to callable agency securities to increase the
portfolio's yield; this helped cushion the blow from the second quarter's rise
in rates.
Second quarter activity was aimed at maintaining our slightly short
duration and maintaining the mortgage-backed securities (MBS) allocation. The
Fund used the cash from mortgage paydowns to purchase mortgage pass-through to
maintain the allocation of MBS helping to maintain the portfolio's yield. The
Fund reduced its exposure in the corporate bond sector modestly, swapping a
30-year corporate bond for a similar maturity Treasury bond. The Fund also
tendered some 10-year corporate bonds and invested the proceeds in similar
maturity Corporates.
Lesley Fox -- Portfolio Manager
Nancy McFadden, CFA -- Portfolio Manager
Tim Hokari -- Portfolio Manager
Gregory Card, CFA -- Portfolio Manager
D-5
Performance Overview & Highlights
Safeco Intermediate-Term Bond Fund
(Unaudited)
INVESTOR CLASS
Average Annual Total Return
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year
- ------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund 0.16% 0.02% 5.86% 5.88%
Lehman Brothers Aggregate Bond Index 0.15% 0.32% 6.95% 7.39%
Lipper, Inc. (Intermediate Investment-Grade
Bond Funds) (0.08)% 0.18% 6.16% 6.61%
- ------------------------------------------------------------------------------------------------------
* Not annualized.
Performance does not reflect the deduction for taxes that a shareholder would
pay on Fund distributions or the redemption of Fund shares.
<GRAPHIC OMITTED>
The performance graph compares a hypothetical $10,000 investment in the
Investor Class to a hypothetical investment in a relevant market index. The
index is unmanaged and includes no operating expenses or transaction costs.
Past performance is not predictive of future results. Principal value may
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost.
Current Yield (30-day) ............ 3.67%
Weighted Average Maturity ......... 5.50 years
Percent of
BONDS BY TYPE Net Assets
- -----------------------------------------------------------------
Asset Backed Securities 1.4%
Corporate Bonds 32.5
Collateralized Mortgage Obligations 4.0
U.S. Government & Agency Obligations 25.6
U.S. Government Agency-Mortgage Backed Securities 28.3
Municipal Bonds 1.1
Cash & Other 7.1
-----
100.0%
=====
CREDIT RATING DISTRIBUTION AS A PERCENT OF NET ASSETS
- --------------------------------------------------------------------------------
[THE FOLLOWING WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
AAA: 62.0%
AA: 0.9%
A: 17.5%
BBB: 12.5%
Cash & Other: 7.1%
D-6
Report From the Fund Managers
Safeco Intermediate-Term Municipal Bond Fund
As of June 30, 2004
How did the Fund perform?
The Safeco Intermediate-Term Municipal Bond Fund matched its benchmark
index, the Lehman Brothers 7-Year Municipal Bond Index, for the six-month
period ending June 30, 2004.
What factors impacted the Fund's performance?
After gaining fairly steadily since last summer, bond prices moved down
during most of the first quarter, recovering somewhat in late May and June. We
underperformed during the period. The steep decline (approximately 100 basis
point in a two-month period beginning in March and ending in May) hurt us, and
the period of increased stability at the end of the quarter was not long enough
for us to recover from the hit.
What changes did you make to the Fund and why?
We did not make any changes in the basic structure of the fund. We did
just one trade during each quarter. During the first quarter, we added to our
position in Chicago, IL Tax Increment 5%. During the second quarter, we
purchased Columbus, Ohio, general obligation bonds. These are very high
credit-quality bonds from a state where a significant premium is usually paid
by investors in order to gain the state tax exemption. The bonds, however, were
sold at close to general market values. We believe that at some point in the
future, the spread will widen out and their value will increase relative to
other bonds.
Mary Metastasio -- Portfolio Manager
Stephen Bauer -- Portfolio Manager
D-7
Performance Overview & Highlights
Safeco Intermediate-Term Municipal Bond Fund
(Unaudited)
INVESTOR CLASS
Average Annual Total Return
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year
- ------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Municipal Bond Fund (1.03)% (0.27)% 4.94% 5.25%
Lehman Brothers 7-Year Municipal Bond Index (1.03)% 0.50% 5.88% 6.04%
Lipper, Inc. (Intermediate Municipal Bond Funds) (1.00)% 0.02% 4.93% 5.29%
- ------------------------------------------------------------------------------------------------------
* Not annualized.
Performance does not reflect the deduction for taxes that a shareholder would
pay on Fund distributions or the redemption of Fund shares.
<GRAPHIC OMITTED>
The performance graph compares a hypothetical $10,000 investment in the
Investor Class to a hypothetical investment in a relevant market index. The
index is unmanaged and includes no operating expenses or transaction costs.
Past performance is not predictive of future results. Principal value may
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost.
Current Yield (30-day) ............ .14%
Weighted Average Maturity ......... .81 years
Percent of
TOP FIVE HOLDINGS Net Assets
- --------------------------------------------------- -----------
New York State Housing Finance Agency Health
Facilities Revenue 4.3%
Tempe Arizona Unified High School District #213
General Obligation 3.8
Chicago Illinois Metropolitan Water Reclamation
District of Greater Chicago General Obligation 3.7
Ohio State Building Authority Adult Correction 3.4
Michigan State Trunk Line Revenue 3.4
Percent of
TOP FIVE STATES Net Assets
- ----------------- -----------
Washington 11.9%
Illinois 11.3
New York 10.9
Texas 10.1
South Carolina 6.4
CREDIT RATING DISTRIBUTION AS A PERCENT OF NET ASSETS
- --------------------------------------------------------------------------------
[THE FOLLOWING WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
AAA: 44.0%
AA: 25.1%
A: 12.6%
BBB: 17.4%
Cash & Other: 0.9%
D-8
Report From the Fund Managers
Safeco Intermediate-Term U.S. Government Fund
As of June 30, 2004
How did the Fund perform?
The Safeco Intermediate-Term U.S. Government Fund outperformed its
benchmark index, the Lehman Intermediate Government Index, for the six-month
period ending June 30, 2004.
What factors impacted the Fund's performance?
Rising interest rates marked a performance shift between the first and
second quarters. While rates fell in the first quarter, favoring longer
duration securities, rates began an upward climb in the second. The Fund's
shorter duration, along with its exposure to mortgage-backed securities (MBS),
allowed it to benefit from this rising interest-rate environment and
contributed to improved performance relative to the benchmark for the first six
months of the year.
What changes did you make to the Fund and why?
Trading activity for the first six months was aimed at modestly
lengthening the Fund's duration, increasing yield, and maintaining the MBS
allocation.
During the first half of the year, we sold a four-plus year Treasury to
buy a longer duration Treasury security (2023 maturity) to increase the Fund's
exposure to the long end of the yield curve and lengthen its duration. Some of
the proceeds were also used to buy 30-year 5.5% FNMA pass-throughs to maintain
the allocation of MBS slightly above 40%.
The Fund used the cash from mortgage pay downs to purchase a 30-year 5.0%
FNMA pass-through to maintain the allocation of MBS slightly above 40%. The
Fund also sold an eight-year Treasury and bought a 10-year Federal Home Loan
Bank (FHLB) bond. The FHLB bond yielded almost 1.5% more than the Treasury.
This added both yield and duration to the portfolio.
Paul Stevenson, CFA -- Portfolio Manager
Lesley Fox -- Portfolio Manager
Tim Hokari -- Portfolio Manager
D-9
Performance Overview & Highlights
Safeco Intermediate-Term U.S. Government Fund
(Unaudited)
INVESTOR CLASS
Average Annual Total Return
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year
- ------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term U.S. Government Fund 0.15% (0.73)% 5.73% 6.29%
Lehman Brothers Intermediate Government Index (0.15)% (0.48)% 6.25% 6.56%
Merrill Lynch U.S. Treasury/Agency Master Index (0.18)% (1.29)% 6.66% 7.13%
Lipper, Inc. (General U.S. Gov't Funds) (0.32)% (1.45)% 5.68% 6.14%
- ------------------------------------------------------------------------------------------------------
* Not annualized.
Performance does not reflect the deduction for taxes that a shareholder would
pay on Fund distributions or the redemption of Fund shares.
<GRAPHIC OMITTED>
The performance graph compares a hypothetical $10,000 investment in the
Investor Class to a hypothetical investment in a relevant market index. The
index is unmanaged and includes no operating expenses or transaction costs.
Past performance is not predictive of future results. Principal value may
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost.
Current Yield (30-day) ............ 3.16%
Weighted Average Maturity ......... 4.6 years
D-10
Report From the Fund Managers
Safeco Money Market Fund
As of June 30, 2004
How did the Fund Perform?
The Fund had returns for the six-month period ending June 30, 2004 above
the average of other taxable money market funds. However, the 12-month return
on the Fund was lower than the 3.2% year-over-year increase in the Consumer
Price Index (CPI) as of the end of June 2004.
What factors impacted the Fund's performance?
After a full year of the Federal Funds target rate of 1.00%, the Federal
Reserve's Open Market Committee (FOMC) finally raised the rate to 1.25% on June
30. The Fed Funds futures market anticipates a 0.25% rise in the rate at each
of the four remaining FOMC meetings in 2004 and even higher rates in 2005.
The main reason the Fund outperformed the Lipper benchmark was the large
holdings (33%) of 7-day reset floating rate notes that reset off of the 1-month
London inter-bank offer rate (LIBOR). LIBOR-based securities currently offer
higher rates than other available money market securities, and the frequent
rate reset of the notes captures higher rates more quickly in a rapidly rising
rate environment. Also contributing to the superior returns were the Fund's
holdings of longer-term corporate bonds purchased at relatively high yields on
a steep money market yield curve.
What changes did you make to the Fund and why?
We increased the allocation of floating rate notes. This has become our
asset class of choice because the spread is much higher than commercial paper.
We continued to reduce our holdings of Commercial paper (to 31% of Fund)
relative to our peers (49% according to iMoneyNet). Commercial paper remains
one of the lowest-yielding assets in the prime money markets.
After rates had risen significantly, we made a purchase of a Federal Home
Loan Bank (FHLB) thirteen-month maturity bond which is callable every three
months and some purchases of one-year bank and broker paper.
Lesley Fox -- Portfolio Manager
Cathleen Beauchamp, CFA -- Portfolio Manager/Taxable Fixed Income Analyst
D-11
Performance Overview & Highlights
Safeco Money Market Fund
(Unaudited)
INVESTOR CLASS
Average Annual Total Return
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year
- -------------------------------------------------------------------------------------------------
Safeco Money Market Fund 0.25% 0.51% 2.86% 3.85%
Lipper, Inc. (Money Market Funds) 0.17% 0.35% 2.63% 3.81%
- -------------------------------------------------------------------------------------------------
* Not annualized.
Performance does not reflect the deduction for taxes that a shareholder would
pay on Fund distributions or the redemption of Fund shares.
Weighted Average Maturity ......... 56 Days
7 Day Yield ....................... 0.66%
D-12
Report From the Fund Managers
Safeco Municipal Bond Fund
As of June 30, 2004
How did the Fund perform?
Though it had negative overall performance, the Safeco Municipal Bond Fund
outperformed its benchmark Index, the Lehman Long Municipal Bond Index, for the
six-month period ending June 30, 2004.
What factors impacted the Fund's performance?
After a typical first quarter, long-term bond yields rose about 50 basis
points during the second quarter. This was due to more news demonstrating a
stronger economy and an increasing threat of renewed inflation, both of which
could inspire the Federal Reserve to increase short-term yields at a faster
pace than expected.
With a longer average maturity than most of its peers, the Fund performed
relatively poorly during the first half, as bond prices declined sharply.
What changes did you make to the Fund and why?
Three new issues were purchased during the first half of 2004. All were
rated A by Standard & Poor's, and offered significant additional yield to the
benchmark AAA scale. In the first quarter, we purchased $4 million of
Dorchester County School District 5.25 12/1/29 to yield 4.90%. These A-rated
bonds provided 55 basis points more yield than AAA bonds, a very attractive
spread.
In the second quarter, Empire State Development Authority 5.125 7/1/21
came to market at a yield of 4.70%, 49 basis points more than AAA bonds. Puerto
Rico Highway 5.125% 7/1/43 bonds were offered at a yield of 5.20%, which was an
additional 42 basis points over AAA-rated bonds.
We also swapped out of several bonds priced near par into deeper
discounts. This move afforded a greater total return in the event of a market
turnaround without adding significant downside potential.
Stephen Bauer -- Portfolio Manager
Mary Metastasio -- Portfolio Manager
D-13
Performance Overview & Highlights
Safeco Municipal Bond Fund
(Unaudited)
INVESTOR CLASS
Average Annual Total Return
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year
- -------------------------------------------------------------------------------------------
Safeco Municipal Bond Fund (0.86)% 0.42% 5.90% 6.60%
Lehman Brothers Long Municipal Bond Index (1.26)% 0.53% 6.04% 7.08%
Lipper, Inc. (General Municipal Bond Funds) (0.99)% 0.32% 4.64% 5.40%
- -------------------------------------------------------------------------------------------
* Not annualized.
Performance does not reflect the deduction for taxes that a shareholder would
pay on Fund distributions or the redemption of Fund shares.
<GRAPHIC OMITTED>
The performance graph compares a hypothetical $10,000 investment in the
Investor Class to a hypothetical investment in a relevant market index. The
index is unmanaged and includes no operating expenses or transaction costs.
Past performance is not predictive of future results. Principal value may
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost.
Current Yield (30-day) ............ 4.35%
Weighted Average Maturity ......... 22.59 years
Percent of
TOP FIVE HOLDINGS Net Assets
- ----------------------------------------------------------------
San Joaquin Hills Transportation Corridor Agency
Senior Lien Toll Road Revenue 3.9%
Massachusetts State Housing Finance Agency
(Series B) 3.7
Indiana State Development Finance Authority
Environmental Revenue 3.7
Los Angeles California Unified School District 2.7
Golden State Tobacco Securitization Corp. Tobacco
Settlement Revenue 2.7
Percent of
TOP FIVE STATES Net Assets
- ----------------- -----------
California 20.4%
Texas 7.3
Illinois 6.9
Massachusetts 5.6
Washington 5.6
CREDIT RATING DISTRIBUTION AS A PERCENT OF NET ASSET
- --------------------------------------------------------------------------------
[THE FOLLOWING WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
AAA: 42.1%
AA: 14.2%
A: 14.2%
BBB: 20.2%
BB: 3.9%
Not Rated: 1.0%
Cash & Other: 4.4%
D-14
Report From the Fund Managers
Safeco Tax-Free Money Market Fund
As of June 30, 2004
How did the Fund perform?
The Fund had returns above the average of other tax-free money market
funds for the six-month period ending June 30, 2004.
What factors impacted the fund's performance?
Although in absolute numbers the return is small, the fund has continued
to fare well compared to its peers. The structure of the portfolio serves us
well.
As of June 30, 66% of the fund was invested in variable rate demand option
(VRDO) bonds which can be tendered on a daily or weekly basis, and 34% in
six-month and one-year put bonds. The heavy weighting in VRDOs gives us
liquidity and flexibility, along with a competitive yield. The longer put bonds
let us lock in some higher rates on a smaller portion of the fund.
What changes did you make to the fund and why?
We have not made any significant changes to the fund. The barbell strategy
outlined above -- with a heavy concentration in VRDOs, a smaller concentration
in put bonds, and not much in between -- has worked for us consistently.
Mary Metastasio -- Portfolio Manager
Stephen Bauer -- Portfolio Manager
D-15
Report From the Fund Manager
Safeco Tax-Free Money Market Fund
As of June 30, 2004
Average Annual Total Return
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year
- ------------------------------------------------------------------------------------------------------
Safeco Tax-Free Money Market Fund 0.21% 0.43% 1.79% 2.45%
Lipper, Inc. (Tax-Exempt Money Market Funds) 0.19% 0.37% 1.75% 2.40%
- ------------------------------------------------------------------------------------------------------
* Not annualized.
Performance does not reflect the deduction for taxes that a shareholder would
pay on Fund distributions or the redemption of Fund shares.
Weighted Average Maturity ......... 42 Days
[THE FOLLOWING WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
Safeco Tax-Free Money Market Fund*
Actual 7-day Yield 0.50%
10% Tax Bracket Tax-Equivalent Yield 0.56%
15% Tax Bracket Tax-Equivalent Yield 0.59%
25% Tax Bracket Tax-Equivalent Yield 0.67%
28% Tax Bracket Tax-Equivalent Yield 0.69%
33% Tax Bracket Tax-Equivalent Yield 0.75%
35% Tax Bracket Tax-Equivalent Yield 0.77%
* Represents the Safeco Tax-Free Money Market Fund actual 7-day yield on June
30, 2004, and related tax-equivalent yields assuming various shareholder
tax brackets. Tax-equivalent yield comparisons may vary with market
conditions.
D-16
PIONEER HIGH YIELD FUND
Performance Update 7/30/04 Class A Shares
Share Prices and Distributions
4/30/04 10/31/03
Net Asset Value per Share $ 11.73 $ 11.59
Distributions per Share Net Short-Term Long-Term
(11/1/03 4/30/04) Investment Capital Gains Capital Gains
Income
$ 0.365 $ $ 0.0096
Investment Returns
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer High Yield Fund at public offering price, compared
to that of the Merrill Lynch High Yield Master II Index and the Merrill Lynch
Index of Convertible Bonds (Speculative Quality).
[THE FOLLOWING WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Average Annual Total Returns+
(As of April 30, 2004)
Value of $10,000 Investment
2/98 9,550 10,000 10,000
8,260 9,612 9,185
10/99 10,069 10,151 12,442
13,203 9,980 14,165
10/01 13,773 9,985 10,316
13,302 9,332 10,042
18,201 12,424 14,348
4/04 19,007 13,089 15,340
Period Net Asset Value Public Offering Price*
- ---------------- ----------------- -----------------------
Life-of-Class
(2/12/98) 11.92% 11.10%
5 Years 14.90 13.86
1 Year 17.87 12.57
All returns reflect reinvestment of distributions at net asset value.
* Reflects deduction of the maximum 4.5% sales charge at the beginning of the
period.
Performance data shown represents past performance. Past
performance does not guarantee future results. Assumes
reinvestment of all distributions at net asset value.
Investment return and principal value fluctuate, and
shares, when redeemed, may be worth more or less than
their original cost. Current performance may be lower or
higher than the performance shown. For performance data
that is current to the most recent month-end, please call
1-800-225-6292 or visit our website www.pioneerfunds.com.
+ The performance of each class of the Fund from February
12, 1998 to February 25, 2000 is the performance of Third
Avenue High Yield Fund's single class, which has been
reduced to reflect any applicable sales charges and Rule
12b-1 fees (but not other differences in expenses). This
adjustment has the effect of reducing the previously
reported performance of Third Avenue High Yield Fund.
++ Index comparisons begin 2/28/98. The Merrill Lynch
High Yield Master II Index is a broad-based measure of
the performance of the non-investment grade U.S. domestic
bond market. The Merrill Lynch Index of Convertible Bonds
(Speculative Quality) is a market-capitalization weighted
index including mandatory and non-mandatory domestic
corporate convertible securities. Index returns are
calculated monthly, assume reinvestment of dividends and,
unlike Fund returns, do not reflect any fees, expenses or
sales charges. You cannot invest directly in either
Index. The performance table and graph do not reflect the
deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
D-17
Portfolio Management's Discussion of Fund Performance (as of April 30, 2004)
High-yield bonds continued a string of solid performance during the six months
ended April 30, 2004. Here, Fund manager Margaret Patel explains the rebound in
the high-yield market and the factors that influenced the Fund's performance.
Q: How did the Fund perform?
A: During the six months ended April 30, 2004, the Fund had a total return
based on net asset value of 4.43% for the Fund's Class A shares, 4.01% for
Class B shares, 4.07% for Class C shares, 4.65% for Class R shares, and
4.61% for Class Y shares. To compare, the Merrill Lynch High Yield Master
II Index returned 5.35%.
Q: What was the environment like for the high-yield market during the past six
months?
A: The yield spread, or differential, between high-yield bonds and comparable
Treasuries narrowed, highlighting the solid performance of the high-yield
market. This yield spread narrowing reflected a brighter outlook for the
economy and the declining default rate among high-yield bonds. The Federal
Reserve Board aided the positive backdrop by providing ample liquidity to
the markets in the form of historically low interest rates. A modest level
of new supply also benefited the high-yield market, helping to buoy price
appreciation among outstanding bonds as demand for the asset class remained
high. With interest rates so low, investors looked to the high-yield market
for more attractive yields at a time when the strengthening economy made
them more comfortable venturing there.
Q: Why did the Fund modestly under perform the Merrill Lynch High Yield Master
II Index?
A: Much of the stronger relative performance offered by the index came from the
out-performance of low-quality bonds rated CCC or lower. We had very little
exposure to the lower-rated segments of the market, instead focusing more
of the Fund on those securities rated BB or BBB. These higher-rated bonds
tend to be more sensitive to changes in interest rates and, thus, suffered
on a relative basis as yields on comparable intermediate Treasury
securities rose during the period. However, we felt that the better-quality
issues should offer more favorable performance at this juncture in the
market cycle. In addition, more speculative industries, such as airlines,
telecommunications and lower-tier electric utilities, were among the best
performers during the period. We avoided these industries, feeling that
they were too risky and did not meet our investment criteria, particularly
because we believed that they were less likely to benefit from an economic
upturn than the alternatives we found in other sectors.
Q: What was your strategy during the period?
A: We decreased the proportion of the Fund devoted to convertible securities
from about 56% of the portfolio to just over 49%, and increased its stake
in standard corporate high-yield bonds from about 43% to about 50%. We made
this move because many convertible securities became fully valued, having
benefited from low interest rates and the substantial increase in the
underlying value of the issuing companies' stocks. We invested the proceeds
from these sales in the areas we judged to be most attractively valued
within the high-yield market. We also reduced the Fund's allocations to the
technology and health care sectors, including investments in pharmaceutical
and biotechnology companies. These securities offered substantial
out-performance, reaching fully valued levels. In addition, some technology
companies called a number of convertible bonds. That is, the issuers
decided to redeem the bonds by paying them off, requiring us to surrender
the securities. The assets we gained from our sales and redemptions were
used to increase the Fund's focus on cyclical companies that we felt were
best positioned to benefit from an improving economy. Overall, these firms
should benefit from better supply and demand fundamentals, as well as being
helped modestly by the cheapening U.S. dollar.
Q: Does your recent strategy mean you're gravitating away from a focus on
convertible securities?
A: No, it does not. Convertible securities remain a viable investment
alternative for the Fund. When we use them, we look for those convertibles
that are selling at discounted prices and offering high yields. We invest
in companies within industries where generic high yield bonds are not in
strong supply, especially smaller companies within rapidly growing
industries. Discounted convertible securities can offer appealing prospects
because their prices can appreciate more than regular bonds if the
underlying value of the company's stock rises. Also, holders of convertible
bonds can earn attractive yields similar to those offered within the
high-yield market.
D-18
Q: Which investments proved to be some of the top performers during the fiscal
year? Which disappointed?
A: Tesoro Petroleum was one of the top performers during the period. This West
Coast refining company profited from improved refining margins. Wabash
National, which manufactures truck trailers, benefited from improved demand
and better pricing. The health care sector offered particularly strong
performance for the Fund, with Protein Design Labs, Enzon Pharmaceuticals,
Human Genome, Ligand Pharmaceuticals and Sepracor all demonstrating success
with drug discovery or bringing new pharmaceutical products forward for
approval. In technology, Flir Systems, Xerox, Conexant Systems, Lam
Research, Brooks Automation and Triquint Semiconductors all posted improved
operating results driven by firmer pricing and a better outlook for the
industry. Disappointments included basic materials holdings Freeport Mac
MoRan and Inco. These holdings declined due to concerns about softening
demand for their products from China. In addition, publisher Houghton
Mifflin fell due to disappointing earnings results and projections.
Q: What is your outlook?
A: We remain optimistic because we expect corporate earnings growth rates to
continue to come in above long-term averages as the U.S. economy expands.
We also anticipate further declines in the default rate to well below its
historical average of 3%, due to solid economic growth and substantial
liquidity in the marketplace. Although we expect yields on Treasuries to
rise, we feel that the extra income offered by high-yield bonds should
outweigh the price erosion that accompanies such an increase. The outlook
for the equity market is very bright, reflecting positive earnings
forecasts. As a result, convertible securities could appreciate in price
should the underlying stocks move upward in response to better earnings
reports.
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.
D-19
PIONEER BOND FUND
Performance Update 6/30/04 Class A Shares
Share Prices and Distribution
6/30/04 6/30/03
Net Asset Value per Share $ 9.18 $ 9.41
Distributions per Share Net Short-Term Long-Term
(7/1/03 - 6/30/04) Investment Capital Gains Capital Gains
Income
$ 0.5038 $ -- $ --
Investment Returns
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Bond Fund at public offering price, compared to that
of the Lehman Brothers Aggregate Bond Index.
[THE FOLLOWING WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Average Annual Total Returns+
(As of April 30, 2004)
Value of $10,000 Investment
6/94 9,550 10,000 10,000
10,642 11,277 11,255
6/96 11,070 11,801 11,819
11,854 12,715 12,783
6/98 13,045 14,150 14,129
13,221 14,532 14,572
6/00 13,392 15,158 15,235
14,825 16,846 16,947
6/02 15,944 18,234 18,410
17,759 20,630 20,325
6/04 18,289 20,483 20,391
Period Net Asset Value Public Offering Price*
- --------------------------------------------------------
10 Years 6.72% 6.22%
5 Years 6.70 5.73
1 Year 2.98 -1.62
All returns reflect reinvestment of distributions at net asset value.
* Reflects deduction of the maximum 4.5% sales charge at the beginning of the
period.
Performance data shown represents past
performance. Past performance does not guarantee
future results. Assumes reinvestment of all
distributions at net asset value. Investment
return and principal value fluctuate, and shares,
when redeemed, may be worth more or less than
their original cost. Current performance may be
lower or higher than the performance shown. For
performance data that is current to the most
recent month-end, please call 1-800-225-6292 or
visit our web site www.pioneerfunds.com.
The Lehman Brothers Aggregate Bond Index is a
widely recognized market value- weighted measure
of government and corporate securities, agency
mortgage pass-through securities, asset-backed
securities and commercial mortgage-backed
securities. Index returns are calculated monthly,
assume reinvestment of dividends and, unlike Fund
returns, do not reflect any fees, expenses or
sales charges. You cannot invest directly in the
Indexes. The performance table and graph do not
reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption
of Fund shares.
D-20
Portfolio Management's Discussion of Fund Performance (as of June 30, 2004)
As market interest rates spiked up in the final half of the 12-month period
ending June 30, 2004, high-yield corporate bonds and mortgage-backed securities
provided the best defensive protection, as conditions changed in the U.S.
fixed-income market. In the following discussion, Kenneth J. Taubes discusses
the factors that influenced Pioneer Bond Fund's performance during the 12
months. Mr. Taubes, Director of Pioneer's Fixed Income Group, oversees the team
responsible for daily management of the Fund.
Q: How did the Fund perform during the 12 months ended June 30, 2004?
A: In a challenging period for fixed-income investing, Pioneer Bond Fund
outdistanced both market benchmarks and competitive peer group averages.
For the 12 months, the Fund's Class A shares had a total return of 2.98%,
while Class B and Class C shares returned 2.04% and 2.11%, respectively,
all at net asset value. During the same 12 months, the Lehman Aggregate
Bond Index had a return of 0.32%, while the average return of funds in
Lipper's A-Rated Corporate Debt category was 0.04%. The Fund also continued
to deliver a competitive yield. The standardized 30-day SEC yield on Class
A shares on June 30, for example, was 4.30%.
Q: What were the factors that affected performance?
A: The Fund's performance was helped both by asset allocation and good security
selection. We had the largest overweight positions in the two asset classes
with the best performance during the 12 months: high-yield corporate bonds
and mortgage-backed securities. Throughout the year, we kept the Fund's
high-yield exposure close to the 20% limit of our policy. That strategy
helped substantially as the high-yield market, as measured by the Merrill
Lynch High Yield Master II Index, returned 10.30% for the 12 months. We
also had more than 40% of assets invested in mortgage securities during a
period in which mortgages were the best performing part of the
investment-grade fixed-income market. As a result, typically 60% to 65% of
Fund assets were invested in the two best performing parts of the bond
market. Both high-yield bonds and mortgage-backed securities tend to be
more resistant to the effects of price losses from increasing
interest-rates than other bonds because of their yield advantages. The
performance of mortgage-backed securities is also helped by the tendency of
mortgage prepayment risk to decline as interest rates rise. We held our
allocation to Treasury securities, the worst performing part of the bond
market, to less than 10% of assets during the period, and focused our
Treasury exposure on inflation-protected Treasuries, which outperformed
standard Treasury securities. Treasuries were the worst performing part of
the fixed-income market. During the 12-month period, the prices of 10-year
Treasuries declined by 7.5%.
Q: What types of security selections had the greatest influence on performance?
A: Several high-yield corporate bonds made significant contributions to
performance. Bonds issued by Corning, which restructured its business to
focus on the production of the material used for flat screen monitors, did
very well, as did securities of retailer J.C. Penney, which improved its
credit position through restructuring and the sale of its pharmacy chain
division. Bonds issued by hotel chains also did well as the economy
improved and business travel increased. Among the top performers in the
portfolio were bonds issued by the Hilton, Starwood and John Q. Hammond
hotel chains. The securities of insurance company Allmerica Financial also
appreciated in price during the period as a result of that company's
positive restructuring efforts.
Q: How would you describe the Fund's overall positioning?
A: We kept the Fund positioned to benefit from the improving economy, which
helps support the corporate bond market, while guarding against the threat
of rising interest rates. At the end of the fiscal year, on June 30,
mortgage securities accounted for 44.9% of Fund assets, while corporate
high-yield bonds made up 18.5% of the portfolio. About 30.3% of assets were
in investment-grade corporates, and just 1.4% of assets were invested in
Treasuries. Because rising interest rates tend to undermine bond prices, we
shortened the Fund's duration to lower its sensitivity to changes in
interest rates. Duration, a measure of interest-rate sensitivity, declined
during the period from 4.7 years at the start of the fiscal year to 4.3
years on June 30, 2004. Average credit quality on June 30, 2004 was A.
D-21
Q: What is your outlook for the bond market?
A: We believe the economy is healthy and should continue to grow. Short-term
rates currently are below the rate of inflation and should be expected to
continue to rise in the coming months. The Federal Reserve began to raise
the important Fed Funds rate, the most influential short-term rate, on June
30, and we expect further tightening by the Fed in the months ahead. We
believe market rates on longer-term bonds, which rose in the months leading
up to the June 30 announcement, probably are priced appropriately for
current conditions, but pressure on shorter-term and intermediate-term
interest rates should continue for several more quarters. The outlook for
corporate securities appears good, however, as more companies gain
additional pricing power, which should help them strengthen their balance
sheets. We recently have initiated some positions in the steel industry,
for example, an area we have generally avoided in the past. In this
environment, we anticipate maintaining a focus on corporate bonds and
mortgage-backed securities and expect to maintain the Fund's position to
mute the impact of rising interest rates of short- and intermediate-term
securities by keeping duration relatively short.
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.
D-22
PIONEER TAX FREE INCOME FUND
Performance Update 6/30/04 Class A Shares
Share Prices and Distribution
6/30/04 12/31/03
Net Asset Value per Share $ 11.24 $ 11.70
Distributions Per Share Net Short-Term Long-Term
(1/1/04 - 6/30/04) Investment Capital Gains Capital Gains
Income
$ 0.272 $ -- $ --
Investment Returns
The mountain chart on the right shows the change in value of a $10,000
investment in Pioneer Tax Free Income Fund at public offering price, compared
to that of the Lehman Brothers Municipal Bond Index.
[THE FOLLOWING WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Average Annual Total Returns+
(As of April 30, 2004)
Value of $10,000 Investment
6/94 9,550 10,000
9,428 9,924
11,015 11,657
6/96 11,408 12,173
12,428 13,294
6/98 13,198 14,156
12,632 13,863
6/00 14,101 15,482
14,683 16,276
6/02 15,720 17,837
16,632 18,788
6/04 16,358 18,658
Period Net Asset Value Public Offering Price*
- ---------- ----------------- -----------------------
10 Years 5.53% 5.05%
5 Years 4.84 3.89
1 Year 1.55 -3.04
* Reflects deduction of the maximum 4.5% sales charge at the beginning of the
period and assumes reinvestment of distributions at net asset value.
Performance data shown represents past
performance. Past performance does not guarantee
future results. Assumes reinvestment of all
distributions at net asset value. Investment
return and principal value fluctuate, and shares,
when redeemed, may be worth more or less than
their original cost. Current performance may be
lower or higher than the performance shown. For
performance data that is current to the most
recent month-end, please call 1-800-225-6292 or
visit our web site www.pioneerfunds.com.
The performance table and graph do not reflect the
deduction of taxes that a shareholder would pay on
Fund distributions or the redemption of Fund
shares. The Lehman Brothers Municipal Bond Index
is a widely recognized, unmanaged measure of
approximately 15,000 municipal bonds. Bonds in the
Index have a minimum credit rating of BBB, were
part of at least a $50 million issuance made
within the past five years and have a maturity of
at least two years. Index returns are calculated
monthly, assume reinvestment of dividends and,
unlike Fund returns, do not reflect any fees,
expenses or sales charges. You cannot invest
directly in the Index. A portion of the Fund's
income may be subject to the Alternative Minimum
Tax (AMT) or state and local taxes.
D-23
Portfolio Management's Discussion of Fund Performance (as of June 30, 2004)
While yields and prices on municipal bonds fluctuated widely during the
first half of 2004, on June 30, 2004, yields were higher and prices were lower
than they had been six months before. In this environment, the Fund distributed
a relatively high level of tax-free income to shareholders. In the following
interview, David Eurkus, a member of Pioneer's Fixed-Income management team,
discusses some of the factors that had an impact on the municipal bond market
and your Safeco Fund.
Q: How did the Fund perform?
A: For the six-month period ended June 30, 2004, Pioneer Tax Free Income Fund's
Class A shares produced a -1.65% return; Class B shares returned -1.96%;
and Class C shares -1.96%, all at net asset value. The Fund's benchmark,
the Lehman Brothers Municipal Bond Index returned -0.68%, and the average
return of the 302 funds in the Lipper General Municipal Debt Funds Category
was -0.99%. Lipper is an independent monitor of mutual fund performance.
While we shortened the duration of the Fund, we did not reduce it so much
as to sacrifice yield. The funds in the Lipper category have a much shorter
duration than the Fund; and that difference in duration accounted for the
underperformance relative to Lipper. (Duration measures a bond's
sensitivity to interest rate changes. In a rising interest rate
environment, a shorter duration is usually advantageous because it
mitigates price erosion.) The Fund's Class A shares generated a 30-day SEC
tax-free yield of 5.23% as of June 30, 2004. That translates into a taxable
equivalent yield of 8.05%, based on the maximum federal income-tax rate of
35%.
Q: Why did the Fund under perform the benchmark?
A: The relative underperformance of the Fund's tobacco bonds, which accounted
for about 9% of net assets, was the primary detractor from performance
versus the Lehman Brothers Municipal Bond Index. While tobacco bonds
provided a very high level of income, their prices declined because certain
court rulings regarding tobacco companies were interpreted negatively by
the investment community. The Fund's allocation to transportation bonds,
which was about 4% of net assets, also detracted from performance. During
the period, Delta Airlines raised the possibility of filing for bankruptcy.
While we did not hold Delta bonds, nearly all airline bonds were negatively
affected by the company's announcement. The Fund's 34.6% allocation to
AAA-rated bonds also held back total return.
Q: What was the investment environment like during the period?
A: There were two distinct environments during the period. For the first
quarter of 2004, interest rates continued to decline, because investors
were not sure about the sustainability of the economic recovery. As we
moved into the second quarter, however, data began to indicate that the
economy was on a relatively strong recovery course and that hundreds of
thousands of new jobs had been created. The strong jobs numbers sparked
concerns about accelerating inflation and higher interest rates. Against
this backdrop, yields on both taxable and tax-free bonds rose sharply.
While yields moved higher across all maturities, those on short-term bonds
went up the most.
Q: What contributed to performance?
A: The declining interest rates in the first quarter of 2004 were a substantial
help to performance. Also, the higher-yielding -- or below investment-grade
-- bonds in the portfolio aided results.
Q: What were the principal strategies used in managing the Fund?
A: In keeping with the Fund's guidelines, we maintained our strategy of keeping
up to 10% of net assets in below investment-grade securities, which
enhanced the Fund's income and performance. The rest of the portfolio was
invested in investment-grade bonds. We focused on economically sensitive
market sectors, areas in which the underlying credit quality of
fixed-income securities tends to improve during periods of economic
recovery. These sectors included the hospital/health care, transportation,
and power/energy parts of the market. As mentioned above, to moderate the
Fund's price decline as interest rates rose, we shortened duration.
D-24
Q: What is your outlook?
A: We believe the economy will continue on a positive growth path. The Fed
boosted rates by 0.25% on June 30, and we expect the central bank to
continue making modest rate hikes over the second half of 2004. The Fed's
actions could push short-term yields higher. We believe the possibility of
higher interest rates will increase the level of income to the Fund. At the
same time, the portfolio's shorter duration will help guard against the
possibility of price loss as interest rates begin to rise. Another factor
that could benefit the Fund is the significant decline in the issuance of
new bonds. In 2003, low interest rates made it attractive for
municipalities to borrow money in record numbers. In 2004, new issuance
could be down as much as 20%. While supply may be down, demand remains
constant. This supply/demand dynamic can raise the value of certain
municipal bonds.
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.
D-25
PIONEER AMERICA INCOME TRUST
Performance Update 6/30/04 Class A Shares
Share Prices and Distribution
6/30/04 12/31/03
Net Asset Value Per Share $ 9.72 $ 9.95
Distributions per Share Net Short-Term Long-Term
(1/1/04 - 6/30/04) Investment Capital Gains Capital Gains
Income
$ 0.2171 $ $
Investment Returns
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer America Income Trust at public offering price,
compared to that of the Lehman Brothers Government Bond Index and of the Lehman
Brothers Fixed-Rate Mortgage-Backed Securities Index.
[THE FOLLOWING WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Average Annual Total Returns+
(As of April 30, 2004)
Value of $10,000 Investment
6/94 9,550 10,000 10,000
9,580 10,130 10,077
11,119 11,832 11,926
6/96 11,374 12,466 12,255
12,342 13,648 13,429
6/98 13,302 14,599 14,752
12,965 14,869 14,421
6/00 14,467 16,529 16,331
15,324 17,888 17,513
6/02 16,821 19,452 19,527
17,069 20,045 19,988
6/04 17,045 20,200 19,964
Period Net Asset Value Public Offering Price*
- ---------- ----------------- -----------------------
10 Years 5.97% 5.48%
5 Years 5.64 4.68
1 Year -0.37 -4.81
* Reflects deduction of the maximum 4.5% sales charge at the beginning of the
period and assumes reinvestment of distributions at net asset value.
Performance data shown represents past performance. Past
performance does not guarantee future results. Assumes
reinvestment of all distributions at net asset value.
Investment return and principal value fluctuate, and
shares, when redeemed, may be worth more or less than
their original cost. Current performance may be lower or
higher than the performance shown. For performance data
that is current to the most recent month-end, please call
1-800-225-6292 or visit our web site
www.pioneerfunds.com.
The performance table and graph do not reflect the
deduction of taxes that a shareholder would pay on Trust
distributions or the redemption of Trust shares. Prior to
May 1, 2003, the Trust's investment adviser, Pioneer
Investment Management, Inc., reduced its management fee
and certain other expenses, otherwise, returns would have
been lower. Expense limitation for the Trust's Class A
shares applies proportionately to Class B, C and R
shares. The Lehman Brothers Government Bond Index is an
unmanaged measure of the performance of U.S. Treasury
debt, all publicly issued debt of U.S. government
agencies and quasi-federal corporations, and corporate
debt guaranteed by the U.S. government. The Lehman
Brothers Fixed-Rate Mortgage-Backed Securities Index is
an unmanaged index including 15- and 30-year fixed rate
securities backed by mortgage pools of the Government
National Mortgage Association (GNMA), Federal Home Loan
Mortgage Corporation (FHLMC) and Federal National
Mortgage Association (FNMA). Index returns assume
reinvestment of dividends and, unlike Trust returns, do
not reflect any fees, expenses or sales charges.
D-26
You cannot invest directly in the Indexes.
Portfolio Management's Discussion of Fund Performance (as of June 30, 2004)
In an improving economy, uncertainty about rising interest rates dominated
market sentiment. As a result, the yields on fixed-income securities declined
and then rose, as investors tried to determine when the Federal Reserve would
raise interest rates and by how much. In this volatile environment, Pioneer
America Income Trust delivered a relatively high level of income to
shareholders. In the interview below, Richard Schlanger, a member of the
Pioneer fixed-income team, discusses the factors that affected the fixed-income
market and the Trust over the past six months.
Q: How did the Trust perform during the six-month period ended June 30, 2004?
A: For the six-month period ended June 30, 2004, Class A shares of Pioneer
America Income Trust produced a total return of -0.14% at net asset value.
The Trust performed in line with the Lehman Brothers Government Bond Index,
which returned -0.13% for the same period. It under performed the Lehman
Brothers Fixed-Rate Mortgage-Backed Index, which returned 0.77%. We
attribute the Fund's underperformance relative to the Lehman Brothers
Fixed-Rate Mortgage-Backed Index to the fact that the index has significant
exposure to securities issued by the Federal Home Loan Mortgage Corporation
(Freddie Mac) and the Federal National Mortgage Association (Fannie Mae),
which outperformed. Because these securities do not have the backing of the
full faith and credit of the U.S. Government, we do not invest in them. The
Trust outperformed the -0.32% return generated by the General U.S.
Government Funds Category of Lipper, Inc., an independent monitor of mutual
fund performance. At the end of the period, the 30-day SEC yield for Class
A shares was 4.26%.
Q: What was the investment environment like during the period?
A: For the first three months of 2004, concerns about geopolitical issues and
the "jobless" economic recovery kept interest rates at 45-year lows. When
we moved into the second calendar quarter of 2004, however, the employment
picture changed dramatically. Several hundred thousand jobs were added to
the economy in April and May, leading to concerns about accelerating
inflation, the pace of Federal Reserve tightening and higher interest
rates. In this environment, market interest rates rose, causing the yield
curve to flatten. (The yield curve shows the relationship between bond
yields and maturity lengths.) Normally, the yield curve is positively
sloped, with yields on long-term bonds exceeding those on short-term bonds.
The yield curve flattens when yields on short term bonds rise more than
those on long-term bonds, as was the case during the period. As interest
rates rose, bond yields went up and prices declined.
Q: What investment strategies contributed to performance?
A: Nearly 75% of net assets were invested in mortgage-backed securities issued
by the Government National Mortgage Association (GNMA), which are backed by
the full faith and credit of the U.S. government. (A full faith and credit
backing applies to underlying Trust securities, not to Trust shares.)
Because GNMA securities outperformed Treasuries, the Trust's focus on
mortgages relative to the benchmark was the biggest aid to total return. In
the volatile interest-rate environment, we were concerned about the
prepayment risk that is associated with mortgage-backed securities. When
interest rates decline, homeowners often "prepay" their existing mortgages
and refinance their homes at a lower rate. Significant prepayment activity
can result in declining yields and share prices in portfolios with
investments in mortgages. To mitigate this risk, we selected mortgages that
had lower weighted average coupon (stated rate of interest) rates, which we
believe are less likely to be prepaid.
D-27
Q: What investment strategies detracted from performance?
A: Nearly 25% of the portfolio was invested in Treasury securities with
predominantly short- and intermediate-term maturities. As yields on
securities in these maturity ranges moved higher, their prices declined. As
a result, the Trust's exposure to bonds in the middle of the yield curve
held back results.
Q: What is your outlook over the next several months?
A: We believe the economy is on a sustained path for improvement and are
concerned that the seeds for higher inflation are being planted. The
Federal Reserve raised interest rates by 0.25% on June 30 and is likely to
continue doing so at a measured pace over the next two years. As interest
rates move higher, we will consider using a barbell strategy in managing
the Treasury portion of the Trust -- that is, we may sell some of our
intermediate-term holdings and add securities in the one-to-two-year range
and in the 20 plus-year range. With this approach, the Trust should benefit
from the higher yields that long-term bonds provide and from the relative
price stability of short-term securities. We will also seek mortgage-backed
securities that are selling at a discount and that can provide the Trust
with relatively high yields as well as the potential for price
appreciation.
Any information in this shareholder 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.
D-28
PIONEER CASH RESERVES FUND
Performance Update 6/30/04
Share Prices
Net Asset Value Per Share 6/30/04 12/31/03
- ---------------------------------------------------------
Class A Shares $ 1.00 $ 1.00
Class B Shares $ 1.00 $ 1.00
Class C Shares $ 1.00 $ 1.00
Class R Shares $ 1.00 $ 1.00
Distributions
Per Share Income Short-Term Long-Term
(1/1/04 - 6/30/04) Dividends Capital Gains Capital Gains
- -----------------------------------------------------------------------
Class A Shares $ 0.00089 $ $
Class B Shares $ 0.00024 $ $
Class C Shares $ 0.00024 $ $
Class R Shares $ 0.00030 $ $
Yields*
7-Day 7-Day
Annualized Effective **
- -----------------------------------------------------
Class A Shares 0.35% 0.35%
Class B Shares 0.05% 0.05%
Class C Shares 0.05% 0.05%
Class R Shares 0.11% 0.11%
* The 7-day yields do not reflect the deduction of the contingent deferred
sales charges (CDSC) for Class B (maximum 4%) and Class C (maximum 1%) shares.
Please contact Pioneer to obtain the Fund's current 7-day yields.
** Assumes daily compounding of dividends. The 7-day effective yield if fees
and expenses were not subsidized would be as follows: Class B 0.48%, Class C
0.35% and Class R 0.06%. Class A share fees and expenses were not subsidized.
Performance data shown represents past
performance. Past performance does not guarantee
future results. Investment returns will fluctuate,
and there can be no guarantee the Fund will be
able to maintain a stable net asset value of $1.00
per share. An investment in the Fund is not
insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the
value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
Pioneer has agreed to limit the fund's expenses
for any class of shares or waive a portion of its
management fee to maintain a net asset value of
$1.00. Under certain circumstances, this
limitation may result in a 0.00% yield for one or
more classes of shares. From time to time, Pioneer
and its affiliates may limit the expenses of one
or more classes for the purpose of increasing its
yield during the period of the limitation. These
expense limitation policies are voluntary and
temporary and may be revised or terminated by
Pioneer at any time without notice.
Performance does not reflect the deduction of
taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
D-29
Portfolio Management's Discussion of Fund Performance (as of June 30, 2004)
Short-term interest rates remained at 46-year lows during the first half of
2004, although the U.S. Federal Reserve Board finally signaled a shift in its
accommodative monetary policy on June 30 when it raised the key Fed Funds Rate
from 1.00% to 1.25%. Throughout the six months, Pioneer Cash Reserves Fund
maintained a $1 share price and provided modest current income consistent with
the low yields available in the money market. The Fund invests exclusively in
high quality money market instruments issued by the U.S. government and
domestic corporations and banks. All issues have the highest ratings from the
two leading nationally recognized ratings organizations: A1 by Standard &
Poor's Investors Services and P1 by Moody's Investor Services. (Ratings apply
to underlying securities, not Fund shares.) In the following discussion, Andrew
D. Feltus reviews the investment environment and the strategies that affected
Pioneer Cash Reserves Fund over the six months ended June 30, 2004. Mr. Feltus
is a member of Pioneer's Fixed Income Group, which is responsible for the daily
management of the Fund.
Q: How did the Fund perform during the first half of 2004?
A: For the six months ended June 30, 2004, Pioneer Cash Reserves Fund Class A
shares had a total return of 0.09%, while Class B, Class C and Class R
shares each had returns of 0.03%. All returns were at net asset value. For
the same six months, the average return in Lipper's Money Market Fund
category was 0.17%. On June 30, 2004, the Fund's seven-day effective yield
for Class A shares was 0.35%.
Q: What factors affected Fund performance?
A: Short-term interest rates remained at historically low levels over the six
months. It was a period, however, in which evidence steadily accumulated
that the U.S. economy was recovering briskly. Growth Domestic Product
(GDP), for example, grew by an annual rate of 3.9% for the first three
months. The nation's industrial production increased by 5.6% since June 30,
2004, and the economy added 1.4 million new jobs during the same 12 months.
Evidence of the economy's vibrancy became more persuasive during the six
months, especially after the Department of Labor released an unexpectedly
strong new-jobs report for March. Market interest rates began rising and
expectations grew that the Federal Reserve Board finally would shift from
its accommodative monetary policy and begin raising short-term interest
rates. The Fed confirmed those expectations on the final day of the six
month period when it raised the influential Fed Funds Rate by one quarter
of one percent and signaled that it was likely to raise the rate further in
subsequent months to head-off inflationary threats.
Q: Given this environment, what strategies did you pursue?
A: We held to our quality orientation in managing the Fund, but gradually
lowered the effective duration from 61 days on December 31, 2003, to 51
days by June 30, 2004. We did this as we saw that the Federal Reserve was
likely to begin to raise rates. A shorter duration portfolio gives the Fund
more flexibility in investing in new, higher-yielding securities as rates
start to rise.
Q: What is your investment outlook?
A: We anticipate that while the Federal Reserve will continue to stimulate
continued economic growth, it is likely to raise short term rates further
for the remainder of 2004 and at least the beginning of 2005. Given this
outlook, we expect to keep effective duration relatively short to give us
the flexibility to capture additional yield as rates rise. However, we also
expect to take a more bar belled approach, with concentrations both in very
short, one-to two-month securities and in one-year maturities, where higher
yields are available. We also intend to consider opportunities to invest in
floating-rate notes, where we can obtain higher yields without taking more
risk.
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.
D-30
PIONEER AMERICA INCOME TRUST
STATEMENT OF ADDITIONAL INFORMATION
October 25, 2004
This Statement of Additional Information is not a Prospectus. It should be
read in conjunction with the related combined Proxy Statement and Prospectus
(also dated October 25, 2004) which covers Investor Class shares of Pioneer
America Income Trust to be issued in exchange for shares of Safeco
Intermediate-Term U.S. Government Fund, a series of Safeco Taxable Bond Trust.
Please retain this Statement of Additional Information for further reference.
The Prospectus is available to you free of charge (please call
1-800-407-7298).
INTRODUCTION...................................................................2
EXHIBITS.......................................................................2
ADDITIONAL INFORMATION ABOUT PIONEER AMERICA INCOME TRUST......................2
FUND HISTORY........................................................2
DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS....................2
MANAGEMENT OF THE FUND..............................................3
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.................3
INVESTMENT ADVISORY AND OTHER SERVICES..............................3
BROKERAGE ALLOCATION AND OTHER PRACTICES............................3
CAPITAL STOCK AND OTHER SECURITIES..................................3
PURCHASE, REDEMPTION AND PRICING OF SHARES..........................3
TAXATION OF THE FUND................................................3
UNDERWRITERS........................................................3
CALCULATION OF PERFORMANCE DATA.....................................3
FINANCIAL STATEMENTS................................................3
INTRODUCTION
This Statement of Additional Information is intended to supplement the
information provided in a Combined Proxy Statement and Prospectus dated October
25, 2004 (the "Proxy Statement and Prospectus") relating to the proposed
reorganization of Safeco Intermediate-Term U.S. Government Fund, a series of
Safeco Taxable Bond Trust, into Pioneer America Income Trust and in connection
with the solicitation by the management of Safeco Taxable Bond Trust of proxies
to be voted at the Meeting of Shareholders of Safeco Intermediate-Term U.S.
Government Fund to be held on December 8, 2004.
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 America Income Trust's statement of additional information for
Class A, B, C and R shares, dated April 30, 2004 (the "SAI") (File No.
33-20795), as filed with the Securities and Exchange Commission on April
29, 2004 (Accession No. 0001016964-04-000116) is incorporated herein by
reference.
2. Pioneer America Income Trust's Annual Report for the fiscal year ended
December 31, 2003 (File No. 811-05516), as filed with the Securities and
Exchange Commission on March 5, 2004 (Accession No. 0000812195-04-000009)
is incorporated herein by reference.
3. Pioneer America Income Trust's Semi-Annual Report for the period ended
June 30, 2004 (File No. 811-04717), as filed with the Securities and
exchange Commission on August 25, 2004 (Accession No. 0001104659-04-025561
is incorporated by reference
4. Safeco Taxable Bond Trust's statement of additional information, dated
April 30, 2004 (File No. 33-22132), as filed with the Securities and
Exchange Commission on April 29, 2004 (Accession No. 0001193125-04-072468)
is incorporated herein by reference.
5. Safeco Intermediate-Term U.S. Government Fund's Annual Report for the
fiscal year ended December 31, 2003 (File No. 811-05574), as filed with
the Securities and Exchange Commission on February 26, 2004 (Accession No.
0001193125-04-030227) is incorporated herein by reference.
6. Safeco Intermediate-Term U.S. Government Fund's Semi-Annual Report for the
period ended June 30, 2004 (File No. 811-05574), as filed with the
Securities and Exchange Commission on August 26, 2004 (Accession No.
0001193125-04-147132) is incorporated by reference.
ADDITIONAL INFORMATION ABOUT
PIONEER AMERICA INCOME TRUST
FUND HISTORY
For additional information about Pioneer America Income Trust generally
and its history, see "Fund History" in the SAI.
DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS
For additional information about Pioneer America Income Trust's investment
objective, policies, risks and restrictions, see "Investment Policies, Risks and
Restrictions" in the SAI.
-2-
MANAGEMENT OF THE FUND
For additional information about Pioneer America Income Trust's Board of
Trustees and officers, see "Trustees and Officers" in the SAI.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
For additional information, see "Annual Fee, Expense and Other Information
- - Share ownership."
INVESTMENT ADVISORY AND OTHER SERVICES
For additional information, see "Investment Adviser," "Shareholder
Servicing/Transfer Agent," "Custodian" and "Independent Auditors" in Pioneer
America Income Trust's SAI.
BROKERAGE ALLOCATION AND OTHER PRACTICES
For additional information about the Pioneer America Income Trust's
brokerage allocation practices, see "Portfolio Transactions" in the SAI.
CAPITAL STOCK AND OTHER SECURITIES
For additional information about the voting rights and other
characteristics of shares of beneficial interest of Pioneer America Income
Trust, see "Description of Shares" in the SAI.
PURCHASE, REDEMPTION AND PRICING OF SHARES
For additional information about purchase, redemption and pricing of
shares of Pioneer America Income Trust, see "Sales Charges," "Redeeming Shares,"
"Telephone and Online Transactions" and "Pricing of Shares" in the SAI.
TAXATION OF THE FUND
For additional information about tax matters related to an investment in
Pioneer America Income Trust, see "Tax Status" in the SAI.
UNDERWRITERS
For additional information about the Pioneer America Income Trust's
principal underwriter and distribution plans, see "Principal Underwriter and
Distribution Plans" and "Sales Charges" in the SAI.
CALCULATION OF PERFORMANCE DATA
For additional information about the investment performance of Pioneer
America Income Trust, see "Investment Results" in the SAI.
FINANCIAL STATEMENTS
For additional information, see "Financial Statements" in Pioneer America
Income Trust's SAI.
-3-
PIONEER AMERICA INCOME TRUST
PRO FORMA
Schedule of Investments(a)
June 30, 2004
(Unaudited) (Amounts in thousands except amounts in percents)
Pioneer Safeco Safeco
America Intermediate- Pioneer Intermediate-
Income Term U.S. Pro Forma Income Term U.S.
Trust Government Combined Trust Government Pro Forma
Principal Fund Principal Principal % of Net Market Fund Combined Market
Amount Amount Amount Assets Value Market Value Value
------ ------ ------ ------ ----- ------------ -----
U.S. TREASURY OBLIGATIONS 27.2%
$ 10,270 $ $ 10,270 U.S. Treasury Bonds, 7.25%, 5/516 $ 12,416 $ $ 12,416
3,500 3,500 U.S. Treasury Notes, 4.625%, 5/15/06 3,624 3,624
1,200 1,200 U.S. Treasury Notes, 4.75%, 5/15/14 1,213 1,213
1,100 1,100 U.S. Treasury Notes, 6.25%, 2/15/07 1,189 1,189
5.525 5,252 U.S. Treasury Notes, 6.38%, 8/15/27 6,236 6,236
16,000 16,000 U.S. Treasury Notes, 6.5%, 2/15/10 18,029 18,029
3,000 3,000 U.S. Treasury Notes, 6.63%, 5/15/07 3,285 3,285
1,750 1,750 U.S. Treasury Notes, 1.125%, 6/30/05 1,734 1.734
2,000 2,000 U.S. Treasury Notes, 1.625%, 4/30/05 1,994 1,994
3,100 3,100 U.S. Treasury Notes, 10.00%, 5/15/10 3,309 3,309
3,500 3,500 U.S. Treasury Notes, 3.50%, 11/15/06 3,545 3,545
3,000 3,000 U.S. Treasury Notes, 4.00%, 11/15/12 2,904 2,904
1,300 1,300 U.S. Treasury Notes, 4.75%,11/15/08 1,358 1,358
1,750 1,750 U.S. Treasury Notes, 5.50%, 2/15/08 1,874 1,874
2,000 2,000 U.S. Treasury Notes, 5.50%, 8/15/28 2,026 2,026
3,300 3,300 U.S. Treasury Notes, 5.75%, 11/15/05 3,451 3,451
250 250 U.S. Treasury Notes, 6.125%, 8/15/29 275 275
800 800 U.S. Treasury Notes, 6.25%, 8/15/23 886 886
250 250 U.S. Treasury Notes, 6.50%, 11/15/26 286 286
1,300 1,300 U.S. Treasury Notes, 6.50%, 2/15/10 1,465 1,465
500 500 U.S. Treasury Notes, 8.75%, 5/15/20 691 691
1,795 1,795 U.S. Treasury Inflation Index Note
3.50%, 1/15/11 2,153 2,153
-----------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS $ 45,991 $ 27,951 $ 73,942
-----------------------------------------
U.S. TREASURY OBLIGATIONS (AT COST) $ 46,853 $ 28,444 $ 75,297
-----------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS 66.6%
2,000 2,000 Federal Farm Credit Bank (Designated $ $ 1,940 $ 1,940
Bond) 3.00%, 4/15/08
1,400 1,400 Federal Home Loan Bank (Unsecured Bond) 1,404 1,404
5.25%, 6/18/14
-4-
PIONEER AMERICA INCOME TRUST
PRO FORMA
Schedule of Investments(a)
June 30, 2004
(Unaudited) (Amounts in thousands except amounts in percents)
Pioneer Safeco Safeco
America Intermediate- Pioneer Intermediate-
Income Term U.S. Pro Forma Income Term U.S.
Trust Government Combined Trust Government Pro Forma
Principal Fund Principal Principal % of Net Market Fund Combined Market
Amount Amount Amount Assets Value Market Value Value
------ ------ ------ ------ ----- ------------ -----
$ $ 97 $ 97 Federal Home Loan Mortgage Corporation, $ $ 99 $ 99
5.50%, 8/10/17
1,070 1,070 Federal Home Loan Mortgage Corporation, 1,096 1,096
5.50%, 9/01/17
297 297 Federal Home Loan Mortgage Corporation, 310 310
6.00%, 4/01/14
1,844 1,844 Federal Home Loan Mortgage Corporation, 1,887 1,887
6.00%, 9/01/32
382 382 Federal Home Loan Mortgage Corporation, 399 399
6.50%, 4/01/29
333 333 Federal Home Loan Mortgage Corporation, 365 365
8.00%, 9/01/25
2,500 2,500 Federal Home Loan Mortgage Corporation, 2,484 2,484
(Unsecured Note), 2.125%, 11/15/05
1,350 1,350 Federal Home Loan Mortgage Corporation, 1,334 1,334
(Unsecured Note), 4.375%, 2/04/10
1,189 1,189 Federal National Mortgage Association, 1,150 1,150
5.00%, 5/01/34
3,781 3,781 Federal National Mortgage Association, 3,664 3,664
5.00%, 9/01/33
1,285 1,285 Federal National Mortgage Association, 1,283 1,283
5.50%, 11/01/33
2,863 2,863 Federal National Mortgage Association, 2,858 2,858
5.50%, 3/01/33
284 284 Federal National Mortgage Association, 291 291
6.00%, 4/01/32
308 308 Federal National Mortgage Association, 315 315
6.00%, 8/01/32
1,825 1,825 Federal National Mortgage Association, 1,905 1,905
6.50%, 10/01/28
105 105 Federal National Mortgage Association, 111 111
7.00%, 10/01/29
614 614 Federal National Mortgage Association, 650 650
7.00%, 4/01/29
150 150 Federal National Mortgage Association, 159 159
7.00%, 5/01/29
140 140 Federal National Mortgage Association, 154 154
8.00%, 7/01/27
140 140 Federal National Mortgage Association, 158 158
9.00%, 11/01/22
2,000 2,000 Government National Mortgage Association, 1,878 1,878
4.5%, TBA 30 YRS
2,493 2,493 Government National Mortgage Association, 2,346 2,346
4.5%, 6/15/34-8/15/33
2,877 2,877 Government National Mortgage Association, 2,901 2,901
5.0%, 12/20/18 - 2/15/19
17,295 17,295 Government National Mortgage Association, 17,340 17,340
5.5%, 6/15/18 - 10/15/33
1,545 1,545 Government National Mortgage Association, 1,585 1,585
6.00%, 11/20/31
58,552 58,552 Government National Mortgage Association, 60,189 60,189
6.0%, 5/15/17 - 12/20/33
262 262 Government National Mortgage Association, 276 276
6.50%, 1/20/24
25,175 25,175 Government National Mortgage Association, 26,369 26,369
6.5%, 4/15/17 - 10/15/33
242 242 Government National Mortgage Association, 257 257
7.00%, 1/15/30
342 342 Government National Mortgage Association, 364 364
7.00%, 4/15/28
284 284 Government National Mortgage Association, 301 301
7.00%, 7/20/31
7,775 7,775 Government National Mortgage Association, 8,276 8,276
7.0%, 10/15/16 - 4/15/32
2,889 2,889 Government National Mortgage Association, 3,116 3,116
7.5%, 2/15/27 - 11/15/32
-5-
PIONEER AMERICA INCOME TRUST
PRO FORMA
Schedule of Investments(a)
June 30, 2004
(Unaudited) (Amounts in thousands except amounts in percents)
Pioneer Safeco Safeco
America Intermediate- Pioneer Intermediate-
Income Term U.S. Pro Forma Income Term U.S.
Trust Government Combined Trust Government Pro Forma
Principal Fund Principal Principal % of Net Market Fund Combined Market
Amount Amount Amount Assets Value Market Value Value
------ ------ ------ ------ ----- ------------ -----
$ $ 544 $ 544 Government National Mortgage Association, $ $ 587 $ 587
7.50%, 10/15/27
419 419 Government National Mortgage Association, 459 459
8.00%, 12/15/29
148 148 Government National Mortgage Association, 162 162
8.00%, 3/20/30
529 529 Government National Mortgage Association, 587 587
8.25%, 5/15/20
111 111 Government National Mortgage Association, 124 124
8.5%, 7/15/24
29 29 Government National Mortgage Association, 32 32
9.0%, 9/15/16 - 4/15/20
175 175 Government National Mortgage Association, 195 195
10.0%, 11/15/18 - 3/15/20
1,194 1,194 Government National Mortgage Association 1,250 1,250
I, 6.5%, 11/15/31 - 9/15/32
867 867 Government National Mortgage Association 922 922
I, 7.0%, 12/15/30
335 335 Government National Mortgage Association 358 358
I, 7.5%, 8/15/23
967 967 Government National Mortgage Association 973 973
II, 5.0%, 2/20/19
9,815 9,815 Government National Mortgage Association 9,807 9,807
II, 5.5%, 2/20/34 - 3/20/34
7,697 7,697 Government National Mortgage Association 7,918 7,918
II, 6.0%, 7/20/17 - 6/20/34
6,160 6,160 Government National Mortgage Association 6,433 6,433
II, 6.5%, 8/20/28 - 3/20/34
823 823 Government National Mortgage Association 874 874
II, 7.0%, 12/20/08 - 7/20/31
324 324 Government National Mortgage Association 351 351
II, 7.49%, 10/20/22
212 212 Government National Mortgage Association 229 229
II, 7.5%, 2/12/30 - 12/20/30
10 10 Government National Mortgage Association 11 11
II, 8.0%, 5/20/25 - 3/20/30
243 243 Government National Mortgage Association 272 272
II, 9.0%, 9/20/21 - 11/20/24
3 3 Government National Mortgage Association 3 3
II, 10.0%, 1/20/06 -----------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS $152,167 $ 28,594 $ 180,761
-----------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (AT
COST) $152,406 $ 28,615 $ 181,021
-----------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS 2.0%
Government 2.0%
2,500 2,500 Freddie Mac, 3.50%, 8/01/33 $ $ 2,520 $ 2,520
3,000 3,000 Freddie Mac, 3.50%, 9/15/10 3,017 3,017
-----------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS $ $ 5,537 $ 5,537
-----------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (AT
COST) $ --- $ 5,603 $ 5,603
-----------------------------------------
ASSET BACKED SECURITIES 1.3%
Consumer Finance 1.3%
2,000 2,000 Americredit Automobile Receivables $ $ 2,032 $ 2,032
Trust, 4.41%, 11/12/08
1,500 1,500 Chemical Master Credit Card Trust, 1,564 1,546
5.98%, 9/15/08 -----------------------------------------
-6-
PIONEER AMERICA INCOME TRUST
PRO FORMA
Schedule of Investments(a)
June 30, 2004
(Unaudited) (Amounts in thousands except amounts in percents)
Pioneer Safeco Safeco
America Intermediate- Pioneer Intermediate-
Income Term U.S. Pro Forma Income Term U.S.
Trust Government Combined Trust Government Pro Forma
Principal Fund Principal Principal % of Net Market Fund Combined Market
Amount Amount Amount Assets Value Market Value Value
------ ------ ------ ------ ----- ------------ -----
$ $ $ TOTAL ASSET BACKED SECURITIES $ $ 3,596 $ 3,596
-----------------------------------------
ASSET BACKED SECURITIES (AT COST) --- $ 3,624 $ 3,624
-----------------------------------------
TEMPORARY CASH INVESTMENT 3.5%
Repurchase Agreement 3.1%
8,500 8,500 UBS Warburg, 1.25%, dated 6/30/04, $ 8,500 $ $ 8,500
repurchase price of $8,500,000 plus
accrued interest on 7/1/04,
collateralized by $8,733,000 U.S.
Treasury Bonds, 5.875%, 11/15/2005
Shares Shares Investment Companies 0.3%
------ ------
887 887 AIM Short-Term Investments Co. Liquid
Assets Money Market Portfolio
(Institutional Shares) $ $ 887 $ 887
-----------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS $ 8,500 $ 887 $ 9,387
-----------------------------------------
TEMPORARY CASH INVESTMENTS (AT COST) $ 8,500 $ 887 $ 9,387
-----------------------------------------
TOTAL INVESTMENTS IN SECURITIES 100.6% $206,658 $ 66,565 $ 273,223
-----------------------------------------
OTHER ASSETS AND LIABILITIES -0.6% $ -1,922 $ 177 $ -1,745
-----------------------------------------
TOTAL NET ASSETS - 100.0% $204,736 $ 66,742 $ 271,478
-----------------------------------------
Investments at Cost $207,759 $ 67,173 $ 274,932
=========================================
TBA (To Be Assigned) securities are purchased on a forward commitment basis
with an approximate (generally plus/minus 2.5%) principal and no definite
maturity date period. The actual principal amount and maturity date will
be determined upon settlement.
(a) No adjustments are shown to the unaudited pro forma combined schedule of
investments due to the fact that upon consummation of the merger, no
securities would need to be sold in order for Pioneer America Income Trust
to comply with its prospectus restrictions. The foregoing sentence shall
not restrict in any way the ability of the investment adviser of either of
the funds from buying or selling securities in the normal course of such
fund's business and operations.
The accompanying notes are an integral part of these financial statements.
-7-
Pioneer America Income Trust
Pro Forma Statement of Assets and Liabilities
June 30, 2004
(Unaudited) (Amounts in Thousands, except per share data)
Safeco
Intermediate-
Term U.S.
Pioneer America Government Pro Forma Pro Forma
Income Trust Fund Adjustments Combined
------------ ---- ----------- --------
ASSETS:
Investment in securities of unaffiliated issuers, at value (cost
$207,759 and $67,173, respectively) $ 206,658 66,565 $ 273,223
Investment in securities of affiliated issuers, at value - - -
---------- ---------- ---------
Total investments in Securities at value 206,658 66,565 273,223
Cash 95 - 95
Receivables - -
Fund shares sold 166 - 166
Advisor - 16 16
Dividends, interest and foreign taxes withheld 1,441 463 1,904
---------- ---------- --------- ---------
Total assets $ 208,360 $ 67,044 $ 275,404
---------- ---------- --------- ---------
LIABILITIES:
Payables -
Investment securities purchased $ 2,787 $ - $ 2,787
Fund shares repurchased 333 20 353
Dividends 139 226 365
Due to affiliates 304 30 334
Accrued expenses 61 26 $ 87
---------- ---------- --------- ---------
Total liabilities $ 3,624 302 $ - $ 3,926
---------- ---------- --------- ---------
NET ASSETS:
Paid-in capital $ 216,568 $ 69,256 $ 285,824
Accumulated undistributed net investment loss (1,501) (477) $ (1,978)
Accumulated net realized loss on investments (9,230) (1,429) (10,659)
Net unrealized loss on investments (1,101) (608) (1,709)
---------- ---------- --------- ---------
Total net assets $ 204,736 $ 66,742 $ - $ 271,478
========== ========== ========= =========
OUTSTANDING SHARES:
(Unlimited number of shares authorized)
Investor Class - 6,291 575 (a) 6,866
========== ========== ========= =========
Class A 13,322 543 (543) (a) 13,322
========== ========== ========= =========
Class B 4,586 248 (248) (a) 4,586
========== ========== ========= =========
Class C 3,148 10 (10) (a) 3,148
========== ========== ========= =========
Class R 49 - 49
========== ========== ========= =========
NET ASSET VALUE PER SHARE:
Investor Class $ - $ 9.41 $ 9.72
========== ========== ========= =========
Class A $ 9.72 $ 9.41 $ 9.72
========== ========== ========= =========
Class B $ 9.66 $ 9.42 $ 9.66
========== ========== ========= =========
Class C $ 9.69 $ 9.42 $ 9.69
========== ========== ========= =========
Class R $ 9.82 - $ 9.82
========== ========== ========= =========
MAXIMUM OFFERING PRICE:
Class A $ 10.18 $ 9.75 $ 10.18
========== ========== ========= =========
Class C $ 9.79 $ - $ 9.79
========== ========== ========= =========
(a) Class A, Class B, Class C, and Investor shares of Safeco Intermediate-Term
U.S. Government Fund are exchanged for new Investor Class shares of
Pioneer America Income Trust, to be established upon consummation of the
merger. Initial per share values of Investor Class shares are presumed to
be equal to that of Class A shares.
The accompanying notes are an integral part of these financial statements.
-8-
Pioneer America Income Trust
Pro Forma Statement of Operations
For the Twelve Months Ended June 30, 2004
(Unaudited) (Amounts in Thousands)
Safeco
Intermediate - Term
Pioneer U.S. Government Pro Forma Pro Forma
America Income Trust Fund Adjustments Combined
-------------------- ------------------- ----------- ---------
INVESTMENT INCOME:
Dividends $ -- $ -- $ --
Interest 10,851 2,537 13,388
Income from securities loaned, net -- 1 1
---------- ----------- ---------- -----------
Total investment income $ 10,851 $ 2,538 $ 13,389
EXPENSES:
Management fees $ 1,238 $ 371 $ (20)(b) $ 1,589
Transfer agent fees
Investor Class -- 87 172e 259
Class A 442 10 (10)e 442
Class B 218 5 (5)e 218
Class C 112 -- 112
Shareholder Servicing fees
Class A -- 11 (11)(d) 0
Class B -- 6 (6)(d) 0
Distribution Fees
Class A 386 -- 386
Class B 554 17 (17)(e) 554
Class C 378 -- 378
Class R 1 -- 1
Administrative fees 42 60 (40)(f) 62
Custodian fees 23 10 33
Registration fees 107 45 152
Professional fees 50 28 (28)(a) 50
Printing 25 14 39
Fees and expenses of nonaffiliated trustees 8 10 (10)(a) 8
Miscellaneous 12 10 22
---------- ----------- ---------- -----------
Total expenses $ 3,596 $ 684 $ 25 $ 4,305
Less management fees waived and/or expenses -- (150) (4)(b) (154)
reimbursed by Advisor
Less fees paid indirectly (6) -- (6)
---------- ----------- ---------- -----------
Net expenses $ 3,590 $ 534 $ 21 $ 4,145
---------- ----------- ---------- -----------
Net investment income $ 7,261 $ 2,004 $ (21) $ 9,244
---------- ----------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on:
Investments $ (1,172) $ 1,030 $ $ (142)
Forward foreign currency contracts and other assets -- -- --
and liabilities denominated in foreign currencies
Chance in net unrealized gain (loss) on:
Investments (8,562) (2,823) (11,385)
Other assets and liabilities denominated in foreign
currencies -- -- -- --
---------- ----------- ---------- -----------
Net loss on investments, foreign currency
transactions and future contracts (9,734) (1,793) $ -- $ (11,527)
---------- ----------- ---------- -----------
Net increase (decrease) in net assets resulting from
operations $ (2,473) $ 211 $ (21) $ (2,260)
========== =========== ========== ===========
(a) Reflects reduction in expenses due to elimination of duplicate services.
(b) Management fees conformed to Pioneer America Income Trust's management
contract.
(c) Reclass Transfer Agent Expenses to Investor class and change in fee
structure..
(d) Eliminate Shareholder servicing Expense.
(e) Eliminate Distribution Expense of Safeco Intermediate-Term U.S. Government
Fund.
(f) Reflects decrease due to a change in fee rates.
The accompanying notes are an integral part of these financial statements.
-9-
Pioneer America Income Trust
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
6/30/04
(Unaudited)
1. General
The accompanying pro forma combined financial statements are presented to show
the effect of the proposed acquisition (the "acquisition") of Safeco
Intermediate-Term U.S. Government Fund by Pioneer America Income Trust.
Under the terms of an Agreement and Plan of Reorganization between the Funds,
the combination of Pioneer America Income Trust and Safeco Intermediate-Term
U.S. Government Fund 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 acquisition will be accomplished by an acquisition
of the net assets of Safeco Intermediate-Term U.S. Government Fund in exchange
for a new "Investor Class" of shares of Pioneer America Income Trust at net
asset value, which will be established upon consummation of the merger. The
accompanying schedules of investments, statements of assets and liabilities and
the related statements of operations of Pioneer America Income Trust and Safeco
Intermediate-Term U.S. Government Fund have been combined as of and for their
most recent 12 months ended June 30, 2004. Adjustments have been made to
expenses for duplicate services that would not have been incurred if the merger
took place on July 1, 2003. Following the acquisition, Pioneer America Income
Trust will be the accounting survivor. All related acquisition costs will be
borne by the Advisors.
These pro forma financial statements and related notes should be read in
conjunction with the financial statements of Pioneer America Income Trust and
Safeco Intermediate-Term U.S. Government Fund included in their respective
semiannual reports to shareowners dated June 30, 2004.
2. Organization and Significant Accounting Policies
Pioneer America Income Trust (the Trust) is a Massachusetts statutory trust
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The investment objective of the Trust is to
provide a high level of current income consistent with preservation of capital
and prudent investment risk.
After the merger, the Trust will consist of five classes of shares - Class A,
Class B, Class C, Class R and Investor Class shares. Class R shares were first
publicly offered on April 1, 2003. Investor Class shares are being offered as
part of the acquisition. Shares of Class A, Class B, Class C, Class R and
Investor Class each represent an interest in the same portfolio of investments
of the Trust and have equal rights to voting, redemptions, dividends and
liquidation, 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, Class C and Class
R shareowners, respectively. There is no distribution plan for Investor Class
shares.
Each Fund's management has prepared their respective financial information using
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the pro forma financial statements, and the reported amounts of income, expenses
and gains and losses on investments during the reporting periods. Actual results
could differ from those estimates.
-10-
The following is a summary of significant accounting policies consistently
followed by the Trust, which are in conformity with those generally accepted in
the investment company industry:
A. Security Valuation
Security transactions are recorded as of trade date. 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 method are valued at their fair values as
determined by, or under the direction of the Fund's Board of Trustees. At June
30, 2004, there were no securities fair valued. Principal amounts of
mortgage-backed securities are adjusted for monthly paydowns. Premiums and
discounts related to certain mortgage-backed securities are amortized or
accreted in proportion to the underlying monthly pay downs. All
discounts/premiums on debt securities are accreted/amortized for financial
reporting purposes. Interest income is recorded on the accrual basis. Temporary
cash investments are valued at amortized cost.
Gains and losses on sales of investments are calculated on the identified cost
method for both financial reporting and federal income tax purposes.
B. Federal Income Taxes
Each fund has previously elected to be taxed as a "regulated investment company"
under the Internal Revenue Code. After the acquisition, it will be 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.
At December 31, 2003, the combined capital loss carryforward of $8,538,000
includes a net capital loss carryforward of $1,398,000 from the merger with
Safeco Intermediate-term U.S. Government Fund, the full use of which may be
limited.
C. Fund Shares
The Trust records sales and repurchases of its shares as of trade date. Pioneer
Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a
wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito
Italiano), earned $40,046 in underwriting commissions on the sale of Trust
shares for the 12 months ended June 30, 2004.
D. Class Allocations
Distribution fees are calculated based on the average daily net asset value
attributable to Class A, Class B, Class C, Class R, and Investor Class shares of
the Trust, respectively. 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 5). Income, common expenses and realized and unrealized gains
and losses are calculated at the Trust level and allocated daily to each class
of shares based on the respective percentage of adjusted net assets at the
beginning of the day.
The Trust 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 Trust 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, Class R, and Investor Class shares can bear different transfer agent
and distribution fees.
-11-
E. Repurchase Agreements
With respect to repurchase agreements entered into by the Trust, the value of
the underlying securities (collateral), including accrued interest received from
counter parties, is required to be at least equal to or in excess of the value
of the repurchase agreement at the time of purchase. The collateral for all
repurchase agreements is held in safekeeping in the customer-only account of the
Trust's custodian, or sub custodians. The Trust's investment adviser, Pioneer
Investment Management, Inc. (PIM) is responsible for determining that the value
of the collateral remains at least equal to the repurchase price.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of shares of the
Trust that would have been issued at June 30, 2004, in connection with the
proposed acquisition. The number of the shares assumed to be issued is equal to
the net asset value of Safeco Intermediate-Term U.S. Government Fund, as of June
30, 2004, divided by the net asset value per share of the Investor Class shares
of the Trust as of June 30, 2004. The pro forma number of shares outstanding (in
thousands), by class, for the combined fund consist of the following at June 30,
2004:
Shares of Additional Shares Total Outstanding
The Trust Assumed Issued Shares
Class of Shares Pre-Combination In Reorganization Post-Combination
- --------------- --------------- ----------------- ----------------
Class A 13,322 13,322
Class B 4,586 4,586
Class C 3,148 3,148
Class R 49 49
Investor Class - 6,866 6,866
4. Management Agreement
PIM manages the Trust's portfolio and is a wholly owned indirect subsidiary of
UniCredito Italiano. Management fees are calculated daily at the annual rate of
0.50% of the Trust's average daily net assets. PIM discontinued the Fund's
expense limitation on May 1, 2003. Prior to May 1, 2003, PIM had agreed not to
impose a portion of its management fee and to assume other operating expenses of
the Trust to the extent necessary to limit Class A expenses to 1.00% of the
average daily net assets attributable to Class A shares; the portion of the
Trust-wide expenses attributable to Class B, Class C and Class R shares were
reduced only to the extent that such expenses were reduced for Class A shares.
In addition, under the management and administration agreements, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Trust. At June 30, 2004, $128,414 was payable to PIM
related to management fees, administrative fees and certain other services, and
is included in due to affiliates.
-12-
5. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $105,634 in transfer agent
fees payable to PIMSS at June 30, 2004.
6. Distribution and Service Plans
The Trust adopted Plans of Distribution with respect to each class of shares
(Class A Plan, Class B Plan, Class C Plan, and Class R Plan) in accordance with
Rule 12b-1 of the Investment Company Act of 1940. Pursuant to the Class A Plan,
the Trust pays PFD a service fee of up to 0.25% of the Trust's average daily net
assets attributable to Class A shares in reimbursement of such expenditures to
finance activities primarily intended to result in the sale of Class A shares.
Pursuant to the Class B Plan and the Class C Plan, the Trust 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. Pursuant to the
Class R Plan, the Trust pays PFD 0.50% of the average daily net assets
attributable to Class R shares for distribution services. Included in due to
affiliates is $100,070 in distribution fees payable to PFD at June 30, 2004. The
Trust also has adopted a separate service plan for Class R shares (Service
Plan). The Service Plan authorizes the Trust to pay securities dealers, plan
administrators or other services organizations that agree to provide certain
services to retirement plans or plan participants holding shares of the Trust a
service fee of up to 0.25% of the Trust's daily net assets attributable to Class
R shares held by such plans.
In addition, redemptions of each class of shares (except Investor Class 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 one year of purchase. Class B shares that are redeemed within six 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%.
Redemptions of Class R shares within 18 months of purchase may be subject to a
CDSC of 1.00%. Proceeds from the CDSCs are paid to PFD. For the 12 months ended
June 30, 2004, CDSCs in the amount of $373,990 were paid to PFD.
Investor Class shares will not be subject to shareholder servicing or
distribution fees. Investor Class shares will convert to Class A shares 24
months after the date on which the acquisition is completed.
7. Expense Offset Arrangements
The Trust has entered into certain expense offset arrangements with PIMSS,
resulting in a reduction in the Trust's total expenses due to interest earned on
cash held by PIMSS. For the 12 months ended June 30, 2004, the Trust's expenses
were reduced by $6,000 under such arrangements.
-13-
PIONEER AMERICA INCOME TRUST
PRO FORMA
Schedule of Investments (a)
December 31, 2003
(Unaudited) (Amounts in thousands except amounts in percents)
Pioneer
America Safeco Pro Safeco
Income Intermediate-Term Forma Pioneer Intermediate-
Trust U.S. Government Combined America Term U.S. Pro Forma
Principal Fund Principal Principal % of Net Income Trust Government Fund Combined
Amount Amount Amount Assets Market Value Market Value Market Value
------ ------ ------ ------ ------------ ------------ ------------
U.S. TREASURY OBLIGATIONS
$ 14,270 $ 14,270 U.S. Treasury Bonds, 7.25%, 5/5/16 28.9% $ 17,801 $ $ 17,801
$ 1,795 1,795 U.S. Treasury Inflation Index Note,
3.50%, 1/15/11 2,144 2,144
1,750 1,750 U.S. Treasury Notes, 1.125%, 6/30/05 1,741 1,741
2,700 2,700 U.S. Treasury Notes, 1.625%, 4/30/05 2,708 2,708
450 450 U.S. Treasury Notes, 3.00%, 11/15/07 454 454
500 500 U.S. Treasury Notes, 3.25%, 5/31/04 504 504
3,500 3,500 U.S. Treasury Notes, 3.50%, 11/15/06 3,618 3,618
3,000 3,000 U.S. Treasury Notes, 4.00%, 11/15/12 2,971 2,971
1,500 1,500 U.S. Treasury Notes, 4.75%, 11/15/08 1,606 1,606
1,350 1,350 U.S. Treasury Notes, 4,875%, 2/15/12 1,430 1,430
2,000 2,000 U.S. Treasury Notes, 5.50%, 8/15/28 2,083 2,083
2,250 2,250 U.S. Treasury Notes, 5.50%, 2/15/08 2,481 2,481
5,850 2,700 8,550 U.S. Treasury Notes, 5.625%, 5/15/08 6,480 2,991 9,471
3.300 3,300 U.S. Treasury Notes, 5.75%, 11/15/05 3,543 3,543
250 250 U.S. Treasury Notes, 6.125%, 8/15/29 283 283
2,600 2,600 U.S. Treasury Notes, 6.25%, 2/15/07 2,898 2,898
6,525 6,525 U.S. Treasury Notes, 6.375%, 8/15/27 7,578 7,578
250 250 U.S. Treasury Notes, 6.50%, 11/15/26 294 294
17,500 1,300 18,800 U.S. Treasury Notes, 6.50%, 2/15/10 20,336 1,511 21,847
3,000 3,000 U.S. Treasury Notes, 6.625%, 5/15/07 3,395 3,395
500 500 U.S. Treasury Notes, 8.75%, 5/15/20 714 714
3,100 3,100 U.S. Treasury Notes, 10.00%, 5/15/10 3,451 3,451
-----------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS $ 58,489 $ 34,527 $ 93,016
-----------------------------------------
U.S. TREASURY OBLIGATIONS (AT COST) $ 58,504 $ 34,325 $ 92,829
-----------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS 67.0%
122 122 Federal Home Loan Mortgage Corporation, $ $ 127 $ 127
5.50%, 8/01/17
1,349 1,349 Federal Home Loan Mortgage Corporation, 1,399 1399
5.50%, 9/01/17
377 377 Federal Home Loan Mortgage Corporation, 396 396
6.00%, 4/01/14
-14-
PIONEER AMERICA INCOME TRUST
PRO FORMA
Schedule of Investments (a)
December 31, 2003
(Unaudited) (Amounts in thousands except amounts in percents)
Pioneer
America Safeco Pro Safeco
Income Intermediate-Term Forma Pioneer Intermediate-
Trust U.S. Government Combined America Term U.S. Pro Forma
Principal Fund Principal Principal % of Net Income Trust Government Fund Combined
Amount Amount Amount Assets Market Value Market Value Market Value
------ ------ ------ ------ ------------ ------------ ------------
2,363 2,363 Federal Home Loan Mortgage Corporation, 2,443 2,443
6.00%, 9/01/32
511 511 Federal Home Loan Mortgage Corporation, 535 535
6.50%, 4/01/29
402 402 Federal Home Loan Mortgage Corporation, 437 437
8.00%, 9/01/25
2,000 2,000 Federal Farm Credit Bank (Designated 1,971 1,971
Bond), 3.00%, due 4/15/08
2,500 2,500 Federal Home Loan Mortgage Corporation 2,511 2,511
(Unsecured Note), 2.125%, due 11/15/05
1,350 1,350 Federal Home Loan Mortgage Corporation 1,349 1,349
(Unsecured Note), 4.375%, due 2/04/10
4,042 4,042 Federal National Mortgage Association, 4,002 4,002
5.00%, 9/01/33
3,272 3,272 Federal National Mortgage Association, 3,317 3,317
5.50%, 3/01/33
385 385 Federal National Mortgage Association, 398 398
6.00%, 4/01/32
411 411 Federal National Mortgage Association, 425 425
6.00%, 8/01/32
2,376 2,376 Federal National Mortgage Association, 2,488 2,488
6.50%, 10/01/28
115 115 Federal National Mortgage Association, 122 122
7.00%, 10/01/29
682 682 Federal National Mortgage Association, 722 722
7.00%, 4/01/29
151 151 Federal National Mortgage Association, 160 160
7.00%, 5/01/29
153 153 Federal National Mortgage Association, 167 167
8.00%, 7/01/27
142 142 Federal National Mortgage Association, 158 158
9.00%, 11/01/22
2,044 2,044 Government National Mortgage Association, 2,115 2,115
6.00%, 11/20/31
353 353 Government National Mortgage Association, 374 374
6.50%, 1/20/24
335 335 Government National Mortgage Association, 357 357
7.00%, 1/15/30
558 558 Government National Mortgage Association, 596 596
7.00%, 4/15/28
417 417 Government National Mortgage Association, 443 443
7.00%, 7/20/31
728 728 Government National Mortgage Association, 782 782
7.50%, 10/15/27
583 583 Government National Mortgage Association, 635 635
8.00%, 12/15/29
211 211 Government National Mortgage Association, 228 228
8.00%, 3/20/30
658 658 Government National Mortgage Association, 725 725
8.25%, 5/15/20
3,000 3,000 Government National Mortgage Association, 3,118 3,118
6.0%, TBA 30 YRS
29,046 29,046 Government National Mortgage Association, 29,574 29,574
5.5%, 6/15/18-10/15/33
70,764 70,764 Government National Mortgage Association, 73,717 73,717
6.0%, 1/15/24-11/15/33
40,531 40,531 Government National Mortgage Association, 42,781 42,781
6.5%, 4/15/17-4/15/33
11,196 11,196 Government National Mortgage Association, 11,957 11,957
7.0%, 10/15/16-4/15/32
-15-
PIONEER AMERICA INCOME TRUST
PRO FORMA
Schedule of Investments (a)
December 31, 2003
(Unaudited) (Amounts in thousands except amounts in percents)
Pioneer
America Safeco Pro Safeco
Income Intermediate-Term Forma Pioneer Intermediate-
Trust U.S. Government Combined America Term U.S. Pro Forma
Principal Fund Principal Principal % of Net Income Trust Government Fund Combined
Amount Amount Amount Assets Market Value Market Value Market Value
------ ------ ------ ------ ------------ ------------ ------------
4,573 4,573 Government National Mortgage Association, 4,909 4,909
7.5%, 2/15/17-11/15/32
123 123 Government National Mortgage Association, 135 135
8.5%, 7/15/24
37 37 Government National Mortgage Association, 42 42
9.0%, 9/15/16-4/15/20
188 188 Government National Mortgage Association, 211 211
10..0%, 11/15/18-3/15/20
1,769 1,769 Government National Mortgage Association 1,865 1,865
I, 6.5%, 11/15/31-9/15/32
1,234 1,234 Government National Mortgage Association 1,315 1,315
I, 7.0%, 12/15/30
412 412 Government National Mortgage Association 442 442
I, 7.5%, 8/15/23
7,126 7,126 Government National Mortgage Association 7,383 7,383
II, 6.0%, 7/20/17-11/20/33
6,101 6,101 Government National Mortgage Association 6,425 6,425
II, 6.5%, 8/20/28-10/20/32
1,187 1,187 Government National Mortgage Association 1,262 1,262
II, 7.0%, 12/20/08-11/20/32
657 657 Government National Mortgage Association 702 702
II, 7.5%, 10/20/22-12/2/30
15 15 Government National Mortgage Association 16 16
II, 8.0%, 5/20/25-3/20/30
307 307 Government National Mortgage Association 341 341
II, 9.0% 9/20/21-11/20/24
4 4 Government National Mortgage Association 5 5
II, 10.0%, 1/20/06 -----------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS $186,201 $ 29,382 $ 215,583
-----------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (AT $184,009 $ 28,966 $ 212,975
COST) -----------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS 2.0%
Government 2.0%
2,500 2,500 Freddie Mac, 3.50%, due 8/01/33 2,541 2,541
3,000 3,000 Freddie Mac, 3.50%, due 9/15/10 3,052 3,052
696 696 Freddie Mac, 5.00%, due 7/18/33 696 696
-----------------------------------------
TOTAL COLLATERALIZED MORTGAGE $ $ 6,289 $ 6,289
OBLIGATIONS -----------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (AT $ - $ 6,299 $ 6,299
COST) -----------------------------------------
ASSET BACKED SECURITIES 1.1%
Consumer Finance
-16-
PIONEER AMERICA INCOME TRUST
PRO FORMA
Schedule of Investments (a)
December 31, 2003
(Unaudited) (Amounts in thousands except amounts in percents)
Pioneer
America Safeco Pro Safeco
Income Intermediate-Term Forma Pioneer Intermediate-
Trust U.S. Government Combined America Term U.S. Pro Forma
Principal Fund Principal Principal % of Net Income Trust Government Fund Combined
Amount Amount Amount Assets Market Value Market Value Market Value
------ ------ ------ ------ ------------ ------------ ------------
2,000 2,000 Americredit Automobile Receivables 2,063 2,063
Trust, 4.41%, due 11/12/08
1,500 1,500 Chemical Master Credit Card Trust, 1,594 1,594
5.98%, due 9/15/08
-----------------------------------------
TOTAL ASSET BACKED SECURITIES $ $ 3,657 $ 3,657
-----------------------------------------
ASSET BACKED SECURITIES (AT COST) $ $ 3,637 $ 3,637
-----------------------------------------
TEMPORARY CASH INVESTMENT 1.6%
-----------------------------------------
4,800 4,800 Repurchase Agreement 1.5%
UBS Warburg, 0.73% dated 12/31/03,
repurchase price of $4,800,000 plus
accrued interest on 1/2/03,
collateralized by $4,533,000 U.S.
Treasury Bonds, 6.75%, 5/15/05 $ 4,800 $ $ 4,800
Shares Shares Investment Company 0.1%
292 292 AIM Short-Term Investments Co.
Liquid Assets Money market
Portfolio (Institutional Shares) 292 292
-----------------------------------------
-----------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS $ 4,800 $ 292 $ 5,092
-----------------------------------------
TEMPORARY CASH INVESTMENTS (AT COST) $ 4,800 $ 292 $ 5,092
-----------------------------------------
TOTAL INVESTMENTS IN SECURITIES 100.6% $249,490 $ 74,147 $ 323,637
-----------------------------------------
OTHER ASSETS AND LIABILITIES -0.6% $ (2,464) $ 401 $ (2,063)
TOTAL NET ASSETS - 100.0% 100.0% $247,026 $ 74,548 $ 321,574
=========================================
Total Investments at Cost 247,313 $ 73,519 $ 320,832
=========================================
(a) No adjustments are shown to the unaudited pro forma combined schedule of
investments due to the fact that upon consummation of the merger, no
securities would need to be sold in order for Pioneer America Income Trust
to comply with its prospectus restrictions. The foregoing sentence shall
not restrict in any way the ability of the investment adviser of either of
the funds from buying or selling securities in the normal course of such
fund's business and operations.
TBA (To Be Assigned) securities are purchased on a forward commitment basis
with an approximate (generally plus/minus 2.5%) principal and no definite
maturity date period. The actual principal amount and maturity date will
be determined upon settlement when the specific mortgage pools are
assigned.
The accompanying notes are an integral part of these financial statements.
-17-
Pioneer America Income Trust
Pro Forma Statement of Assets and Liabilities
December 31, 2003
(unaudited) (Amounts in Thousands, except per share data)
Safeco
Intermediate-Term
Pioneer America U.S. Government Pro Forma Pro Forma
Income Trust Fund Adjustments Combined
------------ ---- ----------- --------
ASSETS:
Investment in securities, at value (cost
$247,313 and $73,519, respectively) $ 249,490 74,147 $ 323,637
Cash 72 - 72
Receivables -
Fund shares sold 133 8 141
Interest 1,762 518 2,280
From Advisor - 16 16
---------- ------------ ---------- -----------
Other 5 1 6
---------- ------------ ---------- -----------
Total assets $ 251,462 $ 74,690 $ 326,152
---------- ------------ ---------- -----------
LIABILITIES:
Payables -
Investment securities purchased $ 3,124 $ - $ 3,124
Fund shares repurchased 689 10 699
Dividends 216 55 271
Due to affiliates 329 35 364
Accrued expenses 78 42 $ 120
---------- ------------ ---------- -----------
Total liabilities $ 4,436 142 $ - $ 4,578
---------- ------------ ---------- -----------
NET ASSETS:
Paid-in capital $ 253,674 $ 75,774 $ 329,448
Accumulated undistributed net investment
loss (1,068) (377) $ (1,445)
Accumulated net realized loss on
investments (7,758) (1,477) (9,235)
Net unrealized loss on investments 2,178 628 2,806
---------- ------------ ---------- -----------
Total net assets $ 247,026 $ 74,548 $ - $ 321,574
========== ============ ========== ===========
OUTSTANDING SHARES:
(Unlimited number of shares authorized)
Investor Class - 6,893 599 (a) 7,492
========== ============ ========== ===========
Class A 15,468 560 (560) (a) 15,468
========== ============ ========== ===========
Class B 5,591 309 (309) (a) 5,591
========== ============ ========== ===========
Class C 3,775 11 (11) (a) 3,775
========== ============ ========== ===========
Class R 33 - 33
========== ============ ========== ===========
NET ASSET VALUE PER SHARE:
Investor Class $ - $ 9.59 $ 9.95
========== ============ ===========
Class A $ 9.95 $ 9.59 $ 9.95
========== ============ ===========
Class B $ 9.89 $ 9.60 $ 9.89
========== ============ ===========
Class C $ 9.92 $ 9.60 $ 9.92
========== ============ ===========
Class R $ 10.07 - $ 10.07
========== ============ ===========
MAXIMUM OFFERING PRICE:
Class A $ 10.42 $ 9.94 $ 10.42
========== ============ ===========
Class C $ 10.02 $ 10.02
========== ===========
(a) Class A, Class B, Class C, and Investor shares of Safeco Intermediate-Term
U.S. Government Fund are exchanged for new Investor Class shares of
Pioneer America Income Trust, to be established upon consummation of the
merger. Initial per share values of Investor Class shares are presumed to
be equal to that of Class A shares.
The accompanying notes are an integral part of these financial statements.
-18-
Pioneer America Income Trust
Pro Forma Statement of Operations
For the Twelve Months Ended December 31, 2003
(Unaudited)
Safeco
Pioneer Intermediate-Term
America Income U.S. Government Pro Forma Pro Forma Combined
Trust (000's) Fund (000's) Adjustments (000's) (000's)
------------- ------------ ------------------- -------
INVESTMENT INCOME:
Interest $ 11,258 $ 2,465 $ 13,723
Securities lending and Other income -- 1 1
---------- ------------ -----------
Total investment income $ 11,258 $ 2,466 $ 13,724
EXPENSES:
Management fees $ 1,424 $ 332 $ (29)(b) $ 1,727
Transfer agent fees
Investor Class -- 82 143(c) 225
Class A 467 5 (5)(c) 467
Class B 241 3 (3)(c) 241
Class C 102 -- 102
Distribution fees
Class A 433 -- 433
Class B 675 8 (8)(e) 675
Class C 441 -- 441
Shareholder Servicing
Class A -- 5 (5)(d) --
Class B -- 3 (3)(d) --
Administrative fees 37 54 (37)(f) 54
Custodian fees 25 9 34
Registration fees 114 45 159
Professional fees 54 26 (26)(a) 54
Printing 31 11 42
Fees and expenses of nonaffiliated trustees 11 9 (9)(a) 11
Miscellaneous 15 8 23
---------- ------------ ------------ -----------
Total expenses $ 4,070 $ 600 $ 18 $ 4,688
Less management fees waived and/or
expenses reimbursed by Advisors (57) (135) $ (2)(b) (190)
Less fees paid indirectly (8) -- (8)
---------- ------------ ------------ -----------
Net expenses $ 4,005 $ 465 $ 20 $ 4,490
---------- ------------ ------------ -----------
Net investment income $ 7,253 $ 2,001 $ (20) $ 9,.234
---------- ------------ ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments $ 1,555 $ 1,212 $ 2,767
Change in net unrealized (gain) loss on (6,064) (2,494) (8,558)
investments ---------- ------------ -----------
Net loss on investments $ (4,509) $ (1,282) $ (5,791)
---------- ------------ ------------ -----------
Net increase in net assets resulting
from operations $ 2,744 $ 719 $ (20) $ 3,443
========== ============ ============ ===========
(a) Reflects reduction in expenses due to elimination of duplicate services.
(b) Management fees conformed to Pioneer America Income Trust's management
contract.
(c) Reclass Transfer Agent Expenses to Investor class and change in fee
structure.
(d) Eliminate Shareholder Servicing Expense.
(e) Eliminate Distribution Expense of Safeco Intermediate-Term U.S. Government
Fund.
(f) Reflects decrease due to a change in fee rates
The accompanying notes are an integral part of these financial statements.
-19-
Pioneer America Income Trust
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
12/31/03
(Unaudited)
1. General
The accompanying pro forma combined financial statements are presented to show
the effect of the proposed acquisition (the "acquisition") of Safeco
Intermediate-Term U.S. Government Fund by Pioneer America Income Trust.
Under the terms of an Agreement and Plan of Reorganization between the Funds,
the combination of Pioneer America Income Trust and Safeco Intermediate-Term
U.S. Government Fund 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 acquisition will be accomplished by an acquisition
of the net assets of Safeco Intermediate-Term U.S. Government Fund in exchange
for a new "Investor Class" of shares of Pioneer America Income Trust at net
asset value, which will be established upon consummation of the merger. The
accompanying schedules of investments, statements of assets and liabilities and
the related statements of operations of Pioneer America Income Trust and Safeco
Intermediate-Term U.S. Government Fund have been combined as of and for their
most recent fiscal year ended December 31, 2003. Adjustments have been made to
expenses for duplicate services that would not have been incurred if the merger
took place on January 1, 2003. Following the acquisition, the Pioneer America
Income Trust will be the accounting survivor. All related acquisition costs will
be borne by the Advisors.
These pro forma financial statements and related notes should be read in
conjunction with the financial statements of Pioneer America Income Trust and
Safeco Intermediate-Term U.S. Government Fund included in their respective
annual reports to shareowners dated December 31, 2003.
2. Organization and Significant Accounting Policies
Pioneer America Income Trust (the Trust) is a Massachusetts statutory trust
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The investment objective of the Trust is to
provide a high level of current income consistent with preservation of capital
and prudent investment risk.
After the merger, the Trust will consist of five classes of shares - Class A,
Class B, Class C, Class R and Investor Class shares. Class R shares were first
publicly offered on April 1, 2003. Investor Class shares are being offered as
part of the acquisition. Shares of Class A, Class B, Class C, Class R and
Investor Class each represent an interest in the same portfolio of investments
of the Trust and have equal rights to voting, redemptions, dividends and
liquidation, 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, Class C and Class
R shareowners, respectively. There is no distribution plan for Investor Class
shares.
Each Fund's management has prepared their respective financial information using
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the pro forma financial statements, and the reported amounts of income, expenses
and gains and losses on investments during the reporting periods. Actual results
could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Trust, which are in conformity with those generally accepted in
the investment company industry:
-20-
A. Security Valuation
Security transactions are recorded as of trade date. 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 method are valued at their fair values as
determined by, or under the direction of the Trust's Board of Trustees. At
December 31, 2003, there were no securities fair valued. Principal amounts of
mortgage-backed securities are adjusted for monthly paydowns. Premiums and
discounts related to certain mortgage-backed securities are amortized or
accreted in proportion to the underlying monthly pay downs. All
discounts/premiums on debt securities are accreted/amortized for financial
reporting purposes. Interest income is recorded on the accrual basis. Temporary
cash investments are valued at amortized cost.
Gains and losses on sales of investments are calculated on the identified cost
method for both financial reporting and federal income tax purposes.
B. Federal Income Taxes
Each fund has previously elected to be taxed as a "regulated investment company"
under the Internal Revenue Code. After the acquisition, it will be 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 combined capital loss carryforward of $8,538,000 includes a net capital loss
carryforward of $1,398,000 from the merger with Safeco Intermediate-term U.S.
Government Fund, the full use of which may be limited.
C. Fund Shares
The Trust records sales and repurchases of its shares as of trade date. Pioneer
Funds Distributor, Inc. (PFD), the principal underwriter for the Trust and a
wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito
Italiano), earned $65,614 in underwriting commissions on the sale of Trust
shares for the year ended December 31, 2003.
D. Class Allocations
Distribution fees are calculated based on the average daily net asset value
attributable to Class A, Class B, Class C, Class R, and Investor Class shares of
the Trust, respectively. 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 5). Income, common expenses and realized and unrealized gains
and losses are calculated at the Trust level and allocated daily to each class
of shares based on the respective percentage of adjusted net assets at the
beginning of the day.
The Trust 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 Trust 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, Class R, and Investor Class shares can bear different transfer agent
and distribution fees.
E. Repurchase Agreements
With respect to repurchase agreements entered into by the Trust, the value of
the underlying securities (collateral), including accrued interest received from
counter parties, is required to be at least equal to or in excess of the value
of the repurchase agreement at the time of purchase. The collateral for all
repurchase agreements is held in safekeeping in the customer-only account of the
Trust's custodian, or sub custodians. The Trust's investment adviser, Pioneer
Investment Management, Inc. (PIM) is responsible for determining that the value
of the collateral remains at least equal to the repurchase price.
-21-
3. Capital Shares
The pro forma net asset value per share assumes the issuance of shares of the
Trust that would have been issued at December 31, 2003, in connection with the
proposed acquisition. The number of the shares assumed to be issued is equal to
the net asset value of Safeco Intermediate-Term U.S. Government Fund, as of
December 31, 2003, divided by the net asset value per share of the Investor
Class shares of the Trust as of December 31, 2003. The pro forma number of
shares outstanding (in thousands), by class, for the combined fund consist of
the following at December 31, 2003:
Shares of Additional Shares Total Outstanding
the Trust Assumed Issued Shares
Class of Shares Pre-Combination In Reorganization Post-Combination
- --------------- --------------- ----------------- ----------------
Class A 15,468 15,468
Class B 5,591 5,591
Class C 3,775 3,775
Class R 33 33
Investor Class - 7,492 7,492
-22-
4. Management Agreement
PIM manages the Trust's portfolio and is a wholly owned indirect subsidiary of
UniCredito Italiano. Management fees are calculated daily at the annual rate of
0.50% of the Trust's average daily net assets. PIM discontinued the Fund's
expense limitation on May 1, 2003. Prior to May 1, 2003, PIM had agreed not to
impose a portion of its management fee and to assume other operating expenses of
the Trust to the extent necessary to limit Class A expenses to 1.00% of the
average daily net assets attributable to Class A shares; the portion of the
Trust-wide expenses attributable to Class B, Class C and Class R shares were
reduced only to the extent that such expenses were reduced for Class A shares.
In addition, under the management and administration agreements, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Trust. At December 31, 2003, $158,222 was payable to
PIM related to management fees, administrative fees and certain other services,
and is included in due to affiliates.
5. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $77,973 in transfer agent
fees payable to PIMSS at December 31, 2003.
6. Distribution and Service Plans
The Trust adopted Plans of Distribution with respect to each class of shares
(Class A Plan, Class B Plan, Class C Plan, and Class R Plan) in accordance with
Rule 12b-1 of the Investment Company Act of 1940. Pursuant to the Class A Plan,
the Trust pays PFD a service fee of up to 0.25% of the Trust's average daily net
assets attributable to Class A shares in reimbursement of such expenditures to
finance activities primarily intended to result in the sale of Class A shares.
Pursuant to the Class B Plan and the Class C Plan, the Trust 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. Pursuant to the
Class R Plan, the Trust pays PFD 0.50% of the average daily net assets
attributable to Class R shares for distribution services. Included in due to
affiliates is $127,966 in distribution fees payable to PFD at December 31, 2003.
The Trust also has adopted a separate service plan for Class R shares (Service
Plan). The Service Plan authorizes the Trust to pay securities dealers, plan
administrators or other services organizations that agree to provide certain
services to retirement plans or plan participants holding shares of the Trust a
service fee of up to 0.25% of the Trust's daily net assets attributable to Class
R shares held by such plans.
In addition, redemptions of each class of shares (except Investor Class 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 one year of purchase. Class B shares that are redeemed within six 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%.
Redemptions of Class R shares within 18 months of purchase may be subject to a
CDSC of 1.00%. Proceeds from the CDSCs are paid to PFD. For the year ended
December 31, 2003, CDSCs in the amount of $383,960 were paid to PFD.
Investor Class shares will not be subject to shareholder servicing or
distribution fees. Investor Class shares will be converted to Class A shares 24
months after the date on which the acquisition is completed.
7. Expense Offset Arrangements
The Trust has entered into certain expense offset arrangements with PIMSS,
resulting in a reduction in the Trust's total expenses due to interest earned on
cash held by PIMSS. For the year ended December 31, 2003, the Trust's expenses
were reduced by $8,000 under such arrangements.
-23-
PART C
OTHER INFORMATION
PIONEER AMERICA INCOME TRUST
ITEM 15. INDEMNIFICATION
No change from the information set forth in Item 25 of the most recently filed
Registration Statement of Pioneer America Income Trust (the "Registrant") on
Form N-1A under the Securities Act of 1933 and the Investment Company Act of
1940 (File Nos. 33-20795 and 811-05516), as filed with the Securities and
Exchange Commission on April 29, 2004 (Accession No. 0001016964-04-000116),
which information is incorporated herein by reference.
(1)(a) Amended and Restated Declaration of Trust (1)
(1)(b) Amendment to Amended and Restated Declaration of Trust to (6)
establish Investor Class Shares
(2) By-Laws (2)
(3) Not applicable
(4) Form of Agreement and Plan of Reorganization (5)
(5) Reference is made to Exhibits (1) and (2) hereof
(6)(a) Management Contract (3)
(6)(b) Expense Limitation Agreement (6)
(7) Underwriting Agreement with Pioneer Funds Distributor, Inc. (3)
(8) Not applicable
(9) Custodian Agreement with Brown Brothers Harriman & Co. (4)
(10) Multiple Class Plan Pursuant to Rule 18f-3 (6)
(11) Opinion of Counsel (legality of securities being offered) (*)
(12) Form of opinion as to tax matters and consent (6)
(13)(a) Investment Company Service Agreement with Pioneering Services (4)
Corporation
(13)(b) Administration Agreement with Pioneer Investment Management, (4)
Inc.
(14) Consents of Independent Registered Public Accounting Firm (*)
(15) Not applicable
(16) Powers of Attorney (4)
(17)(a) Code of Ethics (4)
(17)(b) Form of Proxy Card (*)
(1) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 9 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-20795; 811-05516), as filed with the Securities and
Exchange Commission on April 27, 1995 (Accession no. 0000831120-95-000006).
(2) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 10 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-20795; 811-05516), as filed with the Securities and
Exchange Commission on April 22, 1996 (Accession no. 0000831120-96-000005).
(3) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 19 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-20795; 811-05516), as filed with the Securities and
Exchange Commission on May 1, 2002 (Accession no. 0000831120-02-000041).
(4) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 22 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-20795; 811-05516), as filed with the Securities and
Exchange Commission on April 29, 2004 (Accession no. 0001016964-04-000116).
(5) Filed herewith as Exhibit A to the Proxy Statement and Prospectus included
as Part A of this Registration Statement.
(6) Previously filed. Incorporated herein by reference from the exhibits filed
with Registrant's Initial Registration Statement on Form N-14 (File No.
333-118424), as filed with the Securities and Exchange Commission on August 20,
2004 (Accession no. 0001145443-04-001266).
(*) 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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
25th day of October, 2004.
Pioneer America Income Trust
By: /s/ Osbert M. Hood
------------------------------------
Osbert M. Hood
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
* Chairman of the Board, October 25, 2004
- -------------------------- Trustee, and President
John F. Cogan, Jr.
* Chief Financial Officer and October 25, 2004
- -------------------------- Treasurer
Vincent Nave
*
- --------------------------
Mary K. Bush Trustee
*
- --------------------------
Richard H. Egdahl Trustee
*
- --------------------------
Margaret B.W. Graham Trustee
/s/ Osbert M. Hood_
- --------------------------
Osbert M. Hood Trustee
*
- --------------------------
Marguerite A. Piret Trustee
*
- --------------------------
Steven K. West Trustee
*
- --------------------------
John Winthrop Trustee
* By: /s/ Osbert M. Hood October 25, 2004
--------------------------------
Osbert M. Hood, Attorney-in-Fact
EXHIBIT INDEX
The following exhibits are filed as part of this Registration Statement:
Exhibit No. Description
(11) Opinion of Counsel (legality of securities being offered)
(14) Consents of Independent Registered Public Accounting Firm
(17)(b) Form of Proxy Card