- ------------------------------------------------------------------------------------------------------------------------------------
Regions Morgan Keegan Select Core Equity
Fund Pioneer Fund
- ------------------------------------------------------------------------------------------------------------------------------------
investment grade convertible debt securities.
The fund invests in debt securities when
Pioneer believes they are consistent with the
fund's investment objective of reasonable
income and capital growth, to diversify the
fund's portfolio or for greater liquidity.
With respect to the investment strategies and
practices enumerated above, to the extent that
a percentage limitation is not specified, there
is no specific limit on the fund's ability to
engage in such strategy or practice.
- ------------------------------------------------------------------------------------------------------------------------------------
Cash management and To minimize potential losses and maintain Normally, the fund invests substantially all of
temporary investments liquidity to meet shareholder redemptions its assets to meet its investment objective.
during adverse market conditions, the fund The fund may invest the remainder of its
may temporarily depart from its principal assets in securities with remaining maturities
investment strategy by investing up to 100% of less than one year or cash equivalents, or
of the fund's assets in cash and cash may hold cash. For temporary defensive
equivalents, including short-term bank purposes, including during periods of unusual
obligations, repurchase agreements and other cash flows, the fund may depart from its
money market instruments and securities principal investment strategies and invest part
issued and/or guaranteed as to payment of or all of its assets in these securities or may
principal and interest by the U.S. government, hold cash. During such periods, the fund may
its agencies or instrumentalities. This may not be able to achieve its investment
cause the fund to temporarily fail to meet its objective. The fund may adopt a defensive
goal and forego greater investment returns for strategy when Pioneer believes securities in
the safety of principal. which the fund normally invests have
extraordinary risks due to political or
economic factors and in other
extraordinary circumstances.
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term trading Although the fund does not intend to invest for The fund usually does not trade for short-term
the purpose of seeking short-term profits, profits. The fund will sell an investment,
securities will be sold without regard to the however, even if it has only been held for a
length of time they have been held when MAM short time, if it no longer meets the fund's
believes it is appropriate to do so in light of investment criteria. If the fund does a lot of
the fund's investment goal. A higher portfolio trading, it may incur additional operating
turnover rate involves greater transaction expenses, which would reduce performance,
expenses which must be borne directly by the and could cause shareowners to incur a
fund (and thus, indirectly by its shareholders), higher level of taxable income or capital gains.
and impact fund performance. In addition, a
high rate of portfolio turnover may result in the
realization of larger amounts of net capital
gains that, when distributed to the fund's
shareholders, are taxable to them.
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45
Regions
Morgan
Keegan Select
Money Market Pioneer Cash
Fund Reserves Fund Combined
(period ended (period ended Pioneer Cash
November 30, December 31, Reserves Fund
2008) 2008) (Pro Forma)
------------- ------------- -------------
Shareholder transaction fees
(paid directly from your investment) Class A Class A Class A
Maximum sales charge (load) when you buy shares
as a percentage of offering price ................... None None None
Maximum deferred sales charge (load) as a
percentage of offering price or the amount you
receive when you sell shares, whichever is less ..... None None None
Annual Fund operating expenses (deducted from
fund assets) as a % of average daily net assets
Management Fee ....................................... 0.25% 0.40% 0.40%
Distribution and Service (12b-1) Fee ................. 0.15% 0.15% 0.15%
Other Expenses ....................................... 0.30% 0.18%(1) 0.14%(1)
Acquired Fund Fees and Expenses ...................... 0.01% 0.00% 0.00%
- ---------------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses ................. 0.71% 0.73% 0.69%
- ---------------------------------------------------------------------------------------------------------------------
Less: Fee Waiver and Expense Limitations ............. 0.00%(2) 0.00%(3) 0.00%(3)(4)
Net Expenses ......................................... 0.71% 0.73% 0.69%
- ---------------------------------------------------------------------------------------------------------------------
Regions
Morgan
Keegan Select
Money Market Pioneer Cash
Fund Reserves Fund Combined
(period ended (period ended Pioneer Cash
November 30, December 31, Reserves Fund
2008) 2008) (Pro Forma)
--------------- ------------- -------------
Shareholder transaction fees
(paid directly from your investment) Class I Class Y Class Y
Maximum sales charge (load) when you buy shares
as a percentage of offering price ................... None None None
Maximum deferred sales charge (load) as a
percentage of offering price or the amount you
receive when you sell shares, whichever is less ..... None None None
Annual Fund operating expenses (deducted from
fund assets) as a % of average daily net assets
Management Fee ....................................... 0.25% 0.40% 0.40%
Distribution and Service (12b-1) Fee ................. 0.00% 0.00% 0.00%
Other Expenses ....................................... 0.20% 0.12%(1) 0.08%(1)
Acquired Fund Fees and Expenses ...................... 0.01% 0.00% 0.00%
- ---------------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses ................. 0.46% 0.52% 0.48%
- ---------------------------------------------------------------------------------------------------------------------
Less: Fee Waiver and Expense Limitations ............. 0.00%(2) 0.00%(3) (0.03)%(3)(4)
Net Expenses ......................................... 0.46% 0.52% 0.45%
- ---------------------------------------------------------------------------------------------------------------------
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 total operating expenses
remain the same, and (e) with respect to the Pioneer Fund, Pioneer's
contractual expense limitation is in effect for year one. Pro forma expenses
are included assuming a Reorganization of the Funds. The examples are for
comparison purposes only and are not a representation of either Fund's actual
expenses or returns, either past or future.
Regions Morgan Keegan Combined Pioneer
Number of years Select Money Pioneer Cash Cash Reserves Fund
you own your shares Market Fund Reserves Fund (Pro Forma)
- ------------------- --------------------- ------------- ------------------
Class A -- with or without redemption
Year 1 ............................. $ 73 $ 75 $ 70
Year 3 ............................. $ 227 $ 233 $ 221
Year 5 ............................. $ 395 $ 406 $ 384
Year 10 ............................ $ 883 $ 906 $ 859
Class I/Y
Year 1 ............................. $ 47 $ 53 $ 46
Year 3 ............................. $ 148 $ 167 $ 151
Year 5 ............................. $ 258 $ 291 $ 266
Year 10 ............................ $ 579 $ 653 $ 601
- ----------
(1) "Other Expenses" do not include the extraordinary expenses incurred by the
Pioneer Fund to participate in the U.S. Treasury Department's Temporary
Guarantee Program for Money Market Funds (the "Program"). The Program is
described in detail later in this Proposal under the heading "Additional
Information." These expenses have been borne by the Fund without regard to
any expense limitation currently in effect. Unless extended by the
Treasury, the Program will expire on April 30, 2009. Assuming (i) the
Program is extended to September 18, 2009, (ii) the Fund elects to
participate in the extended Program, and (iii) the fee payable to the
Treasury for the extended period will be 0.015% of the Fund's net asset
value as of the close of business on September 19, 2008, then the effect
of the cost of the Program as reflected in the pro forma "Other Expenses,"
"Total Annual Fund Operating Expenses" and "Net Expenses" of the combined
Pioneer Fund would be as follows:
Class A Class Y
Other Expenses 0.17% 0.11%
Total Annual Fund Operating Expenses 0.72% 0.51%
Net Expenses 0.72% 0.48%
198
Any additional cost to participate in the entended Program will be borne by
the Fund without regard to any expense limitation then in effect for the Fund.
The fee to participate in the Program, if it is extended beyond April 30,
2009, is not known at this time and may be higher or lower than that
estimated.
(2) Effective January 27, 2009, MAM has agreed to waive fees and reimburse
expenses to the extent necessary to prevent a negative yield for each
class of shares of the fund. This undertaking is voluntary and may be
modified or discontinued by MAM at any time.
(3) Pioneer has agreed to limit fund expenses for any class of shares or waive
a portion of its management fee to maintain a net asset value of $1.00.
From time to time, Pioneer and its affiliates may limit the expenses of
one or more classes for the purpose of avoiding a negative yield or
increasing the Pioneer Fund's 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.
(4) Pioneer has contractually agreed to limit ordinary operating expenses to
the extent required to reduce fund expenses to 0.70% and 0.45% of the
average daily net assets attributable to Class A shares and Class Y
shares, respectively. Assuming the Reorganization is approved, these
expense limitations will be in effect for a period of two years after the
close of the Reorganization. There can be no assurance that Pioneer will
extend the expense limitations beyond such time.
Reasons for the Proposed Reorganization
The RMK Trustees believe that the proposed Reorganization is in the best
interests of the RMK Fund and its shareholders. The RMK Trustees considered the
following matters, among others, in approving this Proposal 11.
First, MAM, the investment adviser to the RMK Fund, informed the RMK Board
that engaging in the business of investment adviser to the RMK Funds is not a
core business that MAM intends to continue and that Regions would be conducting
a search for a buyer for MAM's mutual fund management business. After requests
for proposals were solicited, received and reviewed, MAM and Regions decided to
recommend to the RMK Board that the RMK Funds be reorganized into similar
mutual funds managed by Pioneer, as being in the best interest of shareholders
of each of the RMK Funds.
Second, the RMK Board considered that the pro forma net expense ratio of
the combined Pioneer Fund is expected to be the same or lower for each class of
shares of the combined Pioneer Fund as compared to the corresponding classes of
your RMK Fund. The current projected pro forma net expense ratios for the
combined Pioneer Fund's Class A and Class Y shares are anticipated to be 0.69%
and 0.45%, respectively, after giving effect to Pioneer's contractual expense
limitation with respect to Class A and Class Y shares, and the historical net
expense ratios for the corresponding classes of shares of your RMK Fund are
0.71% and 0.46%, respectively. In addition, the broader distribution
arrangements of the Pioneer Fund offer greater potential for further asset
growth and further reduced per share expenses.
Third, the RMK Board considered that Pioneer has contractually agreed to
limit ordinary operating expenses of the combined Pioneer Fund to the extent
required to reduce fund expenses to 0.70% and 0.45% of the average daily net
assets attributable to Class A shares and Class Y shares, respectively.
Assuming the shareholders of your RMK Fund approve the Reorganization, these
expense limitations will be in effect for the combined Pioneer Fund for a
period of two years from the Closing Date. There can be no assurance that
Pioneer will extend the expense limitations beyond such time. In addition,
Pioneer may limit the combined Pioneer 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. Assuming the shareholders of your RMK Fund approve the Reorganization,
this expense limitation will also be in effect for the combined Pioneer Fund.
These expense limitation policies are voluntary and temporary and may be
revised or terminated by Pioneer at any time without notice.
Fourth, the reputation, financial strength, resources and capabilities of
Pioneer will benefit RMK Fund shareholders. At December 31, 2008, Pioneer
managed $49 billion in assets. Pioneer is an indirect, wholly owned subsidiary
of UniCredit 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
December 31, 2008, assets under management of the group were approximately $206
billion worldwide. Shareholders of your RMK 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. As of December 31,
2008, the Pioneer family of mutual funds offers over 75 funds, including
domestic and international equity and fixed income funds and money market funds
that will be available to your RMK Fund's shareholders through exchanges. In
addition, your RMK Fund may reduce the level of its operational expenses for
administrative, compliance and portfolio management services if it becomes part
of a large mutual fund complex.
Fifth, the substantially larger size of the combined Pioneer Fund will
offer greater opportunity for diversification of the investment portfolio,
which should help to reduce risks and provide benefits to the shareholders of
the Fund from the long-term economies of scale that may result from
consummation of the Reorganization.
199
of the Reorganization. You should consult your tax adviser for the particular
tax consequences to you of the transaction, including the applicability of any
state, local or foreign tax laws.
VOTING RIGHTS AND REQUIRED VOTE
Each share of each RMK Fund is entitled to one vote. A quorum is required
to conduct business at the meeting. With respect to each RMK Fund, the presence
in person or by proxy of more than 50% of the total number of outstanding
shares of the RMK Fund entitled to vote at the meeting will constitute a quorum
with respect to the RMK Fund. A favorable vote of more than fifty percent of
the outstanding shares of the applicable RMK Fund is required to approve each
Proposal.
The table below shows how shares will be treated for the purposes of
quorum and voting requirements.
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Quorum Voting
- ------------------------------------------------------------------------------------------------------------------------------------
In General All shares "present" in person or by proxy are Shares "present" in person will be voted in
counted toward a quorum. person at the meeting. Shares present by
proxy will be voted in accordance
with instructions.
- ------------------------------------------------------------------------------------------------------------------------------------
Signed Proxy with no Voting Considered "present" at meeting for purposes Voted "for" the Proposal.
Instruction (other than Broker of quorum.
Non-Vote)
- ------------------------------------------------------------------------------------------------------------------------------------
Broker Non-Vote (where the Considered "present" at meeting for purposes Broker non-votes do not count as a vote "for"
underlying holder had not of quorum. the Proposal and have the same effect as a
voted and the broker does not vote "against" the Proposal.
have discretionary authority to
vote the shares)
- ------------------------------------------------------------------------------------------------------------------------------------
Signed Proxy with Vote to Considered "present" at meeting for purposes Abstentions do not constitute a vote "for" the
Abstain of quorum. Proposal and have the same effect as a vote
"against" the Proposal.
- ------------------------------------------------------------------------------------------------------------------------------------
If the required approval of shareholders of an RMK Fund is not obtained,
the meeting may be adjourned as to that RMK Fund as more fully described in
this Proxy Statement/Prospectus, and the RMK Fund will continue to engage in
business as a separate mutual fund and the RMK Board will consider what further
action may be appropriate.
COMPARISON OF DELAWARE STATUTORY TRUST AND MASSACHUSETTS BUSINESS TRUST
Although federal law, and particularly the 1940 Act, regulates many of the
aspects of the governance of a mutual fund, some state laws apply because each
mutual fund also is organized as an entity under state law. Each of the RMK
Funds is a series of a Massachusetts business trust. Each of the Pioneer Funds
is a Delaware statutory trust or a series thereof. The federal laws governing
mutual funds apply to both the RMK Funds and the Pioneer Funds. However, there
are differences between Delaware state law and Massachusetts state law, and
shareholders should consider these differences when considering each Proposal.
The following is a summary of the principal differences between Delaware
statutory trusts and Massachusetts business trusts.
A fund organized as a Massachusetts business trust is governed by its
declaration of trust or similar instrument. Massachusetts law allows the
trustees of a business trust to set the terms of a fund's governance in its
declaration. All power and authority to manage the fund and its affairs
generally reside with the trustees, and shareholder voting and other rights are
limited to those provided to the shareholders in the declaration. The
flexibility inherent to the Massachusetts business trust has led to it becoming
a common form of organization for mutual funds. That flexibility also means
that the Massachusetts business trust law may be open to interpretation
although, in resolving such matters, courts may look by analogy to
Massachusetts corporate law.
A fund organized as a Delaware statutory trust, on the other hand, is
governed both by the Delaware Statutory Trust Act (the "Delaware Act") and the
fund's governing instrument. For a Delaware statutory trust, unlike a
Massachusetts business trust, the law specifically addresses many aspects of
corporate governance. The body of Delaware law on the topic is consequently
more detailed than in Massachusetts. This detail provides somewhat clearer
guidelines as to the rights and obligations of the trust, trustees, and
shareholders.
206
Under the Delaware Act, shareholders generally are shielded from personal
liability for the trust's debts or obligations to the same extent a shareholder
is shielded from a corporation's debts. Shareholders of a Massachusetts
business trust, on the other hand, are shielded only to the extent provided in
the declaration of trust. The declaration of trust for each Pioneer Fund
provides that shareholders are not personally liable for the obligations of the
Fund and requires the Fund to indemnify a shareholders against liability
arising solely from the shareholder's ownership of shares in the Fund. The
declaration of trust for each Pioneer Fund also provides that the Fund will
assume the defense of any claim against a shareholder for personal liability at
the request of the shareholder. The declaration of trust for each RMK Fund
contains similar provisions.
The Delaware Act permits a shareholder to bring a derivative action on
behalf of the trust if the trustees refuse to do so, but that power can be
restricted by such standards and restrictions as are set forth in the
declaration of trust. The declaration of trust for each Pioneer Fund sets forth
a detailed process for the bringing of derivative actions on behalf of the Fund
by shareholders. Under the declaration of trust for each Pioneer Fund, prior to
bringing a derivative action, a demand by three unrelated shareholders must
first be made on the Fund's Trustees. The declaration of trust for each Pioneer
Fund details various information, certifications, undertakings and
acknowledgements that must be included in the demand. Massachusetts courts
generally have required shareholders of business trusts to follow the
provisions of the Massachusetts Business Corporation Act with respect to
derivative lawsuits, meaning that derivative lawsuits are permitted but can be
dismissed by the decision of an independent court appointee, by a vote of a
majority of the outstanding shares, by a vote of a majority of the independent
trustees constituting a quorum, or by a vote of a committee established by the
independent trustees.
Both a Delaware statutory trust and a Massachusetts business trust can
limit a trustee's personal liability in the declaration of trust. The
declaration of trust for each Pioneer Fund extends to Trustees, officers and
employees of the Fund the fullest protection from liability that the law allows
and, in addition, requires the Fund to indemnify them to the extent permitted
by law against liability and against all expenses reasonably incurred in
connection with any claim, action, suit or proceeding in which the Trustee,
officer or employee becomes involved as a party or otherwise by virtue of being
or having been such a Trustee, director, officer, employee, or agent and
against amounts paid or incurred in settlement thereof. The declaration of
trust for each RMK Fund contains a similar indemnification provision. The 1940
Act currently provides that no officer or director shall be protected from
liability to the Fund or shareholders for misfeasance, bad faith, gross
negligence, or reckless disregard of the duties of office.
Neither a Delaware statutory trust nor a Massachusetts business trust is
required to hold shareholder meetings or get shareholder approval for certain
actions unless the declaration of trust requires it. The declaration of trust
of each Pioneer Fund provides for shareholder voting as required by the 1940
Act or other applicable laws but otherwise permits, consistent with Delaware
law, actions by the Board without seeking the consent of shareholders. The 1940
Act requires a vote of shareholders on matters that Congress has determined may
have a material effect on shareholders and their investments. For example,
shareholder consent is required to approve new investment advisory agreements
in most cases, increases in advisory fees or 12b-1 fees, changes to fundamental
investment policies, election of trustees in certain circumstances, and the
merger or reorganization of a fund in certain circumstances, particularly where
the merger or consolidation involves an affiliated party. The declaration of
trust of each RMK Fund specifically provides that shareholders have the power
to vote (i) for the election or removal of Trustees, (ii) to approve new
investment advisory or sub-investment advisory agreement, (iii) to the same
extent as the shareholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should be brought or
maintained derivatively or as a class action on behalf of the Trust or the
shareholders, and (iv) with respect to such additional matters relating to the
Trust as may be required by applicable law. In addition, the declaration of
trust of each RMK Fund provides that shareholders have the power to vote with
respect to the amendment of the declaration of trust, except for any amendments
that change the name of the Trust, and certain amendments with respect to the
establishment and designation of any series or class of shares of the Trust,
which may be made without shareholder approval. In contrast, subject to the
limitations imposed by the 1940 Act, the declaration of trust of each Pioneer
Fund authorizes the Trustees to amend the declaration without shareholder
approval.
FUNDAMENTAL INVESTMENT POLICIES OF THE FUNDS
Each Fund has adopted certain fundamental investment policies which may
not be changed without the affirmative vote of the holders of a "majority of
the outstanding voting securities" (as defined in the 1940 Act) of the Fund.
Under the 1940 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 RMK Fund represented at the meeting, if at least 50% of all
outstanding shares of the RMK Fund are represented at the meeting, or (ii) 50%
or more of the outstanding shares of the RMK Fund entitled to vote at the
meeting. The following table lists the fundamental investment restrictions for
each RMK Fund and each Pioneer Fund. For a more complete discussion of each
Fund's other investment policies and fundamental and non-fundamental investment
restrictions, please see the statement of additional information for this Proxy
Statement/Prospectus.
207
- ------------------------------------------------------------------------------------------------------------------------------------
RMK Funds Pioneer Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value The net asset value for each class of an RMK Fund's Each Pioneer Fund's net asset value is the value
shares is computed by subtracting the liabilities from of its securities plus any other assets minus its
the total assets attributable to each class of shares and operating expenses and other liabilities. Each
dividing the result by the number of shares outstanding. Pioneer Fund calculates a net asset value for each
Each RMK Fund calculates its net asset value as of the class of shares every day the NYSE is open when
close of regular trading (approximately 4:00 p.m. regular trading closes (normally 4:00 p.m. Eastern
Eastern Time, or any earlier NYSE closing time that day) time). Pioneer Treasury Reserves Fund and
on each day the NYSE is open for trading. Pioneer Cash Reserves Fund also calculate a net
asset value for each class of shares at 2:00 p.m.,
Eastern time, every day the NYSE is open.
You buy or sell shares at the share price. When
you buy Class A shares, you pay an initial sales
charge unless you qualify for a waiver or reduced
sales charge. When you call Class C shares, you
may pay a contingent deferred sales charge
depending on how long you have owned your
shares.
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL INFORMATION
Indemnification
Regions has separately agreed with the RMK Trust that for a period of six
years, if indemnification from the assets of the RMK Funds or liability
insurance is not otherwise available to current and former Independent RMK
Trustees, Regions will indemnify and hold them harmless to the same extent as
such Trustees would have been indemnified under the RMK Trust's declaration of
trust and bylaws up to an aggregate amount of $10 million.
Section 15(f) Safe Harbor
MAM and Pioneer have agreed to use their commercially reasonable efforts
to assure compliance with the conditions of Section 15(f) of the 1940 Act.
Section 15(f) provides a non-exclusive safe harbor for an investment adviser or
any affiliated persons thereof to receive any amount or benefit in connection
with a sale of securities of, or any other interest in, such adviser which
results in an assignment of an investment advisory contract with an investment
company as long as two conditions are met. First, no "unfair burden" may be
imposed on the investment company as a result of the transaction, or any
express or implied terms, conditions or understandings applicable thereto. As
defined in the 1940 Act, the term "unfair burden" includes any arrangement
during the two-year period after the date on which such transaction occurs
whereby the investment adviser (or predecessor or successor adviser) or any
interested person of any such adviser receives or is entitled to receive any
compensation, directly or indirectly, from the investment company or its
security holders (other than fees for bona fide investment advisory or other
services), or from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of the investment company
(other than bona fide ordinary compensation as principal underwriter of the
investment company). The RMK Trustees considered that RMK Fund shareholders
would experience sales loads in certain circumstances The RMK Trustees were
advised that MAM and Pioneer were not aware of any circumstances relating to
the Reorganizations that might result in the imposition of such an "unfair
burden" on any RMK Fund as a result of the transaction between Pioneer and MAM.
Second, during the three-year period immediately following the transaction, at
least 75% of an investment company's board of directors must not be "interested
persons" of the investment adviser or the predecessor investment adviser within
the meaning of the 1940 Act. The Pioneer Funds' Boards of Trustees will satisfy
this condition at the time of the Reorganizations.
Purchase of Certain Securities by Regions
Currently, each of Regions Morgan Keegan Select Mid Cap Value Fund,
Regions Morgan Keegan Select Balanced Fund, Regions Morgan Keegan Select Mid
Cap Growth Fund, Regions Morgan Keegan Select Growth Fund, Regions Morgan
Keegan Select Fixed Income Fund, and Regions Morgan Keegan Select Limited
Maturity Fixed Income Fund (together, the "Securities Lending Funds")
participate in a securities lending program (the "Program") administered by The
Bank of New York Mellon Corporation ("BNY Mellon"). As part of this program,
BNY Mellon facilitates the lending of securities owned by the Securities
Lending Funds to third parties. In connection with the Program,
219
the Securities Lending Funds are investors in BNY Institutional Cash Reserves
Fund (the "BNY Fund"), an unregistered money market investment fund managed by
the Bank of New York Mellon. The BNY Fund provides a short-term investment
vehicle for the cash collateral received by the Securities Lending Funds and
other participants in securities lending transactions under the Program.
The fixed-income securities currently held by the BNY Fund include (i) a
promissory note issued by Whistlejacket Capital Ltd. or certain of its
affiliates (as successor-in-interest to White Pine Finance, LLC), due March 12,
2008 (the "Whistlejacket Security") and (ii) certain floating rate debt
securities of Lehman Brothers Holdings Incorporated, maturing on October 14,
2008 and October 22, 2008, respectively (the "Lehman Securities" and, together
with the Whistlejacket Security, the "Securities"). Each issuer of the
Securities has filed for bankruptcy protection and thereby defaulted under the
terms of its respective Security. Consequently, the market value of each
Security has decreased substantially below its par value and the Securities
have become substantially illiquid.
In response to these events, BNY Mellon has undertaken to provide certain
limited capital support for the BNY Fund or, alternatively, directly to each
investor in the BNY Fund (each, an "Investor") in respect of the Whistlejacket
Security, and to offer certain limited capital support in respect of the Lehman
Securities, in each case to the extent of such Investor's indirect,
proportionate interest in each Security, subject to certain terms and
conditions. In respect of the Whistlejacket Security, BNY Mellon has undertaken
to provide capital support such that the Securities Lending Funds would recover
approximately 100% of their respective proportionate share of the par value of
the Whistlejacket Security (the "Whistlejacket Support"). In respect of the
Lehman Securities, BNY Mellon has undertaken to provide capital support such
that the Securities Lending Funds would recover at least 80% of their
respective proportionate share of the par value of the Lehman Securities (the
"Lehman Support").
The Pioneer Funds do not participate in the Program. For that reason, the
Securities Lending Funds will exit the Program prior to the Reorganizations and
redeem their interests in the BNY Fund for cash, except in respect of that
portion of the net asset value redeemed that represents the Whistlejacket
Security and the Lehman Securities. These assets will be redeemed for in-kind
proceeds consisting of a proportionate share of the Whistlejacket Security and
the Lehman Securities pursuant to the terms of the Whistlejacket Support and
the Lehman Support.
Under the terms of the Lehman Support, the Lehman Support will be lost
immediately upon the Securities Lending Funds' withdrawal from the Program. In
the case of the Whistlejacket Security, while the Whistlejacket Support
continues after withdrawal from the Program (subject to certain terms and
conditions), the benefit of such support in these circumstances effectively
would not, because Pioneer has informed Regions and MAM that the Pioneer Funds
would not accept the Whistlejacket Security as part of the Reorganizations.
Pioneer also has informed Regions and MAM that the Pioneer Funds would not
accept the Lehman Securities as part of the Reorganizations.
In order to make the impact of withdrawing from the Program neutral to the
Securities Lending Funds, Regions has undertaken to purchase the Securities
from the Securities Lending Funds at such time as such Securities are delivered
to the Securities Lending Funds in connection with the Securities Lending
Funds' withdrawal from the Program, on terms that would give the Securities
Lending Funds current value equal to or better than the realizable value of the
Securities as accompanied by the Whistlejacket Support and Lehman Support.
Specifically, Regions will purchase each Securities Lending Fund's
proportionate share of the Whistlejacket Security at 100% of par value, and
each Securities Lending Fund's proportionate share of the Lehman Securities at
80% of par value. Regions also has undertaken that if that if the aggregate
amount ultimately realized by Regions in respect of the Securities is more than
the sum of (a) any purchase price paid to a Securities Lending Fund by Regions
for such Securities and (b) any income due on such Securities from and after
the date that Regions purchase such Securities from a Securities Lending Fund,
at the rate(s) specified in the applicable Securities, Regions will remit such
excess amount (after deducting all reasonable expenses, if any, incurred in
connection with the recovery) promptly to the Securities Lending Fund.
Notwithstanding anything to the contrary herein, the foregoing obligation of
Regions to purchase the Securities will be conditioned upon the receipt from
the SEC of "no-action" or other appropriate relief under the 1940 Act that
would permit such purchase of the Securities, provided that, in the event that
such relief is not forthcoming, Regions will use its best efforts to make
alternative arrangements designed to provide equivalent value to each
Securities Lending Fund consistent with applicable laws and regulations.
Investment Adviser
Pioneer serves as the investment adviser to each Pioneer Fund. Pioneer
oversees each Pioneer Fund's operations and is responsible for the day-to-day
management of each Fund's portfolio. Pioneer is an indirect, wholly owned
subsidiary of UniCredit 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 December 31, 2008, assets under management were approximately
$206 billion worldwide, including over $50 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.
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