OMB APPROVAL
OMB Number: 3235-0570
Expires: September 30, 2007
Estimated average burden
hours per response.....19.4
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21460
Pioneer Series Trust II
(Exact name of registrant as specified in charter)
60 State Street, Boston, MA 02109
(Address of principal executive offices) (ZIP code)
Dorothy E. Bourassa, Pioneer Investment Management, Inc.,
60 State Street, Boston, MA 02109
(Name and address of agent for service)
Registrant's telephone number, including area code: (617) 742-7825
Date of fiscal year end: December 31
Date of reporting period: January 1, 2005 through December 31, 2005
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO SHAREOWNERS.
- --------------------------------------------------------------------------------
PIONEER
-------
AMPAC
GROWTH
FUND*
Annual
Report
12/31/05
[LOGO]PIONEER
Investments(R)
*Formerly Pioneer Papp America-Pacific Rim Fund. Name change effective May 1,
2005.
Table of Contents
- --------------------------------------------------------------------------------
Letter to Shareowners 1
Portfolio Summary 2
Prices and Distributions 3
Performance Update 4
Comparing Ongoing Fund Expenses 8
Portfolio Management Discussion 10
Schedule of Investments 14
Financial Statements 18
Notes to Financial Statements 26
Report of Independent Registered Public Accounting Firm 33
Factors Considered by the Independent Trustees in Approving
the Management Contract 34
Trustees, Officers and Service Providers 40
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
LETTER TO SHAREOWNERS 12/31/05
- --------------------------------------------------------------------------------
Dear Shareowner,
- --------------------------------------------------------------------------------
As 2005 came to a close, U.S. investors looked back on a year of major
challenges, though without much change in the market indices. The war in Iraq
continued, oil prices soared, then dropped, while short-term interest rates
ratcheted steadily higher and intermediate and long-term rates stayed about the
same. Natural disasters also threatened economic expansion. Still, the economy
moved forward as corporate earnings grew. The hope of a growing economy was not
reflected by the small gains or losses in the major U.S. market indices. Among
capitalization ranges, midcap issues made the most headway. Bond prices held
firm and yields remained low, perhaps a sign that the Federal Reserve Board's
interest rate hikes would temper the inflationary pressures induced by a
growing economy.
Among the nagging issues facing the U.S. economy in 2006 is the potential
impact of high energy prices on consumer spending and corporate profits. Also
unknown at this time is whether the Federal Reserve Board will continue to
raise interest rates under its new chairman, Ben Bernanke, who stated his top
priority will be to maintain continuity.
Rising interest rates and improving business conditions made U.S. holdings more
attractive to foreign investors, helping to strengthen the dollar versus the
euro and other key currencies. Investors in many foreign markets enjoyed
stellar returns. Double-digit gains were widespread in Europe, Asia and Latin
America. Even the long-dormant Japanese economy began to stir, while emerging
markets, especially those rich in natural resources, fed global economic
growth.
The disparity of returns among countries and sectors underscores the importance
for investors to maintain a well-diversified portfolio. We believe this may be
a good time for investors to review their holdings with their advisor and
determine if they reflect the wide range of opportunities that exist across
many asset classes, as last year's results make clear.
Investing for income with Pioneer
Adding one or more of Pioneer's income-oriented funds to your investment
program may help improve your portfolio's overall balance. As a premier
provider of fixed-income investments, Pioneer offers you a broad selection of
actively managed bond funds to help meet a variety of investment needs. Pioneer
also offers income-oriented equity funds, each managed using a value-oriented,
total return investment philosophy that seeks enhanced return potential and
lower volatility through active diversification. Your financial advisor can
help you select among Pioneer's fixed-income choices.
Respectfully,
/s/ Osbert M. Hood
Osbert M. Hood
President
Pioneer Investment Management, Inc.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Before investing consider the fund's investment objectives, risks, charges and
expenses. Contact your advisor or Pioneer Investments for a prospectus
containing this information. Read it carefully.
1
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY 12/31/05
- --------------------------------------------------------------------------------
Portfolio Diversification
- --------------------------------------------------------------------------------
(As a percentage of total investment portfolio)
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
U.S. Common Stocks 95.1%
Depositary Receipts for International Stocks 4.9%
Sector Distribution
(As a percentage of equity holdings)
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Information Technology 30.1%
Industrials 22.6%
Health Care 17.3%
Financials 13.8%
Consumer Staples 8.8%
Consumer Discretionary 5.0%
Energy 2.4%
10 Largest Holdings
- --------------------------------------------------------------------------------
(As a percentage of equity holdings)
1. State Street Corp. 5.98%
2. Medtronic, Inc. 5.76
3. Emerson Electric Co. 5.75
4. William Wrigley Jr. Co. 5.46
5. T. Rowe Price Associates, Inc. 5.36
6. General Electric Co. 5.31
7. WPP Group Plc 4.85
8. 3M Co. 4.70
9. Stryker Corp. 4.56
10. Intel Corp. 4.42
This list excludes temporary cash and derivative instruments. Portfolio
holdings will vary for other periods.
2
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
Net Asset Value Per Share
- --------------------------------------------------------------------------------
Class 12/31/05 12/31/04
- ------- ---------- ---------
A $16.08 $15.97
B $15.87 $15.93
C $15.87 $15.92
R $15.64 $15.85
Distributions Per Share
- --------------------------------------------------------------------------------
1/1/05 - 12/31/05
-------------------------------------------
Net
Investment Short-Term Long-Term
Class Income Capital Gains Capital Gains
- ------- ------------ --------------- --------------
A $0.0034 $ -- $ --
B $ -- $ -- $ --
C $ -- $ -- $ --
R $ -- $ -- $ --
- --------------------------------------------------------------------------------
INDEX DEFINITIONS
- --------------------------------------------------------------------------------
The Russell 1000 Growth Index measures the performance of large-cap U.S. growth
stocks. Companies in this index tend to exhibit higher price-to-book and
price-to-earnings ratios, lower dividend yields, and higher forecasted growth
values than the Value universe.
The index defined here pertains to the Value of $10,000 Investment charts shown
on pages 4, 5, 6 and 7.
3
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS A SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer AmPac Growth Fund at public offering price, compared
to that of the Russell 1000 Growth Index.
- ------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
- ------------------------------------------------------------
Net Asset Public
Value Offering
Period (NAV) Price (POP)
Life-of-Class
(3/14/97) 6.37% 5.66%
5 Years -2.38 -3.53
1 Year 0.71 -5.06
- ------------------------------------------------------------
Pioneer AmPac Growth Fund Russell 1000 Growth Index
------------------------- -------------------------
3/97 9425 10000
12/97 11730 12979
15052 18003
12/99 18751 23972
18876 18596
12/01 16158 14799
12866 10672
12/03 16451 13847
16608 14720
12/05 16726 15494
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
NAV results represent the percent change in net asset value per share. Returns
would have been lower had sales charges been reflected. POP returns reflect
deduction of maximum 5.75% sales charge. All results are historical and assume
the reinvestment of dividends and capital gains. Other share classes are
available for which performance and expenses will differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
The performance of each class of the Fund from March 14, 1997 to February 20,
2004 is the performance of Papp America-Pacific Rim Fund's single class, which
has been restated to reflect any applicable sales charges, Rule 12b-1 fees and
service fees (but not other differences in expenses). This adjustment has the
effect of reducing the previously reported performance of Papp America-Pacific
Rim Fund. Pioneer AmPac Growth Fund was created through the reorganization of
predecessor Papp funds on February 21, 2004.
4
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS B SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer AmPac Growth Fund, compared to that of the Russell
1000 Growth Index.
- ------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
- ------------------------------------------------------------
If If
Period Held Redeemed
Life-of-Class
(3/14/97) 5.55% 5.55%
5 Years -3.18 -3.18
1 Year -0.38 -4.36
- ------------------------------------------------------------
Pioneer AmPac Growth Fund Russell 1000 Growth Index
------------------------- -------------------------
3/97 10000 10000
12/97 12380 12979
15762 18003
12/99 19489 23972
19468 18596
12/01 16545 14799
13069 10672
12/03 16587 13847
16628 14720
12/05 16566 15494
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
"If Held" results represent the percent change in net asset value per share.
Returns would have been lower had sales charges been reflected. "If redeemed"
returns reflect the deduction of applicable contingent deferred sales charge
(CSDC). Effective December 1, 2004, the period during which a CDSC is applied to
withdrawals was shortened to 5 years. The maximum CDSC for class B shares
continues to be 4%. For more complete information, please see the prospectus for
details. Note: Shares purchased prior to December 1, 2004 remain subject to the
CDSC in effect at the time you purchased those shares. For performance
information for shares purchased prior to December 1, 2004, please visit
www.pioneerfunds.com/bshares.
All results are historical and assume the reinvestment of dividends and capital
gains. Other share classes are available for which performance and expenses will
differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
The performance of each class of the Fund from March 14, 1997 to February 20,
2004 is the performance of Papp America-Pacific Rim Fund's single class, which
has been restated to reflect any applicable sales charges, Rule 12b-1 fees and
service fees (but not other differences in expenses). This adjustment has the
effect of reducing the previously reported performance of Papp America-Pacific
Rim Fund. Pioneer AmPac Growth Fund was created through the reorganization of
predecessor Papp funds on February 21, 2004.
5
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS C SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer AmPac Growth Fund, compared to that of the Russell
1000 Growth Index.
- -----------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
- -----------------------------------------------------------
If If
Period Held Redeemed
Life-of-Class
(3/14/97) 5.55% 5.55%
5 Years -3.18 -3.18
1 Year -0.31 -0.31
- -----------------------------------------------------------
Pioneer AmPac Growth Fund Russell 1000 Growth Index
------------------------- -------------------------
3/97 10000 10000
12/97 12380 12979
15762 18003
12/99 19489 23972
19468 18596
12/01 16545 14799
13069 10672
12/03 16587 13847
16618 14720
12/05 16566 15494
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
Class C shares held for less than one year are also subject to a 1% contingent
deferred sales charge (CDSC). The performance of Class C shares does not reflect
the 1% front-end sales charge in effect prior to February 1, 2004. If you paid a
1% sales charge, your returns would be lower than those shown above. "If Held"
results represent the percent change in net asset value per share. Returns would
have been lower had sales charges been reflected. All results are historical and
assume the reinvestment of dividends and capital gains. Other share classes are
available for which performance and expenses will differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
The performance of each class of the Fund from March 14, 1997 to February 20,
2004 is the performance of Papp America-Pacific Rim Fund's single class, which
has been restated to reflect any applicable sales charges, Rule 12b-1 fees and
service fees (but not other differences in expenses). This adjustment has the
effect of reducing the previously reported performance of Papp America-Pacific
Rim Fund. Pioneer AmPac Growth Fund was created through the reorganization of
predecessor Papp funds on February 21, 2004.
6
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS R SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer AmPac Growth Fund, compared to that of the Russell
1000 Growth Index.
- -----------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
- -----------------------------------------------------------
If If
Period Held Redeemed
Life-of-Class
(3/14/97) 5.58% 5.58%
5 Years -3.30 -3.30
1 Year -1.33 -1.33
- -----------------------------------------------------------
Pioneer AmPac Growth Fund Russell 1000 Growth Index
------------------------- -------------------------
3/97 10000 10000
12/97 12402 12979
15834 18003
12/99 19628 23972
19660 18596
12/01 16748 14799
13273 10672
12/03 16886 13847
16844 14720
12/05 16621 15494
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The performance of Class R shares for the period prior to the commencement of
operations of Class R shares on April 1, 2003 is based on the performance of
Class A shares, reduced to reflect the higher distribution and service fees of
Class R shares. For the period after April 1, 2003, the actual performance of
Class R shares is reflected, which performance may be influenced by the smaller
asset size of Class R shares compared to Class A shares. The performance of
Class R shares does not reflect the 1% CDSC that was in effect prior to July 1,
2004. Class R shares are not subject to sales charges and are available for
limited groups of eligible investors, including institutional investors. All
results are historical and assume the reinvestment of dividends and capital
gains. Other share classes are available for which performance and expenses will
differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
The performance of each class of the Fund from March 14, 1997 to February 20,
2004 is the performance of Papp America-Pacific Rim Fund's single class, which
has been restated to reflect any applicable sales charges, Rule 12b-1 fees and
service fees (but not other differences in expenses). This adjustment has the
effect of reducing the previously reported performance of Papp America-Pacific
Rim Fund. Pioneer AmPac Growth Fund was created through the reorganization of
predecessor Papp funds on February 21, 2004.
7
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
COMPARING ONGOING FUND EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Fund, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Fund expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds. The example is based on an investment
of $1,000 at the beginning of the Fund's latest six-month period and held
throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer AmPac Growth Fund
Based on actual returns from July 1, 2005 through December 31, 2005
Share Class A B C R
- ------------------------------- ------------ ------------ ------------ ------------
Beginning Account Value $1,000.00 $1,000.00 $1,000.00 $1,000.00
On 7/1/05
Ending Account Value $1,054.00 $1,056,08 $1,048.26 $1,039.84
On 12/31/05
Expenses Paid During Period* $ 6.47 $ 12.02 $ 11.51 $ 15.58
* Expenses are equal to the Fund's annualized expense ratio of 1.25%, 2.32%,
2.22% and 3.01% for Class A, Class B, Class C and Class R shares,
respectively, multiplied by the average account value over the period,
multiplied by 184/365 (to reflect the one-half year period).
8
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the
5% hypothetical examples that appear in the shareholder reports of the other
funds.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
Expenses Paid on a $1,000 Investment in Pioneer AmPac Growth Fund
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2005 through December 31, 2005
Share Class A B C R
- ------------------------------- ------------ ------------ ------------ ------------
Beginning Account Value $1,000.00 $1,000.00 $1,000.00 $1,000.00
On 7/1/05
Ending Account Value $1,018.90 $1,013.51 $1,013.96 $1,009,93
On 12/31/05
Expenses Paid During Period* $ 6.36 $ 11.77 $ 11.32 $ 15.35
* Expenses are equal to the Fund's annualized expense ratio of 1.25%, 2.32%,
2.22% and 3.01% for Class A, Class B, Class C and Class R shares,
respectively, multiplied by the average account value over the period,
multiplied by 184/365 (to reflect the one-half year period).
9
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05
- --------------------------------------------------------------------------------
During 2005, the market had to contend with another year of dramatic increases
in oil prices and a constantly increasing Fed funds rate courtesy of the
Federal Reserve. Many growth stocks remained out of favor, and companies that
experienced even minor disappointments were punished by the market. Despite the
challenging market, many fund holdings prospered - helped in large part by
their unique market niche or product superiority - as Rosellen Papp, a member
of the firm's management team, discusses in the following interview:
Q: How did the Fund perform during fiscal 2005?
A: The Fund's Class A shares rose 0.71% at net asset value for the 12 months
ended December 31, 2005. By comparison, the Standard & Poor's 500 Index and
the Russell 1000 Growth Index posted returns of 4.91% and 5.26%,
respectively, for the same period. The average return of the 687
Large-Capitalization Growth Funds tracked by Lipper, Inc., the Fund's peer
group, was 6.20%. (Lipper Inc. is an independent firm that measures mutual
fund performance.)
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent
month-end performance results. Current performance may be lower or higher
than the performance data quoted.
The performance data quoted represents past performance, which is no
guarantee of future results. Investment return and principal value will
fluctuate, and shares, when redeemed, may be worth more or less than their
original cost.
The Fund's underperformance relative to the indexes and its Lipper
universe centered around five companies in particular that experienced
challenges. Estee Lauder encountered much more competition in their
fragrance business than anticipated. We were concerned that the problems
could be longer term in nature and sold the position. The pharmaceutical
giant Pfizer has been struggling since 2004 when safety concerns about
several competitors' blockbuster drugs cast doubt on its hugely successful
drug, Celebrex. More recently, investors have become concerned about the
sales of its cholesterol-reducing drug Lipitor, which could fall in
response to the availability of lower cost alternatives. With Pfizer's
earnings potential uncertain, we sold it and redeployed the proceeds of
the sale to other healthcare related companies with more predictable
prospects.
10
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IBM started the year with a slight revenue and earnings disappointment
relative to analysts' expectations. The marketplace punished the stock as
some analysts concluded that IBM tried to "hide" the disappointment by
changing some accounting policies, including options expensing. We believe
that this is a temporary disappointment. We continue to think the company
is inexpensively priced and therefore have retained it in the portfolio.
Electrical component manufacturer, Molex, reported disappointing sales and
earnings, which caused us to reposition those assets into niche computer
software companies that have brighter prospects in our opinion. Longer
term, we are very bullish on global prospects for technology and related
services. We have also been concerned about governance and accounting
issues at American International Group. Late in the fiscal year, we
reduced the position significantly, selling into strength.
After carefully analyzing these disappointments, we find no consistent
theme and conclude that the challenges are in no way related to the fund's
emphasis on American companies with substantial and growing business
interests in the Pacific Rim region. In a challenging year, we have
carefully adjusted the portfolio to avoid any recurrence of these
company-specific issues.
Q: Could you highlight some of the companies that were added to the portfolio?
A: Certainly. In the technology sector, we are shifting the emphasis from
hardware to software companies. As part of this minor repositioning, we
reinvested the proceeds from the sale of Hewlett-Packard and Molex into
Adobe Systems, which has a strong market niche in graphics, photography and
digital imaging, and Symantec, which is a leading provider of security
solutions for individuals and businesses.
We added United Parcel Services (UPS), the delivery and logistics company
with trade routes from the United States to Europe and within Europe. In
our estimation, UPS outshines its competitors and is poised to grow its
business to Asia. We bought the stock on weakness when investors became
concerned that higher fuel costs could threaten its profitability. We
think UPS will be resilient, as it has the ability to pass on increased
fuel costs to its customers with a fuel surcharge.
11
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05 (continued)
- --------------------------------------------------------------------------------
In the financial sector - a second area of concentration of the portfolio,
we added UCBH Holdings, which is a commercial bank that caters to the
Chinese-American population. With a strong customer base on the West
Coast, the bank is well positioned to benefit from the growth of trade
with China. The company is a good example of the portfolio's investment
strategy, which is designed to offer shareowners exposure to Asian
economies by investing in American companies - eliminating many of the
risks associated with investing directly in developing markets. I would
like to add that two existing holdings - State Street and T. Rowe Price
Group - performed very well during the year.
Q: Health care stocks represent the third major area of investment for the
Fund. Have you made any changes within this sector?
A: We are very optimistic about the future of this industry, because we expect
health care expenditures to rise at a much faster rate than the U.S. economy
for the foreseeable future. An aging world population is boosting demand for
drugs and medical equipment worldwide. However, we are concerned that the
traditional pharmaceutical companies are currently battling a variety of
issues. These include the new Medicare drug bill that went into effect on
January 1, 2006, intellectual property rights, product liability issues and
high-profile drug trials. Consequently, we have shifted our focus in the
health care sector from pharmaceuticals toward a mix of medical device
companies, market research companies, suppliers to the industry and
orthopedic implants, which we think offer a better risk/reward profile. In
keeping with this new direction, we added 3M, a diversified company that
derives about 20% of its business from medical products.
Q: Do you think 2006 will be a positive year for U.S. stocks?
A: As the New Year begins, we think several factors bode well for the economy
and U.S. growth stocks. Many Wall Street economists are upbeat, looking for
economic growth of 3% to 31/2% for 2006. We concur, and barring any external
shocks, we think the U.S. stock market - particularly growth stocks that
have been out of favor for several years - will generate above-average
returns. Secondly, with corporate earnings as strong as they were in 2005,
companies are likely to increase capital expenditures and buy new
technologies and capital equipment. Finally, we saw a valuation gap emerge
between stock prices and the underlying strength of the companies in 2005 -
creating undervalued companies.
12
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Therein lies the growth potential that we hope to capture with the
companies held in this portfolio.
Investing in foreign and/or emerging markets securities involves risks relating
to interest rates, currency exchange rates, economic, and political conditions.
The portfolio may invest a substantial amount of its assets in issuers located
in a limited number of countries and therefore is susceptible to adverse
economic, political or regulatory developments affecting those countries.
Investing in the securities of U.S. issuers with substantial foreign activities
involves many of the same risks as investing in the securities of foreign
issuers. The Fund invests in a limited number of securities and, as a result,
the fund's performance may be more volatile than the performance of other funds
holding more securities. At times, the Fund's investments may represent
industries or industry sectors that are interrelated or have common risks,
making it more susceptible to any economic, political, or regulatory
developments or other risks affecting those industries and sectors.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These opinions should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
13
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 99.0%
Energy - 2.5%
Integrated Oil & Gas - 2.5%
8,400 Chevron Corp. $ 476,868
-----------
Total Energy $ 476,868
-----------
Capital Goods - 15.6%
Electrical Component & Equipment - 5.7%
15,000 Emerson Electric Co. $ 1,120,500
-----------
Industrial Conglomerates - 9.9%
29,500 General Electric Co. $ 1,033,975
11,800 3M Co. 914,500
-----------
$ 1,948,475
-----------
Total Capital Goods $ 3,068,975
-----------
Transportation - 6.8%
Air Freight & Couriers - 6.8%
12,000 Expeditors International of Washington, Inc. $ 810,120
7,000 United Parcel Service 526,050
-----------
$ 1,336,170
-----------
Total Transportation $ 1,336,170
-----------
Media - 4.8%
Advertising - 4.8%
17,500 WPP Group Plc (A.D.R.) $ 945,000
-----------
Total Media $ 945,000
-----------
Food, Beverage & Tobacco - 5.4%
Packaged Foods & Meats - 5.4%
16,000 William Wrigley Jr. Co. $ 1,063,840
-----------
Total Food, Beverage & Tobacco $ 1,063,840
-----------
Household & Personal Products - 3.3%
Household Products - 3.3%
12,000 Colgate-Palmolive Co. $ 658,200
-----------
Total Household & Personal Products $ 658,200
-----------
14 The accompanying notes are an integral part of these financial statements.
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Health Care Equipment & Services - 11.9%
Health Care Equipment - 10.2%
19,500 Medtronic, Inc. $ 1,122,615
20,000 Stryker Corp. 888,600
-----------
$ 2,011,215
-----------
Health Care Services - 1.7%
13,000 IMS Health, Inc. $ 323,960
-----------
Total Health Care Equipment & Services $ 2,335,175
-----------
Pharmaceuticals & Biotechnology - 5.3%
Pharmaceuticals - 5.3%
14,000 Johnson & Johnson $ 841,400
3,500 Eli Lilly & Co. 198,065
-----------
$ 1,039,465
-----------
Total Pharmaceuticals & Biotechnology $ 1,039,465
-----------
Banks - 1.4%
Regional Banks - 1.4%
15,500 UCBH Holdings, Inc. $ 277,140
-----------
Total Banks $ 277,140
-----------
Diversified Financials - 11.2%
Asset Management & Custody Banks - 11.2%
21,000 State Street Corp. $ 1,164,240
14,500 T. Rowe Price Associates, Inc. 1,044,435
-----------
$ 2,208,675
-----------
Total Diversified Financials $ 2,208,675
-----------
Insurance - 1.0%
Multi-Line Insurance - 1.0%
3,000 American International Group, Inc. $ 204,690
-----------
Total Insurance $ 204,690
-----------
Software & Services - 7.1%
Application Software - 1.9%
10,000 Adobe Systems, Inc. $ 369,600
-----------
The accompanying notes are an integral part of these financial statements. 15
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
Shares Value
Systems Software - 5.2%
31,000 Microsoft Corp. $ 810,650
12,000 Symantec Corp.* 210,000
-----------
$ 1,020,650
-----------
Total Software & Services $ 1,390,250
-----------
Technology Hardware & Equipment - 9.7%
Communications Equipment - 3.1%
36,000 Cisco Systems, Inc.* $ 616,320
-----------
Computer Hardware - 3.2%
7,500 IBM Corp. $ 616,500
-----------
Computer Storage & Peripherals - 1.8%
25,500 EMC Corp.* $ 347,310
-----------
Electronic Equipment & Instruments - 1.6%
10,000 National Instruments Corp. $ 320,500
-----------
Total Technology Hardware & Equipment $ 1,900,630
-----------
Semiconductors - 13.1%
Semiconductor Equipment - 1.9%
20,400 Applied Materials, Inc. $ 365,976
-----------
Semiconductors - 11.2%
34,500 Intel Corp. $ 861,120
15,000 Linear Technology Corp. 541,050
25,000 Microchip Technology 803,750
-----------
$ 2,205,920
-----------
Total Semiconductors $ 2,571,896
-----------
TOTAL COMMON STOCKS
(Cost $15,862,820) $19,476,974
-----------
TOTAL INVESTMENT IN SECURITIES - 99.0%
(Cost $15,862,820)(a) $19,476,974
-----------
OTHER ASSETS AND LIABILITIES - 1.0% $ 199,250
-----------
TOTAL NET ASSETS - 100.0% $19,676,224
===========
16 The accompanying notes are an integral part of these financial statements.
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(A.D.R.) American Depositary Receipt
* Non-income producing security
(a) At December 31, 2005, the net unrealized gain on investments based on cost for federal
income tax purposes of $15,862,820 was as follows:
Aggregate gross unrealized gain for all investments in which
there is an excess of value over tax cost $4,241,163
Aggregate gross unrealized loss for all investments in which
there is an excess of tax cost over value (627,009)
----------
Net unrealized gain $3,614,154
==========
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 2005 aggregated $3,173,715 and $6,386,706,
respectively.
The accompanying notes are an integral part of these financial statements. 17
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/05
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities (cost $15,862,820) $ 19,476,974
Cash 265,143
Receivables -
Fund shares sold 15,002
Dividends and interest 18,013
Due from Pioneer Investment Management, Inc. 190
------------
Total assets $ 19,775,322
------------
LIABILITIES:
Payables -
Fund shares repurchased $ 22,149
Due to affiliates 4,725
Accrued expenses 72,224
------------
Total liabilities $ 99,098
------------
NET ASSETS:
Paid-in capital $ 16,190,821
Accumulated net realized loss on investments (128,751)
Net unrealized gain on investments 3,614,154
------------
Total net assets $ 19,676,224
============
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Class A (based on $15,780,311/981,540 shares) $ 16.08
============
Class B (based on $1,224,143/77,138 shares) $ 15.87
============
Class C (based on $2,663,758/167,802 shares) $ 15.87
============
Class R (based on $8,012/512.13 shares) $ 15.64
============
MAXIMUM OFFERING PRICE:
Class A ($16.08 [divided by] 94.25%) $ 17.06
============
18 The accompanying notes are an integral part of these financial statements.
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/05
INVESTMENT INCOME:
Dividends $268,374
Interest 5,925
Income from securities loaned, net 19
--------
Total investment income $ 274,318
----------
EXPENSES:
Management fees $154,801
Transfer agent fees and expenses
Class A 30,351
Class B 5,795
Class C 11,216
Class R 342
Distribution fees
Class A 40,249
Class B 11,694
Class C 28,256
Class R 77
Administrative reimbursements 18,512
Custodian fees 13,161
Registration fees 96,211
Professional fees 45,718
Printing expense 32,727
Fees and expenses of nonaffiliated trustees 4,984
Miscellaneous 6,043
--------
Total expenses $ 500,137
----------
Less management fees waived and
expenses reimbursed by Pioneer
Investment Management, Inc. $ (201,187)
Less fees paid indirectly (666)
----------
Net expenses $ 298,284
----------
Net investment loss $ (23,966)
----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments $ 371,160
Change in net unrealized loss on investments (338,464)
----------
Net gain on investments $ 32,696
----------
Net increase in net assets resulting from operations $ 8,730
==========
The accompanying notes are an integral part of these financial statements. 19
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/05 and 12/31/04
Year Ended Year Ended
12/31/05 12/31/04
FROM OPERATIONS:
Net investment income (loss) $ (23,966) $ 69,891
Net realized gain on investments 371,160 14,361
Change in net unrealized gain (loss) on investments (338,464) 195,503
----------- ------------
Net increase in net assets resulting from
operations $ 8,730 $ 279,755
----------- ------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class A ($0.00 and $0.06 per share, respectively) $ (3,362) $ (66,563)
----------- ------------
Total distributions to shareowners $ (3,362) $ (66,563)
----------- ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 4,436,171 $15,153,340
Reinvestment of distributions 2,821 54,060
Cost of shares repurchased (7,900,842) (4,509,754)
----------- ------------
Net increase (decrease) in net assets resulting
from Fund share transactions $(3,461,850) $10,697,646
----------- ------------
Net increase (decrease) in net assets $(3,456,482) $10,910,838
NET ASSETS:
Beginning of year 23,132,706 12,221,868
----------- ------------
End of year (including undistributed net investment
income of $0 and $3,328, respectively) $19,676,224 $23,132,706
=========== ===========
20 The accompanying notes are an integral part of these financial statements.
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
'05 Shares '05 Amount '04 Shares '04 Amount
CLASS A
Shares sold 192,558 $ 3,049,556 684,917 $10,774,867
Reinvestment of distributions 174 2,821 3,402 54,060
Less shares repurchased (403,331) (6,339,140) (266,540) (4,130,634)
-------- ----------- -------- -----------
Net increase (decrease) (210,599) $(3,286,763) 421,779 $ 6,698,293
======== =========== ======== ===========
CLASS B
Shares sold 22,676 $ 354,627 85,039 $ 1,326,121
Less shares repurchased (19,404) (300,157) (11,173) (171,707)
-------- ----------- -------- -----------
Net increase 3,272 $ 54,470 73,866 $ 1,154,414
======== =========== ======== ===========
CLASS C
Shares sold 65,277 $ 1,019,684 196,007 $ 3,043,674
Less shares repurchased (79,989) (1,249,079) (13,493) (206,837)
-------- ----------- -------- -----------
Net increase (decrease) (14,712) $ (229,395) 182,514 $ 2,836,837
======== =========== ======== ===========
CLASS R
Shares sold 792 $ 12,304 570 $ 8,678
Less shares repurchased (813) (12,466) (38) (576)
-------- ----------- -------- -----------
Net increase (decrease) (21) $ (162) 532 $ 8,102
======== =========== ======== ===========
The accompanying notes are an integral part of these financial statements. 21
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/05 12/31/04 12/31/03 12/31/02 12/31/01
CLASS A
Net asset value, beginning of period $ 15.97 $ 15.87 $ 12.38 $ 15.51 $ 18.07
------- ------- ------- -------- --------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.02 $ 0.06 $ (0.11) $ (0.08) $ (0.08)
Net realized and unrealized gain (loss) on investments 0.09 0.10 3.60 (3.05) (2.44)
------- ------- ------- -------- --------
Net increase (decrease) from investment operations $ 0.11 $ 0.16 $ 3.49 $ (3.13) $ (2.52)
Distributions to shareowners:
Net investment income 0.00(a) (0.06) -- -- --
Net realized gain -- -- -- -- (0.04)
------- ------- ------- -------- --------
Net increase (decrease) in net asset value $ 0.11 $ 0.10 $ 3.49 $ (3.13) $ (2.56)
------- ------- ------- -------- --------
Net asset value, end of period $ 16.08 $ 15.97 $ 15.87 $ 12.38 $ 15.51
======= ======= ======= ======== ========
Total return* 0.71% 0.99%** 28.19% (20.18)% (13.94)%
Ratio of net expenses to average net assets+ 1.25% 1.25% 1.25% 1.25% 1.25%
Ratio of net investment income (loss) to average net assets+ 0.08% 0.43% (0.20)% (0.38)% (0.49)%
Portfolio turnover rate 16% 11% 15% 8% 7%
Net assets, end of period (in thousands) $15,780 $19,042 $12,222 $ 11,108 $ 14,651
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 2.23% 2.22% 1.56% 1.52% 1.40%
Net investment loss (0.90)% (0.54)% (0.51)% (0.65)% (0.64)%
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 1.25% 1.25% 1.25% 1.25% 1.25%
Net investment income (loss) 0.08% 0.43% (0.20)% (0.38)% (0.49)%
(a) Amount rounds to less than $0.01 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.
+ Ratios with no reduction for fees paid indirectly.
** Total Return would be reduced if sales charges were taken into account.
The accompanying notes are an integral part of these financial statements.
22
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended 2/21/04(b) to
12/31/05 12/31/04
CLASS B
Net asset value, beginning of period $ 15.93 $ 16.32
------- ---------
Increase (decrease) from investment operations:
Net investment loss $ (0.15) $ (0.01)
Net realized and unrealized gain (loss)
on investments 0.09 (0.38)
------- ---------
Net decrease from investment operations $ (0.06) $ (0.39)
------- ---------
Net decrease in net asset value $ (0.06) $ (0.39)
------- ---------
Net asset value, end of period $ 15.87 $ 15.93
======= =========
Total return* (0.38)% (2.39)%(a)
Ratio of net expenses to average net assets+ 2.32% 2.08%**
Ratio of net investment loss to average net assets+ (0.98)% (0.07)%**
Portfolio turnover rate 16% 11%
Net assets, end of period (in thousands) $ 1,224 $ 1,177
Ratios with no waiver of management fees and
assumption of expenses by PIM and no reduction
for fees paid indirectly:
Net expenses 3.30% 3.14%**
Net investment loss (1.96)% (1.14)%**
Ratios with waiver of management fees and
assumption of expenses by PIM and reduction for
fees paid indirectly:
Net expenses 2.32% 2.08%**
Net investment loss (0.98)% (0.07)%**
* 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.
(a) Not Annualized.
(b) Class B shares were first publicly offered on February 21, 2004.
The accompanying notes are an integral part of these financial statements. 23
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended 2/21/04(b) to
12/31/05 12/31/04
CLASS C
Net asset value, beginning of period $ 15.92 $ 16.32
------- ---------
Increase (decrease) from investment operations:
Net investment income (loss) $ (0.15) $ 0.01
Net realized and unrealized gain (loss)
on investments 0.10 (0.41)
------- ---------
Net decrease from investment operations $ (0.05) $ (0.40)
------- ---------
Net decrease in net asset value $ (0.05) $ (0.40)
------- ---------
Net asset value, end of period $ 15.87 $ 15.92
======= =========
Total return* (0.31)% (2.45)%(a)
Ratio of net expenses to average net assets+ 2.23% 2.12%**
Ratio of net investment income (loss) to average
net assets+ (0.90)% 0.14%**
Portfolio turnover rate 16% 11%
Net assets, end of period (in thousands) $ 2,664 $ 2,905
Ratios with no waiver of management fees and
assumption of expenses by PIM and no
reduction for fees paid indirectly:
Net expenses 3.20% 3.16%**
Net investment loss (1.87)% (0.89)%**
Ratios with waiver of management fees and
assumption of expenses by PIM and reduction
for fees paid indirectly:
Net expenses 2.22% 2.12%**
Net investment income (loss) (0.89)% 0.14%**
* 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.
(a) Not Annualized.
(b) Class C shares were first publicly offered on February 21, 2004.
24 The accompanying notes are an integral part of these financial statements.
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended 2/21/04(b) to
12/31/05 12/31/04
CLASS R
Net asset value, beginning of period $ 15.85 $ 16.32
------- ---------
Increase (decrease) from investment operations:
Net investment loss $ (0.51) $ (0.03)
Net realized and unrealized gain (loss)
on investments 0.30 (0.44)
------- ---------
Net decrease from investment operations $ (0.21) $ (0.47)
------- ---------
Net decrease in net asset value $ (0.21) $ (0.47)
------- ---------
Net asset value, end of period $ 15.64 $ 15.85
======= =========
Total return* (1.33)% (2.88)%(a)
Ratio of net expenses to average net assets+ 3.03% 2.84%**
Ratio of net investment loss to average net assets+ (1.73)% (0.51)%**
Portfolio turnover rate 16% 11%
Net assets, end of period (in thousands) $ 8 $ 8
Ratios with no waiver of management fees and
assumption of expenses by PIM and no reduction
for fees paid indirectly:
Net expenses 4.54% 3.86%**
Net investment loss (3.24)% (1.53)%**
Ratios with waiver of management fees and
assumption of expenses by PIM and reduction for
fees paid indirectly:
Net expenses 3.01% 2.84%**
Net investment loss (1.71)% (0.51)%**
* 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.
(a) Not Annualized.
(b) Class R shares were first publicly offered on February 21, 2004.
The accompanying notes are an integral part of these financial statements. 25
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer AmPac Growth Fund (the Fund) (formerly, Pioneer Papp America-Pacific
Rim Fund), is one of eight series of portfolios comprising Pioneer Series Trust
II, a Delaware statutory trust registered under the Investment Company Act of
1940 as a diversified, open-end management investment company. The Fund, which
commenced operations on February 20, 2004, is the successor to the Papp
America-Pacific Rim Fund, Inc. Papp America-Pacific Rim Fund, Inc. transferred
all of its net assets in exchange for the Fund's Class A shares in a one-to-one
exchange ratio on February 20, 2004 pursuant to an agreement and plan of
reorganization (the "reorganization" which was approved by the shareholders of
Papp America-Pacific Rim Fund, Inc. on February 20, 2004). The Fund had no
assets or liabilities prior to the reorganization. Accordingly, the
reorganization, which was a tax-free exchange, had no effect on the Fund's
operations. The investment objective of the Fund is to seek long-term growth.
The Fund offers four classes of shares - Class A, Class B, Class C, and Class R
shares. Class B, Class C, and Class R shares were first publicly offered on
February 21, 2004. Each class of shares represents an interest in the same
portfolio of investments of the Fund and has equal rights to voting,
redemptions, dividends and liquidation, except that the level of transfer agent
and distribution fees may differ among classes. Class A, Class B, Class C, and
Class R shareowners have exclusive voting rights with respect to the
distribution plan for each class.
The Fund's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Fund to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses and gains and losses on investments during the
reporting year. Actual results could differ from those estimates. The following
is a summary of significant accounting policies followed by the Fund in the
preparation of its financial statements, which are consistent with those
policies generally accepted in the investment company industry.
26
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A. Security Valuation
Security transactions are recorded as of trade date. The net asset value
of the Fund is computed once daily, on each day the New York Stock
Exchange (NYSE) is open, as of the close of regular trading on the NYSE.
In computing the net asset value, securities are valued at the last sale
price on the principal exchange where they are traded. Securities that
have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. Securities for which market quotations are not
readily available are valued at their fair values as determined by, or
under the direction of, the Board of Trustees. Trading in foreign
securities is substantially completed each day at various times prior to
the close of the NYSE. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times. The
Fund also may use the fair value of a security, including a non-U.S.
security, when the closing market price on the principal exchange where
the security is traded no longer reflects the value of the security. At
December 31, 2005 there were no securities fair valued. Temporary cash
investments are valued at amortized cost.
Dividend income is recorded on the ex-dividend date except that certain
dividends from foreign securities where the ex dividend date may have
passed are recorded as soon as the Fund becomes aware of the ex-dividend
data in exercise of reasonable diligence. Dividend and interest income is
recorded on the accrual basis, net of unrecoverable foreign taxes withheld
at the applicable country rates.
Gains and losses on sales of investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes.
The Fund invests in a limited number of securities and, as a result, the
Fund's performance may be more volatile than the performance of other
funds holding more securities. At times, the Fund's investments may
represent industries or industry sectors that are interrelated or have
common risks, making it more susceptible to any economic, political, or
regulatory developments or other risks affecting those industries and
sectors. Information regarding the Fund's principal risk is contained in
the Fund's prospectus. Please refer to those documents when considering
the Fund's risks.
27
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
B. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the sources of the Fund's distributions may
be shown in the accompanying financial statements as either from or in
excess of net investment income or net realized gain on investment
transactions, or from paid-in capital, depending on the type of book/tax
differences that may exist.
The Fund had a net capital loss carryforward of $128,751, which will
expire in 2010 if not utilized.
The tax character of distributions paid during the years ended December
31, 2005 and 2004 were as follows:
- --------------------------------------------------------------------------------
2005 2004
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 3,362 $66,563
Long-term capital gain -- --
------- -------
Total $ 3,362 $66,563
======= =======
- --------------------------------------------------------------------------------
The following shows the components of distributable earnings on a
federal income tax basis at December 31, 2005:
- --------------------------------------------------------------------------------
2005
- --------------------------------------------------------------------------------
Capital loss carryforward $ (128,751)
Unrealized appreciation 3,614,154
-----------
Total $ 3,485,403
===========
- --------------------------------------------------------------------------------
The Fund has reclassified $24,000 to decrease accumulated net
investment loss and $24,000 to decrease paid-in capital to reflect
permanent book/tax differences. The reclassification has no
28
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
impact on the net asset value of the Fund and is designed to present the
Fund's capital accounts on a tax basis.
C. Fund Shares
The Fund records sales and repurchases of its shares as of trade date.
Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the
Fund and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A.
(UniCredito Italiano), earned approximately $3,664 in underwriting
commissions on the sale of Class A shares during the year ended December
31, 2005.
D. Class Allocations
Distribution fees are calculated based on the average daily net asset
value attributable to Class A, Class B, Class C, and Class R shares of the
Fund, respectively. (see Note 4) Shareowners of each class share all
expenses and fees paid to the transfer agent, Pioneer Investment
Management Shareholder Services, Inc. (PIMSS), for its services, which are
allocated based on the number of accounts in each class and the ratable
allocation of related out-of-pocket expenses (see Note 3). Income, common
expenses and realized and unrealized gains and losses are calculated at
the Fund level and allocated daily to each class of shares based on the
respective percentage of adjusted net assets at the beginning of the day.
Distributions to shareowners are recorded as of the ex-dividend date.
Distributions paid by the Fund with respect to each class of shares are
calculated in the same manner, at the same time, on the same day, and in
the same amount, except that Class A, Class B, Class C, and Class R shares
bear different transfer agent and distribution fees.
E. Security Lending
The Fund lends securities in its portfolio to certain broker-dealers or
other institutional investors, with the Fund's custodian acting as the
lending agent. When entering into a loan, the Fund receives collateral,
which is maintained by the custodian and earns income in the form of
negotiated lenders' fees. The Fund also continues to receive interest or
payments in lieu of dividends on the securities loaned. Gain or loss in
the fair value of the loaned securities that may occur during the term of
the loan will be for the account of the
29
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
Fund. The loans are secured by collateral of at least 102%, at all times,
of the fair value of the securities loaned. The amount of the collateral
will be adjusted daily to reflect any price fluctuation in the value of
the loaned securities. The Fund has the right under the lending agreements
to recover the securities from the borrower on demand. The Fund invests
cash collateral in interest bearing bank deposits.
2. Management Agreement
Pioneer Investment Management, Inc. (PIM), a wholly owned indirect subsidiary
of UniCredito Italiano, manages the Fund's portfolio. PIM receives a basic fee
that is calculated at the annual rate of 0.75% of the Fund's average daily net
assets up to $1 billion; and 0.70% of the excess over $1 billion.
PIM and not the Fund pays a portion of the fee it receives from the Fund to L.
Roy Papp & Associates LLP (Papp) as compensation for its sub advisory services
to the Fund. Prior to the reorganization, Papp America Pacific Rim Fund, Inc.,
was advised by Papp, which received an annual fee equal to 1.0% of the Fund's
net assets.
Through December 31, 2006, PIM has agreed not to impose all or a portion of its
management fee and to assume other operating expenses of the Fund to the extent
necessary to limit expenses to 1.25% of average daily net assets attributable
to Class A; the portion of the Fund-wide expenses attributable to Class B,
Class C and Class R shares will be reduced only to the extent that such
expenses are 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 Fund. On December 31, 2005, $12 was payable to PIM
related to management fees, administrative costs and certain others services,
and is included in due to affiliates.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides
substantially all transfer agent and shareowner services to the Fund at
negotiated rates. Included in due to affiliates is $4,241 in transfer agent
fees payable to PIMSS at December 31, 2005.
30
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. Distribution and Service Plans
Effective February 20, 2004 the Fund adopted a Plan of Distribution for 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 Fund pays PFD a service fee of up to 0.25% of the average
daily net assets attributable to Class A shares in reimbursement of its actual
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 Fund
pays PFD 1.00% of the average daily net assets attributable to each class of
shares. The fee consists of a 0.25% service fee and a 0.75% distribution fee
paid as compensation for personal services and/or account maintenance services
or distribution services with regard to Class B and Class C shares. Pursuant to
the Class R Plan, the Fund pays PFD 0.50% of the average daily net assets
attributable to Class R shares as compensation for distribution services.
Included in due to affiliates is $472 in distribution fees payable to PFD at
December 31, 2005. The Fund also has adopted a separate service plan for Class
R shares (Service Plan). The Service Plan authorizes the Fund to pay securities
dealers, plan administrators or other service organizations that agree to
provide certain services to retirement plans or plan participants holding
shares of the Fund a service fee of up to 0.25% of the Fund's average daily net
assets attributable to Class R shares held by such plans.
In addition, redemptions of each class of shares may be subject to a contingent
deferred sales charge (CDSC). Effective February 1, 2004, a CDSC of 1.00% may
be imposed on certain net asset value purchases of Class A shares that are
redeemed within 18 months of purchase (12 months for shares purchased prior to
February 1, 2004). Effective December 1, 2004, Class B shares that are redeemed
within five years of purchase are subject to a CDSC at declining rates
beginning at 4.00%, based on the lower of cost or market value of shares being
redeemed. Shares purchased prior to December 1, 2004, remain subject to the
CDSC in effect at the time those shares were purchased. 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 were subject to a CDSC of 1.00%.
Effective July 1, 2004, the CDSC on Class R Shares was eliminated. Proceeds
from the CDSCs are paid to PFD. For the
31
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
year ended December 31, 2005, CDSCs in the amount of $3,953 were paid to PFD.
5. Expense Offset Arrangements
The Fund has entered into certain expense offset arrangements with PIMSS
resulting in a reduction in the Fund's total expenses due to interest earned on
cash held by PIMSS. For the year ended December 31, 2005, the Fund's expenses
were reduced by $666 under such arrangements.
ADDITIONAL INFORMATION (unaudited)
For the fiscal year ended December 31, 2005, the percentage of the ordinary
income distributions made by the Fund subject to a maximum tax rate of 15%, as
provided for by the Jobs and Growth Tax Relief Act of 2003, was 100.00%.
The qualifying percentage of the Fund's ordinary income dividends for the
purposes of the corporate dividends received deduction was 100.00%.
32
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Series Trust II and the
Shareowners of Pioneer AmPac Growth Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer AmPac Growth Fund (formerly Pioneer
Papp America-Pacific Rim Fund) one of the series constituting Pioneer Series
Trust II (the "Trust"), as of December 31, 2005, and the related statement of
operations for the year then ended, the statements of changes in net assets and
financial highlights for each of the two years then ended. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for each of the two years in the period ended December 31, 2003 were
audited by other auditors whose report, dated January 23, 2004, expressed an
unqualified opinion on those financial highlights. The financial highlights the
year ended December 31, 2001 were audited by other auditors who have ceased
operations and whose report, dated January 17, 2002, expressed an unqualified
opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Trust's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Trust's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2005, by correspondence
with the custodian. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer AmPac Growth Fund of the Pioneer Series Trust II at December 31, 2005,
the results of its operations for the year then ended, and the changes in its
net assets and financial highlights for each of the two years in the period
then ended, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 10, 2006
33
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT
- --------------------------------------------------------------------------------
The Investment Company Act of 1940 requires that both the Board of Trustees and
a majority of the Independent Trustees (collectively "the Trustees") voting
separately annually approve the Fund's management contract (the "Management
Contract") between the Fund and Pioneer Investment Management, Inc., the Fund's
adviser (the "Investment Adviser"). The Investment Adviser has retained L. Roy
Papp and Associates, LLC. (the "Sub-adviser") to act as sub-adviser to the Fund
pursuant to a sub-advisory agreement between the Investment Adviser and the
Sub-adviser (the "Sub-advisory Agreement"). The Trustees have determined that
the terms of the Management Contract and the Sub-advisory Agreement are fair
and reasonable and that renewal of these contracts will enable the Fund to
receive quality investment advisory services at a cost deemed reasonable and is
in the best interests of the Fund and its shareowners. In making such
determinations, the Independent Trustees relied upon the assistance of counsel
to the Independent Trustees and counsel to the Fund.
Throughout the year, the Independent Trustees regularly met in executive
session separately from the Interested Trustees of the Fund and any officer of
the Investment Adviser, or its affiliates. While the Trustees, including the
Independent Trustees, act on all major matters relating to the Fund, a
significant portion of the activities of the Board of Trustees (including
certain of those described herein) is conducted through committees, the members
of which are comprised exclusively of Independent Trustees. Such committee
meetings are attended by officers of the Fund or the Investment Adviser to the
extent requested by the members of the committee.
In evaluating the Management Contract and Sub-advisory Agreement, the Trustees
conducted a review that was specifically focused upon the renewal of the
Management Contract and Sub-advisory Agreement, and relied upon their
knowledge, resulting from their meetings throughout the year, of the Investment
Adviser, its services and the Fund. Both in meetings specifically dedicated to
renewal of the Management Contract and at other meetings during the course of
the year, the Trustees, including the Independent Trustees, received materials
relating to the Investment Adviser's investment and management services under
the Management Contract. These materials included (i) information on the
investment performance of the Fund, a peer group of funds and an index, in each
case selected by the Independent Trustees for this purpose, (ii) sales and
redemption data in respect of the Fund, (iii) the general investment outlook in
the
34
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
markets in which the Fund invests, (iv) arrangements in respect of the
distribution of the Fund's shares, (v) the procedures employed to determine the
value of each of the Fund's assets, (vi) the Investment Adviser's management of
the relationships with the Fund's unaffiliated service providers, (vii) the
record of compliance with the Fund's investment policies and restrictions and
with the Fund's Code of Ethics and the structure and responsibilities of the
Investment Adviser's compliance department, (viii) the nature, cost and
character of non-investment management services provided by the Investment
Adviser and its affiliates, (ix) the disclosures included in the Fund's
prospectuses and reports to shareowners and (x) the investment and compliance
staff and operations of the Sub-Adviser.
Specifically, in connection with the Independent Trustees' review of the
Management Contract and the Sub-advisory Agreement, the Independent Trustees
requested and the Investment Adviser provided additional information in order
to evaluate the quality of the Investment Adviser's and Sub-adviser's services
and the reasonableness of the fee under the Management Contract and the
Sub-advisory Agreement. Among other items, this information included data or
analyses of (1) investment performance for one, three and five year periods for
the Fund and a peer group selected by the Independent Trustees for this
purpose, (2) management and other fees incurred by a peer group of funds
selected by the Independent Trustees for this purpose, (3) the advisory fees of
comparable portfolios of other clients of the Investment Adviser, (4) expense
ratios for the Fund and a peer group of funds selected by the Independent
Trustees for this purpose, (5) the overall organization of the Investment
Adviser, (6) the Investment Adviser's financial results and condition,
including its and certain of its affiliates profitability from services
performed for the Fund, (7) transfer agency fees and administrative
reimbursements paid to the Investment Adviser or affiliates, (8) investment
management staffing, and (9) operating expenses paid to third parties. The
Trustees also reviewed information regarding the potential for each of the Fund
and the Investment Adviser to benefit from further economies of scale in the
management of the Fund in light of reasonable growth expectations for the Fund,
the break points in the Fund's management fee and of a peer group of funds
selected by the Independent Trustees for this purpose and certain of the Fund's
expenses that are not incurred as fees based on a percentage of net assets.
35
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT (continued)
- --------------------------------------------------------------------------------
The following summarizes matters considered by the Trustees in connection with
their renewal of the Fund's Management Contract and Sub-advisory Agreement. The
Trustees did not identify any single factor as all-important or controlling,
and the summary does not detail all the matters that were considered.
A. Ancillary Benefits to Shareowners. The Trustees considered the benefits to
shareowners of investing in a Fund that is part of a large number of
investment companies offering a variety of investment disciplines and
providing for a large variety of Fund and shareowner services.
B. Compliance and Investment Performance. The Trustees determined that the
Investment Adviser had policies and systems reasonably designed to achieve
compliance with the Fund's investment objectives and regulatory
requirements. The Trustees also reviewed the Fund's investment performance
based upon total return, as well as the Fund's performance compared to both
the performance of a peer group and an index, in each case selected by the
Independent Trustees for this purpose. The Fund's performance based upon
total return was in the fifth quintile of the peer group for the 12 months
ended June 30, 2005, the fourth quintile of the peer group for the three
years ended June 30, 2005, and the third quintile for the five years ended
June 30, 2005. (In all quintile rankings referred to throughout this
discussion first quintile is most favorable to the Fund's shareowners. Thus,
highest relative performance would be first quintile and lowest relative
expenses also would be first quintile.) The Trustees also considered the
activities of the Investment Adviser in monitoring the investment and
compliance operations of the Sub-adviser. The Trustees concluded that the
longer-term performance of the Fund supported the continuation of the
Management Contract and the Sub-advisory Agreement.
C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the
background of members of the team responsible for the daily management of
the Fund and the Fund's investment objective and discipline. The Independent
Trustees also have had discussions with senior management of the Investment
Adviser responsible for investment operations. Among other things, the
Trustees considered the number, education and experience of the
Sub-adviser's investment staff. The Trustees concluded that the
36
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Investment Adviser and the Sub-adviser have the quality and depth of
personnel and the well-developed methods essential to performing their
duties under the Management Contract and the Sub-advisory Agreement.
D. Nature and Quality of Other Services. The Trustees considered the nature,
quality, cost and extent of other services provided to shareowners of the
Fund, including administrative and shareowner services performed by the
Investment Adviser under the Management Contract. The Trustees also
considered the reasonableness of the arrangements for reimbursement of the
Investment Adviser's out-of-pocket costs and expenses, including overhead,
for certain administrative services that the Investment Adviser is not
required to provide under the Management Contract. The Trustees also
considered the nature and extent of the other services provided by the
Investment Adviser's affiliates under other contracts and its supervision of
third party service providers. Based on these considerations, the Trustees
concluded that the nature, quality, cost and extent of such services are
satisfactory and reliable and serve the shareowners of the Fund well.
E. Management Fee and Expenses. The Trustees considered the Investment
Adviser's fee under the Management Contract relative to the management fees
charged by a peer group of funds selected by the Independent Trustees for
this purpose using data provided by an independent third party. The Fund's
management fee for the 12 months ended June 30, 2005 was in the third
quintile relative to the management fees paid by the other funds in that
peer group for the comparable period. The Trustees determined that the fee
under the Management Contract was reasonable and fair in light of both the
overall nature and quality of services provided by the Investment Adviser
and the fees charged by the funds in the peer group. The Trustees also
evaluated the fee under the Sub-advisory Agreement and the portion of the
fee under the Management Contract retained by the Investment Adviser and
determined that they were consistent with other sub-advised funds. The
Trustees also considered the Fund's expense ratio and expense ratios of a
peer group of funds selected by the Independent Trustees for this purpose.
The Fund's expense ratio for the 12 months ended June 30, 2005 (after
expense limitations) was in the first quintile of the applicable peer group
for the most recent fiscal year of the peer group for the comparable
37
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT (continued)
- --------------------------------------------------------------------------------
period. The Trustees concluded that the Fund's overall expense ratio
(after expense limitations) was reasonable compared to that of comparable
funds.
F. Profitability. The Trustees considered the level of the Investment Adviser's
profits with respect to the management of the Pioneer Funds, including
details with respect to the Fund. This consideration included a review of
the Investment Adviser's methodology in allocating certain of its costs to
the management of each Fund. The Trustees also considered the financial
results realized by the Investment Adviser in connection with the operation
of the Fund. They further considered the profits realized by the Investment
Adviser and its affiliates from non-fund businesses that may benefit from or
be related to the Fund's business. The Trustees considered the Investment
Adviser's profit margins in comparison with the limited available industry
data. The Trustees concluded that the Investment Adviser's profits from
management of the Pioneer Funds, including the financial results derived
from the Fund, bear a reasonable relationship to the services rendered and
are fair for the management of the Fund.
G. Economies of Scale. The Trustees considered the economies of scale with
respect to the management of the Fund, whether the Fund had appropriately
benefited from any economies of scale, and whether there was potential for
realization of any further economies of scale. Because of break points in
the management fee, the Trustees concluded that any perceived or potential
economies of scale would be shared at future asset levels, in a reasonable
manner as the Fund grows in size, between the Investment Adviser and the
Fund's shareholders.
H. Other Benefits to the Investment Adviser. The Trustees also considered the
character and amount of fees paid by the Fund, other than under the
Management Contract, for services provided by the Investment Adviser and
affiliates, including fees for services such as shareholder services. The
Trustees also considered the receipt of sales loads and payments under Rule
12b-1 plans in respect of the Pioneer Funds (including the Fund), and
benefits to the Investment Adviser from the use of "soft" commission dollars
to pay for research and brokerage services. The Trustees further considered
the revenues and profitability of the Investment Adviser's businesses other
than the fund business, including the Investment
38
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Adviser's institutional investment advisory business. The Trustees
considered the intangible benefits that accrue to the Investment Adviser
and its affiliates by virtue of its relationship with the Fund and the
Pioneer Funds as a group. The Trustees concluded that all these types of
benefits accruing to the Investment Adviser were reasonable in the context
of the overall relationship between the Investment Adviser and the Fund.
Conclusion. The Trustees, in light of the Investment Adviser's and
Sub-adviser's overall performance, considered it appropriate to continue to
retain the management services of the Investment Adviser and the Sub-adviser.
Based on their evaluation of all material factors deemed relevant and the
advice of independent counsel, the Trustees concluded that the Management
Contract with the Fund and the Sub-advisory Agreement are fair and reasonable
and voted to approve the continuation of the Management Contract and the
Sub-advisory Agreement for another year.
39
Pioneer AmPac Growth Fund
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
Investment Adviser
Pioneer Investment Management, Inc.
Custodian
Brown Brothers Harriman & Co.
Independent Registered Public Accounting Firm
Ernst & Young LLP
Principal Underwriter
Pioneer Funds Distributor, Inc.
Legal Counsel
Wilmer Cutler Pickering Hale and Dorr LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
Trustees and Officers
The Fund's Board of Trustees provides broad supervision over the Fund's
affairs. The officers of the Fund are responsible for the Fund's operations.
The Fund's Trustees and officers are listed below, together with their
principal occupations during the past five years. Trustees who are interested
persons of the Fund within the meaning of the Investment Company Act of 1940
are referred to as Interested Trustees. Trustees who are not interested persons
of the Fund are referred to as Independent Trustees. Each of the Trustees may
serve as a trustee of each of the 91 U.S. registered investment portfolios for
which Pioneer Investment Management, Inc. ("Pioneer") serves as investment
adviser (the "Pioneer Funds"). The address for all Interested Trustees and all
officers of the Fund is 60 State Street, Boston, Massachusetts 02109.
The Fund's statement of additional information provides more detailed
information regarding the Fund's Trustees and is available upon request,
without charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Fund are available without charge,
upon request, by calling our toll free number (1-800-225-6292). Information
regarding how the Fund voted proxies relating to portfolio securities during
the most recent 12-month period ended June 30 is publicly available to
shareowners at www.pioneerfunds.com and on the SEC's web site at
http://www.sec.gov.
40
Pioneer AmPac Growth Fund
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation During Other Directorships
Name and Age With the Fund and Term of Office Past Five Years Held by this
Trustee
John F. Cogan, Jr. (79)* Chairman of the Trustee since 2003. Deputy Chairman and a Director of Chairman and
Board, Trustee Serves until Pioneer Global Asset Management Director of ICI
and President successor trustee S.p.A. ("PGAM"); Non-Executive Mutual Insurance
is elected or Chairman and a Director of Pioneer Company; Director of
earlier retirement Investment Management USA Inc. Harbor Global
or removal ("PIM-USA"); Chairman and a Company, Ltd.
Director of Pioneer; Director of
Pioneer Alternative Investment
Management Limited (Dublin);
President and a Director of Pioneer
Alternative Investment Management
(Bermuda) Limited and affiliated
funds; President and Director of
Pioneer Funds Distributor, Inc. ("PFD");
President of all of the Pioneer
Funds; and Of Counsel (since 2000,
partner prior to 2000), Wilmer
Cutler Pickering Hale and Dorr LLP
(counsel to PIM-USA and the Pioneer
Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
41
Pioneer AmPac Growth Fund
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation During Other Directorships
Name, Age and Address With the Fund and Term of Office Past Five Years Held by this
Trustee
David R. Bock **(62) Trustee Trustee since 2005. Senior Vice President and Chief Director of The
3050 K. Street NW, Serves until Financial Officer, I-trax, Inc. Enterprise Social
Washington, DC 20007 successor trustee (publicly traded health care Investment Company
is elected or services company) (2001-present); (privately-held
earlier retirement Managing Partner, Federal City affordable housing
or removal. Capital Advisors (boutique merchant finance company);
bank) (1995 - 2000; 2002 to 2004); Director of New York
Executive Vice President and Chief Mortgage Trust
Financial Officer, Pedestal Inc. (publicly traded
(internet-based mortgage trading mortgage REIT)
company) (2000-2002)
** Mr. Bock became a Trustee of the Fund January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (57) Trustee Trustee since 2003. President, Bush International Director of Brady
3509 Woodbine Street, Serves until (international financial Corporation
Chevy Chase, MD 20815 successor trustee advisory firm) (industrial
is elected or identification and
earlier retirement specialty coated
or removal material products
manufacturer),
Millenium Chemicals,
Inc. (commodity
chemicals),
Mortgage Guaranty
Insurance
Corporation, and
R.J. Reynolds, Inc.
(tobacco)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham (58) Trustee Trustee since 2003. Founding Director, The Winthrop None
1001 Sherbrooke Street Serves until Group, Inc. (consulting firm);
West, Montreal, Quebec, successor trustee Professor of Management, Faculty
Canada H3A 1G5 is elected or of Management, McGill University
earlier retirement
or removal
- ------------------------------------------------------------------------------------------------------------------------------------
42
Pioneer AmPac Growth Fund
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation During Other Directorships
Name, Age and Address With the Fund and Term of Office Past Five Years Held by this
Trustee
Marguerite A. Piret (57) Trustee Trustee since 2003. President and Chief Executive Director of New
One Boston Place, Serves until Officer, Newbury, Piret & Company, America High Income
28th Floor, successor trustee Inc. (investment banking firm) Fund, Inc.
Boston, MA 02108 is elected or (closed-end
earlier retirement investment company)
or removal
- ------------------------------------------------------------------------------------------------------------------------------------
John Winthrop (69) Trustee Trustee since 2003. President, John Winthrop & Co., None
One North Adgers Wharf, Serves until Inc. (private investment firm)
Charleston, SC 29401 successor trustee is
elected or earlier
retirement or
removal
- ------------------------------------------------------------------------------------------------------------------------------------
FUND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (53) Executive Vice Since 2003. President and Chief Executive Trustee of certain
President Serves at the Officer, PIM-USA since May, 2003 Pioneer Funds
discretion of (Director since January 2001);
the Board. President and Director of Pioneer
since May, 2003; Chairman and
Director of Pioneer Investment
Management Shareholder Services,
Inc. ("PIMSS") since May, 2003;
Executive Vice President of all of
Pioneer Funds since June 3, 2003;
and Executive Vice President and
Chief Operating Officer of PIM-USA,
November 2000 - May 2003.
- ------------------------------------------------------------------------------------------------------------------------------------
Dorothy E. Bourassa (57) Secretary Since 2003. Secretary of PIM-USA; Senior Vice None
Serves at the President - Legal of Pioneer; and
discretion of Secretary/Clerk of most of
the Board PIM-USA's subsidiaries; Secretary
of all of the Pioneer Funds since
September 2003 (Assistant Secretary
from November 2000 to September
2003)
- ------------------------------------------------------------------------------------------------------------------------------------
43
Pioneer AmPac Growth Fund
- ------------------------------------------------------------------------------------------------------------------------------------
FUND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation During Other Directorships
Name and Age With the Fund and Term of Office Past Five Years Held by this
Officer
Christopher J. Kelley (41) Assistant Since 2003. Assistant Vice President and Senior None
Secretary Serves at the Counsel of Pioneer since July 2002;
discretion of Vice President and Senior Counsel
the Board of BISYS Fund Services, Inc. (April
2001 to June 2002); Senior Vice
President and Deputy General
Counsel of Funds Distributor, Inc.
(July 2000 to April 2001; and
Assistant Secretary of all Pioneer
Funds since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Phelan (48) Assistant Since 2003. Partner, Wilmer Cutler Pickering None
Secretary Serves at the Hale and Dorr LLP; Assistant
discretion of Secretary of all Pioneer Funds
the Board since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (60) Treasurer Since 2003. Vice President - Fund Accounting, None
Serves at the Administration and Custody Services
discretion of of Pioneer; and Treasurer of all of
the Board the Pioneer Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (46) Assistant Since November, Deputy Treasurer of Pioneer since None
Treasurer 2004. Serves at the 2004; Treasurer and Senior Vice
discretion of the President, CDC IXIS Asset
Board Management Services from 2002 to
2003; Assistant Treasurer and Vice
President, MFS Investment
Management from 1997 to 2002; and
Assistant Treasurer of all of the
Pioneer Funds since November 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (40) Assistant Since 2003. Assistant Vice President - Fund None
Treasurer Serves at the Accounting, Administration and
discretion of Custody Services of Pioneer; and
the Board Assistant Treasurer of all of the
Pioneer Funds
- ------------------------------------------------------------------------------------------------------------------------------------
44
Pioneer AmPac Growth Fund
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation During Other Directorships
Name and Age With the Fund and Term of Office Past Five Years Held by this
Officer
Gary Sullivan (47) Assistant Since 2003. Fund Accounting Manager - Fund None
Treasurer Serves at the Accounting, Administration and
discretion of Custody Services of Pioneer; and
the Board Assistant Treasurer of all of the
Pioneer Funds since May 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan Assistant Since 2003. Fund Administration Manager - Fund None
(32) Treasurer Serves at the Accounting, Administration and
discretion of Custody Services since June 2003;
the Board Assistant Vice President - Mutual
Fund Operations of State Street
Corporation from June 2002 to June
2003 (formerly Deutsche Bank Asset
Management); Pioneer Fund
Accounting, Administration and
Custody Services (Fund Accounting
Manager from August 1999 to May
2002, Assistant Treasurer of all
Pioneer Funds since September
2003
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin (38) Chief Since October, 2004. Chief Compliance Officer of Pioneer None
Compliance Serves at the (Director of Compliance and Senior
Officer discretion of the Counsel from November 2000 to
Board September 2004); and Chief
Compliance Officer of all of the
Pioneer Funds since 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Fund's investment adviser, provides investment
management and financial services to mutual funds, institutional and other
clients.
45
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
46
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
47
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
48
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
49
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
50
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
51
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
52
- --------------------------------------------------------------------------------
HOW TO CONTACT PIONEER
- --------------------------------------------------------------------------------
We are pleased to offer a variety of convenient ways for you to contact us for
assistance or information.
Call us for:
Account Information, including existing accounts,
new accounts, prospectuses, applications
and service forms 1-800-225-6292
FactFone(SM) for automated fund yields, prices,
account information and transactions 1-800-225-4321
Retirement plans information 1-800-622-0176
Telecommunications Device for the Deaf (TDD) 1-800-225-1997
Write to us:
PIMSS, Inc.
P.O. Box 55014
Boston, Massachusetts 02205-5014
Our toll-free fax 1-800-225-4240
Our internet e-mail address ask.pioneer@pioneerinvest.com
(for general questions about Pioneer only)
Visit our web site: www.pioneerfunds.com
Before investing consider the Fund's investment objectives, risks, charges and
expenses. Contact your advisor or Pioneer Investments for a prospectus
containing this information. Read it carefully.
The Fund files a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
web site at http://www.sec.gov. The filed form may also be viewed and copied at
the Commission's Public Reference Room in Washington, DC. Information regarding
the operations of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
PIONEER
-------
AMT-FREE CA
MUNICIPAL
FUND
Annual
Report
12/31/05
[Logo] PIONEER
Investments(R)
Table of Contents
- --------------------------------------------------------------------------------
Letter to Shareowners 1
Portfolio Summary 2
Prices and Distributions 3
Performance Update 4
Comparing Ongoing Fund Expenses 8
Portfolio Management Discussion 10
Schedule of Investments 15
Financial Statements 18
Notes to Financial Statements 26
Report of Independent Registered Public Accounting Firm 32
Factors Considered by the Independent Trustees in Approving
the Management Contract 33
Trustees, Officers and Service Providers 38
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
LETTER TO SHAREOWNERS 12/31/05
- --------------------------------------------------------------------------------
Dear Shareowner,
- --------------------------------------------------------------------------------
As 2005 came to a close, U.S. investors looked back on a year of major
challenges, though without much change in the market indices. The war in Iraq
continued, oil prices soared, then dropped, while short-term interest rates
ratcheted steadily higher and intermediate and long-term rates stayed about the
same. Natural disasters also threatened economic expansion. Still, the economy
moved forward as corporate earnings grew. The hope of a growing economy was not
reflected by the small gains or losses in the major U.S. market indices. Among
capitalization ranges, midcap issues made the most headway. Bond prices held
firm and yields remained low, perhaps a sign that the Federal Reserve Board's
interest rate hikes would temper the inflationary pressures induced by a growing
economy.
Among the nagging issues facing the U.S. economy in 2006 is the potential impact
of high energy prices on consumer spending and corporate profits. Also unknown
at this time is whether the Federal Reserve Board will continue to raise
interest rates under its new chairman, Ben Bernanke, who stated his top priority
will be to maintain continuity.
Rising interest rates and improving business conditions made U.S. holdings more
attractive to foreign investors, helping to strengthen the dollar versus the
euro and other key currencies. Investors in many foreign markets enjoyed stellar
returns. Double-digit gains were widespread in Europe, Asia and Latin America.
Even the long-dormant Japanese economy began to stir, while emerging markets,
especially those rich in natural resources, fed global economic growth.
The disparity of returns among countries and sectors underscores the importance
for investors to maintain a well-diversified portfolio. We believe this may be a
good time for investors to review their holdings with their advisor and
determine if they reflect the wide range of opportunities that exist across many
asset classes, as last year's results make clear.
Investing for income with Pioneer
Adding one or more of Pioneer's income-oriented funds to your investment program
may help improve your portfolio's overall balance. As a premier provider of
fixed-income investments, Pioneer offers you a broad selection of actively
managed bond funds to help meet a variety of investment needs. Pioneer also
offers income-oriented equity funds, each managed using a value-oriented, total
return investment philosophy that seeks enhanced return potential and lower
volatility through active diversification. Your financial advisor can help you
select among Pioneer's fixed-income choices.
Respectfully,
/s/ Osbert M. Hood
Osbert M. Hood
President
Pioneer Investment Management, Inc.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Before investing consider the fund's investment objectives, risks, charges and
expenses. Contact your advisor or Pioneer Investments for a prospectus
containing this information. Read it carefully.
1
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY 12/31/05
- --------------------------------------------------------------------------------
Sector Distribution
- --------------------------------------------------------------------------------
(As a percentage of total investment portfolio)
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
Insured 35.5%
Health 20.3%
Various Revenues 13.8%
General Obligation 9.1%
Special Revenues 5.6%
Education 5.5%
Power 4.0%
Reserves 2.6%
Water & Sewer 2.2%
Escrowed 1.4%
Portfolio Quality
- --------------------------------------------------------------------------------
(As a percentage of total investment portfolio; based on S&P ratings)
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
AAA 36.8%
A 31.4%
BBB 18.4%
BB & Lower 5.9%
AA 4.9%
Commercial Paper 2.6%
10 Largest Holdings
- --------------------------------------------------------------------------------
(As a percentage of debt holdings)
1. California Health Facilities Financing Authority, 6.25% 12/1/34 6.24%
2. San Joaquin Hills Transportation Corridor Agency, 5.0%, 1/1/33 5.91
3. California State, 4.75%, 4/1/29 5.63
4. Central California Joint Powers Health Financing Center,
6.0%, 2/1/30 5.21
5. California State Department of Veteran Affairs, 4.75%, 12/1/25 5.06
6. Alameda Corridor Transportation Authority, 4.75%, 10/1/25 5.05
7. California Health Facilities Financing Authority, 5.0%, 3/1/33 5.01
8. Duarte California Certificates of Participation, 5.25%, 4/1/31 4.42
9. California State Department of Water Resources Power Supply,
5.25%, 5/1/20 4.10
10. University of California Revenues, 5.0%, 5/15/36 3.87
This list excludes temporary cash and derivative instruments. The portfolio is
actively managed, and current holdings may be different.
2
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
Net Asset Value Per Share
- --------------------------------------------------------------------------------
Class 12/31/05 12/31/04
- -----------------------------------------------------
A $12.86 $12.65
B $12.79 $12.64
C $12.76 $12.63
Investor $12.83 $12.66
Distributions Per Share
- --------------------------------------------------------------------------------
1/1/05 - 12/31/05
-----------------------------------------
Short-Term Long-Term
Class Dividends Capital Gains Capital Gains
----- --------- ------------- -------------
A $0.5270 $ - $0.1266
B $0.3956 $ - $0.1266
C $0.4260 $ - $0.1266
Investor $0.5561 $ - $0.1266
3
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS A SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer AMT-Free CA Municipal Fund public offering price,
compared to that of the Lehman Brothers Municipal Bond Index.
Average Annual Total Returns
(As of December 31, 2005)
Net Asset Public Offering
Period Value (NAV) Price (POP)
Life-of-Class
(9/30/96) 6.04% 5.40%
5 Years 5.82 4.84
1 Year 6.94 2.10
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED
MATERIAL.]
Value of $10,000 Investment
Pioneer AMT-Free Lehman Brothers
CA Municipal Fund Muni Bond Index
9/96 9,550 10,000
9,719 10,255
12/97 10,816 11,197
11,436 11,923
12/99 10,358 11,678
12,264 13,042
12/01 12,733 13,711
13,790 15,028
12/03 14,451 15,826
15,213 16,535
12/05 16,269 17,116
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
NAV results represent the percent change in net asset value per share. Returns
would have been lower had sales charges been reflected. POP returns reflect
deduction of maximum 4.5% sales charge. All results are historical and assume
the reinvestment of dividends and capital gains. Other share classes are
available for which performance and expenses will differ.
The performance of each class of the Fund includes the performance of the
predecessor fund's Class A, Class B and Class C shares, which has been restated
to reflect differences in any applicable sales charges (but not differences in
expenses). If all the expenses of the Pioneer fund were reflected, the
performance would be lower. This adjustment has the effect of reducing the
previously reported performance of the predecessor fund. Pioneer AMT-Free CA
Municipal Fund was created through the reorganization of predecessor Safeco
funds on December 10, 2004.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers fund performance would be lower. Waivers may
not be in effect for all funds and can be rescinded at any time. See the
prospectus and financial statements for complete details.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
The Lehman Brothers Municipal Bond Index is a broad measure of the municipal
bond market. 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 an Index.
4
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS B SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer AMT-Free CA Municipal Fund, compared to that of the
Lehman Brothers Municipal Bond Index.
Average Annual Total Returns
(As of December 31, 2005)
If If
Period Held Redeemed
Life-of-Class
(9/30/96) 5.19% 5.19%
5 Years 4.89 4.89
1 Year 5.39 1.39
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED
MATERIAL.]
Value of $10,000 Investment
Pioneer AMT-Free Lehman Brothers
CA Municipal Fund Muni Bond Index
9/96 10,000 10,000
10,256 10,255
12/97 11,328 11,197
11,893 11,923
12/99 10,694 11,678
12,578 13,042
12/01 12,960 13,711
13,927 15,028
12/03 14,479 15,826
15,156 16,535
12/05 15,973 17,116
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
"If Held" results represent the percent change in net asset value per share.
Returns would have been lower had sales charges been reflected. "If Redeemed"
returns reflect the deduction of applicable contingent deferred sales charge
(CDSC).
Class B shares reflect the deduction of the maximum applicable contingent
deferred sales charge (CDSC). The maximum CDSC is 4.0% and declines over five
years.
All results are historical and assume the reinvestment of dividends and capital
gains. Other share classes are available for which performance and expenses will
differ.
The performance of each class of the Fund includes the performance of the
predecessor fund's Class A, Class B and Class C shares, which has been restated
to reflect differences in any applicable sales charges (but not differences in
expenses). If all the expenses of the Pioneer fund were reflected, the
performance would be lower. This adjustment has the effect of reducing the
previously reported performance of the predecessor fund. Pioneer AMT-Free CA
Municipal Fund was created through the reorganization of predecessor Safeco
funds on December 10, 2004.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers fund performance would be lower. Waivers may
not be in effect for all funds and can be rescinded at any time. See the
prospectus and financial statements for complete details.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
The Lehman Brothers Municipal Bond Index is a broad measure of the municipal
bond market. 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 an Index.
5
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS C SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer AMT-Free CA Municipal Fund, compared to that of the
Lehman Brothers Municipal Bond Index.
Average Annual Total Returns
(As of December 31, 2005)
If If
Period Held Redeemed
Life-of-Class
(10/1/2003) 5.35% 5.35%
1 Year 5.49 5.49
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED
MATERIAL.]
Value of $10,000 Investment
Pioneer AMT-Free Lehman Brothers
CA Municipal Fund Muni Bond Index
10/03 10,000 10,000
12/03 10,225 10,188
12/04 10,696 10,644
12/05 11,283 11,018
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
Class C shares held for less than one year are also subject to a 1% contingent
deferred sales charge (CDSC). The performance of Class C shares does not reflect
the 1% front-end sales charge in effect prior to February 1, 2004. If you paid a
1% sales charge, your returns would be lower than those shown above. "If Held"
results represent the percent change in net asset value per share. Returns would
have been lower had sales charges been reflected. All results are historical and
assume the reinvestment of dividends and capital gains. Other share classes are
available for which performance and expenses will differ.
The performance of each class of the Fund includes the performance of the
predecessor fund's Class A, Class B and Class C shares, which has been restated
to reflect differences in any applicable sales charges (but not differences in
expenses). If all the expenses of the Pioneer fund were reflected, the
performance would be lower. This adjustment has the effect of reducing the
previously reported performance of the predecessor fund. Pioneer AMT-Free CA
Municipal Fund was created through the reorganization of predecessor Safeco
funds on December 10, 2004.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers fund performance would be lower. Waivers may
not be in effect for all funds and can be rescinded at any time. See the
prospectus and financial statements for complete details.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
The Lehman Brothers Municipal Bond Index is a broad measure of the municipal
bond market. 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 an Index.
6
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 INVESTOR CLASS SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer AMT-Free CA Municipal Fund, compared to that of the
Lehman Brothers Municipal Bond Index.
Average Annual Total Returns
(As of December 31, 2005)
If If
Period Held Redeemed
Life-of-Class
(10/5/1983) 8.11% 8.11%
10 Years 5.80 5.80
5 Years 6.05 6.05
1 Year 6.86 6.86
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED
MATERIAL.]
Value of $10,000 Investment
Pioneer AMT-Free Lehman Brothers
CA Municipal Fund Muni Bond Index
12/95 10,000 10,000
10,253 10,443
12/97 11,438 11,403
12,146 12,142
12/99 11,028 11,892
13,102 13,281
12/01 13,642 13,962
14,837 15,303
12/03 15,576 16,116
16,463 16,838
12/05 17,592 17,430
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
Certain Pioneer funds (the "Funds") issued Investor Class shares in connection
with the reorganization of Safeco mutual funds. The Funds are not offering
additional [Investor Class] shares except in connection with the reinvestment of
dividends on the Funds' outstanding Investor Class shares. All Investor Class
shares of the Funds, whenever issued, convert to Class A shares of their
respective Funds on December 10, 2006. Investor Class shares are not subject to
sales charges.
The performance of each class of the Fund includes the performance of the
predecessor fund's Class A, Class B and Class C shares, which has been restated
to reflect differences in any applicable sales charges (but not differences in
expenses). If all the expenses of the Pioneer fund were reflected, the
performance would be lower. This adjustment has the effect of reducing the
previously reported performance of the predecessor fund. Pioneer AMT-Free CA
Municipal Fund was created through the reorganization of predecessor Safeco
funds on December 10, 2004.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers fund performance would be lower. Waivers may
not be in effect for all funds and can be rescinded at any time. See the
prospectus and financial statements for complete details.
The Lehman Brothers Municipal Bond Index is a broad measure of the municipal
bond market. 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 an Index.
7
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
COMPARING ONGOING FUND EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Fund, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Fund expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds. The example is based on an investment
of $1,000 at the beginning of the Fund's latest six-month period and held
throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [DIVIDED BY] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer AMT-Free CA Municipal Fund
Based on actual returns from July 1, 2005 through December 31, 2005.
Investor
Share Class A B C Class
- -----------------------------------------------------------------------------------------
Beginning Account Value $1,000.00 $1,000.00 $1,000.00 $1,000.00
On 7/1/05
Ending Account Value $1,015.96 $1,010.84 $1,010.84 $1,016.36
On 12/31/05
Expenses Paid $ 4.37 $ 9.00 $ 7.90 $ 3.21
During Period*
* Expenses are equal to the Fund's annualized expense ratio of 0.86%, 1.78%,
1.56%, and 0.63% for Class A, Class B, Class C, and Investor Class shares,
respectively, multiplied by the average account value over the period,
multiplied by 184/365 (to reflect the one-half year period).
8
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
Expenses Paid on a $1,000 Investment in Pioneer AMT-Free CA Municipal Fund
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2005 through December 31, 2005.
Investor
Share Class A B C Class
- --------------------------------------------------------------------------------------
Beginning Account Value $1,000.00 $1,000.00 $1,000.00 $1,000.00
On 7/1/05
Ending Account Value $1,020.87 $1,016.25 $1,017.35 $1,022.03
On 12/31/05
Expenses Paid $ 4.38 $ 9.03 $ 7.93 $ 3.21
During Period*
* Expenses are equal to the Fund's annualized expense ratio of 0.86%, 1.78%,
1.56%, and 0.63% for Class A, Class B, Class C, and Investor Class shares,
respectively, multiplied by the average account value over the period,
multiplied by 184/365 (to reflect the one-half year period).
9
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05
- --------------------------------------------------------------------------------
In the following interview, Portfolio Manager Stephen C. Bauer outlines the
investment environment for California tax-free bonds during the Fund's most
recent fiscal year, Fund performance, his investment philosophy and strategy.
Q: How did the Fund perform during its most recent fiscal year?
A: For the 12-month period ended December 31, 2005, Pioneer AMT- Free CA
Municipal Fund's Class A shares produced a 6.94% return; Class B shares
returned 5.39%; and Class C shares 5.49%, all at net asset value. The
Fund's benchmark, the Lehman Brothers Municipal Bond Index, returned 3.51%,
and the average return of the Lipper California Municipal Debt Funds
Category was 3.82%. Lipper is an independent monitor of mutual fund
performance.
Call 1-800-225-6292 to visit www.pioneerfunds.com for the most recent
month-end performance results. Current performance may be lower or higher
than the performance data quoted.
The performance data quoted represents past performance, which is no
guarantee of future results. Investment return and principal value will
fluctuate, and shares, when redeemed, may be worth more or less than their
original cost.
Q: Will you describe the investing environment for tax-exempt bonds during the
time period?
A: For the second year in a row, the environment for long-term municipals was
remarkably stable. The U.S. economy maintained steady GDP growth throughout
the year, energy prices soared, but inflation was muted. Yields of
long-term municipals and Treasury securities continued to be low, close to
their all-time low in June 2003. (The Bond Buyer 40 Municipal Index, an
industry standard for measuring long-term municipal bond interest rates,
closed the period at 4.77%.) The trading range for long-term municipals was
extremely narrow for the period. This was mildly surprising given that the
Federal Reserve continued to raise short-term interest rates aggressively
throughout 2005, and that most economists had once again predicted that
long-term rates would increase. Intermediate-term rates rose, but long-term
rates, where this portfolio is concentrated, were slightly lower during the
past 12 months. That meant long-term municipal investors generally earned
their coupon interest rate, plus some price appreciation (as bond yields
decline, bond prices rise, and vice versa).
10
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Q: How would you characterize supply and demand for municipal bonds?
A: The year 2005 set a record for total volume of new municipal issues during
the year, over $400 billion. The volume was much higher than anticipated
and largely related to tax-free bond refundings, where issuers take
advantage of declining interest rates and refinance higher yielding bonds
at lower rates.
Refundings were a very important part of the story of the California
municipal debt market in 2005: As our shareowners may recall, several years
ago California found itself in a fiscal crisis, where the state and its
agencies were forced to issue billions in municipal debt just to maintain
services. Now that California's economy is performing much better, there
has been considerable progress in dealing with the state's budget deficit.
In light of this, two major ratings agencies upgraded the state's debt in
July 2005, and its bonds have been trading strongly. During the past 12
months, California's state and local governments took advantage of the
strong state bond market - and the resulting lower interest rates on
municipal debt - through bond refundings. In fact, half of California bond
issuance in 2005 came from refundings. With an advance refunding, a
municipal bond's maturity date moves forward to the earlier call date, the
bonds are retired and the proceeds put in escrow in U.S. Treasury
securities. And because the number of years to maturity of the bonds is
often dramatically reduced, and the escrow holdings now rated AAA, the
value of the bonds can increase enormously. Over the period, advance
refundings of California tax-free bonds strongly benefited the Fund, as
almost 18% of portfolio holdings were refunded at premium prices.
Though demand from individual investors remained flat during the period,
tremendous demand for municipal bonds came from property and casualty
insurance companies. These firms have actually experienced strong profit
growth during a terrible year nationally for natural disasters, as they
have been able to raise their rates and benefit from increased demand from
businesses and consumers for property and casualty insurance.
Q: Will you restate your philosophy in managing the Fund?
A: My investment philosophy is to stay fully invested in long-term bonds at
all times. Pioneer California Tax Free Income Fund is a long-term fund, and
I feel responsible to maintain it as such, and not to try to predict the
direction or magnitude of interest-rate changes and make maturity or other
investment decisions on that
11
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05 (continued)
- --------------------------------------------------------------------------------
basis. At the close of the period, the Fund's average maturity was
approximately 21 years.
In addition, I believe that being invested in long-term municipal bonds is
a sound strategy for two reasons: First, long-term municipal bonds
historically yield more than shorter-term bonds. There are no inverse yield
curves in the municipal bond market (i.e., where long-term rates are lower
than short-term rates). Of course, the reason that longer-term municipal
bonds yield more is that they are more volatile than bonds of shorter
maturity. Greater interest rate risk is the trade-off for more total return
through the accumulation of higher yield over the long-term.
The second reason is that I take a very long-term view of the bond market.
I rarely make any transactions that I think will pay off only over the
short term. As I see it, many of the best investment decisions take years
to bear fruit. This long-term view means that the Fund will generally have
a very low turnover ratio and reasonably low transaction costs.
Q: Will you discuss your portfolio strategy during the 12-month period?
A: I pursued two main strategies over the period. First, I sold some municipal
bonds with short call dates. These bonds were purchased inexpensively
several years ago and had performed well for the Fund. But with their call
protection running out (at the call date, the issuer can refund the
proceeds of the bond for cash at "par," the original offering price), the
price appreciation potential for these bonds was limited. In their place,
the Fund purchased municipal bonds with more attractive call features. This
call protection strategy is meant to optimize the Fund's performance
characteristics and has worked well over the long term.
Second, during the 12-month period I purchased par bonds for the Fund.
Typically these bonds have limited appeal because - in terms of their price
performance - they may have marginal upside and higher than normal downside
should interest rates rise. However, the par bonds purchased during the
period carried high yields and were very attractively priced.
12
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Q: How is the Fund positioned in terms of credit quality and diversification?
A: Approximately 56% of the Fund's portfolio is rated AAA or the equivalent
(the highest rating). For the period, the Fund generally avoided purchasing
any bonds with ratings lower than AAA. Purchasing lower quality bonds has
been a popular strategy in the municipal marketplace in recent years, and
"spreads" - or differences in yield between higher and lower quality
municipal bonds - have narrowed considerably. At present, I do not believe
investors are being adequately compensated in additional yield for the risk
of buying lower quality bonds.
Q: What is your outlook going forward?
A: Every year brings unexpected events that move the market, but at present
long-term municipal bonds look stable. Inflation figures seem modest, and
it is hard to find economic factors or other trends that might change that.
With an inverted yield curve in the Treasury market in December 2005 (where
short-term rates were modestly higher than long-term rates), some have
predicted an economic slowdown in 2006. If this occurs, it would be good
news for long-term municipal bonds, because such slowdowns tend to reduce
inflationary pressures. We will be monitoring the progress of the national,
state and local economies over the course of the coming year, as well as
the actions of the incoming Fed chairman Benjamin Bernanke.
13
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05 (continued)
- --------------------------------------------------------------------------------
When interest rates rise, the prices of fixed income securities in the fund will
generally fall. Conversely, when interest rates fall, the prices of fixed income
securities in the fund will generally rise. Investments in the fund are subject
to possible loss due to the financial failure of underlying securities and their
inability to meet their debt obligations. Investing primarily in the securities
issued by California and it's municipalities makes the Fund more vulnerable to
unfavorable developments in California than are funds that invest in municipal
securities of many states. Investing in foreign and/or emerging markets
securities involves risks relating to interest rates, currency exchange rates,
economic, and political conditions. At times, the fund's investments may
represent industries or industry sectors that are interrelated or have common
risks, making it more susceptible to any economic, political, or regulatory
developments or other risks affecting those industries and sectors.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These opinions should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
14
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05
- --------------------------------------------------------------------------------
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
CALIFORNIA MUNICIPAL BONDS - 93.0%
Government - 6.5%
$4,500,000 A/A3 California State, 4.75%, 4/1/29 $ 4,527,225
1,000,000 AAA/Aaa Mount San Antonia Community Municipalty
College District, 5.0%, 5/1/27 1,088,220
-----------
$ 5,615,445
-----------
Municipal Development - 3.5%
3,000,000 A/A3 San Jose California Redevelopment Agency Tax
Allocation, 4.75%, 8/1/22 $ 2,999,850
-----------
Municipal Facilities - 6.0%
2,100,000 AAA/Aaa Fresno Joint Powers Financing Authority Lease
Revenue, 4.75%, 9/1/28 $ 2,120,874
3,000,000 AAA/Aaa Los Angeles County California Certificates of
Participation, 4.75%, 3/1/23 3,042,450
-----------
$ 5,163,324
-----------
Municipal General - 1.2%
1,000,000 AAA/Aaa Sacramento City Financing Authority, 5.0%, 12/1/32 $ 1,074,460
-----------
Municipal Higher Education - 8.9%
2,000,000 NR/Baa3 California State University Fresno Association, Inc.,
6.0%, 7/1/26 $ 2,280,720
2,000,000 NR/Baa3 California State University Fresno Association, Inc.,
6.0%, 7/1/31 2,280,720
3,000,000 AAA/Aaa University of California Revenues, 5.0%, 5/15/36 3,109,500
-----------
$ 7,670,940
-----------
Municipal Housing - 4.7%
4,000,000 AA-/Aa2 California State Department of Veteran Affairs,
4.75%, 12/1/25 $ 4,069,800
-----------
Municipal Medical - 22.3%
4,500,000 NR/A3 California Health Facilities Financing Authority,
6.25%, 12/1/34 $ 5,018,490
4,000,000 A/NR California Health Facilities Financing Authority,
5.0%, 3/1/33 4,028,480
4,000,000 BBB-/Baa2 Central California Joint Powers Health Financing
Center, 6.0%, 2/1/30 4,189,240
3,500,000 BBB+/Baa1 Duarte CA Certificates of Participation,
5.25%, 4/1/31 3,549,385
2,500,000 A/A3 San Bernardino County California Certificates of
Participation, 5.5%, 8/1/24 2,515,625
-----------
$19,301,220
-----------
The accompanying notes are an integral part of these financial statements. 15
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
Municipal Power - 6.2%
$2,990,000 BBB+/A2 California State Department of Water Resources
Power Supply, 5.25%, 5/1/20 $ 3,295,817
2,000,000 AAA/Aaa Southern California Public Power Project,
5.0%, 7/1/33 2,078,560
-----------
$ 5,374,377
-----------
Municipal School District - 4.7%
1,180,000 AAA/Aaa Pomona Unified School District, 6.55%, 8/1/29 $ 1,541,658
2,500,000 NR/Aaa Sacramento City Unified School District,
4.75%, 7/1/29 2,526,525
-----------
$ 4,068,183
-----------
Municipal Tobacco - 5.4%
2,500,000 BBB/Baa3 Golden State Tobacco Securitization,
6.75%, 6/1/39 $ 2,809,450
1,500,000 BBB/Baa3 Golden State Tobacco Securitization,
7.9%, 6/1/42 1,812,285
-----------
$ 4,621,735
-----------
Muni Transportation - 10.2%
4,000,000 AAA/Aaa Alameda Corridor Transportation Authority,
4.75%, 10/1/25 $ 4,058,440
5,000,000 BB/Ba2 San Joaquin Hills Transportation Corridor Agency,
5.0%, 1/1/33 4,751,500
-----------
$ 8,809,940
-----------
Muni Utilities - 5.2%
2,000,000 AAA/Aaa Los Angeles California Wastewater System
Revenue, 5.0%, 6/1/29 $ 2,075,460
2,315,000 AAA/Aaa Orange County Sanitation District Certificates of
Participation, 5.0%, 2/1/33 2,388,617
-----------
$ 4,464,077
-----------
16 The accompanying notes are an integral part of these financial statements.
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
Muni Water - 8.2%
$2,645,000 AAA/NR Capistrano Beach CA Water District,
4.75%, 12/1/28 $ 2,666,821
1,475,000 AAA/NR Capistrano Beach CA Water District,
4.75%, 12/1/28 1,487,169
1,200,000 AAA/Aaa Los Angeles Department of Water & Power
Waterworks Revenue, 4.25%, 10/15/34 1,142,472
1,750,000 NR/Baa2 West Kern County Water District Certificates of
Participation, 5.625%, 6/1/31 1,823,185
-----------
$ 7,119,647
-----------
TOTAL CALIFORNIA MUNICIPAL BONDS
(Cost $72,779,809) $80,352,998
-----------
Shares
TAX-EXEMPT MONEY MARKET MUTUAL FUND - 2.5%
2,176,120 Blackrock Liquidity Funds $ 2,176,120
-----------
TOTAL TAX-EXEMPT MONEY MARKET MUTUAL FUND
(Cost $2,176,120) $ 2,176,120
-----------
TOTAL INVESTMENTS IN SECURITIES - 95.5%
(Cost $74,955,929)(a) $82,529,118
-----------
OTHER ASSETS AND LIABILITIES - 4.5% $ 3,901,530
-----------
TOTAL NET ASSETS - 100.0% $86,430,648
===========
NR Not rated by either S&P or Moody's.
(a) At December 31, 2005, the net unrealized gain on investments based on cost
for federal income tax purposes of $74,211,691 was as follows:
Aggregate gross unrealized gain for all investments in which there is
an excess of value over tax cost $8,330,068
Aggregate gross unrealized loss for all investments in which there is
an excess of tax cost over value (12,641)
----------
Net unrealized gain $8,317,427
==========
Purchases and sales of securities (excluding temporary cash investments) for the
year ended December 31, 2005 aggregated $6,053,697 and $11,269,062,
respectively.
The accompanying notes are an integral part of these financial statements. 17
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/05
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities (cost $74,955,929) $82,529,118
Receivables -
Fund shares sold 3,007,118
Interest 1,116,521
Due from Pioneer Investment Management, Inc. 16,600
-----------
Total assets $86,669,357
-----------
LIABILITIES:
Payables -
Fund shares repurchased $ 14,245
Dividends 91,475
Due to bank 89,177
Due to affiliates 8,111
Accrued expenses 35,701
-----------
Total liabilities $ 238,709
-----------
NET ASSETS:
Paid-in capital $78,024,260
Undistributed net investment income 805,003
Accumulated net realized gain on investments 28,196
Net unrealized gain on investments 7,573,189
-----------
Total net assets $86,430,648
===========
NET ASSET VALUE PER SHARE:
(Unlimited number of shares authorized)
Class A (based on $10,186,307/792,017 shares) $ 12.86
===========
Class B (based on $411,485/32,183 shares) $ 12.79
===========
Class C (based on $1,560,790/122,314 shares) $ 12.76
===========
Investor Class (based on $74,272,066/5,786,727 shares) $ 12.83
===========
MAXIMUM OFFERING PRICE:
Class A ($12.86 [divided by] 95.5%) $ 13.47
===========
18 The accompanying notes are an integral part of these financial statements.
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/05
INVESTMENT INCOME:
Interest $4,398,462
----------
Total investment income $4,398,462
----------
EXPENSES:
Management fees $ 425,739
Transfer agent fees and expenses
Class A 6,826
Class B 376
Class C 319
Investor Class 42,767
Distribution fees
Class A 10,150
Class B 1,402
Class C 6,111
Administrative reimbursements 18,512
Custodian fees 11,226
Registration fees 9,469
Professional fees 51,172
Printing expense 22,841
Fees and expenses of nonaffiliated trustees 4,310
Miscellaneous 10,413
----------
Total expenses $ 621,633
Less management fees waived and
expenses reimbursed by Pioneer Investment
Management, Inc. (67,301)
Less fees paid indirectly (705)
----------
Net expenses $ 553,627
----------
Net investment income $3,844,835
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments $ 836,085
----------
Change in net unrealized gain on investments $ 964,991
----------
Net gain on investments $1,801,076
----------
Net increase in net assets resulting from operations $5,645,911
==========
The accompanying notes are an integral part of these financial statements. 19
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/05 and 12/31/04
Year Ended Year Ended
12/31/05 12/31/04
FROM OPERATIONS:
Net investment income $ 3,844,835 $ 4,189,895
Net realized gain on investments 836,085 875,953
Change in net unrealized gain on investments 964,991 (124,695)
----------- -----------
Net increase in net assets resulting from
operations $ 5,645,911 $ 4,941,153
----------- -----------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class A ($0.53 and $0.53 per share, respectively) $ (167,882) $ (38,349)
Class B ($0.40 and $0.43 per share, respectively) (4,181) (21,776)
Class C ($0.43 and $0.43 per share, respectively) (19,537) (3,294)
Investor Class ($0.56 and $0.56 per share,
respectively) (3,467,686) (3,904,965)
Net realized gain:
Class A ($0.13 and $0.16 per share, respectively) (73,020) (10,260)
Class B ($0.13 and $0.16 per share, respectively) (3,916) (7,365)
Class C ($0.13 and $0.16 per share, respectively) (13,832) (1,233)
Investor Class ($0.13 and $0.16 per share,
respectively) (736,088) (1,026,169)
----------- -----------
Total distributions to shareowners $(4,486,142) $(5,013,411)
----------- -----------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $14,078,561 $23,247,060
Reinvestment of distributions 3,169,129 3,792,963
Cost of shares repurchased (17,261,133) (29,277,500)
----------- -----------
Net decrease in net assets resulting from
Fund share transactions $ (13,443) $(2,237,477)
----------- -----------
Net increase (decrease) in net assets $ 1,146,326 $(2,309,735)
NET ASSETS:
Beginning of year 85,284,322 87,594,057
----------- -----------
End of year (including undistributed net investment
income of $805,003 and $680,143, respectively) $86,430,648 $85,284,322
=========== ===========
20 The accompanying notes are an integral part of these financial statements.
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
'05 Shares '05 Amounts '04 Shares '04 Amounts
CLASS A
Shares sold 934,703 $ 12,067,294 53,928 $ 681,663
Reinvestment of distributions 5,596 71,961 2,886 36,352
Less shares repurchased (155,148) (1,996,475) (41,467) (528,053)
Shares transferred in
reorganization - - (66,886) (847,708)
-------- ------------ -------- ------------
Net increase (decrease) 785,151 $ 10,142,780 (51,539) $ (657,746)
-------- ============ ======== ============
CLASS B
Shares sold 33,051 $ 425,291 8,090 $ 102,620
Reinvestment of distributions 224 2,857 1,771 22,332
Less shares repurchased (1,883) (24,182) (43,836) (553,644)
Shares transferred in
reorganization - - (45,861) (579,994)
-------- ------------ -------- ------------
Net increase (decrease) 31,392 $ 403,966 (79,836) $(1,008,686)
-------- ============ ======== ============
CLASS C
Shares sold 122,969 $ 1,585,976 791 $ 10,000
Reinvestment of distributions 307 3,918 - -
Less shares repurchased (1,753) (22,000) (4) (51)
Shares transferred in
reorganization - - (7,968) (100,750)
-------- ------------ -------- ------------
Net increase (decrease) 121,523 $ 1,567,894 (7,181) $ (90,801)
-------- ============ ======== ============
INVESTOR CLASS
Shares sold - $ - 1,778,201 $22,452,777
Reinvestment of distributions 240,524 3,090,393 296,010 3,734,279
Less shares repurchased (1,182,707) (15,218,476) (2,225,920) (28,195,752)
Shares transferred in
reorganization - - 120,682 1,528,452
---------- ------------ ----------- ------------
Net decrease (942,183) $(12,128,083) (31,027) $ (480,244)
---------- ============ =========== ============
The accompanying notes are an integral part of these financial statements. 21
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/05 12/31/04(a) 12/31/03 12/31/02 12/31/01
CLASS A
Net asset value, beginning of period $ 12.65 $ 12.69 $ 12.67 $ 12.40 $ 12.50
------- ------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.45 $ 0.53(b) $ 0.56 $ 0.57 $ 0.58
Net realized and unrealized gain (loss) on investments 0.42 0.12 0.03 0.43 (0.11)
------- ------- ------- ------- -------
Net increase from investment operations $ 0.87 $ 0.65 $ 0.59 $ 1.00 $ 0.47
Distributions to shareowners:
Net investment income (0.53) (0.53) (0.53) (0.51) (0.57)
Distributions in excess of net investment income - - - (0.04) -
Net realized gain (0.13) (0.16) (0.04) (0.18) -
------- ------- ------- ------- -------
Net increase (decrease) in net asset value $ 0.21 $ (0.04) $ 0.02 $ 0.27 $ (0.10)
------- ------- ------- ------- -------
Net asset value, end of period $ 12.86 $ 12.65 $ 12.69 $ 12.67 $ 12.40
======= ======= ======= ======= =======
Total return* 6.94% 5.22% 4.79% 8.31% 3.82%
Ratio of net expenses to average net assets+ 0.86% 0.86% 0.86% 1.06% 1.06%
Ratio of net investment income to average net assets+ 4.23% 4.21% 4.49% 4.25% 4.66%
Portfolio turnover rate 7% 22% 19% 25% 32%
Net assets, end of period (in thousands) $10,186 $ 87 $ 741 $ 636 $ 645
Ratios with no waivers of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 1.06% 1.04% 1.06% 1.06% 1.06%
Net investment income 4.03% 4.03% 4.29% 4.25% 4.66%
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 0.86% 1.04% 1.06% 1.06% 1.06%
Net investment income 4.23% 4.03% 4.29% 4.25% 4.66%
(a) Effective August 2, 2004, PIM became the sub-advisor of the Fund and
subsequently became the advisor on December 10, 2004.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.
+ Ratios assuming no reduction for fees paid indirectly.
(b) Net investment income per share has been calculated using the average
shares method.
The accompanying notes are an integral part of these financial statements.
22
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/05 12/31/04(a) 12/31/03 12/31/02 12/31/01
CLASS B
Net asset value, beginning of period $ 12.64 $ 12.66 $ 12.65 $ 12.39 $ 12.49
------- ------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.32 $ 0.43(b) $ 0.47 $ 0.48 $ 0.49
Net realized and unrealized gain (loss) on investments 0.36 0.14 0.02 0.42 (0.11)
------- ------- ------- ------- -------
Net increase from investment operations $ 0.68 $ 0.57 $ 0.49 $ 0.90 $ 0.38
Distributions to shareowners:
Net investment income (0.40) (0.43) (0.44) (0.42) (0.48)
Distributions in excess of net investment income - - - (0.04) -
Net realized gain (0.13) (0.16) (0.04) (0.18) -
------- ------- ------- ------- -------
Net increase (decrease) in net asset value $ 0.15 $ (0.02) $ 0.01 $ 0.26 $ (0.10)
------- ------- ------- ------- -------
Net asset value, end of period $ 12.79 $ 12.64 $ 12.66 $ 12.65 $ 12.39
======= ======= ======= ======= =======
Total return* 5.39% 4.62% 3.96% 7.47% 3.02%
Ratio of net expenses to average net assets+ 1.78% 1.68% 1.61% 1.77% 1.80%
Ratio of net investment income to average net assets+ 3.40% 3.61% 3.74% 3.54% 3.97%
Portfolio turnover rate 7% 22% 19% 25% 32%
Net assets, end of period (in thousands) $ 411 $ 10 $ 1,021 $ 1,111 $ 1,613
Ratios with no waivers of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 1.95% 1.88% 1.76% 1.77% 1.80%
Net investment income 3.23% 3.41% 3.59% 3.54% 3.97%
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 1.78% 1.88% 1.76% 1.77% 1.80%
Net investment income 3.40% 3.41% 3.59% 3.54% 3.97%
(a) Effective August 2, 2004, PIM became the sub-advisor of the Fund and
subsequently became the advisor on December 10, 2004.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.
+ Ratios assuming no reduction for fees paid indirectly.
(b) Net investment income per share has been calculated using the average
shares method.
The accompanying notes are an integral part of these financial statements.
23
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended 10/01/03(c) to
12/31/05 12/31/04(a) 12/31/03
CLASS C
Net asset value, beginning of period $ 12.63 $ 12.66 $ 12.55
------- ------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.35 $ 0.43(b) $ 0.14
Net realized and unrealized gain on investments 0.34 0.13 0.09
------- ------- -------
Net increase from investment operations $ 0.69 $ 0.56 $ 0.23
Distributions to shareowners:
Net investment income (0.43) (0.43) (0.11)
Distribtions in excess of net investment income - - (0.01)
Net realized gain (0.13) (0.16) -
------- ------- -------
Net increase (decrease) in net asset value $ 0.13 $ (0.03) $ 0.11
------- ------- -------
Net asset value, end of period $ 12.76 $ 12.63 $ 12.66
======= ======= =======
Total return* 5.49% 4.54% 1.91%^
Ratio of net expenses to average net assets+ 1.56% 1.61% 1.61%**
Ratio of net investment income to average net assets+ 3.50% 3.47% 4.60%**
Portfolio turnover rate 7% 22% 19%
Net assets, end of period (in thousands) $ 1,561 $ 10 $ 101
Ratios with no waivers of management fees and assumption of expenses by PIM
and no reduction for fees paid indirectly:
Net expenses 1.72% 2.06% 4.09%**
Net investment income 3.34% 3.02% 2.12%**
Ratios with waiver of management fees and assumption of expenses by PIM
and reduction for fees paid indirectly:
Net expenses 1.56% 1.61% 1.61%**
Net investment income 3.50% 3.47% 4.60%**
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.
^ Not annualized
** Annualized
+ Ratios assuming no reduction for fees paid indirectly.
(a) Effective August 2, 2004, PIM became the sub-advisor of the Fund and
subsequently became the advisor on December 10, 2004.
(b) Net investment income per share has been calculated using the average
shares method.
(c) Class C shares were first publicly offered on October 1, 2003.
The accompanying notes are an integral part of these financial statements.
24
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
INVESTOR CLASS 12/31/05 12/31/04(a) 12/31/03 12/31/02 12/31/01
Net asset value, beginning of period $ 12.66 $ 12.68 $ 12.67 $ 12.39 $ 12.49
------- ------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.60 $ 0.59(b) $ 0.60 $ 0.61 $ 0.62
Net realized and unrealized gain on investments and
foreign currency transactions 0.26 0.11 0.02 0.44 (0.11)
------- ------- ------- ------- -------
Net increase from investment operations $ 0.86 $ 0.70 $ 0.62 $ 1.05 $ 0.51
Distributions to shareowners:
Net investment income (0.56) (0.56) (0.57) (0.55) (0.61)
Distributions in excess of net investment income - - - (0.04) -
Distributions from net realized gains (0.13) (0.16) (0.04) (0.18) -
------- ------- ------- ------- -------
Net increase (decrease) in net asset value $ 0.17 $ (0.02) $ 0.01 $ 0.28 $ (0.10)
------- ------- ------- ------- -------
Net asset value, end of period $ 12.83 $ 12.66 $ 12.68 $ 12.67 $ 12.39
======= ======= ======= ======= =======
Total return* 6.86% 5.63% 4.97% 8.76% 4.12%
Ratio of net expenses to average net assets+ 0.63% 0.63% 0.63% 0.73% 0.75%
Ratio of net investment income to average net assets+ 4.54% 4.72% 4.72% 4.57% 4.98%
Portfolio turnover rate 7% 22% 19% 25% 32%
Net assets, end of period (in thousands) $74,272 $85,177 $85,731 $93,293 $90,165
Ratios with no waiver of management fees by PIM and no
reduction for fees paid indirectly:
Net expenses 0.70% 0.74% 0.75% 0.73% 0.75%
Net investment income 4.47% 4.60% 4.60% 4.57% 4.98%
Ratios with waiver of management fees by PIM and reduction for
fees paid indirectly:
Net expenses 0.63% 0.74% 0.75% 0.73% 0.75%
Net investment income 4.54% 4.60% 4.60% 4.57% 4.98%
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.
+ Ratios assuming no reduction for fees paid indirectly.
(a) Effective August 2, 2004, PIM became sub-advisor of the Fund and
subsequently became the advisor on December 10, 2004.
(b) Net investment income per share has been calculated using the average
shares method.
The accompanying notes are an integral part of these financial statements.
25
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer AMT-Free CA Municipal Fund (the Fund) (effective January 20, 2006, the
Fund changed its name from Pioneer California Tax Free Income Fund to Pioneer
AMT-Free CA Municipal Fund) is a Delaware statutory trust registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Fund is the successor to the Safeco California Tax Free Income
Fund, Inc. Safeco California Tax Free Income Fund transferred all of its assets
to the Fund's Investor Class shares in a one-to-one ratio on December 10, 2004
pursuant to an agreement and plan of reorganization (the 'reorganization" which
was approved by the shareholders of Safeco California Tax Free Income Fund on
December 10, 2004). The Fund had no assets or liabilities prior to the
reorganization. Accordingly, the reorganization, which was a tax-free exchange,
had no effect on the Fund's operations. The investment objective of the Fund is
to seek a high level of income exempt from federal income tax, consistent with
preservation of capital.
The Trustees have authorized the issuance of four classes of shares of the Fund.
The Fund offers four classes of shares designated as Class A, Class B, Class C,
and Investor Class shares. The Fund is not offering additional Investor Class
shares except in connection with the reinvestment of dividends on the Funds'
outstanding Investor Class shares. Each class of shares represents an interest
in the same portfolio of investments of the Fund and have equal rights to
voting, redemptions, dividends and liquidations, except that each class of
shares can bear different transfer agent and distribution fees and has exclusive
voting rights with respect to the distribution plans that have been adopted by
Class A, Class B and Class C shareowners, respectively. There is no distribution
plan for Investor Class shares.
The Fund's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the Fund
to, among other things, make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
income, expenses, and gain or loss on investments during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies followed by the Fund in
26
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the preparation of its financial statements which, are consistent with those
policies generally accepted in the investment company industry:
A. Security Valuation
Security transactions are recorded as of trade date. Securities are valued
at prices supplied by independent pricing services, which consider such
factors as Treasury spreads, yields, maturities and ratings. Valuations may
be supplemented by dealers and other sources, as required. Securities for
which there are no other readily available valuation methods are valued at
their fair values as determined by, or under the direction of the Board of
Trustees. The values of such securities used in computing the net asset
value of the Fund's shares are determined as of such times. At December 31,
2005 there were no securities fair valued. Discount and premium on debt
securities are accreted or amortized, respectfully daily into interest
income on a yield-to-maturity basis with a corresponding increase or
decrease in the cost basis of the security. Interest income is recorded on
the accrual basis. Temporary cash investments are valued at 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.
Investing primarily in the securities issued by California and its
municipalities makes the Fund more vulnerable to unfavorable developments
in California than are funds that invest in municipal securities of many
states. At times, the Fund's investments may represent industries or
industry sectors that are interrelated or have common risks, making it more
susceptible to any economic, political, or regulatory developments or other
risks affecting those industries and sectors. Information regarding the
Fund's principal risk is contained in the Fund's prospectus. Please refer
to those documents when considering the Fund's risks.
B. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal tax provision is required.
27
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the sources of the Fund's distributions may be
shown in the accompanying financial statements as either from or in excess
of net investment income or net realized gain on investment transactions,
or from paid-in capital, depending on the type of book/tax differences that
may exist.
The Fund has elected to defer $32,414 in capital losses recognized between
November 1, 2005 and December 31, 2005 to its fiscal year ending December
31, 2006.
The tax character of distributions paid during the years ended December 31,
2005 and 2004, were as follows:
- --------------------------------------------------------------------------------
2005 2004
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary Income $ 16,444 $ 20,245
Tax exempt income $3,642,842 3,948,139
Long-term capital gain 826,856 1,045,027
---------- ----------
Total $4,486,142 $5,013,411
========== ==========
- --------------------------------------------------------------------------------
The following shows the components of distributable earnings on a federal
income tax basis at December 31, 2005.
- --------------------------------------------------------------------------------
2005
- --------------------------------------------------------------------------------
Undistributed Tax Exempt income $ 60,765
Undistributed long-term gain 60,610
Post October loss deferred (32,414)
Unrealized appreciation 8,317,427
----------
Total $8,406,388
==========
- --------------------------------------------------------------------------------
The difference between book basis and tax-basis unrealized apprecia tion is
attributable to the tax treatment of premium and amortization.
The Fund has reclassified $60,689 to decrease undistributed net investment
income and $60,689 to increase accumulated net realized gain on investments
to reflect permanent book/tax differences. The reclassification has no
impact on the net asset value of
28
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the Fund and is designed to present the Fund's capital accounts on a tax
basis.
C. Fund Shares
The Fund records sales and repurchases of its shares as of trade date.
Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the
Fund and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A.,
(UniCredito Italiano), earned $7,951 in underwriting commissions on the
sale of Class A shares during the year ended December 31, 2005.
D. Class Allocations
Distribution fees are calculated based on the average daily net asset value
attributable to Class A, Class B and Class C shares of the Fund,
respectively (see Note 4). Investor Class shares are not subject to a
distribution plan. Shareowners of each class share all expenses and fees
paid to the transfer agent, Pioneer Investment Management Shareholder
Services, Inc. (PIMSS), for its services, which are allocated based on the
number of accounts in each class and the ratable allocation of related
out-of-pocket expenses (see Note 3). Income, common expenses and realized
and unrealized gains and losses are calculated at the Fund level and
allocated daily to each class of shares based on the respective percentage
of adjusted net assets at the beginning of the day.
The Fund declares, as daily dividends, substantially all of its net
investment income. All dividends are paid on a monthly basis. Short-term
capital gain distributions, if any, may be declared with the daily
dividends. Distributions to shareowners are recorded as of the ex-dividend
date. Distributions paid by the Fund with respect to each class of shares
are calculated in the same manner, at the same time, and in the same
amount, except that Class A, Class B, Class C, and Investor Class shares
can bear different transfer agent and distribution fees.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the
Fund's portfolio. Management fees are calculated daily at the annual rate of
0.50% of the Fund's average daily net assets up
29
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
to $250 million, 0.45% on assets between $250 million and $750 million and 0.40%
on the excess of $750 million.
Through May 1, 2006, PIM has agreed not to impose all or a portion of its
management fee and to assume other operating expenses of the Fund to the extent
necessary to limit expenses to 0.86% of the average daily net assets
attributable to Class A; the portion of the Fund-wide expenses attributable to
Class B, Class C and Investor Class shares will be reduced only to the extent
that such expenses are reduced for Class A shares.
Through December 10, 2006, PIM has agreed not to impose all or a portion of its
management fee and to assume other operating expenses (excluding taxes,
commissions, interest and extraordinary expenses) of the Fund to the extent
necessary to limit Investor Class expenses to 0.63% of the average daily net
assets attributable to Investor Class 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 Fund. At December 31, 2005, $2,237 was payable to PIM
related to man- agement fees, administrative costs and certain other services
and is included in due to affiliates.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides
substantially all transfer agent and shareholder services to the Fund at
negotiated rates. Included in due to affiliates is $5,637 in transfer agent fees
payable to PIMSS at December 31, 2005.
4. Distribution Plans
The Fund adopted a Plan of Distribution for each class of shares (Class A Plan,
Class B Plan and Class C Plan) in accordance with Rule 12b-1 of the Investment
Company Act of 1940. Pursuant to the Class A Plan, the Fund pays PFD a service
fee of up to 0.25% of the average daily net assets attributable to Class A
shares in reimbursement of its actual 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 Fund pays PFD 1.00% of the average daily
net assets attributable to each class of shares. The fee consists of a 0.25%
service fee and a 0.75% distribution fee paid as compensation
30
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
for personal services and/or account maintenance services or distribution
services with regard to Class B and Class C shares. Included in due to
affiliates is $237 in distribution fees payable to PFD at December 31, 2005.
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%.
Proceeds from the CDSCs are paid to PFD. For the year ended December 31, 2005,
no CDSCs were paid to PFD.
5. Expense Offset Arrangements
The Fund has entered into certain expense offset arrangements with PIMSS
resulting in a reduction in the Fund's total expenses due to interest earned on
cash held by PIMSS. For the year ended December 31, 2005, the funds expenses
were reduced by $705 under such arrangements.
31
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Series Trust II and Shareowners of Pioneer
AMT-Free CA Municipal Fund: We have audited the accompanying statement of assets
and liabilities, including the schedule of investments, of Pioneer AMT-Free CA
Municipal Fund (formerly Pioneer California Tax Free Income Fund), one of the
series comprising the Pioneer Series Trust II (the "Trust"), as of December 31,
2005, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Trust's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Trust's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2005, by correspondence with the custodian.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer AMT-Free CA Municipal Fund of the Pioneer Series Trust II at December
31, 2005, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and financial
highlights for each of the five years in the period then ended, in conformity
with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 10, 2006
32
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT
- --------------------------------------------------------------------------------
The Investment Company Act of 1940 requires that both the Board of Trustees and
a majority of the Independent Trustees (collectively "the Trustees") voting
separately annually approve the Fund's management contract (the "Management
Contract"). The Trustees have determined that the terms of the Management
Contract are fair and reasonable and that renewal of the contract will enable
the Fund to receive quality investment advisory services at a cost deemed
reasonable and is in the best interests of the Fund and its shareowners. In
making such determinations, the Independent Trustees relied upon the assistance
of counsel to the Independent Trustees and counsel to the Fund.
Throughout the year, the Independent Trustees regularly met in executive session
separately from the Interested Trustees of the Fund and any officer of Pioneer
Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or
its affiliates. While the Trustees, including the Independent Trustees, act on
all major matters relating to the Fund, a significant portion of the activities
of the Board of Trustees (including certain of those described herein) is
conducted through committees, the members of which are comprised exclusively of
Independent Trustees. Such committee meetings are attended by officers of the
Fund or the Investment Adviser to the extent requested by the members of the
committee.
In evaluating the Management Contract, the Trustees conducted a review that was
specifically focused upon the renewal of the Management Contract, and relied
upon their knowledge, resulting from their meetings throughout the year, of the
Investment Adviser, its services and the Fund. Both in meetings specifically
dedicated to renewal of the Management Contract and at other meetings during the
course of the year, the Trustees, including the Independent Trustees, received
materials relating to the Investment Adviser's investment and management
services under the Management Contract. These materials included (i) information
on the investment performance of the Fund, a peer group of funds and an index,
in each case selected by the Independent Trustees for this purpose, (ii) sales
and redemption data in respect of the Fund, (iii) the general investment outlook
in the markets in which the Fund invests, (iv) arrangements in respect of the
distribution of the Fund's shares, (v) the procedures employed to determine the
value of each of the Fund's assets, (vi) the Investment Adviser's management of
the relationships with the Fund's unaffiliated service providers, (vii) the
record of compliance with the Fund's investment policies and restrictions and
with the Fund's Code of Ethics and the structure and
33
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT (continued)
- --------------------------------------------------------------------------------
responsibilities of the Investment Adviser's compliance department, (viii) the
nature, cost and character of non-investment management services provided by the
Investment Adviser and its affiliates and (ix) the disclosures included in the
Fund's prospectuses and reports to shareowners.
Specifically in connection with the Independent Trustees' review of the
Management Contract, the Independent Trustees requested and the Investment
Adviser provided additional information in order to evaluate the quality of the
Investment Adviser's services and the reasonableness of the fee under the
Management Contract. Among other items, this information included data or
analyses of (1) investment performance for one, three and five year periods for
the Fund and a peer group selected by the Independent Trustees for this purpose,
(2) management and other fees incurred by a peer group of funds selected by the
Independent Trustees for this purpose, (3) the advisory fees of comparable
portfolios of other clients of the Investment Adviser, (4) expense ratios for
the Fund and a peer group of funds selected by the Independent Trustees for this
purpose, (5) the overall organization of the Investment Adviser, (6) the
Investment Adviser's financial results and condition, including its and certain
of its affiliates profitability from services performed for the Fund, (7)
transfer agency fees and administrative reimbursements paid to the Investment
Adviser or affiliates, (8) investment management staffing, and (9) operating
expenses paid to third parties. The Trustees also reviewed information regarding
the potential for each of the Fund and the Investment Adviser to benefit from
further economies of scale in the management of the Fund in light of reasonable
growth expectations for the Fund, the break points in the Fund's management fee
and of a peer group of funds selected by the Independent Trustees for this
purpose and certain of the Fund's expenses that are not incurred as fees based
on a percentage of net assets.
The following summarizes factors considered by the Trustees in connection with
reviewing the information described above and their renewal of the Fund's
Management Contract. The Trustees did not identify any single factor as
all-important or controlling, and the summary does not detail all the matters
that were considered.
A. Ancillary Benefits to Shareowners. The Trustees considered the benefits to
shareowners of investing in a Fund that is part of a large number of
investment companies offering a variety of
34
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
investment disciplines and providing for a large variety of Fund and
shareowner services.
B. Compliance and Investment Performance. The Trustees determined that the
Investment Adviser had policies and systems reasonably designed to achieve
compliance with the Fund's investment objectives and regulatory
requirements. The Trustees also reviewed the Fund's investment performance
based upon total return, as well as the Fund's performance compared to both
the performance of a peer group and an index, in each case selected by the
Independent Trustees for this purpose. The Fund's performance, based upon
total return, was in the first quintile of the peer group for the 12 months
ended June 30, 2005, the first quintile of the peer group for the three
years ended June 30, 2005, and the first quintile for the five years ended
June 30, 2005. (In all quintile rankings referred to throughout this
discussion first quintile is most favorable to the Fund's shareowners.
Thus, highest relative performance would be first quintile and lowest
relative expenses also would be first quintile.) The Trustees also
considered the yield (gross of expenses) to the Fund's Class A shareholder
compared to the yield (as of June 30, 2005) of the Lehman Municipal Bond
Index. The Trustees concluded that the performance of the Fund supported
the continuation of the Management Contract.
C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the
background of members of the team responsible for the daily management of
the Fund and the Fund's investment objective and discipline. The
Independent Trustees also have had discussions with senior management of
the Investment Adviser responsible for investment operations and the senior
management of the Investment Adviser's fixed income group. Among other
things, the Trustees considered the number, education and experience of the
Investment Adviser's investment staff and their use of technology and
emphasis on analytics in view of the risk profile of securities in which
the Fund invests. The Trustees concluded that the Investment Adviser had
the quality and depth of personnel and the well-developed methods essential
to performing its duties under the Management Contract.
D. Nature and Quality of Other Services. The Trustees considered the nature,
quality, cost and extent of other services provided to shareowners of the
Fund, including administrative and shareowner
35
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT (continued)
- --------------------------------------------------------------------------------
services performed by the Investment Adviser under the Management Contract.
The Trustees also considered the reasonableness of the arrangements for
reimbursement of the Investment Adviser's out-of-pocket costs and expenses,
including overhead, for certain administrative services that the Investment
Adviser is not required to provide under the Management Contract. The
Trustees also considered the nature and extent of the other services
provided by the Investment Adviser's affiliates under other contracts and
its supervision of third party service providers. Based on these
considerations, the Trustees concluded that the nature, quality, cost and
extent of such services are satisfactory and reliable and serve the
shareowners of the Fund well.
E. Management Fee and Expenses. The Trustees considered the Investment
Adviser's fee under the Management Contract relative to the management fees
charged by a peer group of funds selected by the Independent Trustees for
this purpose using data provided by an independent third party. The Fund's
management fee for the 12 months ended June 30, 2005 was in the second
quintile relative to the management fees paid by the other funds in that
peer group for the comparable period. The Trustees determined that the fee
under the Management Contract was reasonable and fair in light of both the
overall nature and quality of services provided by the Investment Adviser
and the fees charged by the funds in the peer group. The Trustees also
considered the Fund's expense ratio and expense ratios of a peer group of
funds selected by the Independent Trustees for this purpose. The Fund's
expense ratio for the 12 months ended June 30, 2005 was in the second
quintile of the applicable peer group for the most recent fiscal year of
the peer group for the comparable period. The Trustees concluded that the
Fund's overall expense ratio was reasonable compared to that of comparable
funds.
F. Profitability. The Trustees considered the level of the Investment
Adviser's profits with respect to the management of the Pioneer Funds,
including details with respect to the Fund. This consideration included a
review of the Investment Adviser's methodology in allocating certain of its
costs to the management of each Fund. The Trustees also considered the
financial results realized by the Investment Adviser in connection with the
operation of the Fund. They further considered the profits realized by the
Investment Adviser and its affiliates from non-fund businesses that may
36
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
benefit from or be related to the Fund's business. The Trustees considered
the Investment Adviser's profit margins in comparison with the limited
available industry data. The Trustees concluded that the Investment
Adviser's profits from management of the Pioneer Funds, including the
financial results derived from the Fund, bear a reasonable relationship to
the services rendered and are fair for the management of the Fund.
G. Economies of Scale. The Trustees considered the economies of scale with
respect to the management of the Fund, whether the Fund had appropriately
benefited from any economies of scale, and whether there was potential for
realization of any further economies of scale. Because of break points in
the management fee, the Trustees concluded that any perceived or potential
economies of scale would be shared in a reasonable manner as the Fund grows
in size between the Fund's shareholders and the Investment Adviser.
H. Other Benefits to the Investment Adviser. The Trustees also considered the
character and amount of fees paid by the Fund, other than under the
Management Contract, for services provided by the Investment Adviser and
affiliates, including fees for services such as shareowner services. The
Trustees also considered the receipt of sales loads and payments under Rule
12b-1 plans in respect of the Pioneer Funds (including the Fund). The
Trustees further considered the revenues and profitability of the
Investment Adviser's businesses other than the fund business, including the
Investment Adviser's institutional investment advisory business. The
Trustees considered the intangible benefits that accrue to the Investment
Adviser and its affiliates by virtue of its relationship with the Fund and
the Pioneer Funds as a group. The Trustees concluded that all these types
of benefits accruing to the Investment Adviser were reasonable in the
context of the overall relationship between the Investment Adviser and the
Fund.
Conclusion. The Trustees, in light of the Investment Adviser's overall
performance, considered it appropriate to continue to retain the management
services of the Investment Adviser. Based on their evaluation of all material
factors deemed relevant and the advice of independent counsel, the Trustees
concluded that the Management Contract with the Fund is fair and reasonable and
voted to approve the continuation of the Management Contract for another year.
37
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser
Pioneer Investment Management, Inc.
Custodian
Brown Brothers Harriman & Co.
Independent Registered Public Accounting Firm
Ernst & Young LLP
Principal Underwriter
Pioneer Funds Distributor, Inc.
Legal Counsel
Wilmer Cutler Pickering Hale and Dorr LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
Trustees and Officers
The Fund's Board of Trustees provides broad supervision over the Fund's affairs.
The officers of the Fund are responsible for the Fund's operations. The Fund's
Trustees and officers are listed below, together with their principal
occupations during the past five years. Trustees who are interested persons of
the Fund within the meaning of the Investment Company Act of 1940 are referred
to as Interested Trustees. Trustees who are not interested persons of the Fund
are referred to as Independent Trustees. Each of the Trustees (except Mr. West
and Mr. Hood) serves as a Trustee of each of the 91 U.S. registered investment
portfolios for which Pioneer Investment Management, Inc. ("Pioneer") serves as
investment adviser (the "Pioneer Funds"). Mr. West and Mr. Hood serve on 35 of
the 91 Pioneer Funds. The address for all Interested Trustees and all officers
of the Fund is 60 State Street, Boston, Massachusetts 02109.
The Fund's statement of additional information provides more detailed
information regarding the Fund's Trustees and is available upon request, without
charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Fund are available without charge,
upon request, by calling our toll free number (1-800-225-6292). Information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is publicly available to shareowners
at www.pioneerfunds.com and on the SEC's web site at http://www.sec.gov.
38
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
Positions Held Length of Service
Name and Age With the Fund and Term of Office
John F. Cogan, Jr. (79)* Chairman of the Trustee since 2004.
Board, Serves until
Trustee and President successor trustee is
elected or earlier
retirement or
removal
*Mr. Cogan is an Interested Trustee because he is an officer or director of
Pioneer and certain of its affiliates.
- --------------------------------------------------------------------------------
Pioneer AMT-Free CA Municipal Fund
- ----------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
- ----------------------------------------------------------------------------------------------------------------
Other Directorships Held
Name and Age Principal Occupation During Past Five Years by this Trustee
John F. Cogan, Jr. (79)* Deputy Chairman and a Director of Pioneer Global Asset Chairman and Director of
Management S.p.A. ("PGAM"); Non-Executive Chairman ICI Mutual Insurance
and a Director of Pioneer Investment Management USA Company; Director
Inc. ("PIM-USA"); Chairman and a Director of Pioneer; of Harbor Global
Director of Pioneer Alternative Investment Management Company, Ltd.
Limited (Dublin); President and a Director of Pioneer
Alternative Investment Management (Bermuda) Limited
and affiliated funds; Director of PIOGLOBAL Real Estate
Investment Fund (Russia); Director of Nano-C, Inc. (since
2003); Director of Cole Investment Corporation (since
2004); Director of Fiduciary Counseling Inc.; President
and Director of Pioneer Funds Distributor, Inc. ("PFD");
President of all of the Pioneer Funds; and Of Counsel,
Wilmer Cutler Pickering Hale and Dorr LLP (counsel to
PIM-USA and the Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------
39
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
Positions Held Length of Service
Name, Age and Address With the Fund and Term of Office
David R. Bock **(62) Trustee Trustee since 2005.
3050 K. Street NW, Serves until successor
Washington, DC 20007 trustee is elected or
earlier retirement or
removal.
**Mr. Bock became a Trustee of the Fund on January 1, 2005.
- --------------------------------------------------------------------------------
Mary K. Bush (57) Trustee Trustee since 2004.
3509 Woodbine Street, Serves until
Chevy Chase, MD 20815 successor trustee
is elected or earlier
retirement or removal
- --------------------------------------------------------------------------------
Margaret B.W. Graham (58) Trustee Trustee since 2004.
1001 Sherbrooke Street West, Serves until
Montreal, Quebec, Canada successor trustee
H3A 1G5 is elected or earlier
retirement or removal
- --------------------------------------------------------------------------------
Pioneer AMT-Free CA Municipal Fund
- -------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -------------------------------------------------------------------------------------------------------------------------
Other Directorships Held
Name, Age and Address Principal Occupation During Past Five Years by this Trustee
David R. Bock **(62) Senior Vice President and Chief Financial Officer, I-trax, Director of The Enterprise
3050 K. Street NW, Inc. (publicly traded health care services company) Social Investment
Washington, DC 20007 (2001 - present); Managing Partner, Federal City Capital Company (privately-held
Advisors (boutique merchant bank)(1995 - 2000; 2002 affordable housing
to 2004); Executive Vice President and Chief Financial finance company);
Officer, Pedestal Inc. (internet-based mortgage trading Director of New York
company) (2000 - 2002) Mortgage Trust (publicly
traded mortgage REIT)
**Mr. Bock became a Trustee of the Fund on January 1, 2005.
- -------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (57) President, Bush International (international financial Director of Brady
3509 Woodbine Street, advisory firm) Corporation (industrial
Chevy Chase, MD 20815 identification and
specialty coated
material products
manufacturer),
Millennium Chemicals,
Inc. (commodity
chemicals), Mortgage
Guaranty Insurance
Corporation, and Briggs &
Stratton, Inc. (engine
manufacturer)
- -------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham (58) Founding Director, The Winthrop Group, Inc. (consulting None
1001 Sherbrooke Street West, firm); Desaultels, Faculty of Management, McGill
Montreal, Quebec, Canada University
H3A 1G5
- -------------------------------------------------------------------------------------------------------------------------
40
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Positions Held Length of Service
Name, Age and Address With the Fund and Term of Office
Marguerite A. Piret (57) Trustee Trustee since 2004.
One Boston Place, 28th Floor, Serves until
Boston, MA 02108 successor trustee
is elected or earlier
retirement or removal
- --------------------------------------------------------------------------------
John Winthrop (69) Trustee Trustee since 2004.
One North Adgers Wharf, Serves until
Charleston, SC 29401 successor trustee
is elected or earlier
retirement or removal
- --------------------------------------------------------------------------------
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Other Directorships Held
Name, Age and Address Principal Occupation During Past Five Years by this Trustee
Marguerite A. Piret (57) President and Chief Executive Officer, Newbury, Director of New America
One Boston Place, 28th Floor, Piret & Company, Inc. (investment banking firm) High Income Fund, Inc.
Boston, MA 02108 (closed-end investment
company)
- -------------------------------------------------------------------------------------------------------------------
John Winthrop (69) President, John Winthrop & Co., Inc. None
One North Adgers Wharf, (private investment firm)
Charleston, SC 29401
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FUND OFFICERS
- -------------------------------------------------------------------------------
Osbert M. Hood (53) Executive Vice Since 2004.
President Serves at the
discretion of
the Board
- -------------------------------------------------------------------------------
Dorothy E. Bourassa (58) Secretary Since September,
2004. Serves
at the discretion of
the Board
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
FUND OFFICERS
- ------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (53) President and Chief Executive Officer, PIM-USA since Trustee of certain
May, 2003 (Director since January, 2001); President Pioneer Funds
and Director of Pioneer since May, 2003; Chairman and
Director of Pioneer Investment Management Shareholder
Services, Inc. ("PIMSS") since May, 2003; Executive Vice
President of all of Pioneer Funds since June 3, 2003;
and Executive Vice President and Chief Operating Officer of
PIM-USA, November 2000 - May 2003.
- -------------------------------------------------------------------------------------------------------------------
Dorothy E. Bourassa (58) Secretary of PIM-USA; Senior Vice President - Legal None
of Pioneer; and Secretary/Clerk of most of PIM-USA's
subsidiaries; Secretary of all of the Pioneer Funds since
September 2003 (Assistant Secretary from November
2000 to September 2003)
- -------------------------------------------------------------------------------------------------------------------
41
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
FUND OFFICERS
- --------------------------------------------------------------------------------
Positions Held Length of Service
Name and Age With the Fund and Term of Office
Christopher J. Kelley (41) Assistant Secretary Since September,
2004. Serves at
the discretion of
the Board
- --------------------------------------------------------------------------------
David C. Phelan (48) Assistant Secretary Since September,
2004. Serves at
the discretion of
the Board
- --------------------------------------------------------------------------------
Vincent Nave (60) Treasurer Since 2004.
Serves at the
discretion of
the Board
- --------------------------------------------------------------------------------
Mark E. Bradley (46) Assistant Treasurer Since November,
2004. Serves
at the discretion
of the Board
- --------------------------------------------------------------------------------
Luis I. Presutti (40) Assistant Treasurer Since 2004.
Serves at the
discretion of
the Board
- --------------------------------------------------------------------------------
Pioneer AMT-Free CA Municipal Fund
- -----------------------------------------------------------------------------------------------------------------
FUND OFFICERS
- -----------------------------------------------------------------------------------------------------------------
Other Directorships Held
Name and Age Principal Occupation During Past Five Years by this Officer
Christopher J. Kelley (41) Assistant Vice President and Senior Counsel of None
Pioneer since July 2002; Vice President and Senior
Counsel of BISYS Fund Services, Inc. (April 2001 to
June 2002); Senior Vice President and Deputy General
Counsel of Funds Distributor, Inc. (July 2000 to April
2001; Assistant Secretary of all Pioneer Funds since
September 2003
- -----------------------------------------------------------------------------------------------------------------
David C. Phelan (48) Partner, Wilmer Cutler Pickering Hale and Dorr LLP; None
Assistant Secretary of all Pioneer Funds since
September 2003
- -----------------------------------------------------------------------------------------------------------------
Vincent Nave (60) Vice President - Fund Accounting, Administration None
and Custody Services of Pioneer; and Treasurer of all
of the Pioneer Funds
- -----------------------------------------------------------------------------------------------------------------
Mark E. Bradley (46) Deputy Treasurer of Pioneer since 2004; Treasurer None
and Senior Vice President, CDC IXIS Asset
Management Services from 2002 to 2003; Assistant
Treasurer and Vice President, MFS Investment
Management from 1997 to 2002; and Assistant
Treasurer of all of the Pioneer Funds since
November 2004
- -----------------------------------------------------------------------------------------------------------------
Luis I. Presutti (40) Assistant Vice President - Fund Accounting, None
Administration and Custody Services of Pioneer; and
Assistant Treasurer of all of the Pioneer Funds
- -----------------------------------------------------------------------------------------------------------------
42
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Positions Held Length of Service
Name and Age With the Fund and Term of Office
Gary Sullivan (47) Assistant Treasurer Since 2004.
Serves at the
discretion of
the Board
- --------------------------------------------------------------------------------
Katherine Kim Sullivan (32) Assistant Treasurer Since 2004.
Serves at the
discretion of
the Board
- --------------------------------------------------------------------------------
Martin J. Wolin (38) Chief Compliance Since October, 2004.
Officer Serves at the
discretion of
the Board
- --------------------------------------------------------------------------------
Pioneer AMT-Free CA Municipal Fund
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Other Directorships Held
Name and Age Principal Occupation During Past Five Years by this Officer
Gary Sullivan (47) Fund Accounting Manager - Fund Acconting, None
Administration and Custody Services of Pioneer;
and Assistant Treasurer of all of the Pioneer Funds
since May 2002
- --------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan (32) Fund Administration Manager - Fund Accounting, None
Administration and Custody Services since June
2003; Assistant Vice President - Mutual Fund
Operations of State Street Corporation from June
2002 to June 2003 (formerly Deutsche Bank Asset
Management); Pioneer Fund Accounting, Manager
from August 1999 to May 2002); Assistant
Treasurer of all Pioneer Funds since September 2004
- --------------------------------------------------------------------------------------------------------------
Martin J. Wolin (38) Chief Compliance Officer of Pioneer (Director of None
Compliance and Senior Counsel from November 2000
to September 2004); and Chief Compliance Officer
of all of the Pioneer Funds since 2004.
- --------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Fund's investment adviser, provides investment
management and financial services to mutual funds, institutional and other
clients.
43
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
44
- --------------------------------------------------------------------------------
HOW TO CONTACT PIONEER
- --------------------------------------------------------------------------------
We are pleased to offer a variety of convenient ways for you to contact us
for assistance or information.
Call us for:
Account Information, including existing accounts,
new accounts, prospectuses, applications
and service forms 1-800-225-6292
FactFone(SM) for automated fund yields, prices,
account information and transactions 1-800-225-4321
Retirement plans information 1-800-622-0176
Telecommunications Device for the Deaf (TDD) 1-800-225-1997
Write to us:
PIMSS, Inc.
P.O. Box 55014
Boston, Massachusetts 02205-5014
Our toll-free fax 1-800-225-4240
Our internet e-mail address ask.pioneer@pioneerinvest.com
(for general questions about Pioneer only)
Visit our web site: www.pioneerfunds.com
Before investing consider the Fund's investment objectives, risks, charges and
expenses. Contact your advisor or Pioneer Investments for a prospectus
containing this information. Read it carefully.
The Fund files a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the
Commission's web site at http://www.sec.gov. The filed form may also be viewed
and copied at the Commission's Public Reference Room in Washington, DC.
Information regarding the operations of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
- --------------------------------------------------------------------------------
PIONEER
-------
SMALL AND
MID CAP GROWTH
FUND*
Annual
Report
12/31/05
[LOGO] PIONEER
Investments(R)
*Formerly Papp Small & Mid-Cap Growth Fund. Name change effective May 1, 2005.
Table of Contents
- --------------------------------------------------------------------------------
Letter to Shareowners 1
Portfolio Summary 2
Prices and Distributions 3
Performance Update 4
Comparing Ongoing Fund Expenses 8
Portfolio Management Discussion 10
Schedule of Investments 14
Financial Statements 19
Notes to Financial Statements 27
Report of Independent Registered Public Accounting Firm 33
Factors Considered by the Independent Trustees in Approving
the Management Contract 34
Trustees, Officers and Service Providers 40
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
LETTER TO SHAREOWNERS 12/31/05
- --------------------------------------------------------------------------------
Dear Shareowner,
- --------------------------------------------------------------------------------
As 2005 came to a close, U.S. investors looked back on a year of major
challenges, though without much change in the market indices. The war in Iraq
continued, oil prices soared, then dropped, while short-term interest rates
ratcheted steadily higher and intermediate and long-term rates stayed about the
same. Natural disasters also threatened economic expansion. Still, the economy
moved forward as corporate earnings grew. The hope of a growing economy was not
reflected by the small gains or losses in the major U.S. market indices. Among
capitalization ranges, midcap issues made the most headway. Bond prices held
firm and yields remained low, perhaps a sign that the Federal Reserve Board's
interest rate hikes would temper the inflationary pressures induced by a growing
economy.
Among the nagging issues facing the U.S. economy in 2006 is the potential impact
of high energy prices on consumer spending and corporate profits. Also unknown
at this time is whether the Federal Reserve Board will continue to raise
interest rates under its new chairman, Ben Bernanke, who stated his top priority
will be to maintain continuity.
Rising interest rates and improving business conditions made U.S. holdings more
attractive to foreign investors, helping to strengthen the dollar versus the
euro and other key currencies. Investors in many foreign markets enjoyed stellar
returns. Double-digit gains were widespread in Europe, Asia and Latin America.
Even the long-dormant Japanese economy began to stir, while emerging markets,
especially those rich in natural resources, fed global economic growth.
The disparity of returns among countries and sectors underscores the importance
for investors to maintain a well-diversified portfolio. We believe this may be a
good time for investors to review their holdings with their advisor and
determine if they reflect the wide range of opportunities that exist across many
asset classes, as last year's results make clear.
Investing for income with Pioneer
Adding one or more of Pioneer's income-oriented funds to your investment program
may help improve your portfolio's overall balance. As a premier provider of
fixed-income investments, Pioneer offers you a broad selection of actively
managed bond funds to help meet a variety of investment needs. Pioneer also
offers income-oriented equity funds, each managed using a value-oriented, total
return investment philosophy that seeks enhanced return potential and lower
volatility through active diversification. Your financial advisor can help you
select among Pioneer's fixed-income choices.
Respectfully,
/s/ Osbert M. Hood
Osbert M. Hood
President
Pioneer Investment Management, Inc.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Before investing consider the fund's investment objectives, risks, charges and
expenses. Contact your advisor or Pioneer Investments for a prospectus
containing this information. Read it carefully.
1
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY 12/31/05
- --------------------------------------------------------------------------------
Portfolio Diversification
- --------------------------------------------------------------------------------
(As a percentage of total investment portfolio)
[The following data was represented as a pie chart in the printed material]
U.S. Common Stocks 90.6%
Depositary Receipts for International Stocks 6.4%
Temporary Cash Investment 3.0%
Sector Distribution
- --------------------------------------------------------------------------------
(As a percentage of equity holdings)
[The following data was represented as a pie chart in the printed material]
Health Care 27.3%
Information Technology 26.6%
Consumer Discretionary 15.3%
Industrials 11.7%
Financials 10.3%
Consumer Staples 6.1%
Materials 2.7%
10 Largest Holdings
- --------------------------------------------------------------------------------
(As a percentage of equity holdings)*
1. Techne Corp. 3.59%
2. Express Scripts, Inc. 3.49
3. WPP Group Plc 3.22
4. ChoicePoint, Inc. 3.15
5. Alberto-Culver Co. (Class B) 3.14
6. Federated Investors, Inc. 3.11
7. O'Reilly Automotive, Inc. 3.11
8. Microchip Technology, Inc. 3.04
9. Harte-Hanks, Inc. 3.01
10. Clorox Co. 3.00
* This list excludes temporary cash and derivative instruments. Portfolio
holdings will vary for other periods.
2
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
Net Asset Value Per Share
- --------------------------------------------------------------------------------
Class 12/31/05 12/31/04
----- -------- --------
A $27.39 $26.12
B $26.95 $25.94
C $26.99 $25.96
R $27.16 $26.00
Distributions Per Share
- --------------------------------------------------------------------------------
1/1/05 - 12/31/05
-----------------
Net
Investment Short-Term Long-Term
Class Income Capital Gains Capital Gains
----- ------ ------------- -------------
A $ - $ - $ -
B $ - $ - $ -
C $ - $ - $ -
R $ - $ - $ -
- --------------------------------------------------------------------------------
INDEX DEFINITIONS
- --------------------------------------------------------------------------------
The Russell 2500 Growth Index measures the performance of U.S. small- and
mid-cap growth stocks. Index returns assume reinvestment of dividends and,
unlike Fund returns, do not reflect any fees, expenses or sales charges. Pioneer
believes the Russell 2500 Growth Index is representative of the issues in the
Fund's portfolio and will not provide the Russell 2000 Index in the future. You
cannot invest directly in an Index.
The index defined here pertains to the Value of $10,000 Investment charts on
pages 4-7.
3
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS A SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Small and Mid Cap Growth Fund at public offering
price, compared to that of the Russell 2500 Growth Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
Net Asset Public
Value Offering
Period (NAV) Price (POP)
Life-of-Class
(12/14/98) 9.39% 8.47%
5 Years 3.37 2.15
1 Year 4.86 -1.15
- --------------------------------------------------------------------------------
[The following data was represented as a mountain chart in the printed
material.]
Value of $10,000 Investment
Pioneer
Small and Mid Cap Russell
Growth 2500 Growth
Fund Index
12/98 9,425 10,000
12/99 10,630 15,548
12/01 14,037 11,633
12/03 14,859 12,069
12/05 16,431 14,960
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
NAV results represent the percent change in net asset value per share. Returns
would have been lower had sales charges been reflected. POP returns reflect
deduction of maximum 5.75% sales charge. All results are historical and assume
the reinvestment of dividends and capital gains. Other share classes are
available for which performance and expenses will differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
The performance of each class of the Fund from 12/15/98 to 2/20/04 is the
performance of Papp Small & Mid-Cap Growth Fund's single class, which has been
restated 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 Papp Small & Mid-Cap Growth Fund. Pioneer
Small and Mid Cap Growth Fund acquired the assets of Papp Small & Mid-Cap Growth
Fund in a reorganization on 2/21/04.
4
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS B SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Small and Mid Cap Growth Fund, compared to that of
the Russell 2500 Growth Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
If If
Period Held Redeemed
Life-of-Class
(12/14/98) 8.54% 8.54%
5 Years 2.55 2.55
1 Year 3.89 -0.11
- --------------------------------------------------------------------------------
[The following data was represented as a mountain chart in the printed
material.]
Value of $10,000 Investment
Pioneer
Small and Mid Cap Russell
Growth 2500 Growth
Fund Index
12/98 10,000 10,000
12/99 11,194 15,548
12/01 14,562 11,633
12/03 15,181 12,069
12/05 16,503 14,960
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
"If Held" results represent the percent change in net asset value per share.
Returns would have been lower had sales charges been reflected. "If Redeemed"
returns reflect the deduction of applicable contingent deferred sales charge
(CDSC). Effective December 1, 2004, the period during which a CDSC is applied to
withdrawals was shortened to 5 years. The maximum CDSC for Class B shares
continues to be 4%. For more complete information, please see the prospectus for
details. Note: Shares purchased prior to December 1, 2004 remain subject to the
CDSC in effect at the time you purchased those shares. For performance
information for shares purchased prior to December 1, 2004, please visit
www.pioneerfunds.com/bshares.
All results are historical and assume the reinvestment of dividends and capital
gains. Other share classes are available for which performance and expenses will
differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
The performance of each class of the Fund from 12/15/98 to 2/20/04 is the
performance of Papp Small & Mid-Cap Growth Fund's single class, which has been
restated 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 Papp Small & Mid-Cap Growth Fund. Pioneer
Small and Mid Cap Growth Fund acquired the assets of Papp Small & Mid-Cap Growth
Fund in a reorganization on 2/21/04.
5
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS C SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Small and Mid Cap Growth Fund, compared to that of
the Russell 2500 Growth Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
If If
Period Held Redeemed
Life-of-Class
(12/14/98) 8.56% 8.56%
5 Years 2.58 2.58
1 Year 3.97 3.97
- --------------------------------------------------------------------------------
[The following data was represented as a mountain chart in the printed
material.]
Value of $10,000 Investment
Pioneer
Small and Mid Cap Russell
Growth 2500 Growth
Fund Index
12/98 10,000 10,000
12/99 11,194 15,548
12/01 14,562 11,633
12/03 15,181 12,069
12/05 16,528 14,960
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
Class C shares held for less than one year are also subject to a 1% contingent
deferred sales charge (CDSC). If you paid a 1% sales charge, your returns would
be lower than those shown above. "If Held" results represent the percent change
in net asset value per share. Returns would have been lower had sales charges
been reflected. All results are historical and assume the reinvestment of
dividends and capital gains. Other share classes are available for which
performance and expenses will differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
The performance of each class of the Fund from 12/15/98 to 2/20/04 is the
performance of Papp Small & Mid-Cap Growth Fund's single class, which has been
restated 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 Papp Small & Mid-Cap Growth Fund. Pioneer
Small and Mid Cap Growth Fund acquired the assets of Papp Small & Mid-Cap Growth
Fund in a reorganization on 2/21/04.
6
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS R SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Small and Mid Cap Growth Fund, compared to that of
the Russell 2500 Growth Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
If If
Period Held Redeemed
Life-of-Class
(12/14/98) 8.86% 8.86%
5 Years 2.88 2.88
1 Year 4.46 4.46
- --------------------------------------------------------------------------------
[The following data was represented as a mountain chart in the printed
material.]
Value of $10,000 Investment
Pioneer
Small and Mid Cap Russell
Growth 2500 Growth
Fund Index
12/98 10,000 10,000
12/99 11,222 15,548
12/01 14,671 11,633
12/03 15,372 12,069
12/05 16,849 14,960
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The performance of Class R shares for the period to the commencement of
operations of Class R shares on April 1, 2003 is based on the performance of
Class A shares, reduced to reflect the higher distribution and service fees of
Class R shares. For the period after April 1, 2003, the actual performance of
Class R shares is reflected, which performance may be influenced by the smaller
asset size of Class R shares compared to Class A shares. The performance of
Class R shares does not reflect the 1% CDSC that was in effect prior to July 1,
2004. Class R shares are not subject to sales charges and are available for
limited group of eligible investors, including institutional investors. All
results are historical and assume the reinvestment of dividends and capital
gains. Other share classes are available for which performance and expenses will
differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
The performance of each class of the Fund from 12/15/98 to 2/20/04 is the
performance of Papp Small & Mid-Cap Growth Fund's single class, which has been
restated 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 Papp Small & Mid-Cap Growth Fund. Pioneer
Small and Mid Cap Growth Fund acquired the assets of Papp Small & Mid-Cap Growth
Fund in a reorganization on 2/21/04.
7
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
COMPARING ONGOING FUND EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Fund, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Fund expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds. The example is based on an investment
of $1,000 at the beginning of the Fund's latest six-month period and held
throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Small and Mid Cap Growth Fund
Based on actual returns from July 1, 2005 through December 31, 2005
Share Class A B C R
- -------------------------------------------------------------------------------------------
Beginning Account Value $1,000.00 $1,000.00 $1,000.00 $1,000.00
On 7/1/05
Ending Account Value $1,069.89 $1,064.77 $1,065.16 $1,066.79
On 12/31/05
Expenses Paid During Period* $ 6.52 $ 11.29 $ 10.93 $ 8.65
* Expenses are equal to the Fund's annualized expense ratio of 1.25%, 2.17%,
2.10% and 1.66%, for Class A, Class B, Class C and Class R shares,
respectively, multiplied by the average account value over the period,
multiplied by 184/365 (to reflect the one-half year period).
8
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
Expenses Paid on a $1,000 Investment in Pioneer Small and Mid Cap Growth Fund
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2005 through December 31, 2005
Share Class A B C R
- -------------------------------------------------------------------------------------------
Beginning Account Value $1,000.00 $1,000.00 $1,000.00 $1,000.00
On 7/1/05
Ending Account Value $1,018.90 $1,014.27 $1,014.62 $1,016.84
On 12/31/05
Expenses Paid During Period* $ 6.36 $ 11.02 $ 10.66 $ 8.44
* Expenses are equal to the Fund's annualized expense ratio of 1.25%, 2.17%,
2.10% and 1.66%, for Class A, Class B, Class C and Class R shares,
respectively, multiplied by the average account value over the period,
multiplied by 184/365 (to reflect the one-half year period).
9
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05
- --------------------------------------------------------------------------------
While the U.S. economy and corporate profits registered strong gains during
2005, stock market indexes produced below-average returns for the year.
Investors worried about oil prices, the impact of the Federal Reserve Board's 13
successive interest-rate hikes over 18 months, and the possibility that federal
tax cuts on capital gains and stock dividends might not be made permanent. Given
these concerns, stock valuations failed to keep pace with increasing corporate
earnings and gross domestic product (GDP). In the following interview, members
of the management team of L. Roy Papp & Associates - L. Roy Papp and Rosellen
Papp - who are responsible for the Fund's management, discuss the factors that
influenced the performance of Pioneer Small and Mid Cap Growth Fund during the
12-months ended December 31, 2005.
Q: How did the Fund perform?
A: For the 12 months ended December 31, 2005, Class A shares of Pioneer Small
and Mid Cap Growth Fund returned 4.86% at net asset value. During the same
12 months, the Russell Midcap Growth Index returned 12.10%, while the
average total return of the 553 funds in Lipper's Mid-Cap Growth group was
9.79%.
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent
month-end performance results. Current performance may be lower or higher
than the performance data quoted.
The performance data quoted represents past performance, which is no
guarantee of future results. Investment return and principal value will
fluctuate, and shares, when redeemed, may be worth more or less than their
original cost.
Q: What were the principal factors that affected Fund performance?
A: Our consistent discipline favoring industry-leading stable growth companies
with superior long-term earnings prospects led us to de-emphasize the more
volatile energy sector, where stock performance is closely tied to
commodity prices. However, the extraordinary stock price gains by mid-cap
energy companies - such as oil services companies and exploration and
production companies - drove the mid-cap stock index performance during the
year. As a result, the Fund's performance tended to lag that of market
benchmarks as well as mutual fund peer group averages.
10
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Overall, the economy showed persistent, resilient strength during 2005 and
corporate earnings continued to produce impressive gains. Gross Domestic
Product (GDP) grew briskly throughout the year and most corporations were
able to report double-digit earnings gains. Despite this positive economic
backdrop, stocks outside the energy sector produced modest results.
Investors worried about the higher energy prices, the tightening of
monetary policy by the Federal Reserve and on-going political controversies
and policy stalemates in Washington. As a result, the performance of
non-energy stocks failed to keep pace with underlying economic fundamentals
for the second consecutive year and the market ended 2005 with an unmet gap
between corporate profitability and stock valuations.
Consistent with our history, we kept to the investment philosophy that has
served us well, emphasizing stable growth companies with superior long-term
prospects. We also continued to pursue investment themes we have developed.
As examples, we sought opportunities created by demographic changes - most
notably the aging of the baby-boom generation - in sectors such as health
care and financial services, and we tried to invest in companies that would
benefit from the expanding global economy in sectors such as information
technology and industrials. We did not make any significant sector changes
during the year, although we did increase our exposure to industrial
companies because of our view that one of the emerging themes in 2006 was
likely to be increasing capital expenditures by corporations. Within
information technology, we added software companies such as Adobe and
Micros, as well as Trimble, producer of a sophisticated global positioning
system. At the same time, we reduced our exposure in the technology
hardware area.
Q: What were some of the individual investments that contributed to
performance?
A: In financial services, we focused on companies whose profitability was not
too sensitive to the risks of rising interest rates. Two holdings that
performed particularly well were T. Rowe Price and Federated Investors,
investment management and mutual fund companies that are well positioned to
benefit from the growing need of the baby-boom generation for retirement
products and services. Both companies performed exceptionally well during
the year, even as other financial companies were affected by rising
11
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05 (continued)
- --------------------------------------------------------------------------------
short-term interest rates that could potentially shrink the profit margins
of traditional lending activities.
Among our health-care investments, several selections performed well.
Although we normally de-emphasize the biotechnology industry because of the
volatility of company earnings, we found two interesting opportunities in
corporations that supply the biotechnology sector and have more consistent
earnings history. Both Techne, which produces proteins used by
biotechnology companies, and Molecular Devices, which produces equipment
used by biotech companies, performed very well. In addition, pharmacy
benefit managers Medco and Express Scripts benefited as managers
successfully gained more control over pharmacy expenses.
Our investment in Expeditors International of Washington was a successful
way to play the globalization of world trade theme. The company handles
logistical planning, and directly benefited from the rise in trade between
China and the United States. Its stock declined during the first part of
the year on concerns about its vulnerability to higher energy prices, but
the company's valuation recovered strongly in the second six months.
In the information technology sector, contributors included Adobe Software
and Microchip.
Q: What types of investments held back results?
A: Our underweight in energy stocks held back results during a year in which
commodity prices rose to record-high levels. Individual holdings that
detracted from results tended to come from a variety of sectors. In
financial services, Investors Financial was hurt by concerns over the
flattening of the yield curve - which occurs when the yield gap between
short-term and long-term fixed income securities narrows. That can squeeze
the profits in traditional lending businesses. However, we have retained
our confidence in Investors Financial for the longer-term. A substantial
part of its business is in operations that provide record-keeping and
financial custodial and accounting services to retirement plans, and we
think it should benefit from the increasing demand for retirement services.
The company is also a leader in issuing exchange traded funds, which are
becoming increasingly popular as investment products.
Several of our holdings were adversely affected by rising energy prices,
including the Family Dollar retail chain and Cintas, which provides laundry
and uniform services to businesses. We have
12
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
retained our holding in Cintas because we continue to be impressed by the
longer-term fundamentals of its business, but we have sold our position in
Family Dollar.
Other companies that we sold during the year included adult education
company Apollo, because we were concerned about its future growth
potential, and Saga Radio, whose advertising revenues from its chain of
radio stations were affected by the increasing popularity of advertising on
the Internet.
Q: What is your investment outlook?
A: We believe the stock market is inexpensive after two successive years in
which stock price performance has failed to keep pace with growth in the
economy and in corporate profitability. As we enter 2006, the American
economy is strong, as evidenced by the overwhelming consensus of 56
economists recently surveyed by the Wall Street Journal. The average
forecast for growth in GDP during 2006 was between 3% and 3.5%.
In our view, there is a significant valuation gap between company earnings
and company stock valuations, and we think there is strong potential for
good stock performance during the coming year.
Small and mid-sized companies may offer the potential for higher returns, but
are also subject to greater short-term price fluctuations than larger, more
established companies. The Fund invests in a limited number of securities and,
as a result, the Fund's performance may be more volatile than the performance of
other funds holding more securities. At times, the Fund's investments may
represent industries or industry sectors that are interrelated or have common
risks, making it more susceptible to any economic, political, or regulatory
developments or other risks affecting those industries and sectors.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These opinions should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
13
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCK - 98.8%
Materials - 2.7%
Specialty Chemicals - 2.7%
31,000 Sigma-Aldrich Corp. $1,961,990
----------
Total Materials $1,961,990
----------
Capital Goods - 2.7%
Building Products - 2.7%
54,000 Simpson Manufacturing Co., Inc. $1,962,900
----------
Total Capital Goods $1,962,900
----------
Commercial Services & Supplies - 6.0%
Diversified Commercial Services - 6.0%
51,000 Cintas Corp. $2,100,180
51,000 ChoicePoint, Inc.* 2,270,010
----------
$4,370,190
----------
Total Commercial Services & Supplies $4,370,190
----------
Transportation - 2.8%
Air Freight & Couriers - 2.8%
30,000 Expeditors International of Washington, Inc. $2,025,300
----------
Total Transportation $2,025,300
----------
Consumer Durables & Apparel - 1.9%
Leisure Products - 1.9%
28,000 Polaris Industries, Inc. (b) $1,405,600
----------
Total Consumer Durables & Apparel $1,405,600
----------
Consumer Services - 3.9%
Education Services - 1.4%
50,000 DeVry, Inc.*(b) $1,000,000
----------
Restaurants - 2.5%
48,350 Brinker International, Inc $1,869,211
----------
Total Consumer Services $2,869,211
----------
Media - 6.2%
Advertising - 6.2%
82,050 Harte-Hanks, Inc. $2,165,300
43,000 WPP Group Plc (A.D.R.) 2,322,000
----------
$4,487,300
----------
Total Media $4,487,300
----------
14 The accompanying notes are an integral part of these financial statements.
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Retailing - 3.1%
Automotive Retail - 3.1%
70,000 O'Reilly Automotive, Inc.* $ 2,240,700
-----------
Total Retailing $ 2,240,700
-----------
Household & Personal Products - 6.1%
Household Products - 3.0%
38,000 Clorox Co. $ 2,161,820
-----------
Personal Products - 3.1%
49,500 Alberto-Culver Co. (Class B) $ 2,264,625
-----------
Total Household & Personal Products $ 4,426,445
-----------
Health Care Equipment & Services - 23.4%
Health Care Distributors - 1.8%
40,000 Patterson Co.* $ 1,336,000
-----------
Health Care Equipment - 11.7%
28,000 C. R. Bard, Inc. $ 1,845,760
74,000 Molecular Devices Corp.* 2,140,820
50,000 ResMed Inc.* 1,915,500
41,000 Stryker Corp. 1,821,630
22,000 Waters Corp.* 831,600
-----------
$ 8,555,310
-----------
Health Care Services - 7.0%
30,000 Express Scripts, Inc.* $ 2,514,000
60,000 IMS Health, Inc. 1,495,200
19,700 Medco Health Solutions, Inc.* 1,099,260
-----------
$ 5,108,460
-----------
Health Care Supplies - 2.9%
38,700 Dentsply International, Inc. $ 2,077,803
-----------
Total Health Care Equipment & Services $17,077,573
-----------
Pharmaceuticals & Biotechnology - 3.5%
Biotechnology - 3.5%
46,000 Techne Corp.* $ 2,582,900
-----------
Total Pharmaceuticals & Biotechnology $ 2,582,900
-----------
The accompanying notes are an integral part of these financial statements. 15
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
Shares Value
Banks - 2.7%
Regional Banks - 2.7%
110,000 UCBH Holdings, Inc. (b) $1,966,800
----------
Total Banks $1,966,800
----------
Diversified Financials - 7.5%
Asset Management & Custody Banks - 7.5%
60,500 Federated Investors, Inc. $2,240,920
29,000 Investors Financial Services Corp. (b) 1,068,070
30,000 T. Rowe Price Associates, Inc. 2,160,900
----------
$5,469,890
----------
Total Diversified Financials $5,469,890
----------
Software & Services - 10.1%
Application Software - 1.7%
33,000 Adobe Systems, Inc. $1,219,680
----------
Data Processing & Outsourced Services - 5.6%
33,000 DST Systems, Inc.* $1,977,030
48,000 Fiserv, Inc.* 2,076,960
----------
$4,053,990
----------
Systems Software - 2.8%
43,000 Micros Systems, Inc.* $2,077,760
----------
Total Software & Services $7,351,430
----------
Technology Hardware & Equipment - 6.9%
Communications Equipment - 1.6%
42,000 Plantronics, Inc. $1,188,600
----------
Electronic Equipment & Instruments - 3.8%
38,000 Mettler-Toledo International, Inc.* $2,097,600
19,750 National Instruments Corp. 632,987
----------
$2,730,587
----------
Electronic Manufacturing Services - 1.5%
34,100 Molex, Inc. $ 838,519
7,000 Trimble Navigation Ltd. 248,430
----------
$1,086,949
----------
Total Technology Hardware & Equipment $5,006,136
----------
16 The accompanying notes are an integral part of these financial statements.
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Semiconductors - 9.3%
Semiconductor Equipment - 3.5%
37,000 KLA-Tencor Corp. $ 1,825,210
32,000 Novellus Systems, Inc.* 771,840
-----------
$ 2,597,050
-----------
Semiconductors - 5.8%
56,000 Linear Technology Corp. $ 2,019,920
68,000 Microchip Technology 2,186,200
-----------
$ 4,206,120
-----------
Total Semiconductors $ 6,803,170
-----------
TOTAL COMMON STOCK
(Cost $59,316,318) $72,007,535
-----------
TEMPORARY CASH INVESTMENTS
Security Lending Collateral - 6.8%
Securities Lending Investment Fund, 4.24% $ 4,940,655
-----------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $4,940,655) $ 4,940,655
-----------
TOTAL INVESTMENTS IN SECURITIES - 105.6%
(Cost $64,256,973) (a) $76,948,190
-----------
OTHER ASSETS AND LIABILITIES - (5.6)% $(4,097,589)
-----------
TOTAL NET ASSETS - 100.0% $72,850,601
===========
* Non-income producing
(A.D.R.) American Depositary Receipt
(a) At December 31, 2005, the net unrealized gain on investments based on
cost for federal income tax purposes of $64,256,973 was as follows:
Aggregate gross unrealized gain for all investments
in which there is an excess of value over tax cost $13,681,944
Aggregate gross unrealized loss for all investments
in which there is an excess of tax cost over value (990,727)
-----------
Net unrealized gain $12,691,217
===========
The accompanying notes are an integral part of these financial statements. 17
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
(b) At December 31, 2005, the following securities were out on loan:
Shares Security Value
8,225 Apollo Group Inc.+ $ 497,284
47,500 DeVry, Inc.* 950,000
27,550 Investors Financial Services Corp. 1,014,667
22,800 Polaris Industries, Inc. 1,144,560
63,565 UCBH Holdings, Inc. 1,136,542
----------
Total $4,743,053
==========
+ Indicates pending sale as of 12/31/05.
Purchases and sales of securities (excluding temporary cash investments) for the
year ended December 31, 2005 aggregated $26,933,408 and $7,422,516,
respectively.
18 The accompanying notes are an integral part of these financial statements.
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/05
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities (including securities loaned of
($4,743,053) (cost $64,256,973) $76,948,190
Cash 886,459
Receivables -
Investment securities sold 667,028
Fund shares sold 162,710
Dividends, interest and foreign taxes withheld 21,739
Other 9
-----------
Total assets $78,686,135
-----------
LIABILITIES:
Payables -
Investment securities purchased $ 779,660
Fund shares repurchased 46,533
Upon return of securities loaned 4,940,655
Due to affiliates 10,468
Accrued expenses 58,218
-----------
Total liabilities $ 5,835,534
-----------
NET ASSETS:
Paid-in capital $61,497,972
Accumulated net realized loss on investments (1,338,588)
Net unrealized gain on investments 12,691,217
-----------
Total net assets $72,850,601
===========
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Class A (based on $53,321,426/1,946,624 shares) $ 27.39
===========
Class B (based on $7,061,561/261,984 shares) $ 26.95
===========
Class C (based on $11,054,080/409,545 shares) $ 26.99
===========
Class R (based on $1,413,534/52,040 shares) $ 27.16
===========
MAXIMUM OFFERING PRICE:
Class A ($27.39 [divided by] 94.25%) $ 29.06
===========
The accompanying notes are an integral part of these financial statements. 19
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/05
INVESTMENT INCOME:
Dividends $335,800
Interest 35,424
Income from securities loaned, net 815
--------
Total investment income $ 372,039
----------
EXPENSES:
Management fees $514,701
Transfer agent fees and expenses
Class A 101,323
Class B 18,332
Class C 24,289
Class R 4,275
Distribution fees
Class A 113,801
Class B 48,934
Class C 79,407
Class R 5,921
Administrative reimbursements 18,512
Custodian fees 15,827
Registration fees 111,535
Professional fees 43,248
Printing expense 36,352
Fees and expenses of nonaffiliated trustees 6,228
Miscellaneous 8,622
--------
Total expenses $1,151,307
Less management fees waived and expenses
reimbursed by Pioneer Investments, Inc. (276,420)
Less fees paid indirectly (2,088)
----------
Net expenses $ 872,799
----------
Net investment loss $ (500,760)
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments $ 24,890
Change in net unrealized gain on investments 3,527,740
----------
Net gain on investments $3,552,630
----------
Net increase in net assets resulting from operations $3,051,870
==========
20 The accompanying notes are an integral part of these financial statements.
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/05 and 12/31/04
Year Ended Year Ended
12/31/05 12/31/04
FROM OPERATIONS:
Net investment loss $ (500,760) $ (315,911)
Net realized gain (loss) on investments 24,890 (556,013)
Change in net unrealized gain on investments 3,527,740 3,335,258
----------- -----------
Net increase in net assets resulting from
operations $ 3,051,870 $ 2,463,334
----------- -----------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $35,886,431 $35,731,301
Cost of shares repurchased (16,748,168) (13,779,468)
----------- -----------
Net increase in net assets resulting from
Fund share transactions $19,138,263 $21,951,833
----------- -----------
Net increase in net assets $22,190,133 $24,415,167
NET ASSETS:
Beginning of year 50,660,468 26,245,301
----------- -----------
End of the year $72,850,601 $50,660,468
=========== ===========
The accompanying notes are an integral part of these financial statements. 21
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (continued)
- --------------------------------------------------------------------------------
'05 Shares '05 Amount '04 Shares '04 Amount
CLASS A
Shares sold 877,355 $23,033,498 978,829 $24,463,232
Less shares repurchased (481,431) (12,580,140) (487,984) (12,274,043)
-------- ----------- -------- -----------
Net increase 395,924 $10,453,358 490,845 $12,189,189
======== =========== ======== ===========
CLASS B (a)
Shares sold 156,108 $ 4,105,284 194,370 $ 4,822,998
Less shares repurchased (45,507) (1,171,942) (42,987) (1,047,620)
-------- ----------- -------- -----------
Net increase 110,601 $ 2,933,342 151,383 $ 3,775,378
======== =========== ======== ===========
CLASS C (a)
Shares sold 258,978 $ 6,740,836 243,715 $ 6,068,076
Less shares repurchased (75,177) (1,959,400) (17,971) (440,629)
-------- ----------- -------- -----------
Net increase 183,801 $ 4,781,436 225,744 $ 5,627,447
======== =========== ======== ===========
CLASS R (a)
Shares sold 78,559 $ 2,006,813 14,882 $ 376,995
Less shares repurchased (40,733) (1,036,686) (668) (17,176)
-------- ----------- -------- -----------
Net increase 37,826 $ 970,127 14,214 $ 359,819
======== =========== ======== ===========
(a) Class B, Class C, and Class R shares were first publicly offered February
23, 2004.
22 The accompanying notes are an integral part of these financial statements.
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/05 12/31/04 12/31/03 12/31/02 12/31/01
CLASS A
Net asset value, beginning of period $ 26.12 $ 24.76 $ 19.02 $ 23.28 $ 23.02
------- ------- ------- -------- -------
Increase (decrease) from investment operations:
Net investment loss $ (0.15) $ (0.16) $ (0.10) $ (0.01) $ (0.12)
Net realized and unrealized gain (loss) on investments 1.42 1.52 5.84 (4.25) 0.38
------- ------- ------- -------- -------
Net increase (decrease) from investment operations $ 1.27 $ 1.36 $ 5.74 $ (4.26) $ 0.26
------- ------- ------- -------- -------
Net increase (decrease) in net asset value $ 1.27 $ 1.36 $ 5.74 $ (4.26) $ 0.26
------- ------- ------- -------- -------
Net asset value, end of period $ 27.39 $ 26.12 $ 24.76 $ 19.02 $ 23.28
======= ======= ======= ======== =======
Total return* 4.86% 5.49% 30.18% (18.30)% 1.13%
Ratio of net expenses to average net assets+ 1.25% 1.25% 1.25% 1.25% 1.25%
Ratio of net investment loss to average net assets+ (0.64)% (0.78)% (0.83)% (0.88)% (0.86)%
Portfolio turnover rate 13% 8% 4% 5% 11%
Net assets, end of period (in thousands) $53,321 $40,504 $26,245 $ 15,659 $ 9,764
Ratios assuming no waiver of management fees and assumption
of expenses by PIM and no reduction for fees paid indirectly:
Net expenses+ 1.71% 1.79% 1.38% 1.56% 1.69%
Net investment loss+ (1.10)% (1.33)% (0.96)% (1.19)% (1.30)%
Ratios assuming waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 1.25% 1.25% 1.25% 1.25% 1.25%
Net investment loss (0.64)% (0.78)% (0.83)% (0.88)% (0.86)%
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of each period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
+ Ratios with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
23
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
2/21/04 (a)
Year Ended to
12/31/05 12/31/04
CLASS B
Net asset value, beginning of period $ 25.94 $ 25.32
------- --------
Increase (decrease) from investment operations:
Net investment loss $ (0.29) $ (0.20)
Net realized and unrealized gain 1.30 0.82
------- --------
Net increase from investment operations $ 1.01 $ 0.62
------- --------
Net increase in net asset value $ 1.01 $ 0.62
------- --------
Net asset value, end of period $ 26.95 $ 25.94
======= ========
Total return* 3.89% 2.45%(b)
Ratio of net expenses to average net assets+ 2.17% 2.16%**
Ratio of net investment loss to average net assets+ (1.56)% (1.68)%**
Portfolio turnover rate 13% 8%
Net assets, end of period (in thousands) $ 7,062 $ 3,927
Ratios assuming no waiver of management fees and
assumption of expenses by PIM and no reduction
for fees paid indirectly:
Net expenses 2.62% 2.74%**
Net investment loss (2.01)% (2.26)%**
Ratios assuming waiver of management fees and
assumption of expenses by PIM and reduction for
fees paid indirectly:
Net expenses 2.16% 2.16%**
Net investment loss (1.55)% (1.68)%**
* 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.
(a) Class B shares were first publicly offered on February 21, 2004.
(b) Not Annualized.
24 The accompanying notes are an integral part of these financial statements.
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
2/21/04(a)
Year Ended to
12/31/05 12/31/04
CLASS C
Net asset value, beginning of period $ 25.96 $ 25.32
------- --------
Increase (decrease) from investment operations:
Net investment loss $ (0.29) $ (0.17)
Net realized and unrealized gain on investments 1.32 0.81
------- --------
Net increase from investment operations $ 1.03 $ 0.64
------- --------
Net increase in net asset value $ 1.03 $ 0.64
------- --------
Net asset value, end of period $ 26.99 $ 25.96
======= ========
Total return* 3.97% 2.53%(b)
Ratio of net expenses to average net assets+ 2.10% 2.07%**
Ratio of net investment loss to average net assets+ (1.48)% (1.59)%**
Portfolio turnover rate 13% 8%
Net assets, end of period (in thousands) $11,054 $ 5,860
Ratios assuming no waiver of management fees and
assumption of expenses by PIM and no reduction
for fees paid indirectly:
Net expenses+ 2.55% 2.67%**
Net investment loss+ (1.93)% (2.19)%**
Ratios assuming waiver of management fees and
assumption of expenses by PIM and reduction for
fees paid indirectly:
Net expenses 2.09% 2.07%**
Net investment loss (1.47)% (1.59)%**
* 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.
(a) Class C shares were first publicly offered on February 21, 2004.
(b) Not Annualized.
The accompanying notes are an integral part of these financial statements. 25
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
2/21/04(a)
Year Ended to
12/31/05 12/31/04
CLASS R
Net asset value, beginning of period $ 26.00 $ 25.32
------- --------
Increase (decrease) from investment operations:
Net investment loss $ (0.24) $ (0.05)
Net realized and unrealized gain on investments 1.40 0.73
------- --------
Net increase from investment operations $ 1.16 $ 0.68
------- --------
Net increase in net asset value $ 1.16 $ 0.68
------- --------
Net asset value, end of period $ 27.16 $ 26.00
======= ========
Total return* 4.46% 2.69%(b)
Ratio of net expenses to average net assets+ 1.66% 1.51%**
Ratio of net investment loss to average net assets+ (1.04)% (1.00)%**
Portfolio turnover rate 13% 8%
Net assets, end of period (in thousands) $ 1,414 $ 370
Ratios assuming no waiver of management fees and
assumption of expenses by PIM and no reduction
for fees paid indirectly:
Net expenses+ 2.12% 2.09%**
Net investment loss+ (1.50)% (1.58)%**
Ratios assuming waiver of management fees and
assumption of expenses by PIM and reduction for
fees paid indirectly:
Net expenses 1.66% 1.51%**
Net investment loss (1.04)% (1.00)%**
* 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.
(a) Class R shares were first publicly offered on February 21, 2004.
(b) Not Annualized.
26 The accompanying notes are an integral part of these financial statements.
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer Small and Mid Cap Growth Fund (the Fund), formerly known as Pioneer Papp
Small and Mid Cap Growth Fund, is one of eight portfolios comprising Pioneer
Series Trust II, a Delaware statutory trust registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
The Fund, which commenced operations on February 20, 2004 is the successor to
the Papp Small & Mid-Cap Growth Fund, Inc. The Papp Small & Mid-Cap Growth Fund
transferred all of its net assets in exchange for the Fund's Class A shares in a
one-to-one exchange ratio on February 20, 2004 pursuant to an agreement and plan
of reorganization (the "reorganization" was approved by the Shareholders of Papp
Small & Mid-Cap Growth Fund, Inc. on February 20, 2004). The Fund had no assets
or liabilities prior to the reorganization. Accordingly, the reorganization,
which was a tax-free exchange, had no effect on the Fund's operations. The
investment objective of the Fund is to seek capital appreciation by investing in
a diversified portfolio of securities consisting primarily of common stocks.
The Fund offers four classes of shares - Class A, Class B, Class C and Class R
shares. Class B, Class C, and Class R shares were first publicly offered on
February 23, 2004. Each class of shares represents an interest in the same
portfolio of investments of the Fund and has equal rights to voting,
redemptions, dividends and liquidation, except that the level of transfer agent
and distribution fees may differ among classes. Class A, Class B, Class C, and
Class R shareowners have exclusive voting rights with respect to the
distribution plan for each class.
The Fund's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the Fund
to, among other things, make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
income, expenses and gains and losses on investments during the reporting years.
Actual results could differ from those estimates. Information regarding the
Fund's principal investment risks is contained in the Fund's prospectus. Please
refer to those documents when considering the Fund's risks. The following is a
summary of significant accounting policies followed by the Fund in the
preparation of its financial statements, which are consistent with those
policies generally accepted in the investment company industry.
27
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
A. Security Valuation
Security transactions are recorded as of trade date. The net asset value of
the Fund is computed once daily, on each day the New York Stock Exchange
(NYSE) is open, as of the close of regular trading on the NYSE. In
computing the net asset value, securities are valued at the last sale price
on the principal exchange where they are traded. Securities that have not
traded on the date of valuation, or securities for which sale prices are
not generally reported, are valued at the mean between the last bid and
asked prices. Securities for which market quotations are not readily
available are valued at their fair values as determined by, or under the
direction of, the Board of Trustees. Trading in foreign securities is
substantially completed each day at various times prior to the close of the
NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of such times. The Fund also may use
the fair value of a security including a non-U.S. security when the closing
market price on the principal exchange where the security is traded no
longer reflects the value of the security. At December 31, 2005 there were
no securities fair valued. Temporary cash investments are valued at
amortized cost.
Dividend income is recorded on the ex-dividend date except that certain
dividends from foreign securities where the ex-dividend date may have
passed are recorded as soon as the Fund becomes aware of the ex-dividend
data in exercise of reasonable diligence. Dividend and interest income is
recorded on the accrual basis, net of unrecoverable foreign taxes withheld
at the applicable country rates.
Gains and losses on sales of investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes.
B. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with
28
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
federal income tax rules. Therefore, the sources of the Fund's
distributions may be shown in the accompanying financial statements as
either from or in excess of net investment income or net realized gain on
investment transactions, or from paid-in capital, depending on the type of
book/tax differences that may exist.
At December 31, 2005, the Fund had a net capital loss carryforward of
$1,332,133 of which $129,800 will expire in 2009, $266,040 will expire in
2010, $380,280 will expire in 2011 and $556,013 will expire in 2012, if not
utilized.
There were no distributions paid during the fiscal years ended December 31,
2005 and December 31, 2004.
The following shows the components of distributable earnings on a federal
income tax basis at December 31, 2005.
- --------------------------------------------------------------------------------
2005
- --------------------------------------------------------------------------------
Undistributed ordinary income $ -
Capital Loss Carryforward (1,332,133)
Post October losses deferred (6,455)
Unrealized appreciation 12,691,217
-----------
Total $11,352,629
===========
- --------------------------------------------------------------------------------
At December 31, 2005, the Fund reclassified $500,760 to increase
undistributed net investment income and $500,760 to decrease paid in
capital. This reclassification has no impact on the net assets of the Fund
and presents the Fund's capital accounts on a tax basis.
C. Fund Shares
The Fund records sales and repurchases of its shares as of trade date.
Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the
Fund and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A.
(UniCredito Italiano), earned approximately $20,008 in underwriting
commissions on the sale of Class A shares during the year ended December
31, 2005.
29
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
D. Class Allocations
Distribution fees are calculated based on the average daily net asset value
attributable to Class A, Class B, Class C, and Class R shares of the Fund,
respectively (see Note 4). Shareowners of each class share all expenses and
fees paid to the transfer agent, Pioneer Investment Management Shareholder
Services, Inc. (PIMSS), for its services, which are allocated based on the
number of accounts in each class and the ratable allocation of related
out-of-pocket expenses (see Note 3). Income, common expenses and realized
and unrealized gains and losses are calculated at the Fund level and
allocated daily to each class of shares based on the respective percentage
of adjusted net assets at the beginning of the day.
Distributions to shareowners are recorded as of the ex-dividend date.
Distributions paid by the Fund with respect to each class of shares are
calculated in the same manner, at the same time, on the same day, and in
the same amount, except that Class A, Class B, Class C, and Class R shares
can bear different transfer agent and distribution fees.
E. Securities Lending
The Fund lends securities in the Portfolio to certain broker-dealers or
other institutional investors, with the Fund's custodian acting as the
lending agent. When entering into a loan, the Fund receives collateral,
which is maintained by the custodian and earns income in the form of
negotiated lenders' fees. The Fund also continues to receive interest or
payments in lieu of dividends on the securities loaned. Gain or loss on the
fair value of the loaned securities that may occur during the term of the
loan will be for account of the Fund. The loans are secured by collateral
of at least 102%, at all times, of the fair value of the securities loaned.
The amount of the collateral will be adjusted daily to reflect any price
fluctuation in the value of the loaned securities. The Fund has the right
under the lending agreements to recover the securities from the borrower on
demand. The Fund invests cash collateral in the Securities Lending
Investment Fund, which is sponsored by Brown Brothers Harriman & Co., the
Fund's custodian.
30
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the
Fund's portfolio. Management fees are calculated daily at the annual rate of
0.85% of the Fund's average daily net assets up to $1 billion and 0.80% of the
excess over $1 billion.
PIM and not the Fund pays a portion of the fee it receives from the Fund to L.
Roy Papp & Associates LLP (Papp) as compensation for its sub advisory services
to the Fund.
Through December 31, 2006, PIM has agreed not to impose all or a portion of its
management fee and to assume other operating expenses of the Fund to the extent
necessary to limit expenses to 1.25% of average daily net assets attributable to
Class A; the portion of the Fund-wide expenses attributable to Class B, Class C
and Class R shares will be reduced only to the extent that such expenses are
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 Fund. On December 31, 2005, $3,349 was receivable from
PIM related to management fees, administrative costs and certain others
services, and is included in due to affiliates.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides
substantially all transfer agent and shareowner services to the Fund at
negotiated rates. Included in due to affiliates is $12,076 in transfer agent
fees payable to PIMSS at December 31, 2005.
4. Distribution and Service Plans
Effective February 20, 2004 the Fund adopted a Plan of Distribution for 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 Fund pays PFD a service fee of up to 0.25% of the average
daily net assets attributable to Class A shares in reimbursement of its actual
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 Fund pays
PFD 1.00% of the average daily net assets attributable to each class of shares.
The fee consists of a 0.25% service fee and
31
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
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 Fund pays PFD 0.50% of the
average daily net assets attributable to Class R shares as compensation for
distribution services. Included in due to affiliates is $1,741 in distribution
fees payable to PFD at December 31, 2005. The Fund also has adopted a separate
service plan for Class R shares (Service Plan). The Service Plan authorizes the
Fund to pay as compensation for securities dealers, plan administrators or other
service organizations that agree to provide certain services to retirement plans
or plan participants holdings shares of the Fund a service fee of 0.25% of the
Fund's average daily net assets attributable to Class R shares held by such
plans.
In addition, redemptions of each class of shares may be subject to a contingent
deferred sales charge (CDSC). Effective February 20, 2004 a CDSC of 1.00% may be
imposed on certain net asset value purchases of Class A shares that are redeemed
within 18 months of purchase. Class B shares subscribed on or after December 1,
2004 that are redeemed within five years of purchase are subject to a CDSC at
declining rates beginning at 4.00%, based on the lower of cost or market value
of shares being redeemed. Shares purchased prior to December 1, 2004 remain
subject to the CDSC in effect at the time those shares were purchased.
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 were
subject to a CDSC of 1.00%. Effective July 1, 2004, the CDSC on Class R shares
was eliminated. Proceeds from the CDSCs are paid to PFD. For the year ended
December 31, 2005, CDSCs in the amount of $15,679 were paid to PFD.
5. Expense Offset Arrangements
The Fund has entered into certain expense offset arrangements with PIMSS
resulting in a reduction in the Fund's total expenses due to interest earned on
cash held by PIMSS. For the year ended December 31, 2005, the Fund's expenses
were reduced by $2,088 under such arrangements.
32
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Series Trust II and
Shareowners of Pioneer Small and Mid Cap Growth Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Small & Mid Cap Growth Fund (formerly
Pioneer Papp Small & Mid Cap Growth Fund), one of the series constituting
Pioneer Series Trust II (the "Trust"), as of December 31, 2005, and the related
statement of operations for the year then ended, and the statements of changes
in net assets and financial highlights for each of the two years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for each of the two years in the period ended
December 31, 2003 were audited by other auditors whose report, dated January 23,
2004, expressed an unqualified opinion on those financial highlights. The
financial highlights for the year ended December 31, 2001 were audited by other
auditors who have ceased operations and whose report, dated January 17, 2002,
expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Trust's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Trust's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2005, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Small & Mid Cap Growth Fund of the Pioneer Series Trust II at December
31, 2005, the results of its operations for the year then ended, and the changes
in its net assets and financial highlights for each of the two years in the
period then ended, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 10, 2006
33
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT
- --------------------------------------------------------------------------------
The Investment Company Act of 1940 requires that both the Board of Trustees and
a majority of the Independent Trustees (collectively "the Trustees") voting
separately annually approve the Fund's management contract (the "Management
Contract") between the Fund and Pioneer Investment Management, Inc., the Fund's
adviser (the "Investment Adviser"). The Investment Adviser has retained L. Roy
Papp and Associates, LLC. (the "Sub-adviser") to act as sub-adviser to the Fund
pursuant to a sub-advisory agreement between the Investment Adviser and the
Sub-adviser (the "Sub-advisory Agreement"). The Trustees have determined that
the terms of the Management Contract and the Sub-advisory Agreement are fair and
reasonable and that renewal of these contracts will enable the Fund to receive
quality investment advisory services at a cost deemed reasonable and is in the
best interests of the Fund and its shareowners. In making such determinations,
the Independent Trustees relied upon the assistance of counsel to the
Independent Trustees and counsel to the Fund.
Throughout the year, the Independent Trustees regularly met in executive session
separately from the Interested Trustees of the Fund and any officer of the
Investment Adviser, or its affiliates. While the Trustees, including the
Independent Trustees, act on all major matters relating to the Fund, a
significant portion of the activities of the Board of Trustees (including
certain of those described herein) is conducted through committees, the members
of which are comprised exclusively of Independent Trustees. Such committee
meetings are attended by officers of the Fund or the Investment Adviser to the
extent requested by the members of the committee.
In evaluating the Management Contract and Sub-advisory Agreement, the Trustees
conducted a review that was specifically focused upon the renewal of the
Management Contract and Sub-advisory Agreement, and relied upon their knowledge,
resulting from their meetings throughout the year, of the Investment Adviser,
its services and the Fund. Both in meetings specifically dedicated to renewal of
the Management Contract and at other meetings during the course of the year, the
Trustees, including the Independent Trustees, received materials relating to the
Investment Adviser's investment and management services under the Management
Contract. These materials included (i) information on the investment performance
of the Fund, a peer group of funds and an index, in each case selected by the
Independent Trustees for this purpose, (ii) sales and redemption data in respect
of the Fund, (iii) the general investment outlook in the markets in which
34
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the Fund invests, (iv) arrangements in respect of the distribution of the Fund's
shares, (v) the procedures employed to determine the value of each of the Fund's
assets, (vi) the Investment Adviser's management of the relationships with the
Fund's unaffiliated service providers, (vii) the record of compliance with the
Fund's investment policies and restrictions and with the Fund's Code of Ethics
and the structure and responsibilities of the Investment Adviser's compliance
department, (viii) the nature, cost and character of non-investment management
services provided by the Investment Adviser and its affiliates, (ix) the
disclosures included in the Fund's prospectuses and reports to shareowners and
(x) the investment and compliance staff and operations of the Subadviser.
Specifically, in connection with the Independent Trustees' review of the
Management Contract and the Sub-advisory Agreement, the Independent Trustees
requested and the Investment Adviser provided additional information in order to
evaluate the quality of the Investment Adviser's and Sub-adviser's services and
the reasonableness of the fee under the Management Contract and the Sub-advisory
Agreement. Among other items, this information included data or analyses of (1)
investment performance for one, three and five year periods for the Fund and a
peer group selected by the Independent Trustees for this purpose, (2) management
and other fees incurred by a peer group of funds selected by the Independent
Trustees for this purpose, (3) the advisory fees of comparable portfolios of
other clients of the Investment Adviser, (4) expense ratios for the Fund and a
peer group of funds selected by the Independent Trustees for this purpose, (5)
the overall organization of the Investment Adviser, (6) the Investment Adviser's
financial results and condition, including its and certain of its affiliates
profitability from services performed for the Fund, (7) transfer agency fees and
administrative reimbursements paid to the Investment Adviser or affiliates, (8)
investment management staffing, and (9) operating expenses paid to third
parties. The Trustees also reviewed information regarding the potential for each
of the Fund and the Investment Adviser to benefit from further economies of
scale in the management of the Fund in light of reasonable growth expectations
for the Fund, the break points in the Fund's management fee and of a peer group
of funds selected by the Independent Trustees for this purpose and certain of
the Fund's expenses that are not incurred as fees based on a percentage of net
assets.
35
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT (continued)
- --------------------------------------------------------------------------------
The following summarizes matters considered by the Trustees in connection with
their renewal of the Fund's Management Contract and Sub-advisory Agreement. The
Trustees did not identify any single factor as all-important or controlling, and
the summary does not detail all the matters that were considered.
A. Ancillary Benefits to Shareowners. The Trustees considered the benefits to
shareowners of investing in a Fund that is part of a large number of
investment companies offering a variety of investment disciplines and
providing for a large variety of Fund and shareowner services.
B. Compliance and Investment Performance. The Trustees determined that the
Investment Adviser had policies and systems reasonably designed to achieve
compliance with the Fund's investment objectives and regulatory
requirements. The Trustees also reviewed the Fund's investment performance
based upon total return, as well as the Fund's performance compared to both
the performance of a peer group and an index, in each case selected by the
Independent Trustees for this purpose. The Fund's performance based upon
total return was in the fifth quintile of the peer group for the 12 months
ended June 30, 2005, the fifth quintile of the peer group for the three
years ended June 30, 2005, and the second quintile for the five years ended
June 30, 2005. (In all quintile rankings referred to throughout this
discussion first quintile is most favorable to the Fund's shareowners.
Thus, highest relative performance would be first quintile and lowest
relative expenses also would be first quintile.) The Trustees also
considered the activities of the Investment Adviser in monitoring the
investment and compliance operations of the Sub-adviser. The Trustees
concluded that the longer-term performance of the Fund supported the
continuation of the Management Contract and the Sub-advisory Agreement.
C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the
background of members of the team responsible for the daily management of
the Fund and the Fund's investment objective and discipline. The
Independent Trustees also have had discussions with senior management of
the Investment Adviser responsible for investment operations. Among other
things, the Trustees considered the number, education and experience of the
Sub-adviser's investment staff. The Trustees concluded that the
36
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Investment Adviser and the Sub-adviser have the quality and depth of
personnel and the well-developed methods essential to performing their
duties under the Management Contract and the Sub-advisory Agreement.
D. Nature and Quality of Other Services. The Trustees considered the nature,
quality, cost and extent of other services provided to shareowners of the
Fund, including administrative and shareowner services performed by the
Investment Adviser under the Management Contract. The Trustees also
considered the reasonableness of the arrangements for reimbursement of the
Investment Adviser's out-of-pocket costs and expenses, including overhead,
for certain administrative services that the Investment Adviser is not
required to provide under the Management Contract. The Trustees also
considered the nature and extent of the other services provided by the
Investment Adviser's affiliates under other contracts and its supervision
of third party service providers. Based on these considerations, the
Trustees concluded that the nature, quality, cost and extent of such
services are satisfactory and reliable and serve the shareowners of the
Fund well.
E. Management Fee and Expenses. The Trustees considered the Investment
Adviser's fee under the Management Contract relative to the management fees
charged by a peer group of funds selected by the Independent Trustees for
this purpose using data provided by an independent third party. The Fund's
management fee for the 12 months ended June 30, 2005 was in the third
quintile without giving effect to fee waivers. The Trustees determined that
the fee under the Management Contract was reasonable and fair in light of
both the overall nature and quality of services provided by the Investment
Adviser and the fees charged by the funds in the peer group. The Trustees
also evaluated the fee under the Sub-advisory Agreement and the portion of
the fee under the Management Contract retained by the Investment Adviser
and determined that they were consistent with other sub-advised funds. The
Trustees also considered the Fund's expense ratio and expense ratios of a
peer group of funds selected by the Independent Trustees for this purpose.
The Fund's expense ratio for the 12 months ended June 30, 2005 (after
expense limitations) was in the first quintile of the applicable peer group
for the most recent fiscal year of the peer group for the comparable
period. The Trustees concluded that the Fund's overall expense
37
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT (continued)
- --------------------------------------------------------------------------------
ratio (after expense limitations) was reasonable compared to that of
comparable funds.
F. Profitability. The Trustees considered the level of the Investment
Adviser's profits with respect to the management of the Pioneer Funds,
including details with respect to the Fund. This consideration included a
review of the Investment Adviser's methodology in allocating certain of its
costs to the management of each Fund. The Trustees also considered the
financial results realized by the Investment Adviser in connection with the
operation of the Fund. They further considered the profits realized by the
Investment Adviser and its affiliates from non-fund businesses that may
benefit from or be related to the Fund's business. The Trustees considered
the Investment Adviser's profit margins in comparison with the limited
available industry data. The Trustees concluded that the Investment
Adviser's profits from management of the Pioneer Funds, including the
financial results derived from the Fund, bear a reasonable relationship to
the services rendered and are fair for the management of the Fund.
G. Economies of Scale. The Trustees considered the economies of scale with
respect to the management of the Fund, whether the Fund had appropriately
benefited from any economies of scale, and whether there was potential for
realization of any further economies of scale. Because of break points in
the management fee, the Trustees concluded that any perceived or potential
economies of scale would be shared at future asset levels, in a reasonable
manner as the Fund grows in size, between the Investment Adviser and the
Fund's shareholders.
H. Other Benefits to the Investment Adviser. The Trustees also considered the
character and amount of fees paid by the Fund, other than under the
Management Contract, for services provided by the Investment Adviser and
affiliates, including fees for services such as shareowner services. The
Trustees also considered the receipt of sales loads and payments under Rule
12b-1 plans in respect of the Pioneer Funds (including the Fund), and
benefits to the Sub-Adviser from the use of "soft" commission dollars to
pay for research and brokerage services. The Trustees further considered
the revenues and profitability of the Investment Adviser's businesses other
than the fund business, including the Investment Adviser's institutional
investment advisory business. The Trustees
38
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
considered the intangible benefits that accrue to the Investment Adviser
and its affiliates by virtue of its relationship with the Fund and the
Pioneer Funds as a group. The Trustees concluded that all these types of
benefits accruing to the Investment Adviser were reasonable in the context
of the overall relationship between the Investment Adviser and the Fund.
Conclusion. The Trustees, in light of the Investment Adviser's and Sub-adviser's
overall performance, considered it appropriate to continue to retain the
management services of the Investment Adviser and the Sub-adviser. Based on
their evaluation of all material factors deemed relevant and the advice of
independent counsel, the Trustees concluded that the Management Contract with
the Fund and the Sub-advisory Agreement are fair and reasonable and voted to
approve the continuation of the Management Contract and the Sub-advisory
Agreement for another year.
39
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser
Pioneer Investment Management, Inc.
Custodian
Brown Brothers Harriman & Co.
Independent Registered Public Accounting Firm
Ernst & Young LLP
Principal Underwriter
Pioneer Funds Distributor, Inc.
Legal Counsel
Wilmer Cutler Pickering Hale and Dorr LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
Trustees and Officers
The Fund's Board of Trustees provides broad supervision over the Fund's affairs.
The officers of the Fund are responsible for the Fund's operations. The Fund's
Trustees and officers are listed below, together with their principal
occupations during the past five years. Trustees who are interested persons of
the Fund within the meaning of the Investment Company Act of 1940 are referred
to as Interested Trustees. Trustees who are not interested persons of the Fund
are referred to as Independent Trustees. Each of the Trustees (except Mr. Hood
and Mr. West) serves as a Trustee of each of the 91 U.S. registered investment
portfolios for which Pioneer Investment Management, Inc. ("Pioneer") serves as
investment adviser (the "Pioneer Funds"). Mr. Hood and Mr. West serve as
Trustees for 35 of the 91 Pioneer Funds. The address for all Interested Trustees
and all officers of the Fund is 60 State Street, Boston, Massachusetts 02109.
The Fund's statement of additional information provides more detailed
information regarding the Fund's Trustees and is available upon request, without
charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Fund are available without charge,
upon request, by calling our toll free number (1-800-225-6292). Information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is publicly available to shareowners
at www.pioneerfunds.com and on the SEC's web site at http://www.sec.gov.
40
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation Other Directorships
Name and Age With the Fund and Term of Office During Past Five Years Held by this Trustee
John F. Cogan, Jr. (79)* Chairman of the Trustee since 2003. Deputy Chairman and a Director of Chairman and
Board, Serves until Pioneer Global Asset Management S.p.A. Director of ICI
Trustee and President successor trustee is ("PGAM"); Non-Executive Chairman and a Mutual Insurance
elected or earlier Director of Pioneer Investment Company; Director of
retirement or Management USA Inc. ("PIM-USA"); Harbor Global
removal. Chairman and a Director of Pioneer; Company, Ltd.
Director of Pioneer Alternative
Investment Management Limited
(Dublin); President and a Director of
Pioneer Alternative Investment
Management (Bermuda) Limited and
affiliated funds; Director of
PIOGLOBAL Real Estate Investment Fund
(Russia); Director of Nano-C, Inc.
(since 2003); Director of Cole
Investment Corporation (since 2004);
Director of Fiduciary Counseling Inc.;
President and Director of Pioneer
Funds Distributor, Inc. ("PFD");
President of all of the Pioneer Funds;
and Of Counsel, Wilmer Cutler
Pickering Hale and Dorr LLP (counsel
to PIM-USA and the Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
41
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
Name, Age and Positions Held Length of Service Principal Occupation Other Directorships
Address With the Fund and Term of Office During Past Five Years Held by this Trustee
David R. Bock **(62) Trustee Trustee since 2005. Senior Vice President and Chief Director of The
3050 K. Street NW, Serves until Financial Officer, I-trax, Inc. Enterprise Social
Washington, DC 20007 successor trustee is (publicly traded health care services Investment Company
elected or earlier company) (2001 - present); Managing (privately-held
retirement or Partner, Federal City Capital Advisors affordable housing
removal. (boutique merchant bank) (2002 to finance company);
2004); Executive Vice President and Director of New York
Chief Financial Officer, Pedestal Inc. Mortgage Trust
(internet-based mortgage trading (publicly traded
company) (2000 - 2002). mortgage REIT)
**Mr. Bock became a Trustee of the Fund on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (57) Trustee Trustee since 2003. President, Bush International Director of Brady
3509 Woodbine Street, Serves until (international financial advisory Corporation
Chevy Chase, MD 20815 successor trustee is firm). (industrial
elected or earlier identification and
retirement or specialty coated
removal. material products
manufacturer),
Mortgage Guaranty
Insurance
Corporation, and
Briggs & Stratton,
Inc. (engine
manufacturer)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Trustee Trustee since 2003. Founding Director, The Winthrop Group, None
Graham (58) Serves until Inc. (consulting firm); Desautels,
1001 Sherbrooke Street West, successor trustee is Faculty of Management, McGill
Montreal, Quebec, Canada elected or earlier University.
H3A 1G5 retirement or
removal.
- ------------------------------------------------------------------------------------------------------------------------------------
42
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name, Age and Positions Held Length of Service Principal Occupation Other Directorships
Address With the Fund and Term of Office During Past Five Years Held by this Trustee
Marguerite A. Piret (57) Trustee Trustee since 2003. President and Chief Executive Officer, Director of New
One Boston Place, 28th Floor, Serves until Newbury, Piret & Company, Inc. America High Income
Boston, MA 02108 successor trustee is (investment banking firm). Fund, Inc.
elected or earlier (closed-end
retirement or investment company)
removal.
- ------------------------------------------------------------------------------------------------------------------------------------
John Winthrop (69) Trustee Trustee since 2003. President, John Winthrop & Co., Inc. None
One North Adgers Wharf, Serves until (private investment firm).
Charleston, SC 29401 successor trustee is
elected or earlier
retirement or
removal.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FUND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (53) Executive Vice Since 2003. Serves President and Chief Executive Officer, Trustee of certain
President at the discretion of PIM-USA since May 2003 (Director since Pioneer Funds
the Board. January, 2001); President and Director
of Pioneer since May, 2003; Chairman
and Director of Pioneer Investment
Management Shareholder Services, Inc.
("PIMSS") since May, 2003; Executive
Vice President of all of Pioneer Funds
since June 3, 2003; and Executive Vice
President and Chief Operating Officer
of PIM-USA, November 2000 - May 2003.
- ------------------------------------------------------------------------------------------------------------------------------------
Dorothy E. Bourassa (58) Secretary Since 2003. Serves Secretary of PIM-USA; Senior Vice None
at the discretion of President - Legal of Pioneer; and
the Board. Secretary/Clerk of most of PIM-USA's
subsidiaries; Secretary of all of the
Pioneer Funds since September 2003
(Assistant Secretary from November
2000 to September 2003).
- ------------------------------------------------------------------------------------------------------------------------------------
43
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
FUND OFFICERS
- --------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation Other Directorships
Name and Age With the Fund and Term of Office During Past Five Years Held by this Officer
Christopher J. Kelley (41) Assistant Secretary Since September, Assistant Vice President and Senior None
2003. Serves at Counsel of Pioneer since July 2002;
the discretion of Vice President and Senior Counsel of
the Board BISYS Fund Services, Inc. (April 2001
to June 2002); Senior Vice President
and Deputy General Counsel of Funds
Distributor, Inc. (July 2000 to April
2001; Assistant Secretary of all
Pioneer Funds since September 2003.
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Phelan (48) Assistant Secretary Since September, Partner, Wilmer Cutler Pickering None
2003. Serves at Hale and Dorr LLP; Assistant
the discretion of Secretary of all Pioneer Funds since
the Board September 2003.
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (60) Treasurer Since November, Vice President - Fund Accounting, None
2000. Serves at Administration and Custody Services
the discretion of of Pioneer; and Treasurer of all of
the Board the Pioneer Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (46) Assistant Treasurer Since November, Deputy Treasurer of Pioneer since None
2004. Serves 2004; Treasurer and Senior Vice
at the discretion President, CDC IXIS Asset Management
of the Board Services from 2002 to 2003;
Assistant Treasurer and Vice
President, MFS Investment Management
from 1997 to 2002; and Assistant
Treasurer of all of the Pioneer
Funds since November 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (40) Assistant Treasurer Since 2003. Serves Assistant Vice President - Fund None
at the discretion of Accounting, Administration and
the Board Custody Services of Pioneer; and
Assistant Treasurer of all of the
Pioneer Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
44
Pioneer Small and Mid Cap Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation Other Directorships
Name and Age With the Fund and Term of Office During Past Five Years Held by this Officer
Gary Sullivan (47) Assistant Treasurer Since 2003. Serves Fund Accounting Manager - Fund None
at the discretion of Accounting, Administration and
the Board. Custody Services of Pioneer; and
Assistant Treasurer of all of the
Pioneer Funds since May 2002.
- ------------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan (32) Assistant Treasurer Since 2003. Serves Fund Administration Manager - Fund None
at the discretion of Accounting, Administration and
the Board. Custody Services since June 2003;
Assistant Vice President - Mutual
Fund Operations of State Street
Corporation from June 2002 to June
2003 (formerly Deutsche Bank Asset
Management); Pioneer Fund
Accounting, Administration and
Custody Services (Fund Accounting
Manager from August 1999 to May
2002, Assistant Treasurer of all
Pioneer Funds since September 2003.
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin (38) Chief Compliance Since October, 2004. Chief Compliance Officer of Pioneer None
Officer Serves at the (Director of Compliance and Senior
discretion of Counsel from November 2000 to
the Board. September 2004); and Chief
Compliance Officer of all of the
Pioneer Funds since 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Fund's investment adviser, provides investment
management and financial services to mutual funds, institutional and other
clients.
45
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
46
- --------------------------------------------------------------------------------
This page for your notes.
47
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
48
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
49
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
50
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
51
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
52
- --------------------------------------------------------------------------------
HOW TO CONTACT PIONEER
- --------------------------------------------------------------------------------
We are pleased to offer a variety of convenient ways for you to contact us for
assistance or information.
Call us for:
Account Information, including existing accounts,
new accounts, prospectuses, applications
and service forms 1-800-225-6292
FactFone(SM) for automated fund yields, prices,
account information and transactions 1-800-225-4321
Retirement plans information 1-800-622-0176
Telecommunications Device for the Deaf (TDD) 1-800-225-1997
Write to us:
PIMSS, Inc.
P.O. Box 55014
Boston, Massachusetts 02205-5014
Our toll-free fax 1-800-225-4240
Our internet e-mail address ask.pioneer@pioneerinvest.com
(for general questions about Pioneer only)
Visit our web site: www.pioneerfunds.com
Before investing consider the Fund's investment objectives, risks, charges and
expenses. Contact your advisor or Pioneer Investments for a prospectus
containing this information. Read it carefully.
The Fund files a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
web site at http://www.sec.gov. The filed form may also be viewed and copied at
the Commission's Public Reference Room in Washington, DC. Information regarding
the operations of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
- --------------------------------------------------------------------------------
PIONEER
-----------------------
AMT-FREE
MUNICIPAL
FUND*
Annual
Report
12/31/05
[LOGO] PIONEER
Investments(R)
*Formerly Pioneer Municipal Bond Fund. Name change effective January 20, 2006.
Table of Contents
- --------------------------------------------------------------------------------
Letter to Shareowners 1
Portfolio Summary 2
Prices and Distributions 3
Performance Update 4
Comparing Ongoing Fund Expenses 8
Portfolio Management Discussion 10
Schedule of Investments 14
Financial Statements 20
Notes to Financial Statements 28
Report of Independent Registered Public Accounting Firm 34
Factors Considered by the Independent Trustees in Approving
the Management Contract 35
Trustees, Officers and Service Providers 40
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
LETTER TO SHAREOWNERS 12/31/05
- --------------------------------------------------------------------------------
Dear Shareowner,
- --------------------------------------------------------------------------------
As 2005 came to a close, U.S. investors looked back on a year of major
challenges, though without much change in the market indices. The war in Iraq
continued, oil prices soared, then dropped, while short-term interest rates
ratcheted steadily higher and intermediate and long-term rates stayed about the
same. Natural disasters also threatened economic expansion. Still, the economy
moved forward as corporate earnings grew. The hope of a growing economy was not
reflected by the small gains or losses in the major U.S. market indices. Among
capitalization ranges, midcap issues made the most headway. Bond prices held
firm and yields remained low, perhaps a sign that the Federal Reserve Board's
interest rate hikes would temper the inflationary pressures induced by a growing
economy.
Among the nagging issues facing the U.S. economy in 2006 is the potential impact
of high energy prices on consumer spending and corporate profits. Also unknown
at this time is whether the Federal Reserve Board will continue to raise
interest rates under its new chairman, Ben Bernanke, who stated his top priority
will be to maintain continuity.
Rising interest rates and improving business conditions made U.S. holdings more
attractive to foreign investors, helping to strengthen the dollar versus the
euro and other key currencies. Investors in many foreign markets enjoyed stellar
returns. Double-digit gains were widespread in Europe, Asia and Latin America.
Even the long-dormant Japanese economy began to stir, while emerging markets,
especially those rich in natural resources, fed global economic growth.
The disparity of returns among countries and sectors underscores the importance
for investors to maintain a well-diversified portfolio. We believe this may be a
good time for investors to review their holdings with their advisor and
determine if they reflect the wide range of opportunities that exist across many
asset classes, as last year's results make clear.
Investing for income with Pioneer
Adding one or more of Pioneer's income-oriented funds to your investment program
may help improve your portfolio's overall balance. As a premier provider of
fixed-income investments, Pioneer offers you a broad selection of actively
managed bond funds to help meet a variety of investment needs. Pioneer also
offers income-oriented equity funds, each managed using a value-oriented, total
return investment philosophy that seeks enhanced return potential and lower
volatility through active diversification. Your financial advisor can help you
select among Pioneer's fixed-income choices.
Respectfully,
/s/ Osbert M. Hood
Osbert M. Hood
President
Pioneer Investment Management, Inc.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Before investing consider the fund's investment objectives, risks, charges and
expenses. Contact your advisor or Pioneer Investments for a prospectus
containing this information. Read it carefully.
1
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY 12/31/05
- --------------------------------------------------------------------------------
Portfolio Diversification
- --------------------------------------------------------------------------------
(As a percentage of total investment portfolio)
[The following data was represented as a pie chart in the printed material]
AAA 44.1%
BBB 18.6%
A 15.7%
AA 13.5%
BB & Lower 6.3%
Commercial Paper 1.8%
Sector Distribution
- --------------------------------------------------------------------------------
(As a percentage of total investment portfolio)
[The following data was represented as a pie chart in the printed material]
Insured 37.3%
Various Revenues 18.3%
Escrowed 13.2%
Health 11.6%
Power 9.4%
Education 2.3%
Special Revenues 2.3%
General Obligation 2.3%
Reserves 1.8%
Housing 1.5%
10 Largest Holdings
- --------------------------------------------------------------------------------
(As a percentage of total debt holdings)
1. San Joaquin Hills Transportation Corridor Agency, 5.0%, 1/1/33 4.98%
2. Massachusetts State Housing Finance Agency, 5.4%, 12/1/28 4.29
3. Indianapolis State Development Finance Authority, 5.6%, 12/1/32 4.13
4. Piedmont Municipal Power Agency, 5.25%, 1/1/21 3.19
5. North Carolina Eastern Municipal Power, 6.0%, 1/1/22 2.92
6. West Virginia State Hospital Finance Authority, 6.75%, 9/1/30 2.90
7. Pittsburg California Redevelopment Agency, 5.80%, 8/1/34 2.85
8. Golden State Tobacco Security Corp. California, 5.5%, 6/1/43 2.34
9. San Jose California Redevelopment Agency Tax, 4.9%, 8/1/33 2.32
10. Illinois Educational Facilities Authority, 6.25%, 5/1/30 2.29
This list excludes temporary cash and derivative investments. Fund holdings
will vary for other periods.
2
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
Net Asset Value Per Share
- --------------------------------------------------------------------------------
Class 12/31/05 12/31/04
- ------------ ---------- ---------
A $14.13 $14.38
B $14.07 $14.34
C $14.04 $14.34
Investor $14.07 $14.36
Distributions Per Share
- --------------------------------------------------------------------------------
1/1/05 - 12/31/05
-----------------
Short-Term Long-Term
Class Dividends Capital Gains Capital Gains
- ------------ ------------ --------------- --------------
A $0.6379 $0.0175 $0.2698
B $0.5463 $0.0175 $0.2698
C $0.5426 $0.0175 $0.2698
Investor $0.6868 $0.0175 $0.2698
- --------------------------------------------------------------------------------
INDEX DEFINITIONS
- --------------------------------------------------------------------------------
The Lehman Brothers Municipal Bond Index is a broad measure of the municipal
bond market. 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 an Index.
The index defined here pertains to the Value of $10,000 Investment charts shown
on pages 4-7.
3
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS A SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment in Pioneer Municipal Bond Fund at public offering price, compared to
that of the Lehman Brothers Municipal Bond Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
Net Asset Public
Value Offering
Period (NAV) Price (POP)
Life-of-Class
(9/30/96) 5.98% 5.34%
5 Years 6.14 5.17
1 Year 4.81 0.07
- --------------------------------------------------------------------------------
[The following data was represented as a line chart in the printed material]
Value of a $10,000 Investment
Pioneer Lehman Brothers
Municipal Municipal
Bond Bond
Fund Index
9/96 10,000 9,550
12/97 11,197 10,677
12/99 11,678 10,559
12/01 13,711 12,600
12/03 15,826 14,641
12/05 17,116 16,181
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
NAV results represent the percent change in net asset value per share. Returns
would have been lower had sales charges been reflected. POP returns reflect
deduction of maximum 4.5% sales charge. All results are historical and assume
the reinvestment of dividends and capital gains. Other share classes are
available for which performance and expenses will differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance of each class of the fund includes the performance of the
predecessor fund's Class A, Class B and Class C shares, which has been restated
to reflect differences in any applicable sales charges (but not differences in
expenses). This adjustment has the effect of reducing the previously reported
performance of predecessor fund. Pioneer Municipal Bond Fund was created through
the reorganization of predecessor Safeco Funds on December 10, 2004. If all the
expenses of the Pioneer fund were reflected, the performance would be lower.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
4
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS B SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Municipal Bond Fund, compared to that of the Lehman
Brothers Municipal Bond Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
If If
Period Held Redeemed
Life-of-Class
(9/30/96) 5.21% 5.21%
5 Years 5.33 5.33
1 Year 4.02 0.09
- --------------------------------------------------------------------------------
[The following data was represented as a line chart in the printed material]
Value of a $10,000 Investment
Pioneer Lehman Brothers
Municipal Municipal
Bond Bond
Fund Index
9/96 10,000 10,000
12/97 11,197 11,189
12/99 11,678 10,931
12/01 13,711 12,847
12/03 15,826 14,703
12/05 17,116 15,993
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
"If Held" results represent the percent change in net asset value per share.
Returns would have been lower had sales charges been reflected. "If redeemed"
returns reflect the deduction of applicable contingent deferred sales charge
(CDSC). Class B shares reflect the deduction of the maximum applicable
contingent deferred sales charge (CDSC). The maximum CDSC is 4.0% and declines
over five years.
All results are historical and assume the reinvestment of dividends and capital
gains. Other share classes are available for which performance and expenses will
differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance of each class of the fund includes the performance of the
predecessor fund's Class A, Class B and Class C shares, which has been restated
to reflect differences in any applicable sales charges (but not differences in
expenses). This adjustment has the effect of reducing the previously reported
performance of predecessor fund. Pioneer Municipal Bond Fund was created through
the reorganization of predecessor Safeco funds on December 10, 2004. If all the
expenses of the Pioneer fund were reflected, the performance would be lower.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
5
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS C SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Municipal Bond Fund, compared to that of the Lehman
Brothers Municipal Bond Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
If If
Period Held Redeemed
Life-of-Class
(10/1/03) 4.32% 4.32%
1 Year 3.78 3.77
- --------------------------------------------------------------------------------
[The following data was represented as a line chart in the printed material]
Value of a $10,000 Investment
Pioneer Lehman Brothers
Municipal Municipal
Bond Bond
Fund Index
10/03 10,000 10,000
12/03 10,188 10,210
12/04 10,644 10,664
12/05 11,018 11,066
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
Class C shares held for less than one year are also subject to a 1% contingent
deferred sales charge (CDSC). The performance of Class C shares does not reflect
the 1% front-end sales charge in effect prior to February 1, 2004. If you paid a
1% sales charge, your returns would be lower than those shown above. "If Held"
results represent the percent change in net asset value per share. Returns would
have been lower had sales charges been reflected. All results are historical and
assume the reinvestment of dividends and capital gains. Other share classes are
available for which performance and expenses will differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance of each class of the fund includes the performance of the
predecessor fund's Class A, Class B and Class C shares, which has been restated
to reflect differences in any applicable sales charges (but not differences in
expenses). This adjustment has the effect of reducing the previously reported
performance of predecessor fund. Pioneer Municipal Bond Fund was created through
the reorganization of predecessor Safeco funds on December 10, 2004. If all the
expenses of the Pioneer fund were reflected, the performance would be lower.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
6
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 INVESTOR CLASS SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Municipal Bond Fund, compared to that of the Lehman
Brothers Municipal Bond Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
If If
Period Held Redeemed
10 Years 5.90% 5.90%
5 Years 6.40 6.40
1 Year 4.88 4.88
- --------------------------------------------------------------------------------
[The following data was represented as a line chart in the printed material]
Value of a $10,000 Investment
Pioneer Lehman Brothers
Municipal Municipal
Bond Bond
Fund Index
12/95 10,000 10,000
12/97 11,403 11,420
12/99 11,892 11,393
12/01 13,962 13,695
12/03 16,116 16,007
12/05 17,430 17,734
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
Certain Pioneer funds (the "Funds") issued Investor Class shares in connection
with the reorganization of Safeco mutual funds. The Funds are not offering
additional Investor Class shares except in connection with the reinvestment of
dividends on the Funds' outstanding Investor Class shares. All Investor Class
shares of the Fund, whenever issued, convert to Class A shares of their
respective Funds on December 10, 2006. Investor Class shares are not subject to
sales charges.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance of each class of the fund includes the performance of the
predecessor fund's Class A, Class B and Class C shares, which has been restated
to reflect differences in any applicable sales charges (but not differences in
expenses). This adjustment has the effect of reducing the previously reported
performance of predecessor fund. Pioneer Municipal Bond Fund was created through
the reorganization of predecessor Safeco funds on December 10, 2004. If all the
expenses of the Pioneer fund were reflected, the performance would be lower.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
7
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
COMPARING ONGOING FUND EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Fund, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Fund expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds. The example is based on an investment
of $1,000 at the beginning of the Fund's latest six-month period and held
throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Municipal Bond Fund
Based on actual returns from July 1, 2005 through December 31, 2005.
Investor
Share Class A B C Class
- -------------------------------------------------------------------------------------------
Beginning Account Value $1,000.00 $1,000.00 $1,000.00 $1,000.00
On 7/1/05
Ending Account Value $1,009.83 $1,006.78 $1,024.68 $1,010.70
On 12/31/05
Expenses Paid During Period* $ 4.46 $ 7.13 $ 7.04 $ 2.94
* Expenses are equal to the Fund's annualized expense ratio of 0.87%, 1.41%,
1.38% and 0.58%, for Class A, Class B, Class C and Investor Class shares,
respectively, multiplied by the average account value over the period,
multiplied by 184/365 (to reflect the one-half year period).
8
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
Expenses Paid on a $1,000 Investment in Pioneer Municipal Bond Fund
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2005 through December 31, 2005.
Investor
Share Class A B C Class
- -------------------------------------------------------------------------------------------
Beginning Account Value $1,000.00 $1,000.00 $1,000.00 $1,000.00
On 7/1/05
Ending Account Value $1,020.77 $1,018.10 $1,018.25 $1,022.28
On 12/31/05
Expenses Paid During Period* $ 4.48 $ 7.17 $ 7.02 $ 2.96
* Expenses are equal to the Fund's annualized expense ratio of 0.87%, 1.41%,
1.38% and 0.58% for Class A, Class B, Class C and Investor Class shares,
respectively, multiplied by the average account value over the period,
multiplied by 184/365 (to reflect the one-half year period).
9
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05
- --------------------------------------------------------------------------------
In the following interview, Portfolio Manager Stephen C. Bauer outlines the
investment environment for tax-free bonds during the Fund's most recent fiscal
year, Fund performance, his investment philosophy and strategy, and his outlook.
Q: How did the Fund perform during its most recent fiscal year?
A: For the 12-month period ended December 31, 2005, Pioneer Municipal Bond
Fund's Class A shares produced a 4.81% return; Class B shares returned
4.02%; and Class C shares 3.78%, each at net asset value. The Fund's
benchmark, the Lehman Brothers Municipal Bond Index, returned 3.51% and the
average return of the Lipper General Municipal Debt Funds category was
3.00%. Lipper is an independent monitor of mutual fund performance.
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent
month-end performance results. Current performance may be lower or higher
than the performance data quoted.
The performance data quoted represents past performance, which is no
guarantee of future results. Investment return and principal value will
fluctuate, and shares, when redeemed, may be worth more or less than their
original cost.
Q: Will you describe the investing environment for tax-exempt bonds during the
time period?
A: For the second year in a row, the environment for long-term municipals was
remarkably stable. The U.S. economy maintained steady Gross Domestic
Product growth throughout the year, energy prices soared, but inflation was
muted. Yields of long-term municipals and Treasury securities continue to
be low, close to their all-time low in June 2003. (The Bond Buyer 40
Municipal Index, an industry standard for measuring long-term municipal
bond interest rates, closed the period at 4.77%.) The trading range for
long-term municipals was extremely narrow for the period. This was mildly
surprising given that the Federal Reserve continued to raise short-term
interest rates aggressively throughout 2005, and that most economists had
once again predicted that long-term rates would increase. Intermediate-term
rates rose, but long-term rates, where this portfolio is concentrated, were
slightly lower during the past 12 months. This meant that long-term
municipal investors generally earned their coupon interest rate, plus some
price appreciation (as bond yields decline, bond prices rise, and vice
versa).
10
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Q: How would you characterize supply and demand for municipal bonds?
A: The year 2005 set a record for total volume of new municipal issues during
the year, over $400 billion. The volume was much higher than anticipated
and largely related to tax-free bond refundings, where issuers take
advantage of declining interest rates and refinance higher yielding bonds
at lower rates.
Though demand from individual investors remained flat during the period,
tremendous demand for municipal bonds came from property and casualty
insurance companies. These firms have actually experienced strong profit
growth during a terrible year for natural disasters in 2005, as they have
been able to raise their rates and benefit from increased demand from
businesses and consumers for property and casualty insurance.
Q: Will you restate your philosophy in managing the Fund?
A: My investment philosophy is to stay fully invested in long-term bonds.
Pioneer Municipal Bond Fund is a long-term fund, and I feel responsible to
maintain it as such, and not to try to predict the direction or magnitude
of interest rate changes and make maturity or other investment decisions on
that basis. At the close of the period, the Fund's average maturity was
approximately 21 years.
In addition, I believe that being invested in long-term municipal bonds is
a sound strategy for two reasons: First, long-term municipal bonds
consistently yield and more than shorter-term bonds. There have been no
inverse yield curves in the municipal bond market (i.e., where long-term
rates are lower than short-term rates). Of course, the reason that
longer-term municipal bonds yield more is that they are more volatile than
bonds of shorter maturity. Greater interest rate risk is the trade-off for
more total return through the accumulation of higher yield over the long
term.
The second reason is that I take a very long-term view of the bond market.
I rarely make any transactions that I think will pay off only over the
short term. As I see it, many of the best investment decisions take years
to bear fruit. This long-term view means that the Fund will generally have
a very low turnover ratio and reasonably low transaction costs.
11
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05 (continued)
- --------------------------------------------------------------------------------
Q: Will you discuss your portfolio strategy during the 12-month period?
A: I pursued two main strategies over the period. First, I sold a number of
municipal bonds with short call dates. These bonds were purchased
inexpensively several years ago and had performed well for the Fund. But
with their call protection running out (at the call date, the issuer can
refund the proceeds of the bond for cash at "par," the original offering
price), the price appreciation potential for the bonds was limited. In
their place, the Fund purchased municipal bonds with more attractive call
features. This call protection strategy is meant to optimize the Fund's
performance characteristics and has worked well over the long term.
Second, during the 12-month period I purchased several par bonds for the
Fund. Typically these bonds have limited appeal because - in terms of their
price performance - they may have marginal upside and higher than normal
downside should interest rates rise. However, the par bonds purchased
during the period carried high yields and were very attractively priced.
Several years ago, when California was in the midst of a fiscal crisis and
issuing billions in debt in order to maintain services, I purchased a
number of California bonds for the Fund because they were so inexpensive.
Now that California's economy is performing much better, the state is
beginning to make progress in dealing with its budget deficit. In light of
this, two major ratings agencies upgraded California's debt in July 2005
and its bonds have been trading extremely strongly. Because the yields on
the state's bonds have declined in the face of this progress, the Fund took
profits on a number of California issues during the period.
Q: How is the Fund positioned in terms of credit quality and diversification?
A: Approximately 44% of the Fund's portfolio is rated AAA or the equivalent
(the highest rating). In addition, the Fund is broadly diversified among 24
states and Puerto Rico. For the period, the Fund generally avoided
purchasing any bonds with ratings lower than AAA. Purchasing lower quality
bonds has been a popular strategy in the municipal marketplace in recent
years, and "spreads" - or differences in yield between higher and lower
quality municipal bonds - have narrowed considerably. At present,
12
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I do not believe investors are being adequately compensated in additional
yield for the risk of buying lower quality bonds.
Q: What is your outlook going forward?
A: Every year brings unexpected events that move the market, but at present,
long-term municipal bonds look very stable. Inflation figures seem modest,
and it is hard to find economic factors or other trends that might change
that. With an inverted yield curve in the Treasury market in December 2005
(where short-term rates were modestly higher than long-term rates), some
have predicted an economic slowdown in 2006. If this occurs, it would be
good news for long-term municipal bonds, because such slowdowns tend to
reduce inflationary pressures. We will be monitoring the progress of the
economy and markets over the course of the coming year, as well as the
actions of the incoming Fed chairman Bernanke.
We believe that Pioneer Municipal Bond Fund continues to be a suitable
vehicle for long-term investors seeking high income free from federal
taxes.
When interest rates rise, the prices of fixed income securities in the fund
will generally fall. Conversely, when interest rates fall, the prices of
fixed income securities in the fund will generally rise. Investments in the
fund are subject to possible loss due to the financial failure of
underlying securities and their inability to meet their debt obligations.
Investing in foreign and/or emerging markets securities involves risks
relating to interest rates, currency exchange rates, economic, and
political conditions. At times, the fund's investments may represent
industries or industry sectors that are interrelated or have common risks,
making it more susceptible to any economic, political, or regulatory
developments or other risks affecting those industries and sectors.
Any information in this shareholder report regarding market or economic
trends or the factors influencing the fund's historical or future
performance are statements of the opinion of fund management as of the date
of this report. These opinions should not be relied upon for any other
purposes. Past performance is not guarantee of future results, and there is
no guarantee that market forecasts discussed will be realized.
13
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05
- --------------------------------------------------------------------------------
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
MUNICIPAL BONDS - 97.0%
Alabama - 1.8%
$5,000,000 AAA/Aaa Alabama Drinking Water Finance Authority,
4.0%, 8/15/28 $ 4,600,500
3,855,000 AAA/Aaa Jefferson County Alabama Sewer Revenue,
4.75%, 2/1/38 4,105,806
------------
$ 8,706,306
------------
Arizona - 1.1%
5,000,000 BBB+/A3 Scottsdale Healthcare, 6.8%, 12/1/31 $ 5,363,000
------------
$ 5,363,000
------------
California - 19.7%
8,000,000 AAA/Aaa California Infrastructure & Economic Development,
5.0%, 7/1/36 $ 8,316,880
7,000,000 A/A2 California State, 5.0%, 2/1/32 7,207,620
6,345,000 AA-/Aa2 California State Department of Veteran Affairs,
4.75%, 12/1/25 6,455,720
10,020,000 AAA/Aaa Golden State Tobacco Security Corp. California,
5.5%, 6/1/43 11,141,438
3,000,000 AAA/NR Los Angeles County Sanitation Districts Financing
Authority Revenue, 4.5%, 10/1/35 2,965,830
3,550,000 NR/Baa2 Northern California Power Agency, 5.0%, 7/1/09 3,703,112
11,995,000 AAA/Aaa Pittsburg California Redevelopment Agency,
5.8%, 8/1/34 13,586,497
7,010,000 AAA/Aaa San Joaquin County California, 4.75%, 11/15/19 7,012,804
25,000,000 B/Ba2 San Joaquin Hills Transportation Corridor Agency,
5.0%, 1/1/33 23,757,500
10,865,000 AAA/Aaa San Jose California Redevelopment Agency Tax,
4.9%, 8/1/33 11,040,687
------------
$ 95,188,088
------------
Colorado - 4.0%
6,555,000 A-/A3 Colorado Springs Colorado Hospital Revenue,
6.375%, 12/15/30 $ 7,154,324
8,220,000 AAA/Aaa Colorado Water & Power Development Authority,
4.375%, 8/1/35 7,928,765
4,000,000 NR/Baa1 University of Colorado Hospital Authority Revenue,
5.6%, 11/15/31 4,184,360
------------
$ 19,267,449
------------
14 The accompanying notes are an integral part of these financial statements.
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
Florida - 4.4%
$8,000,000 AA/Aa2 Escambia County Florida Health Facilities,
5.25%, 11/15/32 $ 8,337,200
2,000,000 AAA/Aa1 Florida State Board of Education, Public Education,
4.5%, 6/1/28 1,996,000
2,750,000 NR/NR Florida State Mid-Bay Bridge Authority Revenue,
6.05%, 10/1/22 2,873,860
7,500,000 NR/Baa2 Tallahassee Florida Health, 6.375%, 12/1/30 8,059,350
------------
$ 21,266,410
------------
Illinois - 8.2%
9,000,000 AAA/Aaa Chicago Illinois, 5.5%, 1/1/35 $ 9,623,250
2,000,000 AAA/Aaa Chicago, Illinois Sales Tax Revenue,
5.375%, 1/1/27 2,118,860
10,000,000 NR/Baa3 Illinois Educational Facilities Authority,
6.25%, 5/1/30 10,931,900
10,000,000 AAA/Aaa Metropolitan Pier & Expo, 5.25%, 6/15/42 10,502,100
5,000,000 AAA/Aaa Metropolitan Pier & Expo, 7.0%, 7/1/26 6,605,700
------------
$ 39,781,810
------------
Indiana - 6.0%
6,450,000 AAA/Aaa Indianapolis Indiana Utilities District,
4.0%, 6/1/11 $ 6,591,771
19,000,000 BBB+/Baa1 Indianapolis State Development Finance
Authority, 5.6%, 12/1/32 19,676,970
2,500,000 AAA/Aaa St. Joseph County Indiana Authority,
4.5%, 8/15/18 2,517,675
------------
$ 28,786,416
------------
Kentucky - 0.5%
2,000,000 NR/NR Kentucky Economic Development Finance
Authority, 6.625%, 10/1/28 $ 2,184,840
------------
$ 2,184,840
------------
Massachusetts - 6.3%
4,250,000 AAA/Aaa Massachusetts Bay Transportation Authority,
4.5%, 3/1/26 $ 4,252,380
20,000,000 AAA/Aaa Massachusetts State Housing Finance Agency,
5.4%, 12/1/28 20,457,400
5,740,000 AAA/Aaa Massachusetts State Housing Finance Agency,
6.2%, 7/1/38 5,924,024
------------
$ 30,633,804
------------
The accompanying notes are an integral part of these financial statements. 15
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
Maryland - 2.1%
$3,400,000 AAA/Aaa Baltimore Maryland Project Revenue,
5.0%, 7/1/24 $ 3,752,104
1,725,000 AAA/Aaa Baltimore Maryland Project Revenue,
5.0%, 7/1/24 1,896,603
4,000,000 NR/A3 Maryland State Health & Higher Educational
Facilities, 6.75%, 7/1/30 4,569,640
------------
$ 10,218,347
------------
Michigan - 1.6%
5,000,000 AA/Aa2 Michigan State Hospital Finance Authority,
5.5%, 11/15 $ 5,256,250
1,000,000 AA/Aa2 North Muskegon Michigan Public Schools,
5.25%, 5/1/28 1,066,950
1,210,000 AA/Aa2 North Muskegon Michigan Public Schools,
5.25%, 5/1/33 1,283,943
------------
$ 7,607,143
------------
Minnesota - 1.1%
5,000,000 A-/A2 Minnesota Health Care Revenue,
5.75%, 11/15/32 $ 5,347,500
------------
$ 5,347,500
------------
Missouri - 0.2%
1,000,000 AAA/Aaa Missouri State Health & Educational Facilities,
5.25%, 6/1/28 $ 1,086,730
------------
$ 1,086,730
------------
Mississippi - 1.1%
5,500,000 AAA/Aaa Harrison County Mississippi Wastewater,
4.75%, 2/1/27 $ 5,517,985
------------
$ 5,517,985
------------
Montana - 0.6%
2,785,000 AAA/Aaa Forsyth Montana Pollution Control Revenue,
5.0%, 3/1/31 $ 2,896,539
------------
$ 2,896,539
------------
North Carolina - 2.9%
12,000,000 BBB/Baa2 North Carolina Eastern Municipal Power,
6.0%, 1/1/22 $ 13,947,720
------------
$ 13,947,720
------------
16 The accompanying notes are an integral part of these financial statements.
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
North Dakota - 0.7%
$3,000,000 NR/Baa2 Grand Forks North Dakota Health Care Systems,
7.125%, 8/15/24 $ 3,293,880
------------
$ 3,293,880
------------
New York - 5.1%
900,000 AAA/AAA Long Island Power Authority NY Electric Systems,
Revenue, 5.125%, 12/1/22 $ 942,750
3,820,000 AAA/Aaa Metropolitan Transportation Authority NY,
4.75%, 4/1/28 4,111,619
5,500,000 AA-/A1 New York State Dormitory Authority Revenue,
5.25%, 5/15/15 6,008,585
1,425,000 AA-/A1 New York State Dormitory Authority Revenue,
7.5%, 5/15/11 1,630,058
2,410,000 AA-/A1 New York State Dormitory Authority Revenue,
7.5%, 5/15/11 2,716,552
5,250,000 AA-/A1 New York State Dormitory Authority Revenue,
7.5%, 5/15/13 6,463,380
1,000,000 A/A1 New York State Urban Development Corp.,
5.125%, 7/1/21 1,061,160
1,500,000 AA-/A1 Port Authority of NY & NJ, Ninety Third Series,
6.125%, 6/1/94 1,792,455
------------
$ 24,726,559
------------
Ohio - 0.8%
4,000,000 AAA/Aaa Cleveland-Cuyahoga County Ohio Port Authority
Revenue, 4.5%, 8/1/36 $ 3,884,000
------------
$ 3,884,000
------------
Oklahoma - 1.4%
5,590,000 AAA/Aaa McGee Creek Authority Water Revenue,
6.0%, 1/1/23 $ 6,638,349
------------
$ 6,638,349
------------
Pennsylvania - 3.9%
10,000,000 AAA/Aaa Lehigh County PA Industrial Development Authority
Pollution Control, 4.75%, 2/15/27 $ 10,192,400
5,000,000 A+/Aa3 Pennsylvania State Higher Education,
6.0%, 1/15/31 5,428,950
3,000,000 AAA/Aaa Southeastern PA Transportation Authority PA,
4.75%, 3/1/29 3,021,690
------------
$ 18,643,040
------------
The accompanying notes are an integral part of these financial statements. 17
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
Puerto Rico - 1.1%
$5,000,000 A-/A3 Puerto Rico Electric Power Authority,
5.125%, 7/1/29 $ 5,177,300
------------
$ 5,177,300
------------
South Carolina - 6.8%
1,000,000 A/A3 Dorchester, SC County School District,
5.25%, 12/1/29 $ 1,036,710
7,000,000 AA-/Aa3 Greenville, SC County School District,
5.5%, 12/1/28 7,545,230
15,000,000 BBB/Baa3 Piedmont Municipal Power Agency, 5.25%, 1/1/21 15,210,450
7,500,000 NR/NR South Carolina Jobs Economic Development
Authority, 7.375%, 12/15/21 8,912,775
------------
$ 32,705,165
------------
Texas - 5.6%
2,245,000 AAA/Aaa Austin Texas Utilities System Revenue,
12.5%, 11/15/07 $ 2,612,237
7,755,000 AAA/Aaa Austin Texas Utility System Revenue,
12.5%, 11/15/07 9,015,498
3,000,000 AAA/Aaa Houston, TX Independent School District,
4.75%, 2/15/22 3,033,690
7,500,000 AAA/Aaa Houston, TX Independent School District,
4.25%, 2/15/26 7,206,075
10,000 AAA/Aaa Lower Colorado River Authority Texas Revenue,
5.625%, 1/1/17 11,364
5,000,000 AA/Aa1 San Antonio Texas Electricity & Gas, Series A,
4.5%, 2/1/21 5,031,300
------------
$ 26,910,164
------------
Virginia - 1.7%
2,500,000 AAA/Aaa Loudoun County VA Sanitation Authority,
4.75%, 1/1/30 $ 2,528,825
3,085,000 AA+/Aa1 Virginia State Public School Revenue,
4.75%, 8/1/26 3,163,637
2,235,000 AA+/Aa1 Virginia State Public School Revenue,
4.75%, 8/1/27 2,288,752
------------
$ 7,981,214
------------
18 The accompanying notes are an integral part of these financial statements.
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
Washington - 4.8%
$ 700,000 AAA/Aaa CDP-King County III WA Lease Revenue,
5.25%, 6/1/26 $ 721,581
5,055,000 AA/Aa2 Douglas County WA Public Utilities,
8.75%, 9/1/18 5,530,069
3,054,000 AAA/NR Seattle, WA Housing Authority, 6.6%, 8/20/38 3,205,845
6,290,000 NR/NR Vancouver WA Housing Authority 5.65%, 3/1/31 6,173,509
7,750,000 AAA/Aaa Washington State, 4.5%, 7/1/23 7,769,995
------------
$ 23,400,999
------------
West Virginia - 3.5%
12,055,000 NR/A2 West VA State Hospital Finance Authority,
6.75%, 9/1/30 $ 13,810,329
2,945,000 NR/A2 West VA State Hospital Finance Authority,
6.75%, 9/1/30 3,221,535
------------
$ 17,031,864
------------
TOTAL MUNICIPAL BONDS
(Cost $422,607,478) $468,192,621
------------
Shares
TAX-EXEMPT MONEY MARKET MUTUAL FUND - 1.4%
6,638,222 Blackrock Provident Institutional Fund $ 8,660,173
------------
TOTAL TAX-EXEMPT MONEY MARKET
MUTUAL FUND
(Cost $8,660,173) $ 8,660,173
------------
TOTAL INVESTMENT IN SECURITIES - 98.8%
(cost $431,267,651)(a) $476,852,794
------------
OTHER ASSETS AND LIABILITIES - 1.2% $ 6,064,486
------------
TOTAL NET ASSETS - 100.0% $482,917,280
============
NR Not rated by either S&P or Moody's.
(a) At December 31, 2005, the net unrealized gain on investments based on cost
for federal income tax purposes of $427,517,017 was as follows:
Aggregate gross unrealized gain for all investments in which there is
an excess of value over tax cost $49,466,905
Aggregate gross unrealized loss for all investments in which there is
an excess of tax cost over value (131,128)
-----------
Net unrealized gain $49,335,777
===========
Purchases and sales of securities (excluding temporary cash investments) for the
year ended December 31, 2005 aggregated $57,369,057 and $99,612,749,
respectively.
The accompanying notes are an integral part of these financial statements. 19
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/05
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities at value (cost $431,267,651) $476,852,794
Receivables -
Fund shares sold 260,507
Dividends, interest and foreign taxes withheld 7,084,781
Other 5,111
------------
Total assets $484,203,193
------------
LIABILITIES:
Payables -
Fund shares repurchased $ 239,832
Dividends 656,218
Due to bank 119,504
Due to affiliates 38,749
Due to Pioneer Investment Management, Inc. 204,368
Accrued expenses 27,242
------------
Total liabilities $ 1,285,913
------------
NET ASSETS:
Paid-in capital $432,553,369
Undistributed net investment income 3,149,562
Accumulated net realized gain on investments 1,629,206
Net unrealized gain on investments 45,585,143
------------
Total net assets $482,917,280
============
NET ASSET VALUE PER SHARE:
(Unlimited number of shares authorized)
Class A (based on $16,032,633/1,134,813 shares) $ 14.13
============
Class B (based on $2,368,679/168,335 shares) $ 14.07
============
Class C (based on $1,183,340/84,265 shares) $ 14.04
============
Investor Class (based on $463,332,628/32,938,017 shares) $ 14.07
============
MAXIMUM OFFERING PRICE:
Class A ($14.13 [divided by] 95.5%) $ 14.80
============
20 The accompanying notes are an integral part of these financial statements.
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For Year Ended 12/31/05
INVESTMENT INCOME:
Interest $ 25,939,992
------------
EXPENSES:
Management fees $2,339,272
Transfer agent fees and expenses
Class A 27,055
Class B 886
Class C 482
Investor Class 248,133
Distribution fees
Class A 18,129
Class B 6,419
Class C 4,597
Administrative reimbursements 98,065
Custodian fees 11,927
Registration fees 66,347
Professional fees 33,520
Printing expense 32,639
Fees and expenses of nonaffiliated trustees 11,883
Miscellaneous 18,605
----------
Total expenses $ 2,917,959
Less management fees waived and
expenses reimbursed by Pioneer
Investment Management, Inc. (23,424)
Less fees paid indirectly (4,167)
------------
Net expenses $ 2,890,368
------------
Net investment income $ 23,049,624
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments $ 10,655,557
------------
Change in net unrealized gain on investments $(10,336,729)
------------
Net gain on investments $ 318,828
------------
Net increase in net assets resulting from operations $ 23,368,452
============
The accompanying notes are an integral part of these financial statements. 21
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/05 and the Year Ended 12/31/04
Year Ended Year Ended
12/31/05 12/31/04
FROM OPERATIONS:
Net investment income $ 23,049,624 $ 26,509,845
Net realized gain on investments 10,655,557 5,214,549
Change in net unrealized loss on investments (10,336,729) (1,826,770)
------------- --------------
Net increase in net assets resulting from operations $ 23,368,452 $ 29,897,624
------------- --------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class A ($0.64 and $0.60 per share, respectively) $ (318,149) $ (264,916)
Class B ($0.55 and $0.49 per share, respectively) (25,269) (91,186)
Class C ($0.54 and $0.47 per share, respectively) (18,038) (4,632)
Investor Class ($0.69 and $0.64 per
share, respectively) (23,149,406) (24,819,437)
Net realized gain:
Class A ($0.29 and $0.22 per share, respectively) (286,210) (122,918)
Class B ($0.29 and $0.22 per share, respectively) (27,642) (41,490)
Class C ($0.29 and $0.22 per share, respectively) (22,633) (2,464)
Investor Class ($0.29 and $0.22 per
share, respectively) (9,365,690) (8,226,209)
------------- --------------
Total distributions to shareowners $ (33,213,037) $ (33,573,252)
------------- --------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 27,797,893 $ 46,249,584
Reinvestment of distributions 23,229,179 23,699,425
Cost of shares repurchased (74,953,994) (122,707,605)
Redemption fees - 39,148
------------- --------------
Net decrease in net assets resulting from
Fund share transactions $ (23,926,922) $ (52,719,448)
------------- --------------
Net decrease in net assets $ (33,771,507) $ (56,395,076)
NET ASSETS:
Beginning of year 516,688,787 573,083,863
------------- --------------
End of year (including undistributed net investment
income of $3,149,562 and $3,610,800, respectively) $ 482,917,280 $ 516,688,787
============= ==============
22 The accompanying notes are an integral part of these financial statements.
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
'05 Shares '05 Amount '04 Shares '04 Amount
CLASS A
Shares sold 1,635,540 $ 23,541,141 528,397 $ 7,428,361
Reinvestment of distributions 25,947 367,905 23,644 339,010
Less shares repurchased (542,448) (7,802,346) (356,210) (5,092,207)
Shares transferred in
reorganization - - (632,456) (9,080,745)
--------- ------------- -------- --------------
Net increase (decrease) 1,119,039 $ 16,106,700 (436,625) $ (6,405,581)
========= ============= ======== ==============
CLASS B
Shares sold 177,267 $ 2,523,705 699 $ 10,000
Reinvestment of distributions 1,136 15,994 6,752 96,407
Less shares repurchased (10,767) (155,303) (46,593) (668,672)
Shares transferred
in reorganization - - (177,979) (2,547,835)
--------- ------------- -------- --------------
Net increase (decrease) 167,636 $ 2,384,396 (217,121) $ (3,110,100)
========= ============= ======== ==============
CLASS C
Shares sold 121,358 $ 1,733,047 4,805 $ 70,511
Reinvestment of distributions 1,146 16,098 167 2,384
Less shares repurchased (38,938) (547,462) (4) (51)
Shares transferred in
reorganization - - (11,193) (160,251)
--------- ------------- ---------- --------------
Net increase (decrease) 83,566 $ 1,201,683 (6,225) $ (87,407)
========= ============= ======== ==============
INVESTOR CLASS
Shares sold - $ - 2,696,920 $ 38,740,712
Reinvestment of distributions 1,604,146 22,829,182 1,626,700 23,261,624
Less shares repurchased (4,627,035) (66,448,883) (8,188,640) (116,946,675)
Shares transferred in
reorganization - - 822,260 11,788,831
---------- ------------- ------------ --------------
Net decrease (3,022,889) $ (43,619,701) (3,042,760) $ (43,155,508)
========= ============= ======== ==============
The accompanying notes are an integral part of these financial statements. 23
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/05 12/31/04 (a) 12/31/03 12/31/02 12/31/01
CLASS A
Net asset value, beginning of period $ 14.38 $ 14.45 $ 14.46 $ 13.98 $ 13.97
------- ------- ------- ------- -------
Increase from investment operations:
Net investment income $ 0.54 $ 0.61(b) $ 0.66 $ 0.66 $ 0.66
Net realized and unrealized gain on investments 0.14 0.14 0.13 0.69 0.02
------- ------- ------- ------- -------
Net increase from investment operations $ 0.68 $ 0.75 $ 0.79 $ 1.35 $ 0.68
Distributions to shareowners:
Net income (0.64) (0.60) (0.63) (0.64) (0.64)
Net realized gain (0.29) (0.22) (0.17) (0.23) (0.03)
------- ------- ------- ------- -------
Net increase (decrease) in net asset value $ (0.25) $ (0.07) $ (0.01) $ 0.48 $ 0.01
------- ------- ------- ------- -------
Net asset value, end of period $ 14.13 $ 14.38 $ 14.45 $ 14.46 $ 13.98
======= ======= ======= ======= =======
Total return* 4.81% 5.40% 5.66% 9.99% 4.92%
Ratio of net expenses to average net assets+ 0.87% 0.91% 0.87% 0.89% 0.98%
Ratio of net investment income to average net assets+ 4.42% 4.25% 4.58% 4.74% 4.63%
Portfolio turnover rate 12% 7% 20% 19% 9%
Net assets, end of period (in thousands) $16,033 $ 227 $ 6,538 $ 3,787 $ 1,273
Ratios with no waiver of management fees by PIM and no
reduction for fees paid indirectly:
Net expenses 1.16% 0.91% 0.87% 0.89% 0.98%
Net investment income 4.13% 4.25% 4.58% 4.74% 4.63%
Ratios with waiver of management fees by PIM and reduction for
fees paid indirectly:
Net expenses 0.87% 0.91% 0.87% 0.89% 0.98%
Net investment income 4.42% 4.25% 4.58% 4.74% 4.63%
(a) Effective August 2, 2004, PIM became the sub-advisor of the Fund and
subsequently became the advisor on December 10, 2004.
(b) Net investment income per share has been calculated using the average
shares method.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.
+ Ratios assuming no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
24
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/05 12/31/04 (a) 12/31/03 12/31/02 12/31/01
CLASS B
Net asset value, beginning of period $ 14.34 $ 14.42 $ 14.42 $ 13.95 $ 13.94
------- ------- ------- ------- -------
Increase from investment operations:
Net investment income $ 0.45 $ 0.49(b) $ 0.55 $ 0.55 $ 0.55
Net realized and unrealized gain on investments 0.12 0.14 0.14 0.68 0.02
------- ------- ------- ------- -------
Net increase from investment operations $ 0.57 $ 0.63 $ 0.69 $ 1.23 $ 0.57
Distributions to shareowners:
Net income (0.55) (0.49) (0.52) (0.53) (0.53)
Net realized gain (0.29) (0.22) (0.17) (0.23) (0.03)
------- ------- ------- ------- -------
Net increase (decrease) in net asset value $ (0.27) $ (0.08) $ - $ 0.47 $ 0.01
------- ------- ------- ------- -------
Net asset value, end of period $ 14.07 $ 14.34 $ 14.42 $ 14.42 $ 13.95
======= ======= ======= ======= =======
Total return* 4.02% 4.52% 4.93% 9.07% 4.14%
Ratio of net expenses to average net assets+ 1.41% 1.70% 1.66% 1.68% 1.73%
Ratio of net investment income to average net assets+ 3.90% 3.49% 3.78% 3.86% 3.87%
Portfolio turnover rate 12% 7% 20% 19% 9%
Net assets, end of period (in thousands) $ 2,369 $ 10 $ 3,141 $ 2,494 $ 1,236
Ratios with no waiver of management fees by PIM and no
reduction for fees paid indirectly:
Net expenses 1.68% 1.70% 1.66% 1.68% 1.73%
Net investment income 3.63% 3.49% 3.78% 3.86% 3.87%
Ratios with waiver of management fees by PIM and reduction for
fees paid indirectly:
Net expenses 1.41% 1.70% 1.66% 1.68% 1.73%
Net investment income 3.90% 3.49% 3.78% 3.86% 3.87%
(a) Effective August 2, 2004, PIM became the sub-advisor of the Fund and
subsequently became the advisor on December 10, 2004.
(b) Net investment income per share has been calculated using the average
shares method.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.
+ Ratios assuming no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
25
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended 10/01/03 (b)
12/31/05 12/31/04 (a) to 12/31/03
CLASS C
Net asset value, beginning of period $ 14.34 $ 14.42 $ 14.45
------- ------- ---------
Increase from investment operations:
Net investment income $ 0.44 $ 0.47(c) $ 0.16
Net realized and unrealized gain on
investments 0.09 0.14 0.04
------- ------- ---------
Net increase from investment
operations $ 0.53 $ 0.61 $ 0.20
Distributions to shareowners:
Net income (0.54) (0.47) (0.13)
Net realized gain (0.29) (0.22) (0.10)
------- ------- ---------
Net increase in net asset value $ (0.30) $ (0.08) $ (0.03)
------- ------- ---------
Net asset value, end of period $ 14.04 $ 14.34 $ 14.42
======= ======= =========
Total return* 3.78% 4.38% 1.40%^
Ratio of net expenses to average
net assets+ 1.38% 1.84% 1.87%**
Ratio of net investment income to average
net assets+ 3.87% 3.35% 4.36%**
Portfolio turnover rate 12% 7% 20%
Net assets, end of period (in thousands) $ 1,183 $ 10 $ 100
Ratios assuming no waiver of management
fees and assumption of expenses by
PIM and no reduction for fees paid
indirectly:
Net expenses 1.63% 1.84% 43.13%**
Net investment income 3.62% 3.35% (36.90)%**
Ratios with waiver of management fees
by PIM and reduction for fees paid
indirectly:
Net expenses 1.38% 1.84% 1.87%**
Net investment income 3.87% 3.35% 4.36%**
(a) Effective August 2, 2004, PIM became the sub-advisor of the Fund and
subsequently became the advisor on December 10, 2004.
(b) Initial issue date of Class C Shares.
(c) Net investment income per share has been calculated using the average
shares method.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.
** Annualized.
^ Not annualized.
+ Ratios assuming no reduction for fees paid indirectly.
26 The accompanying notes are an integral part of these financial statements.
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/05 12/31/04(a) 12/31/03 12/31/02 12/31/01
INVESTOR CLASS
Net asset value, beginning of period $ 14.36 $ 14.44 $ 14.45 $ 13.97 $ 13.96
-------- -------- -------- -------- --------
Increase from investment operations:
Net investment income $ 0.79 $ 0.67(b) $ 0.70 $ 0.71 $ 0.71
Net realized and unrealized gain on investments (0.10) 0.11 0.13 0.69 0.02
-------- -------- -------- -------- --------
Net increase from investment operations $ 0.69 $ 0.78 $ 0.83 $ 1.40 $ 0.73
Distributions to shareowners:
Net income (0.69) (0.64) (0.67) (0.69) (0.69)
Net realized gain (0.29) (0.22) (0.17) (0.23) (0.03)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value $ (0.29) $ (0.08) $ (0.01) $ 0.48 $ 0.01
-------- -------- -------- -------- --------
Net asset value, end of period $ 14.07 $ 14.36 $ 14.44 $ 14.45 $ 13.97
======== ======= ======== ======== ========
Total return* 4.88% 5.63% 5.96% 10.33% 5.30%
Ratio of net expenses to average net assets+ 0.58% 0.63% 0.61% 0.61% 0.62%
Ratio of net investment income to average net assets+ 4.69% 4.78% 4.83% 4.91% 5.01%
Portfolio turnover rate 12% 7% 20% 19% 9%
Net assets, end of period (in thousands) $463,333 $516,442 $563,305 $569,484 $533,803
Ratios assuming no waiver of management fees and assumption
of expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.58% 0.63% 0.61% 0.61% 0.62%
Net investment income 4.69% 4.78% 4.83% 4.91% 5.01%
Ratios with waiver of management fees by PIM and reduction for
fees paid indirectly:
Net expenses 0.58% 0.63% 0.61% 0.61% 0.62%
Net investment income 4.69% 4.78% 4.83% 4.91% 5.01%
(a) Effective August 2, 2004, PIM became the sub-advisor of the Fund and
subsequently became the advisor on December 10, 2004.
(b) Net investment income per share has been calculated using the average
shares method.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.
+ Ratios assuming no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
27
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer AMT-Free Municipal Fund (the Fund) (effective January 20, 2006, the Fund
changed its name from Pioneer Municipal Bond Fund to Pioneer AMT-Free Municipal
Fund) is one of eight series of portfolios comprising Pioneer Series Trust II, a
Delaware statutory trust registered under the Investment Company Act of 1940 as
a diversified, open-end management investment company. The Fund is the successor
to the Safeco Municipal Bond Fund, Inc. Safeco Municipal Bond Fund transferred
all of its net assets in exchange for the Fund's Investor Class shares on
December 10, 2004 pursuant to an agreement and plan of reorganization (the
"reorganization" which was approved by the shareholders of Safeco Municipal Bond
Fund on December 8, 2004). The Fund had no assets or liabilities prior to the
reorganization. Accordingly, the reorganization, which was a tax-free exchange,
had no effect on the Fund's operations. The investment objective of the Fund is
to seek a high level of current income exempt from federal income tax as is
consistent with the relative stability of capital.
The Trustees have authorized the issuance of four classes of shares of the Fund.
The Fund offers four classes of shares designated as Class A, Class B, Class C,
and Investor Class shares. The Fund is not offering additional Investor Class
shares except in connection with the reinvestment of dividends on the Fund's
outstanding Investor Class shares. Each class of shares represents an interest
in the same portfolio of investments of the Fund and have equal rights to
voting, redemptions, dividends and liquidations, except that each class of
shares can bear different transfer agent and distribution fees and has exclusive
voting rights with respect to the distribution plans that have been adopted by
Class A, Class B and Class C shareowners, respectively. There is no distribution
plan for Investor Class shares.
The Fund's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the Fund
to, among other things, make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
income, expenses, and gain or loss on investments during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies followed by the Fund in
28
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the preparation of its financial statements which, are consistent with those
policies generally accepted in the investment company industry:
A. Security Valuation
Security transactions are recorded as of trade date. 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 market quotations are valued at
their fair values as determined by, or under the direction of the Board of
Trustees. The Fund also may use the fair value of a security including a
non-U.S. security when the closing market price on the principal exchange
where the security is traded no longer reflects the value of the security.
At December 31, 2005 there were no securities fair valued. Temporary cash
investments are valued at amortized cost.
Discount and premium on debt securities are accreted or amortized,
respectfully daily into interest income on a yield-to-maturity basis with a
corresponding increase or decrease in the cost basis of the security.
Interest income is recorded on the accrual basis.
Gains and losses on sales of investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes.
At times, the Fund's investments may represent industries or industry
sectors that are interrelated or have common risks, making it more
susceptible to any economic, political, or regulatory developments or other
risks affecting those industries and sectors. Information regarding the
Fund's principal risk is contained in the Fund's prospectus. Please refer
to those documents when considering the Fund's risks.
B. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal tax provision is required.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with
29
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
federal income tax rules. Therefore, the sources of the Fund's
distributions may be shown in the accompanying financial statements as
either from or in excess of net investment income or net realized gain on
investment transactions, or from paid-in capital, depending on the type of
book/tax differences that may exist.
The tax character of distributions paid during the years ended December 31,
2005 and 2004 were as follows:
- --------------------------------------------------------------------------------
2005 2004
- --------------------------------------------------------------------------------
Distributions paid from:
Tax-exempt income $23,133,946 $25,180,171
Ordinary income 966,312 339,839
Long-term capital gain 9,112,779 8,053,242
----------- -----------
Total $33,213,037 $33,573,252
=========== ===========
- --------------------------------------------------------------------------------
The following shows the components of distributable earnings on a federal
income tax basis at December 31, 2005.
- --------------------------------------------------------------------------------
2005
- --------------------------------------------------------------------------------
Undistributed long-term gain $ 1,629,206
Dividends payable (601,072)
Unrealized appreciation 49,335,777
-----------
Total $50,363,911
===========
- --------------------------------------------------------------------------------
The difference between book basis and tax-basis unrealized appreciation is
attributable to the tax treatment of amortization.
The Fund has reclassified $410 to decrease accumulated net realized gain on
investments and $410 to increase paid-in capital to reflect permanent
book/tax differences. The reclassification has no impact on the net asset
value of the Fund and is designed to present the Fund's capital accounts on
a tax basis.
C. Fund Shares
The Fund records sales and repurchases of its shares as of trade date.
Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the
Fund and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A.,
(UniCredito Italiano), earned $15,105 in underwrit-
30
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ing commissions on the sale of Class A shares during the year ended
December 31, 2005.
D. Class Allocations
Distribution fees are calculated based on the average daily net asset value
attributable to Class A, Class B and Class C shares of the Fund,
respectively (see Note 4). Investor Class shares are not subject to a
distribution plan. Shareowners of each class share all expenses and fees
paid to the transfer agent, Pioneer Investment Management Shareholder
Services, Inc. (PIMSS), for its services, which are allocated based on the
number of accounts in each class and the ratable allocation of related
out-of-pocket expenses (see Note 3). Income, common expenses and realized
and unrealized gains and losses are calculated at the Fund level and
allocated daily to each class of shares based on the respective percentage
of adjusted net assets at the beginning of the day.
The Fund declares, as daily dividends, substantially all of its net
investment income. All dividends are paid on a monthly basis. Short-term
capital gain distributions, if any, may be declared with the daily
dividends. Distributions to shareowners are recorded as of the ex-dividend
date. Distributions paid by the Fund with respect to each class of shares
are calculated in the same manner, at the same time, and in the same
amount, except that Class A, Class B, Class C, and Investor Class shares
can bear different transfer agent and distribution fees.
2. Management Agreement
Pioneer Investment Management, Inc., (PIM), a wholly owned indirect subsidiary
of UniCredito Italiano, manages the Fund's portfolio. Management fees are
calculated daily at the annual rate of 0.50% of the Fund's average daily net
assets up to $250 million; 0.45% of the next $500 million; and 0.40% of the
excess over $750 million.
Through May 1, 2006, PIM has agreed not to impose all or a portion of its
management fee and to assume other operating expenses of the Fund to the extent
necessary to limit expenses to 0.87% of the average daily net assets
attributable to Class A; the portion of the Fund-wide expenses attributable to
Class B and Class C shares will be reduced only to the extent that such expenses
are reduced for Class A shares.
31
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
Through December 10, 2006, PIM has agreed not to impose all or a portion of its
management fee and to assume other operating expenses (excluding taxes,
commissions, interest and extraordinary expenses) of the Fund to the extent
necessary to limit Investor Class expenses to 0.62% of the average daily net
assets attributable to Investor Class 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 Fund. At December 31, 2005, $12,695 was payable to PIM
related to management fees, administrative costs and certain other services and
is included in due to affiliates. Prior to the reorganization, fund accounting
and fund administration fees were paid to Safeco Asset Management Company.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides
substantially all transfer agent and shareholder services to the Fund at
negotiated rates. Included in due to affiliates is $25,652 in transfer agent
fees payable to PIMSS at December 31, 2005.
4. Distribution Plans
The Fund adopted a Plan of Distribution for each class of shares (Class A Plan,
Class B Plan and Class C Plan) in accordance with Rule 12b-1 of the Investment
Company Act of 1940. Pursuant to the Class A Plan, the Fund pays PFD a service
fee of up to 0.25% of the average daily net assets attributable to Class A
shares in reimbursement of its actual 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 Fund pays PFD 1.00% of the average daily
net assets attributable to each class of shares. The fee consists of a 0.25%
service fee and a 0.75% distribution fee paid as compensation for personal
services and/or account maintenance services or distribution services with
regard to Class B and Class C shares. Included in due to affiliates is $402 in
distribution fees payable to PFD at December 31, 2005.
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 18 months of
32
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
purchase. Effective December 1, 2004 Class B shares that are redeemed within
five years of purchase are subject to a CDSC at declining rates beginning at
4.00%, based on the lower of cost or market value of shares being redeemed.
Shares purchased prior to December 1, 2004, remain subject to the CDSC in effect
at the time those shares were purchased. Redemptions of Class C shares within
one year of purchase are subject to a CDSC of 1.00%. Proceeds from the CDSCs are
paid to PFD. For the year ended December 31, 2005, CDSCs in the amount of $3,974
were paid to PFD.
5. Expense Offset Arrangements
The Fund has entered into certain expense offset arrangements with PIMSS which
may result in a reduction in the Fund's total expenses due to interest earned on
cash held by PIMSS. For the year ended December 31, 2005, the Fund's expenses
were reduced by $4,167 under such arrangements.
33
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Series Trust II and
Shareowners of Pioneer AMT-Free Municipal Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer AMT-Free Municipal Fund, (formerly
Pioneer Municipal Bond Fund), one of the series comprising the Pioneer Series
Trust II (the "Trust"), as of December 31, 2005, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Trust's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Trust's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2005, by correspondence with the custodian.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer AMT-Free Municipal Fund of the Pioneer Series Trust II at December 31,
2005, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and financial
highlights for each of the five years in the period then ended, in conformity
with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 10, 2006
34
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT
- --------------------------------------------------------------------------------
The Investment Company Act of 1940 requires that both the Board of Trustees and
a majority of the Independent Trustees (collectively "the Trustees") voting
separately annually approve the Fund's management contract (the "Management
Contract"). The Trustees have determined that the terms of the Management
Contract are fair and reasonable and that renewal of the contract will enable
the Fund to receive quality investment advisory services at a cost deemed
reasonable and is in the best interests of the Fund and its shareowners. In
making such determinations, the Independent Trustees relied upon the assistance
of counsel to the Independent Trustees and counsel to the Fund.
Throughout the year, the Independent Trustees regularly met in executive session
separately from the Interested Trustees of the Fund and any officer of Pioneer
Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or
its affiliates. While the Trustees, including the Independent Trustees, act on
all major matters relating to the Fund, a significant portion of the activities
of the Board of Trustees (including certain of those described herein) is
conducted through committees, the members of which are comprised exclusively of
Independent Trustees. Such committee meetings are attended by officers of the
Fund or the Investment Adviser to the extent requested by the members of the
committee.
In evaluating the Management Contract, the Trustees conducted a review that was
specifically focused upon the renewal of the Management Contract, and relied
upon their knowledge, resulting from their meetings throughout the year, of the
Investment Adviser, its services and the Fund. Both in meetings specifically
dedicated to renewal of the Management Contract and at other meetings during the
course of the year, the Trustees, including the Independent Trustees, received
materials relating to the Investment Adviser's investment and management
services under the Management Contract. These materials included (i) information
on the investment performance of the Fund, a peer group of funds and an index,
in each case selected by the Independent Trustees for this purpose, (ii) sales
and redemption data in respect of the Fund, (iii) the general investment outlook
in the markets in which the Fund invests, (iv) arrangements in respect of the
distribution of the Fund's shares, (v) the procedures employed to determine the
value of each of the Fund's assets, (vi) the Investment Adviser's management of
the relationships with the Fund's unaffiliated service providers, (vii) the
record of compliance with the Fund's investment policies and restrictions and
with the Fund's Code of Ethics and
35
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT (continued)
- --------------------------------------------------------------------------------
the structure and responsibilities of the Investment Adviser's compliance
department, (viii) the nature, cost and character of non-investment management
services provided by the Investment Adviser and its affiliates and (ix) the
disclosures included in the Fund's prospectuses and reports to shareowners.
Specifically in connection with the Independent Trustees' review of the
Management Contract, the Independent Trustees requested and the Investment
Adviser provided additional information in order to evaluate the quality of the
Investment Adviser's services and the reasonableness of the fee under the
Management Contract. Among other items, this information included data or
analyses of (1) investment performance for one, three and five year periods and
life of the Fund periods for the Fund and a peer group selected by the
Independent Trustees for this purpose, (2) management and other fees incurred by
a peer group of funds selected by the Independent Trustees for this purpose, (3)
the advisory fees of comparable portfolios of other clients of the Investment
Adviser, (4) expense ratios for the Fund and a peer group of funds selected by
the Independent Trustees for this purpose, (5) the overall organization of the
Investment Adviser, (6) the Investment Adviser's financial results and
condition, including its and certain of its affiliates profitability from
services performed for the Fund, (7) transfer agency fees and administrative
reimbursements paid to the Investment Adviser or affiliates, (8) investment
management staffing, and (9) operating expenses paid to third parties. The
Trustees also reviewed information regarding the potential for each of the Fund
and the Investment Adviser to benefit from further economies of scale in the
management of the Fund in light of reasonable growth expectations for the Fund,
the break points in the Fund's management fee and of a peer group of funds
selected by the Independent Trustees for this purpose and certain of the Fund's
expenses that are not incurred as fees based on a percentage of net assets.
The following summarizes factors considered by the Trustees in connection with
reviewing the information described above and their renewal of the Fund's
Management Contract. The Trustees did not identify any single factor as
all-important or controlling, and the summary does not detail all the matters
that were considered.
A. Ancillary Benefits to Shareowners. The Trustees considered the benefits to
shareowners of investing in a Fund that is part of a large number of
investment companies offering a variety of invest-
36
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ment disciplines and providing for a large variety of Fund and shareowner
services.
B. Compliance and Investment Performance. The Trustees determined that the
Investment Adviser had policies and systems reasonably designed to achieve
compliance with the Fund's investment objectives and regulatory
requirements. The Trustees also reviewed the Fund's investment performance
based upon total return, as well as the Fund's performance compared to both
the performance of a peer group and an index, in each case selected by the
Independent Trustees for this purpose. The Fund's performance based upon
total return was in the first quintile of the peer group for the 12 months
ended June 30, 2005, the first quintile of the peer group for the three
years ended June 30, 2005, and the first quintile for the five years ended
June 30, 2005. (In all quintile rankings referred to throughout this
discussion first quintile is most favorable to the Fund's shareowners.
Thus, highest relative performance would be first quintile and lowest
relative expenses also would be first quintile.) The Trustees also
considered the yield (gross of expenses) to the Fund's Class A shares
relative to the yield (as of June 30, 2005) of the Lehman Municipal Bond
Index. The Trustees concluded that the performance of the Fund supported
the continuation of the Management Contract.
C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the
background of members of the team responsible for the daily management of
the Fund and the Fund's investment objective and discipline. The
Independent Trustees also have had discussions with senior management of
the Investment Adviser responsible for investment operations and the senior
management of the Investment Adviser's fixed income group. Among other
things, the Trustees considered the number, education and experience of the
Investment Adviser's investment staff and their use of technology and
emphasis on analytics in view of the risk profile of securities in which
the Fund invests. The Trustees concluded that the Investment Adviser had
the quality and depth of personnel and the well-developed methods essential
to performing its duties under the Management Contract.
D. Nature and Quality of Other Services. The Trustees considered the nature,
quality, cost and extent of other services provided to shareowners of the
Fund, including administrative and shareowner
37
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT (continued)
- --------------------------------------------------------------------------------
services performed by the Investment Adviser under the Management Contract.
The Trustees also considered the reasonableness of the arrangements for
reimbursement of the Investment Adviser's out-of-pocket costs and expenses,
including overhead, for certain administrative services that the Investment
Adviser is not required to provide under the Management Contract. The
Trustees also considered the nature and extent of the other services
provided by the Investment Adviser's affiliates under other contracts and
its supervision of third party service providers. Based on these
considerations, the Trustees concluded that the nature, quality, cost and
extent of such services are satisfactory and reliable and serve the
shareowners of the Fund well.
E. Management Fee and Expenses. The Trustees considered the Investment
Adviser's fee under the Management Contract relative to the management fees
charged by a peer group of funds selected by the Independent Trustees for
this purpose using data provided by an independent third party. The Fund's
management fee for the 12 months ended June 30, 2005 was in the third
quintile relative to the management fees paid by the other funds in that
peer group for the comparable period. The Trustees determined that the fee
under the Management Contract was reasonable and fair in light of both the
overall nature and quality of services provided by the Investment Adviser
and the fees charged by the funds in the peer group. The Trustees also
considered the Fund's expense ratio and expense ratios of a peer group of
funds selected by the Independent Trustees for this purpose. The Fund's
expense ratio for the 12 months ended June 30, 2005 was in the third
quintile of the applicable peer group for the most recent fiscal year of
the peer group for the comparable period. The Trustees concluded that the
Fund's overall expense ratio was reasonable compared to that of comparable
funds.
F. Profitability. The Trustees considered the level of the Investment
Adviser's profits with respect to the management of the Pioneer Funds,
including details with respect to the Fund. This consideration included a
review of the Investment Adviser's methodology in allocating certain of its
costs to the management of each Fund. The Trustees also considered the
financial results realized by the Investment Adviser in connection with the
operation of the Fund. They further considered the profits realized by the
Investment Adviser and its affiliates from non-fund businesses that may
38
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
benefit from or be related to the Fund's business. The Trustees considered
the Investment Adviser's profit margins in comparison with the limited
available industry data. The Trustees concluded that the Investment
Adviser's profits from management of the Pioneer Funds, including the
financial results derived from the Fund, bear a reasonable relationship to
the services rendered and are fair for the management of the Fund.
G. Economies of Scale. The Trustees considered the economies of scale with
respect to the management of the Fund, whether the Fund had appropriately
benefited from any economies of scale, and whether there was potential for
realization of any further economies of scale. Because of break points in
the management fee, the Trustees concluded that any perceived or potential
economies of scale would be shared at future asset levels, in a reasonable
manner as the Fund grows in size, between the Investment Adviser and the
Fund's shareholders.
H. Other Benefits to the Investment Adviser. The Trustees also considered the
character and amount of fees paid by the Fund, other than under the
Management Contract, for services provided by the Investment Adviser and
affiliates, including fees for services such as shareowner services. The
Trustees also considered the receipt of sales loads and payments under Rule
12b-1 plans in respect of the Pioneer Funds (including the Fund). The
Trustees further considered the revenues and profitability of the
Investment Adviser's businesses other than the fund business, including the
Investment Adviser's institutional investment advisory business. The
Trustees considered the intangible benefits that accrue to the Investment
Adviser and its affiliates by virtue of its relationship with the Fund and
the Pioneer Funds as a group. The Trustees concluded that all these types
of benefits accruing to the Investment Adviser were reasonable in the
context of the overall relationship between the Investment Adviser and the
Fund.
Conclusion. The Trustees, in light of the Investment Adviser's overall
performance, considered it appropriate to continue to retain the management
services of the Investment Adviser. Based on their evaluation of all material
factors deemed relevant and the advice of independent counsel, the Trustees
concluded that the Management Contract with the Fund is fair and reasonable and
voted to approve the continuation of the Management Contract for another year.
39
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser
Pioneer Investment Management, Inc.
Custodian
Brown Brothers Harriman & Co.
Independent Registered Public Accounting Firm
Ernst & Young LLP
Principal Underwriter
Pioneer Funds Distributor, Inc.
Legal Counsel
Wilmer Cutler Pickering Hale and Dorr LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
Trustees and Officers
The Fund's Board of Trustees provides broad supervision over the Fund's affairs.
The officers of the Fund are responsible for the Fund's operations. The Fund's
Trustees and officers are listed below, together with their principal
occupations during the past five years. Trustees who are interested persons of
the Fund within the meaning of the Investment Company Act of 1940 are referred
to as Interested Trustees. Trustees who are not interested persons of the Fund
are referred to as Independent Trustees. Each of the Trustees may serve as a
trustee of each of the 91 U.S. registered investment portfolios for which
Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser
(the "Pioneer Funds"). The address for all Interested Trustees and all officers
of the Fund is 60 State Street, Boston, Massachusetts 02109.
The Fund's statement of additional information provides more detailed
information regarding the Fund's Trustees and is available upon request, without
charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Fund are available without charge,
upon request, by calling our toll free number (1-800-225-6292). Information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is publicly available to shareowners
at www.pioneerfunds.com and on the SEC's web site at http://www.sec.gov.
40
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation Other Directorships
Name and Age With the Fund and Term of Office During Past Five Years Held by this Trustee
John F. Cogan, Jr. (79)* Chairman of the Trustee since 2004. Deputy Chairman and a Director of Chairman and
Board, Serves until Pioneer Global Asset Management S.p.A. Director of ICI
Trustee and President successor trustee is ("PGAM"); Non-Executive Chairman and a Mutual Insurance
elected or earlier Director of Pioneer Investment Company; Director of
retirement or Management USA Inc. ("PIM-USA"); Harbor Global
removal Chairman and a Director of Pioneer; Company, Ltd.
Director of Pioneer Alternative
Investment Management Limited
(Dublin); President and a Director of
Pioneer Alternative Investment
Management (Bermuda) Limited and
affiliated funds; Director of
PIOGLOBAL Real Estate Investment Fund
(Russia); Director of Nano-C, Inc.
(since 2003); Director of Cole
Investment Corporation (since 2004);
Director of Fiduciary Counseling Inc.;
President and Director of Pioneer
Funds Distributor, Inc. ("PFD");
President of all of the Pioneer Funds;
and Of Counsel, Wilmer Cutler
Pickering Hale and Dorr LLP (counsel
to PIM-USA and the Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
41
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
Name, Age and Positions Held Length of Service Principal Occupation Other Directorships
Address With the Fund and Term of Office During Past Five Years Held by this Trustee
David R. Bock **(62) Trustee Trustee since 2005. Senior Vice President and Chief Director of The
3050 K. Street NW, Serves until Financial Officer, I-trax, Inc. Enterprise Social
Washington, DC 20007 successor trustee (publicly traded health care services Investment Company
is elected or company) (2001 - present); Managing (privately-held
earlier retirement Partner, Federal City Capital Advisors affordable housing
or removal. (boutique merchant bank) (2002 to finance company);
2004); and Executive Vice President Director of New York
and Chief Financial Officer, Pedestal Mortgage Trust
Inc. (internet-based mortgage trading (publicly traded
company) (2000 - 2002) mortgage REIT)
**Mr. Bock became a Trustee of the Fund on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (57) Trustee Trustee since 2004. President, Bush International Director of Brady
3509 Woodbine Street, Serves until (international financial advisory Corporation
Chevy Chase, MD 20815 successor trustee firm) (industrial
is elected or identification and
earlier retirement specialty coated
or removal. material products
manufacturer),
Mortgage Guaranty
Insurance
Corporation, and
Briggs & Stratton,
Inc. (engine mfg.)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham (58) Trustee Trustee since 2004. Founding Director, The Winthrop Group, None
1001 Sherbrooke Street West, Serves until Inc. (consulting firm); Desautels,
Montreal, Quebec, Canada successor trustee Faculty of Management, McGill
H3A 1G5 is elected or University
earlier retirement
or removal.
- ------------------------------------------------------------------------------------------------------------------------------------
42
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name, Age and Positions Held Length of Service Principal Occupation Other Directorships
Address With the Fund and Term of Office During Past Five Years Held by this Trustee
Marguerite A. Piret (57) Trustee Trustee since 2004. President and Chief Executive Officer, Director of New
One Boston Place, Serves until Newbury, Piret & Company, Inc. America High Income
28th Floor, successor trustee (investment banking firm) Fund, Inc.
Boston, MA 02108 is elected or (closed-end
earlier retirement investment company)
or removal.
- ------------------------------------------------------------------------------------------------------------------------------------
John Winthrop (69) Trustee Trustee since 2004. President, John Winthrop & Co., Inc. None
One North Adgers Wharf, Serves until (private investment firm)
Charleston, SC 29401 successor trustee
is elected or
earlier retirement
or removal
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FUND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (53) Executive Vice Since 2004. President and Chief Executive Officer, Trustee of certain
President Serves at PIM-USA since May, 2003 (Director Pioneer Funds
the discretion since January, 2001); President and
of the Board. Director of Pioneer since May, 2003;
Chairman and Director of Pioneer
Investment Management Shareholder
Services, Inc. ("PIMSS") since May,
2003; Executive Vice President of all
of Pioneer Funds since June 3, 2003;
and Executive Vice President and Chief
Operating Officer of PIM-USA, November
2000 - May 2003.
- ------------------------------------------------------------------------------------------------------------------------------------
Dorothy E. Bourassa (58) Secretary Since September, Secretary of PIM-USA; Senior Vice None
2004. Serves President - Legal of Pioneer; and
at the discretion of Secretary/Clerk of most of PIM-USA's
the Board subsidiaries; and Secretary of all of
the Pioneer Funds since September 2003
(Assistant Secretary from November
2000 to September 2003)
- ------------------------------------------------------------------------------------------------------------------------------------
43
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
FUND OFFICERS
- --------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation Other Directorships
Name and Age With the Fund and Term of Office During Past Five Years Held by this Officer
Christopher J. Kelley (41) Assistant Secretary Since September, Assistant Vice President and Senior None
2004. Serves at Counsel of Pioneer since July 2002;
the discretion of Vice President and Senior Counsel of
the Board BISYS Fund Services, Inc. (April 2001
to June 2002); Senior Vice President
and Deputy General Counsel of Funds
Distributor, Inc. (July 2000 to April
2001; Assistant Secretary of all
Pioneer Funds since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Phelan (48) Assistant Secretary Since September, Partner, Wilmer Cutler Pickering Hale None
2004. Serves at and Dorr LLP; Assistant Secretary of
the discretion of all Pioneer Funds since September 2003
the Board
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (60) Treasurer Since 2004. Vice President - Fund Accounting, None
Serves at Administration and Controllership
the discretion Services of Pioneer; and Treasurer of
of the Board all of the Pioneer Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (46) Assistant Treasurer Since November, Deputy Treasurer of Pioneer since None
2004. Serves 2004; Treasurer and Senior Vice
at the discretion President, CDC IXIS Asset Management
of the Board Services from 2002 to 2003; Assistant
Treasurer and Vice President, MFS
Investment Management from 1997 to
2002; and Assistant Treasurer of all
of the Pioneer Funds since November
2004
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (40) Assistant Treasurer Since 2004. Assistant Vice President - Fund None
Serves at Accounting, Administration and
the discretion Controllership Services of Pioneer;
of the Board and Assistant Treasurer of all of the
Pioneer Funds
- ------------------------------------------------------------------------------------------------------------------------------------
44
Pioneer AMT-Free Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation Other Directorships
Name and Age With the Fund and Term of Office During Past Five Years Held by this Officer
Gary Sullivan (47) Assistant Treasurer Since 2004. Fund Accounting Manager - Fund None
Serves at the Accounting, Administration and
discretion Controllership Services of Pioneer;
of the Board. and Assistant Treasurer of all of
the Pioneer Funds since May 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan (32) Assistant Treasurer Since 2004. Fund Administration Manager - Fund None
Serves at the Accounting, Administration and
discretion Controllership Services since
of the Board. June 2003; Assistant Vice President
- Mutual Fund Operations of State
Street Corporation from June 2002 to
June 2003 (formerly Deutsche Bank
Asset Management); Pioneer Fund
Accounting, Administration and
Controllership Services (Fund
Accounting Manager from August 1999
to May 2002); Assistant Treasurer
of all Pioneer Funds since September
2003
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin (38) Chief Compliance Since October, Chief Compliance Officer of Pioneer None
Officer 2004. Serves at (Director of Compliance and Senior
the discretion Counsel from November 2000 to
of the Board September 2004); and Chief
Compliance Officer of all of the
Pioneer Funds since 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Fund's investment adviser, provides investment
management and financial services to mutual funds, institutional and other
clients.
45
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
46
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
47
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
48
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
49
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
50
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
51
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
52
- --------------------------------------------------------------------------------
HOW TO CONTACT PIONEER
- --------------------------------------------------------------------------------
We are pleased to offer a variety of convenient ways for you to contact us for
assistance or information.
Call us for:
Account Information, including existing accounts,
new accounts, prospectuses, applications
and service forms 1-800-225-6292
FactFone(SM) for automated fund yields, prices,
account information and transactions 1-800-225-4321
Retirement plans information 1-800-622-0176
Telecommunications Device for the Deaf (TDD) 1-800-225-1997
Write to us:
PIMSS, Inc.
P.O. Box 55014
Boston, Massachusetts 02205-5014
Our toll-free fax 1-800-225-4240
Our internet e-mail address ask.pioneer@pioneerinvest.com
(for general questions about Pioneer only)
Visit our web site: www.pioneerfunds.com
Before investing consider the Fund's investment objectives, risks, charges and
expenses. Contact your advisor or Pioneer Investments for a prospectus
containing this information. Read it carefully.
The Fund files a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
web site at http://www.sec.gov. The filed form may also be viewed and copied at
the Commission's Public Reference Room in Washington, DC. Information regarding
the operations of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
- --------------------------------------------------------------------------------
PIONEER
-------
GROWTH LEADERS
FUND*
Annual
Report
12/31/05
[LOGO]PIONEER
Investments(R)
*Formerly Pioneer Papp Stock Fund. Name change effective May 1, 2005.
Table of Contents
- --------------------------------------------------------------------------------
Letter to Shareowners 1
Portfolio Summary 2
Prices and Distributions 3
Performance Update 4
Comparing Ongoing Fund Expenses 8
Portfolio Management Discussion 10
Schedule of Investments 14
Financial Statements 18
Notes to Financial Statements 26
Report of Independent Registered Public Accounting Firm 34
Factors Considered by the Independent Trustees in Approving
the Management Contract 35
Trustees, Officers and Service Providers 41
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
LETTER TO SHAREOWNERS 12/31/05
- --------------------------------------------------------------------------------
Dear Shareowner,
- --------------------------------------------------------------------------------
As 2005 came to a close, U.S. investors looked back on a year of major
challenges, though without much change in the market indices. The war in Iraq
continued, oil prices soared, then dropped, while short-term interest rates
ratcheted steadily higher and intermediate and long-term rates stayed about the
same. Natural disasters also threatened economic expansion. Still, the economy
moved forward as corporate earnings grew. The hope of a growing economy was not
reflected by the small gains or losses in the major U.S. market indices. Among
capitalization ranges, midcap issues made the most headway. Bond prices held
firm and yields remained low, perhaps a sign that the Federal Reserve Board's
interest rate hikes would temper the inflationary pressures induced by a growing
economy.
Among the nagging issues facing the U.S. economy in 2006 is the potential impact
of high energy prices on consumer spending and corporate profits. Also unknown
at this time is whether the Federal Reserve Board will continue to raise
interest rates under its new chairman, Ben Bernanke, who stated his top priority
will be to maintain continuity.
Rising interest rates and improving business conditions made U.S. holdings more
attractive to foreign investors, helping to strengthen the dollar versus the
euro and other key currencies. Investors in many foreign markets enjoyed stellar
returns. Double-digit gains were widespread in Europe, Asia and Latin America.
Even the long-dormant Japanese economy began to stir, while emerging markets,
especially those rich in natural resources, fed global economic growth.
The disparity of returns among countries and sectors underscores the importance
for investors to maintain a well-diversified portfolio. We believe this may be a
good time for investors to review their holdings with their advisor and
determine if they reflect the wide range of opportunities that exist across many
asset classes, as last year's results make clear.
Investing for income with Pioneer
Adding one or more of Pioneer's income-oriented funds to your investment program
may help improve your portfolio's overall balance. As a premier provider of
fixed-income investments, Pioneer offers you a broad selection of actively
managed bond funds to help meet a variety of investment needs. Pioneer also
offers income-oriented equity funds, each managed using a value-oriented, total
return investment philosophy that seeks enhanced return potential and lower
volatility through active diversification. Your financial advisor can help you
select among Pioneer's fixed-income choices.
Respectfully,
/s/ Osbert M. Hood
Osbert M. Hood
President
Pioneer Investment Management, Inc.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Before investing consider the fund's investment objectives, risks, charges and
expenses. Contact your advisor or Pioneer Investments for a prospectus
containing this information. Read it carefully.
1
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY 12/31/05
- --------------------------------------------------------------------------------
Sector Distribution
- --------------------------------------------------------------------------------
(As a percentage of equity holdings)
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Information Technology 29.4%
Health Care 19.9%
Industrials 16.1%
Financials 14.6%
Consumer Staples 10.6%
Consumer Discretionary 8.9%
Energy 0.5%
10 Largest Holdings
- --------------------------------------------------------------------------------
(As a percentage of equity holdings)*
1. Microsoft Corp. 8.23%
2. General Electric Co. 8.21
3. Intel Corp. 8.20
4. State Street Corp. 8.14
5. Medtronic, Inc. 7.85
6. Omnicom Group 7.22
7. Techne Corp. 5.99
8. Expeditors International of Washington, Inc. 5.31
9. T. Rowe Price Associates, Inc. 4.66
10. Johnson & Johnson 4.62
* This list excludes temporary cash and derivative instruments. Portfolio
holdings will vary for other periods.
2
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
Net Asset Value Per Share
- --------------------------------------------------------------------------------
Class 12/31/05 12/31/04
- ------- ---------- ---------
A $19.22 $21.05
B $18.69 $20.81
C $18.59 $20.69
R $18.38 $20.55
Distributions Per Share
- --------------------------------------------------------------------------------
1/1/05 - 12/31/05
-----------------
Net
Investment Short-Term Long-Term
Class Income Capital Gains Capital Gains
- ------- ------------ --------------- --------------
A $0.0017 $ -- $2.9695
B $ -- $ -- $2.9695
C $ -- $ -- $2.9695
R $ -- $ -- $2.9695
- --------------------------------------------------------------------------------
INDEX DEFINITIONS
- --------------------------------------------------------------------------------
The Russell 1000 Growth Index measures the performance of large-cap U.S. growth
stocks. Index returns assume reinvestment of dividends and, unlike Fund returns,
do not reflect any fees, expenses or sales charges. Pioneer believes the Russell
1000 Growth Index is representative of the issues in the Fund's portfolio and
will not provide the S&P 500 Index in the future. You cannot invest directly in
an Index.
The index defined here pertains to the Value of $10,000 Investment charts on
pages 4-7.
3
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS A SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Growth Leaders Fund at public offering price,
compared to that of the Russell 1000 Growth Index.
- ------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
- ------------------------------------------------------------
Net Asset Public Offering
Period Value (NAV) Price (POP)
10 Years 6.64% 6.01%
5 Years -2.86 -4.00
1 Year 5.70 -0.35
- ------------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL]
Value of $10,000 Investment
Pioneer Growth Leaders Fund Russell 1000 Growth Index
--------------------------- -------------------------
12/95 9425 10000
11457 12312
12/97 15210 16066
19263 22285
12/99 22098 29674
10719 23020
12/01 18040 18318
13681 13211
12/03 16918 17141
16955 18220
12/05 17922 19179
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
NAV results represent the percent change in net asset value per share. Returns
would have been lower had sales charges been reflected. POP returns reflect
deduction of maximum 5.75% sales charge. All results are historical and assume
the reinvestment of dividends and capital gains. Other share classes are
available for which performance and expenses will differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
The performance of each class of the Fund from 11/29/89 to 2/20/04 is the
performance of Papp Stock Fund's single class, which has been restated 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 Papp Stock Fund. Pioneer Growth Leaders Fund
was created through the reorganization of the predecessor Papp funds on February
20, 2004.
4
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS B SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Growth Leaders Fund, compared to that of the Russell
1000 Growth Index.
- ------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
- ------------------------------------------------------------
If If
Period Held Redeemed
10 Years 5.68% 5.68%
5 Years -3.86 -3.86
1 Year 4.34 0.74
- ------------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL]
Value of $10,000 Investment
Pioneer Growth Leaders Fund Russell 1000 Growth Index
--------------------------- -------------------------
12/95 10000 10000
12057 12312
12/97 15891 16066
19976 22285
12/99 22745 29674
21166 23020
12/01 18289 18318
13762 13211
12/03 16896 17141
16661 18220
12/05 17383 19179
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
"If Held" results represent the percent change in net asset value per share.
Returns would have been lower had sales charges been reflected. "If Redeemed"
returns reflect the deduction of applicable contingent deferred sales charge
(CDSC). Effective December 1, 2004, the period during which a CDSC is applied to
withdrawals was shortened to 5 years. The maximum CDSC for Class B shares
continues to be 4%. For more complete information, please see the prospectus for
details. Note: Shares purchased prior to December 1, 2004 remain subject to the
CDSC in effect at the time you purchased those shares. For performance
information for shares purchased prior to December 1, 2004, please visit
www.pioneerfunds.com/bshares.
All results are historical and assume the reinvestment of dividends and capital
gains. Other share classes are available for which performance and expenses will
differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
The performance of each class of the Fund from 11/29/89 to 2/20/04 is the
performance of Papp Stock Fund's single class, which has been restated 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 Papp Stock Fund. Pioneer Growth Leaders Fund
was created through the reorganization of the predecessor Papp funds on February
20, 2004.
5
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS C SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Growth Leaders Fund, compared to that of the Russell
1000 Growth Index.
- -----------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
- -----------------------------------------------------------
If If
Period Held Redeemed
10 Years 5.65% 5.65%
5 Years -3.92 -3.92
1 Year 4.44 4.44
- -----------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL]
Value of $10,000 Investment
Pioneer Growth Leaders Fund Russell 1000 Growth Index
--------------------------- -------------------------
12/95 10000 10000
12057 12312
12/97 15891 16066
19976 22285
12/99 22745 29674
21166 23020
12/01 18289 18318
13762 13211
12/03 16896 17141
16589 18220
12/05 17326 19179
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
Class C shares held for less than one year are also subject to a 1% contingent
deferred sales charge (CDSC). If you paid a 1% sales charge, your returns would
be lower than those shown above. "If Held" results represent the percent change
in net asset value per share. Returns would have been lower had sales charges
been reflected. All results are historical and assume the reinvestment of
dividends and capital gains. Other share classes are available for which
performance and expenses will differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
The performance of each class of the fund from 11/29/89 to 2/20/04 is the
performance of Papp Stock Fund's single class, which has been restated 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 Papp Stock Fund. Pioneer Growth Leaders Fund
was created through the reorganization of the predecessor Papp funds on February
20, 2004.
6
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS R SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Growth Leaders Fund, compared to that of the Russell
1000 Growth Index.
- -----------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
- -----------------------------------------------------------
If If
Period Held Redeemed
10 Years 5.79% 5.79%
5 Years -3.91 -3.91
1 Year 4.24 4.24
- -----------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL]
Value of $10,000 Investment
Pioneer Growth Leaders Fund Russell 1000 Growth Index
--------------------------- -------------------------
12/95 10000 10000
12088 12312
12/97 15971 16066
20128 22285
12/99 22979 29674
21435 23020
12/01 18571 18318
14011 13211
12/03 17241 17141
16846 18220
12/05 17560 19179
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The performance of Class R shares for the period prior to the commencement of
operations of Class R shares on April 1, 2003 is based on the performance of
Class A shares, reduced to reflect the higher distribution and service fees of
Class R shares. For the period after April 1, 2003, the actual performance of
Class R shares is reflected, which performance may be influenced by the smaller
asset size of Class R shares compared to Class A shares. The performance of
Class R shares does not reflect the 1% CDSC that was in effect prior to July 1,
2004. Class R shares are not subject to sales charges and are available for
limited groups of eligible investors, including institutional investors. All
results are historical and assume the reinvestment of dividends and capital
gains. Other share classes are available for which performance and expenses will
differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
The performance of each class of the Fund from 11/29/89 to 2/20/04 is the
performance of Papp Stock Fund's single class, which has been restated 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 Papp Stock Fund. Pioneer Growth Leaders Fund
was created through the reorganization of the predecessor Papp funds on February
20, 2004.
7
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
COMPARING ONGOING FUND EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Fund, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Fund expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds. The example is based on an investment
of $1,000 at the beginning of the Fund's latest six-month period and held
throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Growth Leaders Fund
Based on actual returns from July 1, 2005 through December 31, 2005.
Share Class A B C R
- -------------------------------------------------------------------------------------------
Beginning Account Value $1,000.00 $1,000.00 $1,000.00 $1,000.00
On 7/1/05
Ending Account Value $1,055.52 $1,050.44 $1,049.44 $1,058.92
On 12/31/05
Expenses Paid During Period* $ 6.48 $ 12.09 $ 12.04 $ 14.43
* Expenses are equal to the Fund's annualized expense ratio of 1.25%, 2.33%,
2.32% and 2.59%, for Class A, Class B, Class C and Class R shares,
respectively, multiplied by the average account value over the period,
multiplied by 184/365 (to reflect the one-half year period).
8
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
Expenses Paid on a $1,000 Investment in Pioneer Growth Leaders Fund
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2005 through December 31, 2005.
Share Class A B C R
- -------------------------------------------------------------------------------------------
Beginning Account Value $1,000.00 $1,000.00 $1,000.00 $1,000.00
On 7/1/05
Ending Account Value $1,018.90 $1,013.41 $1,013.46 $1,011.19
On 12/31/05
Expenses Paid During Period* $ 6.36 $ 11.88 $ 11.82 $ 14.09
* Expenses are equal to the Fund's annualized expense ratio of 1.25%, 2.33%,
2.32% and 2.59%, for Class A, Class B, Class C and Class R shares,
respectively, multiplied by the average account value over the period,
multiplied by 184/365 (to reflect the one-half year period).
9
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05
- --------------------------------------------------------------------------------
While the U.S. economy and corporate profits registered strong gains during
2005, stock market indexes produced below-average returns for the year.
Investors worried about oil prices, the impact of the Federal Reserve Board's 13
successive interest-rate hikes over 18 months, and the possibility that federal
tax cuts on capital gains and stock dividends might not be made permanent. Given
these concerns, stock valuations failed to keep pace with increasing corporate
earnings and gross domestic product (GDP). In the following interview, members
of the management team of L. Roy Papp & Associates - L. Roy Papp and Rosellen
Papp, who are responsible for the Fund's management, discuss the factors that
influenced the performance of Pioneer Growth Leaders Fund during the 12 months
ended December 31, 2005.
Q: How did the Fund perform?
A: The Fund performed well in a mixed environment for stock investing. For the
12 months ended December 31, 2005, Class A shares of Pioneer Growth Leaders
Fund returned 5.70% at net asset value. During the same 12 months, the
Russell 1000 Growth Index returned 5.25%, while the average total return of
the 888 funds in Lipper's Large-Cap Core group was 4.85%.
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent
month-end performance results. Current performance may be lower or higher
than the performance data quoted.
The performance data quoted represents past performance, which is no
guarantee of future results. Investment return and principal value will
fluctuate, and shares, when redeemed, may be worth more or less than their
original cost.
Q: What were the principal factors that affected Fund performance?
A: The economy showed persistent, resilient strength during 2005, and corporate
earnings continued to produce impressive gains. Gross Domestic Product (GDP)
grew briskly throughout the year and most corporations were able to report
double-digit earnings gains. Despite this positive economic backdrop, stocks
on average produced modest results. The most notable exception was in the
energy sector, where sharply rising oil and natural gas prices pushed stock
prices significantly higher. Investors worried about these higher energy
prices, the tightening of monetary policy by the Federal Reserve and
on-going political controversies and policy stalemates in Washington. As a
result, stock performance failed
10
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
to keep pace with underlying economic fundamentals for the second
consecutive year and the market ended 2005 with a gap between corporate
profitability and stock valuations.
In this environment, we kept to our long-term strategy of investments in
industry-leading, stable growth companies with superior long-term earnings
growth potential. We also continued to pursue investment themes we have
developed. As examples, we sought opportunities created by demographic
changes - most notably the aging of the baby-boom generation - in sectors
such as health care and financial services, and we tried to invest in
companies that would benefit from the expanding global economy in sectors
such as information technology and industrials. We did not make any
significant sector changes during the year, although we did increase our
exposure to industrial companies because of our view that one of the
emerging themes in 2006 was likely to be increasing capital expenditures by
corporations. For example, we established a position in 3M, a leading
industrial firm, during the year. Within information technology, we added
software companies such as Adobe and Symantec, while reducing our exposure
in the technology hardware area. Although the energy sector was the
best-performing part of the market, we tended to underweight energy
companies both because of the volatility of their earnings and because we
believed energy commodity prices had reached unsustainably high prices.
Q: What were some of the individual investments that contributed to
performance?
A: In financial services, we focused on companies whose profitability was not
overly sensitive to the risks of rising interest rates. Two holdings that
performed particularly well were State Street Bank & Trust and T. Rowe
Price. While State Street Bank had disappointing performance in 2004, we
maintained our position because of underlying strengths derived from its
leadership position as a transaction processor and provider of custodial,
record-keeping and accounting services for the financial services industry,
especially companies managing retirement plans. T. Rowe Price is a leading
investment management and mutual fund company that, like State Street, is
positioned to benefit from the growing need of the baby-boom generation for
retirement products and services. Both companies performed exceptionally
well during the year, even as other financial companies were affected by
rising short-term
11
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05 (continued)
- --------------------------------------------------------------------------------
interest rates that potentially could shrink the profit margins of
traditional lending activities.
Among our health-care investments, one company that performed particularly
well was Techne, which produces proteins used by biotechnology companies.
Normally, we tend to de-emphasize biotechnology companies because of the
volatility of their earnings, but Techne's profits tend to be more
consistent than those of the customers that it supplies. The company offered
an interesting way to pursue the health care theme during a period in which
large-cap pharmaceuticals were out of favor.
Our investment in Expeditors International of Washington was a successful
way to play the globalization of world trade theme. The company handles
logistical planning and directly benefited from the rise in trade between
China and the United States. Its stock declined during the first part of the
year on concerns about its vulnerability to higher energy prices, but the
company's valuation recovered strongly in the second six months.
In the information technology sector, one of our newer holdings, Adobe
Software was a strong contributor.
Q: What types of investments held back results?
A: Our underweight in energy stocks held back results during a year in which
commodity prices rose to record-high levels. Individual holdings that
detracted from results tended to come from a variety of sectors. Health care
giant Johnson & Johnson declined because of market concerns about its
planned acquisition of cardiac device manufacturer Guidant. We believe the
market has overreacted and Johnson & Johnson remains a high-quality company.
In the consumer staples area, Clorox faltered as it had trouble passing
along rising materials costs to consumers. Sysco, which supplies food to the
restaurant industry, fell victim to high energy costs, but we continue to
like its longer-term prospects. In the industrials sector, General
Electric's stock underperformed because of market fears about its
vulnerability to higher energy costs. We believe those fears are
unjustified, however, as the need for more efficient engines and industrial
equipment may play to GE's strengths. We expect healthy earnings growth from
GE over the longer term.
We were able to sell our positions in several companies whose stock prices
had floundered early in the period after their valuations began to recover
again. They included insurance giant American
12
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
International Group and technology hardware companies Hewlett-Packard,
American Power Conversion and Molex.
Q: What is your investment outlook?
A: We believe the stock market is inexpensive after two successive years in
which stock price performance has failed to keep pace with growth in the
economy and in corporate profitability. As we enter 2006, the American
economy is strong, as evidenced by the overwhelming consensus of 56
economists recently surveyed by the Wall Street Journal. The average
forecast for growth in GDP during 2006 was between 3% and 3.5%. The overall
valuation gap that we see between company earnings and company stock
valuations is especially pronounced in large- and very-large cap companies,
and we think there is strong potential for good stock performance during the
coming year. The most noteworthy possible exception may be in health care,
where earnings growth of the larger pharmaceutical companies could be
limited because of the cost control efforts of pharmacy benefit providers,
including HMOs, and because many profitable drugs are nearing the end of
their patent protection.
Investments in mid-sized companies may offer the potential for higher returns,
but are also subject to greater short-term price fluctuations than larger, more
established companies. The Fund invests in a limited number of securities and,
as a result, the Fund's performance may be more volatile than the performance of
other funds holding more securities. At times, the Fund's investments may
represent industries or industry sectors that are interrelated or have common
risks, making it more susceptible to any economic, political, or regulatory
developments or other risks affecting those industries and sectors.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These opinions should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
13
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 99.8%
Energy - 0.5%
Integrated Oil & Gas - 0.5%
5,400 Chevron Corp. $ 306,558
-----------
Total Energy $ 306,558
-----------
Capital Goods - 9.6%
Industrial Conglomerates - 9.6%
10,500 3M Co. $ 813,750
134,000 General Electric Co. 4,696,700
-----------
$ 5,510,450
-----------
Total Capital Goods $ 5,510,450
-----------
Transportation - 6.4%
Air Freight & Couriers - 6.4%
45,000 Expeditors International of Washington, Inc. $ 3,037,950
8,500 United Parcel Service 638,775
-----------
$ 3,676,725
-----------
Total Transportation $ 3,676,725
-----------
Media - 7.2%
Advertising - 7.2%
48,500 Omnicom Group $ 4,128,805
-----------
Total Media $ 4,128,805
-----------
Retailing - 1.6%
General Merchandise Stores - 1.6%
17,200 Target Corp. $ 945,484
-----------
Total Retailing $ 945,484
-----------
Food & Drug Retailing - 6.0%
Drug Retail - 4.1%
53,000 Walgreen Co. $ 2,345,780
-----------
Food Distributors - 0.7%
12,500 Sysco Corp. $ 388,125
-----------
Hypermarkets & Supercenters - 1.2%
15,000 Wal-Mart Stores, Inc. $ 702,000
-----------
Total Food & Drug Retailing $ 3,435,905
-----------
14 The accompanying notes are an integral part of these financial statements.
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Household & Personal Products - 4.6%
Household Products - 3.7%
37,000 Clorox Co. $ 2,104,930
-----------
Personal Products - 0.9%
12,000 Alberto-Culver Co. (Class B) $ 549,000
-----------
Total Household & Personal Products $ 2,653,930
-----------
Health Care Equipment & Services - 9.3%
Health Care Equipment - 7.8%
78,000 Medtronic, Inc. $ 4,490,460
-----------
Health Care Services - 1.5%
14,828 Medco Health Solutions, Inc.* $ 827,402
-----------
Total Health Care Equipment & Services $ 5,317,862
-----------
Pharmaceuticals & Biotechnology - 10.6%
Biotechnology - 6.0%
61,000 Techne Corp.* $ 3,425,150
-----------
Pharmaceuticals - 4.6%
44,000 Johnson & Johnson $ 2,644,400
-----------
Total Pharmaceuticals & Biotechnology $ 6,069,550
-----------
Diversified Financials - 14.6%
Asset Management & Custody Banks - 14.6%
19,500 Northern Trust Corp. $ 1,010,490
84,000 State Street Corp. 4,656,960
37,000 T. Rowe Price Associates, Inc. 2,665,110
-----------
$ 8,332,560
-----------
Total Diversified Financials $ 8,332,560
-----------
Software & Services - 13.4%
Application Software - 0.9%
13,000 Adobe Systems, Inc. $ 480,480
-----------
Data Processing & Outsourced Services - 3.8%
51,000 First Data Corp. $ 2,193,510
-----------
The accompanying notes are an integral part of these financial statements. 15
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
Shares Value
Systems Software - 8.7%
180,000 Microsoft Corp. $ 4,707,000
17,000 Symantec Corp.* 297,500
-----------
$ 5,004,500
-----------
Total Software & Services $ 7,678,490
-----------
Technology Hardware & Equipment - 0.8%
Computer Hardware - 0.5%
3,500 IBM Corp. $ 287,700
-----------
Computer Storage & Peripherals - 0.3%
14,000 EMC Corp.* $ 190,680
-----------
Total Technology Hardware & Equipment $ 478,380
-----------
Semiconductors - 15.2%
Semiconductor Equipment - 2.7%
87,600 Applied Materials, Inc. $ 1,571,544
-----------
Semiconductors - 12.5%
188,000 Intel Corp. $ 4,692,480
67,000 Linear Technology Corp. 2,416,690
-----------
$ 7,109,170
-----------
Total Semiconductors $ 8,680,714
-----------
TOTAL COMMON STOCKS
(Cost $25,272,184) $57,215,413
-----------
TOTAL INVESTMENT IN SECURITIES - 99.8%
(Cost $25,272,184) (a) $57,215,413
-----------
OTHER ASSETS AND LIABILITIES - 0.2% $ 135,193
-----------
TOTAL NET ASSETS - 100.0% $57,350,606
===========
16 The accompanying notes are an integral part of these financial statements.
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Non-income prducing
(a) At December 31, 2005, the net unrealized gain on investments based on cost
for federal income tax purposes of $25,272,184 was as follows:
Aggregate gross unrealized gain for all investments in which there is an
excess of value over tax cost $32,022,270
Aggregate gross unrealized loss for all investments in which there is an
excess of tax cost over value (79,041)
-----------
Net unrealized gain $31,943,229
===========
Purchases and sales of securities (excluding temporary cash investments) for the
year ended December 31, 2005 aggregated $1,473,244 and $14,065,806,
respectively.
The accompanying notes are an integral part of these financial statements. 17
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/05
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities (cost $25,272,184) $57,215,413
Receivables -
Investment securities sold 332,460
Fund shares sold 1,554
Dividends, interest and foreign taxes withheld 84,495
Due from Pioneer Investment Management, Inc. 2,071
Other 96
-----------
Total assets $57,636,089
-----------
LIABILITIES:
Payables -
Fund shares repurchased $ 91,892
Due to bank 120,628
Due to affiliates 2,498
Accrued expenses 70,465
-----------
Total liabilities $ 285,483
-----------
NET ASSETS:
Paid-in capital $23,510,205
Accumulated net realized gain on investments 1,897,172
Net unrealized gain on investments 31,943,229
-----------
Total net assets $57,350,606
===========
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Class A (based on $56,039,765/2,916,122 shares) $ 19.22
===========
Class B (based on $904,388/48,401 shares) $ 18.69
===========
Class C (based on $405,791/21,826 shares) $ 18.59
===========
Class R (based on $662/36 shares) $ 18.38
===========
MAXIMUM OFFERING PRICE:
Class A ($19.22 [divided by] 94.25%) $ 20.39
===========
18 The accompanying notes are an integral part of these financial statements.
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/05
INVESTMENT INCOME:
Dividends $527,934
Interest 6,826
Income from securities loaned, net 5
--------
Total investment income $ 534,765
-----------
EXPENSES:
Management fees $318,856
Transfer agent fees and expenses
Class A 33,953
Class B 1,873
Class C 758
Class R 112
Distribution fees
Class A 113,399
Class B 4,082
Class C 1,588
Class R 4
Administrative reimbursements 20,107
Custodian fees 15,062
Registration fees 92,326
Professional fees 49,296
Printing expense 29,310
Fees and expenses of nonaffiliated trustees 5,617
--------
Total expenses $ 686,343
Less management fees waived and
expenses reimbursed by Pioneer
Investment Management, Inc. (148,604)
Less fees paid indirectly (410)
-----------
Net expenses $ 537,329
-----------
Net investment loss $ (2,564)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments $ 7,096,673
-----------
Change in net unrealized gain on investments $(4,611,454)
-----------
Net gain on investments $ 2,485,219
-----------
Net increase in net assets resulting
from operations $ 2,482,655
===========
The accompanying notes are an integral part of these financial statements. 19
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/05 and 12/31/04, respectively
Year Ended Year Ended
12/31/05 12/31/04
FROM OPERATIONS:
Net investment income (loss) $ (2,564) $ 281,414
Net realized gain on investments 7,096,673 10,648,184
Change in net unrealized gain (loss) on investments (4,611,454) (11,141,722)
----------- ------------
Net increase (decrease) in net assets resulting
from operations $ 2,482,655 $ (212,124)
----------- ------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class A ($0.00 and $0.24 per share, respectively) $ (2,573) $ (278,970)
Net realized gain:
Class A ($2.97 and $7.04 per share, respectively) (5,133,831) (10,590,216)
Class B ($2.97 and $7.04 per share, respectively) (87,736) (13,233)
Class C ($2.97 and $7.04 per share, respectively) (16,121) (6,193)
Class R ($2.97 and $7.04 per share, respectively) (107) (248)
----------- ------------
Total distributions to shareowners $(5,240,368) $(10,888,860)
----------- ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 2,551,944 $ 1,527,279
Shares issued in reorganization 28,469,444
Reinvestment of distributions 4,685,476 9,520,300
Cost of shares repurchased (16,243,678) (16,586,975)
----------- ------------
Net increase (decrease) in net assets resulting
from Fund share transactions $19,463,186 $ (5,539,396)
----------- ------------
Net increase (decrease) in net assets $16,705,473 $(16,640,380)
NET ASSETS:
Beginning of year 40,645,133 57,285,513
----------- ------------
End of year (including undistributed net investment
income of $0 and $2,444 respectively) $57,350,606 $ 40,645,133
=========== ============
20 The accompanying notes are an integral part of these financial statements.
Pioneer Growth Leaders Fund
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
'05 Shares '05 Amount '04 Shares '04 Amount
CLASS A
Shares sold 76,244 $ 1,563,052 48,518 $ 1,337,899
Shares issued in
reorganization 1,463,245 28,021,144 - -
Reinvestment of distributions 238,026 4,582,310 449,084 9,501,370
Less shares repurchased (788,196) (16,010,694) (601,430) (16,472,179)
--------- ------------ -------- ------------
Net increase (decrease) 989,319 $ 18,155,812 (103,828) $ (5,623,910)
========= ============ ======== ============
CLASS B
Shares sold 35,303 $ 718,657 5,891 $ 158,624
shares issued in
reorganization 9,074 169,591 - -
Reinvestment of distributions 4,667 87,520 625 12,985
Less shares repurchased (3,148) (59,322) (4,011) (109,374)
--------- ------------ -------- ------------
Net increase 45,896 $ 916,446 2,505 $ 62,235
========= ============ ======== ============
CLASS C
Shares sold 13,888 $ 270,035 1,082 $ 29,681
shares issued in
reorganization 14,985 278,709 - -
Reinvestment of distributions 835 15,646 288 5,945
Less shares repurchased (9,050) (173,478) (202) (5,347)
--------- ------------ -------- ------------
Net increase 20,658 $ 390,912 1,168 $ 30,279
========= ============ ======== ============
CLASS R
Shares sold 10 $ 200 38 $ 1,075
Less shares repurchased (9) (184) (3) (75)
--------- ------------ -------- ------------
Net increase 1 $ 16 35 $ 1,000
========= ============ ======== ============
The accompanying notes are an integral part of these financial statements. 21
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/05 12/31/04 12/31/03 12/31/02 12/31/01
CLASS A
Net asset value, beginning of period $ 21.05 $ 28.21 $ 23.87 $ 31.40 $ 37.09
------- ------- ------- ------- -------
Net increase (decrease) from investment operations:
Net investment income (loss) $ 0.01 $ 0.19 $ (0.05) $ (0.06) $ (0.11)
Net realized and unrealized gain (loss) on investments 1.13 (0.13) 5.77 (7.47) (4.58)
------- ------- ------- ------- -------
Net increase (decrease) from investment operations $ 1.14 $ 0.06 $ 5.72 $ (7.53) $ (4.69)
Distributions to shareowners:
Net investment income (0.00)(a) (0.18) - - -
Net realized gain (2.97) (7.04) (1.38) - (1.00)
------- ------- ------- ------- -------
Net increase (decrease) in net asset value $ (1.83) $ (7.16) $ 4.34 $ (7.53) $ (5.69)
------- ------- ------- ------- -------
Net asset value, end of period $ 19.22 $ 21.05 $ 28.21 $ 23.87 $ 31.40
======= ======= ======= ======= =======
Total return* 5.70 0.25% 23.97% (23.98)% (12.69)%
Ratio of net expenses to average net assets+ 1.25% 1.25% 1.22% 1.14% 1.11%
Ratio of net investment income (loss) to average net assets+ 0.01% 0.58% (0.01)% (0.04)% (0.19)%
Portfolio turnover rate 3% 6% 3% 4% 5%
Net assets, end of period (in thousands) $56,040 $40,568 $57,286 $52,528 $75,215
Ratios with no waiver of management fees by PIM and no
reduction for fees paid indirectly:
Net expenses 1.59% 1.49% 1.22% 1.14% 1.11%
Net investment income (loss) (0.35)% 0.34% (0.01)% (0.04)% (0.19)%
Ratios with waiver of management fees by PIM and
reduction for fees paid indirectly:
Net expenses 1.25% 1.25% 1.22% 1.14% 1.11%
Net investment income (loss) 0.01% 0.58% (0.01)% (0.04)% (0.19)%
(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 and the complete redemption of
the investment at net asset value at the end of each period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
+ Ratios with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
22
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended 2/21/04 to
12/31/05 12/31/04(a)
CLASS B
Net asset value, beginning of period $ 20.81 $ 28.39
------- ---------
Net increase (decrease) from investment operations:
Net investment loss $ (0.08) $ (0.11)
Net realized and unrealized gain (loss) on
investments 0.93 (0.43)
------- ---------
Net increase (decrease) from investment
operations $ 0.85 $ (0.54)
------- ---------
Distributions to shareowners:
Net realized gain (2.97) (7.04)
------- ---------
Net decrease in net asset value $ (2.12) $ (7.58)
------- ---------
Net asset value, end of period $ 18.69 $ 20.81
======= =========
Total return* 4.34% (1.88)%(b)
Ratio of net expenses to average net assets+ 2.34% 3.18%**
Ratio of net investment loss to average net assets+ (1.02)% (0.78)%**
Portfolio turnover rate 3% 6%
Net assets, end of period (in thousands) $ 904 $ 52
Ratios with no waiver of management fees by PIM
and no reduction for fees paid indirectly:
Net expenses 2.67% 3.48%**
Net investment loss (1.35)% (1.08)%**
Ratios with waiver of management fees by PIM and
reduction for fees paid indirectly:
Net expenses 2.33% 3.18%**
Net investment loss (1.01)% (0.78)%**
(a) Class B shares were first publicly offered on February 21, 2004.
(b) Not annualized.
* 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.
The accompanying notes are an integral part of these financial statements. 23
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended 2/21/04 to
12/31/05 12/31/04(a)
CLASS C
Net asset value, beginning of period $ 20.69 $ 28.39
------- ---------
Net increase (decrease) from investment operations:
Net investment loss $ (0.07) $ (0.09)
Net realized and unrealized gain (loss) on
investments 0.94 (0.57)
------- ---------
Net increase (decrease) from investment
operations $ 0.87 $ (0.66)
------- ---------
Distributions to shareowners:
Net realized gain (2.97) (7.04)
------- ---------
Net decrease in net asset value $ (2.10) $ (7.70)
------- ---------
Net asset value, end of period $ 18.59 $ 20.69
======= =========
Total return* 4.44% (2.30)%(b)
Ratio of net expenses to average net assets+ 2.32% 3.80%**
Ratio of net investment loss to average net assets+ (0.95)% (1.36)%**
Portfolio turnover rate 3% 6%
Net assets, end of period (in thousands) $ 406 $ 24
Ratios with no waiver of management fees by PIM
and no reduction for fees paid indirectly:
Net expenses 2.66% 4.11%**
Net investment loss (1.29)% (1.68)%**
Ratios with waiver of management fees by PIM and
reduction for fees paid indirectly:
Net expenses 2.32% 3.80%**
Net investment loss (0.95)% (1.36)%**
(a) Class C shares were first publicly offered on February 21, 2004.
(b) Not annualized.
* 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.
24 The accompanying notes are an integral part of these financial statements.
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended 2/21/04 to
12/31/05 12/31/04(a)
CLASS R
Net asset value, beginning of period $ 20.55 $ 28.39
-------- ---------
Net increase (decrease) from investment operations:
Net investment loss $ (0.27) $ (0.45)
Net realized and unrealized gain (loss) on
investments 1.07 (0.35)
-------- ---------
Net increase (decrease) from investment
operations $ 0.80 $ (0.80)
-------- ---------
Distributions to shareowners:
Net realized gain (2.97) (7.04)
-------- ---------
Net decrease in net asset value $ (2.17) $ (7.84)
-------- ---------
Net asset value, end of period $ 18.38 $ 20.55
======== =========
Total return* 4.24% (2.81)%(b)
Ratio of net expenses to average net assets+ 2.78% 4.20%**
Ratio of net investment loss to average net assets+ (1.57)% (1.98)%**
Portfolio turnover rate 3% 6%
Net assets, end of period (in thousands) $ 1 $ 1
Ratios with no waiver of management fees by PIM
and no reduction for fees paid indirectly:
Net expenses 17.63% 4.56%**
Net investment loss (16.43)% (2.34)%**
Ratios with waiver of management fees by PIM and
reduction for fees paid indirectly:
Net expenses 2.59% 4.19%**
Net investment loss (1.39)% (1.97)%**
(a) Class R shares were first publicly offered on February 21, 2004.
(b) Not annualized.
* Assumes initial investment at net asset value at the beginning of each
year, 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.
+ Ratios with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements. 25
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer Growth Leaders Fund (the Fund), formerly known as Pioneer Papp Stock
Fund, is one of eight series of portfolios comprising Pioneer Series Trust II, a
Delaware statutory trust registered under the Investment Company Act of 1940 as
a diversified, open-end management investment company. The Fund, which commenced
operations on February 20, 2004, is the successor to the Papp Stock Fund, Inc.
Papp Stock Fund, Inc., transferred all of its net assets in exchange for the
Fund's Class A shares in a one-to-one exchange ratio, on February 20, 2004
pursuant to an agreement and plan of reorganization (the "reorganization" which
was approved by the shareholders of Papp Stock Fund, Inc., on February 20,
2004). The Fund had no assets or liabilities prior to the reorganization.
Accordingly, the reorganization, which was a tax-free exchange, had no effect on
the Fund's operations. The investment objective of the Fund is long-term growth.
The Fund offers four classes of shares - Class A, Class B, Class C, and Class R
shares. Class B, Class C, and Class R shares were first publicly offered on
February 21, 2004. Each class of shares represents an interest in the same
portfolio of investments of the Fund and has equal rights to voting,
redemptions, dividends and liquidation, except that the level of transfer agent
and distribution fees may differ among classes. Class A, Class B, Class C, and
Class R shareowners have exclusive voting rights with respect to the
distribution plan for each class.
The Fund's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the Fund
to, among other things, make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
income, expenses and gains and losses on investments during the reporting year.
Actual results could differ from those estimates. Information regarding the
Fund's principal investment risks is contained in the Fund's prospectus and
Statement of Additional Information. Please refer to those documents when
considering the Fund's risks. The following is a summary of significant
accounting policies followed by the Fund in the preparation of its financial
statements, which are consistent with those policies generally accepted in the
investment company industry:
26
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A. Security Valuation
Security transactions are recorded as of trade date. The net asset value of
the Fund is computed once daily, on each day the New York Stock Exchange
(NYSE) is open, as of the close of regular trading on the NYSE. In computing
the net asset value, securities are valued at the last sale price on the
principal exchange where they are traded. Securities that have not traded on
the date of valuation, or securities for which sale prices are not generally
reported, are valued at the mean between the last bid and asked prices.
Securities for which market quotations are not readily available are valued
at their fair values as determined by, or under the direction of, the Board
of Trustees. Trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. The Fund also may use the fair value of a
security, including a non-U.S. security, when the closing market price on
the principal exchange where the security is traded no longer reflects the
value of the security. At December 31, 2005, there were no securities fair
valued. Temporary cash investments are valued at amortized cost.
Dividend income is recorded on the ex-dividend date; Dividend and interest
income is recorded on the accrual basis. Gains and losses on sales of
investments are calculated on the identified cost method for both financial
reporting and federal income tax purposes.
B. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the sources of the Fund's distributions may be
shown in the accompanying financial statements as either from or in excess
of net investment income or net realized gain on investment transactions, or
from paid-in capital, depending on the type of book/tax differences that may
exist.
27
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
The tax character of distributions paid during the years ended December 31,
2005 and December 31, 2004 were as follows:
- --------------------------------------------------------------------------------
2005 2004
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 2,573 $ 278,970
Long-term capital gain 5,237,795 10,609,890
----------- -----------
Total $ 5,240,368 $10,888,860
=========== ===========
- --------------------------------------------------------------------------------
The following shows the components of distributable earnings on a federal
income tax basis as of December 31, 2005.
- --------------------------------------------------------------------------------
2005
- --------------------------------------------------------------------------------
Undistributed long-term gain $ 1,897,172
Unrealized appreciation 31,943,229
-----------
Total $33,840,401
===========
- --------------------------------------------------------------------------------
The Fund has reclassified $2,693 to decrease undistributed net investment
loss and $2,693 to decrease paid-in capital to reflect permanent book/tax
differences. The reclassification has no impact on the net asset value of
the Fund and is designed to present the Fund's Capital accounts on a tax
basis.
C. Fund Shares
The Fund records sales and repurchases of its shares as of trade date.
Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the
Fund and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A.
(UniCredito Italiano) earned approximately $1,898 in underwriting
commissions on the sale of class A shares during the year ended December 31,
2005.
D. Class Allocations
Distribution fees are calculated based on the average daily net asset value
attributable to Class A, Class B, Class C and Class R shares of the Fund,
respectively (see Note 4). Shareowners of each class share all expenses and
fees paid to the transfer agent, Pioneer Investment Management Shareholder
Services, Inc.
28
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PIMSS), for its services, which are allocated based on the number of
accounts in each class and the ratable allocation of related out-of-pocket
expenses (see Note 3). Income, common expenses and realized and unrealized
gains and losses are calculated at the Fund level and allocated daily to each
class of shares based on the respective percentage of adjusted net assets at
the beginning of the day.
Distributions to shareowners are recorded as of the ex-dividend date.
Distributions paid by the Fund with respect to each class of shares are
calculated in the same manner, at the same time, and in the same amount,
except that Class A, Class B, Class C, and Class R shares can bear different
transfer agent and distribution fees.
2. Management Agreement
Pioneer Investment Management, Inc. (PIM), a wholly owned indirect subsidiary of
UniCredito Italiano, manages the Fund's portfolio. PIM receives a basic fee that
is calculated at the annual rate of 0.75% of the Fund's average daily net assets
up to $1 billion; and 0.70% of the excess over $1 billion.
PIM and not the Fund, pays a portion of the fee it receives from the Fund to L.
Roy Papp & Associates LLP (Papp) as compensation for its sub advisory services
to the Fund.
Through December 31, 2006, PIM has agreed not to impose all or a portion of its
management fee and to assume other operating expenses of the Fund to the extent
necessary to limit expenses to 1.25% of average daily net assets attributable to
Class A; the portion of the Fund-wide expenses attributable to Class B, Class C
and Class R shares will be reduced only to the extent that such expenses are
reduced for Class A shares.
In addition, under the management and administrative agreements, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Fund. At December 31, 2005, $1,608 was payable to PIM
related to management fees, administrative costs and certain other services and
is included in due to affiliates.
29
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides
substantially all transfer agent and shareowner services to the Fund at
negotiated rates. Included in due to affiliates is $100 in transfer agent fees
payable to PIMSS at December 31, 2005.
4. Distribution and Service Plans
Effective February 20, 2004, the Fund adopted a Plan of Distribution for 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 Fund pays PFD a service fee of up to 0.25% of the average
daily net assets attributable to Class A shares in reimbursement of its actual
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 Fund pays
PFD 1.00% of the average daily net assets attributable to each class of shares.
The fee consists of a 0.25% service fee and a 0.75% distribution fee paid as
compensation for personal services and/or account maintenance services or
distribution services with regard to Class B and Class C shares. Pursuant to the
Class R Plan, the Fund pays PFD 0.50% of the average daily net assets
attributable to Class R shares as compensation for distribution services.
Included in due to affiliates is $790 in distribution fees payable to PFD at
December 31, 2005. The Fund also has adopted a separate service plan for Class R
shares (Service Plan). The Service Plan authorizes the Fund to pay securities
dealers, plan administrators or other service organizations that agree to
provide certain services to retirement plans or plan participants holding shares
of the Fund a service fee of up to 0.25% of the Fund's average daily net assets
attributable to Class R shares held by such plans.
In addition, redemptions of each class of shares may be subject to a contingent
deferred sales charge (CDSC). Effective February 20, 2004, a CDSC of 1.00% may
be imposed on redemptions of certain net asset value purchases of Class A shares
within 18 months of purchase. Class B shares subscribed on or after December 1,
2004 that are redeemed within five years of purchase are subject to a CDSC at
declining rates beginning at 4.00%, based on the lower of cost or market value
of shares being redeemed. Shares purchased prior to December 1, 2004 remain
subject to the CDSC in effect at the time those shares were purchased.
Redemptions of Class C
30
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
shares within one year of purchase are subject to a CDSC of 1.00%. Redemptions
of Class R shares within 18 months of purchase were subject to a CDSC of 1.00%.
Effective July 1, 2004, the CDSC on Class R shares was eliminated. Proceeds from
the CDSCs are paid to PFD. For the six months ended December 31, 2005, CDSCs in
the amount of $586 were paid to PFD.
5. Expense Offset Arrangements
The Fund has entered into certain expense offset arrangements with PIMSS
resulting in a reduction in the Fund's total expenses due to interest earned on
cash held by PIMSS. For the year ended December 31, 2005, the Fund's expenses
were reduced by $410 under such arrangements.
6. Merger Information
On September 13, 2005, beneficial owners of Pioneer Strategic Growth Fund
approved a proposed Agreement and Plan of Reorganization that provided for the
merger listed below. This tax-free reorganization was accomplished on September
16, 2005, by exchanging all of Strategic Growth Fund's net assets for Papp Stock
Fund's shares, based on Papp Stock Fund's Class A, Class B, Class C, and Class R
shares' ending net asset value, respectively. In connection with the
reorganization, Pioneer Papp Stock Fund was subsequently renamed Pioneer Growth
Leaders Fund.
31
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
The following charts show the details of the reorganizations as of that closing
date ("Closing Date"):
- -----------------------------------------------------------------------------------------------
Pioneer
Pioneer Papp Strategic Pioneer Growth
Stock Fund Growth Fund Leaders Fund
(Pre-Reorganization) (Pre-Reorganization) (Post-Reorganization)
- -----------------------------------------------------------------------------------------------
Net Assets
Class A $31,992,779 $28,021,144 $60,013,923
Class B 573,990 169,591 743,581
Class C 77,913 278,709 356,622
Class R 658 658
Total Net Assets $32,645,340 $28,469,444 $61,114,784
----------- ----------- -----------
Shares Outstanding
Class A 1,670,301 2,043,569 3,133,546
Class B 30,715 12,579 39,789
Class C 4,188 20,686 19,173
Class R 36 36
Shares Issued in Reorganization
Class A 1,463,245
Class B 9,074
Class C 14,985
- -----------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Unrealized Accumulated
Appreciation on Gain on
Closing Date Closing Date
- --------------------------------------------------------------------------------
Pioneer Strategic Growth Fund $12,194,197 $4,422,847
----------- ----------
- --------------------------------------------------------------------------------
32
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (unaudited)
For the fiscal year ended December 31, 2005, the percentage of the ordinary
income distributions made by the Fund subject to a maximum tax rate of 15%, as
provided for by the Jobs and Growth Tax Relief Act of 2003, was 100.00%.
The qualifying percentage of the Fund's ordinary income dividends for the
purposes of the corporate dividends received deduction was 100.00%.
33
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Series Trust II and the Shareowners of
Pioneer Growth Leaders Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Growth Leaders Fund (formerly Pioneer
Papp Stock Fund) one of the series constituting Pioneer Series Trust II (the
"Trust"), as of December 31, 2005, and the related statement of operations for
the year then ended, and the statements of changes in net assets and financial
highlights for each of the two years in the period then ended. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for each of the two years in the period ended December 31, 2003 were
audited by other auditors whose report, dated January 23, 2004, expressed an
unqualified opinion on those financial highlights. The financial highlights for
the year ended December 31, 2001 were audited by other auditors who have ceased
operations and whose report, dated January 17, 2002, expressed an unqualified
opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Trust's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Trust's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2005, by correspondence with the custodian.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Growth Leaders Fund of the Pioneer Series Trust II at December 31, 2005,
the results of its operations for the year then ended, and the changes in its
net assets and financial highlights for each of the two years in the period then
ended, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 10, 2006
34
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT
- --------------------------------------------------------------------------------
The Investment Company Act of 1940 requires that both the Board of Trustees and
a majority of the Independent Trustees (collectively "the Trustees") voting
separately annually approve the Fund's management contract (the "Management
Contract") between the Fund and Pioneer Investment Management, Inc., the Fund's
adviser (the "Investment Adviser"). The Investment Adviser has retained L. Roy
Papp and Associates, LLC. (the "Sub-adviser") to act as sub-adviser to the Fund
pursuant to a sub-advisory agreement between the Investment Adviser and the
Sub-adviser (the "Sub-advisory Agreement"). The Trustees have determined that
the terms of the Management Contract and the Sub-advisory Agreement are fair and
reasonable and that renewal of these contracts will enable the Fund to receive
quality investment advisory services at a cost deemed reasonable and is in the
best interests of the Fund and its shareowners. In making such determinations,
the Independent Trustees relied upon the assistance of counsel to the
Independent Trustees and counsel to the Fund.
Throughout the year, the Independent Trustees regularly met in executive session
separately from the Interested Trustees of the Fund and any officer of the
Investment Adviser, or its affiliates. While the Trustees, including the
Independent Trustees, act on all major matters relating to the Fund, a
significant portion of the activities of the Board of Trustees (including
certain of those described herein) is conducted through committees, the members
of which are comprised exclusively of Independent Trustees. Such committee
meetings are attended by officers of the Fund or the Investment Adviser to the
extent requested by the members of the committee.
In evaluating the Management Contract and Sub-advisory Agreement, the Trustees
conducted a review that was specifically focused upon the renewal of the
Management Contract and Sub-advisory Agreement, and relied upon their knowledge,
resulting from their meetings throughout the year, of the Investment Adviser,
its services and the Fund. Both in meetings specifically dedicated to renewal of
the Management Contract and at other meetings during the course of the year, the
Trustees, including the Independent Trustees, received materials relating to the
Investment Adviser's investment and management services under the Management
Contract. These materials included (i) information on the investment performance
of the Fund, a peer group of funds and an index, in each case selected by the
Independent Trustees for this purpose, (ii) sales and redemption data in respect
of the Fund, (iii) the general investment outlook in the
35
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT (continued)
- --------------------------------------------------------------------------------
markets in which the Fund invests, (iv) arrangements in respect of the
distribution of the Fund's shares, (v) the procedures employed to determine the
value of each of the Fund's assets, (vi) the Investment Adviser's management of
the relationships with the Fund's unaffiliated service providers, (vii) the
record of compliance with the Fund's investment policies and restrictions and
with the Fund's Code of Ethics and the structure and responsibilities of the
Investment Adviser's compliance department, (viii) the nature, cost and
character of non-investment management services provided by the Investment
Adviser and its affiliates, (ix) the disclosures included in the Fund's
prospectuses and reports to shareowners and (x) the investment and compliance
staff and operations of the Subadviser.
Specifically, in connection with the Independent Trustees' review of the
Management Contract and the Sub-advisory Agreement, the Independent Trustees
requested and the Investment Adviser provided additional information in order to
evaluate the quality of the Investment Adviser's and Sub-adviser's services and
the reasonableness of the fee under the Management Contract and the Sub-advisory
Agreement. Among other items, this information included data or analyses of (1)
investment performance for one, three, five and ten year periods for the Fund
and a peer group selected by the Independent Trustees for this purpose, (2)
management and other fees incurred by a peer group of funds selected by the
Independent Trustees for this purpose, (3) the advisory fees of comparable
portfolios of other clients of the Investment Adviser, (4) expense ratios for
the Fund and a peer group of funds selected by the Independent Trustees for this
purpose, (5) the overall organization of the Investment Adviser, (6) the
Investment Adviser's financial results and condition, including its and certain
of its affiliates profitability from services performed for the Fund, (7)
transfer agency fees and administrative reimbursements paid to the Investment
Adviser or affiliates, (8) investment management staffing, and (9) operating
expenses paid to third parties. The Trustees also reviewed information regarding
the potential for each of the Fund and the Investment Adviser to benefit from
further economies of scale in the management of the Fund in light of reasonable
growth expectations for the Fund, the break points in the Fund's management fee
and of a peer group of funds selected by the Independent Trustees for this
purpose and certain of the Fund's expenses that are not incurred as fees based
on a percentage of net assets.
36
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following summarizes matters considered by the Trustees in connection with
their renewal of the Fund's Management Contract and Sub-advisory Agreement. The
Trustees did not identify any single factor as all-important or controlling, and
the summary does not detail all the matters that were considered.
A. Ancillary Benefits to Shareowners. The Trustees considered the benefits to
shareowners of investing in a Fund that is part of a large number of
investment companies offering a variety of investment disciplines and
providing for a large variety of Fund and shareowner services.
B. Compliance and Investment Performance. The Trustees determined that the
Investment Adviser had policies and systems reasonably designed to achieve
compliance with the Fund's investment objectives and regulatory
requirements. The Trustees also reviewed the Fund's investment performance
based upon total return, as well as the Fund's performance compared to both
the performance of a peer group and an index, in each case selected by the
Independent Trustees for this purpose. The Fund's performance based upon
total return was in the fourth quintile of the peer group for the 12 months
ended June 30, 2005, the fifth quintile of the peer group for the three
years ended June 30, 2005, the second quintile for the five years ended June
30, 2005 and the third quintile for the ten years ended June 30, 2005. (In
all quintile rankings referred to throughout this discussion first quintile
is most favorable to the Fund's shareowners. Thus, highest relative
performance would be first quintile and lowest relative expenses also would
be first quintile.) The Trustees also considered the activities of the
Investment Adviser in monitoring the investment and compliance operations of
the Sub-adviser. The Trustees concluded that the longer-term performance of
the Fund supported the continuation of the Management Contract and the
Sub-advisory Agreement.
C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the
background of members of the team responsible for the daily management of
the Fund and the Fund's investment objective and discipline. The Independent
Trustees also have had discussions with senior management of the Investment
Adviser responsible for investment operations. Among other things, the
Trustees considered the number, education and experience of the
37
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT (continued)
- --------------------------------------------------------------------------------
Sub-adviser's investment staff. The Trustees concluded that the Investment
Adviser and the Sub-adviser have the quality and depth of personnel and the
well-developed methods essential to performing their duties under the
Management Contract and the Sub-advisory Agreement.
D. Nature and Quality of Other Services. The Trustees considered the nature,
quality, cost and extent of other services provided to shareowners of the
Fund, including administrative and shareowner services performed by the
Investment Adviser under the Management Contract. The Trustees also
considered the reasonableness of the arrangements for reimbursement of the
Investment Adviser's out-of-pocket costs and expenses, including overhead,
for certain administrative services that the Investment Adviser is not
required to provide under the Management Contract. The Trustees also
considered the nature and extent of the other services provided by the
Investment Adviser's affiliates under other contracts and its supervision of
third party service providers. Based on these considerations, the Trustees
concluded that the nature, quality, cost and extent of such services are
satisfactory and reliable and serve the shareowners of the Fund well.
E. Management Fee and Expenses. The Trustees considered the Investment
Adviser's fee under the Management Contract relative to the management fees
charged by a peer group of funds selected by the Independent Trustees for
this purpose using data provided by an independent third party. The Fund's
management fee for the 12 months ended June 30, 2005 was in the third
quintile relative to the management fees paid by the other funds in that
peer group for the comparable period. The Trustees determined that the fee
under the Management Contract was reasonable and fair in light of both the
overall nature and quality of services provided by the Investment Adviser
and the fees charged by the funds in the peer group. The Trustees also
evaluated the fee under the Sub-advisory Agreement and the portion of the
fee under the Management Contract retained by the Investment Adviser and
determined that they were consistent with other sub-advised funds. The
Trustees also considered the Fund's expense ratio and expense ratios of a
peer group of funds selected by the Independent Trustees for this purpose.
The Fund's expense ratio for the 12 months ended June 30, 2005 (after
expense limitations) was in the first quintile of the applicable peer group
for the
38
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
most recent fiscal year of the peer group for the comparable period. The
Trustees concluded that the Fund's overall expense ratio (after expense
limitations) was reasonable compared to that of comparable funds.
F. Profitability. The Trustees considered the level of the Investment Adviser's
profits with respect to the management of the Pioneer Funds, including
details with respect to the Fund. This consideration included a review of
the Investment Adviser's methodology in allocating certain of its costs to
the management of each Fund. The Trustees also considered the financial
results realized by the Investment Adviser in connection with the operation
of the Fund. They further considered the profits realized by the Investment
Adviser and its affiliates from non-fund businesses that may benefit from or
be related to the Fund's business. The Trustees considered the Investment
Adviser's profit margins in comparison with the limited available industry
data. The Trustees concluded that the Investment Adviser's profits from
management of the Pioneer Funds, including the financial results derived
from the Fund, bear a reasonable relationship to the services rendered and
are fair for the management of the Fund.
G. Economies of Scale. The Trustees considered the economies of scale with
respect to the management of the Fund, whether the Fund had appropriately
benefited from any economies of scale, and whether there was potential for
realization of any further economies of scale. Because of break points in
the management fee, the Trustees concluded that any perceived or potential
economies of scale would be shared at future asset levels, in a reasonable
manner as the Fund grows in size, between the Investment Adviser and the
Fund's shareholders.
H. Other Benefits to the Investment Adviser. The Trustees also considered the
character and amount of fees paid by the Fund, other than under the
Management Contract, for services provided by the Investment Adviser and
affiliates, including fees for services such as shareholder services. The
Trustees also considered the receipt of sales loads and payments under Rule
12b-1 plans in respect of the Pioneer Funds (including the Fund), and
benefits to the Sub-Adviser from the use of "soft" commission dollars to pay
for research and brokerage services. The Trustees further considered the
revenues and profitability of the Investment Adviser's
39
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT (continued)
- --------------------------------------------------------------------------------
businesses other than the fund business, including the Investment Adviser's
institutional investment advisory business. The Trustees considered the
intangible benefits that accrue to the Investment Adviser and its affiliates
by virtue of its relationship with the Fund and the Pioneer Funds as a
group. The Trustees concluded that all these types of benefits accruing to
the Investment Adviser were reasonable in the context of the overall
relationship between the Investment Adviser and the Fund.
Conclusion. The Trustees, in light of the Investment Adviser's and Sub-adviser's
overall performance, considered it appropriate to continue to retain the
management services of the Investment Adviser and the Sub-adviser. Based on
their evaluation of all material factors deemed relevant and the advice of
independent counsel, the Trustees concluded that the Management Contract with
the Fund and the Sub-advisory Agreement are fair and reasonable and voted to
approve the continuation of the Management Contract and the Sub-advisory
Agreement for another year.
40
Pioneer Growth Leaders Fund
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser
Pioneer Investment Management, Inc.
Custodian
Brown Brothers Harriman & Co.
Independent Registered Public Accounting Firm
Ernst & Young LLP
Principal Underwriter
Pioneer Funds Distributor, Inc.
Legal Counsel
Wilmer Cutler Pickering Hale and Dorr LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
Trustees and Officers
The Fund's Board of Trustees provides broad supervision over the Fund's affairs.
The officers of the Fund are responsible for the Fund's operations. The Fund's
Trustees and officers are listed below, together with their principal
occupations during the past five years. Trustees who are interested persons of
the Fund within the meaning of the Investment Company Act of 1940 are referred
to as Interested Trustees. Trustees who are not interested persons of the Fund
are referred to as Independent Trustees. Each of the Trustees (except Mr. Hood
and Mr. West) serve as a Trustee of the 91 U.S. registered investment portfolios
for which Pioneer Investment Management, Inc. ("Pioneer") serves as investment
adviser (the "Pioneer Funds"). Mr. Hood and Mr. West serve as Trustees for 35 of
the 91 Pioneer Funds. The address for all Interested Trustees and all officers
of the Fund is 60 State Street, Boston, Massachusetts 02109.
The Fund's statement of additional information provides more detailed
information regarding the Fund's Trustees and is available upon request, without
charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Fund are available without charge,
upon request, by calling our toll free number (1-800-225-6292). Information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is publicly available to shareowners
at www.pioneerfunds.com and on the SEC's web site at http://www.sec.gov.
41
Pioneer Growth Leaders Fund
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation During Other Directorships
Name and Age With the Fund and Term of Office Past Five Years Held by this Trustee
John F. Cogan, Jr. (79)* Chairman of the Trustee since 2003. Deputy Chairman and a Director of Chairman and
Board, Trustee Serves until Pioneer Global Asset Management Director of ICI
and President successor trustee S.p.A. ("PGAM"); Non-Executive Mutual Insurance
is elected or Chairman and a Director of Pioneer Company; Director of
earlier retirement Investment Management USA Inc. Harbor Global
or removal. ("PIM-USA"); Chairman and a Company, Ltd.
Director of Pioneer; Director of
Pioneer Alternative Investment
Management Limited (Dublin);
President and a Director of Pioneer
Alternative Investment Management
(Bermuda) Limited and affiliated
funds; Director of PIOGLOBAL Real
Estate Investment Fund (Russia);
Director of Nano-C, Inc. (since
2003); Director of Cole Investment
Corporation (since 2004); Director
of Fiduciary Counseling, Inc.;
President and Director of Pioneer
Funds Distributor, Inc. ("PFD");
President of all of the Pioneer
Funds; and Of Counsel, Wilmer
Cutler Pickering Hale and Dorr LLP
(counsel to PIM-USA and the Pioneer
Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (53)** Trustee and Trustee since 2003. President and Chief Executive None
Executive Serves until Officer, PIM-USA since May 2003
Vice President successor trustee (Director since January 2001);
is elected or President and Director of Pioneer
earlier retirement since May 2003; Chairman and
or removal. Director of Pioneer Investment
Management Shareholder Services,
Inc. ("PIMSS") since May 2003;
Executive Vice President of all of
the Pioneer Funds since June 2003;
Executive Vice President and Chief
Operating Officer of PIM-USA,
November 2000 to May 2003.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
42
Pioneer Growth Leaders Fund
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation During Other Directorships
Name, Age and Address With the Fund and Term of Office Past Five Years Held by this Trustee
David R. Bock **(62) Trustee Trustee since 2005. Senior Vice President and Chief Director of The
3050 K. Street NW, Serves until Financial Officer, I-trax, Inc. Enterprise Social
Washington, DC 20007 successor trustee (publicly traded health care Investment Company
is elected or services company) (2001 - present); (privately-held
earlier retirement Managing Partner, Federal City affordable housing
or removal. Capital Advisors (boutique merchant finance company);
bank) (2002 to 2004); Executive Director of New York
Vice President and Chief Financial Mortgage Trust
Officer, Pedestal Inc. (publicly traded
(internet-based mortgage trading mortgage REIT).
company) (2000 - 2002).
**Mr. Bock became a Trustee of the Fund on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (57) Trustee Trustee since 2003. President, Bush International Director of Brady
3509 Woodbine Street, Serves until (international financial Corporation
Chevy Chase, MD 20815 successor or trustee advisory firm). (industrial
is elected or identification and
earlier retirement specialty coated
or removal. material products
manufacturer),
Mortgage Guaranty
Insurance
Corporation and
Briggs & Stratton,
Inc. (engine
manufacturer).
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham (58) Trustee Trustee since 2003. Founding Director, The Winthrop None
1001 Sherbrooke Street Serves until Group, Inc. (consulting firm);
West, Montreal, Quebec, successor trustee Desautels, Faculty of Management,
Canada H3A 1G5 is elected or McGill University.
earlier retirement
or removal.
- ------------------------------------------------------------------------------------------------------------------------------------
43
Pioneer Growth Leaders Fund
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation During Other Directorships
Name, Age and Address With the Fund and Term of Office Past Five Years Held by this Trustee
Marguerite A. Piret (57) Trustee Trustee since 2003. President and Chief Executive Director of New
One Boston Place, Serves until Officer, Newbury, Piret & Company, America High Income
28th Floor, successor trustee Inc. (investment banking firm). Fund, Inc.
Boston, MA 02108 is elected (closed-end
or earlier investment company)
retirement or
removal.
- ------------------------------------------------------------------------------------------------------------------------------------
Steven K. West (77) Trustee Trustee since 2003. Senior Counsel, Sullivan & Director, The Swiss
125 Broad Street, Serves until Cromwell (law firm). Helvetia Fund, Inc.
New York, NY 10004 successor trustee (closed-end investment
is elected or company) and
earlier retirement AMVESCAP PLC.
or removal. (investment managers).
- ------------------------------------------------------------------------------------------------------------------------------------
John Winthrop (69) Trustee Trustee since President, John Winthrop & Co., None
One North Adgers Wharf, 2003. Serves until Inc. (private investment firm).
Charleston, SC 29401 successor trustee is
elected or earlier
retirement or
removal.
- ------------------------------------------------------------------------------------------------------------------------------------
FUND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
Dorothy E. Bourassa (58) Secretary Since 2003. Secretary of PIM-USA; Senior Vice None
Serves at the President - Legal of Pioneer; and
discretion of the Secretary/Clerk of most of
Board. PIM-USA's subsidiaries; Secretary
of all of the Pioneer Funds since
September 2003 (Assistant Secretary
from November 2000 to September
2003).
- ------------------------------------------------------------------------------------------------------------------------------------
44
Pioneer Growth Leaders Fund
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation During Other Directorships
Name and Age With the Fund and Term of Office Past Five Years Held by this Officer
Christopher J. Kelley (41) Assistant Since 2003. Assistant Vice President and Senior None
Secretary Serves at the Counsel of Pioneer since July 2002;
discretion of the Vice President and Senior Counsel
Board. of BISYS Fund Services, Inc. (April
2001 to June 2002); Senior Vice
President and Deputy General
Counsel of Funds Distributor, Inc.
(July 2000 to April 2001; and
Assistant Secretary of all Pioneer
Funds since September 2003.
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Phelan (48) Assistant Since 2003. Partner, Wilmer Cutler Pickering None
Secretary Serves at the Hale and Dorr LLP; Assistant
discretion of the Secretary of all Pioneer Funds
Board. since September 2003.
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (60) Treasurer Since 2003. Vice President - Fund Accounting, None
Serves at the Administration and Custody Services
discretion of the of Pioneer; and Treasurer of all of
Board. the Pioneer Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (46) Assistant Since November, Deputy Treasurer of Pioneer since None
Treasurer 2004. Serves at the 2004; Treasurer and Senior Vice
discretion of the President, CDC IXIS Asset
Board. Management Services from 2002 to
2003; Assistant Treasurer and Vice
President, MFS Investment
Management from 1997 to 2002); and
Assistant Treasurer of all of the
Pioneer Funds since November 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (40) Assistant Since 2003. Assistant Vice President - Fund None
Treasurer Serves at the Accounting, Administration and
discretion of the Custody Services of Pioneer; and
Board. Assistant Treasurer of all of the
Pioneer Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
45
Pioneer Growth Leaders Fund
- ------------------------------------------------------------------------------------------------------------------------------------
FUND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation During Other Directorships
Name and Age With the Fund and Term of Office Past Five Years Held by this Officer
Gary Sullivan (47) Assistant Since 2003. Fund Accounting Manager - Fund None
Treasurer Serves at the Accounting, Administration and
discretion of the Custody Services of Pioneer; and
Board. Assistant Treasurer of all of the
Pioneer Funds since May 2002.
- ------------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan (32) Assistant Since 2003. Fund Administration Manager - Fund None
Treasurer Serves at the Accounting, Administration and
discretion of the Custody Services since June 2003;
Board. Assistant Vice President - Mutual
Fund Operations of State Street
Corporation from June 2002 to June
2003 (formerly Deutsche Bank Asset
Management); Pioneer Fund
Accounting, Administration and
Custody Services (Fund Accounting
Manager from August 1999 to May
2002); and Assistant Treasurer of
all Pioneer Funds since September
2003.
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin (38) Chief Since October, 2004. Chief Compliance Officer of Pioneer None
Compliance Serves at the (Director of Compliance and Senior
Officer discretion of the Counsel from November 2000 to
Board. September 2004); and Chief
Compliance Officer of all of the
Pioneer Funds since 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Fund's investment adviser, provides investment
management and financial services to mutual funds, institutional and other
clients.
46
- --------------------------------------------------------------------------------
This page for your notes.
47
- --------------------------------------------------------------------------------
This page for your notes.
48
- --------------------------------------------------------------------------------
This page for your notes.
49
- --------------------------------------------------------------------------------
This page for your notes.
50
- --------------------------------------------------------------------------------
This page for your notes.
51
- --------------------------------------------------------------------------------
This page for your notes.
52
- --------------------------------------------------------------------------------
HOW TO CONTACT PIONEER
- --------------------------------------------------------------------------------
Call us for:
Account Information, including existing accounts,
new accounts, prospectuses, applications
and service forms 1-800-225-6292
FactFone(SM) for automated fund yields, prices,
account information and transactions 1-800-225-4321
Retirement plans information 1-800-622-0176
Telecommunications Device for the Deaf (TDD) 1-800-225-1997
Write to us:
PIMSS, Inc.
P.O. Box 55014
Boston, Massachusetts 02205-5014
Our toll-free fax 1-800-225-4240
Our internet e-mail address ask.pioneer@pioneerinvest.com
(for general questions about Pioneer only)
Visit our web site: www.pioneerfunds.com
Before investing consider the Fund's investment objectives, risks, charges and
expenses. Contact your advisor or Pioneer Investments for a prospectus
containing this information. Read it carefully.
The Fund files a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
web site at http://www.sec.gov. The filed form may also be viewed and copied at
the Commission's Public Reference Room in Washington, D.C. Information regarding
the operations of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
- --------------------------------------------------------------------------------
PIONEER
-----------------------
GROWTH
OPPORTUNITIES
FUND
Annual
Report
12/31/05
[LOGO] PIONEER
Investments(R)
Table of Contents
- --------------------------------------------------------------------------------
Letter to Shareowners 1
Portfolio Summary 2
Prices and Distributions 3
Performance Update 4
Comparing Ongoing Fund Expenses 9
Portfolio Management Discussion 11
Schedule of Investments 15
Financial Statements 25
Notes to Financial Statements 34
Report of Independent Registered Public Accounting Firm 43
Factors Considered by the Independent Trustees in Approving
the Management Contract 44
Trustees, Officers and Service Providers 49
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
LETTER TO SHAREOWNERS 12/31/05
- --------------------------------------------------------------------------------
Dear Shareowner,
- --------------------------------------------------------------------------------
As 2005 came to a close, U.S. investors looked back on a year of major
challenges, though without much change in the market indices. The war in Iraq
continued, oil prices soared, then dropped, while short-term interest rates
ratcheted steadily higher and intermediate and long-term rates stayed about the
same. Natural disasters also threatened economic expansion. Still, the economy
moved forward as corporate earnings grew. The hope of a growing economy was not
reflected by the small gains or losses in the major U.S. market indices. Among
capitalization ranges, midcap issues made the most headway. Bond prices held
firm and yields remained low, perhaps a sign that the Federal Reserve Board's
interest rate hikes would temper the inflationary pressures induced by a growing
economy.
Among the nagging issues facing the U.S. economy in 2006 is the potential impact
of high energy prices on consumer spending and corporate profits. Also unknown
at this time is whether the Federal Reserve Board will continue to raise
interest rates under its new chairman, Ben Bernanke, who stated his top priority
will be to maintain continuity.
Rising interest rates and improving business conditions made U.S. holdings more
attractive to foreign investors, helping to strengthen the dollar versus the
euro and other key currencies. Investors in many foreign markets enjoyed stellar
returns. Double-digit gains were widespread in Europe, Asia and Latin America.
Even the long-dormant Japanese economy began to stir, while emerging markets,
especially those rich in natural resources, fed global economic growth.
The disparity of returns among countries and sectors underscores the importance
for investors to maintain a well-diversified portfolio. We believe this may be a
good time for investors to review their holdings with their advisor and
determine if they reflect the wide range of opportunities that exist across many
asset classes, as last year's results make clear.
Investing for income with Pioneer
Adding one or more of Pioneer's income-oriented funds to your investment program
may help improve your portfolio's overall balance. As a premier provider of
fixed-income investments, Pioneer offers you a broad selection of actively
managed bond funds to help meet a variety of investment needs. Pioneer also
offers income-oriented equity funds, each managed using a value-oriented, total
return investment philosophy that seeks enhanced return potential and lower
volatility through active diversification. Your financial advisor can help you
select among Pioneer's fixed-income choices.
Respectfully,
/s/ Osbert M. Hood
Osbert M. Hood
President
Pioneer Investment Management, Inc.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Before investing consider the fund's investment objectives, risks, charges and
expenses. Contact your advisor or Pioneer Investments for a prospectus
containing this information. Read it carefully.
1
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY 12/31/05
- --------------------------------------------------------------------------------
Portfolio Diversification
- --------------------------------------------------------------------------------
(As a percentage of total investment portfolio)
[The following data was represented as a pie chart in the printed material]
U.S. Common Stocks 86.3%
Temporary Cash Investments 11.7%
Exchange Traded Funds 1.8%
Warrants 0.2%
Sector Distribution
- --------------------------------------------------------------------------------
(As a percentage of total equity holdings)
[The following data was represented as a pie chart in the printed material]
Information Technology 27.0%
Health Care 22.4%
Consumer Discretionary 13.6%
Industrials 11.9%
Financials 10.8%
Energy 8.5%
Materials 2.9%
Consumer Staples 2.3%
Utilities 0.6%
10 Largest Holdings
- --------------------------------------------------------------------------------
(As a percentage of total equity holdings)*
1. Rare Hospitality International, Inc. 1.67%
2. Micros Systems, Inc. 1.63
3. Central Garden & Pet Co. 1.62
4. Grey Wolf, Inc. 1.58
5. Hologic, Inc. 1.58
6. Cubist Pharmaceuticals, Inc. 1.55
7. Forest Oil Corp. 1.52
8. Stage Stores, Inc. 1.51
9. Connetics Corp. 1.49
10. Palomar Medical Technologies 1.47
*This list excludes temporary cash and derivative instruments. The portfolio is
actively managed, and current holdings may be different.
2
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
Net Asset Value Per Share
- --------------------------------------------------------------------------------
Class 12/31/05 12/31/04
- ------------ ---------- ---------
A $31.16 $29.80
B $28.94 $27.94
C $29.01 $27.94
Investor $31.80 $30.31
12/31/05 9/23/05
---------- ---------
Y $31.19 $29.80
Distributions Per Share
- --------------------------------------------------------------------------------
1/1/05 - 12/31/05
-----------------
Net
Investment Short-Term Long-Term
Class Income Capital Gains Capital Gains
- ------------ ------------ --------------- --------------
A $ - $ - $ -
B $ - $ - $ -
C $ - $ - $ -
Investor $ - $ - $ -
9/23/05 - 12/31/05
------------------
Y $ - $ - $ -
- --------------------------------------------------------------------------------
INDEX DEFINITIONS
- --------------------------------------------------------------------------------
The Russell 2000 Growth Index measures the performance of U.S. small-cap growth
stocks. Index returns are calculated monthly, assume reinvestment of dividends
and, unlike Fund returns, do not reflect any fees, charges or expenses. You
cannot invest directly in an index.
The index defined here pertains to the Value of $10,000 Investment charts on
pages 4-8.
3
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS A SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Growth Opportunities Fund at public offering price,
compared to that of the Russell 2000 Growth Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
Net Asset Public
Value Offering
Period (NAV) Price (POP)
Life-of-Class
(9/30/96) 9.89% 9.22%
5 Years 7.05 5.80
1 Year 4.56 -1.45
- --------------------------------------------------------------------------------
[The following data was represented as a mountain chart in the printed material]
Value of a $10,000 Investment
Pioneer Russell
Growth 2000
Opportunities Growth
Fund Index
9/96 9,425 10,000
12/97 15,742 11,324
12/99 16,844 16,404
12/01 19,565 11,550
12/03 17,693 11,965
12/05 22,613 14,245
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
NAV results represent the percent change in net asset value per share. Returns
would have been lower had sales charges been reflected. POP returns reflect
deduction of maximum 5.75% sales charge. All results are historical and assume
the reinvestment of dividends and capital gains. Other share classes are
available for which performance and expenses will differ.
The performance of each class of the Fund is the performance of the predecessor
fund's Class A, Class B and Class C shares, which has been restated to reflect
differences in any applicable sales charges (but not differences in expenses).
This adjustment has the effect of reducing the previously reported performance
of predecessor fund. Pioneer Growth Opportunities Fund was created through the
reorganization of predecessor Safeco funds on December 10, 2004. If all the
expenses of the Pioneer fund were reflected, the performance would be lower.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds and can be rescinded at any time. See the
prospectus and financial statements for complete details.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
4
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS B SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Growth Opportunities Fund, compared to that of the
Russell 2000 Growth Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
If If
Period Held Redeemed
Life-of-Class
(9/30/96) 9.04% 9.04%
5 Years 6.20 6.20
1 Year 3.58 -0.42
- --------------------------------------------------------------------------------
[The following data was represented as a mountain chart in the printed material]
Value of a $10,000 Investment
Pioneer Russell
Growth 2000
Opportunities Growth
Fund Index
9/96 10,000 10,000
12/97 16,528 11,324
12/99 17,363 16,404
12/01 19,902 11,550
12/03 17,733 11,965
12/05 22,264 14,245
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
"If Held" results represent the percent change in net asset value per share.
Returns would have been lower had sales charges been reflected. "If Redeemed"
returns reflect the deduction of applicable contingent deferred sales charge
(CDSC). Class B shares reflect the deduction of the maximum applicable
contingent deferred sales charge (CDSC). The maximum CDSC is 4.0% and declines
over five years.
All results are historical and assume the reinvestment of dividends and capital
gains. Other share classes are available for which performance and expenses will
differ.
The performance of each class of the Fund is the performance of the predecessor
fund's Class A, Class B and Class C shares, which has been restated to reflect
differences in any applicable sales charges (but not differences in expenses).
If all the expenses of the Pioneer fund were reflected, the performance would be
lower. This adjustment has the effect of reducing the previously reported
performance of predecessor fund. Pioneer Growth Opportunities Fund was created
through the reorganization of predecessor Safeco funds on December 10, 2004.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds and can be rescinded at any time. See the
prospectus and financial statements for complete details.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
5
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS C SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Growth Opportunities Fund, compared to that of the
Russell 2000 Growth Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
If If
Period Held Redeemed
Life-of-Class
(9/30/96) 9.06% 9.06%
5 Years 6.26 6.26
1 Year 3.83 3.83
- --------------------------------------------------------------------------------
[The following data was represented as a mountain chart in the printed material]
Value of a $10,000 Investment
Pioneer Russell
Growth 2000
Opportunities Growth
Fund Index
9/96 10,000 10,000
12/97 16,528 11,324
12/99 17,363 16,404
12/01 19,887 11,550
12/03 17,733 11,965
12/05 22,318 14,245
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
Class C shares held for less than one year are also subject to a 1% contingent
deferred sales charge (CDSC). The performance of Class C shares does not reflect
the 1% front-end sales charge in effect prior to February 1, 2004. If you paid a
1% sales charge, your returns would be lower than those shown above. "If Held"
results represent the percent change in net asset value per share. Returns would
have been lower had sales charges been reflected. All results are historical and
assume the reinvestment of dividends and capital gains. Other share classes are
available for which performance and expenses will differ.
The performance of each class of the Fund is the performance of the predecessor
fund's Class A, Class B and Class C shares, which has been restated to reflect
differences in any applicable sales charges (but not differences in expenses).
This adjustment has the effect of reducing the previously reported performance
of predecessor fund. Pioneer Growth Opportunities Fund was created through the
reorganization of predecessor Safeco funds on December 10, 2004. If all the
expenses of the Pioneer fund were reflected, the performance would be lower.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds and can be rescinded at any time. See the
prospectus and financial statements for complete details.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
6
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 INVESTOR CLASS SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Growth Opportunities Fund, compared to that of the
Russell 2000 Growth Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
If If
Period Held Redeemed
10 Years 10.42% 10.42%
5 Years 7.33 7.33
1 Year 4.92 4.92
- --------------------------------------------------------------------------------
[The following data was represented as a mountain chart in the printed material]
Value of a $10,000 Investment
Pioneer Russell
Growth 2000
Opportunities Growth
Fund Index
12/95 10,000 10,000
12/97 18,431 12,567
12/99 19,744 18,203
12/01 23,091 12,817
12/03 20,973 13,277
12/05 26,946 15,807
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
Certain Pioneer funds (the "Funds") issued Investor Class shares in connection
with the reorganization of Safeco mutual funds. The Funds are not offering
additional Investor Class shares except in connection with the reinvestment of
dividends on the Funds' outstanding Investor Class shares. All Investor Class
shares of the Funds, whenever issued, convert to Class A shares of their
respective Funds on December 10, 2006. Investor Class shares are not subject to
sales charges.
The performance of each class of the Fund is the performance of the predecessor
fund's Class A, Class B and Class C shares, which has been restated to reflect
differences in any applicable sales charges (but not differences in expenses).
This adjustment has the effect of reducing the previously reported performance
of predecessor fund. Pioneer Growth Opportunities Fund was created through the
reorganization of predecessor Safeco funds on December 10, 2004. If all the
expenses of the Pioneer fund were reflected, the performance would be lower.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds and can be rescinded at any time. See the
prospectus and financial statements for complete details.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
7
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS Y SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Growth Opportunities Fund, compared to that of the
Russell 2000 Growth Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2005)
If If
Period Held Redeemed
Life-of-Class
(9/30/96) 9.90% 9.90%
5 Years 7.08 7.08
1 Year 4.66 4.66
- --------------------------------------------------------------------------------
[The following data was represented as a mountain chart in the printed material]
Value of a $10,000 Investment
Pioneer Russell
Growth 2000
Opportunities Growth
Fund Index
9/96 10,000 10,000
12/97 16,659 11,324
12/99 17,825 16,404
12/01 20,705 11,550
12/03 18,724 11,965
12/05 23,954 14,245
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
Performance for periods prior to the inception of Y shares reflects the NAV
performance of the Fund's A shares. The performance does not reflect differences
in expenses, including the Rule 12b-1 fees applicable to A shares. Since fees
for A shares are generally higher than those of Y shares, the performance shown
for Y shares prior to their inception would have been higher.
The performance of each class of the Fund is the performance of the predecessor
fund's Class A, Class B and Class C shares, which has been restated to reflect
differences in any applicable sales charges (but not differences in expenses).
This adjustment has the effect of reducing the previously reported performance
of predecessor fund. Pioneer Growth Opportunities Fund was created through the
reorganization of predecessor Safeco funds on December 10, 2004. If all the
expenses of the Pioneer fund were reflected, the performance would be lower.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds and can be rescinded at any time. See the
prospectus and financial statements for complete details.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
8
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
COMPARING ONGOING FUND EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Fund, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Fund expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds. The example is based on an investment
of $1,000 at the beginning of the Fund's latest six-month period and held
throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Growth Opportunities Fund
Based on actual returns from July 1, 2005 through December 31, 2005.
Investor
Share Class A B C Class Y
- -----------------------------------------------------------------------------------------------------
Beginning Account Value $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
On 7/1/05
Ending Account Value $1,061.95 $1,055.86 $1,057.55 $1,063.56 $1,046.60
On 12/31/05
Expenses Paid $ 6.55 $ 12.28 $ 10.48 $ 4.68 $ 2.19
During Period*
* Expenses are equal to the Fund's annualized expense ratio of 1.25%, 2.36%,
2.02%, 0.90% and 0.77% for Class A, Class B, Class C, Investor Class and
Class Y shares, respectively, multiplied by the average account value over
the period, multiplied by 184/365 (to reflect the one-half year period).
9
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
COMPARING ONGOING FUND EXPENSES (continued)
- --------------------------------------------------------------------------------
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
Expenses Paid on a $1,000 Investment in Pioneer Growth Opportunities Fund
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2005 through December 31, 2005.
Investor
Share Class A B C Class Y
- -----------------------------------------------------------------------------------------------------
Beginning Account Value $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
On 7/1/05
Ending Account Value $1,018.85 $1,013.26 $1,015.02 $1,011.23 $1,011.56
On 12/31/05
Expenses Paid $ 6.41 $ 12.03 $ 10.26 $ 2.48 $ 2.15
During Period*
* Expenses are equal to the Fund's annualized expense ratio of 1.25%, 2.36%,
2.02%, 0.90% and 0.77% for Class A, Class B, Class C, Investor Class and
Class Y shares, respectively, multiplied by the average account value over
the period, multiplied by 184/365 (to reflect the one-half year period).
10
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05
- --------------------------------------------------------------------------------
Class A shares of Pioneer Growth Opportunities Fund produced a total return of
4.56% at net asset value during the twelve-month period ended December 31, 2005,
outpacing the return of 4.15% for the Fund's benchmark, the Russell 2000 Growth
Index. The Fund underperformed the 5.66% average return of the 523 funds in the
Fund's Lipper Small-Cap Growth category.
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
In the following interview, Michael Rega and Diego Franzin, members of the
Pioneer Growth Opportunities Fund team, discuss the factors that influenced
performance during the 12-month period ended December 31, 2005.
Q: How would you characterize the investment backdrop in 2005?
A: The headline market indices moved higher in 2005, masking underlying
investor nervousness about the direction of economic growth, energy prices
and Federal Reserve policy. This disconnect was reflected in the widely
divergent returns of the underlying industry sectors. Energy stocks were
the top performers by a wide margin, as the prices of oil and gas climbed
steadily for most of the year before exploding higher in the wake of the
September hurricanes. An investor who was underweight in this area would
have had a very difficult time making up the performance shortfall. On the
other end of the spectrum, the environment was much more challenging for
stocks in the biotechnology, banking and - in the second half of the year -
homebuilding sectors.
In this environment, the Fund was well-served by our disciplined and
largely sector-neutral approach. We strive to keep the portfolio's sector
weightings within three to four percentage points of the sector weightings
in the Russell 2000 Growth benchmark, which means that the majority of the
Fund's performance will be the result of our rigorous individual stock
selection process. This was the case in 2005, and we are pleased to report
that our process worked well: the Fund's holdings outperformed the
11
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05 (continued)
- --------------------------------------------------------------------------------
corresponding holdings in the benchmark index in seven of the ten major
market sectors.
Q: What elements of the Fund's positioning helped performance?
A: Several of the Fund's top performers provide an illustration of our
investment process at work. To review, we use a quantitative screen to
identify stocks that are potential buy candidates, and then employ the
research of Pioneer's small-cap stock analysts to confirm whether these
stocks are indeed attractive on a fundamental basis. We think that this
methodology provides a broad, multifaceted view of the stocks we consider
for addition to the portfolio.
This approach supported our investment in Station Casinos, which delivered
a gain of over 20% in 2005. Station is a casino operator in Las Vegas that
caters to the local market rather than vacationers. As such, it is more
sensitive to the city's rapid population growth than it is to broader
trends in travel or the city's position in the increasingly competitive
market for gambling dollars. We continue to like the company's prospects,
believing it has an attractive portfolio of land development rights in
areas that we believe are likely to benefit from continued population
growth. In health care, performance was helped by the Fund's holdings in
Cubist Pharmaceuticals, which benefited from faster-than-expected sales for
Cubicin, a drug that has proven very effective in fighting staph
infections; and American Healthways, which strives to keep health plans'
costs down by helping patients to manage their diseases better. We cited
American Healthways as a contributor in the June semiannual report to
shareholders, and it continued to provide stellar performance through the
second half of the year. We also added value in the technology sector
through a position in SanDisk, whose stock gained over 100% as demand for
its flash memory chips - used in cell phones and Apple's iPod - soared. And
in the materials industry, the Fund was helped by its holding in Florida
Rock Industries, a provider of building materials in the Southeast that
benefited not only from Florida's rapidly growing population, but also from
the need for post-hurricane rebuilding.
All of these stocks ranked highly in our screens, and were then affirmed as
being good holds through the work of our fundamental analysts. There is
more to managing money than just the decision to buy, of course - it is
also necessary to know when to sell. Here, our investment process once
again paid off. In the first half of the year, we were able to identify two
homebuilding stocks that
12
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
were held in the Fund - Standard Pacific, and Meritage Homes - as no longer
having an attractive risk/reward profile. We eliminated both from the
portfolio, and as a result missed the bulk of their second half downturns.
Q: What were some detractors from performance?
A: In the semiannual report, we talked about two poor-performing holdings in
Puerto Rican banks - Doral Financial and W. Holding. The stocks, declined
sharply in the first quarter when Doral restated its earnings results,
causing W. Holding to fall in sympathy. We quickly sold out of the position
in Doral, but we maintained a position in W. Holding on the belief that the
company, which we see as the most well managed of the Puerto Rican banks,
is attractively valued following its poor performance of the past year.
Our decisions regarding the specialty retailer Aeropostale also detracted
from Fund performance. Although the stock performed well after our initial
purchase, it ultimately faltered due to its failure to deliver a compelling
product mix. Nu Skin Enterprises was another notable detractor. We believed
the company, which makes health and beauty products, would be helped by its
push into the rapidly-growing Chinese market. Its profit growth came in
below expectations, however, and we elected to remove it from the
portfolio.
Q: Do you have any closing thoughts for investors?
A: A number of important issues will likely affect market performance in the
year ahead. The strength of the U.S. consumer, the effect of higher
production costs on corporations' profit margins, and the likely direction
of Fed policy are all factors that we will be watching closely. In what we
see as being a potentially risky environment, we will continue to look for
growth, but we will also be very conscious of valuations in order to help
manage downside risk.
Believing the Fund's outperformance of the past year, while modest, helps
validate the effectiveness of our invesment approach, we remain committed
to our bottom-up, research-based discipline.
13
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05 (continued)
- --------------------------------------------------------------------------------
Investments in small companies may offer the potential for higher returns,
but are also subject to greater short-term price fluctuations than larger,
more established companies.
Investing in foreign and/or emerging markets securities involves risks
relating to interest rates, currency exchange rates, economic, and
political conditions. At times, the Fund's investments may represent
industries or industry sectors that are interrelated or have common risks,
making it more susceptible to any economic, political, or regulatory
developments or other risks affecting those industries and sectors.
14
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 95.7%
Energy - 8.3%
Oil & Gas Drilling - 2.9%
1,388,000 Grey Wolf Inc.* (b) $ 10,729,240
302,900 Pride International, Inc* 9,314,175
------------
$ 20,043,415
------------
Oil & Gas Equipment & Services - 1.0%
106,400 Hornbeck Offshore Services* $ 3,479,280
173,500 Superior Energy Services, Inc.* 3,652,175
------------
$ 7,131,455
------------
Oil & Gas Exploration & Production - 4.4%
240,500 Energy Partners, Ltd.* $ 5,240,495
225,900 Forest Oil Corp.* 10,294,263
162,400 Newfield Exploration Co.* 8,131,368
143,000 Stone Energy Corp.* 6,510,790
------------
$ 30,176,916
------------
Total Energy $ 57,351,786
------------
Materials - 2.9%
Aluminum - 0.7%
178,100 Century Aluminum Co.* $ 4,668,001
------------
Construction Materials - 1.1%
95,100 Florida Rock Industries, Inc. $ 4,665,606
53,900 Texas Industries, Inc. 2,686,376
------------
$ 7,351,982
------------
Fertilizers & Agricultural Chemicals - 0.7%
114,600 The Scotts Miracle-Gro Co. $ 5,184,504
------------
Specialty Chemicals - 0.4%
530,000 Omnova Solutions, Inc.* $ 2,544,000
------------
Total Materials $ 19,748,487
------------
The accompanying notes are an integral part of these financial statements. 15
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
Shares Value
Capital Goods - 6.5%
Aerospace & Defense - 1.3%
102,600 DRS Technologies, Inc. $ 5,275,692
90,000 Hexcel Corp.* 1,624,500
83,500 Moog, Inc.* 2,369,730
------------
$ 9,269,922
------------
Construction & Farm Machinery & Heavy Trucks - 1.6%
88,400 Terex Corp.* $ 5,250,960
219,500 Wabtec Corp. 5,904,550
------------
$ 11,155,510
------------
Electrical Component & Equipment - 1.0%
1,112,700 Power-One, Inc.* $ 6,698,454
------------
Industrial Conglomerates - 0.3%
186,400 Tredegar Corp. $ 2,402,696
------------
Industrial Machinery - 1.5%
189,900 Crane Co. $ 6,697,773
105,900 Pentair, Inc. 3,655,668
------------
$ 10,353,441
------------
Trading Companies & Distributors - 0.8%
157,100 Applied Industrial Technologies, Inc. $ 5,292,699
------------
Total Capital Goods $ 45,172,722
------------
Commercial Services & Supplies - 2.1%
Commercial Printing - 0.5%
97,650 R.R. Donnelly & Sons Co. $ 3,340,607
------------
Human Resource & Employment Services - 1.6%
187,500 Labor Ready, Inc.* $ 3,903,750
183,300 Monster Worldwide, Inc.* 7,482,306
------------
$ 11,386,056
------------
Total Commercial Services & Supplies $ 14,726,663
------------
Transportation - 3.0%
Airlines - 0.5%
99,200 Alaska Air Group, Inc* $ 3,543,424
------------
16 The accompanying notes are an integral part of these financial statements.
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Trucking - 2.5%
242,000 Heartland Express, Inc. $ 4,910,180
225,700 Laidlaw International, Inc. 5,243,011
268,287 Old Dominion Freight Line, Inc* 7,238,383
------------
$ 17,391,574
------------
Total Transportation $ 20,934,998
------------
Consumer Durables & Apparel - 2.5%
Apparel, Accessories & Luxury Goods - 0.2%
44,600 Phillips-Van Heusen $ 1,445,040
------------
Footwear - 2.3%
591,100 Skechers U.S.A.* $ 9,055,652
310,700 Wolverine World Wide, Inc. 6,978,322
------------
$ 16,033,974
------------
Total Consumer Durables & Apparel $ 17,479,014
------------
Consumer Services - 6.1%
Casinos & Gaming - 2.2%
297,400 Scientific Games Corp* $ 8,113,072
100,600 Station Casinos, Inc 6,820,680
------------
$ 14,933,752
------------
Leisure Facilities - 0.4%
92,500 Vail Resorts, Inc.* $ 3,055,275
------------
Restaurants - 2.8%
134,000 Papa John's International, Inc.* $ 7,947,540
369,700 Rare Hospitality International, Inc.* 11,235,183
------------
$ 19,182,723
------------
Specialized Consumer Services - 0.7%
175,700 Jackson Hewitt Tax Service, Inc. $ 4,868,647
------------
Total Consumer Services $ 42,040,397
------------
Media - 1.7%
Advertising - 0.8%
145,500 Arbitron, Inc. $ 5,526,090
------------
Publishing - 0.9%
274,200 Interactive Data Corp. $ 6,227,082
------------
Total Media $ 11,753,172
------------
The accompanying notes are an integral part of these financial statements. 17
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
Shares Value
Retailing - 3.0%
Apparel Retail - 3.0%
124,100 Guess?, Inc.* $ 4,417,960
351,900 Stein Mart, Inc. 6,386,985
344,850 Stage Stores, Inc. 10,269,633
------------
$ 21,074,578
------------
Total Retailing $ 21,074,578
------------
Food & Drug Retailing - 0.6%
Food Retail - 0.6%
174,300 Casey's General Stores, Inc. $ 4,322,640
------------
Total Food & Drug Retailing $ 4,322,640
------------
Household & Personal Products - 1.6%
Household Products - 1.6%
238,400 Central Garden & Pet Co.* $ 10,952,096
------------
Total Household & Personal Products $ 10,952,096
------------
Health Care Equipment & Services - 14.0%
Health Care Equipment - 5.6%
265,100 Cytyc Corp.* $ 7,483,773
282,400 Hologic, Inc.* 10,708,608
283,500 Palomar Medical Technologies*(b) 9,933,840
187,400 Symmetry Medical, Inc.* 3,633,686
289,600 Steris Corp. 7,245,792
------------
$ 39,005,699
------------
Health Care Facilities - 0.4%
95,500 Kindred Healthcare, Inc.* $ 2,460,080
------------
Health Care Services - 5.0%
176,100 American Healthways, Inc.* $ 7,968,525
75,800 Cerner Corp.*(b) 6,890,978
376,500 Merge Technologies, Inc.*(b) 9,427,560
276,400 Per Se Technologies, Inc.* 6,456,704
221,000 The Trizetto Group, Inc.* 3,754,790
------------
$ 34,498,557
------------
18 The accompanying notes are an integral part of these financial statements.
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Health Care Supplies - 3.0%
181,700 Haemonetics Corp.* $ 8,877,862
396,200 Merit Medical Systems, Inc.* 4,809,868
206,225 PolyMedica Corp. 6,902,351
------------
$ 20,590,081
------------
Total Health Care Equipment & Services $ 96,554,417
------------
Pharmaceuticals & Biotechnology - 7.7%
Biotechnology - 4.5%
493,600 Cubist Pharmaceuticals, Inc.* $ 10,489,000
275,700 CV Therapeutics, Inc*(b) 6,818,061
414,373 Serologicals Corp.*(b) 8,179,723
203,500 Vertex Pharmaceuticals, Inc.* 5,630,845
------------
$ 31,117,629
------------
Pharmaceuticals - 3.2%
700,600 Connetics Corp.* $ 10,123,670
187,000 Medicis Pharmaceutical Corp. (b) 5,993,350
347,600 Salix Pharmaceuticals, Ltd.* 6,110,808
------------
$ 22,227,828
------------
Total Pharmaceuticals & Biotechnology $ 53,345,457
------------
Banks - 2.4%
Regional Banks - 0.9%
369,747 Fulton Financial Corp. (b) $ 6,507,547
------------
Thrifts & Mortgage Finance - 1.5%
276,500 Franklin Bank Corp.* $ 4,974,235
641,061 W Holding Co., Inc. (b) 5,275,932
------------
$ 10,250,167
------------
Total Banks $ 16,757,714
------------
Diversified Financials - 2.0%
Asset Management & Custody Banks - 1.0%
332,900 Waddell & Reed Financial, Inc.* $ 6,980,913
------------
Consumer Finance - 1.0%
247,200 Asta Funding, Inc. (b) $ 6,758,448
------------
Total Diversified Financials $ 13,739,361
------------
The accompanying notes are an integral part of these financial statements. 19
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
Shares Value
Insurance - 2.5%
Life & Health Insurance - 0.2%
112,500 American Equity Investment Life Holding* $ 1,468,125
------------
Property & Casualty Insurance - 2.3%
172,100 Ohio Casualty Corp. $ 4,873,872
124,100 ProAssurance Corp.* 6,036,224
6,000 Safety Insurance Group 242,220
87,600 Selective Insurance Group, Inc. 4,651,560
------------
$ 15,803,876
------------
Total Insurance $ 17,272,001
------------
Real Estate - 1.7%
Real Estate Management & Development - 0.5%
269,200 Deerfield Triarc Capital Corp. $ 3,688,040
------------
Real Estate Investment Trusts - 1.2%
59,300 Alexandria Real Estate Equities, Inc. $ 4,773,650
320,800 Annaly Mortgage Management, Inc. (b) 3,509,552
------------
$ 8,283,202
------------
Total Real Estate $ 11,971,242
------------
Software & Services - 12.4%
Application Software - 5.3%
147,000 Ansys, Inc.* $ 6,275,430
204,075 Bottomline Technologies, Inc.* 2,248,907
305,600 Jack Henry & Associates, Inc. 5,830,848
72,400 Net 1 UEPS Technologies, Inc.* 2,088,740
1,139,400 Parametric Technology Co.* 6,950,340
564,800 Plato Learning, Inc.* 4,484,512
593,700 Sonic Solutions* 8,970,807
------------
$ 36,849,584
------------
Data Processing & Outsourced Services - 0.2%
90,800 The BISYS Group, Inc.* $ 1,272,108
------------
Internet Software & Services - 2.2%
72,400 J2 Global Communications, Inc.*(b) $ 3,094,376
326,800 HouseValues, Inc.*(b) 4,258,204
123,000 Websense, Inc.* 8,073,720
------------
$ 15,426,300
------------
20 The accompanying notes are an integral part of these financial statements.
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
IT Consulting & Other Services - 2.1%
63,600 CACI International, Inc.* $ 3,649,368
815,208 Ciber, Inc.* 5,380,373
369,800 Perot Systems Corp* 5,228,972
------------
$ 14,258,713
------------
Systems Software - 2.6%
228,356 Micros Systems, Inc.* $ 11,034,162
118,000 Macrovision Corp.* 1,974,140
172,300 Progress Software Corp.* 4,889,874
------------
$ 17,898,176
------------
Total Software & Services $ 85,704,881
------------
Technology Hardware & Equipment - 10.6%
Communications Equipment - 4.9%
528,900 Arris Group, Inc.* $ 5,008,683
282,200 CommScope, Inc.* 5,680,686
545,000 Foundry Networks, Inc.* 7,526,450
471,300 NETGEAR, Inc.* 9,072,525
581,800 Packeteer, Inc.* 4,520,586
225,800 Symmetricom, Inc.* 1,912,526
------------
$ 33,721,456
------------
Computer Hardware - 1.5%
119,900 Avid Technology, Inc.* $ 6,565,724
74,600 Intergraph Corp.* 3,715,826
------------
$ 10,281,550
------------
Computer Storage & Peripherals - 1.3%
322,600 Emulex Corp.* $ 6,384,254
85,600 Intermec, Inc.* 2,893,280
------------
$ 9,277,534
------------
Electronic Equipment & Instruments - 2.2%
552,700 Aeroflex, Inc.* $ 5,941,525
190,200 Paxar Corp* 3,733,626
197,200 Tektronix, Inc. 5,563,012
------------
$ 15,238,163
------------
The accompanying notes are an integral part of these financial statements. 21
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
Shares Value
Technology Distributors - 0.7%
280,800 Agilysys, Inc. $ 5,116,176
------------
Total Technology Hardware & Equipment $ 73,634,879
------------
Semiconductors - 3.4%
Semiconductor Equipment - 1.6%
540,800 Entegris, Inc.* $ 5,094,336
185,700 MKS Instruments, Inc.* 3,322,173
190,400 Photronics, Inc.* 2,867,424
------------
$ 11,283,933
------------
Semiconductors - 1.8%
103,800 DSP Group, Inc.* $ 2,601,228
868,000 SGC Holding Corp.* 4,800,040
257,500 Semtech Corp* 4,701,950
------------
$ 12,103,218
------------
Total Semiconductors $ 23,387,151
------------
Utilities - 0.7%
Independent Power Producer & Energy Traders - 0.7%
130,300 Black Hills Corp. $ 4,509,684
------------
Total Utilities $ 4,509,684
------------
TOTAL COMMON STOCKS
(Cost $542,844,569) $662,433,340
------------
EXCHANGE TRADED FUNDS - 2.0%
Diversified Financial Services - 2.0%
54,300 iShares Russell 2000 Value (b) $ 3,584,343
72,700 iShares Russell 2000 Growth (b) 5,062,101
43,400 iShares Russell 2000 Small Cap Growth (b) 5,046,118
------------
TOTAL EXCHANGE TRADED FUNDS $ 13,692,562
------------
(Cost $10,501,705) $ 13,692,562
------------
22 The accompanying notes are an integral part of these financial statements.
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
RIGHTS/WARRANTS - 0.3%
Commercial Services & Supplies - 0.0%
Diversified Commercial Services - 0.0%
74,330 NCO Group Warrants Expiration, 9/28/06* $ -
------------
Total Commercial Services & Supplies $ -
------------
Health Care Equipment & Services - 0.0%
Health Care Facilities - 0.0%
260,000 Lifepoint Warrants Expiration, 4/1/07* $ -
------------
156,000 Lifepoint Warrants Expiration, 7/21/07* -
------------
$ -
------------
Health Care Supplies - 0.0%
172,200 SpectRx Inc Warrants Expiration, 6/4/06* $ -
------------
Total Health Care Equipment & Services $ -
------------
Pharmaceuticals & Biotechnology - 0.3%
Biotechnology - 0.0%
450,000 Photomedex Warrants Expiration, 6/13/07* $ -
------------
Pharmaceuticals - 0.3%
217,500 Nastech Warrants Expiration, 3/22/06* $ 1,823,193
------------
Total Pharmaceuticals & Biotechnology $ 1,823,193
------------
TOTAL RIGHTS/WARRANTS
(Cost $43,215) $ 1,823,193
------------
Principal
Amount
TEMPORARY CASH INVESTMENTS - 12.9%
Repurchase Agreement - 1.3%
$9,000,000 UBS Warburg, Inc., dated 12/30/05,
repurchase price of $9,000,000 plus accrued
interest on 1/3/06 collateralized by $9,382,000
U.S. Treasury Bill, 4.36%, 6/29/06 $ 9,000,000
------------
The accompanying notes are an integral part of these financial statements. 23
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
Shares Value
Security Lending Collateral - 11.6%
80,400,288 Securities Lending Investment Fund, 4.24% $ 80,400,288
------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $89,400,288) $ 89,400,288
------------
TOTAL INVESTMENT IN SECURITIES - 110.9%
(Cost $642,789,777) (a) $767,349,383
------------
OTHER ASSETS AND LIABILITIES - (10.9)% $(75,787,245)
------------
TOTAL NET ASSETS - 100.0% $691,562,138
============
* Non-income producing security
(a) At December 31, 2005, the net unrealized gain on investments based on cost
for federal income tax purposes of $642,854,123 was as follows:
Aggregate gross unrealized gain for all investments
in which there is an excess of value over tax cost $143,693,283
Aggregate gross unrealized loss for all investments
in which there is an excess of tax cost over value (19,198,023)
-----------
Net unrealized gain $124,495,260
============
(b) At December 31, 2005, the following securities were out on loan:
Market
Shares Security Value
277,140 Annaly Mortgage Management, Inc. $ 3,031,912
214,820 Asta Funding, Inc. 5,873,179
237,410 CV Therapeutics, Inc* 5,871,149
71,610 Cerner Corp.* 6,510,065
55,249 Fulton Financial Corp. 972,382
129,505 Grey Wolf Inc.* 1,001,074
310,315 HouseValues, Inc.* 4,046,508
49,035 iShares Russell 2000 Value (ETF) 3,232,878
69,065 iShares Russell 2000 Growth (ETF) 4,811,068
41,230 iShares Russell 2000 Small Cap Growth (ETF) 4,785,566
68,563 J2 Global Communications, Inc.* 2,930,383
185,070 Medicis Pharmaceutical Corp. 5,931,494
279,712 Merge Technologies, Inc.* 7,003,988
84,879 Palomar Medical Technologies* 2,974,160
262,580 Per Se Technologies, Inc. 6,133,869
361,340 Serologicals Corp* 7,132,852
609,008 W Holding Co., Inc. 5,012,136
-----------
Total $77,254,663
===========
Purchases and sales of securities (excluding temporary cash investments) for the
year ended December 31, 2005 aggregated $440,985,888 and $549,434,698,
respectively.
24 The accompanying notes are an integral part of these financial statements.
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/05
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities (including securities loaned of
$77,254,663) (cost $642,789,777) $767,349,383
Cash 1,858,120
Receivables -
Investment securities sold 9,366,125
Fund shares sold 162,282
Dividends, interest and foreign taxes withheld 331,543
Other 11,467
------------
Total assets $779,078,920
------------
LIABILITIES:
Payables -
Investment securities purchased $ 6,331,387
Fund shares repurchased 556,264
Upon return of securities loaned 80,400,288
Due to affiliates 101,645
Accrued expenses 127,198
------------
Total liabilities $ 87,516,782
------------
NET ASSETS:
Paid-in capital $578,701,175
Accumulated net realized loss on investments (11,698,643)
Net unrealized gain on investments 124,559,606
------------
Total net assets $691,562,138
============
NET ASSET VALUE PER SHARE:
(Unlimited number of shares authorized)
Class A (based on $53,000,110/1,700,902 shares) $ 31.16
============
Class B (based on $3,502,907/121,040 shares) $ 28.94
============
Class C (based on $887,193/30,581 shares) $ 29.01
============
Investor Class (based on $418,416,488/13,156,283 shares) $ 31.80
============
Class Y (based on $215,755,440/6,917,719 shares) $ 31.19
============
MAXIMUM OFFERING PRICE:
Class A ($31.16 [divided by] 94.25%) $ 33.06
============
The accompanying notes are an integral part of these financial statements. 25
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/05
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $21,624) $3,217,891
Interest 345,671
Income from securities loaned, net 179,763
----------
Total investment income $ 3,743,325
-------------
EXPENSES:
Management fees $3,475,846
Transfer agent fees and expenses
Class A 113,766
Class B 7,270
Class C 1,072
Investor Class 774,767
Class Y 27,034
Distribution fees
Class A 80,285
Class B 11,381
Class C 3,629
Administrative reimbursements 111,677
Custodian fees 38,892
Registration fees 103,406
Professional fees 48,749
Printing expense 61,814
Fees and expenses of nonaffiliated trustees 11,673
Miscellaneous 9,205
----------
Total expenses $ 4,880,466
Less fees paid indirectly (16,691)
-------------
Net expenses $ 4,863,775
-------------
Net investment loss $ (1,120,450)
-------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments (including realized gain
from affiliates of $5,852,036) $ 149,730,921
-------------
Change in net unrealized loss on investments $(122,771,520)
-------------
Net gain on investments $ 26,959,401
-------------
Net increase in net assets resulting from operations $ 25,838,951
=============
26 The accompanying notes are an integral part of these financial statements.
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/05 and 12/31/04, respectively
Year Ended Year Ended
12/31/05 12/31/04
FROM OPERATIONS:
Net investment loss $ (1,120,450) $ (1,739,240)
Net realized gain on investments 149,730,921 10,723,430
Change in net unrealized gain (loss) on investments (122,771,520) 94,970,174
-------------- --------------
Net increase in net assets resulting
from operations $ 25,838,951 $ 103,954,364
-------------- --------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 54,335,475 $ 89,900,479
Cost of shares repurchased (162,450,415) (202,924,667)
Shares issued in reorganization 256,854,511 -
Redemption Fees - 21,952
-------------- --------------
Net increase (decrease) in net assets resulting
from Fund share transactions $ 148,739,571 $ (113,002,236)
-------------- --------------
Net increase (decrease) in net assets $ 174,578,522 $ (9,047,872)
NET ASSETS:
Beginning of year $ 516,983,616 $ 526,031,488
-------------- --------------
End of year (including accumulated net investment
loss of $0 and $0, respectively) $ 691,562,138 $ 516,983,616
============== ==============
The accompanying notes are an integral part of these financial statements. 27
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (continued)
- --------------------------------------------------------------------------------
CLASS A '05 Shares '05 Amount '04 Shares '04 Amount
Shares sold 1,028,258 $ 30,304,645 1,625,735 $ 44,781,937
Shares issued in
reorganization 276,936 8,441,014 - -
Less shares repurchased (383,761) (11,269,406) (588,800) (15,344,859)
Shares transferred in
reorganization - - (1,138,308) (32,894,246)
--------- ------------- ---------- --------------
Net increase (decrease) 921,433 $ 27,476,253 (101,373) $ (3,457,168)
========= ============= ========== ==============
CLASS B
Shares sold 45,107 $ 1,252,495 28,766 $ 698,430
Shares issued in
reorganization 83,163 2,361,828 - -
Less shares repurchased (7,599) (215,349) (257,660) (6,201,757)
Shares transferred in
reorganization - - (253,517) (6,875,815)
--------- ------------- ---------- --------------
Net increase (decrease) 120,671 $ 3,398,974 (482,411) $ (12,379,142)
========= ============= ========== ==============
CLASS C
Shares sold 34,354 $ 959,848 1,540 $ 39,648
Less shares repurchased (4,142) (116,851) (416) (10,812)
Shares transferred in
reorganization - - (9,326) (252,937)
--------- ------------- ---------- --------------
Net increase (decrease) 30,212 $ 842,997 (8,202) $ (224,101)
========= ============= ========== ==============
INVESTOR CLASS
Shares sold - $ - 1,698,081 $ 44,380,464
Less shares repurchased (3,131,386) (93,250,360) (6,699,387) (181,367,239)
Shares transferred in
reorganization - - 1,360,781 40,022,998
---------- ------------- ---------- --------------
Net decrease (3,131,386) $ (93,250,360) (3,640,525) $ (96,963,777)
========= ============= ========== ==============
CLASS Y
Shares sold 721,265 $ 21,818,487 - -
Shares issued in
reorganization 8,072,561 246,051,669 - -
Less shares repurchased (1,876,107) (57,598,449) - -
---------- ------------- ---------- --------------
Net increase 6,917,719 $ 210,271,707 - -
========= ============= ========== ==============
28 The accompanying notes are an integral part of these financial statements.
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/05 12/31/04(a) 12/31/03 12/31/02 12/31/01
CLASS A
Net asset value, beginning of period $ 29.80 $ 24.38 $ 16.97 $ 26.96 $ 22.16
------- -------- ------- -------- -------
Net increase (decrease) from investment operations:
Net investment loss $ (0.12) $ (0.14)(b) $ (0.16) $ (0.24) $ (0.20)
Net realized and unrealized gain (loss)
on investments 1.48 5.56 7.56 (9.77)++ 5.00
------- -------- ------- -------- -------
Net increase (decrease) from investment operations $ 1.36 $ 5.42 $ 7.40 $ (10.01) $ 4.80
------- -------- ------- -------- -------
Redemption fees $ - $ 0.00(c) $ 0.01 $ 0.02 $ 0.00(c)
Net increase (decrease) in net asset value $ 1.36 $ 5.42 $ 7.41 $ (9.99) $ 4.80
------- -------- ------- -------- -------
Net asset value, end of period $ 31.16 $ 29.80 $ 24.38 $ 16.97 $ 26.96
======= ======== ======= ======== =======
Total return* 4.56% 22.23% 43.67% (37.05)% 21.66%
Ratio of net expenses to average net assets+ 1.26% 1.31% 1.33% 1.33% 1.31%
Ratio of net investment loss to average net assets+ (0.56)% (0.55)% (0.70)% (1.17)% (1.00)%
Portfolio turnover rate 83% 17% 46% 37% 65%
Net assets, end of period (in thousands) $53,000 $ 23,225 $21,475 $ 19,024 $33,877
Ratios with no waiver of management fees and
assumption of expenses by PIM and no reduction
for fees paid indirectly:
Net expenses 1.26% 2.29% 2.38% 1.67% 1.36%
Net investment loss (0.56)% (1.53)% (1.75)% (1.51)% (1.05)%
Ratios with waiver of management fees and
assumption of expenses by PIM and reduction
for fees paid indirectly:
Net expenses 1.26% 1.31% 1.33% 1.33% 1.31%
Net investment loss (0.56)% (0.55)% (0.70)% (1.17)% (1.00)%
(a) Effective August 2, 2004, PIM became the sub-advisor of the Fund and
subsequently became the advisor on December 10, 2004.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.
+ Ratios with no reduction for fees paid indirectly.
++ Includes $0.10 related to investment reimbursement by affiliate.
(b) Net investment loss per share has been calculated using the average shares
method.
(c) Amount rounds to less than $0.01 cent per share.
The accompanying notes are an integral part of these financial statements.
29
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/05 12/31/04(a) 12/31/03 12/31/02 12/31/01
CLASS B
Net asset value, beginning of period $ 27.94 $ 23.05 $ 16.16 $ 25.87 $ 21.42
------- -------- ------- --------- -------
Net increase (decrease) from investment operations:
Net investment loss $ (0.16) $ (0.47)(b) $ (0.28) $ (0.39) $ (0.40)
Net realized and unrealized gain (loss)
on investments 1.16 5.36 7.16 (9.34)++ 4.85
------- -------- ------- --------- -------
Net increase (decrease) from investment operations $ 1.00 $ 4.89 $ 6.88 $ (9.73) $ 4.45
------- -------- ------- --------- -------
Redemption fees $ - $ 0.00(c) $ 0.01 $ 0.02 $ 0.00(c)
Net increase (decrease) in net asset value $ 1.00 $ 4.89 $ 6.89 $ (9.71) $ 4.45
------- -------- ------- --------- -------
Net asset value, end of period $ 28.94 $ 27.94 $ 23.05 $ 16.16 $ 25.87
======= ======== ======= ========= =======
Total return* 3.58% 21.21% 42.64% (37.53)% 20.77%
Ratio of net expenses to average net assets+ 2.37% 2.08% 2.08% 2.08% 2.06%
Ratio of net investment loss to average net assets+ (1.72)% (1.37)% (1.43)% (1.92)% (1.75)%
Portfolio turnover rate 83% 17% 46% 37% 65%
Net assets, end of period (in thousands) $ 3,503 $ 10 $11,126 $ 8,734 $14,346
Ratios with no waiver of management fees and
assumption of expenses by PIM and no reduction
for fees paid indirectly:
Net expenses 2.37% 2.33% 2.45% 2.21% 2.09%
Net investment loss (1.72)% (1.63)% (1.80)% (2.05)% (1.78)%
Ratios with waiver of management fees and
assumption of expenses by PIM and reduction
for fees paid indirectly:
Net expenses 2.37% 2.08% 2.08% 2.08% 2.06%
Net investment loss (1.72)% (1.37)% (1.43)% (1.92)% (1.75)%
(a) Effective August 2, 2004, PIM became the sub-advisor of the Fund and
subsequently became the advisor on December 10, 2004.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.
+ Ratios with no reduction for fees paid indirectly.
++ Includes $0.10 related to investment reimbursement by affiliate.
(b) Net investment loss per share has been calculated using the average shares
method.
(c) Amount rounds to less than $0.01 cent per share.
The accompanying notes are an integral part of these financial statements.
30
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/05 12/31/04(a) 12/31/03 12/31/02 12/31/01
CLASS C
Net asset value, beginning of period $ 27.94 $ 23.05 $ 16.16 $ 25.85 $ 21.40
------- -------- ------- --------- -------
Net increase (decrease) from investment operations:
Net investment loss $ (0.16) $ (0.33)(b) $ (0.29) $ (0.33) $ (0.35)
Net realized and unrealized gain (loss)
on investments 1.23 5.22 7.17 (9.38)++ 4.80
------- -------- ------- --------- -------
Net increase (decrease) from investment operations $ 1.07 $ 4.89 $ 6.88 $ (9.71) $ 4.45
------- -------- ------- --------- -------
Redemption fees $ - $ 0.00(c) $ 0.01 $ 0.02 $ 0.00(c)
Net increase (decrease) in net asset value $ 1.07 $ 4.89 $ 6.89 $ (9.69) $ 4.45
------- -------- ------- --------- -------
Net asset value, end of period $ 29.01 $ 27.94 $ 23.05 $ 16.16 $ 25.85
======= ======== ======= ========= =======
Total return* 3.83% 21.21% 42.64% (37.49)% 20.74%
Ratio of net expenses to average net assets+ 2.02% 2.08% 2.08% 2.08% 2.06%
Ratio of net investment loss to average net assets+ (1.36)% (1.35)% (1.45)% (1.93)% (1.75)%
Portfolio turnover rate 83% 17% 46% 37% 65%
Net assets, end of period (in thousands) $ 887 $ 10 $ 198 $ 161 $ 194
Ratios with no waiver management of fees and
assumption of expenses by PIM and no reduction
for fees paid indirectly:
Net expenses 2.02% 2.35% 2.48% 2.33% 2.06%
Net investment loss (1.36)% (1.62)% (1.85)% (2.18)% (1.75)%
Ratios with waiver of management fees and
assumption of expenses by PIM and reduction
for fees paid indirectly:
Net expenses 2.02% 2.08% 2.08% 2.08% 2.06%
Net investment loss (1.36)% (1.35)% (1.45)% (1.93)% (1.75)%
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.
+ Ratios with no reduction for fees paid indirectly.
++ Includes $0.10 related to investment reimbursement by affiliate.
(a) Effective August 2, 2004, PIM became the sub-advisor of the Fund and
subsequently became the advisor on December 10, 2004.
(b) Net Investment loss per shares have been calculated using the average
shares method.
(c) Amount rounds to less than $0.01 cent per share.
The accompanying notes are an integral part of these financial statements.
31
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/05 12/31/04(a) 12/31/03 12/31/02 12/31/01
INVESTOR CLASS
Net asset value, beginning of period $ 30.31 $ 24.75 $ 17.19 $ 27.25 $ 22.33
------- -------- ------- -------- -------
Net increase (decrease) from investment operations:
Net investment loss $ (0.06) $ (0.08)(b) $ (0.10) $ (0.22) $ (0.16)
Net realized and unrealized gain (loss)
on investments 1.55 5.64 7.66 (9.86)++ 5.08
------- -------- ------- -------- -------
Net increase (decrease) from investment operations $ 1.49 $ 5.56 $ 7.56 $ (10.08) $ 4.92
------- -------- ------- -------- -------
Redemption fees $ - $ 0.00(c) $ 0.00(c) $ 0.02 $ 0.00(c)
Net increase (decrease) in net asset value $ 1.49 $ 5.56 $ 7.56 $ (10.06) $ 4.92
------- -------- ------- -------- -------
Net asset value, end of period $ 31.80 $ 30.31 $ 24.75 $ 17.19 $ 27.25
======= ======== ======= ======== =======
Total return* 4.92% 22.46% 43.98% (36.92)% 22.03%
Ratio of net expenses to average net assets+ 0.90% 1.03% 1.08% 1.08% 1.03%
Ratio of net investment loss to average net assets+ (0.19)% (0.30)% (0.46)% (0.91)% (0.71)%
Portfolio turnover rate 83% 17% 46% 37% 65%
Net assets, end of period (in thousands) $418,416 $493,738 $493,232 $413,147 $829,052
Ratios with no waiver of management fees and
assumption of expenses by PIM and no reduction
for fees paid indirectly:
Net expenses 0.90% 1.03% 1.14% 1.09% 1.03%
Net investment loss (0.19)% (0.30)% (0.52)% (0.92)% (0.71)%
Ratios with waiver of management fees and
assumption of expenses by PIM and reduction
for fees paid indirectly:
Net expenses 0.90% 1.03% 1.08% 1.08% 1.03%
Net investment loss (0.19)% (0.30)% (0.46)% (0.91)% (0.71)%
(a) Effective August 2, 2004, PIM became the sub-advisor of the Fund and
subsequently became the advisor on December 10, 2004.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.
+ Ratios with no reduction for fees paid indirectly.
++ Includes $0.10 related to investment reimbursement by affiliate.
(b) Net investment loss per share has been calculated using the average shares
method.
(c) Amount rounds to less than $0.01 cent per share.
The accompanying notes are an integral part of these financial statements.
32
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
9/23/05 to
12/31/05**
CLASS Y
Net asset value, beginning of period $ 30.48
--------
Net increase (decrease) from investment operations:
Net investment loss $ (0.01)
Net realized and unrealized gain on investments 0.72
--------
Net increase from investment operations $ 0.71
--------
Redemption fees $ -
--------
Net increase in net asset value $ 0.71
--------
Net asset value, end of period $ 31.19
========
Total return* 4.66%***
Ratio of net expenses to average net assets+ 0.78%++
Ratio of net investment loss to average net assets+ (0.15)%++
Portfolio turnover rate 83%
Net assets, end of period (in thousands) $215,755
Ratios assuming reduction for fees paid indirectly:
Net expenses 0.77%++
Net investment loss (0.14)%++
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.
** Class Y shares were first publicly offered September 23, 2005.
*** Not Annualized.
+ Ratios with no reduction for fees paid indirectly.
++ Annualized.
The accompanying notes are an integral part of these financial statements. 33
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer Growth Opportunities Fund (the Fund) is one of eight portfolios
comprising Pioneer Series Trust II, a Delaware statutory trust registered under
the Investment Company Act of 1940 as a diversified, open-end management
investment company. The Fund is the successor to the Safeco Growth Opportunities
Fund. Safeco Growth Opportunities Fund transferred all of its net assets in
exchange for the Fund's Investor Class shares on December 10, 2004 pursuant to
an agreement and plan of reorganization (the "reorganization" which was approved
by the shareholders of Safeco Growth Opportunities Fund on December 8, 2004).
The Fund had no assets or liabilities prior to the reorganization. Accordingly,
the reorganization, which was a tax-free exchange, had no effect on the Fund's
operations. The investment objective of the Fund is to achieve growth of
capital.
The Trustees have authorized the issuance of five classes of shares of the Fund.
The Fund offers four classes of shares designated as Class A, Class B, Class C,
Investor Class and Class Y shares. The Fund is not offering additional Investor
Class shares except in connection with the reinvestment of dividends on the
Fund's outstanding Investor Class shares. Each class of shares represents an
interest in the same portfolio of investments of the Fund and have equal rights
to voting, redemptions, dividends and liquidations, except that each class of
shares can bear different transfer agent and distribution fees and has exclusive
voting rights with respect to the distribution plans that have been adopted by
Class A, Class B and Class C shareowners, respectively. There is no distribution
plan for Investor Class or Class Y shares.
The Fund's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the Fund
to, among other things, make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
income, expenses, and gain or loss on investments during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies followed by the Fund in the preparation of its
financial statements which, are
34
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
consistent with those policies generally accepted in the investment company
industry:
A. Security Valuation
Security transactions are recorded as of trade date. The net asset value of
the Fund is computed once daily, on each day the New York Stock Exchange
(NYSE) is open, as of the close of regular trading on the NYSE. In
computing the net asset value, securities are valued at the last sale price
on the principal exchange where they are traded. Securities that have not
traded on the date of valuation, or securities for which sale prices are
not generally reported, are valued at the mean between the last bid and
asked prices. Securities for which market quotations are not readily
available are valued at their fair values as determined by, or under the
direction of, the Board of Trustees. Trading in foreign securities is
substantially completed each day at various times prior to the close of the
NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of such times. The Fund also may use
the fair value of a security including a non-U.S. security when the closing
market price on the principal exchange where the security is traded no
longer reflects the value of the security. As of December 31, 2005, there
were no fair valued securities. Temporary cash investments are value at
amortized cost.
Dividend income is recorded on the ex-dividend date, except that certain
dividends from foreign securities where the ex-dividend date may have
passed are recorded as soon as the Fund becomes aware of the ex-dividend
data in the exercise of reasonable diligence. Interest income, including
interest on income bearing cash accounts, is recorded on the accrual basis.
Gains and losses on sales of investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes.
At times, the Fund's investments may represent industries or industry
sectors that are interrelated or have common risks, making it more
susceptible to any economic, political, or regulatory developments or other
risks affecting those industries and sectors. Information regarding the
Fund's principal risk is contained in the Fund's prospectus. Please refer
to those documents when considering the Fund's risks.
35
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
B. Foreign Currency Translation
The books and records of the Fund are maintained in U.S. dollars. Amounts
denominated in foreign currencies are translated into U.S. dollars using
current exchange rates. Net realized gains and losses on foreign currency
transactions represent, among other things, the net realized gains and
losses on foreign currency contracts, disposition of foreign currencies and
the difference between the amount of income accrued and the U.S. dollars
actually received. Further, the effects of changes in foreign currency
exchange rates on investments are not segregated in the statement of
operations from the effects of changes in market price of those securities
but are included with the net realized and unrealized gain or loss on
investments.
C. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal tax provision is required.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the sources of the Fund's distributions may be
shown in the accompanying financial statements as either from or in excess
of net investment income or net realized gain on investment transactions,
or from paid-in capital, depending on the type of book/tax differences that
may exist.
The Fund had a net capital loss carryforward of $11,634,297, of which the
following amounts will expire between 2010 and 2011 if not utilized;
$3,132,502 in 2010 and $8,501,795 in 2011.
There were no distributions paid during the years ended December 31, 2005
and December 31, 2004, respectively.
36
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following shows the components of distributable earnings on a federal
income tax basis at December 31, 2005.
- --------------------------------------------------------------------------------
2005
- --------------------------------------------------------------------------------
Capital loss carryforward $ (8,501,795)
Capital loss carryforward from AmSouth
Small Cap Fund (3,132,502)
Unrealized appreciation 124,495,260
------------
Total $112,860,963
============
- --------------------------------------------------------------------------------
The difference between book basis and tax basis unrealized appre ciation is
attributable to the tax basis adjustments on REIT holdings.
The Fund has reclassified $1,120,450 to decrease accumulated net investment
loss and $1,120,450 to decrease paid-in capital to reflect permanent
book/tax differences. The reclassification has no impact on the net asset
value of the Fund and is designed to present the Fund's capital accounts on
a tax basis.
D. Fund Shares
The Fund records sales and repurchases of its shares as of trade date.
Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the
Fund and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A.,
(UniCredito Italiano), earned $4,272 in underwriting commissions on the
sale of Class A shares during the year ended December 31, 2005.
E. Class Allocations
Distribution fees are calculated based on the average daily net asset value
attributable to Class A, Class B, Class C and Class Y shares of the Fund,
respectively (see Note 4). Investor Class shares are not subject to a
distribution plan. Shareowners of each class share all expenses and fees
paid to the transfer agent, Pioneer Investment Management Shareholder
Services, Inc. (PIMSS), for its services, which are allocated based on the
number of accounts in each class and the ratable allocation of related
out-of-pocket expenses (see Note 3). Income, common expenses and realized
and unrealized gains and losses are calculated at the Fund level and
allocated daily to each class of shares based on the respective percentage
of adjusted net assets at the beginning of the day.
37
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
Distributions to shareowners are recorded as of the ex-dividend date.
Distributions paid by the Fund with respect to each class of shares are
calculated in the same manner, at the same time, and in the same amount,
except that Class A, Class B, Class C, Investor Class and Class Y shares
can bear different transfer agent and distribution fees.
F. Security Lending
The Fund lends securities in its portfolio to certain broker-dealers or
other institutional investors, with the Fund's custodian acting as the
lending agent. When entering into a loan, the Fund receives collateral,
which is maintained by the custodian and earns income in the form of
negotiated lenders' fees. The Fund also continues to receive interest or
payments in lieu of dividends on the securities loaned. Gain or loss in the
fair value of the loaned securities that may occur during the term of the
loan will be for the account of the Fund. The loans are secured by
collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of collateral will be adjusted daily to
reflect any price fluctuation in the value of the loaned securities. The
Fund has the right under the lending agreement to recover the securities on
loan from the borrower on demand. The Fund invests cash collateral in the
Securities Lending Investment Fund, which is sponsored by Brown Brothers
Harriman & Co., the Fund's custodian.
G. Repurchase Agreements
With respect to repurchase agreements entered into by the Fund, the value
of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Fund's custodian, or subcustodians. The Fund'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.
38
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. Management Agreement
Pioneer Investment Management, Inc., (PIM), a wholly owned indirect subsidiary
of UniCredito Italiano, manages the Fund's portfolio. Management fees are
calculated daily at the annual rate of 0.65% of the Fund's average daily net
assets.
Through May 1, 2006, PIM has agreed not to impose all or a portion of its
management fee and to assume other operating expenses of the Fund to the extent
necessary to limit expenses to 1.30% of the average daily net assets
attributable to Class A; the portion of the Fund-wide expenses attributable to
Class B and Class C shares will be reduced only to the extent that such expenses
are reduced for Class A shares.
Through December 10, 2006, PIM has agreed not to impose all or a portion of its
management fee and to assume other operating expenses (excluding taxes,
commissions, interest and extraordinary expenses) of the Fund to the extent
necessary to limit Investor Class expenses to 1.05% of the average daily net
assets attributable to Investor Class 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 Fund. At December 31, 2005, $24,992 was payable to PIM
related to management fees, administrative costs and certain other services and
is included in due to affiliates.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides
substantially all transfer agent and shareholder services to the Fund at
negotiated rates. Included in due to affiliates is $75,795 in transfer agent
fees payable to PIMSS at December 31, 2005.
4. Distribution Plans
The Fund adopted a Plan of Distribution for each class of shares (Class A Plan,
Class B Plan and Class C Plan) in accordance with Rule 12b-1 of the Investment
Company Act of 1940. Pursuant to the Class A Plan, the Fund pays PFD a service
fee of up to 0.25% of the average daily net assets attributable to Class A
shares in reimbursement of its actual expenditures to finance activities
primarily intended to result in the sale of Class A shares. Pursuant to the
Class B Plan
39
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
and the Class C Plan, the Fund pays PFD 1.00% of the average daily net assets
attributable to each class of shares. The fee consists of a 0.25% service fee
and a 0.75% distribution fee paid as compensation for personal services and/or
account maintenance services or distribution services with regard to Class B and
Class C shares. Included in due to affiliates is $858 in distribution fees
payable to PFD at December 31, 2005.
In addition, redemptions of each class of shares (except Investor Class shares)
may be subject to a contingent deferred sales charge (CDSC). Effective February
1, 2004, a CDSC of 1.00% may be imposed on redemptions of certain net asset
value purchases of Class A shares within 18 months of purchase. Effective
December 1, 2004, Class B shares that are redeemed within five years of purchase
are subject to a CDSC at declining rates beginning at 4.00%, based on the lower
of cost or market value of shares being redeemed. Shares purchased prior to
December 1, 2004, remain subject to the CDSC in effect at the time those shares
were purchased. Redemptions of Class C shares within one year of purchase are
subject to a CDSC of 1.00%. Proceeds from the CDSCs are paid to PFD. For the
year ended December 31, 2005, CDSCs in the amount of $1,791 were paid to PFD.
5. Expense Offset Arrangements
The Fund has entered into certain expense offset arrangements with PIMSS
resulting in a reduction in the Fund's total expenses, due to interest earned on
cash held by PIMSS. For the year ended December 31, 2005, the Fund's expenses
were reduced by $16,691 under such arrangements.
6. Merger Information
On September 22, 2005, beneficial owners of AmSouth Small Cap Fund approved a
proposed Agreement and Plan of Reorganization that provided for the merger
listed below. This tax-free reorganization was accomplished on September 23,
2005, by exchanging all of AmSouth Small Cap Fund's net assets for Pioneer
Growth Opportunities Fund's shares, based on Pioneer Growth Opportunities Fund's
Class A, Class B, Class C and Class Y shares' ending net asset
40
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
value, respectively. The following charts show the details of the
reorganizations as of that closing date ("Closing Date"):
- -------------------------------------------------------------------------------------
Pioneer Growth AmSouth Small Pioneer Growth
Opportunities Fund Cap Fund Opportunities Fund
(Pre- (Pre- (Post-
Reorganization) Reorganization) Reorganization)
- -------------------------------------------------------------------------------------
Net Assets
Class A $ 38,238,742 $ 8,441,014 $ 46,679,756
Class B $ 703,461 $ 2,361,829 $ 3,065,290
Class C $ 619,140 $ - $ 619,140
Class Y $ - $ - $246,051,670
Investor Class $425,530,859 $ - $425,530,859
Class I $ - $246,051,670 $ -
Total Net Assets $465,092,202 $256,854,513 $721,946,715
Shares
Outstanding
Class A 1,254,694 882,427 1,531,630
Class B 24,767 261,928 107,930
Class C 21,756 - 21,756
Class Y - - 8,072,561
Investor Class 13,686,792 - 13,686,792
Class I - 25,330,306 -
Shares
Issued in
Reorganization -
Class A 276,936
Class B 83,163
Class Y 8,072,561
- -------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Unrealized Accumulated
Depreciation On Gain On
Closing Date Closing Date
- --------------------------------------------------------------------------------
AmSouth Small Cap Fund $29,577,721 $19,543,137
- --------------------------------------------------------------------------------
41
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
7. Affiliated Companies
The Fund's investment in the following security, when and if converted into
voting stock, will exceed 5% of the outstanding voting stock of the issuer and
is therefore considered to be an affiliate of the Fund for financial reporting
purposes. The following summarizes transactions with the affiliate of the Fund
as of, and for the year ended, December 31, 2005:
- -----------------------------------------------------------------------------------------------------------
Purchases Sales Realized Value of
Shares at of of Shares at loss Dividend Affiliate at
Affiliates 1/1/05 Shares Shares 12/31/05 on sales Income 12/31/05
- -----------------------------------------------------------------------------------------------------------
Harold's
Stores, Inc. * 428,813 -- 428,813 -- $ (3,598,574) $-- $ --*
- -----------------------------------------------------------------------------------------------------------
* No longer an affiliate of the Fund as of 12/31/05.
42
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Series Trust II and
Shareowners of Pioneer Growth Opportunities Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Growth Opportunities Fund, one of the
series comprising Pioneer Series Trust II (the "Trust"), as of December 31,
2005, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Trust's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Trust's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2005, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Growth Opportunities Fund of Pioneer Series Trust II at December 31,
2005, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and financial
highlights for each of the five years in the period then ended, in conformity
with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 10, 2006
43
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT
- --------------------------------------------------------------------------------
The Investment Company Act of 1940 requires that both the Board of Trustees and
a majority of the Independent Trustees (collectively "the Trustees") voting
separately annually approve the Fund's management contract (the "Management
Contract"). The Trustees have determined that the terms of the Management
Contract are fair and reasonable and that renewal of the contract will enable
the Fund to receive quality investment advisory services at a cost deemed
reasonable and is in the best interests of the Fund and its shareowners. In
making such determinations, the Independent Trustees relied upon the assistance
of counsel to the Independent Trustees and counsel to the Fund.
Throughout the year, the Independent Trustees regularly met in executive session
separately from the Interested Trustees of the Fund and any officer of Pioneer
Investment Management, Inc., the Fund's adviser (the "Investment Adviser"), or
its affiliates. While the Trustees, including the Independent Trustees, act on
all major matters relating to the Fund, a significant portion of the activities
of the Board of Trustees (including certain of those described herein) is
conducted through committees, the members of which are comprised exclusively of
Independent Trustees. Such committee meetings are attended by officers of the
Fund or the Investment Adviser to the extent requested by the members of the
committee.
In evaluating the Management Contract, the Trustees conducted a review that was
specifically focused upon the renewal of the Management Contract, and relied
upon their knowledge, resulting from their meetings throughout the year, of the
Investment Adviser, its services and the Fund. Both in meetings specifically
dedicated to renewal of the Management Contract and at other meetings during the
course of the year, the Trustees, including the Independent Trustees, received
materials relating to the Investment Adviser's investment and management
services under the Management Contract. These materials included (i) information
on the investment performance of the Fund, a peer group of funds and an index,
in each case selected by the Independent Trustees for this purpose, (ii) sales
and redemption data in respect of the Fund, (iii) the general investment outlook
in the markets in which the Fund invests, (iv) arrangements in respect of the
distribution of the Fund's shares, (v) the procedures employed to determine the
value of each of the Fund's assets, (vi) the Investment Adviser's management of
the relationships with the Fund's unaffiliated service providers, (vii) the
record of compliance with the Fund's investment policies and restrictions and
with the Fund's Code of Ethics and
44
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the structure and responsibilities of the Investment Adviser's compliance
department, (viii) the nature, cost and character of non-investment management
services provided by the Investment Adviser and its affiliates and (ix) the
disclosures included in the Fund's prospectuses and reports to shareowners.
Specifically in connection with the Independent Trustees' review of the
Management Contract, the Independent Trustees requested and the Investment
Adviser provided additional information in order to evaluate the quality of the
Investment Adviser's services and the reasonableness of the fee under the
Management Contract. Among other items, this information included data or
analyses of (1) investment performance for one, three and five year periods and
life of the Fund periods for the Fund and a peer group selected by the
Independent Trustees for this purpose, (2) management and other fees incurred by
a peer group of funds selected by the Independent Trustees for this purpose, (3)
the advisory fees of comparable portfolios of other clients of the Investment
Adviser, (4) expense ratios for the Fund and a peer group of funds selected by
the Independent Trustees for this purpose, (5) the overall organization of the
Investment Adviser, (6) the Investment Adviser's financial results and
condition, including its and certain of its affiliates profitability from
services performed for the Fund, (7) transfer agency fees and administrative
reimbursements paid to the Investment Adviser or affiliates, (8) investment
management staffing, and (9) operating expenses paid to third parties. The
Trustees also reviewed information regarding the potential for each of the Fund
and the Investment Adviser to benefit from further economies of scale in the
management of the Fund in light of reasonable growth expectations for the Fund
and certain of the Fund's expenses that are not incurred as fees based on a
percentage of net assets.
The following summarizes factors considered by the Trustees in connection with
reviewing the information described above and their renewal of the Fund's
Management Contract. The Trustees did not identify any single factor as
all-important or controlling, and the summary does not detail all the matters
that were considered.
A. Ancillary Benefits to Shareowners. The Trustees considered the benefits to
shareowners of investing in a Fund that is part of a large number of
investment companies offering a variety of investment disciplines and
providing for a large variety of Fund and shareowner services.
45
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT (continued)
- --------------------------------------------------------------------------------
B. Compliance and Investment Performance. The Trustees determined that the
Investment Adviser had policies and systems reasonably designed to achieve
compliance with the Fund's investment objectives and regulatory
requirements. The Trustees also reviewed the Fund's investment performance
based upon total return, as well as the Fund's performance compared to both
the performance of a peer group and an index, in each case selected by the
Independent Trustees for this purpose. The Fund's performance, based upon
total return, was in the second quintile of the peer group for the 12
months ended June 30, 2005, the fourth quintile of the peer group for the
three years ended June 30, 2005, and the second quintile for the five years
ended June 30, 2005. (In all quintile rankings referred to throughout this
discussion first quintile is most favorable to the Fund's shareowners.
Thus, highest relative performance would be first quintile and lowest
relative expenses also would be first quintile.) The Trustees concluded
that the performance of the Fund supported the continuation of the
Management Contract.
C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the
background of members of the team responsible for the daily management of
the Fund and the Fund's investment objective and discipline. The
Independent Trustees also have had discussions with senior management of
the Investment Adviser responsible for investment operations and the senior
management of the Investment Adviser's equities group. Among other things,
the Trustees considered the number, education and experience of the
Investment Adviser's investment staff and their use of technology and
emphasis on analytics in view of the risk profile of securities in which
the Fund invests. The Trustees concluded that the Investment Adviser had
the quality and depth of personnel and the well-developed methods essential
to performing its duties under the Management Contract.
D. Nature and Quality of Other Services. The Trustees considered the nature,
quality, cost and extent of other services provided to shareowners of the
Fund, including administrative and shareowner services performed by the
Investment Adviser under the Management Contract. The Trustees also
considered the reasonableness of the arrangements for reimbursement of the
Investment Adviser's out-of-pocket costs and expenses, including overhead,
for certain administrative services that the Investment Adviser is not
46
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
required to provide under the Management Contract. The Trustees also
considered the nature and extent of the other services provided by the
Investment Adviser's affiliates under other contracts and its supervision
of third party service providers. Based on these considerations, the
Trustees concluded that the nature, quality, cost and extent of such
services are satisfactory and reliable and serve the shareowners of the
Fund well.
E. Management Fee and Expenses. The Trustees considered the Investment
Adviser's fee under the Management Contract relative to the management fees
charged by a peer group of funds selected by the Independent Trustees for
this purpose using data provided by an independent third party. The Fund's
management fee for the 12 months ended June 30, 2005 was in the first
quintile relative to the management fees paid by the other funds in that
peer group for the comparable period. The Trustees determined that the fee
under the Management Contract was reasonable and fair in light of both the
overall nature and quality of services provided by the Investment Adviser
and the fees charged by the funds in the peer group. The Trustees also
considered the Fund's expense ratio and expense ratios of a peer group of
funds selected by the Independent Trustees for this purpose. The Fund's
expense ratio for the 12 months ended June 30, 2004 was in the second
quintile of the applicable peer group for the most recent fiscal year of
the peer group for the comparable period. The Trustees concluded that the
Fund's overall expense ratio was reasonable compared to that of comparable
funds.
F. Profitability. The Trustees considered the level of the Investment
Adviser's profits with respect to the management of the Pioneer Funds,
including details with respect to the Fund. This consideration included a
review of the Investment Adviser's methodology in allocating certain of its
costs to the management of each Fund. The Trustees also considered the
financial results realized by the Investment Adviser in connection with the
operation of the Fund. They further considered the profits realized by the
Investment Adviser and its affiliates from non-fund businesses that may
benefit from or be related to the Fund's business. The Trustees considered
the Investment Adviser's profit margins in comparison with the limited
available industry data. The Trustees concluded that the Investment
Adviser's profits from management of the Pioneer Funds, including the
financial results derived from the Fund, bear a
47
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT (continued)
- --------------------------------------------------------------------------------
reasonable relationship to the services rendered and are fair for the
management of the Fund.
G. Economies of Scale. The Trustees considered the economies of scale with
respect to the management of the Fund, whether the Fund had appropriately
benefited from any economies of scale, and whether there was potential for
realization of any further economies of scale. The Trustees concluded that,
given the fact that the management fee would remain in the first quartile
of its peer group at reasonably anticipated assets levels, a break point in
the management fee was not necessary. The Trustees will continue to
evaluate annually the appropriateness of break points.
H. Other Benefits to the Investment Adviser. The Trustees also considered the
character and amount of fees paid by the Fund, other than under the
Management Contract, for services provided by the Investment Adviser and
affiliates, including fees for services such as shareowner services. The
Trustees also considered the receipt of sales loads and payments under Rule
12b-1 plans in respect of the Pioneer Funds (including the Fund), and
benefits to the Investment Adviser from the use of "soft" commission
dollars to pay for research services. The Trustees further considered the
revenues and profitability of the Investment Adviser's businesses other
than the fund business, including the Investment Adviser's institutional
investment advisory business. The Trustees considered the intangible
benefits that accrue to the Investment Adviser and its affiliates by virtue
of its relationship with the Fund and the Pioneer Funds as a group. The
Trustees concluded that all these types of benefits accruing to the
Investment Adviser were reasonable in the context of the overall
relationship between the Investment Adviser and the Fund.
Conclusion. The Trustees, in light of the Investment Adviser's overall
performance, considered it appropriate to continue to retain the management
services of the Investment Adviser. Based on their evaluation of all material
factors deemed relevant and the advice of independent counsel, the Trustees
concluded that the Management Contract with the Fund is fair and reasonable and
voted to approve the continuation of the Management Contract for another year.
48
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser
Pioneer Investment Management, Inc.
Custodian
Brown Brothers Harriman & Co.
Independent Registered Public Accounting Firm
Ernst & Young LLP
Principal Underwriter
Pioneer Funds Distributor, Inc.
Legal Counsel
Wilmer Cutler Pickering Hale and Dorr LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
Trustees and Officers
The Fund's Board of Trustees provides broad supervision over the Fund's affairs.
The officers of the Fund are responsible for the Fund's operations. The Fund's
Trustees and officers are listed below, together with their principal
occupations during the past five years. Trustees who are interested persons of
the Fund within the meaning of the Investment Company Act of 1940 are referred
to as Interested Trustees. Trustees who are not interested persons of the Fund
are referred to as Independent Trustees. Each of the Trustees serves as a
Trustee of each of the 91 U.S. registered investment portfolios for which
Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser
(the "Pioneer Funds"). The address for all Interested Trustees and all officers
of the Fund is 60 State Street, Boston, Massachusetts 02109.
The Fund's statement of additional information provides more detailed
information regarding the Fund's Trustees and is available upon request, without
charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Fund are available without charge,
upon request, by calling our toll free number (1-800-225-6292). Information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is publicly available to shareowners
at www.pioneerfunds.com and on the SEC's web site at http://www.sec.gov.
49
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation Other Directorships
Name and Age With the Fund and Term of Office During Past Five Years Held by this Trustee
John F. Cogan, Jr. (79)* Chairman of the Trustee since 2004. Deputy Chairman and a Director of Chairman and
Board, Serves until Pioneer Global Asset Management S.p.A. Director of ICI
Trustee and President successor trustee ("PGAM"); Non-Executive Chairman and a Mutual Insurance
is elected or Director of Pioneer Investment Company; Director of
earlier retirement Management USA Inc. ("PIM-USA"); Harbor Global
or removal. Chairman and a Director of Pioneer; Company, Ltd.
Director of Pioneer Alternative
Investment Management Limited
(Dublin); President and a Director of
Pioneer Alternative Investment
Management (Bermuda) Limited and
affiliated funds; Director of
PIOGLOBAL Real Estate Investment Fund
(Russia); Director of Nano-C, Inc.
(since 2003); Director of Cole
Investment Corporation (since 2004);
Director of Fiduciary Counseling Inc.;
President and Director of Pioneer
Funds Distributor, Inc. ("PFD");
President of all of the Pioneer Funds;
and Of Counsel, Wilmer Cutler
Pickering Hale and Dorr LLP (counsel
to PIM-USA and the Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
50
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
Name, Age and Positions Held Length of Service Principal Occupation Other Directorships
Address With the Fund and Term of Office During Past Five Years Held by this Trustee
David R. Bock **(62) Trustee Trustee since 2005. Senior Vice President and Chief Director of The
3050 K. Street NW, Serves until Financial Officer, I-trax, Inc. Enterprise Social
Washington, DC 20007 successor trustee (publicly traded health care services Investment Company
is elected or company) (2001 - present); Managing (privately-held
earlier retirement Partner, Federal City Capital Advisors affordable housing
or removal. (boutique merchant bank); (2002 to finance company);
2004); Executive Vice President and Director of New York
Chief Financial Officer, Pedestal Inc. Mortgage Trust
(internet-based mortgage trading (publicly traded
company) (2000 - 2002). mortgage REIT)
**Mr. Bock became a Trustee of the Fund on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (57) Trustee Trustee since 2004. President, Bush International Director of Brady
3509 Woodbine Street, Serves until (international financial advisory Corporation
Chevy Chase, MD 20815 successor trustee firm). (industrial
is elected or identification and
earlier retirement specialty coated
or removal. material products
manufacturer),
Mortgage Guaranty
Insurance
Corporation, and
Briggs & Stratton,
Inc. (engine
manufacturer)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham (58) Trustee Trustee since 2004. Founding Director, The Winthrop Group, None
1001 Sherbrooke Street West, Serves until Inc. (consulting firm); Desautels,
Montreal, Quebec, Canada successor trustee Faculty of Management, McGill
H3A 1G5 is elected or University.
earlier retirement
or removal.
- ------------------------------------------------------------------------------------------------------------------------------------
51
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
Name, Age and Positions Held Length of Service Principal Occupation Other Directorships
Address With the Fund and Term of Office During Past Five Years Held by this Trustee
Marguerite A. Piret (57) Trustee Trustee since 2004. President and Chief Executive Officer, Director of New
One Boston Place, Serves until Newbury, Piret & Company, Inc. America High Income
28th Floor, successor trustee (investment banking firm). Fund, Inc.
Boston, MA 02108 is elected or (closed-end
earlier retirement investment company)
or removal.
- ------------------------------------------------------------------------------------------------------------------------------------
John Winthrop (69) Trustee Trustee since 2004. President, John Winthrop & Co., Inc. None
One North Adgers Wharf, Serves until (private investment firm).
Charleston, SC 29401 successor trustee
is elected or
earlier retirement
or removal.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FUND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (53) Executive Vice Since 2005. President and Chief Executive Officer, Trustee of certain
President Serves at the PIM-USA since May, 2003 (Director Pioneer Funds
discretion of since January, 2001); President and
the Board. Director of Pioneer since May, 2003;
Chairman and Director of Pioneer
Investment Management Shareholder
Services, Inc. ("PIMSS") since May,
2003; Executive Vice President of all
of Pioneer Funds since June 3, 2003;
and Executive Vice President and Chief
Operating Officer of PIM-USA, November
2000 - May 2003.
- ------------------------------------------------------------------------------------------------------------------------------------
Dorothy E. Bourassa (58) Secretary Since 2004. Secretary of PIM-USA; Senior Vice None
Serves at the President - Legal of Pioneer; and
discretion of Secretary/Clerk of most of PIM-USA's
the Board. subsidiaries; Secretary of all of the
Pioneer Funds since September 2003
(Assistant Secretary from November
2000 to September 2003).
- ------------------------------------------------------------------------------------------------------------------------------------
52
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation Other Directorships
Name and Age With the Fund and Term of Office During Past Five Years Held by this Officer
Christopher J. Kelley (41) Assistant Secretary Since 2004. Assistant Vice President and Senior None
Serves at the Counsel of Pioneer since July 2002;
discretion of Vice President and Senior Counsel of
the Board. BISYS Fund Services, Inc. (April 2001
to June 2002); Senior Vice President
and Deputy General Counsel of Funds
Distributor, Inc. (July 2000 to April
2001; Assistant Secretary of all
Pioneer Funds since September 2003.
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Phelan (48) Assistant Secretary Since 2004. Partner, Wilmer Cutler Pickering Hale None
Serves at the and Dorr LLP; Assistant Secretary of
discretion of all Pioneer Funds since September
the Board. 2003.
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (60) Treasurer Since 2004. Vice President - Fund Accounting, None
Serves at the Administration and Custody Services of
discretion of Pioneer; and Treasurer of all of the
the Board. Pioneer Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (46) Assistant Treasurer Since November, Deputy Treasurer of Pioneer since None
2004. Serves 2004; Treasurer and Senior Vice
at the discretion President, CDC IXIS Asset Management
of the Board. Services from 2002 to 2003; Assistant
Treasurer and Vice President, MFS
Investment Management from 1997 to
2002; and Assistant Treasurer of all
of the Pioneer Funds since November
2004.
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (40) Assistant Treasurer Since 2004. Assistant Vice President - Fund None
Serves at the Accounting, Administration and Custody
discretion Services of Pioneer; and Assistant
of the Board. Treasurer of all of the Pioneer Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
53
Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------
FUND OFFICERS
- --------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation Other Directorships
Name and Age With the Fund and Term of Office During Past Five Years Held by this Officer
Gary Sullivan (47) Assistant Treasurer Since 2004. Fund Accounting Manager - Fund None
Serves at the Accounting, Administration and Custody
discretion Services of Pioneer; and Assistant
of the Board. Treasurer of all of the Pioneer Funds
since May 2002.
- ------------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan (32) Assistant Treasurer Since 2004. Fund Administration Manager - Fund None
Serves at the Accounting, Administration and Custody
discretion Services since June 2003; Assistant
of the Board. Vice President - Mutual Fund
Operations of State Street Corporation
from June 2002 to June 2003 (formerly
Deutsche Bank Asset Management);
Pioneer Fund Accounting,
Administration and Custody Services
(Fund Accounting Manager from August
1999 to May 2002); Assistant Treasurer
of all Pioneer Funds since September
2003.
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin (38) Chief Compliance Since October, 2004. Chief Compliance Officer of Pioneer None
Officer Serves at the (Director of Compliance and Senior
discretion of Counsel from November 2000 to
the Board September 2004); and Chief
Compliance Officer of all of the
Pioneer Funds since 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Fund's investment adviser, provides investment
management and financial services to mutual funds, institutional and other
clients.
54
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
55
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
56
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
57
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
58
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
59
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
60
- --------------------------------------------------------------------------------
HOW TO CONTACT PIONEER
- --------------------------------------------------------------------------------
We are pleased to offer a variety of convenient ways for you to contact us for
assistance or information.
Call us for:
Account Information, including existing accounts,
new accounts, prospectuses, applications
and service forms 1-800-225-6292
FactFone(SM) for automated fund yields, prices,
account information and transactions 1-800-225-4321
Retirement plans information 1-800-622-0176
Telecommunications Device for the Deaf (TDD) 1-800-225-1997
Write to us:
PIMSS, Inc.
P.O. Box 55014
Boston, Massachusetts 02205-5014
Our toll-free fax 1-800-225-4240
Our internet e-mail address ask.pioneer@pioneerinvest.com
(for general questions about Pioneer only)
Visit our web site: www.pioneerfunds.com
Before investing consider the Fund's investment objectives, risks, charges and
expenses. Contact your advisor or Pioneer Investments for a prospectus
containing this information. Read it carefully.
The Fund files a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
web site at http://www.sec.gov. The filed form may also be viewed and copied at
the Commission's Public Reference Room in Washington, DC. Information regarding
the operations of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PIONEER
-------
TAX FREE
MONEY MARKET
FUND
Annual
Report
12/31/05
[Logo] PIONEER
Investments(R)
Table of Contents
- --------------------------------------------------------------------------------
Letter to Shareowners 1
Portfolio Summary 2
Performance Update 3
Comparing Ongoing Fund Expenses 4
Portfolio Management Discussion 6
Schedule of Investments 9
Financial Statements 14
Notes to Financial Statements 21
Report of Independent Registered Public Accounting Firm 27
Factors Considered by the Independent Trustees in Approving
the Management Contract 28
Trustees, Officers and Service Providers 34
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
LETTER TO SHAREOWNERS 12/31/05
- --------------------------------------------------------------------------------
Dear Shareowner,
- --------------------------------------------------------------------------------
As 2005 came to a close, U.S. investors looked back on a year of major
challenges, though without much change in the market indices. The war in Iraq
continued, oil prices soared, then dropped, while short-term interest rates
ratcheted steadily higher and intermediate and long-term rates stayed about the
same. Natural disasters also threatened economic expansion. Still, the economy
moved forward as corporate earnings grew. The hope of a growing economy was not
reflected by the small gains or losses in the major U.S. market indices. Among
capitalization ranges, midcap issues made the most headway. Bond prices held
firm and yields remained low, perhaps a sign that the Federal Reserve Board's
interest rate hikes would temper the inflationary pressures induced by a
growing economy.
Among the nagging issues facing the U.S. economy in 2006 is the potential
impact of high energy prices on consumer spending and corporate profits. Also
unknown at this time is whether the Federal Reserve Board will continue to
raise interest rates under its new chairman, Ben Bernanke, who stated his top
priority will be to maintain continuity.
Rising interest rates and improving business conditions made U.S. holdings more
attractive to foreign investors, helping to strengthen the dollar versus the
euro and other key currencies. Investors in many foreign markets enjoyed
stellar returns. Double-digit gains were widespread in Europe, Asia and Latin
America. Even the long-dormant Japanese economy began to stir, while emerging
markets, especially those rich in natural resources, fed global economic
growth.
The disparity of returns among countries and sectors underscores the importance
for investors to maintain a well-diversified portfolio. We believe this may be
a good time for investors to review their holdings with their advisor and
determine if they reflect the wide range of opportunities that exist across
many asset classes, as last year's results make clear.
Investing for income with Pioneer
Adding one or more of Pioneer's income-oriented funds to your investment
program may help improve your portfolio's overall balance. As a premier
provider of fixed-income investments, Pioneer offers you a broad selection of
actively managed bond funds to help meet a variety of investment needs. Pioneer
also offers income-oriented equity funds, each managed using a value-oriented,
total return investment philosophy that seeks enhanced return potential and
lower volatility through active diversification. Your financial advisor can
help you select among Pioneer's fixed-income choices.
Respectfully,
/s/Osbert M. Hood
Osbert M. Hood
President
Pioneer Investment Management, Inc.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Before investing consider the fund's investment objectives, risks, charges and
expenses. Contact your advisor or Pioneer Investments for a prospectus
containing this information. Read it carefully.
1
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY 12/31/05
- --------------------------------------------------------------------------------
Sector Distribution
- --------------------------------------------------------------------------------
(As a percentage of total investment portfolio)
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Insured Bonds 28.52%
Medical Bonds 14.57%
Housing Bonds 11.82%
General Obligation Bonds 11.33%
Education 10.80%
Revenue Bonds 10.19%
Power Bonds 4.96%
Pollution Bonds 3.37%
Water/Sewer Bonds 2.59%
Airport Bonds 1.85%
10 Largest Holdings
- --------------------------------------------------------------------------------
(As a percentage of debt holdings)*
1. New York, Series F-3, General Obligation,
Floating Rate, 2/15/13 3.26%
2. Pennsylvania Intergovernmental, Floating Rate, 6/15/22 3.26
3. Connecticut State Health and Elderly Facilities,
Floating Rate, 7/1/29 3.26
4. Municipal Electric Authority Georgia, Floating Rate, 1/1/20 3.26
5. Burke County Georgia Development, Floating Rate, 1/1/18 2.93
6. Washington State, Series 96B, General Obligation,
Floating Rate, 6/1/20 2.74
7. Elmhurst Illinois, Floating Rate, 7/1/18 2.65
8. Missouri State Health & Elderly Facilities,
Floating Rate, 11/1/20 2.28
9. Phoenix Arizona Industrial Development Multi-Family,
Floating Rate, 10/1/29 2.25
10. Broward County Florida, Floating Rate, 4/1/24 2.09
* This list excludes temporary cash and derivative instruments. Portfolio
holdings will vary for other periods.
2
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05
- --------------------------------------------------------------------------------
Share Prices
- --------------------------------------------------------------------------------
Net Asset Value per Share 12/31/05 12/31/04
Class A Shares $1.00 $1.00
Investor Class Shares $1.00 $1.00
12/31/05 9/23/05
Class Y Shares $1.00 $1.00
Distributions
- --------------------------------------------------------------------------------
Per Share Income Short-Term Long-Term
(1/1/05 - 12/31/05) Dividends Capital Gains Capital Gains
Class A Shares $0.0126 $ - $ -
Investor Class Shares $0.0167 $ - $ -
(9/23/05 - 12/31/05)
Class Y Shares $0.0054 $ - $ -
Yields
- --------------------------------------------------------------------------------
7-Day Annualized 7-Day Effective**
Class A Shares 2.38% 2.41%
Class Y Shares 2.63% 2.67%
Investor Class Shares 2.61% 2.64%
** Assumes daily compounding of dividends. The 7-day effective yield if
fees and expenses were not subsidized would be as follows: Investor Class
shares 2.62%.
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
Performance data shown represents past performance. Past performance 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.
The performance of each class of the Fund is the performance of the predecessor
fund's Investor Class, which has been restated to reflect differences in any
applicable sales charges (but not Rule 12b-1 fees or other differences in
expenses). This adjustment has the effect of reducing the previously reported
performance of predecessor fund. Pioneer Tax Free Money Market was created
through the reorganization of predecessor Safeco fund on December 8, 2004. If
all the expenses of the Pioneer fund were reflected, the performance would be
lower.
Performance does not reflect the deduction of taxes that a shareowner would pay
on Fund distributions or the redemption of Fund shares.
3
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
COMPARING ONGOING FUND EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Fund, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Fund expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds. The example is based on an investment
of $1,000 at the beginning of the Fund's latest six-month period and held
throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Tax Free Money Market Fund
Based on actual returns from July 1, 2005 through December 31, 2005.
Share Class A Investor Y
- --------------------------------------------------------------------------------
Beginning Account Value On 7/1/05 $1,000.00 $1,000.00 $1,000.00
Ending Account Value On 12/31/05 $1,007.56 $1,359.70 $1,013.20
Expenses Paid During Period* $ 3.95 $ 6.01 $ 1.54
* Expenses are equal to the Fund's annualized expense ratio of 0.78%, 0.64%
and 0.56% for Class A, Investor Class and Class Y shares, respectively,
multiplied by the average account value over the period, multiplied by
184/365 (to reflect the one-half year period).
4
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the
5% hypothetical examples that appear in the shareholder reports of the other
funds.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
Expenses Paid on a $1,000 Investment in Pioneer Tax Free Money Market Fund
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2005 through December 31, 2005.
Share Class A Investor Y
- --------------------------------------------------------------------------------
Beginning Account Value On 7/1/05 $1,000.00 $1,000.00 $1,000.00
Ending Account Value On 12/31/05 $1,021.27 $1,020.11 $1,012.16
Expenses Paid During Period* $ 3.97 $ 5.14 $ 1.54
* Expenses are equal to the Fund's annualized expense ratio of 0.78%, 0.64%
and 0.56% for Class A, Investor Class and Class Y shares, respectively,
multiplied by the average account value over the period, multiplied by
184/365 (to reflect the one-half year period).
5
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05
- --------------------------------------------------------------------------------
In the following interview, Pioneer Tax Free Money Market Fund's Portfolio
Manager David Eurkus outlines the investment environment for tax-free money
market securities during the 12-month period, Fund performance, his investment
strategy, and his outlook.
Q: How did the Fund perform during its most recent fiscal year?
A: For the 12-month period ended December 31, 2005, the Fund's Class A shares
posted a 1.28% total return at net asset value. In comparison, the Lipper
Tax-Exempt Money Market Average returned 1.76%.
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent
month-end performance results. Current performance may be lower or higher
than the performance data quoted.
The performance data quoted represents past performance, which is no
guarantee of future results. Investment return and principal value will
fluctuate, and shares, when redeemed, may be worth more or less than their
original cost.
Q: Will you describe the investing environment for tax-exempt money funds
during the time period?
A: Despite formidable headwinds, the U.S. economy continued to improve
throughout the past year. Gross Domestic Product (GDP), as evidenced by
4.3% growth for the third quarter, has expanded throughout the Federal
Reserve's current credit tightening cycle, which began in June 2004. The
Fed's most recent rate hike was in November 2005, bringing the Federal
Funds rate to 4.25%. Through the Fed's tightening cycle the economy has
withstood increased energy costs, unprecedented natural disasters, rising
budget and trade deficits, and the war in the Middle East. The surprising
resilience of the economy has mandated more action by the Fed than most
had previously forecast.
In the short-term municipal market, interest rates have risen by over 200
basis points since the beginning of 2005. During the 12-month period,
demand for tax-free money market securities continued despite the
uncertainties surrounding the domestic
and global economies. More complex political and energy-related problems
worldwide have caused many investors to adopt a more conservative posture,
particularly in light of the fact that oil prices have increased
substantially.
6
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
During the period, supply and demand for tax-exempt money-market
securities was well balanced. This is evidenced by the still significant
amount of assets being held in taxable as well as tax-free money market
funds (over $2 trillion). While investor demand is strong, there is ample
supply.
Q: What has been the strategy for the Fund over the 12-month period?
A: We continue to maintain broad diversification, both on a regional and
national basis, with AAA credits in revenue as well as general obligation
issues. Since the Fund's changeover from a SAFECO product in August 2004,
we have reduced the number of small issuers within the portfolio and
redeployed the proceeds into larger, more visible issuers. As we continue
to shift from a more regional to a more nationally focused diversification
strategy, we strongly emphasize safety of principal.
The Fund invests in floating rate securities (55% of portfolio assets as
of December 31, 2005) as well as fixed-rate instruments (45% of assets).
The interest rate of floating rate securities adjusts periodically based
on indices such as the Bond Buyer Index and the Fed Funds rate. As of
December 31, the Fund's effective maturity was 7 days. During the past 12
months, as the Fed continued to raise short-term interest rates, we
maintained a short effective maturity of approximately 7 days in order to
take advantage of rising short-term rates. Going forward, we expect 2006
to be a transition period where we think it is highly possible the Fed
will end its rate increase policy. As we perceive a peak in rates, we plan
to extend maturity toward the 30- to 45-day range to lock up as high a
yield as we can. In terms of portfolio quality, over 98% of the portfolio
is AAA-rated, with the balance rated AA.
7
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05 (continued)
- --------------------------------------------------------------------------------
Q: What is your outlook?
A: We think the U.S. economy will grow at a steady rate in 2006, though not as
robustly as the 4.3% GDP during the third quarter of 2005, subject to
policy changes by the Fed. While consumer spending has been strong, much
of it has come from an appreciation in home values rather than from
increases in consumer income.
In the coming months we will continue to monitor Fed actions, pursue a
conservative investment strategy and seek to take advantage of
opportunities for additional income as they arise.
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. Fund shares are
not federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency.
Investments in the fund are subject to possible loss due to the financial
failure of underlying securities and their inability to meet their debt
obligations. At times, the Fund's investments may represent industries or
industry sectors that are interrelated or have common risks, making it more
susceptible to any economic, political, or regulatory developments or other
risks affecting those industries and sectors.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These 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.
8
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05
- --------------------------------------------------------------------------------
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
MUNICIPAL BONDS - 101.6%
Miscellaneous - 1.0%
$1,500,000 A-1+/Aaa Colorado Health Facilities Authority Revenue,
Floating Rate, 5/15/20 $ 1,500,000
------------
Total Miscellaneous $ 1,500,000
------------
GOVERNMENT - 100.6%
Government - 12.6%
1,200,000 NR/NR District of Columbia, Floating Rate, 6/1/30 $ 1,200,000
2,160,000 AA+/Aa2 New York NY Adjustable-Sub-series B2, Floating
Rate, 8/15/20 2,160,000
5,000,000 AA+/Aa2 New York NY Ser F-3 General Obligation, Floating
Rate, 2/15/13 5,000,000
1,400,000 AAA/Aaa New York NY Sub-Series A-7 General Obligation
Floating Rate, 11/1/24 1,400,000
2,000,000 AA/Aa2 New York NY Sub-Series E2 General Obligation,
Floating Rate, 8/1/20 2,000,000
2,925,000 AAA/Aaa North Carolina State Floating Rate, 6/1/19 2,925,000
4,200,000 AA+/Aa1 Washington State Series Variable 96B General,
Floating Rate, 6/1/20 4,200,000
200,000 NR/Aaa Washington Suburban District Metropolitan District,
Floating Rate, 6/1/23 200,000
------------
$ 19,085,000
------------
Municipal Airport - 0.8%
1,165,000 AA-/Aa2 Chicago Illinois O'Hare International Airport,
Floating Rate, 1/1/15 $ 1,165,000
------------
Municipal Development - 7.1%
1,730,000 AA-/NR Alaska Industrial Development and Export
Authority, Floating Rate, 7/1/06 $ 1,730,000
1,300,000 NR/Aa2 Dickson County, Floating Rate, 11/1/12 1,300,000
2,200,000 NR/Aa2 Fulton County Georgia, Floating Rate, 7/1/26 2,200,000
2,800,000 NR/Aa2 Hillsborough County Florida, Floating Rate, 11/1/21 2,800,000
780,000 A+/NR Illinois Development Finance Authority,
Floating Rate, 6/1/17 780,000
290,000 NR/NR Montgomery County Maryland, Industrial
Development, Floating Rate, 4/1/14 290,000
840,000 NR/AA3 Montgomery County Texas Industrial Development
Corp., Floating Rate, 8/1/17 840,000
800,000 AA-/Aa1 Pima County Arizona Industrial Development
Authority, Floating Rate, 12/1/22 800,000
------------
$ 10,740,000
------------
The accompanying notes are an integral part of these financial statements. 9
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
Municipal Education - 3.8%
$3,200,000 AA/NR Broward County Florida, Floating Rate, 4/1/24 $ 3,200,000
2,500,000 NR/NR Chattanooga Tennessee Health,
Floating Rate, 1/1/23 2,500,000
------------
$ 5,700,000
------------
Muni Facilities - 6.5%
2,700,000 NR/NR Clarksville Public Building, Floating Rate, 7/1/16 $ 2,700,000
700,000 NR/Aa1 Holland Creek Metropolitan District Colorado,
Floating Rate, 6/1/41 700,000
2,685,000 AA/NR Metropolitan Government Nash/Davidson County
Tennessee, Floating Rate, 6/1/22 2,685,000
1,400,000 AA-/NR Richland Washington Golf Enterprise Revenue,
Floating Rate, 12/1/21 1,400,000
1,350,000 NR/Aaa Sevier County Tennessee Public Building Authority,
Floating Rate, 6/1/07 1,350,000
1,000,000 A-/NR Wildgrass Metropolitan District Colorado,
Floating Rate, 12/1/34 1,000,000
------------
$ 9,835,000
------------
Municipal General - 6.8%
1,000,000 AA-/NR Commerce City Colorado Northern,
Floating Rate, 12/1/31 $ 1,000,000
1,800,000 NR/Aa2 District of Columbia, Floating Rate, 6/1/25 1,800,000
1,500,000 AA-/NR NBC Metropolitan District Colorado,
Floating Rate, 12/1/30 1,500,000
1,000,000 AAA/Aaa New York State Local Government Assistance
Corp., Floating Rate, 4/1/21 1,000,000
5,000,000 AAA/Aaa Pennsylvania Intergovernmental,
Floating Rate, 6/15/22 5,000,000
------------
$ 10,300,000
------------
Municipal Higher Education - 6.1%
5,000,000 NR/NR Connecticut State Health and Elderly Facilities,
Floating Rate, 7/1/29 $ 5,000,000
1,000,000 AAA/Aaa Connecticut State Health, Floating Rate, 7/1/36 1,000,000
1,150,000 AAA/NR North Carolina State University, North Carolina,
Floating Rate, 12/15/19 1,150,000
2,000,000 AA/Aa1 Purdue University, Indianapolis University
Revenues, Floating Rate, 7/1/27 2,000,000
------------
$ 9,150,000
------------
10 The accompanying notes are an integral part of these financial statements.
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
Municipal Housing - 5.0%
$2,885,000 AAA/AAA Alaska State Housing Financial Corporation,
Floating Rate, 12/1/24 $ 2,885,000
1,100,000 NR/Aa2 Blount County Tennessee, Floating Rate, 1/1/19 1,100,000
3,000,000 AAA/Aa1 South Dakota Housing Development Authority,
Floating Rate, 5/1/32 3,000,000
590,000 NR/Aa2 Washington State Housing Finance,
Floating Rate, 7/1/11 590,000
------------
$ 7,575,000
------------
Municipal Medical - 21.4%
1,300,000 AAA/Aaa Alabama Special Care Faculties Finance Authority,
Floating Rate, 4/1/15 $ 1,300,000
1,960,000 AAA/Aaa Clark County Virginia Industry,
Floating Rate, 1/1/30 1,960,000
1,400,000 NR/NR Daphne-Villa Mercy Alabama Special Care Facilities
Financing Authority, Floating Rate, 12/1/30 1,400,000
4,065,000 AA-/Aa2 Elmhurst Illinois, Floating Rate, 7/1/18 4,065,000
2,110,000 NR/Aa1 Huron County Michigan Economic,
Floating Rate, 10/1/28 2,110,000
3,100,000 AAA/Aaa Illinois Development Finance Authority,
Floating Rate, 5/1/28 3,100,000
2,800,000 AA-/A1 Indiana Health Facilities, Floating Rate, 3/1/33 2,800,000
975,000 AA-/Aa2 Macon-Bibb County Georgia Hospital Authority,
Floating Rate, 5/1/30 975,000
1,605,000 A/NR Maryland State Health and Higher Educational
Facilities Authority Revenue,
Floating Rate, 4/1/31 1,605,000
3,500,000 NR/Aa2 Missouri State Health & Education Facilities,
Floating Rate, 11/1/20 3,500,000
2,000,000 AA/Aa3 North Carolina Medical Care Community,
Floating Rate, 6/1/15 2,000,000
2,000,000 AAA/Aaa Port City Medical Clinic Board Alabama,
Floating Rate, 2/1/25 2,000,000
2,925,000 NR/VMI1 Sarasota County Florida Public Hospital Board,
Floating Rate , 7/1/37 2,925,000
1,000,000 AAA/Aaa University Alabama Revenue,
Floating Rate, 9/1/31 1,000,000
1,600,000 AA-/Aa2 Wisconsin State Health and Educational Facilities
Authority, Floating Rate, 1/1/19 1,600,000
------------
$ 32,340,000
------------
The accompanying notes are an integral part of these financial statements. 11
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
Municipal Multiple Family Housing - 7.7%
$1,500,000 AAA/NR Alabama Housing Finance Authority Multi-family
Housing, Floating Rate, 6/15/26 $ 1,500,000
2,000,000 AA/Aa2 Alaska State Housing Finance Corp., Series B,
Floating Rate, 12/1/30 2,000,000
1,000,000 AAA/NR Cobb County Georgia Housing Multi-Family, Floating
Rate, 6/1/25 1,000,000
1,800,000 AAA/NR Louisiana Public Facilities Authority Revenue,
Floating Rate, 6/15/31 1,800,000
1,915,000 AAA/NR Orange County Florida Housing Finance
Multi-Family Revenue, Floating Rate, 6/1/25 1,915,000
3,450,000 NR/NR Phoenix Arizona Industrial Development Authority
Multi-Family Revenue, Floating Rate, 10/1/29 3,450,000
-------------
$ 11,665,000
-------------
Municipal Pollution - 11.0%
1,000,000 A+/Aa1 Apache County Arizona Industrial Development
Authority, Floating Rate, 12/15/18 $ 1,000,000
1,900,000 A/A2 Appling County Georgia Development Authority
Pollution, Floating Rate, 9/1/29 1,900,000
4,500,000 AAA/NR Burke County Georgia Development Authority
Pollution, Floating Rate, 1/1/18 4,500,000
1,400,000 AAA/Aaa Burke County Georgia Development Authority
Pollution, Floating Rate, 1/1/20 1,400,000
1,585,000 A/NR Clark County Kentucky Pollution Control Revenue,
Floating Rate, 10/15/14 1,585,000
1,300,000 AAA/Aaa Lincoln County Wyoming Pollutant Control,
Floating Rate, 11/1/14 1,300,000
2,000,000 A/A1 Mobile Alabama Industrial Development Board
Pollution Control, Floating Rate, 8/1/17 2,000,000
1,000,000 AAA/Aaa Monroe County Georgia Development Authority
Pollution, Floating Rate, 1/1/20 1,000,000
1,915,000 A/A1 Sabine River Industrial Development Authority
Texas, Floating Rate, 8/15/14 1,915,000
-------------
$ 16,600,000
-------------
Municipal Power - 4.9%
2,325,000 AA/Aaa California State Department Water and Power,
Floating Rate, 5/1/22 $ 2,325,000
5,000,000 AAA/Aaa Municipal Electric Authority Georgia Project One,
Floating Rate, 1/1/20 5,000,000
-------------
$ 7,325,000
-------------
12 The accompanying notes are an integral part of these financial statements.
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
Municipal Single Family Housing - 2.0%
$3,000,000 NR/NR Wyoming Community Development Authority,
Floating Rate, 12/1/32 $ 3,000,000
------------
Municipal Transportation - 1.1%
1,700,000 A+/Aa2 Jackson-Union Counties Illinois Regulation,
Floating Rate, 4/1/24 $ 1,700,000
------------
Municipal Water - 3.8%
2,345,000 NR/Aaa Jackson Tennessee Energy, Floating
Rate, 12/1/23 $ 2,345,000
2,900,000 AA+/Aaa Massachusetts State Water Resource Authority,
Floating Rate, 8/1/20 2,900,000
410,000 AA+/NR Oklahoma State Water Resource,
Floating Rate, 10/1/34 410,000
------------
$ 5,655,000
------------
TOTAL MUNICIPAL BONDS
(Cost $153,335,000) $153,335,000
------------
TOTAL INVESTMENTS IN SECURITIES - 101.6%
(Cost $153,335,000)(a) $153,335,000
------------
OTHER ASSETS AND LIABILITIES - 1.6% $ (2,400,000)
------------
TOTAL NET ASSETS - 100.0% $150,935,000
============
(a) At 12/31/05, cost for federal income tax purposes was $153,335,000.
NR Not rated by either S&P or Moody's.
The accompanying notes are an integral part of these financial statements. 13
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/05
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities (cost $153,335,000) $153,335,000
Receivables -
Investment securities sold 195,000
Fund shares sold 6,100
Interest and dividends 389,614
Due from Pioneer Investment Management, Inc. 51
------------
Total assets $153,925,765
------------
LIABILITIES:
Payables -
Dividends $ 199,679
Due to bank 2,719,067
Due to affiliates 7,101
Accrued expenses 64,918
------------
Total liabilities $ 2,990,765
------------
NET ASSETS:
Paid-in capital $151,123,180
Accumulated net realized loss on investments (188,180)
------------
Total net assets $150,935,000
============
NET ASSET VALUE PER SHARE:
(Unlimited number of shares authorized)
Class A (based on $31,232,365/31,223,029 shares) $ 1.00
============
Investor Class (based on $28,525,612/28,524,068 shares) $ 1.00
============
Class Y (based on $91,177,023/91,172,796 shares) $ 1.00
============
14 The accompanying notes are an integral part of these financial statements.
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/05
INVESTMENT INCOME:
Interest $1,713,870
----------
EXPENSES:
Management fees $281,763
Transfer agent fees and expenses
Class A 4,721
Class Y 1,812
Investor Class 19,764
Distribution fees
Class A 14,317
Administrative reimbursements 21,893
Custodian fees 18,535
Registration fees 92,814
Professional fees 35,759
Printing expense 30,449
Fees and expenses of nonaffiliated trustees 6,784
Miscellaneous 6,604
--------
Total expenses $ 535,215
Less management fees waived and expenses
reimbursed by Pioneer Investment Management, Inc. (90,984)
Less fees paid indirectly (388)
----------
Net expenses $ 443,843
----------
Net investment income $1,270,027
REALIZED GAIN ON INVESTMENTS
Net realized gain on investments 273
----------
Net increase in net assets resulting from operations $1,270,300
==========
The accompanying notes are an integral part of these financial statements. 15
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/05 and 12/31/04, respectively
Year Ended Year Ended
12/31/05 12/31/04
FROM OPERATIONS:
Net investment income $ 1,270,027 $ 328,405
Net realized gain on investments 273 -
------------- ------------
Net increase (decrease) in net assets resulting
from operations $ 1,270,300 $ 328,405
------------- ------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class A ($0.0126 and $0.0004
per share, respectively) $ (158,251) $ (19)
Class Y ($0.0054 and $0.0000
per share, respectively) (581,329) -
Investor Class ($0.0167 and $0.0059
per share, respectively) (530,447) (328,386)
------------- ------------
Total distributions to shareowners $ (1,270,027) $ (328,405)
------------- ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 77,615,060 $ 19,832,675
Shares issued in reorganization 130,250,307 -
Reinvestment of distributions 638,996 297,946
Cost of shares repurchased (97,401,077) (47,426,990)
------------- ------------
Net increase (decrease) in net assets resulting
from fund share transactions $111,103,286 $(27,296,369)
------------- ------------
Net increase (decrease) in net assets $111,103,559 $(27,296,369)
NET ASSETS:
Beginning of year 39,831,441 67,127,810
------------- ------------
End of year $150,935,000 $ 39,831,441
============ ============
16 The accompanying notes are an integral part of these financial statements.
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
'05 Shares '05 Amount '04 Shares '04 Amount
CLASS A (a)
Shares sold 41,433,916 $ 41,433,916 316,947 $ 316,947
Shares issued in
reorganization 27,405,007 27,405,007
Reinvestment of distributions 146,175 146,175 16 16
Less shares repurchased (38,079,032) (38,069,491)
----------- ------------- ----------- -------------
Net increase (decrease) 30,906,066 $ 30,915,607 316,963 $ 316,963
============ ============= =========== =============
INVESTOR CLASS
Shares sold - $ - 19,515,728 $ 19,515,728
Reinvestment of distributions 492,821 492,821 297,930 297,930
Less shares repurchased (11,483,231) (11,483,237) (47,426,990) (47,426,990)
----------- ------------- ----------- -------------
Net increase (decrease) (10,990,410) $ (10,990,416) (27,613,332) $ (27,613,332)
=========== ============= =========== =============
CLASS Y (b)
Shares sold 36,181,144 $ 36,181,144
Shares issued in
reorganization 102,845,300 102,845,300
Reinvestment of distributions - -
Less shares repurchased (47,853,648) (47,848,349)
----------- -------------
Net increase (decrease) 91,172,796 $ 91,178,095
=========== =============
(a) For the period from December 10, 2004 (initial issue of Class A shares)
through December 31, 2005.
(b) For the period from September 23, 2005 (initial issue of Class Y shares)
through December 31, 2005.
The accompanying notes are an integral part of these financial statements. 17
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
12/11/04 (a)
Year Ended to
12/31/05 12/31/04
CLASS A (a)
Net asset value, beginning of period $ 1.0000 $1.0000
--------- -------
Increase from investment operations:
Net investment income $ 0.0126 $0.0004
--------- -------
Distributions to shareowners:
Net investment income $ (0.0126) $(0.0004)
--------- --------
Net asset value, end of period $ 1.0000 $1.0000
========= =======
Total return* 1.28% 0.04%(b)
Ratio of net expenses to average net assets+ 0.78% 0.94%**
Ratio of net investment income to average
net assets+ 1.75% 1.38%**
Net assets, end of period (in thousands) $ 31,232 $ 317
Ratios with no waiver of management fees and
assumptions of expense by PIM and no reductions
for fees paid indirectly:
Net expenses 0.81% 1.17%**
Net investment income 1.72% 1.15%**
Ratios with waiver of management fees and
assumptions of expense by PIM and no reductions
for fees paid indirectly:
Net expenses 0.78% -**
Net investment income 1.75% -**
* 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
+ Ratio with no reduction for fees paid indirectly.
(a) Class A shares commenced operations on December 11, 2004.
(b) Not annualized.
18 The accompanying notes are an integral part of these financial statements.
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/05 12/31/04 (a) 12/31/03 12/31/02 12/31/01
INVESTOR CLASS
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.02 $ 0.01 $ 0.01 $ 0.01 $ 0.02
------- ------- ------- ------- -------
Distributions to shareowners:
Net investment income $ (0.02) $ (0.01) $ (0.01) $ (0.01) $ (0.02)
------- ------- ------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total return* 1.70% 0.59% 0.51% 0.97% 2.34%
Ratio of net expenses to average net assets+ 0.64% 0.65% 0.65% 0.75% 0.75%
Ratio of net investment income (loss) to average net assets+ 1.64% 0.57% 0.51% 0.97% 2.31%
Portfolio turnover rate
Net assets, end of period (in thousands) $28,526 $39,514 $67,128 $75,954 $76,554
Ratios with no waiver of management fees and assumptions of
expense by PIM and no reductions for fees paid indirectly:
Net expenses 0.91% 0.78% 0.74% 0.75% 0.75%
Net investment income 1.36% 0.44% 0.42% 0.97% 2.31%
Ratios with waiver of management fees and assumptions of
expense by PIM and no reductions for fees paid indirectly:
Net expenses 0.64%
Net investment income 1.64%
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, and the complete redemption of
the investment at net asset value at each end of each period.
+ Ratio with no reduction for fees paid indirectly.
(a) Effective August 2, 2004, PIM became the subadvisor of the Fund and
subsequently became the advisor on December 10, 2004.
The accompanying notes are an integral part of these financial statements.
19
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
9/23/2005 (a)
to
12/31/2005
CLASS Y
Net asset value, beginning of period $ 1.0000
--------
Increase from investment operations:
Net investment income $ 0.0054
--------
Distributions to shareowners:
Net investment income $(0.0054)
--------
Net asset value, end of period $ 1.0000
========
Total return* 0.54%
Ratio of net expenses to average net assets+ 0.56%**
Ratio of net investment loss to average net assets+ 1.96%**
Net assets, end of period (in thousands) $ 91,177
Ratios with no waiver of management fees and assumptions
of expense by PIM and no reductions for fees paid
indirectly:
Net expenses 0.56%**
Net investment income 1.96%**
Ratios with waiver of management fees and assumptions of
expense by PIM and no reductions for fees paid indirectly:
Net expenses 0.56%**
Net investment income 1.96%**
* 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. Total return is not annualized.
** Annualized
+ Ratio with no reduction for fees paid indirectly.
(a) Class Y shares were first publicly offered on September 23, 2005.
20 The accompanying notes are an integral part of these financial statements.
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer Tax Free Money Market Fund (the Fund) is a Delaware statutory trust
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The Fund, organized on December 10, 2004, is the
successor to the Safeco Tax Free Money Market Fund. Safeco Tax Free Money
Market Fund transferred all of the net assets of Class A shares in exchange for
the Fund's Investor Class shares in a one-to-one exchange ratio on December 10,
2004 pursuant to an agreement and plan of reorganization (the "reorganization"
which was approved by the shareholders of Safeco Tax Free Money Market Fund on
December 8, 2004). The Fund had no assets or liabilities prior to the
reorganization. Accordingly, the reorganization, which was a tax-free exchange,
had no effect on the Fund's operations. Class Y shares were first publicly
offered on September 23, 2005. The investment objective of the Fund is to
provide current income, preservation of capital and liquidity through
investments in high quality short-term securities. The Fund offers three
classes of shares - Class A, Investor Class and Class Y shares. Shares of each
class represent an interest in the same portfolio of investments of the Fund
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 have exclusive voting rights with respect to the distribution plans
that have been adopted by Class A, Investor Class and Class Y shareowners,
respectively.
The Fund's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Fund to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses and gains and losses on investments during the
reporting periods. Actual results could differ from those estimates.
Information concerning the Fund's principal investment risks is contained in
the Fund's prospectus(es). Please refer to those documents when considering the
Fund's risks. Investments in the Fund are subject to possible loss due to the
financial failure of underlying securities and their inability to meet their
debt obligations.
21
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
A. Security Valuation
Security transactions are recorded as of trade date. Securities are valued
at amortized cost, which approximates fair market value. Investments
purchased at a discount or premium are valued by amortizing the difference
between the original purchase price and maturity value of the issue over
the period to maturity. Interest income, including interest on income
bearing cash accounts, is recorded on the accrual basis.
B. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required.
At December 31, 2005, the Fund had a net capital loss carryforward
acquired as a result of the acquisition of Amsouth Tax-Exempt Money Market
Fund, of $188,180 of which $91,998 will expire in 2006, $74,898 will
expire in 2008, $14,681 will expire in 2010, $56 will expire in 2011, and
$6,547 will expire in 2012, if not utilized.
The tax character of current year distributions will be determined at the
end of the fiscal year. The tax character of distributions paid during the
year ended December 31, 2005 and 2004 was as follows:
- --------------------------------------------------------------------------------
2005 2004
- --------------------------------------------------------------------------------
Distributions paid from:
Tax Exempt income $1,270,027 $328,405
---------- --------
Total $1,270,027 $328,405
========== ========
- --------------------------------------------------------------------------------
The following shows components of distributable earnings on a federal income
tax basis at December 31, 2005.
- --------------------------------------------------------------------------------
2005
- --------------------------------------------------------------------------------
Capital loss carryforward (188,180)
- --------------------------------------------------------------------------------
22
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
C. Fund Shares
The Fund records sales and repurchases of its shares as of trade date. The
Fund declares as daily dividends substantially all of its net investment
income. All dividends are paid on a monthly basis. Short-term capital gain
distributions, if any, may be declared with the daily dividends.
D. Class Allocations
Distribution fees are calculated based on the average daily net asset
value attributable to Class A, Investor Class and Class Y shares of the
Fund, respectively (see Note 4). Shareowners of each class share all
expenses and fees paid to the transfer agent, Pioneer Investment
Management Shareholder Services, Inc. (PIMSS), for its services, which are
allocated based on the number of accounts in each class and the ratable
allocation of related out-of-pocket expenses (see Note 3). Income, common
expenses and realized and unrealized gains and losses are calculated at
the Fund level and allocated daily to each class of shares based on the
respective percentage of adjusted net assets at the beginning of the day.
Distributions to shareowners are recorded as of the ex-dividend date.
Distributions paid by the Fund with respect to each class of shares are
calculated in the same manner, at the same time, and in the same amount,
except that Class A, Investor Class and Class Y shares can bear different
transfer agent and distribution fees.
E. Repurchase Agreements
With respect to repurchase agreements entered into by the Fund, the value
of the underlying securities (collateral), including accrued interest
received from counterparties, and 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 Fund's custodian, or
subcustodians. The Fund'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.
23
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
2. Management Agreement
PIM, a wholly-owned indirect subsidy of UniCredito Italiano, S.p.A., manages
the Fund's portfolio. Management fees are calculated daily at the annual rate
of 0.40% of the Fund's average daily net assets.
Through the second anniversary of the closing of the "reorganization", PIM has
agreed not to impose all or a portion of its management fee and to assume other
operating expenses (excluding taxes, commissions, interest and extraordinary
expenses) of the Fund to the extent necessary to limit Investor Class expenses
to 0.65% of the average daily net assets attributable to Investor Class 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 Fund. At December 31, 2005 $3,423 was payable to PIM
related to management fees, administrative fees and certain other services and
is included in due to affiliates.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides
substantially all transfer agent and shareowner services to the Fund at
negotiated rates. Included in due to affiliates is $3,438 in transfer agent
fees payable to PIMSS at December 31, 2005.
4. Distribution and Service Plans
The Fund adopted a Plan of Distribution for Class A shares (Class A Plan) in
accordance with Rule 12b-1 of the Investment Company Act of 1940. Pursuant to
the Class A Plan, the Fund pays Pioneer Funds Distributor, Inc. (PFD), its
principal underwriter and a wholly owned indirect subsidiary of UniCredito
Italiano, a service fee of up to 0.15% of the average daily net assets
attributable to Class A shares in reimbursement of its actual expenditures to
finance activities primarily intended to result in the sale of Class A shares.
Included in due to affiliates is $240 in distribution fees payable to PFD at
December 31, 2005.
In addition, redemptions of Class A shares may be subject to a contingent
deferred sales charge (CDSC). A CDSC of 1.00% may be imposed on redemptions of
certain net asset value purchases of Class A shares within 18 months of
purchase. Proceeds from the CDSCs are paid to PFD.
24
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. Expense Offsets
The Fund has entered into certain expense offset arrangements with PIMSS
resulting in a reduction in the Fund's total expenses, due to interest earned
on cash held by PIMSS. For the year ended December 31, 2005, the Fund's
expenses were reduced by $388 under such arrangements.
6. Merger Information
On September 22, 2005, beneficial owners of AmSouth Tax-Exempt Money Market
Fund approved a proposed Agreement and Plan of Reorganization that provided for
the merger listed below. This tax-free reorganization was accomplished on
September 23, 2005, by exchanging all of AmSouth Tax-Exempt Money Market Fund's
net assets for Tax Free Money Market Fund's shares, based on Tax Free Money
Market Fund's Class A and Class Y shares' ending net asset value, respectively.
The following charts show the details of the reorganization as of that closing
date ("Closing Date"):
25
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Pioneer Tax AmSouth Tax- Pioneer Tax
Free Money Exempt Money Free Money
Market Fund Market Fund Market Fund
(Pre-Reorganization) (Pre-Reorganization) (Post-Reorganization)
- ---------------------------------------------------------------------------------------------
Net Assets
Class A 1,406,006 27,405,007 28,811,013
Class Y - 102,845,300
Investor Class 29,819,766 - 29,819,766
Class I - 102,845,300 -
Total Net Assets 31,225,772 130,250,307 161,476,079
Shares Outstanding
Class A 1,405,937 27,395,466 28,810,944
Class Y - - 102,845,300
Investor Class 29,817,950 - 29,817,950
Class I - 102,840,001 -
Shares Issued
in Reorganization
Class A 27,405,007
Class Y 102,845,300
- --------------------------------------------------------------------------------
Unrealized Accumulated
Depreciation on Gain on
Closing Date Closing Date
- --------------------------------------------------------------------------------
AmSouth Tax-Exempt Money Market Fund (188,453)
- --------------------------------------------------------------------------------
26
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Series Trust II and
Shareowners of Pioneer Tax Free Money Market Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Tax Free Money Market Fund, one of the
series comprising the Pioneer Series Trust II (the "Trust"), as of December 31,
2005, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Trust's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Trust's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2005, by correspondence
with the custodian. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Tax Free Money Market Fund of the Pioneer Series Trust II at December
31, 2005, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and
financial highlights for each of the five years in the period then ended, in
conformity with U.S. generally accepted accounting principles.
/s/Ernst & Young LLP
Boston, Massachusetts
February 10, 2006
27
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT
- --------------------------------------------------------------------------------
The Investment Company Act of 1940 requires that both the Board of Trustees and
a majority of the Independent Trustees (collectively "the Trustees") vote
separately annually to approve the Fund's management contract (the "Management
Contract"). The Trustees have determined that the terms of the Management
Contract are fair and reasonable and that renewal of the contract will enable
the Fund to receive quality investment advisory services at a cost deemed
reasonable and in the best interests of the Fund and its shareholders. In
making such determinations, the Independent Trustees relied upon the assistance
of counsel to the Independent Trustees and counsel to the Fund.
Throughout the year, the Independent Trustees regularly met in executive
session separately from the Interested Trustees of the Fund and any officer of
Pioneer Investment Management, Inc., the Fund's adviser (the "Investment
Adviser"), or its affiliates. While the Trustees, including the Independent
Trustees, act on all major matters relating to the Fund, a significant portion
of the activities of the Board of Trustees (including certain of those
described herein) is conducted through committees, the members of which are
comprised exclusively of Independent Trustees. Such committee meetings are
attended by officers of the Fund or the Investment Adviser to the extent
requested by the members of the committee.
In evaluating the Management Contract, the Trustees conducted a review that was
specifically focused upon the renewal of the Management Contract, and relied
upon their knowledge, resulting from their meetings throughout the year, of the
Investment Adviser, its services and the Fund. Both in meetings specifically
dedicated to renewal of the Management Contract and at other meetings during
the course of the year, the Trustees, including the Independent Trustees,
received materials relating to the Investment Adviser's investment and
management services under the Management Contract. These materials included (i)
information on the investment performance of the Fund, a peer group of funds
and an index, in each case selected by the Independent Trustees for this
purpose, (ii) sales and redemption data in respect to the Fund, (iii) the
general investment outlook in the markets in which the Fund invests, (iv)
arrangements in respect of the distribution of the Fund's shares, (v) the
procedures employed to determine the value of each of the Fund's assets, (vi)
the Investment Adviser's management of the relationships with the Fund's
unaffiliated service providers, (vii) the record of compliance with the Fund's
investment policies and restrictions and with the Fund's Code of Ethics
28
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
and the structure and responsibilities of the Investment Adviser's compliance
department, (viii) the nature, cost and character of non-investment management
services provided by the Investment Adviser and its affiliates and (ix) the
disclosures included in the Fund's prospectuses and reports to shareholders.
Specifically in connection with the Independent Trustees' review of the
Management Contract, the Independent Trustees requested and the Investment
Adviser provided additional information in order to evaluate the quality of the
Investment Adviser's services and the reasonableness of the fee under the
Management Contract. Among other items, this information included data or
analyses of (1) investment performance for one, three, five and ten year
periods for the Fund and a peer group selected by the Independent Trustees for
this purpose, (2) management fees incurred by a peer group of funds selected by
the Independent Trustees for this purpose, (3) the advisory fees of comparable
portfolios of other clients of the Investment Adviser, (4) expense ratios for
the Fund and a peer group of funds selected by the Independent Trustees for
this purpose, (5) the overall organization of the Investment Adviser, (6) the
Investment Adviser's financial results and condition, including its and certain
of its affiliates profitability from services performed for the Fund, (7)
transfer agency fees and administrative reimbursements paid to the Investment
Adviser or affiliates, (8) investment management staffing, and (9) operating
expenses paid to third parties. The Trustees also reviewed information
regarding the potential for the Fund and the Investment Adviser to benefit from
further economies of scale in the management of the Fund in light of break
points in the Fund's management fee and a peer group of funds selected by the
Independent Trustees for this purpose, reasonable growth expectations for the
Fund and certain of the Fund's expenses that are not incurred as fees based on
a percentage of net assets.
The following summarizes factors considered by the Trustees in connection with
reviewing the information described above and their renewal of the Fund's
Management Contract. The Trustees did not identify any single factor as
all-important or controlling, and the summary does not detail all the matters
that were considered.
A. Ancillary Benefits to Shareholders. The Trustees considered the benefits to
shareholders of investing in a Fund that is part of a large number of
investment companies offering a variety of
29
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT (continued)
- --------------------------------------------------------------------------------
investment disciplines and providing for a large variety of Fund and
shareholder services.
B. Compliance and Investment Performance. The Trustees determined that the
Investment Adviser had policies and systems reasonably designed to achieve
compliance with the Fund's investment objectives and regulatory
requirements. The Trustees also reviewed the Fund's investment performance
based upon total return and yield, as well as the Fund's performance
compared to both the performance of a peer group and an index, in each
case selected by the Independent Trustees for this purpose. The Fund's
performance, based upon total return, was in the third quintile of the
peer group for the 12 months ended June 30, 2005, the third quintile for
the three years ended June 30, 2005, the third quintile for the five years
ended June 30, 2005 and the second quintile for the ten year period ended
June 30, 2005. (In all quintile rankings referred to throughout this
discussion first quintile is most favorable to the Fund's shareholders.
Thus, highest relative performance would be first quintile and lowest
relative expenses also would be first quintile.) The Trustees considered
the yield (gross of expenses) on the Fund's Class A shares relative to the
yield (at June 30, 2005) of the Lehman One Year Municipal Bond Index. The
Trustees concluded that the performance of the Fund supported the
continuation of the Management Contract.
C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the
background of members of the team responsible for the daily management of
the Fund and the Fund's investment objective and discipline. The
Independent Trustees also have had discussions with senior management of
the Investment Adviser responsible for investment operations and the
senior management of the Investment Adviser's fixed income group. Among
other things, the Trustees considered the number, education and experience
of the Investment Adviser's investment staff and their use of technology
and emphasis on analytics in view of the risk profile of securities in
which the Fund invests. The Trustees concluded that the Investment Adviser
had the quality and depth of personnel and the well-developed methods
essential to performing its duties under the Management Contract.
D. Nature and Quality of Other Services. The Trustees considered the nature,
quality, cost and extent of other services provided to
30
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
shareholders of the Fund, including administrative and shareholder
services performed by the Investment Adviser under the Management
Contract. The Trustees also considered the reasonableness of the
arrangements for reimbursement of the Investment Adviser's out-of-pocket
costs and expenses, including overhead, for certain administrative
services that the Investment Adviser is not required to provide under the
Management Contract. The Trustees also considered the nature and extent of
the other services provided by the Investment Adviser's affiliates under
other contracts and its supervision of third party service providers.
Based on these considerations, the Trustees concluded that the nature,
quality, cost and extent of such services are satisfactory and reliable
and serve the shareholders of the Fund well.
E. Management Fee and Expenses. The Trustees considered the Investment
Adviser's fee under the Management Contract relative to the management
fees charged by a peer group of funds selected by the Independent Trustees
for this purpose using data provided by an independent third party. The
Fund's management fee for the 12 months ended June 30, 2005 was in the
fourth quintile relative to the management fees paid by the other funds in
that peer group for the comparable period. The Trustees noted that the
management fee was reduced in December 2004 and Pioneer agreed to add a
break point to the management fee in 2005. The Trustees determined that
the fee under the Management Contract was reasonable and fair in light of
both the overall nature and quality of services provided by the Investment
Adviser and the fees charged by the funds in the peer group. The Trustees
also considered the Fund's expense ratio and expense ratios of a peer
group of funds selected by the Independent Trustees for this purpose. The
Fund's expense ratio for the 12 months ended June 30, 2005 was in the
second quintile of the applicable peer group for the most recent fiscal
year of the peer group for the comparable period. The Trustees concluded
that the Fund's overall expense ratio was reasonable compared to that of
comparable funds.
F. Profitability. The Trustees considered the level of the Investment Adviser's
profits with respect to the management of the Pioneer Funds, including
details with respect to the Fund. This consideration included a review of
the Investment Adviser's methodology in allocating certain of its costs to
the management of each Fund. The Trustees also considered the financial
results realized by the
31
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT (continued)
- --------------------------------------------------------------------------------
Investment Adviser in connection with the operation of the Fund. They
further considered the profits realized by the Investment Adviser and its
affiliates from non-fund businesses that may benefit from or be related to
the Fund's business. The Trustees considered the Investment Adviser's
profit margins in comparison with the limited available industry data. The
Trustees concluded that the Investment Adviser's profits from management
of the Pioneer Funds, including the financial results derived from the
Fund, bear a reasonable relationship to the services rendered and are fair
for the management of the Fund.
G. Economies of Scale. The Trustees considered the economies of scale with
respect to the management of the Fund, whether the Fund had appropriately
benefited from any economies of scale, and whether there was potential for
realization of any further economies of scale. Because of break points in
the management fee, the Trustees concluded that any perceived or potential
economies of scale would be shared at future asset levels, in a reasonable
manner as the Fund grows in size, between the Investment Adviser and the
Fund's shareholders.
H. Other Benefits to the Investment Adviser. The Trustees also considered the
character and amount of fees paid by the Fund, other than under the
Management Contract, for services provided by the Investment Adviser and
affiliates, including fees for services such as shareholder services. The
Trustees also considered the receipt of sales loads and payments under
Rule 12b-1 plans in respect to the Pioneer Funds (including the Fund). The
Trustees further considered the revenues and profitability of the
Investment Adviser's businesses other than the fund business, including
the Investment Adviser's institutional investment advisory business. The
Trustees considered the intangible benefits that accrue to the Investment
Adviser and its affiliates by virtue of its relationship with the Fund and
the Pioneer Funds as a group. The Trustees concluded that all these types
of benefits accruing to the Investment Adviser were reasonable in the
context of the overall relationship between the Investment Adviser and the
Fund.
32
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Conclusion. The Trustees, in light of the Investment Adviser's overall
performance, considered it appropriate to continue to retain the management
services of the Investment Adviser. Based on their evaluation of all material
factors deemed relevant and the advice of independent counsel, the Trustees
concluded that the Management Contract with the Fund is fair and reasonable and
voted to approve the continuation of the Management Contract for another year.
33
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser
Pioneer Investment Management, Inc.
Custodian
Brown Brothers Harriman & Co.
Independent Registered Public Accounting Firm
Ernst & Young LLP
Principal Underwriter
Pioneer Funds Distributor, Inc.
Legal Counsel
Wilmer Cutler Pickering Hale and Dorr LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
Trustees and Officers
The Fund's Board of Trustees provides broad supervision over the Fund's
affairs. The officers of the Fund are responsible for the Fund's operations.
The Fund's Trustees and officers are listed below, together with their
principal occupations during the past five years. Trustees who are interested
persons of the Fund within the meaning of the Investment Company Act of 1940
are referred to as Interested Trustees. Trustees who are not interested persons
of the Fund are referred to as Independent Trustees. Each of the Trustees
serves as a Trustee of each of the 91 U.S. registered investment portfolios for
which Pioneer Investment Management, Inc. ("Pioneer") serves as investment
adviser (the "Pioneer Funds"). The address for all Interested Trustees and all
officers of the Fund is 60 State Street, Boston, Massachusetts 02109.
The Fund's statement of additional information provides more detailed
information regarding the Fund's Trustees and is available upon request,
without charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Fund are available without charge,
upon request, by calling our toll free number (1-800-225-6292). Information
regarding how the Fund voted proxies relating to portfolio securities during
the most recent 12-month period ended June 30 is publicly available to
shareowners at www.pioneerfunds.com and on the SEC's web site at
http://www.sec.gov.
34
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
Positions Held Length of Service
Name and Age With the Fund and Term of Office
John F. Cogan, Jr. (79)* Chairman of the Trustee since 2004.
Board, Serves until
Trustee and President successor trustee is
elected or earlier
retirement or
removal.
*Mr. Cogan is an Interested Trustee because he is an officer or director
of Pioneer and certain of its affiliates.
================================================================================
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
Other Directorships Held
Name and Age Principal Occupation During Past Five Years by this Trustee
John F. Cogan, Jr. (79)* Deputy Chairman and a Director of Pioneer Global Asset Chairman and Director of
Management S.p.A. ("PGAM"); Non-Executive Chairman ICI Mutual Insurance
and a Director of Pioneer Investment Management USA Company; Director
Inc. ("PIM-USA"); Chairman and a Director of Pioneer; of Harbor Global
Director of Pioneer Alternative Investment Management Company, Ltd.
Limited (Dublin); President and a Director of Pioneer
Alternative Investment Management (Bermuda) Limited
and affiliated funds; Director of PIOGLOBAL Real Estate
Investment Fund (Russia); Director of Nano-C, Inc. (since
2003); Director of Cole Investment Corporation (since
2004); Director of Fiduciary Counseling Inc.; President
and Director of Pioneer Funds Distributor, Inc. ("PFD");
President of all of the Pioneer Funds; and Of Counsel,
Wilmer Cutler Pickering Hale and Dorr LLP (counsel to
PIM-USA and the Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director
of Pioneer and certain of its affiliates.
================================================================================
35
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
Positions Held Length of Service
Name, Age and Address With the Fund and Term of Office
David R. Bock **(62) Trustee Trustee since 2005.
3050 K. Street NW, Serves until successor
Washington, DC 20007 trustee is elected or
earlier retirement or
removal.
**Mr. Bock became a Trustee of the Fund on January 1, 2005.
================================================================================
Mary K. Bush (57) Trustee Trustee since 2004.
3509 Woodbine Street, Serves until
Chevy Chase, MD 20815 successor trustee
is elected or earlier
retirement or removal.
================================================================================
Margaret B.W. Graham (58) Trustee Trustee since 2004.
1001 Sherbrooke Street West, Serves until
Montreal, Quebec, Canada successor trustee
H3A 1G5 is elected or earlier
retirement or removal.
================================================================================
Pioneer Tax Free Money Market Fund
- -----------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -----------------------------------------------------------------------------------------------------------------------
Other Directorships Held
Name, Age and Address Principal Occupation During Past Five Years by this Trustee
David R. Bock **(62) Senior Vice President and Chief Financial Officer, I-trax, Director of The Enterprise
3050 K. Street NW, Inc. (publicly traded health care services company) Social Investment
Washington, DC 20007 (2001 - present); Managing Partner, Federal City Capital Company (privately-held
Advisors (boutique merchant bank) (2002 to 2004); affordable housing
Executive Vice President and Chief Financial Officer, finance company);
Pedestal Inc. (internet-based mortgage trading company) Director of New York
(2000 - 2002). Mortgage Trust (publicly
traded mortgage REIT)
**Mr. Bock became a Trustee of the Fund on January 1, 2005.
=======================================================================================================================
Mary K. Bush (57) President, Bush International (international financial Director of Brady
3509 Woodbine Street, advisory firm). Corporation (industrial
Chevy Chase, MD 20815 identification and
specialty coated
material products
manufacturer),
Mortgage Guaranty
Insurance Corporation,
and Briggs & Stratton,
Inc. (engine
manufacturer)
=======================================================================================================================
Margaret B.W. Graham (58) Founding Director, The Winthrop Group, Inc. (consulting None
1001 Sherbrooke Street West, firm); Desautels, Faculty of Management,
Montreal, Quebec, Canada McGill University.
H3A 1G5
=======================================================================================================================
36
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Positions Held Length of Service
Name, Age and Address With the Fund and Term of Office
Marguerite A. Piret (57) Trustee Trustee since 2004.
One Boston Place, 28th Floor, Serves until
Boston, MA 02108 successor trustee
is elected or earlier
retirement or removal.
================================================================================
John Winthrop (69) Trustee Trustee since 2004.
One North Adgers Wharf, Serves until
Charleston, SC 29401 successor trustee
is elected or earlier
retirement or removal.
================================================================================
Pioneer Tax Free Money Market Fund
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Other Directorships Held
Name, Age and Address Principal Occupation During Past Five Years by this Trustee
Marguerite A. Piret (57) President and Chief Executive Officer, Newbury, Piret & Director of New America
One Boston Place, 28th Floor, Company, Inc. (investment banking firm). High Income Fund, Inc.
Boston, MA 02108 (closed-end investment
company)
=======================================================================================================================
John Winthrop (69) President, John Winthrop & Co., Inc. None
One North Adgers Wharf, (private investment firm).
Charleston, SC 29401
=======================================================================================================================
- --------------------------------------------------------------------------------
FUND OFFICERS
- --------------------------------------------------------------------------------
Osbert M. Hood (53) Executive Vice Since 2004. Serves
President at the discretion of
the board.
================================================================================
Dorothy E. Bourassa (58) Secretary Since 2004. Serves
at the discretion of
the Board.
================================================================================
Osbert M. Hood (53) President and Chief Executive Officer, PIM-USA since Trustee of certain
May, 2003 (Director since January, 2001); President Pioneer Funds
and Director of Pioneer since May, 2003; Chairman and
Director of Pioneer Investment Management Shareholder
Services, Inc. ("PIMSS") since May, 2003; Executive Vice
President of all of Pioneer Funds since June 3, 2003; and
Executive Vice President and Chief Operating Officer of
PIM-USA, November 2000 - May 2003.
==========================================================================================================
Dorothy E. Bourassa (58) Secretary of PIM-USA; Senior Vice President - Legal None
of Pioneer; and Secretary/Clerk of most of PIM-USA's
subsidiaries; Secretary of all of the Pioneer Funds since
September 2003 (Assistant Secretary from November
2000 to September 2003).
==========================================================================================================
37
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
FUND OFFICERS
- --------------------------------------------------------------------------------
Positions Held Length of Service
Name and Age With the Fund and Term of Office
Christopher J. Kelley (41) Assistant Secretary Since 2004.
Serves at
the discretion of
the Board.
================================================================================
David C. Phelan (48) Assistant Secretary Since 2004.
Serves at
the discretion of
the Board.
================================================================================
Vincent Nave (60) Treasurer Since 2004.
Serves at
the discretion of
the Board.
================================================================================
Mark E. Bradley (46) Assistant Treasurer Since November,
2004. Serves
at the discretion
of the Board.
================================================================================
Luis I. Presutti (40) Assistant Treasurer Since 2004.
Serves at
the discretion
of the Board.
================================================================================
Pioneer Tax Free Money Market Fund
- -----------------------------------------------------------------------------------------------------------------------
FUND OFFICERS
- -----------------------------------------------------------------------------------------------------------------------
Other Directorships Held
Name and Age Principal Occupation During Past Five Years by this Officer
Christopher J. Kelley (41) Assistant Vice President and Senior Counsel of None
Pioneer since July 2002; Vice President and Senior
Counsel of BISYS Fund Services, Inc. (April 2001 to
June 2002); Senior Vice President and Deputy General
Counsel of Funds Distributor, Inc. (July 2000 to April
2001; Assistant Secretary of all Pioneer Funds since
September 2003.
=======================================================================================================================
David C. Phelan (48) Partner, Wilmer Cutler Pickering Hale and Dorr LLP; None
Assistant Secretary of all Pioneer Funds since
September 2003.
=======================================================================================================================
Vincent Nave (60) Vice President - Fund Accounting, Administration None
and Custody Services of Pioneer; and Treasurer of all
of the Pioneer Funds.
=======================================================================================================================
Mark E. Bradley (46) Deputy Treasurer of Pioneer since 2004; Treasurer None
and Senior Vice President, CDC IXIS Asset
Management Services from 2002 to 2003; Assistant
Treasurer and Vice President, MFS Investment
Management from 1997 to 2002; and Assistant
Treasurer of all of the Pioneer Funds since
November 2004.
=======================================================================================================================
Luis I. Presutti (40) Assistant Vice President - Fund Accounting, None
Administration and Custody Services of Pioneer; and
Assistant Treasurer of all of the Pioneer Funds.
=======================================================================================================================
38
Pioneer Tax Free Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Positions Held Length of Service
Name and Age With the Fund and Term of Office
Gary Sullivan (47) Assistant Treasurer Since 2004. Serves at
the discretion of
the Board.
========================================================================================
Katherine Kim Sullivan (32) Assistant Treasurer Since 2004.
Serves at
the discretion of
the Board.
========================================================================================
Martin J. Wolin (38) Chief Compliance Since October, 2004.
Officer Serves at the
discretion of
the Board.
========================================================================================
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Fund's investment adviser, provides investment
management and financial services to mutual funds, institutional and other
clients.
Other Directorships Held
Name and Age Principal Occupation During Past Five Years by this Officer
Gary Sullivan (47) Fund Accounting Manager - Fund Accounting, None
Administration and Custody Services of Pioneer; and
Assistant Treasurer of all of the Pioneer Funds since
May 2002.
================================================================================================================
Katherine Kim Sullivan (32) Fund Administration Manager - Fund Accounting, None
Administration and Custody Services since June
2003; Assistant Vice President - Mutual Fund
Operations of State Street Corporation from June
2002 to June 2003 (formerly Deutsche Bank Asset
Management); Pioneer Fund Accounting, Administration and
Custody Services (Fund Accounting Manager from August
1999 to May 2002, Assistant Treasurer of all Pioneer
Funds since September 2003.
================================================================================================================
Martin J. Wolin (38) Chief Compliance Officer of Pioneer (Director of None
Compliance and Senior Counsel from November 2000
to September 2004); and Chief Compliance Officer of all
of the Pioneer Funds since 2004.
================================================================================================================
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Fund's investment adviser, provides investment
management and financial services to mutual funds, institutional and other
clients.
39
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
40
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
41
- --------------------------------------------------------------------------------
This page for your notes.
42
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
43
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
44
- --------------------------------------------------------------------------------
HOW TO CONTACT PIONEER
- --------------------------------------------------------------------------------
We are pleased to offer a variety of convenient ways for you to contact us for
assistance or information.
Call us for:
Account Information, including existing accounts,
new accounts, prospectuses, applications
and service forms 1-800-225-6292
FactFone(SM) for automated fund yields, prices,
account information and transactions 1-800-225-4321
Retirement plans information 1-800-622-0176
Telecommunications Device for the Deaf (TDD) 1-800-225-1997
Write to us:
PIMSS, Inc.
P.O. Box 55014
Boston, Massachusetts 02205-5014
Our toll-free fax 1-800-225-4240
Our internet e-mail address ask.pioneer@pioneerinvest.com
(for general questions about Pioneer only)
Visit our web site: www.pioneerfunds.com
Before investing consider the Fund's investment objectives, risks, charges and
expenses. Contact your advisor or Pioneer Investments for a prospectus
containing this information. Read it carefully.
The Fund files a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
web site at http://www.sec.gov. The filed form may also be viewed and copied at
the Commission's Public Reference Room in Washington, DC. Information regarding
the operations of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
ITEM 2. CODE OF ETHICS.
(a) Disclose whether, as of the end of the period covered by the report, the
registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, regardless of
whether these individuals are employed by the registrant or a third party. If
the registrant has not adopted such a code of ethics, explain why it has not
done so.
The registrant has adopted, as of the end of the period covered by this report,
a code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer and controller.
(b) For purposes of this Item, the term "code of ethics" means written standards
that are reasonably designed to deter wrongdoing and to promote:
(1) Honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
(2) Full, fair, accurate, timely, and understandable disclosure in
reports and documents that a registrant files with, or submits to, the
Commission and in other public communications made by the registrant;
(3) Compliance with applicable governmental laws, rules, and
regulations;
(4) The prompt internal reporting of violations of the code to an
appropriate person or persons identified in the code; and
(5) Accountability for adherence to the code.
(c) The registrant must briefly describe the nature of any amendment, during the
period covered by the report, to a provision of its code of ethics that applies
to the registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, and that relates to any element of the code of
ethics definition enumerated in paragraph (b) of this Item. The registrant must
file a copy of any such amendment as an exhibit pursuant to Item 10(a), unless
the registrant has elected to satisfy paragraph (f) of this Item by posting its
code of ethics on its website pursuant to paragraph (f)(2) of this Item, or by
undertaking to provide its code of ethics to any person without charge, upon
request, pursuant to paragraph (f)(3) of this Item.
The registrant has made no amendments to the code of ethics during the period
covered by this report.
(d) If the registrant has, during the period covered by the report, granted a
waiver, including an implicit waiver, from a provision of the code of ethics to
the registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, that relates to one or more of the items set forth
in paragraph (b) of this Item, the registrant must briefly describe the nature
of the waiver, the name of the person to whom the waiver was granted, and the
date of the waiver.
Not applicable.
(e) If the registrant intends to satisfy the disclosure requirement under
paragraph (c) or (d) of this Item regarding an amendment to, or a waiver from,
a provision of its code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions and that relates to any
element of the code of ethics definition enumerated in paragraph (b) of this
Item by posting such information on its Internet website, disclose the
registrant's Internet address and such intention.
Not applicable.
(f) The registrant must:
(1) File with the Commission, pursuant to Item 10(a), a copy of its code
of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller,
or persons performing similar functions, as an exhibit to its annual
report on this Form N-CSR;
(2) Post the text of such code of ethics on its Internet website and
disclose, in its most recent report on this Form N-CSR, its Internet
address and the fact that it has posted such code of ethics on its
Internet website; or
(3) Undertake in its most recent report on this Form N-CSR to provide to
any person without charge, upon request, a copy of such code of ethics
and explain the manner in which such request may be made.
See Item 10(2)
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a) (1) Disclose that the registrant's board of trustees has determined that
the registrant either:
(i) Has at least one audit committee financial expert serving on its audit
committee; or
(ii) Does not have an audit committee financial expert serving on its audit
committee.
The registrant's Board of Trustees has determined that the registrant has at
least one audit committee financial expert.
(2) If the registrant provides the disclosure required by paragraph
(a)(1)(i) of this Item, it must disclose the name of the audit committee
financial expert and whether that person is "independent." In order to be
considered "independent" for purposes of this Item, a member of an audit
committee may not, other than in his or her capacity as a member of the audit
committee, the board of trustees, or any other board committee:
(i) Accept directly or indirectly any consulting, advisory, or other
compensatory fee from the issuer; or
(ii) Be an "interested person" of the investment company as defined in
Section 2(a)(19) of the Act (15 U.S.C. 80a-2(a)(19)).
Ms. Marguerite A. Piret, an independent trustee, is such an audit committee
financial expert.
(3) If the registrant provides the disclosure required by paragraph (a)(1)
(ii) of this Item, it must explain why it does not have an audit committee
financial expert.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Disclose, under the caption AUDIT FEES, the aggregate fees billed for each
of the last two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial statements or
services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal years.
Audit Fees
Fees for audit services provided to the Trust, including
fees associated with the initial and routine filings of its
Form N-1A, totaled approximately $238,625 in 2005 and
$246,300 in 2004 for the Trust's seven portfolios and eight
at that time respectively.
(b) Disclose, under the caption AUDIT-RELATED FEES, the aggregate fees billed in
each of the last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported under
paragraph (a) of this Item. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
Audit-Related Fees
There were no audit-related services provided to
the Trust during the fiscal years ended December 31, 2005
and 2004.
(c) Disclose, under the caption TAX FEES, the aggregate fees billed in each of
the last two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning. Registrants shall
describe the nature of the services comprising the fees disclosed under this
category.
Tax Fees
Fees for tax compliance services, primarily for tax returns,
totaled approximately $47,600 in 2005 and $48,000 in
2004.
(d) Disclose, under the caption ALL OTHER FEES, the aggregate fees billed in
each of the last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs (a) through
(c) of this Item. Registrants shall describe the nature of the services
comprising the fees disclosed under this category.
All Other Fees
There were no audit-related and other services provided to
the Trust during the fiscal years ended December 31, 2005
and 2004.
(e) (1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
PIONEER FUNDS
APPROVAL OF AUDIT, AUDIT-RELATED, TAX AND OTHER SERVICES
PROVIDED BY THE INDEPENDENT AUDITOR
SECTION I - POLICY PURPOSE AND APPLICABILITY
The Pioneer Funds recognize the importance of maintaining the independence of
their outside auditors. Maintaining independence is a shared responsibility
involving Pioneer Investment Management, Inc ("PIM"), the audit committee and
the independent auditors.
The Funds recognize that a Fund's independent auditors: 1) possess knowledge of
the Funds, 2) are able to incorporate certain services into the scope of the
audit, thereby avoiding redundant work, cost and disruption of Fund personnel
and processes, and 3) have expertise that has value to the Funds. As a result,
there are situations where it is desirable to use the Fund's independent
auditors for services in addition to the annual audit and where the potential
for conflicts of interests are minimal. Consequently, this policy, which is
intended to comply with Rule 210.2-01(C)(7), sets forth guidelines and
procedures to be followed by the Funds when retaining the independent audit firm
to perform audit, audit-related tax and other services under those
circumstances, while also maintaining independence.
Approval of a service in accordance with this policy for a Fund shall also
constitute approval for any other Fund whose pre-approval is required pursuant
to Rule 210.2-01(c)(7)(ii).
In addition to the procedures set forth in this policy, any non-audit services
that may be provided consistently with Rule 210.2-01 may be approved by the
Audit Committee itself and any pre-approval that may be waived in accordance
with Rule 210.2-01(c)(7)(i)(C) is hereby waived.
Selection of a Fund's independent auditors and their compensation shall be
determined by the Audit Committee and shall not be subject to this policy.
SECTION II - POLICY
- ---------------- -------------------------------- -------------------------------------------------
SERVICE SERVICE CATEGORY DESCRIPTION SPECIFIC PRE-APPROVED SERVICE SUBCATEGORIES
CATEGORY
- ---------------- -------------------------------- -------------------------------------------------
I. AUDIT Services that are directly o Accounting research assistance
SERVICES related to performing the o SEC consultation, registration
independent audit of the Funds statements, and reporting
o Tax accrual related matters
o Implementation of new accounting
standards
o Compliance letters (e.g. rating agency
letters)
o Regulatory reviews and assistance
regarding financial matters
o Semi-annual reviews (if requested)
o Comfort letters for closed end
offerings
- ---------------- -------------------------------- -------------------------------------------------
II. Services which are not o AICPA attest and agreed-upon procedures
AUDIT-RELATED prohibited under Rule o Technology control assessments
SERVICES 210.2-01(C)(4) (the "Rule") o Financial reporting control assessments
and are related extensions of o Enterprise security architecture
the audit services support the assessment
audit, or use the
knowledge/expertise gained
from the audit procedures as a
foundation to complete the
project. In most cases, if
the Audit-Related Services are
not performed by the Audit
firm, the scope of the Audit
Services would likely
increase. The Services are
typically well-defined and
governed by accounting
professional standards (AICPA,
SEC, etc.)
- ---------------- -------------------------------- -------------------------------------------------
------------------------------------- ------------------------------------
AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE
REPORTING POLICY
------------------------------------- ------------------------------------
o "One-time" pre-approval o A summary of all such
for the audit period for all services and related fees
pre-approved specific service reported at each regularly
subcategories. Approval of the scheduled Audit Committee
independent auditors as meeting.
auditors for a Fund shall
constitute pre approval for
these services.
------------------------------------- ------------------------------------
o "One-time" pre-approval o A summary of all such
for the fund fiscal year within services and related fees
a specified dollar limit (including comparison to
for all pre-approved specified dollar limits)
specific service subcategories reported quarterly.
o Specific approval is
needed to exceed the
pre-approved dollar limit for
these services (see general
Audit Committee approval policy
below for details on obtaining
specific approvals)
o Specific approval is
needed to use the Fund's
auditors for Audit-Related
Services not denoted as
"pre-approved", or
to add a specific service
subcategory as "pre-approved"
------------------------------------- ------------------------------------
SECTION III - POLICY DETAIL, CONTINUED
- ----------------------- --------------------------- -----------------------------------------------
SERVICE CATEGORY SERVICE CATEGORY SPECIFIC PRE-APPROVED SERVICE SUBCATEGORIES
DESCRIPTION
- ----------------------- --------------------------- -----------------------------------------------
III. TAX SERVICES Services which are not o Tax planning and support
prohibited by the Rule, o Tax controversy assistance
if an officer of the Fund o Tax compliance, tax returns, excise
determines that using the tax returns and support
Fund's auditor to provide o Tax opinions
these services creates
significant synergy in
the form of efficiency,
minimized disruption, or
the ability to maintain a
desired level of
confidentiality.
- ----------------------- --------------------------- -----------------------------------------------
- ------------------------------------- -------------------------
AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE
REPORTING POLICY
- ------------------------------------- -------------------------
- ------------------------------------- -------------------------
o "One-time" pre-approval o A summary of
for the fund fiscal year all such services and
within a specified dollar limit related fees
(including comparison
to specified dollar
limits) reported
quarterly.
o Specific approval is
needed to exceed the
pre-approved dollar limits for
these services (see general
Audit Committee approval policy
below for details on obtaining
specific approvals)
o Specific approval is
needed to use the Fund's
auditors for tax services not
denoted as pre-approved, or to add a specific
service subcategory as
"pre-approved"
- ------------------------------------- -------------------------
SECTION III - POLICY DETAIL, CONTINUED
- ----------------------- --------------------------- -----------------------------------------------
SERVICE CATEGORY SERVICE CATEGORY SPECIFIC PRE-APPROVED SERVICE SUBCATEGORIES
DESCRIPTION
- ----------------------- --------------------------- -----------------------------------------------
IV. OTHER SERVICES Services which are not o Business Risk Management support
prohibited by the Rule, o Other control and regulatory
A. SYNERGISTIC, if an officer of the Fund compliance projects
UNIQUE QUALIFICATIONS determines that using the
Fund's auditor to provide
these services creates
significant synergy in
the form of efficiency,
minimized disruption,
the ability to maintain a
desired level of
confidentiality, or where
the Fund's auditors
posses unique or superior
qualifications to provide
these services, resulting
in superior value and
results for the Fund.
- ----------------------- --------------------------- -----------------------------------------------
- --------------------------------------- ------------------------
AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE
REPORTING POLICY
- ------------------------------------- --------------------------
o "One-time" pre-approval o A summary of
for the fund fiscal year within all such services and
a specified dollar limit related fees
(including comparison
to specified dollar
limits) reported
quarterly.
o Specific approval is
needed to exceed the
pre-approved dollar limits for
these services (see general
Audit Committee approval policy
below for details on obtaining
specific approvals)
o Specific approval is
needed to use the Fund's
auditors for "Synergistic" or
"Unique Qualifications" Other
Services not denoted as
pre-approved to the left, or to
add a specific service
subcategory as "pre-approved"
- ------------------------------------- --------------------------
SECTION III - POLICY DETAIL, CONTINUED
- ----------------------- ------------------------- -----------------------------------------------
SERVICE CATEGORY SERVICE CATEGORY SPECIFIC PROHIBITED SERVICE SUBCATEGORIES
DESCRIPTION
- ----------------------- ------------------------- -----------------------------------------------
PROHIBITED SERVICES Services which result 1. Bookkeeping or other services
in the auditors losing related to the accounting records or
independence status financial statements of the audit
under the Rule. client*
2. Financial information systems design
and implementation*
3. Appraisal or valuation services,
fairness* opinions, or
contribution-in-kind reports
4. Actuarial services (i.e., setting
actuarial reserves versus actuarial
audit work)*
5. Internal audit outsourcing services*
6. Management functions or human
resources
7. Broker or dealer, investment
advisor, or investment banking services
8. Legal services and expert services
unrelated to the audit
9. Any other service that the Public
Company Accounting Oversight Board
determines, by regulation, is
impermissible
- ----------------------- ------------------------- -----------------------------------------------
- ------------------------------------------- ------------------------------
AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE
REPORTING POLICY
- ------------------------------------------- ------------------------------
o These services are not to be o A summary of all
performed with the exception of the(*) services and related
services that may be permitted fees reported at each
if they would not be subject to audit regularly scheduled
procedures at the audit client (as Audit Committee meeting
defined in rule 2-01(f)(4)) level will serve as continual
the firm providing the service. confirmation that has
not provided any
restricted services.
- ------------------------------------------- ------------------------------
- --------------------------------------------------------------------------------
GENERAL AUDIT COMMITTEE APPROVAL POLICY:
o For all projects, the officers of the Funds and the Fund's auditors will each
make an assessment to determine that any proposed projects will not impair
independence.
o Potential services will be classified into the four non-restricted service
categories and the "Approval of Audit, Audit-Related, Tax and Other
Services" Policy above will be applied. Any services outside the specific
pre-approved service subcategories set forth above must be specifically
approved by the Audit Committee.
o At least quarterly, the Audit Committee shall review a report summarizing the
services by service category, including fees, provided by the Audit firm as
set forth in the above policy.
- --------------------------------------------------------------------------------
(2) Disclose the percentage of services described in each of paragraphs (b)
through (d) of this Item that were approved by the audit committee pursuant
to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
Non-Audit Services
Beginning with non-audit service contracts entered into on
or after May 6, 2003, the effective date of the new SEC
pre-approval rules, the Trust's audit committee is required
to pre-approve services to affiliates defined by SEC rules
to the extent that the services are determined to have a
direct impact on the operations or financial reporting of the
Trust. For the years ended December 31, 2005 and 2004,
there were no services provided to an affiliate that required
the Trust's audit committee pre-approval.
(f) If greater than 50 percent, disclose the percentage of hours expended on the
principal accountant's engagement to audit the registrant's financial statements
for the most recent fiscal year that were attributed to work performed by
persons other than the principal accountant's full-time, permanent employees.
N/A
(g) Disclose the aggregate non-audit fees billed by the registrant's accountant
for services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the adviser that provides ongoing services to the registrant for each of
the last two fiscal years of the registrant.
Aggregate Non-Audit Fees
The aggregate non-audit fees for the Trust and affiliates, as
previously defined, totaled approximately $47,600 in 2005
and $48,000 in 2004.
The Trust's audit committee of the Board of Trustees has
considered whether the provision of non-audit services that
were rendered to the Affiliates (as defined) that were not
pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01
of Regulation S-X is compatible with maintaining the
principal accountant's independence.
(h) Disclose whether the registrant's audit committee of the board of trustees
has considered whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of
Rule 2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence.
The Fund's independent auditor, Ernst &
Young LLP ("E&Y"), has advised the Audit
Committee of the Fund's Board of Trustees that
E&Ys Spanish affiliate (E&Y Spain) performed
certain non-audit work for Pioneer Global
Investments Limited ("PGIL"), an affiliate of the
Funds investment adviser. The services involved
the receipt and disbursement of monies transferred
to E&Y Spain by PGIL in payment of individual
payroll and related income tax withholdings due on
returns prepared by E&Y Spain for certain PGIL
employees located in Spain from February 2001 to
October 2005. E&Y became auditors of the Fund in
May 2002. These payroll and tax services were
discontinued in November 2005. The annual fee
received by E&Y Spain for all such services totaled
approximately 9,000 Euro per year. E&Y has informed
the Audit Committee that based on its internal
reviews and the de minimus nature of the services
provided and fees received, E&Y does not believe
its independence with respect to the Fund has been
impaired or that it is disqualified from acting as
independent auditors to the Fund.
N/A
Item 5. Audit Committee of Listed Registrants
(a) If the registrant is a listed issuer as defined in Rule 10A-3
under the Exchange Act (17 CFR 240.10A-3), state whether
or not the registrant has a separately-designated standing
audit committee established in accordance with Section
3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)).
If the registrant has such a committee, however designated,
identify each committee member. If the entire board of directors
is acting as the registrants audit committee as specified in
Section 3(a)(58)(B) of the Exchange Act (15 U.S.C. 78c(a)(58)(B)),
so state.
The registrant has a separately-designated standing audit
committe eestablished in accordance with Section
3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)).
(b) If applicable, provide the disclosure required by Rule 10A-3(d)
under the Exchange Act (17 CFR 240.10A-3(d)) regarding an exemption
from the listing standards for audit committees.
N/A
Item 6. Schedule of Investments.
File Schedule I Investments in securities of unaffiliated issuers
as of the close of the reporting period as set forth in 210.12-
12 of Regulation S-X [17 CFR 210.12-12], unless the schedule is
included as part of the report to shareholders filed under Item
1 of this Form.
Included in Item 1
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
A closed-end management investment company that is filing an annual report on
this Form N-CSR must, unless it invests exclusively in non-voting securities,
describe the policies and procedures that it uses to determine how to vote
proxies relating to portfolio securities, including the procedures that the
company uses when a vote presents a conflict between the interests of its
shareholders, on the one hand, and those of the company's investment adviser;
principal underwriter; or any affiliated person (as defined in Section 2(a)(3)
of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules
thereunder) of the company, its investment adviser, or its principal
underwriter, on the other. Include any policies and procedures of the company's
investment adviser, or any other third party, that the company uses, or that are
used on the company's behalf, to determine how to vote proxies relating to
portfolio securities.
Not applicable to open-end management investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment
Companies.
(a) If the registrant is a closed-end management investment company that
is filing an annual report on this Form N-CSR,provide the following
information:
(1) State the name, title, and length of service of the person or persons
employed by or associated with the registrant or an investment adviser
of the registrant who are primarily responsible for the day-to-day management
of the registrants portfolio (Portfolio Manager). Also state each Portfolio
Managers business experience during the past 5 years.
Not applicable to open-end management investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers.
(a) If the registrant is a closed-end management investment company,
in the following tabular format, provide the information specified in
paragraph (b) of this Item with respect to any purchase made by or on
behalf of the registrant or any affiliated purchaser, as defined in
Rule 10b-18(a)(3) under the Exchange Act (17 CFR 240.10b-18(a)(3)), of
shares or other units of any class of the registrants equity securities
that is registered by the registrant pursuant to Section 12 of the
Exchange Act (15 U.S.C. 781). Instruction to paragraph (a). Disclose
all purchases covered by this Item, including purchases that do not
satisfy the conditions of the safe harbor of Rule 10b-18 under the
Exchange Act (17 CFR 240.10b-18), made in the period covered by the
report. Provide disclosures covering repurchases made on a monthly basis.
For example, if the reporting period began on January 16 and ended on
July 15, the chart would show repurchases for the months from January 16
through February 15, February 16 through March 15, March 16 through
April 15, April 16 through May 15, May 16 through June 15, and June 16
through July 15.
Not applicable to open-end management investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
Describe any material changes to the procedures by which shareholders
may recommend nominees to the registrants board of directors, where
those changes were implemented after the registrant last provided
disclosure in response to the requirements of Item 7(d)(2)(ii)(G)
of Schedule 14A (17 CFR 240.14a-101), or this Item.
There have been no material changes to the procedures by which the
shareholders may recommend nominees to the registrants board of
directors since the registrant last provided disclosure in response
to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14(A) in
its definitive proxy statement, or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Disclose the conclusions of the registrant's principal executive officer or
officers and principal financial officer or officers, or persons performing
similar functions, about the effectiveness of the registrant's disclosure
controls and procedures (as defined in Rule 30a-2(c) under the Act (17 CFR
270.30a-2(c))) based on their evaluation of these controls and procedures as of
a date within 90 days of the filing date of the report that includes the
disclosure required by this paragraph.
The registrant's principal executive officer and principal financial
officer have concluded, that the registrant's disclosure controls and
procedures are effective based on their evaluation of these controls and
procedures as of a date within 90 days of the filing date of this report.
(b) Disclose whether or not there were significant changes in the registrant's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant as required by Rule 30a-2 under the Act
(17 CFR 270.30a-2).
Filed herewith.
SIGNATURES
[See General Instruction F]
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Pioneer Series Trust II
By (Signature and Title)* /s/ John F. Cogan, Jr.
John F. Cogan, Jr, President
Date February 28, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ John F. Cogan, Jr.
John F. Cogan, Jr., President
Date February 28, 2006
By (Signature and Title)* /s/ Vincent Nave
Vincent Nave, Treasurer
Date February 28, 2006
* Print the name and title of each signing officer under his or her signature.