MORGAN, LEWIS & BOCKIUS LLP
ONE FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
November 30, 2017
VIA EDGAR
Securities and Exchange Commission
Division of Investment Management
100 F Street, NE
Washington, D.C. 20549
Re: Pioneer Asset Allocation Trust (File No. 333-221237)
Form N-14 Information Statement/Registration Statement
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Ladies and Gentlemen:
This letter is to respond to comments we received from Mr. Jay Williamson
of the Staff of the Division of Investment Management of the Securities and
Exchange Commission (the "Commission") regarding the Information
Statement/Registration Statement (the "Information Statement") on Form N-14
filed by Pioneer Asset Allocation Trust (the "Registrant") with respect to the
reorganization of each of Pioneer Solutions - Conservative Fund (the
"Conservative Fund") and Pioneer Solutions - Growth Fund (the "Growth Fund" and,
together with the Conservative Fund, the "Acquired Funds") into Pioneer
Solutions - Balanced Fund (the "Balanced Fund" or the "Acquiring Fund").
Following are the Staff's comments and the Registrant's responses thereto:
1. Comment: The Staff requested that the Registrant provide an analysis
of the factors considered in determining that the Acquiring Fund
should be the performance survivor of the reorganizations, in
accordance with the North American Security Trust no-action letter
(1993 SEC No-Act, LEXIS 876 (pub. avail. Aug. 5, 1994)).
Response: An analysis of the factors considered in determining the
performance survivor of the reorganizations is attached as Exhibit
A.
2. Comment: The Staff requested that the Registrant ensure that the
disclosure in the cover letter and elsewhere highlights all of the
material differences between an investment in an Acquired Fund and
an investment in the combined fund, including material differences
in investment types, strategies and risks. The Staff suggested,
for example, that the Registrant should address that the combined
fund will have a balanced investment orientation, whereas the
Acquired Funds have a conservative or growth orientation. The
Staff also requested that, given the combined fund's intention to
invest to a greater extent in underlying funds managed by Amundi
Pioneer, the Registrant ensure that it has appropriately disclosed
Acquired Fund Fees and Expenses in the Fee Table.
Response: The Registrant will revise the disclosure in the cover letter to
the Information Statement and similar disclosure elsewhere in the
Information Statement to include the following:
o Following completion of the reorganizations it is anticipated
that the combined fund will have a balanced investment
orientation and, accordingly: (i) relative to the Conservative
Fund, significantly less exposure to fixed income investments
and their related risks and significantly more exposure to
international and U.S. equity investments and their related
risks; and (ii) relative to the Growth Fund, significantly
more exposure to fixed income investments and their related
risks and significantly less exposure to international and
U.S. equity investments and their related risks.
o Each fund currently is managed by Amundi Pioneer. Following
the completion of the reorganizations, the combined fund will
be managed by Amundi Pioneer. The funds' portfolio management
team currently consists of John O'Toole, Paul Weber, and
Salvatore Buono. Following the completion of the
reorganizations, the combined fund's management team will
consist of Kenneth J. Taubes and Marco Pirondini.
The Registrant confirms that the Acquired Fund Fees and Expenses
shown in the Fee Table are consistent with the combined fund's
intention to invest to a greater extent in underlying funds
managed by Amundi Pioneer.
3. Comment: The Staff noted that the Registrant states that, following
the completion of the reorganizations, the combined fund
will not pay a direct management fee to Amundi Pioneer, but
will continue to bear a pro rata portion of the fees and
expenses, including management fees, of each underlying fund
in which the combined fund invests. The Staff also noted
that the combined fund intends to invest to a greater extent
in underlying funds managed by Amundi Pioneer. The Staff
requested that the Registrant address in its response:
(i) if Amundi Pioneer intends to enter into a new investment
advisory agreement with the combined fund and, if so, if
shareholder approval is required;
(ii) whether the Registrant anticipates that fees paid directly
or indirectly to Amundi Pioneer will increase, decrease or
stay the same;
(iii) whether any of the affiliated underlying funds in which the
combined fund intends to invest are newly-formed; and
(iv) whether the combined fund is changing its investment
strategies or investments as a result of the greater
allocation to affiliated underlying funds.
Response: (i) The Registrant confirms that Amundi Pioneer does not intend
to enter into a new investment advisory agreement with the
combined fund. The Registrant notes that the Board of
Trustees of the Registrant approved an amendment to the
current investment advisory agreement to reflect the
elimination of the fund's current management fee. The
Registrant notes that such amendment to the investment
advisory agreement, which did not require shareholder
approval, was filed as an exhibit to the Information
Statement.
(ii) The Registrant notes that, as disclosed under "Background to
the Reorganizations" and "Reasons for each Reorganization,"
the pro rata portion of the management fees of underlying
Amundi Pioneer funds borne by the combined fund following
the completion of the reorganizations is not expected to
exceed the direct management fee and the pro rata portion of
the management fees of underlying Amundi Pioneer funds
currently borne by each Acquired Fund.
(iii) The Registrant confirms that it is not currently
anticipated that any of the affiliated underlying funds in
which the combined fund intends to invest will be
newly-formed.
(iv) The Registrant believes that, to the extent that the
combined fund's greater allocation to affiliated underlying
funds represents a change in the fund's investment
strategies or investments, such change is appropriately
disclosed in the Information Statement. The Registrant notes
that, as disclosed in the Information Statement, the
Acquired Funds and the Acquiring Fund currently invest in
unaffiliated funds primarily when the desired economic
exposure to a particular asset category or investment
strategy is not available through an Amundi Pioneer fund,
and this also will be the case for the combined fund.
4. Comment: The Staff noted that the Registrant states that neither
reorganization is contingent on the occurrence of the other
reorganization. The Staff requested that the Registrant confirm
that its statements in the Information Statement with respect to
potential economies of scale would be accurate if only one
reorganization is completed and, if not, to add appropriate
qualifying disclosure.
Response: The Registrant notes that, as disclosed in the Information
Statement, none of the funds has achieved a sufficient size to
allow for more efficient operations. Accordingly, the Registrant
believes that its statements in the Information Statement with
respect to potential economies of scale would be accurate if only
one reorganization is completed.
5. Comment: The Staff noted that the Registrant states that the
reorganizations do not require shareholder approval. The Staff
requested that the Registrant provide in its response its analysis
why shareholder approval of the reorganizations is not required.
Response: The Registrant notes that the Delaware Statutory Trust Act
provides that a Delaware statutory trust's governing instrument
may provide for the taking of any action, including the
accomplishment of a merger or the transfer of assets of any
series of the statutory trust, without the approval of beneficial
owners (see Delaware Statutory Trust Act, Section 3806(b)(3) and
(b)(4)). The Registrant notes that the declarations of trust of
each Acquired Fund and the Acquiring Fund gives such fund's Board
of Trustees the authority to merge the fund with another fund and
to sell all of the fund's assets to another fund, in each case
without shareholder approval where shareholder approval is not
otherwise required by the 1940 Act.
The Registrant further notes that Rule 17a-8 under the 1940 Act
permits fund reorganizations to be effected without shareholder
approval when: (i) no fundamental policy of the Merging Company
(as defined in Rule 17a-8) is materially different from a policy
of Surviving Company (as defined in Rule 17a-8); (ii) no advisory
contract of the Merging Company is materially different from an
advisory contract of the Surviving Company; (iii) the
non-interested Trustees of the Merging Company who were elected by
its shareholders will comprise a majority of the non-interested
Trustees of the Surviving Company; and (iv) any distribution fees
authorized to be paid under the Surviving Company's distribution
plan are no greater than the distribution fees authorized to be
paid under the Merging Company's distribution plan. The Registrant
confirms that each reorganization meets the conditions of Rule
17a-8.
6. Comment: The Staff noted that the disclosure regarding the funds'
investment objectives under Fund Comparison suggests that current
income will not be a component of the combined fund's investment
objective following the completion of the reorganizations. The
Staff requested that the Registrant revise the disclosure to
clarify that the combined fund's investment objective will not be
changing following the completion of the reorganizations or to
provide additional disclosure regarding any changes to the
combined fund's investment objective.
Response: The Registrant will revise the disclosure to clarify that the
combined fund's investment objective will not be changing
following the completion of the reorganizations.
7. Comment: The Staff noted that the Registrant provides useful
disclosure under Fund Comparison regarding differences in the
funds' asset class exposures. The Staff suggested that the
Registrant consider re-formatting the disclosure regarding
such differences to make the disclosure more accessible to
investors (i.e., to break the disclosure into separate
paragraphs).
Response: The Registrant will re-format the disclosure referenced by the
Staff into separate paragraphs.
8. Comment: The Staff noted that, following the completion of the
reorganizations, the combined fund will have different portfolio
managers. The Staff requested that the Registrant ensure that this
is consistently reflected throughout the Information Statement.
The Staff also requested that the Registrant ensure that the
disclosure highlights any changes to the strategies or style in
which the combined fund will be managed as reflected by the change
in portfolio managers.
Response: As noted in response to Comment #2, the Registrant will revise the
disclosure to reflect that the combined fund will have different
portfolio managers following the completion of the
reorganizations. The Registrant believes that the current
disclosure addresses changes to the investment process by which
the combined fund will be managed following the completion of the
reorganizations.
9. Comment: The Staff noted that the Registrant states that the
Comparison of Principal Risks describes the "common risks" of
investing in an Acquired Fund and the Combined Fund. The Staff
requested that the Registrant revise the disclosure to focus on
the differences in risks between the Acquired Funds and the
combined fund so that shareholders can understand how their
investment risks will change as a result of the reorganizations.
Response: The Registrant notes that, because each Pioneer Fund has a similar
investment objective and similar investment strategies, the
principal risks of investing in each fund are substantially
similar. The Registrant notes that, as indicated in response to
Comment #2, the disclosure will be revised to clarify that,
following the completion of the reorganizations it is anticipated
that the combined fund will have: (i) relative to the Conservative
Fund, significantly less exposure to fixed income investments and
their related risks and significantly more exposure to
international and U.S. equity investments and their related risks;
and (ii) relative to the Growth Fund, significantly more exposure
to fixed income investments and their related risks and
significantly less exposure to international and U.S. equity
investments and their related risks.
10. Comment: The Staff requested that the Registrant confirm that the
Fee Table reflects each fund's current fees and expenses.
Response: The Registrant confirms that the Fee Table reflects each fund's
current fees and expenses.
11. Comment: The Staff requested that the Registrant confirm in its
response that Amundi Pioneer has no ability to recoup any amounts
waived or expenses reimbursed under the contractual fee waiver
discussed in footnote 3 to the Fee Table.
Response: The Registrant confirms that Amundi Pioneer has no ability to
recoup any amounts waived or expenses reimbursed under the
contractual fee waiver discussed in footnote 3 to the Fee Table.
12. Comment: The Staff noted that the Registrant states under "Reasons
for each Reorganization" that the Board concluded that the
elimination of the direct management fee of the combined fund
supported a determination that each reorganization is in the best
interests of shareholders. The Staff asked if the Board considered
any alternatives to, or potential negative factors, such as a
potential diminution of services, that might result from, the
elimination of the combined fund's management fee, and requested
that the Registrant revise the disclosure as appropriate.
Response: The Registrant will revise the disclosure to add a statement that
the Board considered management's representations that the
elimination of the direct management fee would not cause or
reflect a diminution in services to the combined fund. The
Registrant notes that the Board did not consider any alternatives
to the elimination of the combined fund's management fee.
13. Comment: The Staff requested that the Registrant confirm and/or
clarify as appropriate the disclosure regarding the Board's
consideration of potential economies of scale in connection with
the reorganizations, noting that one of the Acquired Funds is
larger the Acquiring Fund.
Response: The Registrant notes that none of the funds has achieved a
sufficient size to allow for more efficient operations and,
accordingly, the Registrant respectfully submits that no change to
the disclosure regarding the Board's consideration of potential
economies of scale is required.
14. Comment: The Staff noted that the Growth Fund has approximately
$36 million in net unrealized gains and requested that the
Registrant revise the disclosure as appropriate to clarify any
Board considerations with respect to such gains, particularly if
some or all of the securities held by Growth Fund will be sold in
connection with such fund's reorganization.
Response: The Registrant notes that, as indicated in the Information
Statement, any long-term capital gains recognized by shareholders
in connection with the disposition of securities following the
completion of the reorganizations are expected to be offset by
available tax capital-loss carryforwards. The Registrant
respectfully submits that no changes to the disclosure are
required.
Please call the undersigned at (617) 951-8458 or Toby Serkin at (617)
951-8760 with any questions.
Sincerely,
/s/ Jeremy Kantrowitz
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Jeremy Kantrowitz
cc: Terrence J. Cullen
Christopher J. Kelley
Roger P. Joseph
Toby R. Serkin
Exhibit A
The Staff stated in the North American Security Trust no-action letter (1993 SEC
No-Act, LEXIS 876 (pub. avail. Aug. 5, 1994) that in determining the performance
survivor of a reorganization, the funds should compare the attributes of the
participating funds to determine which fund the combined fund most closely
resembles. The no-action letter states that, "among other factors, funds should
compare the various funds' investment advisers, investment objectives, policies
and restrictions, expense structures and expense ratios, asset size and
portfolio composition. These factors are substantially similar to the factors
the staff considers in determining the accounting survivor of a business
combination involving investment companies." The factors listed in the North
American Security Trust no-action letter are also set forth in the AICPA
Accounting and Audit Guide for Investment Companies (the "AICPA Guide"), in
order of relative importance: portfolio management, portfolio composition,
investment objectives, policies and restrictions, expense structures and expense
ratios, and, asset size. Following is a performance survivor analysis for the
reorganizations using the factors identified in the North American Security
Trust no-action letter and the AICPA Guide.
The Registrant believes that the most useful factors to consider in the
performance survivor analysis are the factors related to investment objectives,
policies and restrictions and portfolio composition, because these factors
provide the best indication as to which participating fund the combined fund
will most closely resemble. As discussed below, the Balanced Fund is the
proposed performance survivor in the reorganizations because it is the fund
whose asset class exposure and portfolio securities will most closely resemble
those of the combined fund following the completion of the reorganizations.
A. Investment Objectives, Policies and Restrictions
Investment Objective
Acquired Funds and Acquiring Fund, Pre-Reorganizations: Each fund's
investment objective is long-term capital growth and current income.
Combined Fund, Post-Reorganization: Following the completion of the
reorganizations, the combined fund's investment objective will be
long-term capital growth and current income.
Principal Investment Policies and Restrictions
Acquired Funds and Acquiring Fund, Pre-Reorganizations: Each fund invests
primarily in underlying funds, and may also invest directly in securities
and use derivatives. Each fund invests primarily in underlying funds
managed by Amundi Pioneer or one of its affiliates (60%-70% of its total
assets). For each fund, Amundi Pioneer seeks to maintain a target
annualized volatility level that corresponds to the fund's relative risk
profile. As part of its overall strategy, each fund may use derivatives in
an effort to limit the effects of volatility or severe market evens on the
fund, to seek incremental return, and for a variety of other hedging and
non-hedging purposes.
Each fund has a different exposure to fixed income investments, U.S.
equity investments and international equity investments. At July 31, 2017,
approximately 75% of the Conservative Fund's total assets was invested in
fixed income underlying funds, approximately 13% of the fund's total
assets was invested in international equity underlying funds,
approximately 8% of the fund's total assets was invested in U.S. equity
funds, and approximately 4% of the fund's total assets was invested
directly in fixed income obligations.
At July 31, 2017, approximately 15% of the Growth Fund's total assets was
invested in fixed income underlying funds, approximately 47% of the fund's
total assets was invested in international equity underlying funds,
approximately 34% of the fund's total assets was invested in U.S. equity
funds, and approximately 4% of the fund's total assets was invested
directly in fixed income obligations.
At July 31, 2017, approximately 42% of the Balanced Fund's total assets
was invested in fixed income underlying funds, approximately 35% of the
fund's total assets was invested in international equity underlying funds,
approximately 18% of the fund's total assets was invested in U.S. equity
funds, and approximately 4% of the fund's total assets was invested
directly in fixed income obligations.
Combined Fund, Post-Reorganization: Following the completion of the
reorganizations, the combined fund will continue to invest primarily in
underlying funds managed by Amundi Pioneer or one of its affiliates. It is
anticipated that, initially, the combined fund will invest to a greater
extent in underlying funds managed by Amundi Pioneer (90%-95% of its total
assets). Following the completion of the reorganizations, Amundi Pioneer
will not seek to maintain a target annualized volatility level for the
combined fund. Following the completion of the reorganizations, the
combined fund will continue to have the ability to use derivatives, but it
is currently anticipated that the combined fund generally will not use
derivative strategies to the same extent as do the current funds.
It is anticipated that, following completion of the reorganizations, the
combined fund will have a balanced investment orientation and, thus, the
combined fund's exposure to different asset classes will most closely
resemble the Balanced Fund's exposure to different asset classes prior to
the reorganizations.
Conclusion: Each fund has the same investment objective. Each fund is a fund
of funds that invests primarily in underlying funds managed by Amundi
Pioneer. However, each fund has a different exposure to various asset
classes. As noted above, following the completion of the reorganizations, it
is anticipated that the combined fund will have a balanced investment
orientation and, thus, the combined fund's exposure to different asset
classes will most closely resemble that of the Balanced Fund. Accordingly,
this factor favors the Balanced Fund as the performance survivor.
B. Portfolio Composition
Acquired Funds and Acquiring Fund, Pre-Reorganizations: As noted above, each
fund is a fund of funds that invests primarily in underlying funds managed by
Amundi Pioneer. However, as noted above, each fund has a different exposure
to various asset classes. Thus, each fund allocates its assets among the
underlying funds differently.
Combined Fund: As noted above, following the completion of the
reorganizations, it is anticipated that the combined fund will have a
balanced investment orientation and, thus, the combined fund's exposure to
different asset classes will most closely resemble that of the Balanced Fund.
Accordingly, it is anticipated that the allocation of combined fund assets
among the underlying funds will most closely resemble the Balanced Fund's
allocation of assets among underlying funds. Accordingly, the portfolio
composition of the combined fund is expected to most closely resemble the
portfolio composition of the Balanced Fund.
Conclusion: As noted above, the portfolio composition of the combined fund is
expected to most closely resemble the portfolio composition of the Balanced
Fund. Accordingly, this factor favors the Balanced Fund as the performance
survivor.
C. Portfolio Management
Acquired Funds and Acquiring Fund, Pre-Reorganizations: Amundi Pioneer Asset
Management, Inc. serves as each fund's investment adviser. Day-to-day
management of the Acquired Fund's portfolio currently is the responsibility
of John O'Toole, Paul Weber and Salvatore Buono.
Combined Fund, Post-Reorganization: Amundi Pioneer Asset Management, Inc.
will serve as the combined fund's investment adviser. Following completion of
the reorganizations, day-to-day management of the combined fund's portfolio
will be the responsibility of Kenneth J. Taubes and Marco Pirondini.
Conclusion: Following the completion of the reorganizations, the combined
fund will have a different portfolio management team from each Acquired Fund
and the Acquiring Fund. Accordingly, the portfolio management factor does not
favor one fund over another in determining the performance survivor.
D. Expense Structures and Expense Ratios
Management Fees
Acquired Funds and Acquiring Fund, Pre-Reorganizations: Each fund
currently pays Amundi Pioneer a management fee at an annual rate equal to
0.13% of the fund's average daily net assets, up to $2.5 billion; 0.11% of
the fund's average daily net assets, from over $2.5 billion up to $4
billion; 0.10% of the fund's average daily net assets, from over $4
billion up to $5.5 billion; and 0.08% of the fund's average daily net
assets, over $5.5 billion. The fee is accrued daily and paid monthly.
Combined Fund: Following the completion of the reorganizations, the
combined fund will not pay a direct management fee to Amundi Pioneer.
Sales load structure and Rule 12b-1 plans: The funds have the same sales load
structure and Rule 12b-1 plans.
Other expenses: The administrative service, custody, transfer agency and
other non-management fees that the funds pay are substantially similar in
structure. The expense ratio for such other expenses of each class of shares
of the combined fund, post-reorganizations is anticipated to be lower than
the expense ratio for other expenses of the corresponding class shares of
each fund, pre-reorganizations.
Acquired Fund Fees and Expenses: As funds of funds, each fund has significant
Acquired Fund Fees and Expenses (as of July 31, 2017, 0.56% for the
Conservative Fund, 0.72% for the Growth Fund and 0.68% for the Balanced
Fund). While each fund's Acquired Fund Fees and Expenses are generally
similar, the Acquired Fund Fees and Expenses of the combined fund are
anticipated to most closely resemble the Acquired Fund Fees and Expenses of
the Balanced Fund. This reflects that the allocation of combined fund assets
among the underlying funds is anticipated to most closely resemble the
Balanced Fund's allocation of assets among underlying funds.
Total expenses
As shown in the following table, the total annual fund operating expenses of
each class of shares of the combined fund, post-reorganizations are
anticipated to be lower than the total annual fund operating expenses of each
class of shares of the corresponding class shares of each fund,
pre-reorganizations.
---------------------- ---------------------- ---------------------- -----------------------
Conservative Fund Growth Fund Balanced Fund Pro Forma Combined
Fund
---------------------- ---------------------- ---------------------- -----------------------
Total Annual Fund Total Annual Fund Total Annual Fund Total Annual Fund
Operating Operating Operating Operating Expenses/Net
Expenses/Net Expenses Expenses/Net Expenses Expenses/Net Expenses Expenses After Fee
After Fee Waiver and After Fee Waiver and After Fee Waiver and Limitations (assuming
Waiver and Expense Expense Limitations Expense Limitations completion of both
Expense Limitations Reorganizations)
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Class A 1.43%/1.26% 1.36%/1.36% 1.36%/1.36% 1.17%/1.17%
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Class C 2.17%/2.01% 2.07%/2.07% 2.06%/2.06% 1.87%/1.87%
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Class R 2.45%/1.46% 2.13%/1.62% 2.06%/1.58% 1.89%/1.58%
----------------------------------------------------------------------------------------------------------------
Class Y 1.37%/1.21% 1.13%/1.13% 1.15%/1.15% 0.94%/0.94%
----------------------------------------------------------------------------------------------------------------
Conclusion:
The management fee, other expenses and total expenses of the combined fund
will be different from the management fee, other expenses and total expenses
of each Acquired Fund and the Acquiring Fund. The Acquired Fund Fees and
Expenses of the combined fund, while similar to the Acquired Fund Fees and
Expenses of each Acquired Fund and the Acquiring Fund, are anticipated to
most closely resemble the Acquired Fund Fees and Expenses of the Balanced
Fund. Accordingly, the expense structure and expense ratio factor does not
strongly favor one fund over another in determining the performance survivor,
except to the extent that the Acquired Fund Fees and Expenses of the combined
fund most closely resemble the Acquired Fund Fees and Expenses of the
Balanced Fund.
E. Asset Size
Conservative Fund: As of July 31, 2017, the Conservative Fund had assets of
approximately $57.3 million.
Growth Fund: As of July 31, 2017, the Growth Fund had assets of approximately
$306.7 million.
Balanced Fund: As of July 31, 2017, the Balanced Fund had assets of
approximately $164.5 million.
Conclusion: The Registrant acknowledges that the Growth Fund has
significantly more assets than the Balanced Fund. However, the Staff's
guidance in the North American Security Trust no-action letter does not
suggest that asset size is determinative in identifying the performance
survivor in a reorganization. Rather, asset size is only one of a number of
factors to be weighed.
F. Overall conclusion.
The Registrants believe that the factors discussed above indicate that the
combined fund will most closely resemble the Balanced Fund. In particular,
the Registrant notes that the asset class exposure and portfolio composition
of the combined fund are anticipated to most closely resemble the asset class
exposure and portfolio composition of the Balanced Fund. The Registrant notes
that the portfolio management and expense structure factors do not strongly
favor one fund over another as performance survivor. The Registrant
acknowledges that the Growth Fund has significantly more assets than the
Balanced Fund. Nevertheless, the Registrant believes that, on balance, the
factors discussed above favor the Balanced Fund as the performance survivor
of the reorganizations.