As filed with the Securities and Exchange Commission on October 25, 2004
File No. 333-118456
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1
Post-Effective Amendment No. ______
(Check appropriate box or boxes)
PIONEER MID CAP VALUE FUND
(Exact Name of Registrant as Specified in Charter)
(617) 742-7825 (Area
Code and Telephone Number)
60 State Street, Boston, Massachusetts 02109
(Address of Principal Executive Offices: Number, Street, City, State, Zip Code)
Dorothy E. Bourassa, Esq.
Pioneer Investment Management, Inc.
60 State Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Copies to: David C. Phelan, Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
Calculation of Registration Fee under the Securities Act of 1933: No filing fee
is due because of reliance on Section 24(f) of the Investment Company Act of
1940, which permits registration of an indefinite number of securities.
Title of Securities Being Registered: Shares of beneficial interest of the
Registrant.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment, which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall be effective on
such date as the Commission, acting pursuant to Section 8(a), may determine.
COMBINED PROXY STATEMENT OF
SAFECO COMMON STOCK TRUST
(the "Safeco Trust")
on behalf of its Series:
SAFECO BALANCED FUND
SAFECO CORE EQUITY FUND
SAFECO GROWTH OPPORTUNITIES FUND
SAFECO INTERNATIONAL STOCK FUND
SAFECO LARGE-CAP GROWTH FUND
SAFECO LARGE-CAP VALUE FUND
SAFECO MULTI-CAP CORE FUND
SAFECO SMALL-CAP VALUE FUND
(each, "your Safeco Fund" and collectively, the "Safeco Funds")
The address and telephone number of each Safeco Fund is:
4854 154th Place N.E., Redmond, WA 98052
1-800-624-5711
PROSPECTUS
FOR INVESTOR CLASS SHARES OF
PIONEER BALANCED FUND
PIONEER FUND
PIONEER GROWTH OPPORTUNITIES FUND
PIONEER INTERNATIONAL EQUITY FUND
PIONEER GROWTH SHARES
PIONEER MID CAP VALUE FUND
PIONEER SMALL CAP VALUE FUND
PIONEER VALUE FUND
(each, a "Pioneer Fund" and collectively, the "Pioneer Funds")
The address and telephone number of each Pioneer Fund is:
60 State Street, Boston, Massachusetts 02109
1-800-622-3265 or 1-800-225-6292
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
SCHEDULED FOR DECEMBER 8, 2004
To the Shareholders of the Safeco Funds:
A joint special meeting of shareholders (the "Meeting") for each of the
Safeco Funds will be held at the offices of Safeco Mutual Funds, King
Auditorium, 4854 154th Place, N.E., Redmond, WA 98052, on December 8, 2004 at
2:00 p.m., local time, to consider the following:
1. With respect to each Safeco Fund, a proposal to approve an Agreement
and Plan of Reorganization. Under the Agreement and Plan of
Reorganization, your Safeco Fund will transfer all of its assets to an
investment company (each a "Pioneer Fund") managed by Pioneer
Investment Management, Inc. ("Pioneer") in exchange for Investor Class
shares of the Pioneer Fund. The Pioneer Fund also will assume your
Safeco Fund's liabilities that are included in the calculation of your
Safeco Fund's net assets at the closing. Generally, each Pioneer Fund
is an existing mutual fund with a substantially similar investment
objective and similar investment policies as your Safeco Fund. In the
case of certain Safeco Funds, the Pioneer Fund is a newly organized
mutual fund with a substantially similar investment objective and
similar investment policies as your Safeco Fund. Holders of all share
classes of your Safeco Fund will receive Investor Class shares of the
corresponding Pioneer Fund. Investor Class shares of the applicable
Pioneer Fund will be distributed to shareholders in proportion to the
relative net asset value of their share holdings on the closing date
of the reorganization. Following the reorganization, your Safeco Fund
will then be dissolved. As a result of the reorganization you will
become shareholders of the Pioneer Fund. Your board of trustees
recommends that you vote FOR this proposal.
2. With respect to each Safeco Fund, a proposal to approve an interim
investment advisory agreement between your Safeco Fund and Pioneer.
Pioneer has provided advisory services for your Safeco Funds pursuant
to this agreement since August 2, 2004, when the advisory agreement
between your Safeco Fund and Safeco Asset Management Company
terminated. Approval of the interim investment advisory agreement will
enable Pioneer to receive advisory fees currently held in escrow. Your
board of trustees recommends that you vote FOR this proposal.
3. Any other business that may properly come before the Meeting.
Shareholders of record as of the close of business on October 8, 2004, are
entitled to vote at the Meeting and any related follow-up meetings.
Whether or not you expect to attend the Meeting, please complete and return
the enclosed proxy card. If shareholders do not return their proxies in
sufficient numbers, your Safeco Fund may be required to make additional
solicitations.
By order of the Board of Trustees,
[Name]
[Title]
October [ ], 2004
COMBINED PROXY STATEMENT OF
SAFECO COMMON STOCK TRUST
(the "Safeco Trust")
on behalf of its Series:
SAFECO BALANCED FUND
SAFECO CORE EQUITY FUND
SAFECO GROWTH OPPORTUNITIES FUND
SAFECO INTERNATIONAL STOCK FUND
SAFECO LARGE-CAP GROWTH FUND
SAFECO LARGE-CAP VALUE FUND
SAFECO MULTI-CAP CORE FUND
SAFECO SMALL-CAP VALUE FUND
(each, "your Safeco Fund" and collectively, the "Safeco Funds")
The address and telephone number of each Safeco Fund is:
4854 154th Place N.E., Redmond, WA 98052
1-800-624-5711
PROSPECTUS
FOR INVESTOR CLASS SHARES OF
PIONEER BALANCED FUND
PIONEER FUND PIONEER GROWTH OPPORTUNITIES FUND
PIONEER INTERNATIONAL EQUITY FUND
PIONEER GROWTH SHARES
PIONEER MID CAP VALUE FUND
PIONEER SMALL CAP VALUE FUND
PIONEER VALUE FUND
(each, a "Pioneer Fund" and collectively, the "Pioneer Funds")
The address and telephone number of each Pioneer Fund is:
60 State Street, Boston, Massachusetts 02109
and 1-800-622-3265 or 1-800-225-6292.
Shares of the Pioneer Funds have not been approved or disapproved by the
Securities and Exchange Commission (the "SEC"). The SEC has not passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
An investment in any Safeco Fund or Pioneer Fund is not a bank deposit and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
1
This combined proxy statement and prospectus (the "Proxy
Statement/Prospectus"), dated October 25, 2004, is being furnished to
shareholders of the Safeco Funds in connection with the solicitation by the
board of trustees (the "Board", or the "Trustees") of the Safeco Trust of
proxies to be used at a joint meeting of shareholders of the Safeco Funds (the
"Meeting") to be held at the offices of Safeco Mutual Funds, King Auditorium,
4854 154th Place, N.E., Redmond, WA 98052, on December 8, 2004 at 2:00 p.m.,
local time.
The Proxy Statement/Prospectus contains information you should know before
voting on (i) the approval of a proposed Agreement and Plan of Reorganization
(each a "Plan") that provides for the reorganization of each Safeco Fund into a
corresponding Pioneer Fund (each a "Reorganization"), and (ii) the approval of
an interim investment advisory agreement for each Safeco Fund. The following
table indicates (a) the corresponding Pioneer Fund shares that each Safeco Fund
shareholder would receive if each Plan is approved, (b) which Safeco Fund
shareholders may vote on which proposals and on what page of this Proxy
Statement/Prospectus the discussion regarding each proposal begins. Shareholders
of each class of shares of a Safeco Fund will vote together as a single class on
each proposal. Although each Reorganization is similar in structure, you should
read carefully the specific discussion regarding your Safeco Fund's
Reorganization.
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Safeco Fund Pioneer Fund Shareholders Entitled to Vote Page
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PROPOSAL 1(a) Safeco Balanced Fund Pioneer Balanced Fund Safeco Balanced Fund shareholders 7
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PROPOSAL 1(b) Safeco Core Equity Pioneer Fund Safeco Core Equity Fund shareholders 20
Fund
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PROPOSAL 1(c) Safeco Growth Pioneer Growth Safeco Growth Opportunities Fund 33
Opportunities Fund Opportunities Fund shareholders
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PROPOSAL 1(d) Safeco International Pioneer International Safeco International Stock Fund shareholders 46
Stock Fund Equity Fund
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PROPOSAL 1(e) Safeco Large-Cap Pioneer Growth Shares Safeco Large-Cap Growth Fund shareholders 60
Growth Fund
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PROPOSAL 1(f) Safeco Large-Cap Pioneer Value Fund Safeco Large-Cap Value Fund shareholders 74
Value Fund
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PROPOSAL 1(g) Safeco Multi-Cap Pioneer Mid Cap Safeco Multi-Cap Core Fund shareholders 88
Core Fund Value Fund
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PROPOSAL 1(h) Safeco Small-Cap Pioneer Small Cap Safeco Small-Cap Value Fund shareholders 104
Value Fund Value Fund
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PROPOSAL 2 (a)-(h) Each Fund Not applicable Shareholders of each Fund voting separately 120
as to the proposal that affects their Fund
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Where to Get More Information
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The Safeco Funds' prospectuses dated April 30, 2004, as Available to you free of charge by calling 1-800-624-5711.
supplemented August 3, 2004. Each prospectus, which is also on file with the SEC, is
incorporated by reference into this Proxy Statement/Prospectus.
The Safeco Funds' annual report dated December 31, 2003
and semiannual report dated June 30, 2004. Available to you free of charge by calling 1-800-624-5711.
Also on file with the SEC. See "Available Information."
These reports are incorporated by reference into this Proxy
Statement/Prospectus.
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Each Pioneer Funds' current prospectus and each Pioneer Available to you free of charge by calling 1-800-225-6292.
Fund's most recent annual and semiannual reports and These prospectuses and reports are also on file with the SEC.
supplements (as they apply) to shareholders. These prospectuses and reports are incorporated by reference
into this Proxy Statement/Prospectus.
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A statement of additional information for this joint Proxy Available to you free of charge by calling 1-800-225-6292.
Statement/Prospectus (the "SAI"), dated October 25, 2004. Also on file with the SEC. This SAI is incorporated by
It contains additional information about your Safeco Funds reference into this Proxy Statement/Prospectus.
and the Pioneer Funds.
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To ask questions about this Proxy Statement/Prospectus. Call your Safeco Fund's toll-free telephone number:
1-800-624-5711.
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2
Background to the Reorganizations
Safeco Asset Management Company ("SAM"), the Safeco Funds' investment
adviser until August 2, 2004, was a subsidiary of Safeco Corporation, a
multi-line insurance company. On August 2, 2004, Symetra Financial Corporation
("Symetra") acquired certain assets from Safeco Corporation, including all of
the capital stock of SAM. While reviewing the operations of SAM in anticipation
of that transaction, Symetra determined that engaging in the business of
investment adviser to the Safeco Funds was not a core business that it intended
to continue. After investigating and discussing several alternatives for ongoing
investment management of the Safeco Funds with the Trustees, Symetra conducted a
search for a new investment adviser for the Safeco Funds. Ultimately Symetra
decided to recommend to the Boards that Pioneer Investment Management, Inc.
("Pioneer") be hired to manage the Safeco Funds on an interim basis until the
Reorganizations occur and the Safeco Funds be reorganized into similar mutual
funds managed by Pioneer.
The Board met at a series of meetings in July 2004. At these meetings, your
Trustees received and evaluated materials regarding Pioneer and the Pioneer
Funds, including the performance record and expense structure of each of the
Pioneer Funds, the impact of the proposed Reorganizations on the Safeco Funds'
shareholders, and the quality of the services offered by Pioneer. At these
meetings, the Trustees met with representatives of Pioneer. In addition to these
general factors, the Trustees also considered these and other factors
specifically in the context of each Reorganization. On July 30, 2004, the Board,
including all of the Trustees who are not interested persons of SAM (the
"Independent Trustees"), unanimously voted to approve each of the
Reorganizations. In approving the Reorganizations, the Board determined that the
Reorganizations were in the best interests of the Safeco Funds' shareholders and
the interests of existing Safeco Funds' shareholders will not be diluted as a
result of the Reorganizations.
Pioneer believes that it can offer favorable long-term investment
performance and enhanced shareholder services to the Safeco Funds' shareholders.
The Reorganizations will, by combining the assets of two mutual funds and, by
being part of a family of funds with greater distribution capabilities, offer
the potential for increased economies of scale. Increased economies of scale
have the potential of benefiting the shareholders of your Safeco Funds and the
Pioneer Funds by spreading fixed costs over a larger asset base and reducing
expenses on a per share basis. There can be no assurance that such economies of
scale will be realized.
Why the Trustees are Recommending the Reorganizations
The Trustees believe that reorganizing your Safeco Fund into a portfolio
with a substantially similar investment objective and similar investment
policies that is part of the Pioneer family of funds offers you potential
benefits. These potential benefits and considerations include:
o SAM, the investment adviser to each of the Safeco Funds until August
2, 2004, was acquired by Symetra. Symetra informed the Board that it
was not interested in continuing to provide investment advisory
services to the Safeco Funds. Therefore, a change in your Safeco
Fund's investment adviser was necessary;
o The track record of Pioneer in managing the Pioneer Funds as compared
to the historical performance of the Safeco Funds;
o The resources of Pioneer, including its infrastructure in shareholder
services;
o The opportunity to be part of a significantly larger family of funds,
with additional product offerings and enhanced shareholder servicing
options;
o Pioneer's commitment until December 10, 2006, or such later date that
is the second anniversary of the day on which each Reorganization
closes (the "Closing Date"), to limit the expenses of the Investor
Class shares of each Pioneer Fund; and
o Shareholders who own shares in their name as of the closing of the
Reorganizations (i.e., not in the name of a broker or other
intermediary) and maintain their account may purchase Class A shares
of the corresponding Pioneer Fund through such account in the future
or may exchange those shares for Class A shares of another Pioneer
Fund or purchase Class A share of another Pioneer Fund without paying
any sales charge. Investor Class shares will not be offered after the
Reorganizations.
How Each Reorganization will Work
o Safeco Fund shareholder-directed exchanges and purchases made by
check, ACH, or wire will be accepted up until 1 p.m. (Pacific Time) on
Wednesday, December 8, 2004. Exchange and purchase requests received
after this deadline will be rejected and returned. Purchase and
exchange requests made by Safeco Fund shareholders through financial
institutions or advisers must do so earlier to ensure the trade can be
processed within this deadline. Financial institutions and advisers
that trade electronically (NSCC) with the Safeco Funds can place
exchange and purchase requests up until 1 p.m. (Pacific Time) on
Tuesday, December 7, 2004. Exchanges and purchases received after this
deadline will be rejected and returned. The Safeco Funds will not
process purchases made via
3
automatic investment method (AIM) after December 8, 2004.
Dividend/capital gain reinvestment and established systematic
exchanges will continue through December 10, 2004.
o Each Safeco Fund will transfer all of its assets to a corresponding
Pioneer Fund. Each Pioneer Fund will assume the corresponding Safeco
Fund's liabilities that are included in the calculation of such Safeco
Fund's net asset value on the Closing Date.
o Each Pioneer Fund will issue Investor Class shares to the
corresponding Safeco Fund in amounts equal to the aggregate net asset
value of that Safeco Fund's shares. Shareholders of your Safeco Fund
will receive Investor Class shares of the corresponding Pioneer Fund.
These shares will be distributed to shareholders in proportion to the
relative net asset value of their share holdings on the Closing Date.
On the Closing Date, shareholders will hold the shares of the Pioneer
Fund with the same aggregate net asset value as the shares of your
Safeco Fund that you held immediately prior to the Reorganization.
o Each Safeco Fund will be dissolved after the Closing Date.
o Shares of the Investor Class of a Pioneer Fund will automatically
convert to Class A shares of the Pioneer Fund at the end of the
calendar month that is two years after the Closing Date.
o Pioneer acts as investment adviser to each Pioneer Fund. Until
December 10, 2006, or such later date that is the second anniversary
of the Closing Date, Pioneer has agreed to limit each Pioneer Fund's
expenses (excluding extraordinary expenses) for Investor Class shares.
Pioneer is not required to limit any expenses after December 10, 2006,
or such later date that is the second anniversary of the Closing Date.
o The Reorganizations are intended to result in no income, gain or loss
being recognized for federal income tax purposes to any of the Pioneer
Funds, the Safeco Funds or the shareholders of the Safeco Funds.
o In recommending each of the Reorganizations, the Trustees of your
Safeco Fund have determined that the Reorganization is in the best
interest of your Safeco Fund and will not dilute the interests of
shareholders of your Safeco Fund. The Trustees have made that
determination on the basis of the factors listed above and discussed
in more detail under each proposal. A reorganization might not be in
the best interest of the shareholders of a mutual fund if the
surviving fund had higher expenses, less experienced management or the
adviser did not have adequate resources to manage the affairs of the
mutual fund.
o If the Reorganizations are approved, the Safeco Trust will file with
the SEC an application for deregistration on Form N-8F under the
Investment Company Act of 1940, as amended (the "Investment Company
Act"), and will cease to exist as an investment company when such
application is approved.
Who is Pioneer
Pioneer is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended, and acts as investment adviser to mutual funds
and institutional accounts. Pioneer or its predecessors have been managing
mutual funds since 1928 and at June 30, 2004 had, together with its affiliates,
over $35 billion in assets under management. Pioneer is an indirect,
wholly-owned subsidiary of UniCredito Italiano S.p.A., an Italian Bank.
In addition to the Investor Class shares to be issued in the
Reorganization, each Pioneer Fund also offers Class A shares (subject to an
initial sales load and a Rule 12b-1 Plan), Class B shares (subject to a
contingent deferred sales charge and a Rule 12b-1 Plan), and Class C shares
(subject to a contingent deferred sales charge and a Rule 12b-1 Plan). In
addition, most of the Pioneer Funds also offer Class Y shares (which are an
institutional class of shares and are not subject to a sales charge or a Rule
12b-1 Plan) and Class R shares (which are offered only to certain retirement
plans).
Who Bears the Expenses Associated with the Reorganizations
Pioneer and Symetra will pay all out of pocket expenses of the Safeco Funds
and the Pioneer Funds associated with the Reorganizations, including, but not
limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses of
any proxy solicitation firm retained in connection with the Reorganizations; (3)
the legal fees and expenses incurred by the Safeco Funds in connection with the
Reorganizations; and (4) the Trustees' fees and out of pocket expenses incurred
as a result of the Reorganizations.
Will Pioneer and Symetra Benefit from the Reorganizations
Pioneer will benefit from managing a larger pool of assets. Pioneer is also
acquiring certain assets associated with SAM's mutual funds and institutional
account advisory business. In consideration for the acquisition of these assets
and certain covenants from Symetra
4
and SAM, including their assistance in facilitating the Reorganizations and
their obligation to indemnify Pioneer against certain liabilities, Pioneer has
agreed to pay Symetra up to $30 million. This amount is subject to downward
adjustment if the net assets of the Safeco Funds that approve the
Reorganizations (together with assets in certain other accounts) are less than
$2.6 billion. Under this agreement, Pioneer and Symetra have also agreed, among
other things, that (i) once the Investor Class converts to Class A shares,
Pioneer Funds Distributor, Inc. ("PFD"), the principal underwriter of the
Pioneer Funds, shall make payments to Safeco Securities, Inc. ("Safeco
Securities") pursuant to a Rule 12b-1 plan equal to 0.25% of the average daily
net assets attributable to accounts maintained by former shareholders of the
Safeco Funds; (ii) PFD will make additional continuing payments out of its own
resources to Safeco Securities, following Pioneer's acquisition of assets from
SAM, at an annual rate of 0.05% of the average daily net assets of any Pioneer
Fund held by or for the account of any former shareholders of the Safeco Funds
(including assets invested in any Pioneer Fund as a result of the Reorganization
or otherwise) and, in connection with purchases of shares of the Pioneer Funds
by former shareholders of the Safeco Funds after the acquisition, PFD will pay
out of its own resources to Safeco Securities an amount equal to 0.20% of the
amount of such purchases; and (iii) Symetra and SAM will be subject to certain
non-competition provisions.
Why is an Interim Investment Advisory Agreements being Voted On
Having determined to recommend the Reorganizations, the Trustees elected to
appoint Pioneer as investment adviser to each Safeco Fund until the closing of
the Reorganizations given that Symetra had indicated that it did not wish to
continue to offer investment advisory services to the Safeco Funds. In
connection with the retention of Pioneer, the sub-advisory agreement with Bank
of Ireland Asset Management (U.S.) Limited with respect to Safeco International
Stock Fund, and the sub-advisory agreement with RCM Capital Management LLC with
respect to Safeco Large-Cap Growth Fund, were terminated.
Under the Investment Company Act, shareholders must approve any new
investment advisory agreement for a Safeco Fund. However, Rule 15a-4 under the
Investment Company Act permits the Board to appoint an adviser on an interim
basis without prior shareholders' approval of an investment advisory agreement
with the adviser if the new adviser agrees to provide such services on the same
terms as the previous adviser. An adviser may act on such an interim basis for a
period of 150 days. Because Pioneer will be making the payment to Symetra as
discussed above, any fees that Pioneer would be entitled to under the interim
investment advisory agreement will be held in escrow until shareholder approval
of the agreement is obtained. If shareholders of a Safeco Fund do not approve
the interim investment advisory agreement, Pioneer will not receive the fee
under the current investment advisory agreement with SAM but instead would be
paid a fee based upon Pioneer's cost in managing the Fund. If the
Reorganizations and the interim investment advisory agreements are not approved
by December 30, 2004, Pioneer will no longer provide advisory services to the
Safeco Funds, unless an extension of the 150 -day period is permitted by a rule
or independent position of the staff of the SEC. If both the Reorganization and
appointment of Pioneer are approved, the interim investment advisory agreement
will continue in effect until the closing of the Reorganization.
What Happens if a Reorganization is not Approved
If a Reorganization is not approved by shareholders, the Board will
consider what action to take. Such action could include liquidating the Safeco
Fund or seeking SEC relief to permit Pioneer to serve as investment adviser
beyond the 150-day limitation period.
5
Who is Eligible to Vote
Shareholders of record on October 8, 2004 are entitled to attend and vote
at the Meeting or any adjournment of the Meeting. On each proposal, all
shareholders of a Safeco Fund, regardless of the class of shares held, will vote
together as a single class. Each share is entitled to one vote. Shares
represented by properly executed proxies, unless revoked before or at the
Meeting, will be voted according to shareholders' instructions. If you sign a
proxy but do not fill in a vote, your shares will be voted to approve the
Agreement and Plan of Reorganization and the interim advisory agreement with
Pioneer. If any other business comes before the Meeting, your shares will be
voted at the discretion of the persons named as proxies.
TABLE OF CONTENTS
Page
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INTRODUCTION .............................................................................
PROPOSAL 1(a) -- SAFECO BALANCED FUND .................................................... 7
PROPOSAL 1(b) -- SAFECO CORE EQUITY FUND ................................................. 20
PROPOSAL 1(c) -- SAFECO GROWTH OPPORTUNITIES FUND ........................................ 33
PROPOSAL 1(d) -- SAFECO INTERNATIONAL STOCK FUND ......................................... 46
PROPOSAL 1(e) -- SAFECO LARGE-CAP GROWTH FUND ............................................ 60
PROPOSAL 1(f) -- SAFECO LARGE-CAP VALUE FUND ............................................. 74
PROPOSAL 1(g) -- SAFECO MULTI-CAP CORE FUND .............................................. 88
PROPOSAL 1(h) -- SAFECO SMALL-CAP VALUE FUND ............................................. 104
TERMS OF EACH AGREEMENT AND PLAN OF REORGANIZATION ....................................... 118
TAX STATUS OF EACH REORGANIZATION ........................................................ 119
PROPOSAL 2(a)-(h) -- APPROVAL OF AN INTERIM INVESTMENT ADVISORY AGREEMENT WITH PIONEER ... 120
VOTING RIGHTS AND REQUIRED VOTE .......................................................... 122
ADDITIONAL INFORMATION ABOUT THE PIONEER FUNDS ........................................... 122
FINANCIAL HIGHLIGHTS ..................................................................... 129
INFORMATION CONCERNING THE MEETING ....................................................... 136
OWNERSHIP OF SHARES OF THE FUNDS ......................................................... 138
EXPERTS .................................................................................. 146
AVAILABLE INFORMATION .................................................................... 146
EXHIBIT A-1 -- FORM OF AGREEMENT AND PLAN OF REORGANIZATION (C/D) ........................ A-1
EXHIBIT A-2 -- FORM OF AGREEMENT AND PLAN OF REORGANIZATION (F) .......................... A-22
EXHIBIT B -- FORM OF INTERIM ADVISORY AGREEMENT .......................................... B-1
EXHIBIT C -- ADDITIONAL INFORMATION REGARDING PIONEER .................................... C-1
EXHIBIT D -- PORTFOLIO MANAGER'S DISCUSSION OF PERFORMANCE ............................... D-1
6
Safeco Balanced Fund and
Pioneer Balanced Fund
PROPOSAL 1(a)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in
this Proxy Statement/Prospectus or incorporated herein. You should read
carefully the entire Proxy Statement/Prospectus, including the form of Agreement
and Plan of Reorganization attached as EXHIBIT A-1 because they contain details
that are not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor Class
shares, Pioneer is not required to limit the expenses attributable to Class A
shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco Balanced Fund to the Pioneer Balanced Fund
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Safeco Balanced Fund Pioneer Balanced Fund
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Business A series of Safeco Common Stock Trust, A diversified open-end management
a diversified open-end management investment company registered under the
investment company organized as a Investment Company Act and organized as
Delaware statutory trust. a Delaware statutory trust.
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Net assets as of $19.5 million $132 million
June 30, 2004
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Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers (until August 2, 2004): Portfolio Managers:
Rex L. Bentley (since 1996) Day-to-day management of the Fund's
Lynette D. Sagvold (since 1996) portfolio is the responsibility of co-managers
Greg Card (since 2004) Timothy Mulrenan (equity securities) and
Tim Hokari (since 2004) Richard Schlanger (fixed income securities).
Lesley Fox (since 2004)
Nancy McFadden (since 2004) Mr. Mulrenan joined Pioneer in 1997 and has
managed portfolios since 1998. Mr. Schlanger
Currently Pioneer is acting as investment joined Pioneer in 1988.
adviser to Safeco Balanced Fund. The Portfolio
Managers of Pioneer Balanced Fund, as
indicated in the next column, currently manage
Safeco Balanced Fund.
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Investment objective Safeco Balanced Fund seeks growth and Pioneer Balanced Fund seeks capital growth
income consistent with the preservation and current income by actively managing
of capital. a diversified portfolio of equity securities
and bonds.
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The investment objective of each Fund is fundamental and cannot be changed without
shareholder approval.
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7
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Safeco Balanced Fund Pioneer Balanced Fund
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Primary investments Under normal market conditions, Safeco Under normal market conditions, Pioneer
Balanced Fund invests from 50% to 70% of its Balanced Fund invests in a diversified portfolio
assets in common stocks and at least 25% of of equity securities and bonds. Pioneer
its assets in debt securities. allocates the Fund's assets between equity
and debt securities based on its assessment
of current business, economic and market
conditions. Normally, equity and debt
securities each represent 75% and 25%,
respectively, of the Fund's net assets.
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Investment strategies Safeco Balanced Fund seeks growth and Pioneer Balanced Fund uses a blended value/
income consistent with the preservation of growth style of management. In selecting
capital through a "disciplined value" approach. equity securities, the Fund seeks securities
selling at reasonable prices and then holds
When evaluating a stock to purchase for the these securities until the market values
Fund, SAM historically looked for companies reflect their intrinsic values. In selecting debt
having one or more of the following securities, the Fund considers both broad
characteristics: economic factors and issuer specific factors.
o Undervalued stock price as measured by
price-to-earnings ratios and dividend
potential relative to comparable companies
o Potential to beat the S&P 500 Index average
for risk adjusted returns over the next
three-to five-year outlook
o Good long-term growth potential
When evaluating a debt security to buy for
the Fund, SAM historically considered
factors such as:
o The issuer's creditworthiness
o The sensitivity of the security to changes in
interest rates
o The level to which that market sector is
already represented by the Fund's assets
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Other investments Safeco Balanced Fund may invest up to 10% Pioneer Balanced Fund may invest up to
of its net assets in debt securities may be 10% of its total assets in debt securities
invested in below investment grade bonds. rated below investment grade, including
convertible debt.
The Fund may invest up to 25% of its total
assets in real estate investment trusts.
Up to 25% of the Fund's total assets may
e invested in equity and debt securities of
non-U.S. issuers.
The Fund will not invest more than 5% of
its total assets in the securities of emerging
markets issuers.
The Fund may invest in U.S. government
securities, mortgage-backed and asset-
backed securities.
- ------------------------------------------------------------------------------------------------------------------------------------
8
- ------------------------------------------------------------------------------------------------------------------------------------
Safeco Balanced Fund Pioneer Balanced Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Temporary defensive Safeco Balanced Fund may hold cash or invest Pioneer Balanced Fund may invest all or part
strategies in high-quality, short-term securities issued of its assets in securities with remaining
by an agency or instrumentality of the U.S. maturities of less than one year, cash
government, high-quality commercial paper, equivalents or may hold cash.
certificates of deposit, shares of no-load,
open-end money market funds, or
repurchase agreements.
- ------------------------------------------------------------------------------------------------------------------------------------
Diversification Each Fund is diversified for the purpose of the Investment Company Act and each Fund is
subject to diversification requirements under the Internal Revenue Code of 1986, as amended
(the "Code").
- ------------------------------------------------------------------------------------------------------------------------------------
Industry concentration Each Fund may not invest more than 25% of its assets in any one industry.
- ------------------------------------------------------------------------------------------------------------------------------------
Restricted and illiquid If immediately after and as a result of such Pioneer Balanced Fund may not invest more
securities action the value of the following securities, in than 15% of its net assets in securities which
the aggregate, would exceed 15% of Safeco are illiquid and other securities which are not
Balanced Fund's net assets, the Fund will not readily marketable.
(i) purchase securities for which there is no
readily available market, (ii) purchase time
deposits maturing in more than seven days,
(iii) purchase over-the-counter (OTC) options
or hold assets set aside to cover OTC options
written by the Fund, (iv) enter into repurchase
agreements maturing in more than seven
days, or (v) invest in interests in real estate
investment trusts which are not readily
marketable or interests in real estate limited
partnerships which are not listed or traded
on the NASDAQ Stock Market.
- ------------------------------------------------------------------------------------------------------------------------------------
Borrowing Safeco Balanced Fund may borrow money Pioneer Balanced Fund may not borrow
(i) from banks or (ii) by engaging in reverse money, except the Fund may: (a) borrow
repurchase agreements. from banks or through reverse repurchase
agreements in an amount up to 331/3% of
the Fund's total assets (including the amount
borrowed); (b) to the extent permitted by
applicable law, borrow up to an additional 5%
of the Fund's assets for temporary purposes;
(c) obtain such short-term credits as are
necessary for the clearance of portfolio
transactions; (d) purchase securities on
margin to the extent permitted by applicable
law; and (e) engage in transactions in
mortgage dollar rolls that are accounted for
as financings.
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Lending Safeco Balanced Fund may lend securities to Pioneer Balanced Fund may make both short-
qualified institutional investors with a value term (nine months or less) and long-term
of up to 33% of the Fund's total assets. loans of its portfolio securities to the extent
of 30% of the value of the Fund's total assets
computed at the time of making such loans.
- ------------------------------------------------------------------------------------------------------------------------------------
9
- ------------------------------------------------------------------------------------------------------------------------------------
Safeco Balanced Fund Pioneer Balanced Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Derivative instruments Safeco Balanced Fund may write a put or call Pioneer Balanced Fund may use futures and
option if, as a result thereof, the aggregate options on securities, indices and currencies,
value of the assets underlying all such options forward currency exchange contracts and
does not exceed 25% of the Fund's net assets. other derivatives. The Fund does not use
The Fund may purchase a put or call option derivatives as a primary investment technique
or option on a futures contract if, as a result and generally limits their use to hedging.
thereof, the aggregate premiums paid on all However, the Fund may use derivatives for a
options or options on futures contracts held variety of non-principal purposes, including:
by the Fund do not exceed 20% of the Fund's
net assets. o As a hedge against adverse changes
in stock market prices, interest rates
The Fund may enter into any futures contract or currency exchange rates
or option on futures contract if, as a result o As a substitute for purchasing or
thereof, the aggregate margin deposits and selling securities
premiums required on all such instruments o To increase the Fund's return as a
do not exceed 5% of the Fund's net assets. non-hedging strategy that may be
considered speculative
The Fund may not purchase securities on
margin. However, the Fund may (i) obtain
short-term credits as necessary to clear
its purchases and sales of securities, and
(ii) make margin deposits in connection
with its use of financial options and futures,
forward and spot currency contracts, swap
transactions and other financial contracts or
derivative instruments.
- ------------------------------------------------------------------------------------------------------------------------------------
Other investment policies and As described above, the Funds have substantially similar principal investment strategies and
restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Fund's other investment policies and fundamental and non-
fundamental investment restrictions, see the SAI.
- ------------------------------------------------------------------------------------------------------------------------------------
Buying, Selling and Exchanging Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer Balanced
of the Fund are subject to a 5.75% front-end Fund you receive in the Reorganization will
sales charge. not be subject to any sales charge. Moreover,
if you own shares in your own name as of the
Contingent deferred sales charge of up to 5% closing of the Reorganization (i.e., not in the
if you redeem Class B shares within six years name of a broker or other intermediary) and
of purchase. maintain your account, you may purchase
Class A shares of Pioneer Balanced Fund and
Contingent deferred sales charge of 1% if Class A shares of any Fund in the Pioneer
you redeem Class C shares within one year family of funds through such account in the
of purchase. future without paying any sales charge.
Purchases of Investor Class shares of the Fund Except as described above, Class A shares
are not subject to a sales load. of Pioneer Balanced Fund are subject to a
front-end sales charge of up to 4.50%.
The Fund assesses a mandatory redemption
fee of 2%, as a percentage of the amount
redeemed or exchanged, on Class A and
Investor Class shares held less than 30 days.
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10
- ------------------------------------------------------------------------------------------------------------------------------------
Safeco Balanced Fund Pioneer Balanced Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Management and other fees Safeco Balanced Fund pays an advisory fee on a Pioneer Balanced Fund pays Pioneer a
monthly basis at an annual rate as follows: management fee equal to Pioneer's annual fee
is equal to the Fund's average daily net assets
$0-$250,000,000: 0.70 of 1% as follows:
$250,000,001-$750,000,000: 0.65 of 1%
$750,000,001-$1,250,000,000: 0.60 of 1% $0-$1 billion: 0.65%
Over $1,250,000,000: 0.55 of 1% Next $4 billion: 0.60%
Over $5 billion: 0.55%
SAM serves as administrator and fund
accounting agent for the Fund. The Fund pays During its most recent fiscal year, Pioneer
SAM an administrative services fee of 0.05% Balanced Fund paid an advisory fee at an
of the Fund's average daily net assets up to the average rate of 0.65% of average daily
first $200,000,000 and 0.01% of its net assets net assets.
thereafter, and an accounting fee of 0.04% of
the Fund's average daily net assets up to the In addition, the Fund reimburses Pioneer for
first $200,000,000 and 0.01% of its net certain fund accounting and legal expenses
assets thereafter. incurred on behalf of the Fund and pays
a separate shareholder servicing/transfer
During its most recent fiscal year, Safeco agency fee to Pioneer Investment Management
Balanced Fund paid aggregate advisory and Shareholder Services, Inc. ("PIMSS"), an
administration fees at an average rate of affiliate of Pioneer.
0.79% of average daily net assets.
SAM had contractually agreed until April 30, For the fiscal year ended December 31, 2003,
2009, to pay certain fund operating expenses the Fund's total annual operating expenses for
(but not all of the operating expenses of the Class A shares were 1.38% of average daily
Fund) that exceeded the rate of 0.40% per net assets. The Fund does not currently have
annum of the Fund's average daily net assets. an expense limitation for its Class A shares.
This arrangement included all Fund operating
expenses except management fees, Rule 12b-1 Pioneer has agreed until the second anniversary
fees, brokerage commissions, interest, and of the closing of the Reorganization to limit the
extraordinary expenses. expenses (excluding extraordinary expenses) of
the Investor Class to 1.10% of the average daily
For the fiscal year ended December 31, 2003, net assets attributable to the Investor Class.
the Fund's annual operating expenses for Class A
shares, after giving effect to the expense The Investor Class Shares to be issued in
limitation were 1.35%, and without giving effect the Reorganization will convert to Class A
to the expense limitation, were 1.93% per share. shares after two years. Class A shares will
have higher expenses per share than Investor
For the fiscal year ended December 31, 2003, Class Shares due to the Rule 12b-1 Plan. In
the Fund's annual operating expenses for Class B addition, although Pioneer has agreed to limit
shares, after giving effect to the expense the expenses attributable to Investor Class
limitation were 2.10%, and without giving effect shares, Pioneer is not required to limit the
to the expense limitation, were 2.75% per share. expenses attributable to Class A shares.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class C
shares, after giving effect to the expense limitation
were 2.10%, and without giving effect to the
expense limitation, were 42.09% per share.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Investor Class shares, after giving effect to the
expense limitation were 1.10%, and without
giving effect to the expense limitation, were
1.43% per share.
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11
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Safeco Balanced Fund Pioneer Balanced Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class
(12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject
to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
- ------------------------------------------------------------------------------------------------------------------------------------
Buying shares You may buy shares of the Fund directly You may buy shares from any investment firm
through Safeco Securities, the Fund's principal that has a sales agreement with PFD. Existing
underwriter or through brokers, registered shareholders of Safeco Balanced Fund who
investment advisers, banks and other financial own shares in their own name as of the
institutions that have entered into selling closing date of the Reorganization and who
agreements with the Fund's principal underwriter, maintain their accounts may buy shares of
as described in the Fund's prospectus. any fund in the Pioneer family of funds
through such accounts in the future without
Certain account transactions may be done by paying sales charges.
telephone.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
Balanced Fund by telephone or online.
- ------------------------------------------------------------------------------------------------------------------------------------
Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer
acquire through dividend reinvestment or other Balanced Fund without incurring any fee on
fund distributions or for shares that you have the exchange with the more than 62 other
exchanged for shares of the same class of Pioneer Funds. Your exchange would be for
another Fund. Class A shares, which would be subject to
a Rule 12b-1 fee. An exchange generally is
Certain account transactions may be done by treated as a sale and a new purchase of
telephone. shares for federal income tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer Balanced
Fund for shares of other Pioneer Funds by
telephone or online.
- ------------------------------------------------------------------------------------------------------------------------------------
Selling shares Investor Class and Class A shares will be sold at net asset value per share next calculated after
each Fund receives your request in good order.
- ------------------------------------------------------------------------------------------------------------------------------------
You may sell your shares by contacting the Normally, your investment firm will send your
Fund directly in writing or by contacting a request to sell shares to PIMSS. You can
financial intermediary as described in the also sell your shares by contacting the Fund
Fund's prospectus. directly if your account is registered in
your name.
If the account is established in the
shareholder's own name, shareholders may
also redeem shares of Pioneer Balanced Fund
by telephone or online.
- ------------------------------------------------------------------------------------------------------------------------------------
Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks. You
could lose money on your investment in either Fund or not make as much as if you
invested elsewhere if:
o The stock market goes down (this risk may be greater in the short
term)
o The Fund's equity investments do not have the growth potential
originally expected
o Stocks selected for income do not achieve the same return as
securities selected for capital growth
12
Each Fund also has risks associated with investing in debt securities. Each
Fund could underperform other investments if:
o Interest rates go up causing the value of the Fund's portfolio to
decline
o The issuer of a debt security owned by the Fund defaults on its
obligation to pay principal or interest or has its credit rating
downgraded
o During periods of declining interest rates, the issuer of a security
may exercise its option to repay earlier than scheduled, forcing the
Fund to reinvest in lower yielding securities. This is known as a call
prepayment risk
o During periods of rising interest rates, the average life of certain
types of securities may be extended because of slower than expected
principal payments. This may lock in a below market interest rate,
increase the security's duration (the estimated period until the
security is paid in full) and reduce the value of the security. This
is known as an extension risk
o Pioneer's judgment about the attractiveness, relative value or
potential appreciation of a particular sector, security or investment
strategy proves to be incorrect
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor Class
shares, Pioneer is not required to limit the expenses attributable to Class A
shares.
Investments in the Funds are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money by investing in either Fund.
Past Performance
Set forth below is performance information for each Fund. The bar charts
show how each Fund's total return (not including any deduction for sales
charges) has varied from year to year for each full calendar year. The tables
show average annual total return (before and after taxes) for each Fund over
time for each class of shares (including deductions for sales charges) compared
with a broad-based securities market index. The bar charts give an indication of
the risks of investing in each Fund, including the fact that you could incur a
loss and experience volatility of returns year to year. Past performance before
and after taxes does not indicate future results.
Safeco Balanced Fund -- Investor Class
Calendar Year Total Returns*
[DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT]
'97 '98 '99 '00 '01 '02 '03
16.64 12.56 1.05 5.09 -0.29 -8.74 16.90
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return was 11.10% for the quarter ended June 30, 2003, and the
lowest quarterly return was -10.04% for the quarter ended September 30,
2002.
13
Pioneer Balanced Fund -- Class A Shares
Calendar Year Total Returns*
[DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT]
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03
- -4.31 22.00 9.89 13.92 1.14 3.15 5.38 -2.87 11.20 15.99
* During the period shown in the bar chart, Pioneer Balanced Fund's highest
quarterly return was 8.99% for the quarter ended June 30, 2003, and the
lowest quarterly return was -11.66% for the quarter ended September 30,
2002.
Safeco Balanced Fund
Average Annual Total Returns as of December 31, 2003
- ---------------------------------------------------------------------------------------------------------
Since
1 Year 5 Years Inception(1)
Safeco Balanced Fund, Class A Shares*
- ---------------------------------------------------------------------------------------------------------
Return Before Taxes 9.96% 1.00% 5.48%
- ---------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(2) 9.45% 0.03% 4.12%
- ---------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(2) 6.70% 0.27% 3.94%
- ---------------------------------------------------------------------------------------------------------
Safeco Balanced Fund, Class B Shares*
- ---------------------------------------------------------------------------------------------------------
Return Before Taxes 10.79% 1.08% 5.66%
- ---------------------------------------------------------------------------------------------------------
Safeco Balanced Fund, Class C Shares*
- ---------------------------------------------------------------------------------------------------------
Return Before Taxes 14.76% 1.45% 5.53%
- ---------------------------------------------------------------------------------------------------------
Safeco Balanced Fund, Investor Class Shares*
- ---------------------------------------------------------------------------------------------------------
Return Before Taxes 16.90% 2.47% 6.55%
- ---------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(2) 16.29% 1.37% 5.06%
- ---------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(2) 11.26% 1.45% 4.79%
- ---------------------------------------------------------------------------------------------------------
S&P 500 Index3
(reflects no deduction for fees, expenses or taxes) 28.67% -0.57% 9.02%
- ---------------------------------------------------------------------------------------------------------
60% Russell 1000 Value/40% Lehman Brothers Aggregate Bond Index(3)
(reflects no deduction for fees, expenses or taxes) 19.66% 4.79% 9.11%
- ---------------------------------------------------------------------------------------------------------
* Returns for Class A, Class B and Class C shares have not been restated to
reflect Rule 12b-1 fees prior to September 30, 1996, and would be lower if
they were.
14
(1) The Fund commenced operations on January 31, 1996.
(2) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(3) The S&P 500 Index, an unmanaged index of 500 stocks, and the 60/40
combination of the Russell 1000 Value Index and the Lehman Brothers
Aggregate Bond Index, are for reference only and do not mirror the Fund's
investments.
Pioneer Balanced Fund -- Class A Shares
Average Annual Total Returns as of December 31, 2003
- -----------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
Pioneer Balanced Fund, Class A Shares
- -----------------------------------------------------------------------------------------------------
Return Before Taxes 10.78% 0.76% 4.38%
- -----------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 10.19% -0.11% 2.40%
- -----------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 6.98% 0.10% 2.56%
- -----------------------------------------------------------------------------------------------------
S&P 500 Index(2)
(reflects no deduction for fees, expenses or taxes) 28.67% -0.57% 11.06%
- -----------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index(3)
(reflects no deduction for fees, expenses or taxes) 4.10% 6.62% 6.95%
- -----------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(2) The S&P 500 Index, an unmanaged index of 500 stocks, is for reference only
and does not mirror the Fund's investments.
(3) The Lehman Brothers Aggregate Bond Index is for reference only and does not
mirror the Fund's investments.
Pioneer Balanced Fund's Investor Class shares will not be outstanding prior
to the closing of the Reorganization and consequently have no performance
history. However, the performance record of the Investor Class would be modestly
higher than the performance of Class A shares due to the lower expenses
applicable to the Investor Class.
The most recent portfolio manager's discussion of each Fund's performance
is attached as Exhibit D.
15
The Funds' Fees and Expenses
Shareholders of both Funds pay various fees and expenses, either directly
or indirectly. The tables below show the fees and expenses that you would pay if
you were to buy and hold shares of each Fund. The expenses in the tables
appearing below are based on (i) for your Safeco Fund, the expenses of your
Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer Balanced
Fund, the expenses of Pioneer Balanced Fund for the period ended December 31,
2003. Future expenses for all share classes may be greater or less.
Pro Forma
Safeco Pioneer
Safeco Safeco Safeco Balanced Balanced
Balanced Balanced Balanced Fund Fund
Fund Fund Fund Investor Investor
Class A Class B Class C Class Class9
Shareholder transaction fees (paid directly from your investment) -------- -------- -------- -------- ---------
Maximum sales charge (load) when you buy shares as a percentage
of offering price .................................................. 5.75%(6) None None None None(1)
Maximum deferred sales charge (load) as a % of purchase price or the
amount you receive when you sell shares, whichever is less ......... None 5.00%(7) 1.00%(8) None None
Redemption fees for shares held less than 30 days ................... 2.00% None None 2.00% None
Wire redemption fee ................................................. $ 20(4) $ 20(4) $ 20(4) $ 20(4) $ 10
Annual low balance fee .............................................. $ 12(5) $ 12(5) $ 12(5) $ 12(5) None
Annual fund operating expenses (deducted from fund assets)
(as a % of average net assets)
Management fee ...................................................... 0.70% 0.70% 0.70% 0.70% 0.65%
Distribution and service (12b-1) fee ................................ 0.25% 1.00% 1.00% None None
Other expenses ...................................................... 0.98% 1.05% 40.39% 0.73% 0.61%
Total fund operating expenses ....................................... 1.93% 2.75% 42.09% 1.43% 1.26%
Expense reimbursement/reduction ..................................... 0.58%(2) 0.65%(2) 39.99%(2) 0.33%(2) 0.16%(3)
Net fund operating expenses ......................................... 1.35% 2.10% 2.10% 1.10% 1.10%
- ----------
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer Balanced Fund through the Reorganization. In addition, shareholders
of your Safeco Fund who own shares in their own name (i.e., not in the name
of a broker or other intermediary) and maintain such account as of the
closing of the Reorganization may purchase Class A shares of Pioneer
Balanced Fund or of any fund in the Pioneer family of funds through such
account in the future without paying a sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco
Balanced Fund for certain Fund operating expenses (but not all of the
operating expenses of the Fund) that exceeded the rate of 0.40% per annum
of the Fund's average daily net assets. This arrangement included all fund
operating expenses except management fees, Rule 12b-1 fees, brokerage
commissions, interest, and extraordinary expenses.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer Balanced
Fund to 1.10% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once each year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions made in the first twelve months except with
respect to participant-directed redemptions from qualified retirement
plans.
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after six years from purchase, and the Class B shares
convert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
(9) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares. Class A shares do not currently have an
expense limitation.
16
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect for five years for
Safeco Balanced Fund and two years for Pioneer Balanced Fund and (f) the
Investor Class shares of Pioneer Balanced Fund convert to Class A shares after
two years. The examples are for comparison purposes only and are not a
representation of either Fund's actual expenses or returns, either past or
future.
Example
Safeco Balanced Fund
Class A Shares
Year 1 ........................ $ 705
Year 3 ........................ $ 978
Year 5 ........................ $1,272
Year 10 ....................... $2,447
With Without
Class B Shares redemption redemption
Year 1 .............. $ 713 $ 213
Year 3 .............. $ 958 $ 658
Year 5 .............. $1,329 $1,129
Year 10 ............. $2,418 $2,418
With Without
Class C Shares redemption redemption
Year 1 .............. $ 313 $ 213
Year 3 .............. $ 658 $ 658
Year 5 .............. $1,129 $1,129
Year 10 ............. $2,658 $2,658
Investor Class Shares
Year 1 ........................ $ 112
Year 3 ........................ $ 373
Year 5 ........................ $ 677
Year 10 ....................... $1,541
Pro Forma Pioneer Balanced Fund
Investor Class Shares
Year 1 ........................ $ 112
Year 3 ........................ $ 373
Year 5 ........................ $ 677
Year 10 ....................... $1,541
17
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco Balanced Fund. The Trustees considered the following
matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Fund until August 2, 2004, was
acquired by Symetra. Symetra informed the Trustees that it did not intend to
continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the investment performance of Pioneer Balanced Fund is comparable
to the investment performance of your Safeco Fund. For the five year period
ended June 30, 2004, Class A shares of Pioneer Balanced Fund had an average
annual return of 1.34% compared to an average annual return of the Class A
shares and Investor shares of your Safeco Fund of 0.32% and 1.78%, respectively,
during the same period. In addition, the Trustees considered the track record of
Pioneer in managing equity and fixed income mutual funds.
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutions and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholder account
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market fund
that will be available to your Safeco Fund's shareholders through exchanges. In
addition, Pioneer offers shareholders additional options for their accounts,
including the ability to transact and exchange shares over the telephone or
online and the ability to access account values and transaction history in all
of the shareholder's direct accounts in the Pioneer Funds over the telephone or
online.
Fourth, Pioneer Balanced Fund's lower gross operating expenses and
Pioneer's commitment until the second anniversary of the Reorganization to limit
the expenses (excluding extraordinary expenses) of the Investor Class of Pioneer
Balanced Fund to 1.10% of average daily net assets. This expense ratio is below
the gross expenses of each class of shares of your Safeco Fund and is the same
or lower than expenses net of expense reimbursement of each class of shares of
your Safeco Fund.
Fifth, the substantially larger size of Pioneer Balanced Fund offers
greater opportunity for diversification of the investment portfolio, which
should help to reduce risks.
Sixth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
Seventh, the Investor Class shares of Pioneer Balanced Fund received in the
Reorganization will provide Safeco Balanced Fund shareholders with exposure to
substantially the same investment product as they currently have.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco Funds
and the Pioneer Funds associated with the Reorganizations, including, but not
limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses of
any proxy solicitation firm retained in connection with the Reorganizations; (3)
the legal fees and expenses incurred by the Safeco Funds in connection with the
Reorganizations; and (4) the Trustees' fees and out of pocket expenses incurred
as a result of the Reorganizations.
The Trustees also considered that Pioneer and Symetra will benefit from the
Reorganization. See "Certain Agreements between Pioneer and Symetra."
The Board of Trustees of Pioneer Balanced Fund also considered that the
Reorganization presents an excellent opportunity for the Pioneer Balanced Fund
to acquire investment assets without the obligation to pay commissions or other
transaction costs that a fund normally incurs when purchasing securities. This
opportunity provides an economic benefit to Pioneer Balanced Fund and its
shareholders.
18
CAPITALIZATION
The following table sets forth the capitalization of each Fund as of June
30, 2004, and the pro forma capitalization of the combined Fund as of June 30,
2004.
Pro Forma
Safeco Pioneer Pioneer
Balanced Balanced Balanced
Fund Fund Fund
June 30, 2004 June 30, 2004 June 30, 2004
--------------- --------------- --------------
Total Net Assets (in thousands) $ 19,459 $ 132,104 $ 151,563
Class A shares ................ $ 1,784 $ 103,881 $ 103,881
Class B shares ................ $ 1,622 $ 18,462 $ 18,462
Class C shares ................ $ 109 $ 9,761 $ 9,761
Investor Class shares ......... $ 15,944 N/A $ 19,459
Net Asset Value Per Share
Class A shares ................ $ 11.88 $ 9.57 $ 9.57
Class B shares ................ $ 11.84 $ 9.47 $ 9.47
Class C shares ................ $ 11.84 $ 9.54 $ 9.54
Investor Class shares ......... $ 11.83 N/A $ 9.57
Shares Outstanding
Class A shares ................ 150,124 10,851,975 10,851,975
Class B shares ................ 137,010 1,949,543 1,949,543
Class C shares ................ 9,194 1,023,264 1,023,264
Investor Class shares ......... 1,347,406 N/A 2,033,333
It is impossible to predict how many shares of Pioneer Balanced Fund will
actually be received and distributed by your Safeco Fund on the Reorganization
date. The table should not be relied upon to determine the amount of Pioneer
Balanced Fund's shares that will actually be received and distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund. Similarly,
the board of trustees of Pioneer Balanced Fund, including its Independent
Trustees, approved the Reorganization. They also determined that the
Reorganization is in the best interests of Pioneer Balanced Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
19
Safeco Core Equity Fund and
Pioneer Fund
PROPOSAL 1(b)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in
this Proxy Statement/Prospectus or incorporated herein. You should read
carefully the entire Proxy Statement/Prospectus, including the form of Agreement
and Plan of Reorganization attached as EXHIBIT A-1 because they contain details
that are not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor Class
shares, Pioneer is not required to limit the expenses attributable to Class A
shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco Core Equity Fund to the Pioneer Fund
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Safeco Core Equity Fund Pioneer Fund
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Business A series of Safeco Common Stock Trust, A diversified open-end management
a diversified open-end management investment company registered under
investment company organized as a the Investment Company Act organized as
Delaware statutory trust. a Delaware statutory trust.
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Net assets as of $694.6 million $6,321 million
June 30, 2004
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Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers (until August 2, 2004): Portfolio Managers:
Richard D. Meagley (since 1995) Day-to-day management of the Pioneer Fund's
Darcy MacLaren (since 2003) portfolio is the responsibility of John A. Carey
and Walter Hunnewell, Jr. Mr. Carey joined
Currently Pioneer is acting as investment Pioneer in 1979 and Mr. Hunnewell joined
adviser to the Safeco Core Equity Fund. The pioneer in 2001.
Portfolio Managers of the Pioneer Fund, as
indicated in the next column, currently
manage your Safeco Fund.
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Investment objective Safeco Core Equity Fund seeks long-term Pioneer Fund seeks reasonable income and
growth of capital and reasonable current capital growth through investments primarily
income. in equity securities of U.S. issuers.
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The investment objective of each Fund is fundamental and cannot be changed without
shareholder approval.
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Primary investments Under normal market conditions, Safeco Core Pioneer Fund invests a major portion of
Equity Fund invests at least 80% of net assets its assets in equity securities, primarily of
(plus any borrowings for investment purposes) U.S. issuers. For purposes of the Fund's
in equity securities and, to a much lesser investment policies, equity securities include
extent, invests in equity related securities. common stocks, convertible debt and other
equity instruments such as depositary
receipts, warrants, rights and preferred stock.
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20
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Safeco Core Equity Fund Pioneer Fund
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Investment strategies Safeco Core Equity Fund seeks investments Pioneer Fund uses a "value" style of
in fundamentally sound companies with good management and seeks securities selling at
long-term potential. SAM historically evaluated reasonable prices or substantial discounts to
numerous measures such as current valuation, their underlying values and then holds these
profitability, management, competitive position securities until the market values reflect their
and financial soundness. intrinsic values. Pioneer looks at the following
factors in selecting investments: favorable
expected returns relative to perceived risk;
above average potential for earnings and
revenue growth; low market valuations relative
to earnings forecast, book value, cash flow
and sales; a sustainable competitive advantage
such as a brand name, customer base,
proprietary technology or economies of scale.
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Other investments Safeco Core Equity Fund may invest up to 20% Pioneer Fund may invest up to 10% of its
of its assets in foreign securities which are total assets in equity and debt securities of
listed on a national exchange, including non-U.S. corporate issuers and debt securities
investments in American Depositary Receipts. of non-U.S. government issuers.
The Fund may invest in securities convertible The Fund will not invest more than 5% of
into common stock, but less than 35% of its its total assets in securities of emerging
total assets will be invested in such securities. market issuers.
The Fund may invest up to 5% of its net
assets in below investment grade debt
securities issued by both U.S. and non-U.S.
corporate and government issuers.
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Temporary defensive Safeco Core Equity Fund may hold cash or Pioneer Fund may invest all or part of its
strategies invest in high-quality, short-term securities assets in securities with remaining maturities
issued by an agency or instrumentality of the of less than one year, cash equivalents or
U.S. government, high-quality commercial may hold cash.
paper, certificates of deposit, shares of
no-load, open-end money market funds,
or repurchase agreements.
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Diversification Each Fund is diversified for the purpose of the Investment Company Act and each Fund is
subject to diversification requirements under the Code.
- ------------------------------------------------------------------------------------------------------------------------------------
Industry concentration Each Fund may not invest more than 25% of its assets in any one industry.
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21
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Safeco Core Equity Fund Pioneer Fund
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Restricted and illiquid If immediately after and as a result of such Pioneer Fund may not invest more than
securities action the value of the following securities, in 15% of its net assets in securities which are
the aggregate, would exceed 15% of Safeco illiquid and other securities which are not
Core Equity Fund's net assets, the Fund will readily marketable.
not (i) purchase securities for which there is
no readily available market, (ii) purchase time
deposits maturing in more than seven days,
(iii) purchase over-the-counter (OTC) options
or hold assets set aside to cover OTC options
written by the Fund, (iv) enter into repurchase
agreements maturing in more than seven
days, or (v) invest in interests in real estate
investment trusts which are not readily
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
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Borrowing Safeco Core Equity Fund may borrow money Pioneer Fund may not borrow money, except
(i) from banks or (ii) by engaging in reverse the Fund may: (a) borrow from banks or
repurchase agreements. through reverse repurchase agreements in
an amount up to 33 1/3% of the Fund's total
assets (including the amount borrowed);
(b) to the extent permitted by applicable law,
borrow up to an additional 5% of the Fund's
assets for temporary purposes; (c) obtain
such short-term credits as are necessary
for the clearance of portfolio transactions;
(d) purchase securities on margin to the
extent permitted by applicable law; and
(e) engage in transactions in mortgage dollar
rolls that are accounted for as financings.
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Lending Safeco Core Equity Fund may lend securities to Pioneer Fund may lend portfolio securities
qualified institutional investors with a value of with a value that may not exceed 331/3% of
up to 33% of the Fund's total assets. the value of its assets.
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22
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Safeco Core Equity Fund Pioneer Fund
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Derivative instruments Safeco Core Equity Fund may write put or call Pioneer Fund may use futures and options on
options if, as a result thereof, the aggregate securities, indices and currencies, forward
value of the assets underlying all such options currency exchange contracts and other
does not exceed 25% of the Fund's net assets. derivatives. The Fund does not use derivatives
as a primary investment technique and
Safeco Core Equity Fund may purchase put or generally limits their use to hedging. However,
call options or options on futures contracts if, the Fund may use derivatives for a variety of
as a result thereof, the aggregate premiums non-principal purposes, including:
paid on all options or options on futures
contracts do not exceed 20% of the Fund's o As a hedge against adverse changes in
net assets. stock market prices, interest rates or
currency exchange rates
Safeco Core Equity Fund may enter into o As a substitute for purchasing or selling
any futures contract or option on a futures securities
contract, if as a result thereof, the aggregate o To increase the Fund's return as a non-
margin deposits and premiums required on all hedging strategy that may be considered
such instruments does not exceed 5% of the speculative
Fund's net assets.
Safeco Core Equity Fund may not purchase
securities on margin. However, the Fund may
(i) obtain short-term credits as necessary to
clear its purchases and sales of securities and
(ii) make margin deposits in connection with
its use of financial options and futures,
forward and spot currency contracts, swap
transactions and other financial contracts or
derivative instruments.
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Other investment policies and As described above, the Funds have substantially similar principal investment strategies and
restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Fund's other investment policies and fundamental and
non-fundamental investment restrictions, see the SAI.
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Buying, Selling and Exchanging Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer Fund
of Safeco Core Equity Fund are subject to a you receive in the Reorganization will not be
5.75% front-end sales charge. subject to any sales charge. Moreover, if you
own shares in your own name as of the
Contingent deferred sales charge of up to 5% closing of the Reorganizationm (i.e., not in
if you redeem Class B shares within six years the name of a broker or other intermediary)
of purchase. and maintain your account, you may purchase
Class A shares of Pioneer Fund and Class A
Contingent deferred sales charge of 1% if shares of any fund in the Pioneer family of
you redeem Class C shares within one year funds through such account in the future
of purchase. without paying any sales charge.
Purchases of Investor Class shares of Safeco Except as described above, Class A shares of
Core Equity Fund Pioneer Fund are subject to a front-end sales
are not subject to a sales load. charge of up to 5.75%.
Safeco Core Equity Fund assesses a mandatory
redemption fee of 2%, as a percentage of the
amount redeemed or exchanged, on Class A and
Investor Class shares held less than 30 days.
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23
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Safeco Core Equity Fund Pioneer Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Management and other fees Safeco Core Equity Fund pays an advisory Pioneer Fund pays Pioneer an annual basic fee
fee on a monthly basis at an annual rate of 0.60% of the Fund's average daily net assets.
as follows:
Pioneer's fee increases or decreases depending
$0-$250,000,000: 0.70 of 1% upon whether the Fund's performance exceeds,
$250,000,001-$750,000,000: 0.65 of 1% or is exceeded by, that of the S&P 500 Index
$750,000,001-$1,250,000,000: 0.60 of 1% over the specified performance period. Each
Over $1,250,000,000: 0.55 of 1% percentage point of difference between the
performance of the Class A shares and the index
SAM serves as administrator and Fund (limited to a maximum of +/-10) is multiplied
accounting agent for the Fund. The Fund pays by a performance rate adjustment of 0.01%.
SAM an administrative services fee of 0.05% As a result, the fee is subject to a maximum
of the Fund's average daily net assets up to the annualized rate adjustment of +/-0.10%. This
first $200,000,000 and 0.01% of its net assets performance comparison is made at the end of
thereafter, and an accounting fee of 0.04% of each month. An appropriate monthly percentage
the Fund's average daily net assets up to the of this annual rate (based on the number of
first $200,000,000 and 0.01% of its net days in the current month) is then applied to
assets thereafter. the Fund's average net assets for the entire
performance period, giving a dollar amount that
During its most recent fiscal year, Safeco is added to (or subtracted from) the basic fee.
Core Equity Fund paid aggregate advisory and In addition, the fee is also further limited to a
administration fees at an average rate of 0.71% maximum annualized rate adjustment of +/-0.10%
of average daily net assets. (i.e., the management fee will not exceed 0.70%
or be less than 0.50%). However, Pioneer
SAM had contractually agreed until April 30, currently is waving the lower limitation on its
2009, to pay certain Fund operating expenses fee, but may reimpose it in the future. Because
(but not all of the operating expenses of the any adjustments to the basic fee begin with the
Fund) that exceeded the rate of 0.40% per comparative performance of the Fund and the
annum of the Fund's average daily net assets. performance record of the index, the controlling
This arrangement included all Fund operating factor is not whether fund performance is up or
expenses except management fees, Rule 12b-1 down, but whether it is up or down more or
fees, brokerage commissions, interest, and less than the performance record of the index,
extraordinary expenses. regardless of general market performance.
For the fiscal year ended December 31, 2003, During its most recent fiscal year, Pioneer Fund
the Fund's annual operating expenses for Class paid an advisory fee at an average rate of 0.50%
A shares, after giving effect to the expense of average daily net assets.
limitation were 1.32%, and without giving
effect to the expense limitation, were 3.40%. In addition, the Fund reimburses Pioneer for
certain fund accounting and legal expenses
For the fiscal year ended December 31, 2003, incurred on behalf of the Fund and pays a
the Fund's annual operating expenses for Class separate shareholder servicing/transfer agency
B shares, after giving effect to the expense fee to PIMSS, an affiliate of Pioneer.
limitation were 2.07%, and without giving
effect to the expense limitation, were 2.38%. For the fiscal year ended December 31, 2003,
the Fund's total annual operating expenses for
For the fiscal year ended December 31, 2003, Class A shares were 1.09% of average daily net
the Fund's annual operating expenses for Class assets. The Fund does not currently have an
C shares, after giving effect to the expense expense limitation for its Class A shares.
limitation were 2.07%, and without giving
effect to the expense limitation, were 2.41%.
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24
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Safeco Core Equity Fund Pioneer Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Management and other fees For the fiscal year ended December 31, 2003, Pioneer has agreed until the second
(continued) the Fund's annual operating expenses for anniversary of the closing of the
Investor Class shares were 1.05%. Reorganization to limit the expenses
(excluding extraordinary expenses) of the
Investor Class to 1.02% of the average daily
net assets attributable to the Investor Class.
The Investor Class shares to be issued in
the Reorganization will convert to Class A
shares after two years. Class A shares will
have higher expenses per share than Investor
Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit
the expenses attributable to Investor Class
shares, Pioneer is not required to limit the
expenses attributable to Class A shares.
- ------------------------------------------------------------------------------------------------------------------------------------
Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class
(12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject
to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
- ------------------------------------------------------------------------------------------------------------------------------------
Buying shares You may buy shares of the Fund directly You may buy shares from any investment firm
through Safeco Securities, the Fund's principal that has a sales agreement with PFD, Pioneer
underwriter or through brokers, registered Fund's distributor. Existing shareholders of
investment advisers, banks and other financial Safeco Core Equity Fund who own shares
institutions that have entered into selling in their own name as of the closing date of
agreements with the Fund's principal the Reorganization and who maintain their
underwriter, as described in the Fund's accounts may buy shares of any fund in
prospectus. the Pioneer family of funds through such
accounts in the future without paying
Certain account transactions may be done sales charges.
by telephone.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
Fund by telephone or online.
- ------------------------------------------------------------------------------------------------------------------------------------
Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer Fund
acquire through dividend reinvestment or other without incurring any fee on the exchange
fund distributions or for Class A shares that with the more than 62 other Pioneer Funds.
you have exchanged for Class A shares of Your exchange would be for Class A shares,
another Fund. which would be subject to Rule 12b-1 fees.
An exchange generally is treated as a sale and
Certain account transactions may be done a new purchase of shares for federal income
by telephone. tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer Fund for
shares of other Pioneer Funds by telephone
or online.
- ------------------------------------------------------------------------------------------------------------------------------------
25
- ------------------------------------------------------------------------------------------------------------------------------------
Safeco Core Equity Fund Pioneer Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Selling shares Investor Class and Class A shares will be sold at the net asset value per share next calculated
after each Fund receives your request in good order.
- ------------------------------------------------------------------------------------------------------------------------------------
You may sell your shares by contacting the Normally, your investment firm will send
Fund directly in writing or by contacting a your request to sell shares to PIMSS. You
financial intermediary as described in the can also sell your shares by contacting the
Fund's prospectus. Fund directly if your account is registered
in your name.
If the account is established in the
shareholder's own name, shareholders
may also redeem shares of Pioneer Fund
by telephone or online.
- ------------------------------------------------------------------------------------------------------------------------------------
Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks. You
could lose money on your investment in either Fund or not make as much as if you
invested elsewhere if:
o The stock market goes down (this risk may be greater in the short
term)
o Value stocks fall out of favor with investors
o The Fund's assets remain undervalued or do not have the potential
value originally expected
o Stocks selected for income do not achieve the same return as
securities selected for capital growth
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor Class
shares, Pioneer is not required to limit the expenses attributable to Class A
shares.
26
Past Performance
Set forth below is performance information for each Fund. The bar charts
show how each Fund's total return (not including any deduction for sales
charges) has varied from year to year for each full calendar year. The tables
show average annual total return (before and after taxes) for each Fund over
time for each class of shares (including deductions for sales charges) compared
with a broad-based securities market index. The bar charts give an indication of
the risks of investing in each Fund, including the fact that you could incur a
loss and experience volatility of returns year to year. Past performance before
and after taxes does not indicate future results.
Safeco Core Equity Fund -- Investor Class
Calendar Year Total Returns*
[DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT]
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03
9.93 25.26 25.01 24.21 24.93 9.37 -10.97 -9.72 -26.33 24.68
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return was 18.72% for the quarter ended December 31, 1998, and
the lowest quarterly return was -18.37% for the quarter ended September 30,
2002.
Pioneer Fund -- Class A Shares
Calendar Year Total Returns*
[DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT]
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03
- -0.57 26.64 19.70 38.47 29.09 15.63 0.12 -11.13 -20.26 24.58
* During the period shown in the bar chart Pioneer Fund's highest quarterly
return was 22.33% for the quarter ended December 31, 1998, and the lowest
quarterly return was -18.18% for the quarter ended September 30, 2002.
27
Safeco Core Equity Fund
Average Annual Total Returns as of December 31, 2003
- ----------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- ----------------------------------------------------------------------------------------------------------
Safeco Core Equity Fund, Class A Shares
- ----------------------------------------------------------------------------------------------------------
Return Before Taxes 17.23% -5.61% 7.12%
- ----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 17.15% -6.09% 5.51%
- ----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 11.29% -4.83% 5.36%
- ----------------------------------------------------------------------------------------------------------
Safeco Core Equity Fund, Class B Shares
- ----------------------------------------------------------------------------------------------------------
Return Before Taxes 18.53% -5.54% 7.23%
- ----------------------------------------------------------------------------------------------------------
Safeco Core Equity Fund, Class C Shares
- ----------------------------------------------------------------------------------------------------------
Return Before Taxes 22.42% -5.17% 7.14%
- ----------------------------------------------------------------------------------------------------------
Safeco Core Equity Fund, Investor Class Shares
- ----------------------------------------------------------------------------------------------------------
Return Before Taxes 24.68% -4.19% 7.99%
- ----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 24.55% -4.78% 6.28%
- ----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 16.19% -3.72% 6.08%
- ----------------------------------------------------------------------------------------------------------
S&P 500 Index(2)
(reflects no deduction for fees, expenses or taxes) 28.67% -0.57% 11.06%
- ----------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(2) The S&P 500 Index, an unmanaged index of 500 stocks, is for reference only,
does not mirror the Fund's investments, and reflects no deduction for fees,
expenses or taxes.
Pioneer Fund -- Class A Shares
Average Annual Total Returns as of December 31, 2003
- ----------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- ----------------------------------------------------------------------------------------------------------
Pioneer Fund, Class A shares
- ----------------------------------------------------------------------------------------------------------
Return Before Taxes 17.40% -0.76% 10.00%
- ----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 17.06% -1.46% 8.47%
- ----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 11.28% -0.87% 8.01%
- ----------------------------------------------------------------------------------------------------------
S&P 500 Index(2)
(reflects no deduction for fees, expenses or taxes) 28.67% -0.57% 11.06%
- ----------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(2) The S&P 500 Index, an unmanaged index of 500 stocks, is for reference only,
does not mirror the Fund's investments, and reflects no deduction for fees,
expenses or taxes.
28
Pioneer Fund's Investor Class shares will not be outstanding prior to the
closing of the Reorganization and consequently have no performance history.
However, the performance record of the Investor Class would be modestly higher
than the performance of Class A shares due to the lower expenses applicable to
the Investor Class.
The most recent portfolio manager's discussion of each Fund's performance
is attached as Exhibit D.
The Funds' Fees and Expenses
Shareholders of both Funds pay various fees and expenses, either directly
or indirectly. The tables below show the fees and expenses that you would pay if
you were to buy and hold shares of each Fund. The expenses in the tables
appearing below are based on (i) for the Safeco Core Equity Fund, the expenses
of Safeco Core Equity Fund for the period ended December 31, 2003 and (ii) for
Pioneer Fund, the expenses of Pioneer Fund for the period ended December 31,
2003. Future expenses for all share classes may be greater or less.
Pro Forma
Safeco Safeco Safeco Safeco Pioneer
Core Equity Core Equity Core Equity Core Equity Fund
Fund Fund Fund Fund Investor
Class A Class B Class C Investor Class Class (9)
Shareholder transaction fees (paid directly from your investment) ----------- ----------- ----------- -------------- ---------
Maximum sales charge (load) when you buy shares as a percentage
of offering price ................................................ 5.75%(6) None None None None(1)
Maximum deferred sales charge (load) as a percentage of
purchase price or the amount you receive when you sell shares,
whichever is less ................................................ None 5.00%(7) 1.00%(8) None None
Redemption fees for shares held less than 30 days ................. 2.00% None None 2.00% N/A
Wire redemption fee ............................................... $ 20(4) $ 20(4) $ 20(4) $ 20(4) $ 10
Annual low balance fee ............................................ $ 12(5) $ 12(5) $ 12(5) $ 12(5) N/A
Annual fund operating expenses (deducted from fund assets)
(as a % of average net assets)
Management fee .................................................... 0.67% 0.67% 0.67% 0.67% 0.52%
Distribution and service (12b-1) fee .............................. 0.25% 1.00% 1.00% None None
Other expenses .................................................... 2.48% 0.71% 0.74% 0.38% 0.41%
Total fund operating expenses ..................................... 3.40% 2.38% 2.41% 1.05% 0.93%
Expense reimbursement/reduction ................................... 2.08%(2) 0.31%(2) 0.34%(2) None(2) None(3)
Net fund operating expenses ....................................... 1.32% 2.07% 2.07% 1.05% 0.93%
- ----------
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer Fund through the Reorganization. In addition, shareholders of your
Safeco Fund who own shares in their own name (i.e., not in the name of a
broker or other intermediary) and maintain such account as of the closing
of the Reorganization may purchase Class A Shares of Pioneer Fund or of any
fund in the Pioneer family of funds through such account in the future
without paying a sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco Core
Equity Fund for certain Fund operating expenses (but not all of the
operating expenses of the Fund) that exceeded the rate of 0.40% per annum
of the Fund's average daily net assets. This arrangement included all fund
operating expenses except management fees, Rule 12b-1 fees, brokerage
commissions, interest, and extraordinary expenses.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer Fund to
1.02% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once each year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions made in the first twelve months except with
respect to participant-directed redemptions from qualified retirement
plans.
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after six years from purchase, and the Class B shares
convert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
29
(9) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares.
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect for five years for
Safeco Core Equity Fund and two years for Pioneer Fund and (f) and the Investor
Class shares of Pioneer Fund convert to Class A shares after two years. The
examples are for comparison purposes only and are not a representation of either
fund's actual expenses or returns, either past or future.
Example
Safeco Core Equity Fund
Class A Shares
Year 1 ....................... $ 702
Year 3 ....................... $ 969
Year 5 ....................... $1,257
Year 10 ...................... $3,255
With Without
Class B Shares redemption redemption
Year 1 .............. $ 710 $ 210
Year 3 .............. $ 949 $ 649
Year 5 .............. $1,314 $1,114
Year 10 ............. $3,057 $3,057
With Without
Class C Shares redemption redemption
Year 1 .............. $ 310 $ 210
Year 3 .............. $ 649 $ 649
Year 5 .............. $1,114 $1,114
Year 10 ............. $2,599 $2,599
Investor Class Shares
Year 1 ....................... $ 107
Year 3 ....................... $ 334
Year 5 ....................... $ 579
Year 10 ...................... $1,283
Pro Forma Pioneer Fund
Investor Class Shares
Year 1 ....................... $ 95
Year 3 ....................... $ 310
Year 5 ....................... $ 556
Year 10 ...................... $1,261
30
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco Core Equity Fund. The Trustees considered the following
matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Fund until August 2, 2004, was
acquired by Symetra. Symetra informed the Trustees that it did not intend to
continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the historical investment performance of Pioneer Fund is higher
than your Safeco Fund's investment performance. For the one, five and 10 year
periods ended June 30, 2004, Class A shares of Pioneer Fund had an average
annual return of 18.13%; -1.14%; and 11.16% compared to an average annual
return of the Class A shares and Investor Class shares of 7.30% and 14.16% (one
year), -7.12% and -5.70% (five years) and 7.11% and 7.99% (ten years),
respectively, during the same period. In addition, the Trustees considered the
track record of Pioneer in managing equity and fixed income mutual funds.
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutional and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholder account
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market
fund that will be available to your Safeco Fund's shareholders through
exchanges. In addition, Pioneer offers shareholders additional options for
their accounts, including the ability to transact and exchange shares over the
telephone or online and the ability to access account values and transaction
history in all of the shareholder's direct accounts in the Pioneer Funds over
the telephone or online.
Fourth, Pioneer Fund's lower operating expenses and Pioneer's commitment
until the second anniversary of the Reorganization to limit the expenses
(excluding extraordinary expenses) of the Investor Class of Pioneer Fund to
1.02% of average daily net assets. This expense ratio is below the gross
expenses and expenses net of expense reimbursement of each class of shares of
your Safeco Fund. While you will experience higher expenses once the Investor
Class shares convert to Class A shares after two years, the Class A expense
ratio for the most recent fiscal year was 1.09% of average daily net assets,
which was below the net expenses of the Class A shares of your Safeco Fund and
only four basis points above the net expenses of the Investor Class of your
Safeco Fund.
Fifth, the substantially larger size of Pioneer Fund offers greater
opportunity for diversification of the investment portfolio, which should help
to reduce risks.
Sixth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
Seventh, the Investor Class shares of Pioneer Fund received in the
Reorganization will provide Safeco Core Equity Fund shareholders with exposure
to substantially the same investment product as they currently have.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco
Funds and the Pioneer Funds associated with the Reorganizations, including, but
not limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses
of any proxy solicitation firm retained in connection with the Reorganizations;
(3) the legal fees and expenses incurred by the Safeco Funds in connection with
the Reorganizations; and (4) the Trustees' fees and out of pocket expenses
incurred as a result of the Reorganizations.
The Trustees also considered that Pioneer and Symetra will benefit from
the Reorganization. See "Certain Agreements between Pioneer and Symetra."
The Board of Trustees of Pioneer Fund also considered that the
Reorganization presents an excellent opportunity for the Pioneer Fund to
acquire investment assets without the obligation to pay commissions or other
transaction costs that a fund normally incurs when purchasing securities. This
opportunity provides an economic benefit to Pioneer Fund and its shareholders.
31
CAPITALIZATION
The following table sets forth the capitalization of each Fund as of June
30, 2004, and the pro forma combined Fund as of June 30, 2004.
Safeco
Core Equity Pioneer Pro Forma
Fund Fund Pioneer Fund
June 30, 2004 June 30, 2004 June 30, 2004
--------------- --------------- --------------
Total Net Assets (in thousands) $ 694,570 $ 6,321,081 $ 7,015,651
Class A shares ................ $ 17,431 $ 5,328,526 $ 5,328,526
Class B shares ................ $ 8,846 $ 538,395 $ 538,395
Class C shares ................ $ 196 $ 295,384 $ 295,384
Investor Class shares ......... $ 668,097 N/A 694,570
Class R shares ................ N/A $ 11,139 $ 11,139
Class Y shares ................ N/A $ 147,637 $ 147,637
Net Asset Value Per Share
Class A shares ................ $ 17.04 $ 38.64 $ 38.64
Class B shares ................ $ 16.58 $ 37.77 $ 37.77
Class C shares ................ $ 16.60 $ 37.44 $ 37.44
Investor Class shares ......... $ 17.01 N/A $ 38.64
Class R shares ................ N/A $ 38.69 $ 38.69
Class Y shares ................ N/A $ 38.73 $ 38.73
Shares Outstanding
Class A shares ................ 1,022,979 137,918,274 137,918,274
Class B shares ................ 533,442 14,254,949 14,254,949
Class C shares ................ 11,810 7,890,437 7,890,437
Investor Class shares ......... 39,269,334 N/A 17,975,414
Class R shares ................ N/A 287,937 287,937
Class Y shares ................ N/A 3,811,827 3,811,827
It is impossible to predict how many shares of Pioneer Fund will actually
be received and distributed by your Safeco Fund on the Reorganization date. The
table should not be relied upon to determine the amount of Pioneer Fund's
shares that will actually be received and distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund. Similarly,
the Board of Trustees of Pioneer Fund, including its Independent Trustees,
approved the Reorganization. They also determined that the Reorganization is in
the best interests of Pioneer Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
32
Safeco Growth Opportunities Fund and
Pioneer Growth Opportunities Fund
PROPOSAL 1(c)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in
this Proxy Statement/Prospectus or incorporated herein. You should read
carefully the entire proxy statement, including the form of Agreement and Plan
of Reorganization attached as EXHIBIT A-2 because they contain details that are
not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor Class
shares, Pioneer is not required to limit the expenses attributable to Class A
shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco Growth Opportunities Fund to the Pioneer Growth
Opportunities Fund
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Safeco Growth Opportunities Fund Pioneer Growth Opportunities Fund
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Business A series of Safeco Common Stock Trust, A newly organized series of Pioneer Series
a diversified open-end management Trust II, an open-end management investment
investment company organized as a registered under the Investment Company Act
Delaware statutory trust. and organized as a Delaware statutory trust.
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Net assets as of $545.5 million None. The Pioneer Growth Opportunities Fund
June 30, 2004 is newly organized and does not expect to
commence investment operations until the
Reorganization occurs.
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Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers (since 2003 until Portfolio Managers:
August 2, 2004): Day-to-day management of Pioneer Growth
Jeffrey Schwartz Opportunities Fund's portfolio will be the
CFA, Vice President, SAM responsibility of John A. Carey and Walter
Hunnewell, Jr. Mr. Carey joined Pioneer in
Bill Whitlow 1979 and Mr. Hunnewell joined Pioneer
CFA, Vice President, SAM in 2001.
Currently Pioneer is acting as investment Mr. Acheson is Vice President and joined
adviser to Safeco Growth Opportunities Fund. Pioneer as a portfolio manager in 2001
The Portfolio Manager of the Pioneer Growth and has been an investment professional
Opportunities Fund, as indicated in the next since 1994.
column, currently manages your Safeco Fund.
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Investment objective Each Fund seeks growth of capital.
Each Fund provides written notice to shareholders at least 60 days prior to any change to its
investment objective as described above.
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Primary investments To achieve its investment objective, under normal circumstances, each Fund invests most of its
assets in common stocks of companies Pioneer considers to be reasonably priced or
undervalued, with above average growth potential.
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33
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Safeco Growth Opportunities Fund Pioneer Growth Opportunities Fund
Pioneer Growth Opportunities Fund may invest
a significant portion of its assets in equity
securities of small companies.
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Investment strategies When evaluating a stock to buy for each Fund,
Pioneer considers factors such as:
o The strength of the company's balance
sheet
o The quality of the management team
o The rate at which the company's earnings
are projected to grow
o Whether the company's stock may be
trading at a discount relative to its industry
peers or the overall markets
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Safeco Growth Opportunities Fund may sell Pioneer Growth Opportunities Fund generally
as stock if: sells a portfolio security when Pioneer
believes that the issuer no longer offers the
o Any of the above factors or other relative- potential for growth at a reasonable price or
value indicators have deteriorated if any of the above factors have deteriorated.
o The stock becomes overvalued, for Pioneer makes that determination based
example, as a result of overly optimistic upon the same criteria it uses to select
earnings forecasts portfolio securities.
o The stock price reaches a specific target
o Changes in market value cause the Fund
to hold a larger position in the stock than
Pioneer wants
o Other companies present more attractive
investment opportunities
o Cash is needed to meet shareholder
redemptions
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Other investments Each Fund may invest in securities convertible into common stock, but less than 35% of its
total assets will be invested in such securities.
Each Fund may invest up to 20% of assets in foreign securities.
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Safeco Growth Opportunities Fund may invest Pioneer Growth Opportunities Fund may invest
up to 10% of its total assets in debt securities up to 5% of its total assets in debt securities
rated below investment grade. rated below investment grade, including below
investment grade convertible debt securities.
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Temporary defensive Safeco Growth Opportunities Fund may hold Pioneer Growth Opportunities Fund may invest
strategies cash or invest in high-quality, short-term all or part of its assets in securities with
securities issued by an agency or remaining maturities of less than one year,
instrumentality of the U.S. government, cash equivalents or may hold cash.
high-quality commercial paper, certificates of
deposit, shares of no-load, open-end money
market funds, or repurchase agreements as a
temporary defensive measure when market
conditions so warrant.
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34
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Safeco Growth Opportunities Fund Pioneer Growth Opportunities Fund
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Diversification Each Fund is diversified for the purpose of the Investment Company Act, and each Fund is
subject to diversification requirements under the Code.
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Industry concentration Each Fund will not make investments that will result in the concentration (as that term may be
defined in the Investment Company Act, any rule or order thereunder, or SEC staff interpretation
thereof) of its investments in the securities of issuers primarily engaged in the same industry,
provided that this restriction does not limit the Fund from investing in obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities, or governmental issuers of
special or general tax-exempt securities, or certain bank instruments issued by domestic banks.
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At times, more than 25% of Pioneer Growth
Opportunities Fund's assets may be invested
in the same market segment, such as
financials or technology. To the extent the
Fund emphasizes investments in a market
segment, the Fund will be subject to a greater
degree to the risks particular to the industries
in that segment, and may experience greater
market fluctuation, than a fund without the
same focus. For example, industries in the
financial segment, such as banks, insurance
companies, broker-dealers and REITs, may
be sensitive to changes in interest rates and
general economic activity and are subject to
extensive government regulation. Industries in
the technology segment, such as information
technology, communications equipment,
computer hardware and software, and office
and scientific equipment, are subject to
risks of rapidly evolving technology, short
product lives, rates of corporate expenditures,
falling prices and profits, competition
from new market entrants, and general
economic conditions.
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Restricted and illiquid If immediately after and as a result of such Pioneer Growth Opportunities Fund may
securities action the value of the following securities, not invest more than 15% of its net assets
in the aggregate, would exceed 15% of the in securities which are illiquid and other
Safeco Growth Opportunities Fund's net assets, securities which are not readily marketable.
the Fund will not (i) purchase securities for
which there is no readily available market,
(ii) purchase time deposits maturing in more
than seven days, (iii) purchase over-the-
counter (OTC) options or hold assets set aside
to cover OTC options written by the Fund,
(iv) enter into repurchase agreements maturing
in more than seven days, or (v) invest in
interests in real estate investment trusts which
are not readily marketable or interests in real
estate limited partnerships which are not listed
or traded on the NASDAQ Stock Market.
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35
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Safeco Growth Opportunities Fund Pioneer Growth Opportunities Fund
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Borrowing Safeco Growth Opportunities Fund may borrow Pioneer Growth Opportunities Fund may
money (i) from banks or (ii) by engaging in not borrow money, except the Fund may:
reverse repurchase agreements. (a) borrow from banks or through reverse
repurchase agreements in an amount up to
33 1/3% of the Fund's total assets (including
the amount borrowed); (b) to the extent
permitted by applicable law, borrow up to
an additional 5% of the Fund's assets for
temporary purposes; (c) obtain such
short-term credits as are necessary for
the clearance of portfolio transactions;
(d) purchase securities on margin to the
extent permitted by applicable law; and
(e) engage in transactions in mortgage dollar
rolls that are accounted for as financings.
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Lending Safeco Growth Opportunities Fund may lend Pioneer Growth Opportunities Fund may lend
securities to qualified institutional investors portfolio securities with a value that may not
with a value of up to 33% of the Fund's exceed 331/3% of the value of its assets.
total assets.
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Derivative instruments Safeco Growth Opportunities Fund may not Pioneer Growth Opportunities Fund may
purchase securities on margin. However, the use futures and options on securities, indices
Fund may (i) obtain short-term credits as and currencies, forward currency exchange
necessary to clear its purchases and sales of contracts and other derivatives. The Fund
securities, and (ii) make margin deposits in does not use derivatives as a primary
connection with its use of financial options and investment technique and generally limits
futures, forward and spot currency contracts, their use to hedging. However, the Fund may
swap transactions and other financial contracts use derivatives for a variety of non-principal
or derivative instruments. purposes, including:
o As a hedge against adverse changes
in stock market prices, interest rates
or currency exchange rates
o As a substitute for purchasing or
selling securities
o To increase the Fund's return as a
non-hedging strategy that may be
considered speculative
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Other investment policies and As described above, the Funds have substantially similar principal investment strategies and
restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Fund's other investment policies and fundamental and
non-fundamental investment restrictions, see the SAI.
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36
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Safeco Growth Opportunities Fund Pioneer Growth Opportunities Fund
- --------------------------------------------------------------------------------------------------------------
Buying, Selling and Exchanging Shares
- --------------------------------------------------------------------------------------------------------------
Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer
of Safeco Growth Opportunities Fund are Growth Opportunities Fund you receive in
subject to a 5.75% front-end sales charge. the Reorganization will not be subject to any
sales charge. Moreover, if you own shares
Contingent deferred sales charge of up to 5% in your own name as of the closing of the
if you redeem Class B shares within six years Reorganization (i.e., not in the name of a
of purchase. broker or other intermediary) and maintain
your account, you may purchase Class A
Contingent deferred sales charge of 1% if shares of Pioneer Growth Opportunities Fund
you redeem Class C shares within one year and Class A shares of any fund in the Pioneer
of purchase. family of funds through such account in the
future without paying any sales charge.
Purchases of Investor Class shares of Safeco
Growth Opportunities are not subject to a Except as described above, Class A shares of
sales load. Pioneer Growth Opportunities Fund are subject
to a front-end sales charge of up to 5.75%.
Safeco Growth Opportunities Fund assesses
a mandatory redemption fee of 2%, as a
percentage of the amount redeemed or
exchanged, on Class A and Investor
Class shares held less than 30 days.
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37
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Safeco Growth Opportunities Fund Pioneer Growth Opportunities Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Management and other fees Safeco Growth Opportunities Fund pays an Pioneer Growth Opportunities Fund will pay
advisory fee on a monthly basis at an annual rate Pioneer a management fee equal to 0.65% of
as follows: the Fund's average daily net assets.
$0-$250,000,000: 0.70 of 1% In addition, Pioneer Growth Opportunities
$250,000,001-$750,000,000: 0.65 of 1% Fund will reimburse Pioneer for certain fund
$750,000,001-$1,250,000,000: 0.60 of 1% accounting and legal expenses incurred on
Over $1,250,000,000: 0.55 of 1% behalf of the Fund and will pay a separate
shareholder servicing/transfer agency fee to
SAM serves as administrator and fund PIMSS, an affiliate of Pioneer.
accounting agent for the Fund. The Fund pays
SAM an administrative services fee of 0.05% Pioneer has agreed until the second
of the Fund's average daily net assets up to the anniversary of the closing of the
first $200,000,000 and 0.01% of its net assets Reorganization to limit the expenses
thereafter, and an accounting fee of 0.04% of (excluding ordinary expenses) of the Investor
the Fund's average daily net assets up to the Class to 1.05% of the average daily net assets
first $200,000,000 and 0.01% of its net attributable to the Investor Class.
assets thereafter.
The Investor Class shares to be issued in the
During its most recent fiscal year, Safeco Growth Reorganization will convert to Class A shares
Opportunities Fund paid aggregate advisory and after two years. Class A shares will have
administration fees at an average rate of 0.73% higher expenses per share than Investor Class
of average daily net assets. Shares due to the Rule 12b-1 Plan.
SAM had contractually agreed until April 30,
2009, to pay certain fund operating expenses
(but not all of the operating expenses of the
Fund) that exceeded the rate of 0.40% per
annum of the Fund's average daily net assets.
This arrangement included all Fund operating
expenses except management fees, Rule 12b-1
fees, brokerage commissions, interest, and
extraordinary expenses.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class A
shares, after giving effect to the expense
limitation were 1.33%, and without giving effect
to the expense limitation, were 2.38%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class B
shares, after giving effect to the expense
limitation were 2.08%, and without giving effect
to the expense limitation, were 2.45%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class C
shares, after giving effect to the expense
limitation were 2.08%, and without giving effect
to the expense limitation, were 2.48%.
For the fiscal year ended December 31, 2003, the
Fund's annual operating expenses for Investor
Class shares, after giving effect to the expense
limitation were 1.08%, and without giving effect
to the expense limitation, were 1.14%.
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38
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Safeco Growth Opportunities Fund Pioneer Growth Opportunities Fund
- ------------------------------------------------------------------------------------------------------------------------------------
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Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class
(12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject
to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
- ------------------------------------------------------------------------------------------------------------------------------------
Buying shares You may buy shares of the Fund directly You may buy shares from any investment
through Safeco Securities, the Fund's principal firm that has a sales agreement with PFD,
underwriter or through brokers, registered Pioneer Growth Opportunities Fund's
investment advisers, banks and other financial distributor. Existing shareholders of Safeco
institutions that have entered into selling Growth Opportunities Fund who own shares
agreements with the Fund's principal in their own name as of the closing date of
underwriter, as described in the Fund's the Reorganization and who maintain their
prospectus. accounts may buy shares of any fund in
the Pioneer family of funds through such
Certain account transactions may be done accounts in the future without paying
by telephone. sales charges.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
Growth Opportunities Fund by telephone
or online.
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Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer Growth
acquire through dividend reinvestment or other Opportunities Fund without incurring any fee
fund distributions or for Class A shares that on the exchange with the more than 62 other
you have exchanged for Class A shares of Pioneer Funds. Your exchange would be for
another fund. Class A shares, which would be subject to
Rule 12b-1 fees. An exchange generally is
Certain account transactions may be done treated as a sale and a new purchase of
by telephone. shares for federal income tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer Growth
Opportunities Fund for shares of other Pioneer
Funds by telephone or online.
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Selling shares Investor Class and Class A shares will be sold at net asset value per share next calculated after
each Fund receives your request in good order.
- ------------------------------------------------------------------------------------------------------------------------------------
You may sell your shares by contacting the Normally, your investment firm will send your
Safeco Growth Opportunities Fund directly request to sell shares to PIMSS. You can also
in writing or by contacting a financial sell your shares by contacting the Fund
intermediary as described in the directly if your account is registered in
Fund's prospectus. your name.
If the account is established in the
shareholder's own name, shareholders
may also redeem shares of Pioneer Growth
Opportunities Fund by telephone or online.
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39
Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks. Even
though each Fund seeks capital growth, you could lose money on your investment
or not make as much as if you invested elsewhere if:
o The stock market goes down (this risk factor may be greater in the
short term)
o Growth stocks fall out of favor with investors
o The Fund's investments do not have the growth potential originally
expected
o The Fund's shares may be subject to frequent and more significant
changes in value than the stock market in general due to the
volatility of some of the smaller companies in which it invests
o During periods of market concern about inflation or deflation, some
securities in which the Fund invests may become more volatile or
decline in value
Investing in non-U.S. issuers may involve unique risks compared to
investing in securities of U.S. issuers. These risks may include:
o Inadequate financial information
o Smaller, less liquid and more volatile markets
o Political and economic upheavals
The fund also has risks associated with investing in small companies.
Compared to large companies, small companies, and the market for their equity
securities, are likely to:
o Be more sensitive to changes in the economy, earnings results and
investor expectations
o Have more limited product lines and capital resources
o Experience sharper swings in market values
o Be harder to sell at the times and prices Pioneer thinks appropriate
o Offer greater potential for gain or loss
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor Class
shares, Pioneer is not required to limit the expenses attributable to Class A
shares.
40
Past Performance
Set forth below is performance information for Safeco Growth Opportunities
Fund. The bar chart shows how Safeco Growth Opportunities Fund's total return
(not including any deduction for sales charges) has varied from year to year for
each full calendar year. The table shows the average annual total return (before
and after taxes) for Safeco Growth Opportunities Fund over time for each class
of shares (including deductions for sales charges) compared with a broad-based
securities market index. The bar chart gives an indication of the risks of
investing in the Safeco Growth Opportunities Fund, including the fact that you
could incur a loss and experience volatility of returns year to year. Past
performance before and after taxes does not indicate future results. Since
Pioneer Growth Opportunities Fund has not yet commenced investment operations,
it has no prior performance.
Safeco Growth Opportunities Fund -- Investor Class
Calendar Year Total Returns*
[DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT]
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03
- -1.62 26.10 22.90 49.96 4.37 2.64 -4.16 22.03 -36.92 43.98
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return was 34.64% for the quarter ended June 30, 2001, and the
lowest quarterly return was -26.84% for the quarter ended September 30,
2002.
Safeco Growth Opportunities Fund
Average Annual Total Returns As of December 31, 2003
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1 Year 5 Years 10 Years
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Safeco Growth Opportunities Fund, Class A Shares
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Return Before Taxes 35.37% 0.28% 9.23%
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Return After Taxes on Distributions1 35.37% 0.28% 6.93%
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Return After Taxes on Distributions and Sale of Fund Shares1 22.99% 0.24% 6.62%
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Safeco Growth Opportunities Fund, Class B Shares
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Return Before Taxes 37.64% 0.35% 9.38%
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Safeco Growth Opportunities Fund, Class C Shares
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Return Before Taxes 41.64% 0.75% 9.28%
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Safeco Growth Opportunities Fund, Investor Class Shares
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Return Before Taxes 43.98% 1.74% 10.03%
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41
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1 Year 5 Years 10 Years
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Return After Taxes on Distributions1 43.98% 1.74% 7.72%
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Return After Taxes on Distributions and Sale of Fund Shares(1) 28.59% 1.49% 7.34%
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Russell 2000 Index(2)
(reflects no deduction for fees, expenses or taxes) 47.25% 7.13% 9.48%
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(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after- tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(2) The Russell 2000 Index, an unmanaged index of 2,000 small capitalization
stocks, is for reference only and does not mirror the Fund's investments.
The most recent portfolio manager's discussion of the Safeco Fund's
performance is attached as Exhibit D.
The Funds' Fees and Expenses
Shareholders of both Funds pay various fees and expenses, either directly
or indirectly. The tables below show the fees and expenses that you would pay if
you were to buy and hold shares of each Fund. The expenses in the table
appearing below are based on (i) for your Safeco Fund, the expenses of your
Safeco Fund for its fiscal year ended December 31, 2003 and (ii) for the Pioneer
Growth Opportunities Fund, the estimated annual expenses of the Pioneer Growth
Opportunities Fund. The Pioneer Growth Opportunities Fund's actual expenses may
be greater or less.
Safeco Safeco
Growth Growth
Opportunities Opportunities
Fund Fund
Class A Class B
Shareholder transaction fees (paid directly from your investment) --------------- ---------------
Maximum sales charge (load) when you buy shares as a percentage
of offering price ................................................... 5.75%(6) None
Maximum deferred sales charge (load) as a percentage of purchase
price or the amount you receive when you sell shares, whichever
is less ............................................................. None 5.00%(7)
Redemption fees for shares held less than 30 days .................... 2.00% None
Wire redemption fee .................................................. $ 204 $ 204
Annual low balance fee ............................................... $ 12(5) $ 12(5)
Annual fund operating expenses (deducted from fund assets)
(as a % of average net assets)
Management fee ....................................................... 0.68% 0.68%
Distribution and service (12b-1) fee ................................. 0.25% 1.00%
Other expenses ....................................................... 1.45% 0.77%
Total fund operating expenses ........................................ 2.38% 2.45%
Expense reimbursement/reduction ...................................... 1.05%(2) 0.37%(2)
Net fund operating expenses .......................................... 1.33% 2.08%
Pro Forma
Pioneer
Safeco Safeco Growth
Growth Growth Opportunities
Opportunities Opportunities Fund
Fund Fund Investor
Class C Investor Class Class (9)
Shareholder transaction fees (paid directly from your investment) --------------- ---------------- --------------
Maximum sales charge (load) when you buy shares as a percentage
of offering price ................................................... None None None(1)
Maximum deferred sales charge (load) as a percentage of purchase
price or the amount you receive when you sell shares, whichever
is less ............................................................. 1.00%(8) None None
Redemption fees for shares held less than 30 days .................... None 2.00% None
Wire redemption fee .................................................. $ 204 $ 204 $ 10
Annual low balance fee ............................................... $ 12(5) $ 12(5) None
Annual fund operating expenses (deducted from fund assets)
(as a % of average net assets)
Management fee ....................................................... 0.68% 0.68% 0.65%
Distribution and service (12b-1) fee ................................. 1.00% None None
Other expenses ....................................................... 0.80% 0.46% 0.32%
Total fund operating expenses ........................................ 2.48% 1.14% 0.97%
Expense reimbursement/reduction ...................................... 0.40%(2) 0.06%(2) None(3)
Net fund operating expenses .......................................... 2.08% 1.08% 0.97%
- ----------
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer Growth Opportunities Fund through the Reorganization. In addition,
shareholders of your Safeco Fund who own shares in their own name (i.e.,
not in the name of a broker or other intermediary) and maintain such
account as of the closing of the Reorganization may purchase Class A shares
of Pioneer Growth Opportunities Fund or of any fund in the Pioneer family
of funds through such account in the future without paying a sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco Growth
Opportunities Fund for certain Fund operating expenses (but not all of the
operating expenses of the Fund) that exceeded the rate of 0.40% per annum
of the Fund's average daily net assets.
42
This arrangement included all fund operating expenses except management
fees, Rule 12b-1 fees, brokerage commissions, interest, and extraordinary
expenses.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer Growth
Opportunities Fund to 1.05% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once in year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions made in the first twelve months except with
respect to participant-directed redemptions from qualified retirement
plans.
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after six years from purchase, and the Class B shares
convert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
(9) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares. Class A shares do not currently have an
expense limitation and may be subject to higher total operating expenses.
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's and Pioneer Growth
Opportunities Fund's gross operating expenses remain the same, (e) the expense
limitations are in effect for five years for Safeco Growth Opportunities Fund
and two years for Pioneer Growth Opportunities Fund and (f) and the Investor
Class shares of Pioneer Growth Opportunities Fund convert to Class A shares
after two years. The examples are for comparison purposes only and are not a
representation of either Fund's actual expenses or returns, either past or
future.
Example
Safeco Growth Opportunities Fund
Class A Shares
Year 1 .............. $ 703
Year 3 .............. $ 972
Year 5 .............. $1,262
Year 10 ............. $2,696
With Without
Class B Shares redemption redemption
Year 1 .............. $ 711 $ 211
Year 3 .............. $ 952 $ 652
Year 5 .............. $ 1,319 $ 1,119
Year 10 ............. $ 2,593 $ 2,593
With Without
Class C Shares redemption redemption
Year 1 .............. $ 311 $ 211
Year 3 .............. $ 652 $ 652
Year 5 .............. $ 1,119 $ 1,119
Year 10 ............. $ 2,644 $ 2,644
Investor Class Shares
Year 1 .............. $ 110
Year 3 .............. $ 343
Year 5 .............. $ 595
Year 10 ............. $1,356
43
Pro Forma Pioneer Growth Opportunities Fund
Investor Class Shares
Year 1 .................................... $ 99
Year 3 .................................... $ 344
Year 5 .................................... $ 645
Year 10 ................................... $1,499
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco Growth Opportunities Fund. The Trustees considered the
following matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Safeco Fund until August 2, 2004,
was acquired by Symetra. Symetra informed the Trustees that it did not intend to
continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutions and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholder account
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market fund
that will be available to your Safeco Fund's shareholders through exchanges. In
addition, Pioneer offers shareholders additional options for their accounts,
including the ability to transact and exchange shares over the telephone or
online and the ability to access account values and transaction history in all
of the shareholder's direct accounts in the Pioneer Funds over the telephone or
online.
Third, Pioneer's commitment until the second anniversary of the
Reorganization to limit the expenses (excluding extraordinary expenses) of the
Investor Class of Pioneer Growth Opportunities Fund to 1.05% of average daily
net assets. This expense ratio is no higher than both the gross expenses and
expenses net of expense reimbursement of the Investor Class shares of your
Safeco Fund. Although you will experience higher expenses once the Investor
Class shares convert to Class A shares after two years, your expenses will
remain the same until the second anniversary of the Reorganization.
Fourth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
Fifth, the Investor Class shares of Pioneer Growth Opportunities Fund
received in the Reorganization will provide Safeco Growth Opportunities Fund
shareholders with exposure to substantially the same investment product as they
currently have.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco Funds
and the Pioneer Funds associated with the Reorganizations, including, but not
limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses of
any proxy solicitation firm retained in connection with the Reorganizations; (3)
the legal fees and expenses incurred by the Safeco Funds in connection with the
Reorganizations; and (4) the Trustees' fees and out of pocket expenses incurred
as a result of the Reorganizations.
The Trustees also considered that Pioneer and Symetra will benefit from the
Reorganization. See "Certain Agreements between Pioneer and Symetra."
The Trustees of Pioneer Growth Opportunities Fund also considered that the
Reorganization presents an excellent opportunity for the Pioneer Growth
Opportunities Fund to acquire investment assets without the obligation to pay
commissions or other transaction costs that a fund normally incurs when
purchasing securities. This opportunity provides an economic benefit to Pioneer
Growth Opportunities Fund and its shareholders.
44
CAPITALIZATION
The following table sets forth the capitalization of each Fund, as of
September 30, 2004, and the pro forma combined Fund as of September 30, 2004.
Pro Forma
Safeco Growth Pioneer Growth Pioneer Growth
Opportunities Fund Opportunities Fund Opportunities Fund
September 30, 2004 September 30, 2004 September 30, 2004
-------------------- -------------------- -------------------
Total Net Assets (in thousands) $515,288 N/A $515,288
Class A shares ................ $ 29,032 N/A N/A
Class B shares ................ $ 7,301 N/A N/A
Class C shares ................ $ 221 N/A N/A
Investor Class shares ......... $478,733 N/A $515,288
Net Asset Value Per Share
Class A shares ................ $ 26.42 N/A N/A
Class B shares ................ $ 24.84 N/A N/A
Class C shares ................ $ 24.84 N/A N/A
Investor Class shares ......... $ 26.88 N/A $ 26.88
Shares Outstanding
Class A shares ................ 1,098,917 N/A N/A
Class B shares ................ 293,942 N/A N/A
Class C shares ................ 8,913 N/A N/A
Investor Class shares ......... 17,810,634 N/A 19,169,940
It is impossible to predict how many shares of Pioneer Growth Opportunities
Fund will actually be received and distributed by your Safeco Fund on the
Reorganization date. The table should not be relied upon to determine the amount
of Pioneer Growth Opportunities Fund's shares that will actually be received and
distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund. Similarly,
the Board of Trustees of Pioneer Growth Opportunities Fund, including its
Independent Trustees, approved the Reorganization. They also determined that the
Reorganization is in the best interests of Pioneer Growth Opportunities Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
45
Safeco International Stock Fund and
Pioneer International Equity Fund
PROPOSAL 1(d)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in
this Proxy Statement/Prospectus or incorporated herein. You should read
carefully the entire proxy statement, including the form of Agreement and Plan
of Reorganization attached as EXHIBIT A-1 because they contain details that are
not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor Class
shares, Pioneer is not required to limit the expenses attributable to Class A
shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco International Stock Fund to the Pioneer International
Equity Fund
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Safeco International Stock Fund Pioneer International Equity Fund
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Business A series of Safeco Common Stock Trust, A diversified open-end management
a diversified open-end management investment company registered under the
investment company organized as a Investment Company Act and organized as
Delaware statutory trust. a Delaware statutory trust.
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Net assets as of $37 million $36 million
June 30, 2004
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Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Investment sub-advisor (until August 2, 2004): Portfolio Manager:
Bank of Ireland Asset Management Limited Christopher Smart. Mr. Smart is supported by
("Sub-adviser") a team of portfolio managers and analysts.
Portfolio Managers (until August 2, 2004): The Mr. Smart, Senior Vice President and Director
Fund is managed by a committee of portfolio of International Investments, joined Pioneer in
managers at the Sub-adviser who are jointly 1995 as Director of Research of Pioneer First
and primarily responsible for the day-to-day Investments, Moscow, Russia.
management of the Fund.
Currently Pioneer is acting as investment
adviser to Safeco International Stock Fund. The
Portfolio Manager of the Pioneer International
Equity Fund, as indicated in the next column,
currently manages your Safeco Fund.
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Primary investments Under normal market conditions, Safeco Under normal market conditions, at least
International Stock Fund invests at least 80% of total assets (plus any borrowings for
80% of net assets (plus any borrowings for investment purposes) are invested in equity
investment purposes) in stocks and at least securities of non-U.S. issuers.
65% of its assets in securities issued by
companies domiciled in countries other than
the United States.
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46
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Safeco International Stock Fund Pioneer International Equity Fund
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Investment strategies Safeco International Stock Fund uses a "value" Pioneer International Equity Fund uses a
style of management. The sub-adviser that balanced growth-value style of management
historically managed the Fund focused on and seeks to invest in issuers with above
companies that are well established with a average potential for earnings and revenue
durable business model and proven track growth that are also trading at attractive
record of delivering earnings and dividends; market valuations.
undervalued relative to their intrinsic value
and/or future growth potential; undervalued
when compared to their historic valuations,
to competitors, or to companies with similar
growth records; and liquid and readily traded
on established foreign exchanges.
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Other investments Pioneer International Equity Fund may
invest up to 20% of its total assets in debt
securities, cash and cash equivalents.
Generally the Fund acquires debt securities
that are investment grade, but the Fund may
invest up to 5% of its net assets in below
investment grade convertible debt securities.
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Temporary defensive Safeco International Stock Fund may purchase Pioneer International Equity Fund may invest
strategies as temporary investments for its cash: all or part of its assets in securities with
commercial paper; certificates of deposit; remaining maturities of less than one year,
shares of no-load, open-end money market cash equivalents or may hold cash.
funds; repurchase agreements (subject to
restrictions on the Fund's investment in illiquid
securities), and other short-term investments.
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Diversification Each Fund is diversified for the purpose of the Investment Company Act and each Fund is
subject to diversification requirements under the Code.
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Industry concentration Each Fund may not invest more than 25% of its assets in any one industry.
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Restricted and illiquid If immediately after and as a result of such Pioneer International Equity Fund may not
securities action the value of the following securities, invest more than 15% of its net assets in
in the aggregate, would exceed 15% of securities which are illiquid and other
the Fund's net assets, the Fund will not securities which are not readily marketable.
(i) purchase securities for which there is no
readily available market, (ii) purchase time
deposits maturing in more than seven days,
(iii) purchase over-the-counter (OTC) options
or hold assets set aside to cover OTC options
written by the Fund, (iv) enter into repurchase
agreements maturing in more than seven
days, or (v) invest in interests in real estate
investment trusts which are not readily
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
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47
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Safeco International Stock Fund Pioneer International Equity Fund
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Safeco International Stock Fund may borrow Pioneer International Equity Fund may
money (i) from banks or (ii) by engaging in not borrow money, except the Fund may:
reverse repurchase agreements. (a) borrow from banks or through reverse
repurchase agreements in an amount up to
33 1/3% of the Fund's total assets (including
the amount borrowed); (b) to the extent
permitted by applicable law, borrow up to
an additional 5% of the Fund's assets for
temporary purposes; (c) obtain such
short-term credits as are necessary for
the clearance of portfolio transactions;
(d) purchase securities on margin to the
extent permitted by applicable law; and
(e) engage in transactions in mortgage dollar
rolls that are accounted for as financings.
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Lending Safeco International Stock Fund may lend Pioneer International Equity Fund may lend
securities to qualified institutional investors portfolio securities with a value that may not
with a value of up to 33% of the Fund's exceed 33 1/3% of the value of its assets.
total assets.
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Derivative instruments Safeco International Stock Fund may write Pioneer International Equity Fund may use
put or call options if, as a result thereof, the futures and options on securities, indices
aggregate value of the assets underlying all and currencies, forward currency exchange
such options do not exceed 20% of the Fund's contracts and other derivatives. The Fund
net assets. does not use derivatives as a primary
investment technique and generally limits
Safeco International Stock Fund may also their use to hedging. However, the Fund may
purchase put or call options or options on use derivatives for a variety of non-principal
futures contracts if, as a result thereof, the purposes, including:
aggregate premiums paid on all options or
options on futures contracts held by the Fund o As a hedge against adverse changes
do not exceed 20% of the Fund's net assets. in stock market prices, interest rates
or currency exchange rates
Safeco International Stock Fund may enter into
any futures contracts or options on futures o As a substitute for purchasing or
contracts if, as a result thereof, the aggregate selling securities
margin deposits and premiums required on all
such instruments do not exceed 5% of the o To increase the Fund's return as a
Fund's net assets. non-hedging strategy that may be
considered speculative
Safeco International Stock Fund may not
purchase securities on margin. However, the
Fund may (i) obtain short-term credits as
necessary to clear its purchases and sales of
securities, and (ii) make margin deposits in
connection with its use of financial options and
futures, forward and spot currency contracts,
swap transactions and other financial contracts
or derivative instruments.
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48
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Safeco International Stock Fund Pioneer International Equity Fund
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Other investment policies and As described above, the Funds have substantially similar principal investment strategies and
restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Fund's other investment policies and fundamental and
non-fundamental investment restrictions, see the SAI.
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Buying, Selling and Exchanging Shares
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Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer
of Safeco International Stock Fund are subject International Equity Fund you receive in the
to a 5.75% front-end sales charge. Reorganization will not be subject to any
sales charge. Moreover, if you own shares
Contingent deferred sales charge of up to 5% in your own name as of the closing of the
if you redeem Class B shares within six years Reorganization (i.e., not in the name of a
of purchase. broker or other intermediary) and maintain
your account, you may purchase Class A
Contingent deferred sales charge of 1% if you shares of Pioneer International Equity Fund
redeem Class C share within one year of and Class A shares of any fund in the Pioneer
purchase. family of funds through such account in the
future without paying any sales charge.
Purchases of Investor Class shares of Safeco
International Stock Fund are not subject to a Except as described above, Class A shares of
sales load. Pioneer International Equity Fund are subject
to a front-end sales charge of up to 5.75%.
Safeco International Stock Fund assesses a
mandatory redemption fee of 2%, as a
percentage of the amount redeemed or
exchanged, on Class A and Investor Class
shares held less than 30 days.
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49
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Safeco International Stock Fund Pioneer International Equity Fund
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Management and other fees Safeco International Stock Fund pays an Pioneer International Equity Fund pays Pioneer
advisory fee on a monthly basis at an annual a management fee equal to Pioneer's annual
rate as follows: fee is equal to:
$0-$250,000,000: 1.00 of 1%
$250,000,001-$750,000,000: 0.90 of 1% 1.00% of average daily net assets up to
Over $750,000,000: 0.80 of 1% $300 million;
0.85% of the next $200 million;
SAM serves as administrator and fund 0.75% on assets over $500 million.
accounting agent for Safeco International Stock
Fund. The Fund pays SAM an administrative During its most recent fiscal year, Pioneer
services fee of 0.05% of the Fund's average International Equity Fund paid an advisory fee
daily net assets up to the first $200,000,000 at an average rate of 1.00% of average daily
and 0.01% of its net assets thereafter, and an net assets.
accounting fee of 0.04% of the Fund's average
daily net assets up to the first $200,000,000 In addition, Pioneer International Equity
and 0.01% of its net assets thereafter. Fund reimburses Pioneer for certain fund
accounting and legal expenses incurred
During its most recent fiscal year, Safeco on behalf of the Fund and pays a separate
International Stock Fund paid aggregate shareholder servicing/transfer agency fee to
advisory and administration fees at an average PIMSS, an affiliate of Pioneer.
rate of 1.09% of average daily net assets.
For the fiscal year ended March 31, 2004,
SAM had contractually agreed until April 30, Pioneer International Equity Fund's total
2009, to pay certain fund operating expenses annual operating expenses for Class A shares
(but not all of the operating expenses of the were 2.80%. Pursuant to an expense limitation
Safeco International Stock Fund) that exceeded agreement in effect until August 31, 2005, the
the rate of 0.40% per annum of the Fund's net expenses for Class A shares were 1.75%.
average daily net assets. This arrangement There can be no assurance that Pioneer will
included all Fund operating expenses except extend the expense limitation for its Class A
management fees, Rule 12b-1 fees, shares after August 31, 2005.
brokerage commissions, interest, and
extraordinary expenses. Pioneer has agreed until the second
anniversary of the closing of the
For the fiscal year ended December 31, 2003, Reorganization to limit the expenses
Safeco International Stock Fund's annual (excluding extraordinary expenses) of the
operating expenses for the Class A shares, Investor Class to 1.40% of the average daily
after giving effect to the expense limitation net assets attributable to the Investor Class.
were 1.65%, and without giving effect to the
expense limitation, were 2.49%. The Investor Class shares to be issued in the
Reorganization will convert to Class A shares
For the fiscal year ended December 31, 2003, after two years. Class A shares will have
Safeco International Stock Fund's annual higher expenses per share than Investor
operating expenses for the Class B shares, Class shares due to the Rule 12b-1 Plan. In
after giving effect to the expense limitation addition, although Pioneer has agreed to limit
were 2.40%, and without giving effect to the the expenses attributable to Investor Class
expense limitation, were 4.16%. shares, Pioneer is not required to extend the
current expense limitation agreement for its
For the fiscal year ended December 31, 2003, Class A shares after August 31, 2005.
Safeco International Stock Fund's annual
operating expenses for the Advisor Class C
shares, after giving effect to the expense
limitation were 2.40%, and without giving
effect to the expense limitation, were 3.29%.
- ------------------------------------------------------------------------------------------------------------------------------
50
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Safeco International Stock Fund Pioneer International Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Management and other fees For the fiscal year ended December 31, 2003,
(continued) Safeco International Stock Fund's annual net
operating expenses for the Institutional Class
shares, after giving effect to the contractual
expense limitation were 1.40%, and without
giving effect to the expense limitation were
2.43%. Beginning in 2003, SAM also began
voluntarily reimbursing all expenses of the
Institutional Class that exceeded 1.10%.
For the fiscal year ended December 31, 2003,
Safeco International Stock Fund's annual
operating expenses for the Investor Class,
after giving effect to the expense limitation
were 1.40%, and without giving effect to the
expense limitation, were 2.19%.
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Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class
(12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject
to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
- ------------------------------------------------------------------------------------------------------------------------------------
Buying shares You may buy shares of Safeco International You may buy shares from any investment firm
Stock Fund directly through Safeco Securities, that has a sales agreement with PFD, Pioneer
the Fund's principal underwriter or through International Equity Fund's distributor. Existing
brokers, registered investment advisers, banks shareholders of Safeco International Stock
and other financial institutions that have Fund who own shares in their own name as
entered into selling agreements with the Fund's of the closing date of the Reorganization and
principal underwriter, as described in the who maintain their accounts may buy shares
Fund's prospectus. of any Fund in the Pioneer family of funds
through such accounts in the future without
Institutional Class shares have a minimum paying sales charges.
investment amount of $250,000.
If the account is established in the
Certain account transactions may be done shareholder's own name, shareholders may
by telephone.
also purchase additional shares of Pioneer
International Equity Fund by telephone
or online.
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Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer
acquire through dividend reinvestment or other International Equity Fund without incurring any
fund distributions or for shares that you have fee on the exchange with the more than 62
exchanged for equivalent shares of another other Pioneer Funds. Your exchange would be
Fund. A 2% redemption fee will be assessed for Class A shares, which would be subject to
on the value of exchanged shares that are held Rule 12b-1 fees. An exchange generally is
less than 30 days in the Safeco International treated as a sale and a new purchase of
Stock Fund. shares for federal income tax purposes.
Certain account transactions may be done If the account is established in the
by telephone. shareholder's own name, shareholders may
also exchange shares of Pioneer International
Equity Fund for shares of other Pioneer Funds
by telephone or online.
- ------------------------------------------------------------------------------------------------------------------------------------
51
- ------------------------------------------------------------------------------------------------------------------------------------
Safeco International Stock Fund Pioneer International Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Selling shares Each class of shares will be sold at the net asset value per share next calculated after the
Fund receives your request in good order.
- ------------------------------------------------------------------------------------------------------------------------------------
You may sell your shares by contacting the Normally, your investment firm will send
Fund directly in writing or by contacting a your request to sell shares to PIMSS. You
financial intermediary as described in the can also sell your shares by contacting the
Safeco International Stock Fund's prospectus. Fund directly if your account is registered in
your name.
If the account is established in the
shareholder's own name, shareholders may
also redeem shares of Pioneer International
Equity Fund by telephone or online.
- ------------------------------------------------------------------------------------------------------------------------------------
Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks. You
could lose money on your investment in either Fund or not make as much as if you
invested elsewhere if:
o The non-U.S. stock markets go down or perform poorly relative to other
investments (this risk may be greater in the short term)
o Equity securities of non-U.S. issuers or growth stocks fall out of
favor with investors
o The Fund's investments do not have the growth potential originally
expected
Investing in non-U.S. issuers may involve unique risks compared to
investing in securities of U.S. issuers. Some of these risks do not apply to
larger, more developed markets. These risks are more pronounced to the extent
the Fund invests in issuers in countries with emerging markets or if the fund
invests significantly in one country. These risks may include:
o Less information about non-U.S. issuers or markets may be available
due to less rigorous disclosure or accounting standards or regulatory
practices
o Many non-U.S. markets are smaller, less liquid and more volatile. In a
changing market, Pioneer may not be able to sell the Fund's portfolio
securities at times, in amounts and at prices it considers reasonable
o Adverse effect of currency exchange rates or controls on the value of
the Fund's investments
o The economies of non-U.S. countries may grow at slower rates than
expected or may experience a downturn or recession
o Economic, political and social developments may adversely affect the
securities markets
o Withholding and other non-U.S. taxes may decrease the Fund's return
Investments in the Funds are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money by investing in either Fund.
The Investor Class Shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class Shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor Class
shares, Pioneer is not required to limit the expenses attributable to Class A
shares. The current expense limitation agreement for Class A shares is in effect
until August 31, 2005. There can be no assurance that Pioneer will extend the
expense limitation agreement for its Class A shares after August 31, 2005.
52
Past Performance
Set forth below is performance information for each Fund. The bar charts
show how each Fund's total return (not including any deduction for sales
charges) has varied from year to year for each full calendar year. The tables
show average annual total return (before and after taxes) for each Fund over
time for each class of shares (including deductions for sales charges) compared
with a broad-based securities market index. The bar charts give an indication of
the risks of investing in each Fund, including the fact that you could incur a
loss and experience volatility of returns year to year. Past performance before
and after taxes does not indicate future results.
Safeco International Stock Fund -- Investor Class
Calendar Year Total Returns*
[DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT]
'97 '98 '99 '00 '01 '02 '03
4.55 14.26 29.00 -10.95 -24.30 -19.12 27.74
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return was 19.79% for the quarter ended December 31, 1999, and
the lowest quarterly return was -21.14% for the quarter ended September 30,
2002.
Pioneer International Equity Fund -- Class A Shares
Calendar Year Total Returns*
[DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT]
'97 '98 '99 '00 '01 '02 '03
5.81 7.40 41.19 -17.87 -19.28 -19.61 32.29
* During the period shown in the bar chart, since the Fund's inception on
October 31, 1996, Pioneer International Equity Fund's highest quarterly
return was 29.50% for the quarter ended December 31, 1999, and the lowest
quarterly return was -21.25% for the quarter ended September 30, 2002.
53
Safeco International Stock Fund*
Average Annual Total Returns as of December 31, 2003
- ------------------------------------------------------------------------------------------------------------
Since
1 Year 5 Years Inception(1)
- ------------------------------------------------------------------------------------------------------------
Safeco International Stock Fund, Class A Shares*
- ------------------------------------------------------------------------------------------------------------
Return Before Taxes 20.18% -3.53% 1.56%
- ------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(2) 19.98% -4.02% 1.08%
- ------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(2) 13.39% -3.14% 1.12%
- ------------------------------------------------------------------------------------------------------------
Safeco International Stock Fund, Class B Shares*
- ------------------------------------------------------------------------------------------------------------
Return Before Taxes 21.41% -3.49% 1.71%
- ------------------------------------------------------------------------------------------------------------
Safeco International Stock Fund, Class C Shares*
- ------------------------------------------------------------------------------------------------------------
Return Before Taxes 25.38% -3.15% 1.57%
- ------------------------------------------------------------------------------------------------------------
Safeco International Stock Fund, Institutional Class Shares
- ------------------------------------------------------------------------------------------------------------
Return Before Taxes 27.99% -2.07% 2.64%
- ------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(2) 27.74% -2.56% 2.13%
- ------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(2) 18.19% -1.92% 2.04%
- ------------------------------------------------------------------------------------------------------------
Safeco International Stock Fund, Investor Class Shares
- ------------------------------------------------------------------------------------------------------------
Return Before Taxes 27.74% -2.11% 2.61%
- ------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(2) 27.51% -2.60% 2.11%
- ------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(2) 18.34% -1.93% 2.03%
- ------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(3)
(reflects no deduction for fees, expenses or taxes) 38.59% -0.05% 3.29%
- ------------------------------------------------------------------------------------------------------------
* Returns for Class A, Class B and Class C shares have not been restated to
reflect Rule 12b-1 fees prior to September 30, 1996, and would be lower if
they were.
(1) The Fund commenced operations on January 31, 1996.
(2) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(3) The MSCI EAFE Index (Morgan Stanley Capital International Europe,
Australasia, Far East Index), an unmanaged index comprised of 21 developed
equity markets outside of North America, is for reference only and does not
mirror the Fund's investments.
54
Pioneer International Equity Fund -- Class A Shares
Average Annual Total Returns as of December 31, 2003
- ------------------------------------------------------------------------------------------------------------
Since
1 Year 5 Years Inception(1)
- ------------------------------------------------------------------------------------------------------------
Pioneer International Equity Fund, Class A Shares
- ------------------------------------------------------------------------------------------------------------
Return Before Taxes 24.69% -1.27% 1.98%
- ------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(2) 24.69% -1.54% 1.71%
- ------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(2) 16.05% -1.12% 1.62%
- ------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(3)
(reflects no deduction for fees, expenses or taxes) 38.59% -0.05% 3.56%
- ------------------------------------------------------------------------------------------------------------
(1) The Fund commenced operations on October 31, 1996.
(2) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(3) The MSCI EAFE Index (Morgan Stanley Capital International Europe,
Australasia, Far East Index), an unmanaged index comprised of 21 developed
equity markets outside of North America, is for reference only, does not
mirror the Fund's investments, includes reinvested dividends net of tax
withholding, and reflects no deduction of fees or expenses.
Pioneer International Equity Fund's Investor Class shares will not be
outstanding prior to the closing of the Reorganization and consequently have no
performance history. However, the performance record of the Investor Class would
be modestly higher than the performance of Class A shares due to the lower
expenses applicable to the Investor Class.
The most recent portfolio manager's discussion of each Fund's performance
is attached as Exhibit D.
55
The Funds' Fees and Expenses
Shareholders of both Funds pay various fees and expenses, either directly
or indirectly. The tables below show the fees and expenses that you would pay if
you were to buy and hold shares of each Fund. The expenses in the tables
appearing below are based on (i) for your Safeco Fund, the expenses of your
Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer
International Equity Fund, the expenses of Pioneer International Equity Fund for
the period ended December 31, 2003. Future expenses for all share classes may be
greater or less.
Safeco Safeco Safeco
International International International
Stock Fund Stock Fund Stock Fund
Shareholder transaction fees Class A Class B Class C
(paid directly from your investment) --------------- --------------- ---------------
Maximum sales charge (load) when you buy shares
as a percentage of offering price ....................... 5.75%(6) None None
Maximum deferred sales charge (load) as a
percentage of purchase price or the amount you
receive when you sell shares, whichever is less ......... None 5.00%(7) 1.00%(8)
Redemption fees for shares held less than 30 days ........ 2.00% None None
Wire redemption fee ...................................... $ 20(4) $ 20(4) $ 20(4)
Annual low balance fee ................................... $ 12(5) $ 12(5) $ 12(5)
Annual fund operating expenses
(deducted from fund assets)
(as a percentage of average net assets)
Management fee ........................................... 1.00% 1.00% 1.00%
Distribution and service (12b-1) fee ..................... 0.25% 1.00% 1.00%
Other expenses ........................................... 1.24% 2.16% 1.29%
Total fund operating expenses ............................ 2.49% 4.16% 3.29%
Expense reimbursement/reduction .......................... 0.84%(2) 1.76%2 0.89%(2)
Net fund operating expenses .............................. 1.65% 2.40% 2.40%
Pro Forma
Safeco Safeco Pioneer
International Stock International International
Fund Institutional Stock Fund Equity Fund
Shareholder transaction fees Class Investor Class Investor Class(9)
(paid directly from your investment) --------------------- ---------------- ----------------
Maximum sales charge (load) when you buy shares
as a percentage of offering price ....................... None None None(1)
Maximum deferred sales charge (load) as a
percentage of purchase price or the amount you
receive when you sell shares, whichever is less ......... None None None
Redemption fees for shares held less than 30 days ........ 2.00% 2.00% 2.00%
Wire redemption fee ...................................... $ 20(4) $ 20(4) $ 10
Annual low balance fee ................................... $ 12(5) $ 12(5) N/A
Annual fund operating expenses
(deducted from fund assets)
(as a percentage of average net assets)
Management fee ........................................... 1.00% 1.00% 1.00%
Distribution and service (12b-1) fee ..................... None None None
Other expenses ........................................... 1.43% 1.19% 0.76%
Total fund operating expenses ............................ 2.43% 2.19% 1.76%
Expense reimbursement/reduction .......................... 1.03%(2) 0.79%(2) 0.36%(3)
Net fund operating expenses .............................. 1.40% 1.40% 1.40%
- ----------
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer International Equity Fund through the Reorganization. In addition,
shareholders of your Safeco Fund who own shares in their own name (i.e.,
not in the name of a broker or other intermediary) and maintain such
account as of the closing of the Reorganization may purchase Class A shares
of Pioneer International Equity Fund or of any fund in the Pioneer family
of funds through such account in the future without paying a sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco
International Stock Fund for certain Fund operating expenses (but not all
of the operating expenses of the Fund) that exceeded the rate of 0.40% per
annum of the Fund's average daily net assets. This arrangement included all
fund operating expenses except management fees, Rule 12b-1 fees, brokerage
commissions, interest, and extraordinary expenses. In 2003, SAM
additionally began voluntarily reimbursing the Fund to the extent that the
total expenses of the Institutional Class exceeded the rate of 1.10% per
annum of the Fund's average daily net assets for Institutional Class. The
above table reflects "contractual" expense reimbursements from SAM, if any,
but does not reflect "voluntary" expense reimbursements by SAM.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer
International Equity Fund to 1.40% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once each year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions mad in the first twelve months except with
respect to participant-directed redemptions from qualified retirement
plans.
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after six years from purchase, and the Class B shares
covert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
56
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect for five years for
Safeco International Stock Fund and two years for Pioneer International Equity
Fund and (f) and the Investor Class shares of Pioneer International Equity Fund
convert to Class A shares after two years, without giving effect to any expense
limitation upon conversion. The examples are for comparison purposes only and
are not a representation of either Fund's actual expenses or returns, either
past or future.
Example
Safeco International Stock Fund
Class A Shares
Year 1 ................... $ 733
Year 3 ................... $1,065
Year 5 ................... $1,420
Year 10 .................. $2,893
With Without
Class B Shares Redemption Redemption
Year 1 ................... $ 743 $ 243
Year 3 ................... $ 1,048 $ 748
Year 5 ................... $ 1,480 $ 1,280
Year 10 .................. $ 2,956 $ 2,956
With Without
Class C Shares Redemption Redemption
Year 1 ................... $ 343 $ 243
Year 3 ................... $ 748 $ 748
Year 5 ................... $ 1,280 $ 1,280
Year 10 .................. $ 3,232 $ 3,232
Institutional Class Shares
Year 1 ................... $ 143
Year 3 ................... $ 443
Year 5 ................... $ 766
Year 10 .................. $2,168
Investor Class Shares
Year 1 ................... $ 143
Year 3 ................... $ 443
Year 5 ................... $ 766
Year 10 .................. $2,168
Pro Forma Pioneer International Equity Fund
Investor Class Shares
Year 1 ................... $ 143
Year 3 ................... $ 565
Year 5 ................... $1,134
Year 10 .................. $2,686
57
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco International Stock Fund. The Trustees considered the
following matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Safeco Fund until August 2, 2004,
was acquired by Symetra. Symetra informed the Trustees that it did not intend to
continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment management was
necessary.
Second, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutions and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholder account
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market fund
that will be available to your Safeco Fund's shareholders through exchanges. In
addition, Pioneer offers shareholders additional options for their accounts,
including the ability to transact and exchange shares over the telephone or
online and the ability to access account values and transaction history in all
of the shareholder's direct accounts in the Pioneer Funds over the telephone or
online.
Third, Pioneer's commitment until the second anniversary of the
Reorganization to limit the expenses (excluding extraordinary expenses) of the
Investor Class of Pioneer International Equity Fund to 1.40% of average daily
net assets. The estimated expenses of the Investor Class of Pioneer
International Equity Fund are lower than or equal to both the gross and net
expenses after contractual reimbursements of each class of shares of your Safeco
Fund.
Fourth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
Fifth, the Investor Class shares of Pioneer International Equity Fund
received in the Reorganization will provide Safeco International Stock Fund
shareholders with exposure to substantially the same investment product as they
currently have.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco Funds
and the Pioneer Funds associated with the Reorganizations, including, but not
limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses of
any proxy solicitation firm retained in connection with the Reorganizations; (3)
the legal fees and expenses incurred by the Safeco Funds in connection with the
Reorganizations; and (4) the Trustees' fees and out of pocket expenses incurred
as a result of the Reorganizations.
The Trustees also considered that Pioneer and Symetra will benefit from the
Reorganization. See "Certain Agreements between Pioneer and Symetra."
The Board of Trustees of Pioneer International Equity Fund also considered
that the Reorganization presents an excellent opportunity for the Pioneer
International Equity Fund to acquire investment assets without the obligation to
pay commissions or other transaction costs that a fund normally incurs when
purchasing securities. This opportunity provides an economic benefit to Pioneer
International Equity Fund and its shareholders.
58
CAPITALIZATION
The following table sets forth the capitalization of each Fund as of March
31, 2004, and the pro forma combined Fund as of March 31, 2004.
Pro Forma
Safeco Pioneer Pioneer
International International International
Stock Fund Equity Fund Equity Fund
March 31, 2004 March 31, 2004 March 31, 2004
---------------- ---------------- ---------------
Total Net Assets (in thousands) $36,968 $30,572 $67,540
Class A shares ..................... $ 1,417 $18,345 $18,345
Class B shares ..................... $ 716 $ 8,575 $ 8,575
Class C shares ..................... $ 103 $ 3,652 $ 3,652
Institutional Class shares ......... $ 9,043 N/A N/A
Investor Class shares .............. $25,689 N/A $36,968
Net Asset Value Per Share
Class A shares ..................... $ 10.82 $ 17.55 $ 17.55
Class B shares ..................... $ 10.57 $ 16.41 $ 16.41
Class C shares ..................... $ 10.58 $ 16.21 $ 16.21
Institutional Class shares ......... $ 11.02 N/A N/A
Investor Class shares .............. $ 10.92 N/A $ 17.55
Shares Outstanding
Class A shares ..................... 131,004 1,045,193 1,045,193
Class B shares ..................... 67,765 522,503 522,503
Class C shares ..................... 9,689 225,379 225,379
Institutional Class shares ......... 820,220 N/A N/A
Investor Class shares .............. 2,351,852 N/A 2,106,439
It is impossible to predict how many shares of Pioneer International Equity
Fund will actually be received and distributed by your Safeco Fund on the
Reorganization date. The table should not be relied upon to determine the amount
of Pioneer International Equity Fund's shares that will actually be received and
distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund. Similarly,
the Board of Trustees of Pioneer International Equity Fund, including its
Independent Trustees, approved the Reorganization. They also determined that the
Reorganization is in the best interests of Pioneer International Equity Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
59
Safeco Large-Cap Growth Fund and
Pioneer Growth Shares
PROPOSAL 1(e)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in
this Proxy Statement/Prospectus or incorporated herein. You should read
carefully the entire proxy statement, including the form of Agreement and Plan
of Reorganization attached as EXHIBIT A-1 because they contain details that are
not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have a higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor Class
shares, Pioneer is not required to limit the expenses attributable to Class A
shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco Large-Cap Growth Fund to the Pioneer Growth Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Safeco Large-Cap Growth Fund Pioneer Growth Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Business A series of Safeco Common Stock Trust, A diversified open-end management
a diversified open-end management investment company registered under the
investment company organized as a Investment Company Act organized as a
Delaware statutory trust. Delaware statutory trust.
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets as of $7 million $732 million
June 30, 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Sub-adviser (until August 2, 2004): Portfolio Manager:
RCM Capital Management LLC ("Sub-adviser") Christopher M. Galizio
is responsible for the day-to-day management
of Safeco Large-Cap Growth Fund. Mr. Galizio is a vice president and joined
Pioneer in 1994
Portfolio Managers:
Seth A. Reicher (joined Sub-adviser in 1993)
Peter A. Goetz (joined Sub-adviser in 1999)
Currently Pioneer is acting as investment
adviser to Safeco Large-Cap Growth Fund. The
Portfolio Manager of Pioneer Growth Shares,
as indicated in the next column, currently
manages your Safeco Fund.
- ------------------------------------------------------------------------------------------------------------------------------------
Investment objective Safeco Large-Cap Growth Fund seeks long- Pioneer Growth Shares seeks capital
term growth of capital. appreciation primarily through equity
securities of large-cap U.S. companies
believed to have better-than-average
earnings potential.
- ------------------------------------------------------------------------------------------------------------------------------------
The investment objective of each Fund is fundamental and cannot be changed without
shareholder approval.
- ------------------------------------------------------------------------------------------------------------------------------------
60
- ------------------------------------------------------------------------------------------------------------------------------------
Safeco Large-Cap Growth Fund Pioneer Growth Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Primary investments Under normal market conditions, Safeco Under normal market conditions, Pioneer
Large-Cap Growth Fund invests at least 80% Growth Shares invests primarily in equity
of its net assets (plus any borrowings for securities of U.S. issuers. For purposes of the
investment purposes) in equity and equity- Fund's investment policies, equity securities
related securities of companies whose total include common stocks, convertible debt and
market capitalization at the time of the other equity instruments, such as depositary
investment is within the range of market receipts, warrants, rights, interests in real
capitalizations of companies included in the estate investment trusts ("REITs") and
Russell 1000 Growth Index. preferred stocks.
- ------------------------------------------------------------------------------------------------------------------------------------
Investment strategies Safeco Large-Cap Growth Fund uses a Pioneer Growth Shares uses a "growth"
"growth" style of management. The Sub- style and seeks to invest in issuers with
adviser historically has aimed to generate above average potential for earnings and
positive returns over a full market cycle by revenue growth.
investing in companies that show long-term
sustainable growth in revenue, earnings and/or Factors Pioneer looks for in selecting
cash flow. investments include:
The Sub-adviser considered factors such as: o companies with experienced management
teams, strong market positions and the
o the strength of the company's balance sheet; potential to support above average
o the quality of the management team; earnings growth;
o products or services that differentiate the o a sustainable competitive advantage,
company from its competitors; such as a brand name, customer base,
o the company's commitment to research and proprietary technology or economies of
development; and scale; and
o ongoing new products and services. o favorable expected returns relative to
perceived risk.
- ------------------------------------------------------------------------------------------------------------------------------------
Other investments Safeco Large-Cap Growth Fund may invest Pioneer Growth Shares may invest a portion
in securities convertible into common stock, of its assets not invested in equity securities
but less than 35% of its total assets will be in debt securities of corporate and
invested in such securities. government issuers.
Up to 5% of Pioneer Growth Shares' net
assets may be invested in below investment
grade debt securities issued by both U.S. and
non-U.S. corporate and government issuers.
Pioneer Growth Shares may invest up to 25%
of its total assets in REITs.
Pioneer Growth Shares may invest up to 30%
of its total assets in equity and debt securities
of non-U.S. corporate issuers and debt
securities of non-U.S. government issuers.
Pioneer Growth Shares will not invest more
than 5% of its total assets in securities of
emerging markets issuers.
- ------------------------------------------------------------------------------------------------------------------------------------
61
- ------------------------------------------------------------------------------------------------------------------------------------
Safeco Large-Cap Growth Fund Pioneer Growth Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Temporary defensive Safeco Large-Cap Growth Fund may hold cash Pioneer Growth Shares may invest all or part
strategies or invest in high-quality, short-term securities of its assets in securities with remaining
issued by an agency or instrumentality of the maturities of less than one year, cash
U.S. government, high-quality commercial equivalents or may hold cash.
paper, certificates of deposit, shares of no-
load, open-end money market funds, or
repurchase agreements.
- ------------------------------------------------------------------------------------------------------------------------------------
Diversification Each Fund is diversified for the purpose of the Investment Company Act and each Fund is
subject to diversification requirements under the Code.
- ------------------------------------------------------------------------------------------------------------------------------------
Industry concentration Each Fund may not invest more than 25% of its assets in any one industry.
- ------------------------------------------------------------------------------------------------------------------------------------
Restricted and illiquid If immediately after and as a result of such Pioneer Growth Shares may not invest more
securities action the value of the following securities, in than 15% of its net assets in securities which
the aggregate, would exceed 15% of Safeco are illiquid and other securities which are not
Large-Cap Growth Fund's net assets, the Fund readily marketable.
will not (i) purchase securities for which there
is no readily available market, (ii) purchase
time deposits maturing in more than seven
days, (iii) purchase over-the-counter (OTC)
options or hold assets set aside to cover OTC
options written by the Fund, (iv) enter into
repurchase agreements maturing in more than
seven days, or (v) invest in interests in real
estate investment trusts which are not readily
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
- ------------------------------------------------------------------------------------------------------------------------------------
Borrowing Safeco Large-Cap Growth Fund may borrow Borrow money, except Pioneer Growth
money (i) from banks or (ii) by engaging in Shares may: (a) borrow from banks or
reverse repurchase agreements. through reverse repurchase agreements in
an amount up to 33 1/3% of the Fund's total
assets (including the amount borrowed);
(b) to the extent permitted by applicable law,
borrow up to an additional 5% of the Fund's
assets for temporary purposes; (c) obtain
such short-term credits as are necessary
for the clearance of portfolio transactions;
(d) purchase securities on margin to the
extent permitted by applicable law; and
(e) engage in transactions in mortgage dollar
rolls that are accounted for as financings.
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Lending Safeco Large-Cap Growth Fund may lend Pioneer Growth Shares may lend portfolio
securities to qualified institutional investors securities with a value that may not exceed
with a value of up to 33% of the Fund's 331/3% of the value of its assets.
total assets.
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62
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Safeco Large-Cap Growth Fund Pioneer Growth Shares
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Derivative instruments Safeco Large-Cap Growth Fund may write Pioneer Growth Shares may use futures and
put or call options if, as a result thereof, the options on securities, indices and currencies,
aggregate value of the assets underlying all forward currency exchange contracts and
such options does not exceed 25% of the other derivatives. The Fund does not use
Fund's net assets. derivatives as a primary investment technique
and generally limits their use to hedging.
Safeco Large-Cap Growth Fund may purchase However, the Fund may use derivatives for a
put or call options or options on futures variety of non-principal purposes, including:
contracts if, as a result thereof, the aggregate
premiums paid on all options or options on o As a hedge against adverse changes in
futures contracts do not exceed 20% of the stock market prices, interest rates or
Fund's net assets. currency exchange rates
o As a substitute for purchasing or selling
Safeco Large-Cap Growth Fund may enter into securities option on a futures contract
any futures contract or thereof, the aggregate o To increase the Fund's return as a
margin deposits and premiums required on all non-hedging strategy that may be
such instruments does not exceed 5% of the considered speculative
Fund's net assets.
Safeco Large-Cap Growth Fund may not
purchase securities on margin. However, the
Fund may (i) obtain short-term credits as
necessary to clear its purchases and sales of
securities, and (ii) make margin deposits in
connection with its use of financial options and
futures, forward and spot currency contracts,
swap transactions and other financial contracts
or derivative instruments.
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Other investment As described above, the Funds have substantially similar principal investment strategies and
policies and policies. Certain of the non-principal investment policies and restrictions are different. For a
restrictions more complete discussion of each Fund's other investment policies and fundamental and
non-fundamental investment restrictions, see the SAI.
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63
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Safeco Large-Cap Growth Fund Pioneer Growth Shares
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Buying, Selling and Exchanging Shares
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Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer Growth
of Safeco Large-Cap Growth Fund are subject Shares you receive in the Reorganization will
to a 5.75% front-end sales charge. not be subject to any sales charge. Moreover,
if you own shares in your own name as of the
Contingent deferred sales charge of up to 5% closing of the Reorganization (i.e., not in the
if you redeem Class B shares within 6 years name of a broker or other intermediary) and
of purchase.
maintain your account, you may purchase
Contingent deferred sales charge of up to 1% Class A shares of Pioneer Growth Shares and
if you redeem Class C shares within one year Class A shares of any Fund in the Pioneer
of purchase. family of funds through such account in the
future without paying any sales charge.
Purchases of Investor Class shares of Safeco
Large-Cap Growth Fund are not subject to a Except as described above, Class A shares of
sales load. Pioneer Growth Shares are subject to a front-
end sales charge of up to 5.75%.
Safeco Large-Cap Growth Fund assesses
a mandatory redemption fee of 2%, as a
percentage of the amount redeemed or
exchanged, on Class A and Investor Class
shares held less than 30 days.
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64
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Safeco Large-Cap Growth Fund Pioneer Growth Shares
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Management and other fees Safeco Large-Cap Growth Fund pays an Pioneer Growth Shares pays Pioneer a
advisory fee on a monthly basis at an annual management fee, subject to a performance
rate as follows: adjustment, equal to Pioneer's annual fee
equal to:
$0-$250,000,000: 0.80 of 1%
$250,000,001-$750,000,000: 0.75 of 1% 0.70% of average daily net assets up to
$750,000,001-$1,250,000,000: 0.70 of 1% $500 million;
Over $1,250,000,000: 0.65 of 1% 0.65% of the next $500 million;
0.625% on assets over $1 billion.
SAM paid the Sub-adviser a fee in accordance
with the following schedule: Pioneer's fee increases or decreases depending
$0 - $100,000,000: 0.35 of 1% upon whether the Fund's performance exceeds,
$100,000,000 - $250,000,000: 0.25 of 1% or is exceeded by, that of Russell 1000 Growth
Over $250,000,000: 0.20 of 1% Index over the specified performance period.
Each percentage point of difference between the
SAM serves as administrator and fund performance of the Class A shares and the index
accounting agent for Safeco Large-Cap Growth (limited to a maximum of +/-10) is multiplied
Fund. The Fund pays SAM an administrative by a performance rate adjustment of 0.01%.
services fee of 0.05% of the Fund's average As a result, the fee is subject to a maximum
daily net assets up to the first $200,000,000 annualized rate adjustment of +/-0.10%. This
and 0.01% of its net assets thereafter, and an performance comparison is made at the end of
accounting fee of 0.04% of the Fund's average each month. An appropriate monthly percentage
daily net assets up to the first $200,000,000 of this annual rate (based on the number of
and 0.01% of its net assets thereafter. days in the current month) is then applied to
the Fund's average net assets for the entire
During its most recent fiscal year, Safeco performance period, giving a dollar amount that
Large-Cap Growth Fund paid aggregate is added to (or subtracted from) the basic fee.
advisory and administration fees at an average In addition, the fee is also further limited to a
rate of 0.89% of average daily net assets. maximum annualized rate adjustment of +/-0.10%
(i.e., the management fee will not exceed 0.80%
In 2003, SAM began voluntarily reimbursing or be less than 0.525%). However, Pioneer
Safeco Large-Cap Growth Fund to the extent currently is waiving the lower limitation on its
that its total expenses exceeded the rate of fee, but may reimpose it in the future. Because
1.40% per annum of the Fund's average daily any adjustments to the basic fee begin with the
net assets for Class A shares, 2.15% per comparative performance of the Fund and the
annum for Class B and Class C shares, and performance record of the index, the controlling
1.15% per annum for Investor Class shares. factor is not whether fund performance is up or
down, but whether it is up or down more or
For the fiscal year ended December 31, 2003, less than the performance record of the index,
Safeco Large-Cap Growth Fund's annual regardless of general market performance.
operating expenses for Class A shares were
2.79%. After giving effect to the voluntary During its most recent fiscal year, Pioneer
expense reimbursement, the operating Growth Shares paid an advisory fee at an
expenses for Class A shares were 1.40%. average rate of 0.59% of average daily
net assets.
For the fiscal year ended December 31, 2003,
Safeco Large-Cap Growth Fund's annual In addition, Pioneer Growth Shares reimburses
operating expenses for Class B shares were Pioneer for certain fund accounting and legal
3.55%. After giving effect to the voluntary expenses incurred on behalf of the Fund and
expense reimbursement, the operating pays a separate shareholder servicing/transfer
expenses for Class B shares were 2.15%. agency fee to PIMSS, an affiliate of Pioneer.
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65
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Safeco Large-Cap Growth Fund Pioneer Growth Shares
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Management and other fees For the fiscal year ended December 31, 2003, For the fiscal year ended December 31, 2003,
(continued) Safeco Large-Cap Growth Fund's annual Pioneer Growth Shares' total annual operating
operating expenses for Class C shares were expenses for Class A shares were 1.45% of
3.46%. After giving effect to the voluntary average daily net assets. The Fund does not
expense reimbursement, the operating currently have an expense limitation for its
expenses for Class C shares were 2.15%. Class A shares.
For the fiscal year ended December 31, 2003, Pioneer has agreed until the second
Safeco Large-Cap Growth Fund's annual anniversary of the closing of the
operating expenses for Investor Class Reorganization to limit the expenses
shares were 2.55%. After giving effect to (excluding extraordinary expenses) of the
the voluntary expense reimbursement, the Investor Class to 1.15% of the average daily
operating expenses for Investor Class shares net assets attributable to the Investor Class.
were 1.15%.
The Investor Class shares to be issued in
the Reorganization will convert to Class A
shares after two years. Class A shares will
have higher expenses per share than Investor
Class Shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit
the expenses attributable to Investor Class
shares, Pioneer is not required to limit the
expenses attributable to Class A shares.
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Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class
(12b-1) fee shares will convert into Class A share after two years. Class A shares of each Fund are subject
to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
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Buying shares You may buy shares of the Fund directly You may buy shares from any investment
through Safeco Securities, the Fund's firm that has a sales agreement with PFD,
principal underwriter or through brokers, Pioneer Growth Shares' distributor. Existing
registered investment advisers, banks and shareholders of Safeco Large-Cap Growth
other financial institutions that have entered Fund who own shares in their own name as
into selling agreements with the Fund's of the closing date of the Reorganization and
principal underwriter, as described in the who maintain their accounts may buy shares
Fund's prospectus. of any fund in the Pioneer family of funds
through such accounts in the future without
Certain account transactions may be done paying sales charges.
by telephone.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
Growth Shares by telephone or online.
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66
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Safeco Large-Cap Growth Fund Pioneer Growth Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer Growth
acquire through dividend reinvestment or other Shares without incurring any fee on the
fund distributions or for Class A shares that exchange with the more than 62 other Pioneer
you have exchanged for Class A shares of Funds. Your exchange would be for Class A
another Fund. shares, which would be subject to Rule 12b-1
fees. An exchange generally is treated as a
Certain account transactions may be done sale and a new purchase of shares for federal
by telephone. income tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer Growth
Shares for shares of other Pioneer Funds by
telephone or online.
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Selling shares Each class of shares is sold at the net asset value per share next calculated after the Fund
receives your request in good order.
- ------------------------------------------------------------------------------------------------------------------------------------
You may sell your shares by contacting Safeco Normally, your investment firm will send
Large-Cap Growth Fund directly in writing or your request to sell shares to PIMSS. You
by contacting a financial intermediary as can also sell your shares by contacting the
described in the Fund's prospectus. Fund directly if your account is registered in
your name.
If the account is established in the
shareholder's own name, shareholders may
also redeem shares of Pioneer Growth Shares
by telephone or online.
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Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks. You
could lose money on your investment in either Fund or not make as much as if you
invested elsewhere if:
o The stock market goes down (this risk may be greater in the
short-term)
o Growth stocks fall out of favor with investors
o The Fund's investments do not have the growth potential originally
expected
Investing in non-U.S. issuers may involve unique risks compared to
investing in securities of U.S. issuers. These risks may include:
o Less information about non-U.S. issuers or markets may be available
due to less rigorous disclosure or accounting standards or regulatory
practices
o Many non-U.S. markets are small, less liquid and more volatile. In a
changing market, Pioneer might not be able to sell the Fund's
portfolio securities at times, in amounts and at prices it considers
reasonable
o Adverse effect of currency exchange rates or controls on the value of
the Fund's investments
o The economies of non-U.S. countries may grow at slower rates than
expected or may experience a downturn or recession
o Economic, political and social developments may adversely affect the
securities markets
o Withholding and other non-U.S. taxes may decrease the Fund's return
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor Class
shares, Pioneer is not required to limit the expenses attributable to Class A
shares.
67
Past Performance
Set forth below is performance information for each Fund. The bar charts
show how each Fund's total return (not including any deduction for sales
charges) has varied from year to year for each full calendar year. The tables
show average annual total return (before and after taxes) for each Fund over
time for each class of shares (including deductions for sales charges) compared
with a broad-based securities market index. The bar charts give an indication of
the risks of investing in each Fund, including the fact that you could incur a
loss and experience volatility of returns year to year. Past performance before
and after taxes does not indicate future results.
Safeco Large-Cap Growth Fund -- Investor Class
Calendar Year Total Returns*
[DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT]
'02 '03
- -26.95 20.16
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return was 10.31% for the quarter ended June 30, 2003, and the
lowest quarterly return was -16.72% for the quarter ended June 30, 2002.
Pioneer Growth Shares -- Class A Shares
Calendar Year Total Returns*
[DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT]
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03
- -2.60 29.82 26.95 43.78 33.54 7.40 -9.57 -19.23 -34.89 26.19
* During the period shown in the bar chart, Pioneer Growth Shares' highest
quarterly return was 24.06% for the quarter ended June 30, 1997, and the
lowest quarterly return was -20.20% for the quarter ended June 30, 2002.
68
Safeco Large-Cap Growth Fund
Average Annual Total Returns as of December 31, 2003
- ----------------------------------------------------------------------------------------------
Since
1 Year Inception(1)
- ----------------------------------------------------------------------------------------------
Safeco Large-Cap Growth Fund, Class A Shares
- ----------------------------------------------------------------------------------------------
Return Before Taxes 13.05% -5.94%
- ----------------------------------------------------------------------------------------------
Return After Taxes on Distributions(2) 13.05% -5.98%
- ----------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(2) 8.48% -5.05%
- ----------------------------------------------------------------------------------------------
Safeco Large-Cap Growth Fund, Class B Shares
- ----------------------------------------------------------------------------------------------
Return Before Taxes 14.06% -5.40%
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Safeco Large-Cap Growth Fund, Class C Shares
- ----------------------------------------------------------------------------------------------
Return Before Taxes 18.06% -4.06%
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Safeco Large-Cap Growth Fund, Investor Class Shares
- ----------------------------------------------------------------------------------------------
Return Before Taxes 20.16% -3.11%
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Return After Taxes on Distributions(2) 20.16% -3.18%
- ----------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(2) 13.10% -2.68%
- ----------------------------------------------------------------------------------------------
Russell 1000 Growth Index(3)
(reflects no deduction for fees, expenses or taxes) 29.76% 1.09%
- ----------------------------------------------------------------------------------------------
(1) The Fund commenced operations on October 31, 2001.
(2) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(3) The Russell 1000 Growth Index, an unmanaged index of growth stocks in the
Russell 1000 Index of the 1,000 largest-capitalization U.S. stocks, is for
reference only and does not mirror the Fund's investments.
Pioneer Growth Shares -- Class A Shares
Average Annual Total Returns as of December 31, 2003
- --------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------------------------------
Pioneer Growth Shares, Class A Shares
- --------------------------------------------------------------------------------------------------------
Return Before Taxes 18.96% -9.49% 6.47%
- --------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions1 18.96% -10.10% 4.23%
- --------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 12.32% -7.87% 4.47%
- --------------------------------------------------------------------------------------------------------
Russell 1000 Growth Index(2)
(reflects no deduction for fees, expenses or taxes) 29.75% -5.11% 9.21%
- --------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
69
(2) The Russell 1000 Growth Index, an unmanaged index of growth stocks in the
Russell 1000 Index of the 1,000 largest-capitalization U.S. stocks, is for
reference only and does not mirror the Fund's investments.
Pioneer Growth Shares' Investor Class shares will not be outstanding prior
to the closing of the Reorganization and consequently have no performance
history. However, the performance record of the Investor Class would be modestly
higher than the performance of Class A shares due to the lower expenses
applicable to the Investor Class.
The most recent portfolio manager's discussion of each Fund's performance
is attached as Exhibit D.
The Funds' Fees and Expenses
Shareholders of both Funds pay various fees and expenses, either directly
or indirectly. The tables below show the fees and expenses that you would pay if
you were to buy and hold shares of each Fund. The expenses in the tables
appearing below are based on (i) for your Safeco Fund, the expenses of your
Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer Growth
Shares, the expenses of Pioneer Growth Shares for the period ended December 31,
2003. Future expenses for all share classes may be greater or less.
Safeco Safeco
Large-Cap Large-Cap
Growth Fund Growth Fund
Shareholder Transaction fees Class A Class B
(paid directly From your Investment) ------------- -------------
Maximum sales charge (load) when you buy shares as a percentage
of offering price ..................................................... 5.75%(6) None
Maximum deferred sales charge (load) as a % of purchase price or the
amount you receive when you sell shares, whichever is less ............ None 5.00%7
Redemption fees for shares held less than 30 days ...................... 2.00% None
Wire redemption fee .................................................... $ 20(4) $ 20(4)
Annual low balance fee ................................................. $ 12(5) $ 12(5)
Annual fund Operating expenses (deducted from fund Assets)
(as a % of average Net assets)
Management fee ......................................................... 0.80% 0.80%
Distribution and service (12b-1) fee ................................... 0.25% 1.00%
Other expenses ......................................................... 1.74% 1.75%
Total fund operating expenses .......................................... 2.79% 3.55%
Expense reimbursement/reduction ........................................ None(2) None(2)
Net fund operating expenses ............................................ 2.79% 3.55%
Pro Forma
Pioneer
Safeco Safeco Growth
Large-Cap Large-Cap Shares
Growth Fund Growth Fund Investor
Shareholder Transaction fees Class C Investor Class Class(9)
(paid directly From your Investment) ------------- ---------------- ----------
Maximum sales charge (load) when you buy shares as a percentage
of offering price ..................................................... None None None(1)
Maximum deferred sales charge (load) as a % of purchase price or the
amount you receive when you sell shares, whichever is less ............ 1.00%(8) None None
Redemption fees for shares held less than 30 days ...................... None 2.00% N/A
Wire redemption fee .................................................... $ 20(4) $ 20(4) $ 10
Annual low balance fee ................................................. $ 12(5) $ 12(5) N/A
Annual fund Operating expenses (deducted from fund Assets)
(as a % of average Net assets)
Management fee ......................................................... 0.80% 0.80% 0.59%
Distribution and service (12b-1) fee ................................... 1.00% None None
Other expenses ......................................................... 1.66% 1.75% 0.44%
Total fund operating expenses .......................................... 3.46% 2.55% 1.03%
Expense reimbursement/reduction ........................................ None(2) None(2) None(3)
Net fund operating expenses ............................................ 3.46% 2.55% 1.03%
- ----------
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer Growth Shares through the Reorganization. In addition, shareholders
of your Safeco Fund who own shares in their own name (i.e., not in the name
of a broker or other intermediary) and maintain such account as of the
closing of the Reorganization may purchase Class A Shares of Pioneer Growth
Shares or of any fund in the Pioneer family of funds through such account
in the future without paying a sales charge.
(2) In 2003, SAM began voluntarily reimbursing the Fund to the extent that its
total expenses exceeded the rate of 1.40% per annum of the Fund's average
daily net assets for Class A shares, 2.15% per annum for Class B and Class
C shares, and 1.15% per annum for Investor Class shares. The above table
reflects "contractual" expense reimbursements by SAM, if any, but does not
reflect "voluntary" expense reimbursements by SAM.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer Growth
Shares to 1.15% of average daily net assets
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once each year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions made in the first twelve months except with
respect to participant-directed redemptions from qualified retirement
plans.
70
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after six years from purchase, and the Class B shares
convert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
(9) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares. Class A shares do not currently have an
expense limitation and may be subject to higher total operating expenses.
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect for one year for
Safeco Large-Cap Growth Fund and two years for Pioneer Growth Shares and (f) and
the Investor Class shares of Pioneer Growth Shares convert to Class A shares
after two years. The examples are for comparison purposes only and are not a
representation of either Fund's actual expenses or returns, either past or
future.
Example
Safeco Large-Cap Growth Fund
Class A Shares
Year 1 .............. $ 841
Year 3 .............. $1,390
Year 5 .............. $1,964
Year 10 ............. $3,514
With Without
Class B Shares Redemption Redemption
Year 1 .............. $ 858 $ 358
Year 3 .............. $ 1,388 $ 1,088
Year 5 .............. $ 2,040 $ 1,840
Year 10 ............. $ 3,496 $ 3,496
With Without
Class C Shares Redemption Redemption
Year 1 .............. $ 449 $ 349
Year 3 .............. $ 1,062 $ 1,062
Year 5 .............. $ 1,798 $ 1,798
Year 10 ............. $ 3,738 $ 3,738
Investor Class Shares
Year 1 .............. $ 258
Year 3 .............. $ 793
Year 5 .............. $1,355
Year 10 ............. $2,885
Pro Forma Pioneer Growth Shares
Investor Class Shares
Year 1 .............. $ 105
Year 3 .............. $ 367
Year 5 .............. $ 690
Year 10 ............. $1,604
71
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco Large-Cap Growth Fund. The Trustees considered the following
matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Safeco Fund until August 2, 2004,
was acquired by Symetra. Symetra informed the Trustees that it did not intend to
continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, Pioneer Growth Shares has a strong short term performance record
and a substantially longer performance history. For the one year period ended
June 30, 2004, Class A shares of Pioneer Growth Shares had an average annual
return of 9.31% compared to an average annual return of the Class A shares and
Investor Class shares of 4.25% and 10.77%, respectively, during the same
periods. In addition, the Trustees considered the track record of Pioneer in
managing equity and fixed income mutual funds.
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutions and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholder account
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market fund
that will be available to your Safeco Fund's shareholders through exchanges. In
addition, Pioneer offers shareholders additional options for their accounts,
including the ability to transact and exchange shares over the telephone or
online and the ability to access account values and transaction history in all
of the shareholder's direct accounts in the Pioneer Funds over the telephone or
online.
Fourth, Pioneer Growth Shares' lower operating expenses and Pioneer's
commitment until the second anniversary of the Reorganization to limit the
expenses (excluding extraordinary expenses) of the Investor Class of Pioneer
Growth Shares to 1.15% of average daily net assets. The estimated expense ratio
of the Investor Class of Pioneer Growth Shares is lower than the gross and net
expense ratio of each class of shares of your Safeco Fund other than Investor
Class Shares of your Safeco Fund. The expense limitation applicable to Investor
Class Shares of Pioneer Growth Shares is equivalent to the voluntary expense
limit applicable to the Investor Class shares of your Safeco Fund and lower than
the limit on all the other classes of your Safeco Fund. Pioneer has
contractually agreed to keep that limit in place for two years while the expense
limit applicable to your Safeco Fund could be terminated at any time. While you
may experience higher expenses once the Investor Class shares convert to Class A
shares after two years, the Class A shares expense ratio for the most recent
fiscal year was 1.45% of average daily net assets, which was below the gross
expenses of Class A shares of your Safeco Fund.
Fifth, the substantially larger size of Pioneer Growth Shares offers
greater opportunity for diversification of the investment portfolio, which
should help to reduce risks.
Sixth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
shares of another Pioneer Fund without paying any sales charge.
Seventh, the Investor Class shares of Pioneer Growth Shares received in the
Reorganization will provide Safeco Large-Cap Growth Fund shareholders with
exposure to substantially the same investment product as they currently have.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco Funds
and the Pioneer Funds associated with the Reorganizations, including, but not
limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses of
any proxy solicitation firm retained in connection with the Reorganizations; (3)
the legal fees and expenses incurred by the Safeco Funds in connection with the
Reorganizations; and (4) the Trustees' fees and out of pocket expenses incurred
as a result of the Reorganizations.
The Trustees also considered that Pioneer and Symetra will benefit from the
Reorganization. See "Certain Agreements between Pioneer and Symetra."
The Board of Trustees of Pioneer Growth Shares also considered that the
Reorganization presents an excellent opportunity for the Pioneer Growth Shares
to acquire investment assets without the obligation to pay commissions or other
transaction costs that a fund normally incurs when purchasing securities. This
opportunity provides an economic benefit to Pioneer Growth Shares and its
shareholders.
72
Pioneer offers several growth oriented equity funds. From time to time,
Pioneer considers recommending to trustees and shareholders the combination of
certain Pioneer funds that have similar investment strategies and where the
Pioneer funds may benefit from economies of scale. It is possible that Pioneer
will recommend the combination of Pioneer Growth Shares with another Pioneer
fund in the future. If such a recommendation is made, there can be no assurance
that the trustees or shareholders of the relevant funds would approve the
transaction.
CAPITALIZATION
The following table sets forth the capitalization of each Fund as of
September 30, 2004, and pro forma combined Fund as of September 30, 2004.
Safeco Pro Forma
Large-Cap Pioneer Pioneer
Growth Fund Growth Shares Growth Shares
September 30, 2004 September 30, 2004 September 30, 2004
-------------------- -------------------- -------------------
Total Net Assets (in thousands) $6,128 $663,767 $669,895
Class A shares ................ $1,162 $444,912 $444,912
Class B shares ................ $ 931 $168,879 $168,879
Class C shares ................ $ 887 $ 46,992 $ 46,992
Investor Class shares ......... $3,148 N/A $ 6,128
Class Y shares ................ N/A $ 2,719 $ 2,719
Class R shares ................ N/A $265,000 $265,000
Net Asset Value Per Share
Class A shares ................ $ 8.90 $ 10.78 $ 10.78
Class B shares ................ $ 8.70 $ 9.89 $ 9.89
Class C shares ................ $ 8.70 $ 9.99 $ 9.99
Investor Class shares ......... $ 8.94 N/A $ 10.78
Class Y shares ................ N/A $ 11.35 $ 11.35
Class R shares ................ N/A $ 10.81 $ 10.81
Shares Outstanding
Class A shares ................ 130,597 41,259,524 41,259,524
Class B shares ................ 106,917 17,082,803 17,082,803
Class C shares ................ 101,854 4,703,127 4,703,127
Investor Class shares ......... 351,993 N/A 568,460
Class Y shares ................ N/A 239,683 239,683
Class R shares ................ N/A 24,523 24,523
It is impossible to predict how many shares of Pioneer Growth Shares will
actually be received and distributed by your Safeco Fund on the Reorganization
date. The table should not be relied upon to determine the amount of Pioneer
Growth Shares' shares that will actually be received and distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund. Similarly,
the Board of Trustees of Pioneer Growth Shares, including its Independent
Trustees, approved the Reorganization. They also determined that the
Reorganization is in the best interests of Pioneer Growth Shares.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
73
Safeco Large-Cap Value Fund and
Pioneer Value Fund
PROPOSAL 1(f)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in
this Proxy Statement/Prospectus or incorporated herein. You should read
carefully the entire proxy statement, including the form of Agreement and Plan
of Reorganization attached as EXHIBIT A-1 because they contain details that are
not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor Class
shares, Pioneer is not required to limit the expenses attributable to Class A
shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco Large-Cap Value Fund to the Pioneer Value Fund
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Safeco Large-Cap Value Fund Pioneer Value Fund
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Business A series of Safeco Common Stock Trust, A diversified open-end management
a diversified open-end management investment company registered under the
investment company organized as a Investment Company Act and organized as
Delaware statutory trust. a Delaware statutory trust.
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Net assets as of $153 million $3,855 million
June 30, 2004
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Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers (until August 2, 2004): Portfolio Managers:
Rex L. Bentley Day-to-day management of Pioneer Value
Vice President, SAM Fund's portfolio is the responsibility of J.
Lynette D. Sagvold Rodman Wright, who is assisted by Sean
Vice President, SAM Gavin. Mr. Wright is a senior vice president
and joined Pioneer in 1994 and has been an
Currently Pioneer is acting as investment investment professional since 1988. Mr. Gavin
adviser to Safeco Large-Cap Value Fund. The is a vice president and joined Pioneer in 2002.
Portfolio Managers of the Pioneer Fund, as
indicated in the next column, currently manage
your Safeco Fund.
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Investment objective Safeco Large-Cap Value Fund seeks long-term Pioneer Value Fund seeks reasonable income
growth of capital plus current income. and capital growth primarily through equity
securities.
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Safeco Large-Cap Value Fund provides written The investment objective of Pioneer Value
notice to shareholders at least 60 days prior to Fund is fundamental and cannot be changed
any change to its investment objective as without shareholder approval.
described above.
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74
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Safeco Large-Cap Value Fund Pioneer Value Fund
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Primary investments Under normal circumstances, Safeco Large-Cap Under normal market conditions, Pioneer
Value Fund invests at least 80% of net assets Value Fund invests the major portion of its
(plus any borrowings for investment purposes) assets in equity securities, primarily U.S.
in equity and equity-related securities of issuers. For purposes of Pioneer Value Fund's
companies whose total market capitalization at investment policies, equity securities include
the time of the investment is at least $4 billion. common stocks, convertible debt and other
equity instruments, such as depositary
receipts, warrants, rights and preferred stocks.
Up to 25% of Pioneer Value Fund's portfolio
may be invested in the equity securities of
non-U.S. companies.
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Investment strategies In managing the portfolio and selecting Pioneer uses a "value" approach to select
securities, SAM historically analyzed various Pioneer Value Fund's investments. Pioneer
valuation measures such as the ratio of a evaluates a security's potential value,
company's price-to-cash flow compared to its including the attractiveness of its market
historical ratios, industry comparisons, the valuation, based on the company's assets
ratio for the company's competitors, and and prospects for earnings and revenue
companies with similar growth rates. growth. Factors Pioneer looks for in selecting
investments include:
SAM generally sought companies having good
earnings, good value relative to share price, or o Above average potential for earnings and
attractive growth potential. revenue growth
o Favorable expected returns relative to
perceived risks
o Management with demonstrated ability and
commitment to the company
o Low market valuations relative to earnings
forecast, book value, cash flow and sales
o Turnaround potential for companies that
have been through difficult periods
o Good prospects for dividend growth
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Other investments Pioneer Value Fund may invest up to 25% of
its total assets in securities of non-U.S.
issuers. The Fund will not invest more than
5% of its total assets in the securities of
emerging market issuers.
Pioneer Value Fund may invest the balance of
its assets in debt securities of corporate and
government issuers. The Fund may invest up
to 5% of its net assets in below investment
grade debt securities issued by both U.S. and
non-U.S. corporate and government issuers,
including convertible debt securities.
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75
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Safeco Large-Cap Value Fund Pioneer Value Fund
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Temporary defensive Safeco Large-Cap Value Fund may hold cash Pioneer Value Fund may invest all or part
strategies or invest in high-quality, short-term securities of its assets in securities with remaining
issued by an agency or instrumentality of the maturities of less than one year, cash
U.S. government, high-quality commercial equivalents or may hold cash.
paper, certificates of deposit, shares of
no-load, open-end money market funds,
or repurchase agreements.
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Diversification Each Fund is diversified for the purpose of the Investment Company Act and each Fund is
subject to diversification requirements under the Code.
- ------------------------------------------------------------------------------------------------------------------------------------
Industry Concentration Each Fund may not invest more than 25% of its assets in any one industry.
- ------------------------------------------------------------------------------------------------------------------------------------
Restricted and illiquid If immediately after and as a result of such Pioneer Value Fund may not invest more than
securities action the value of the following securities, in 15% of its net assets in securities which are
the aggregate, would exceed 15% of Safeco illiquid and other securities which are not
Large-Cap Value Fund's net assets, the Fund readily marketable.
will not (i) purchase securities for which there
is no readily available market, (ii) purchase
time deposits maturing in more than seven
days, (iii) purchase over-the-counter (OTC)
options or hold assets set aside to cover OTC
options written by the Fund, (iv) enter into
repurchase agreements maturing in more than
seven days, or (v) invest in interests in real
estate investment trusts which are not readily
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
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Borrowing Safeco Large-Cap Value Fund may borrow Borrow money, except Pioneer Value Fund
money (i) from banks or (ii) by engaging in may: (a) borrow from banks or through
reverse repurchase agreements. reverse repurchase agreements in an amount
up to 33 1/3% of the Fund's total assets
(including the amount borrowed); (b) to the
extent permitted by applicable law, borrow
up to an additional 5% of the Fund's assets
for temporary purposes; (c) obtain such
short-term credits as are necessary for
the clearance of portfolio transactions;
(d) purchase securities on margin to the
extent permitted by applicable law; and
(e) engage in transactions in mortgage dollar
rolls that are accounted for as financings.
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Lending Safeco Large-Cap Value Fund may lend Pioneer Value Fund may lend portfolio
securities to qualified institutional investors securities with a value that may not exceed
with a value of up to 33% of the Fund's 33 1/3% of the value of its total assets.
total assets.
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76
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Safeco Large-Cap Value Fund Pioneer Value Fund
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Derivative instruments Safeco Large-Cap Value Fund may write a Pioneer Value Fund may use futures and
put or call option if, as a result thereof, the options on securities, indices and currencies,
aggregate value of the assets underlying all forward currency exchange contracts and
such options does not exceed 25% of the other derivatives. The Fund does not use
Fund's net assets. derivatives as a primary investment technique
and generally limits their use to hedging.
Safeco Large-Cap Value Fund may purchase However, the Fund may use derivatives for a
a put or call option or option on a futures variety of non-principal purposes, including:
contract if, as a result thereof, the aggregate
premiums paid on all options or options on o As a hedge against adverse changes in
a futures contracts held by the Fund do not stock market prices, interest rates or
exceed 20% of the Fund's net assets. currency exchange rates
o As a substitute for purchasing or selling
Safeco Large-Cap Value Fund may enter into a securities
futures contract or option on futures contract o To increase the Fund's return as a non-
if, as a result thereof, the aggregate margin hedging strategy that may be considered
deposits and premiums required on all such speculative
instruments do not exceed 5% of the Fund's
net assets.
Safeco Large-Cap Value Fund may not
purchase securities on margin. However, the
Fund may (i) obtain short-term credits as
necessary to clear its purchases and sales of
securities and (ii) make margin deposits in
connection with its use of financial options and
futures, forward and spot currency contracts,
swap transactions and other financial contracts
or derivative instruments.
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Other investment policies and As described above, the Funds have substantially similar principal investment strategies and
restrictions policies. Certain of the non-principal investment policies and restrictions are different. For
a more complete discussion of each Fund's other investment policies and fundamental and
non-fundamental investment restrictions, see the SAI.
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77
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Safeco Large-Cap Value Fund Pioneer Value Fund
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Buying, Selling and Exchanging Shares
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Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer Value
of Safeco Large-Cap Value Fund are subject to Fund you receive in the Reorganization will
a 5.75% front-end sales charge. not be subject to any sales charge. Moreover,
if you own shares in your own name as of the
Contingent deferred sales charge of up to 5% closing of the Reorganization (i.e., not in the
if you redeem Class B shares within six years name of a broker or other intermediary) and
of purchase. maintain your account, you may purchase
Class A shares of Pioneer Value Fund and
Contingent deferred sales charge of 1% if Class A shares of any fund in the Pioneer
you redeem Class C share within one year family of funds through such account in the
of purchase. future without paying any sales charge.
Purchases of Investor Class shares of Safeco Except as described above, Class A shares of
Large-Cap Value Fund are not subject to a Pioneer Value Fund are subject to a front-end
sales load. sales charge of up to 5.75%.
Safeco Large-Cap Value Fund assesses a
mandatory redemption fee of 2%, as a
percentage of the amount redeemed or
exchanged, on Class A and Investor Class
shares held less than 30 days.
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78
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Safeco Large-Cap Value Fund Pioneer Value Fund
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Management and other fees Safeco Large-Cap Value Fund pays an advisory Pioneer's annual basic fee is 0.60% of Pioneer
fee on a monthly basis at an annual rate Value Fund's average daily net assets.
as follows:
Pioneer's fee increases or decreases
$0-$250,000,000: 0.70 of 1% depending upon whether the Fund's
$250,000,001-$750,000,000: 0.65 of 1% performance exceeds, or is exceeded by,
$750,000,001-$1,250,000,000: 0.60 of 1% that of the Russell 1000 Value Index over the
Over $1,250,000,000: 0.55 of 1% specified performance period. Each percentage
point of difference between the performance
SAM serves as administrator and fund of the Class A shares and the index (limited
accounting agent for Safeco Large-Cap Value to a maximum of +/-10) is multiplied by a
Fund. The Fund pays SAM an administrative performance rate adjustment of 0.01%. As
services fee of 0.05% of the Fund's average a result, the fee is subject to a maximum
daily net assets up to the first $200,000,000 annualized rate adjustment of +/-0.10%. This
and 0.01% of its net assets thereafter, and an performance comparison is made at the end
accounting fee of 0.04% of the Fund's average of each month. An appropriate monthly
daily net assets up to the first $200,000,000 percentage of this annual rate (based on the
and 0.01% of its net assets thereafter. number of days in the current month) is then
applied to the Fund's average net assets for
During its most recent fiscal year, Safeco the entire performance period, giving a dollar
Large-Cap Value Fund paid aggregate advisory amount that is added to (or subtracted from)
and administration fees at an average rate of the basic fee. In addition, the fee is also
0.79% of average daily net assets. further limited to a maximum annualized rate
adjustment of +/-0.10% (i.e., the management
SAM had contractually agreed until April 30, fee will not exceed 0.70% or be less than
2009, to pay certain fund operating expenses 0.50%). However, Pioneer currently is
(but not all of the operating expenses of the waving the lower limitation on its fee, but
Fund) that exceeded the rate of 0.40% per may reimpose it in the future. Because any
annum of Safeco Large-Cap Value Fund's adjustments to the basic fee begin with the
average daily net assets. This arrangement comparative performance of the Fund and
included all Fund operating expenses the performance record of the index, the
except management fees, Rule 12b-1 fees, controlling factor is not whether fund
brokerage commissions, interest, and performance is up or down, but whether
extraordinary expenses. it is up or down more or less than the
performance record of the index, regardless
For the fiscal year ended December 31, 2003, of general market performance.
Safeco Large-Cap Value Fund's annual
operating expenses for Class A shares, after During its most recent fiscal year, Pioneer
giving effect to the expense limitation were Value Fund paid an advisory fee at an average
1.35%, and without giving effect to the rate of 0.70% of average daily net assets.
expense limitation, were 1.71%.
In addition, the Fund reimburses Pioneer for
For the fiscal year ended December 31, 2003, certain Fund accounting and legal expenses
Safeco Large-Cap Value Fund's annual incurred on behalf of the fund and pays a
operating expenses for Class B shares, after separate shareholder servicing/transfer agency
giving effect to the expense limitation were fee to PIMSS, an affiliate of Pioneer.
2.10%, and without giving effect to the
expense limitation, were 2.55%.
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79
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Safeco Large-Cap Value Fund Pioneer Value Fund
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Management and other fees For the fiscal year ended December 31, 2003, For the fiscal year ended September 30, 2003,
(continued) Safeco Large-Cap Value Fund's annual the Fund's total annual operating expenses for
operating expenses for Class C shares, after Class A shares were 1.19% of average daily
giving effect to the expense limitation were net assets. The Fund does not currently have
2.10%, and without giving effect to the an expense limitation for its Class A shares.
expense limitation, were 2.33%.
Pioneer has agreed until the second
For the fiscal year ended December 31, 2003, anniversary of the closing of the
Safeco Large-Cap Value Fund's annual Reorganization to limit the expenses
operating expenses for Investor Class shares, (excluding extraordinary expenses) of the
after giving effect to the expense limitation Investor Class to 1.10% of the average daily
were 1.10%, and without giving effect to the net assets attributable to the Investor Class.
expense limitation, were 1.14%.
The Investor Class Shares to be issued in
the Reorganization will convert to Class A
shares after two years. Class A shares will
have higher expenses per share than Investor
Class Shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit
the expenses attributable to Investor Class
shares, Pioneer is not required to limit the
expenses attributable to Class A shares.
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Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class
(12b-1) fee shares will convert into Class A share after two years. Class A shares of each Fund are subject
to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
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Buying shares You may buy shares of Safeco Large-Cap You may buy shares from any investment firm
Value Fund directly through Safeco Securities, that has a sales agreement with PFD, Pioneer
the Fund's principal underwriter or through Value Fund's distributor. Existing shareholders
brokers, registered investment advisers, of Safeco Large-Cap Value Fund who own
banks and other financial institutions that shares in their own name as of the closing
have entered into selling agreements with the date of the Reorganization and who maintain
Fund's principal underwriter, as described in their accounts may buy shares of any fund in
the Fund's prospectus. the Pioneer family of funds through such
accounts in the future without paying
Certain account transactions may be done by sales charges.
telephone.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
Value Fund by telephone or online.
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80
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Safeco Large-Cap Value Fund Pioneer Value Fund
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Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer
acquire through dividend reinvestment or other Value Fund without incurring any fee on
fund distributions or for Class A shares that the exchange with the more than 62 other
you have exchanged for Class A shares of Pioneer Funds. Your exchange would be for
another Fund. Class A shares, which is subject to Rule
12b-1 fees. An exchange generally is treated
Certain account transactions may be done as a sale and a new purchase of shares for
by telephone. federal income tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer Value Fund
for shares of other Pioneer Funds by
telephone or online.
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Selling shares Investor Class and Class A shares will be sold at net asset value per share next calculated after
each Fund receives your request in good order.
- ------------------------------------------------------------------------------------------------------------------------------------
You may sell your shares by contacting Safeco Normally, your investment firm will send
Large-Cap Value Fund directly in writing or by your request to sell shares to PIMSS. You
contacting a financial intermediary as described can also sell your shares by contacting the
in the Fund's prospectus. Fund directly if your account is registered in
your name.
If the account is established in the
shareholder's own name, shareholders may
also redeem shares of Pioneer Value Fund by
telephone or online.
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Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks. You
could lose money on your investment in either Fund or not make as much as if you
invested elsewhere if:
o Stock market goes down (this risk may be greater in the short-term)
o Value stocks fall out of favor with investors
o The Fund's assets remain undervalued or do not have the potential
value originally expected
o Stocks selected for income do not achieve the same return as
securities selected for capital appreciation Investments in the Funds
are not bank deposits and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. You
could lose money by investing in either Fund.
The Investor Class Shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class Shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor Class
shares, Pioneer is not required to limit the expenses attributable to Class A
shares.
81
Past Performance
Set forth below is performance information for each Fund. The bar charts
show how each Fund's total return (not including any deduction for sales
charges) has varied from year to year for each full calendar year. The tables
show average annual total return (before and after taxes) for each Fund over
time for each class of shares (including deductions for sales charges) compared
with a broad-based securities market index. The bar charts give an indication of
the risks of investing in each Fund, including the fact that you could incur a
loss and experience volatility of returns year to year. Past performance before
and after taxes does not indicate future results.
Safeco Large-Cap Value Fund -- Investor Class
Calendar Year Total Returns*
[DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT]
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03
- -1.09 30.36 23.99 26.43 6.31 1.17 -6.36 -7.06 17.40 4.20
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return was 14.77% for the quarter ended June 30, 2003, and the
lowest quarterly return was -17.60% for the quarter ended September 30,
2002.
Pioneer Value Fund -- Class A Shares
Calendar Year Total Returns*
[DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT]
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03
- -1.73 27.15 21.99 23.70 -7.99 1.61 15.95 -3.09 -18.79 28.54
* During the period shown in the bar chart, Pioneer Value Fund's highest
quarterly return was 15.93% for the quarter ended June 30, 2003, and the
lowest quarterly return was -22.31% for the quarter ended September 30,
1998.
82
Safeco Large-Cap Value Fund
Average Annual Total Returns as of December 31, 2003
- --------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------------------------------
Safeco Large-Cap Value Fund, Class A Shares
- --------------------------------------------------------------------------------------------------------
Return Before Taxes 16.75% -3.39% 5.98%
- --------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 16.57% -4.07% 4.11%
- --------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 11.10% -3.20% 4.18%
- --------------------------------------------------------------------------------------------------------
Safeco Large-Cap Value Fund, Class B Shares
- --------------------------------------------------------------------------------------------------------
Return Before Taxes 17.98% -3.36% 6.19%
- --------------------------------------------------------------------------------------------------------
Safeco Large-Cap Value Fund, Class C Shares
- --------------------------------------------------------------------------------------------------------
Return Before Taxes 22.00% -2.92% 6.11%
- --------------------------------------------------------------------------------------------------------
Safeco Large-Cap Value Fund, Investor Class Shares
- --------------------------------------------------------------------------------------------------------
Return Before Taxes 24.20% -2.01% 6.86%
- --------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 23.94% -2.79% 4.86%
- --------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 16.01% -2.11% 4.87%
- --------------------------------------------------------------------------------------------------------
Russell 1000 Value Index(2)
(reflects no deduction for fees, expenses or taxes) 30.03% 3.57% 11.87%
- --------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(2) The Russell 1000 Value Index, an unmanaged index of value stocks in the
Russell 1000 Index of 1,000 largest-capitalization U.S. stocks, is for
reference only and does not mirror the Fund's investments.
Pioneer Value Fund -- Class A Shares
Average Annual Total Returns as of December 31, 2003
- ------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------
Pioneer Value Fund, Class A Shares
- ------------------------------------------------------------------------------------------------------
Return Before Taxes 21.13% 2.36% 6.90%
- ------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 20.74% 0.96% 4.80%
- ------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 13.76% 1.44% 4.94%
- ------------------------------------------------------------------------------------------------------
Russell 1000 Value Index(2)
(reflects no deduction for fees, expenses or taxes) 30.03% 3.56% 11.88%
- ------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(2) The Russell 1000 Value Index, an unmanaged index of value stocks in the
Russell 1000 Index of 1,000 largest-capitalization U.S. stocks, is for
reference only and does not mirror the Fund's investments.
83
Pioneer Value Fund's Investor Class shares will not be outstanding prior to
the closing of the Reorganization and consequently have no performance history.
However, the performance record of the Investor Class would be modestly higher
than the performance of Class A, B and C shares due to the lower expenses
applicable to the Investor Class.
The most recent portfolio manager's discussion of each Fund's performance
is attached as Exhibit D.
The Funds' Fees and Expenses
Shareholders of both Funds pay various fees and expenses, either directly
or indirectly. The tables below show the fees and expenses that you would pay if
you were to buy and hold shares of each Fund. The expenses in the tables
appearing below are based on (i) for your Safeco Fund, the expenses of your
Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer Value
Fund, the expenses of Pioneer Value Fund for the period ended June 30, 2003.
Future expenses for all share classes may be greater or less.
Safeco
Safeco Large-Cap
Large-Cap Value
Value Fund Fund
Class A Class B
Shareholder transaction fees (paid directly from your investment) ------------ -----------
Maximum sales charge (load) when you buy shares as a percentage
of offering price ................................................... 5.75%(6) None
Maximum deferred sales charge (load) as a percentage of purchase
price or the amount you receive when you sell shares, whichever
is less ............................................................. None 5.00%(7)
Redemption fees for shares held less than 30 days .................... 2.00% None
Wire redemption fee .................................................. $ 20(4) $ 20(4)
Annual low balance fee ............................................... $ 12(5) $ 12(5)
Annual fund operating expenses (deducted from fund assets)
(as a % of average net assets)
Management fee ....................................................... 0.70% 0.70%
Distribution and service (12b-1) fee ................................. 0.25% 1.00%
Other expenses ....................................................... 0.76% 0.85%
Total fund operating expenses ........................................ 1.71% 2.55%
Expense reimbursement/reduction ...................................... 0.36%(2) 0.45%(2)
Net fund operating expenses .......................................... 1.35% 2.10%
Safeco Safeco Pro Forma
Large-Cap Large-Cap Pioneer
Value Value Value Fund
Fund Fund Investor
Class C Investor Class Class(9)
Shareholder transaction fees (paid directly from your investment) ----------- ---------------- -----------
Maximum sales charge (load) when you buy shares as a percentage
of offering price ................................................... None None None(1)
Maximum deferred sales charge (load) as a percentage of purchase
price or the amount you receive when you sell shares, whichever
is less ............................................................. 1.00%(8) None None
Redemption fees for shares held less than 30 days .................... None 2.00% None
Wire redemption fee .................................................. $ 20(4) $ 20(4) $ 10
Annual low balance fee ............................................... $ 12(5) $ 12(5) N/A
Annual fund operating expenses (deducted from fund assets)
(as a % of average net assets)
Management fee ....................................................... 0.70% 0.70% 0.63%
Distribution and service (12b-1) fee ................................. 1.00% None None
Other expenses ....................................................... 0.63% 0.44% 0.47%
Total fund operating expenses ........................................ 2.33% 1.14% 1.10%
Expense reimbursement/reduction ...................................... 0.23%(2) 0.04%(2) None(3)
Net fund operating expenses .......................................... 2.10% 1.10% 1.10%
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(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer Value Fund through the Reorganization. In addition, shareholders of
your Safeco Fund who own shares in their own name (i.e., not in the name of
a broker or other intermediary) and maintain such account as of the closing
of the Reorganization may purchase Class A Shares of Pioneer Value Fund or
of any Fund in the Pioneer family of funds through such account in the
future without paying a sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco
Large-Cap Value Fund for certain Fund operating expenses (but not all of
the operating expenses of the Fund) that exceeded the rate of 0.40% per
annum of the Fund's average daily net assets. This arrangement included all
fund operating expenses except management fees, Rule 12b-1 fees, brokerage
commissions, interest, and extraordinary expenses.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer Value Fund
to 1.10% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once in year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions made in the first twelve months except with
respect to participant-directed redemptions from qualified retirement
plans.
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after six years from purchase, and the Class B shares
convert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
84
(9) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares. Class A shares do not currently have an
expense limitation.
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect for five years for
Safeco Large-Cap Value Fund and two years for Pioneer Value Fund and (f) and the
Investor Class shares of Pioneer Value Fund convert to Class A shares after two
years. The examples are for comparison purposes only and are not a
representation of either Fund's actual expenses or returns, either past or
future.
Example
Safeco Large-Cap Value Fund
Class A Shares
Year 1 .............. $ 705
Year 3 .............. $ 978
Year 5 .............. $1,272
Year 10 ............. $2,318
With Without
Class B Shares Redemption Redemption
Year 1 .............. $ 713 $ 213
Year 3 .............. $ 958 $ 658
Year 5 .............. $ 1,329 $ 1,129
Year 10 ............. $ 2,290 $ 2,290
With Without
Class C Shares Redemption Redemption
Year 1 .............. $ 313 $ 213
Year 3 .............. $ 658 $ 658
Year 5 .............. $ 1,129 $ 1,129
Year 10 ............. $ 2,565 $ 2,565
Investor Class Shares
Year 1 .............. $ 112
Year 3 .............. $ 350
Year 5 .............. $ 606
Year 10 ............. $1,366
Pro FormaPioneer Value Fund
Investor Class Shares
Year 1 .............. $ 113
Year 3 .............. $ 346
Year 5 .............. $ 594
Year 10 ............. $1,430
85
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco Large-Cap Value Fund. The Trustees considered the following
matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Safeco Fund until August 2, 2004,
was acquired by Symetra. Symetra informed the Trustees that it did not intend to
continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, Pioneer Value Fund's short and long-term performance record is
superior to the performance record of your Safeco Fund. For the one, five and
ten year periods ended June 30, 2004, Class A shares of Pioneer Value Fund had
an average annual return of 20.04%, 3.24%, and 8.43%, respectively, compared to
an average annual return of the Class A shares and Investor Class shares of
11.80% and 18.91% (one year) -3.11% and -1.71% (five year) and 6.63% and 7.52%
(ten year), respectively, during the same period. In addition, the Trustees
considered the track record of Pioneer in managing equity and fixed income
mutual funds.
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutions and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholder account
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market fund
that will be available to your Safeco Fund's shareholders through exchanges. In
addition, Pioneer offers shareholders additional options for their accounts,
including the ability to transact and exchange shares over the telephone or
online and the ability to access account values and transaction history in all
of the shareholder's direct accounts in the Pioneer Funds over the telephone or
online.
Fourth, Pioneer Value Fund's lower operating expenses and Pioneer's
commitment until the second anniversary of the Reorganization to limit the
expenses (excluding extraordinary expenses) of the Investor Class of Pioneer
Value Fund to 1.10% of average daily net assets. The estimated expense ratio of
the Investor Class shares of Pioneer Value Fund is lower or equal to both the
gross expenses and expenses net of expense reimbursement of each class of shares
of your Safeco Fund. Although you will experience higher expenses once the
Investor Class shares convert to Class A shares after two years, the Class A
expense ratio for the most recent fiscal year was 1.19% of average daily net
assets, which was below the total gross and net expenses of the Class A shares
of your Safeco Fund.
Fifth, the substantially larger size of Pioneer Value Fund offers greater
opportunity for diversification of the investment portfolio, which should help
to reduce risks.
Sixth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
Seventh, the Investor Class shares of Pioneer Value Fund received in the
Reorganization will provide Safeco Large-Cap Value Fund shareholders with
exposure to substantially the same investment product as they currently have.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco Funds
and the Pioneer Funds associated with the Reorganizations, including, but not
limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses of
any proxy solicitation firm retained in connection with the Reorganizations; (3)
the legal fees and expenses incurred by the Safeco Funds in connection with the
Reorganizations; and (4) the Trustees' fees and out of pocket expenses incurred
as a result of the Reorganizations.
The Trustees also considered that Pioneer and Symetra will benefit from the
Reorganization. See "Certain Agreements between Pioneer and Symetra."
The Board of Trustees of Pioneer Value Fund also considered that the
Reorganization presents an excellent opportunity for the Pioneer Value Fund to
acquire investment assets without the obligation to pay commissions or other
transaction costs that a fund normally incurs when purchasing securities. This
opportunity provides an economic benefit to Pioneer Value Fund and its
shareholders.
86
CAPITALIZATION
The following table sets forth the capitalization of each Fund as of
September 30, 2004, and pro forma combined Fund as of September 30, 2004.
Safeco Pro Forma
Large-Cap Pioneer Pioneer
Value Fund Value Fund Value Fund
September 30, 2004 September 30, 2004 September 30, 2004
-------------------- -------------------- -------------------
Total Net Assets (in thousands) $147,084 $3,788,405 $3,935,489
Class A shares ................ $ 1,654 $3,745,064 $3,745,064
Class B shares ................ $ 996 $ 32,311 $ 32,311
Class C shares ................ $ 143 $ 9,168 $ 9,168
Investor Class shares ......... $144,291 N/A $ 147,084
Class Y shares ................ N/A $ 1,852 $ 1,852
Class R shares ................ N/A $ 10 $ 10
Net Asset Value Per Share
Class A shares ................ $ 19.46 $ 18.83 $ 18.83
Class B shares ................ $ 19.47 $ 17.87 $ 17.87
Class C shares ................ $ 19.55 $ 17.87 $ 17.87
Investor Class shares ......... $ 19.34 N/A $ 18.83
Class Y shares ................ N/A $ 18.84 $ 18.84
Class R shares ................ N/A $ 18.64 $ 18.64
Shares Outstanding
Class A shares ................ 85,000 198,896,441 198,896,441
Class B shares ................ 51,153 1,807,707 1,807,707
Class C shares ................ 7,334 513,049 513,049
Investor Class shares ......... 7,459,486 N/A 7,811,152
Class Y shares ................ N/A 98,313 98,313
Class R shares ................ N/A 539 539
It is impossible to predict how many shares of Pioneer Value Fund will
actually be received and distributed by your Safeco Fund on the Reorganization
date. The table should not be relied upon to determine the amount of Pioneer
Value Fund's shares that will actually be received and distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund. Similarly,
the Board of Trustees of Pioneer Value Fund, including its Independent Trustees,
approved the Reorganization. They also determined that the Reorganization is in
the best interests of Pioneer Value Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
87
Safeco Multi-Cap Core Fund and
Pioneer Mid Cap Value Fund
PROPOSAL 1(g)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in
this Proxy Statement/Prospectus or incorporated herein. You should read
carefully the entire proxy statement, including the form of Agreement and Plan
of Reorganization attached as EXHIBIT A-1 because they contain details that are
not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor Class
shares, Pioneer is not required to limit the expenses attributable to Class A
shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco Multi-Cap Core Fund to the Pioneer Mid Cap Value Fund
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Safeco Multi-Cap Core Fund Pioneer Mid Cap Value Fund
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Business A series of Safeco Common Stock Trust, A diversified open-end management
a diversified open-end management investment company registered under the
investment company organized as a Investment Company Act organized as a
Delaware statutory trust. Delaware statutory trust.
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Net assets as of $90 million $1,820 million
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June 30, 2004
Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers: Portfolio Managers:
Bill Whitlow (since 1997 and until J. Rodman Wright
August 2, 2004) Senior Vice President, Pioneer
CFA, Vice President, SAM Joined Pioneer in 1994
Joined SAM in 2001 Investment professional since 1988
Brian Clancy (since 2003) Sean Gavin
CFA, Equity Analyst, SAM Vice President, Pioneer
Joined SAM in 1996 Joined Pioneer in 2002
Currently Pioneer is acting as investment
adviser to Safeco Multi-Cap Core Fund. The
Portfolio Managers of Pioneer Mid Cap Value
Fund, as indicated in the next column,
currently manage your Safeco Fund.
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Investment objective Safeco Multi-Cap Core Fund seeks long-term Pioneer Mid Cap Value Fund seeks capital
growth of capital. appreciation by investing in a diversified
portfolio of securities consisting primarily
of common stocks.
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Each Fund provides written notice to shareholders at least 60 days prior to any change to its
investment objective as described above.
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88
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Safeco Multi-Cap Core Fund Pioneer Mid Cap Value Fund
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Primary investments Under normal circumstances, Safeco Multi-Cap Normally, Pioneer Mid Cap Value Fund invests
Core Fund invests in a blend of growth and at least 80% of its total assets in equity
value-oriented stocks of companies of any size. securities of mid-size companies, that is
companies with market values within the
range of market values of companies included
in the Russell Midcap Value Index.
Pioneer Mid Cap Value Fund focuses on
issuers with capitalizations within the $1
billion to $10 billion range, and that range
will change depending on market conditions.
The equity securities in which Pioneer
Mid Cap Value Fund principally invests are
common stocks, preferred stocks, depositary
receipts and convertible debt, but the Fund
may invest in other types of equity securities
to a lesser extent, such as warrants
and rights.
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Investment strategies In managing the portfolio and selecting Pioneer Mid Cap Value Fund takes a
securities, SAM considered companies with: fundamental, research-driven approach in
seeking to provide superior returns over time.
o Faster earnings growth than their Pioneer seeks securities selling at substantial
competitors discounts to their underlying values and then
o Low price-to-earnings ratios when compared holds these securities until the market values
to competitors reflect their intrinsic values.
o A share price that represents good value
o Potential for long-term appreciation Pioneer evaluates a security's potential value,
including the attractiveness of its market
valuation, based on the company's assets
and earnings growth. Pioneer evaluates the
issuer based on its financial statements
and operations, employing a bottom-up
analytic style.
Factors Pioneer looks for in selecting
investments include:
o Favorable expected returns relative to
perceived risk
o Management with demonstrated ability and
commitment to the company
o Low market valuations relative to earnings
forecast, book value, cash flow and sales
o Turnaround potential for companies that
have been through difficult periods
o Estimated private market value in excess
of current stock price
o Whether the issuer's industry has strong
fundamentals, such as increasing or
sustainable demand and barriers to entry
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89
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Safeco Multi-Cap Core Fund Pioneer Mid Cap Value Fund
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Other investments Safeco Multi-Cap Core Fund may invest in Pioneer Mid Cap Value Fund may invest up
securities convertible into common stock, to 25% of its total assets in equity and debt
but less than 35% of its total assets will be securities of non-U.S. issuers. The Fund will
invested in such securities. not invest more than 5% of its total assets in
the securities of emerging markets issuers.
Safeco Multi-Cap Core Fund may invest up to
20% of assets in foreign securities. Pioneer Mid Cap Value Fund may invest up
to 20% of its total assets in debt securities of
Safeco Multi-Cap Core Fund may invest up to corporate and government issuers. Generally
10% of its total assets in debt securities rated the Fund acquires debt securities that are
below investment grade. investment grade, but the Fund may invest up
to 5% of its net assets in below investment
grade convertible debt securities issued by
both U.S. and non-U.S. issuers. The Fund
invests in debt securities when Pioneer
believes they are consistent with the Fund's
investment objective by offering the potential
for capital appreciation, to diversify the Fund's
portfolio or for greater liquidity.
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Temporary defensive Safeco Multi-Cap Core Fund may hold cash or Pioneer Mid Cap Value Fund may invest all or
strategies invest in high-quality, short-term securities part of its assets in securities with remaining
issued by an agency or instrumentality of the maturities of less than one year, cash
U.S. government, high-quality commercial equivalents or may hold cash.
paper, certificates of deposit, shares of
no-load, open-end money market funds, or
repurchase agreements as a temporary
defensive measure when market conditions
so warrant.
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Diversification Each Fund is diversified for the purpose of the Investment Company Act and each Fund is
subject to diversification requirements under the Code.
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Industry Concentration Each Fund may not invest more than 25% of its assets in any one industry.
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Restricted and illiquid If immediately after and as a result of such Pioneer Mid Cap Value Fund will not invest
securities action the value of the following securities, in more than 15% of its net assets in illiquid
the aggregate, would exceed 15% of Safeco and other securities that are not readily
Multi-Cap Core Fund's net assets, the Fund will marketable. Repurchase agreements maturing
not (i) purchase securities for which there is in more than seven days will be included for
no readily available market, (ii) purchase time purposes of the foregoing limit. Securities
deposits maturing in more than seven days, subject to restrictions on resale under the
(iii) purchase over-the-counter (OTC) options 1933 Act, are considered illiquid unless they
or hold assets set aside to cover OTC options are eligible for resale pursuant to Rule 144A
written by the Fund, (iv) enter into repurchase or another exemption from the registration
agreements maturing in more than seven requirements of the 1933 Act and are
days, or (v) invest in interests in real estate determined to be liquid by Pioneer.
investment trusts which are not readily
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
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90
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Safeco Multi-Cap Core Fund Pioneer Mid Cap Value Fund
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Borrowing Safeco Multi-Cap Core Fund may borrow Pioneer Mid Cap Value Fund may not borrow
money (i) from banks or (ii) by engaging in money in amounts exceeding 10% of the
reverse repurchase agreements. Fund's total assets (including the amount
borrowed) taken at market value.
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Lending Safeco Multi-Cap Core Fund may lend Pioneer Mid Cap Value Fund may not make
securities to qualified institutional investors loans, except that the Fund may (i) lend
with a value of up to 33% of the Fund's portfolio securities in accordance with the
total assets. Fund's investment policies, (ii) enter into
repurchase agreements, (iii) purchase all or
a portion of an issue of publicly distributed
debt securities, bank loan participation
interests, bank certificates of deposit, bankers'
acceptances, debentures or other securities,
whether or not the purchase is made upon
the original issuance of the securities,
(iv) participate in a credit facility whereby
the Fund may directly lend to and borrow
money from other affiliated funds to the extent
permitted under the Investment Company
Act or an exemption therefrom, and (v) make
loans in any other manner consistent with
applicable law, as amended and interpreted or
modified from time to time by any regulatory
authority having jurisdiction.
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91
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Safeco Multi-Cap Core Fund Pioneer Mid Cap Value Fund
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Derivative instruments Safeco Multi-Cap Core Fund may write a put or Pioneer Mid Cap Value Fund may use
call option if, as a result thereof, the aggregate futures and options on securities, indices
value of the assets underlying all such options and currencies, forward currency exchange
does not exceed 25% of the Fund's net assets. contracts and other derivatives. The Fund
does not use derivatives as a primary
Safeco Multi-Cap Core Fund may purchase a investment technique and generally limits
put or call option or option on a futures their use to hedging. However, the Fund may
contract if, as a result thereof, the aggregate use derivatives for a variety of non-principal
premiums paid on all options or options on purposes, including:
futures contracts held by the Fund do not
exceed 20% of the Fund's net assets. o As a hedge against adverse changes
in stock market prices, interest rates
Safeco Multi-Cap Core Fund may enter into any or currency exchange rates
futures contract or option on futures contract o As a substitute for purchasing or
if, as a result thereof, the aggregate margin selling securities
deposits and premiums required on all such o To increase the Fund's return as a
instruments do not exceed 5% of the Fund's non-hedging strategy that may be
net assets. considered speculative
Safeco Multi-Cap Core Fund may not purchase
securities on margin. However, the Fund may
(i) obtain short-term credits as necessary to
clear its purchases and sales of securities, and
(ii) make margin deposits in connection with
its use of financial options and futures,
forward and spot currency contracts, swap
transactions and other financial contracts or
derivative instruments.
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Other investment policies and As described above, the Funds have substantially similar principal investment strategies and
restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Fund's other investment policies and fundamental and
non-fundamental investment restrictions, see the SAI.
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92
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Safeco Multi-Cap Core Fund Pioneer Mid Cap Value Fund
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Buying, Selling and Exchanging Shares
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Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer Mid Cap
of Safeco Multi-Cap Core Fund are subject to a Value Fund you receive in the Reorganization
5.75% front-end sales charge. will not be subject to any sales charge.
Moreover, if you own shares in your own
Contingent deferred sales charge of up to 5% name as of the closing of the Reorganization
if you redeem Class B shares within six years (i.e., not in the name of a broker or other
of purchase. intermediary) and maintain your account, you
may purchase Class A shares of Pioneer Mid
Contingent deferred sales charge of 1% if Cap Value Fund and Class A shares of any
you redeem Class C shares within one year fund in the Pioneer family of funds through
of purchase. such account in the future without paying any
sales charge.
Purchases of Investor Class shares of Safeco
Multi-Cap Core Fund are not subject to a Except as described above, Class A shares of
sales load. Pioneer Mid Cap Value Fund are subject to a
front-end sales charge of up to 5.75%.
Safeco Multi-Cap Core Fund assesses a
mandatory redemption fee of 2%, as a
percentage of the amount redeemed or
exchanged, on Class A and Investor Class
shares held less than 30 days.
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93
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Safeco Multi-Cap Core Fund Pioneer Mid Cap Value Fund
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Management and other fees Safeco Multi -Cap Core Fund pays an advisory Pioneer Mid Cap Value Fund pays Pioneer a
fee on a monthly basis at an annual rate management fee equal to:
as follows:
0.70% of average daily net assets up to
$0-$250,000,000: 0.70 of 1% $500 million;
$250,000,001-$750,000,000: 0.65 of 1% 0.65% of the next $500 million; and
$750,000,001-$1,250,000,000: 0.60 of 1% 0.625% on assets over $1 billion, based
Over $1,250,000,000: 0.55 of 1% on the Fund's performance and the size of
the Fund.
SAM serves as administrator and fund
accounting agent for Safeco Multi-Cap Core Pioneer's fee increases or decreases
Fund. The Fund pays SAM an administrative depending upon whether the Fund's
services fee of 0.05% of the Fund's average performance exceeds, or is exceeded by,
daily net assets up to the first $200,000,000 that of the Russell Midcap Value Index over
and 0.01% of its net assets thereafter, and an the specified performance period. Each
accounting fee of 0.04% of the Fund's average percentage point of difference between the
daily net assets up to the first $200,000,000 performance of the Class A shares and the
and 0.01% of its net assets thereafter. index (limited to a maximum of +/-10) is
multiplied by a performance rate adjustment
During its most recent fiscal year, Safeco of 0.01%. As a result, the fee is subject to
Multi-Cap Core Fund paid aggregate advisory a maximum annualized rate adjustment of
and administration fees at an average rate of +/-0.10%. This performance comparison
0.79% of average daily net assets. is made at the end of each month. An
appropriate monthly percentage of this annual
SAM had contractually agreed until April 30, rate (based on the number of days in the
2009, to pay certain Fund operating expenses current month) is then applied to the Fund's
(but not all of the operating expenses of the average net assets for the entire performance
Fund) that exceeded the rate of 0.40% per period, giving a dollar amount that is added to
annum of the Fund's average daily net assets. (or subtracted from) the basic fee. In addition,
This arrangement included all Fund operating the fee is also further limited to a maximum
expenses except management fees, Rule 12b-1 annualized rate adjustment of +/-0.10% (i.e., the
fees, brokerage commissions, interest, and management fee will not exceed 0.80% or be
extraordinary expenses. less than 0.525%). However, Pioneer currently
is waving the lower limitation on its fee, but
For the fiscal year ended December 31, 2003, may reimpose it in the future. Because any
the Fund's annual operating expenses for Class adjustments to the basic fee begin with the
A shares, after giving effect to the expense comparative performance of the Fund and the
limitation were 1.35%, and without giving performance record of the index, the
effect to the expense limitation, were 1.78%. controlling factor is not whether fund
performance is up or down, but whether it is
For the fiscal year ended December 31, 2003, up or down more or less than the
the Fund's annual operating expenses for Class performance record of the index, regardless
B shares, after giving effect to the expense of general market performance.
limitation were 2.10%, and without giving
effect to the expense limitation, were 2.54%. During its most recent fiscal year, Pioneer
Mid Cap Value Fund paid an advisory fee at
an average rate of 0.76% of average daily
net assets.
In addition, the Fund reimburses Pioneer for
certain fnd accounting and legal expenses
incurred on behalf of the Fund and pays a
separate shareholder servicing/transfer agency
fee to PIMSS, an affiliate of Pioneer.
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94
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Safeco Multi-Cap Core Fund Pioneer Mid Cap Value Fund
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Management and other fees For the fiscal year ended December 31, 2003, For the fiscal year ended October 31, 2003,
(continued) the Fund's annual operating expenses for Class the Fund's total annual operating expenses for
C shares, after giving effect to the expense Class A shares were 1.37% of average daily
limitation were 2.10%, and without giving net assets. The Fund does not currently have
effect to the expense limitation, were 2.46%. an expense limitation for its Class A shares.
For the fiscal year ended December 31, 2003, Pioneer has agreed until the second
the Fund's annual operating expenses for anniversary of the closing of the
Investor Class shares, after giving effect to Reorganization to limit the expenses
the expense limitation were 1.10%, and (excluding extraordinary expenses) of the
without giving effect to the expense limitation, Investor Class to 1.10% of the average daily
were 1.23%. net assets attributable to the Investor Class.
The Investor Class sares to be issued in the
Reorganization will convert to Class A shares
after two years. Class A shares will have
higher expenses per share than Investor
Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit
the expenses attributable to Investor Class
shares, Pioneer is not required to limit the
expenses attributable to Class A shares.
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Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class
(12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject
to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
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Buying shares You may buy shares of Safeco Multi-Cap You may buy shares from any investment firm
Core Fund directly through Safeco Securities, that has a sales agreement with PFD, Pioneer
the Fund's principal underwriter or through Mid Cap Value Fund's distributor. Existing
brokers, registered investment advisers, banks shareholders of Safeco Multi-Cap Core
and other financial institutions that have Fund who own Investor Class shares in their
entered into selling agreements with the Fund's own name as of the closing date of the
principal underwriter, as described in the Reorganization and who maintain their
Fund's prospectus. accounts may buy shares of any Fund in
the Pioneer family of funds through such
Certain account transactions may be done accounts in the future without paying
by telephone. sales charges.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
Mid Cap Value Fund by telephone or online.
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95
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Safeco Multi-Cap Core Fund Pioneer Mid Cap Value Fund
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Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer Mid Cap
acquire through dividend reinvestment or other Value Fund without incurring any fee on the
Fund distributions or for Class A shares that exchange with the more than 62 other Pioneer
you have exchanged for Class A shares of Funds. Your exchange would be for Class A
another fund. shares, which is subject to Rule 12b-1 fees.
An exchange generally is treated as a sale and
Certain account transactions may be done a new purchase of shares for federal income
by telephone. tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer Mid Cap
Value Fund for shares of other Pioneer Funds
by telephone or online.
- ------------------------------------------------------------------------------------------------------------------------------------
Selling shares Investor Class and Class A shares will be sold at net asset value per share next calculated after
each Fund receives your request in good order.
- ------------------------------------------------------------------------------------------------------------------------------------
You may sell your shares by contacting Safeco Normally, your investment firm will send
Multi-Cap Core Fund directly in writing or by your request to sell shares to PIMSS. You
contacting a financial intermediary as described can also sell your shares by contacting the
in the Fund's prospectus. Fund directly if your account is registered in
your name.
If the account is established in the
shareholder's own name, shareholders may
also redeem shares of Pioneer Mid Cap Fund
by telephone or online.
- ------------------------------------------------------------------------------------------------------------------------------------
Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks. Even
though each Fund seeks capital appreciation, you could lose money on your
investment or not make as much as if you invested elsewhere if:
o The stock market goes down (this risk may be greater in the short
term)
o Mid-size or value stocks fall out of favor with investors
o The Fund's assets remain undervalued or do not have the potential
value originally expected
Each Fund also has risks associated with investing in mid-size companies.
Compared to large companies, mid-size companies, and the market for their equity
securities, are likely to:
o Be more sensitive to changes in earnings results and investor
expectations
o Have more limited product lines and capital resources
o Experience sharper swings in market values
o Be harder to sell at the times and prices Pioneer thinks appropriate
o Offer greater potential for gain and loss
96
Investing in non-U.S. issuers may involve unique risks compared to
investing in securities of U.S. issuers. These risks may include:
o Less information about non-U.S. issuers or markets may be available
due to less rigorous disclosure or accounting standards or regulatory
practices
o Many non-U.S. markets are smaller, less liquid and more volatile. In a
changing market, Pioneer may not be able to sell the Fund's portfolio
securities at times, in amounts and at prices it considers reasonable
o Adverse effect of currency exchange rates or controls on the value of
the Fund's investments
o The economies of non-U.S. countries may grow at slower rates than
expected or may experience a downturn or recession
o Economic, political and social developments may adversely affect the
securities markets
o Withholding and other non-U.S. taxes may decrease the Fund's return
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor Class
shares, Pioneer is not required to limit the expenses attributable to Class A
shares.
Past Performance
Set forth below is performance information for each Fund. The bar charts
show how each Fund's total return (not including any deduction for sales
charges) has varied from year to year for each full calendar year. The tables
show average annual total return (before and after taxes) for each Fund over
time for each class of shares (including deductions for sales charges) compared
with a broad-based securities market index. The bar charts give an indication of
the risks of investing in each Fund, including the fact that you could incur a
loss and experience volatility of returns year to year. Past performance before
and after taxes does not indicate future results.
Safeco Multi-Cap Core Fund -- Investor Class
Calendar Year Total Returns*
[DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT]
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03
- -1.55 20.17 15.04 31.12 3.50 54.25 -16.11 -11.25 24.13 45.18
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return was 34.90% for the quarter ended December 31, 1999, and
the lowest quarterly return was -21.03 for the quarter ended September 30,
2001.
97
Pioneer Mid Cap Value Fund -- Class A Shares
Calendar Year Total Returns*
[DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT]
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03
14.83 30.73 11.66 17.45 -4.71 12.60 17.64 5.56 -11.99 36.87
* During the period shown in the bar chart, Pioneer Mid Cap Value Fund's
highest quarterly return was 17.27% for the quarter ended June 30, 2003,
and the lowest quarterly return was -21.42% for the quarter ended September
30, 1998.
Safeco Multi-Cap Core Fund
Average Annual Total Returns as of December 31, 2003
- ------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------
Safeco Multi-Cap Core Fund, Class A Shares
- ------------------------------------------------------------------------------------------------------
Return Before Taxes 36.47% 3.34% 7.99%
- ------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 36.47% 2.92% 7.03%
- ------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 23.70% 2.72% 6.53%
- ------------------------------------------------------------------------------------------------------
Safeco Multi-Cap Core Fund, Class B Shares
- ------------------------------------------------------------------------------------------------------
Return Before Taxes 38.77% 3.46% 8.20%
- ------------------------------------------------------------------------------------------------------
Safeco Multi-Cap Core Fund, Class C Shares
- ------------------------------------------------------------------------------------------------------
Return Before Taxes 42.74% 3.82% 8.09%
- ------------------------------------------------------------------------------------------------------
Safeco Multi-Cap Core Fund, Investor Class Shares
- ------------------------------------------------------------------------------------------------------
Return Before Taxes 45.18% 4.81% 8.86%
- ------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 45.18% 4.39% 7.89%
- ------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 29.38% 4.00% 7.32%
- ------------------------------------------------------------------------------------------------------
Russell 3000 Index(2)
(reflects no deduction for fees, expenses or taxes) 31.04% 0.36% 10.77%
- ------------------------------------------------------------------------------------------------------
S&P 500 Index(2)
(reflects no deduction for fees, expenses or taxes) 28.67% -0.57% 11.06%
- ------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax
98
returns shown are not relevant to those who hold their shares through
tax-deferred arrangements such as 401(k) plans or IRA accounts, or to
investors that are tax-exempt.
(2) The Russell 3000 Index, an unmanaged index of the 3,000 largest U.S.
companies based on market capitalization, and the S&P 500 Index, an
unmanaged index of 500 stocks, are for reference only and do not mirror the
Fund's investments.
Pioneer Mid Cap Value Fund -- Class A Shares
Average Annual Total Returns as of December 31, 2003
- -------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- -------------------------------------------------------------------------------------------------------
Pioneer Mid Cap Value Fund, Class A Shares
- -------------------------------------------------------------------------------------------------------
Return Before Taxes 28.98% 9.68% 11.53%
- -------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 28.29% 8.04% 9.51%
- -------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 19.16% 7.58% 9.05%
- -------------------------------------------------------------------------------------------------------
Russell Midcap Value Index(2)
(reflects no deduction for fees, expenses or taxes) 38.07% 8.73% 13.04%
- -------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(2) The Russell Midcap Value Index, an unmanaged index that measures the
performance of those companies in the Russell Midcap Value Index with lower
price-to-book ratios and lower forecasted growth values, is for reference
only and does not mirror the Fund's investments.
Pioneer Mid Cap Value Fund's Investor Class shares will not be outstanding
prior to the closing of the Reorganization and consequently have no performance
history. However, the performance record of the Investor Class would be modestly
higher than the performance of Class A, B and C shares due to the lower expenses
applicable to the Investor Class.
The most recent portfolio manager's discussion of each Fund's performance
is attached as Exhibit D.
99
The Funds' Fees and Expenses
Shareholders of both Funds pay various fees and expenses, either directly
or indirectly. The tables below show the fees and expenses that you would pay if
you were to buy and hold shares of each Fund. The expenses in the tables
appearing below are based on (i) for your Safeco Fund, the expenses of your
Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer Mid Cap
Value Fund, the expenses of Pioneer Mid Cap Fund for the period ended October
31, 2003. Future expenses for all share classes may be greater or less.
Pro Forma
Safeco Safeco Safeco Safeco Pioneer
Multi-Cap Multi-Cap Multi-Cap Multi-Cap Mid Cap
Core Core Core Core Fund Value Fund
Fund Fund Fund Investor Investor
Class A Class B Class C Class Class(9)
Shareholder transaction fees (paid directly from your investment) ----------- ----------- ----------- ----------- -----------
Maximum sales charge (load) when you buy shares as a percentage
of offering price ................................................ 5.75%(6) None None None None(1)
Maximum deferred sales charge (load) as a percentage of purchase
price or the amount you receive when you sell shares, whichever
is less .......................................................... None 5.00%(7) 1.00%(8) None None
Redemption fees for shares held less than 30 days ................. 2.00% None None 2.00% N/A
Wire redemption fee ............................................... $ 20(4) $ 20(4) $ 20(4) $ 20(4) $ 10
Annual low balance fee ............................................ $ 12(5) $ 12(5) $ 12(5) $ 12(5) N/A
Annual Fund Operating Expenses (deducted from fund assets)
(as a % of average net assets)
Management fee .................................................... 0.70% 0.70% 0.70% 0.70% 0.74%
Distribution and service (12b-1) fee .............................. 0.25% 1.00% 1.00% None None
Other expenses .................................................... 0.83% 0.84% 0.76% 0.53% 0.51%
Total fund operating expenses ..................................... 1.78% 2.54% 2.46% 1.23% 1.25%
Expense reimbursement/reduction ................................... 0.43%(2) 0.44%(2) 0.36%(2) 0.13%(2) 0.15%(3)
Net fund operating expenses ....................................... 1.35% 2.10% 2.10% 1.10% 1.10%
- ----------
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer Mid Cap Value Fund through the Reorganization. In addition,
shareholders of your Safeco Fund who own shares in their own name (i.e.,
not in the name of a broker or other intermediary) and maintain such
account as of the closing of the Reorganization may purchase Class A Shares
of Pioneer Mid Cap Value Fund or of any fund in the Pioneer family of funds
through such account in the future without paying a sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco
Multi-Cap Core Fund for certain Fund operating expenses (but not all of the
operating expenses of the Fund) that exceeded the rate of 0.40% per annum
of the Fund's average daily net assets. This arrangement included all Fund
operating expenses except management fees, Rule 12b-1 fees, brokerage
commissions, interest, and extraordinary expenses.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer Mid Cap
Value Fund to 1.10% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once in year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions made in the first twelve months except with
respect to participant-directed redemptions from qualified retirement
plans.
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after six years from purchase, and the Class B shares
convert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
(9) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares. Class A shares do not currently have an
expense limitation.
100
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect for five years for
Safeco Multi-Cap Core Fund and two years for Pioneer Mid Cap Value Fund and (f)
and the Investor Class shares of Pioneer Mid Cap Value Fund convert to Class A
shares after two years. The examples are for comparison purposes only and are
not a representation of either Fund's actual expenses or returns, either past or
future.
Example
Safeco Multi-Cap Core Fund
Class A Shares
Year 1 .............. $ 705
Year 3 .............. $ 978
Year 5 .............. $1,272
Year 10 ............. $2,359
With Without
Class B Shares Redemption Redemption
Year 1 .............. $ 713 $ 213
Year 3 .............. $ 958 $ 658
Year 5 .............. $ 1,329 $ 1,129
Year 10 ............. $ 2,323 $ 2,323
With Without
Class C Shares Redemption Redemption
Year 1 .............. $ 313 $ 213
Year 3 .............. $ 658 $ 658
Year 5 .............. $ 1,129 $ 1,129
Year 10 ............. $ 2,641 $ 2,641
Investor Class Shares
Year 1 .............. $ 112
Year 3 .............. $ 350
Year 5 .............. $ 606
Year 10 ............. $1,424
Pro Forma Pioneer Mid Cap Value Fund
Investor Class Shares
Year 1 .............. $ 112
Year 3 .............. $ 359
Year 5 .............. $ 636
Year 10 ............. $1,426
101
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco Multi-Cap Core Fund. The Trustees considered the following
matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Safeco Fund until August 2, 2004,
was acquired by Symetra. Symetra informed the Trustees that it did not intend to
continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the performance of Pioneer Mid Cap Value Fund is higher than the
historical investment performance of your Safeco Fund. For the one, five and ten
year periods ended June 30, 2004, Class A shares of Pioneer Mid Cap Value Fund
had an average annual return of 31.89%, 9.49% and 12.55%, respectively, compared
to an average annual return of the Class A shares and Investor Class shares of
18.34% and 25.78% (one year), 0.89% and 2.32% (five years), and 8.64% and 9.53%
(ten years), respectively, during the same periods. In addition, the Trustees
considered the track record of Pioneer in managing equity and fixed income
mutual funds.
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutions and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholder account
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market fund
that will be available to your Safeco Fund's shareholders through exchanges. In
addition, Pioneer offers shareholders additional options for their accounts,
including the ability to transact and exchange shares over the telephone or
online and the ability to access account values and transaction history in all
of the shareholder's direct accounts in the Pioneer Funds over the telephone or
online.
Fourth, Pioneer's commitment until the second anniversary of the
Reorganization to limit the expenses (excluding extraordinary expenses) of the
Investor Class of Pioneer Mid Cap Value Fund to 1.10% of average daily net
assets. The estimated expenses of the Investor Class shares of Pioneer Mid Cap
Value Fund are below both the gross expenses and expenses net of expense
reimbursement of each class of shares of your Safeco Fund other than Investor
Class shares, and equal to the net expenses of the Investor Class shares of your
Safeco Fund. Although you will experience higher expenses once the Investor
Class shares convert to Class A shares after two years, your expenses will
remain the same until the second anniversary of the Reorganization.
Fifth, the substantially larger size of Pioneer Mid Cap Value Fund offers
greater opportunity for diversification of the investment portfolio, which
should help to reduce risks.
Sixth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
Seventh, the Investor Class shares of Pioneer Mid Cap Value Fund received
in the Reorganization will provide your Safeco Fund's shareholders with exposure
to substantially the same investment product as they currently have.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco Funds
and the Pioneer Funds associated with the Reorganizations, including, but not
limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses of
any proxy solicitation firm retained in connection with the Reorganizations; (3)
the legal fees and expenses incurred by the Safeco Funds in connection with the
Reorganizations; and (4) the Trustees' fees and out of pocket expenses incurred
as a result of the Reorganizations.
The Trustees also considered that Pioneer and Symetra will benefit from the
Reorganization. See "Certain Agreements between Pioneer and Symetra."
The Board of Trustees of Pioneer Mid Cap Value Fund also considered that
the Reorganization presents an excellent opportunity for the Pioneer Mid Cap
Value Fund to acquire investment assets without the obligation to pay
commissions or other transaction costs that a fund normally incurs when
purchasing securities. This opportunity provides an economic benefit to Pioneer
Mid Cap Value Fund and its shareholders.
102
CAPITALIZATION
The following table sets forth the capitalization of each Fund as of
September 30, 2004, and pro forma combined Fund as of September 30, 2004.
Pro Forma
Safeco Pioneer Pioneer
Multi-Cap Mid Cap Mid Cap
Core Fund Value Fund Value Fund
September 30, 2004 September 30, 2004 September 30, 2004
-------------------- -------------------- -------------------
Total Net Assets (in thousands) $75,773 $1,842,494 $1,918,267
Class A shares ................ $ 6,989 $1,507,440 $1,507,440
Class B shares ................ $ 3,128 $ 220,239 $ 220,239
Class C shares ................ $ 120 $ 100,705 $ 100,705
Investor Class shares ......... $65,536 N/A $ 75,773
Class R shares ................ N/A $ 2,696 $ 2,696
Class Y shares ................ N/A $ 11,414 $ 11,414
Net Asset Value Per Share
Class A shares ................ $ 21.05 $ 25.40 $ 25.40
Class B shares ................ $ 19.86 $ 23.18 $ 23.18
Class C shares ................ $ 19.88 $ 23.01 $ 23.01
Investor Class shares ......... $ 21.56 N/A $ 25.40
Class R shares ................ N/A $ 25.29 $ 25.29
Class Y shares ................ N/A $ 25.98 $ 25.98
Shares Outstanding
Class A shares ................ 331,954 59,348,209 59,348,209
Class B shares ................ 157,479 9,502,592 9,502,592
Class C shares ................ 6,029 4,376,222 4,376,222
Investor Class shares ......... 3,039,744 N/A 2,983,189
Class R shares ................ N/A 106,595 106,595
Class Y shares ................ N/A 439,348 439,348
It is impossible to predict how many shares of Pioneer Mid Cap Value Fund
will actually be received and distributed by your Safeco Fund on the
Reorganization date. The table should not be relied upon to determine the amount
of Pioneer Mid Cap Value Fund's shares that will actually be received and
distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund. Similarly,
the board of trustees of Pioneer Mid Cap Value Fund, including its Independent
Trustees, approved the Reorganization. They also determined that the
Reorganization is in the best interests of Pioneer Mid Cap Value Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
103
Safeco Small-Cap Value Fund and
Pioneer Small Cap Value Fund
PROPOSAL 1(h)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in
this Proxy Statement/Prospectus or incorporated herein. You should read
carefully the entire proxy statement, including the form of Agreement and Plan
of Reorganization attached as EXHIBIT A-1 because they contain details that are
not in the summary.
The Investor Class Shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor Class
shares, Pioneer is not required to limit the expenses attributable to Class A
shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco Small-Cap Value Fund to the Pioneer Small Cap Value Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Safeco Small-Cap Value Fund Pioneer Small Cap Value Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Business A series of Safeco Common Stock Trust, A diversified open-end management
a diversified open-end management investment company registered under the
investment company organized as a Investment Company Act and organized as
Delaware statutory trust. a Delaware statutory trust.
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets as of $77 million $522 million
June 30, 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Manager (until August 2, 2004): Portfolio Managers:
Greg Eisen Day-to-day management of Pioneer Small Cap
CFA, Assistant Vice President, SAM Value Fund's portfolio is the responsibility of
David M. Adams and John McPherson.
Currently Pioneer is acting as investment
adviser to Safeco Small-Cap Value Fund. The Mr. Adams is a vice president of Pioneer and
Portfolio Managers of the Pioneer Small Cap joined Pioneer in 1994. Mr. McPherson joined
Value Fund, as indicated in the next column, Pioneer in 2002.
currently manage your Safeco Fund.
- ------------------------------------------------------------------------------------------------------------------------------------
Investment objective Safeco Small-Cap Value Fund seeks long-term Pioneer Small Cap Value Fund seeks long-
growth of capital through investing primarily in term growth through small-capitalization
small-sized companies. value companies.
- ------------------------------------------------------------------------------------------------------------------------------------
Each Fund provides written notice to shareholders at least 60 days prior to any change to its
investment object as described above.
- ------------------------------------------------------------------------------------------------------------------------------------
104
- ------------------------------------------------------------------------------------------------------------------------------------
Safeco Small-Cap Value Fund Pioneer Small Cap Value Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Primary investments Under normal circumstances Safeco Small-Cap Under normal market conditions, Pioneer
Value Fund invests at least 80% of its net Small Cap Value Fund invests at least 80%
assets (plus any borrowings for investment of its net assets in equity securities of small
purposes) in equity and equity-related companies. Small companies are those with
securities of companies with total market market values, at the time of the investment,
capitalizations at the time of the investment that do not exceed the greater of the market
of less than $1.5 billion. capitalization of the largest company within
the Russell 2000 Index. For purposes of the
Fund's investment policies, equity securities
include common stocks, convertible debt and
other equity instruments, such as depositary
receipts, warrants, rights, interest in REITs
and preferred stocks.
- ------------------------------------------------------------------------------------------------------------------------------------
Investment strategies When evaluating a stock to buy for Safeco Pioneer uses a "value" approach to select
Small-Cap Value Fund, SAM historically looked Pioneer Small Cap Value Fund's investments.
for companies having one or more of the Pioneer seeks securities selling at substantial
following characteristics: discounts to their underlying values and then
holds these securities until the market values
o Long-term potential for above-average or reflect their intrinsic values.
improving earnings growth
o Involvement in new or innovative products Pioneer evaluates a security's potential value,
or services including the attractiveness of its market
o A share price that represents good relative valuation, based on the company's assets and
value as determined by price-to-earnings prospects for earnings and revenue growth.
ratio or other commonly used valuation Factors Pioneer looks for in selecting
measures investments include:
o Above average potential for earnings and
revenue growth
o Favorable expected returns relative to
perceived risks
o Management with demonstrated ability and
commitment to the company
o Low market valuations relative to earnings
forecast, book value, cash flow and sales
o Turnaround potential for companies that
have been through difficult periods
o Low debt levels relative to equity
o Issuer's industry has strong fundamentals,
such as increasing or sustainable demand
and barriers to entry
- ------------------------------------------------------------------------------------------------------------------------------------
105
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Safeco Small-Cap Value Fund Pioneer Small Cap Value Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Other investments Safeco Small-Cap Value Fund may invest in Pioneer Small Cap Value Fund may invest up
securities convertible into common stock, but to 25% of its total assets in REITs.
less than 35% of its total assets will be
invested in such securities. Pioneer Small Cap Value Fund may invest in
securities of Canadian issuers to the same
extent as securities of U.S. issuers.
Pioneer Small Cap Value Fund may invest up
to 5% of its total assets in equity and debt
securities of other non-U.S. issuers, including
securities of emerging market issuers.
Pioneer Small Cap Value Fund may invest up
to 20% of its total assets in debt securities of
corporate and government issuers. The Fund
may invest up to 5% of its net assets in
below investment grade debt securities issued
by both U.S. and non-U.S. issuers, including
below investment grade convertible debt
securities.
- ------------------------------------------------------------------------------------------------------------------------------------
Temporary defensive Safeco Small-Cap Value Fund may hold cash Pioneer Small Cap Value Fund may invest
strategies or invest in high-quality, short-term securities all or part of its assets in securities with
issued by an agency or instrumentality of the remaining maturities of less than one year,
U.S. government, high-quality commercial cash equivalents or may hold cash.
paper, certificates of deposit, shares of
no-load, open-end money market funds,
or repurchase agreements.
- ------------------------------------------------------------------------------------------------------------------------------------
Diversification Each Fund is diversified for the purpose of the Investment Company Act and each Fund is
subject to diversification requirements under the Code.
- ------------------------------------------------------------------------------------------------------------------------------------
Industry Concentration Each Fund may not invest more than 25% of its assets in any one industry.
- ------------------------------------------------------------------------------------------------------------------------------------
Restricted and Illiquid If immediately after and as a result of such Pioneer Small Cap Value Fund may not invest
Securities action the value of the following securities, in more than 15% of its net assets in securities
the aggregate, would exceed 15% of Safeco which are illiquid and other securities which
Small-Cap Value Fund's net assets, the Fund are not readily marketable.
will not (i) purchase securities for which there
is no readily available market, (ii) purchase
time deposits maturing in more than seven
days, (iii) purchase over-the-counter (OTC)
options or hold assets set aside to cover OTC
options written by the Fund, (iv) enter into
repurchase agreements maturing in more than
seven days, or (v) invest in interests in real
estate investment trusts which are not readily
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
- ------------------------------------------------------------------------------------------------------------------------------------
106
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Safeco Small-Cap Value Fund Pioneer Small Cap Value Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Borrowing Safeco Small-Cap Value Fund may borrow Borrow money, except Pioneer Small Cap
money (i) from banks or (ii) by engaging in Value Fund may: (a) borrow from banks or
reverse repurchase agreements. through reverse repurchase agreements in
an amount up to 33 1/3% of the Fund's total
assets (including the amount borrowed);
(b) to the extent permitted by applicable law,
borrow up to an additional 5% of the Fund's
assets for temporary purposes; (c) obtain
such short-term credits as are necessary
for the clearance of portfolio transactions;
(d) purchase securities on margin to the
extent permitted by applicable law; and
(e) engage in transactions in mortgage dollar
rolls that are accounted for as financings.
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Lending Safeco Small-Cap Value Fund may lend Pioneer Small Cap Value Fund may lend
securities to qualified institutional investors portfolio securities with a value that may not
with a value of up to 33% of the Fund's total exceed 331/3% of the value of its total assets.
assets.
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Derivative instruments Safeco Small-Cap Value Fund may write a Pioneer Small Cap Value Fund may use
put or call option if, as a result thereof, the futures and options on securities, indices
aggregate value of the assets underlying all and currencies, forward currency exchange
such options does not exceed 25% of the contracts and other derivatives. The Fund
Fund's net assets. Safeco Small-Cap Value does not use derivatives as a primary
Fund may purchase a put or call option or investment technique and generally limits
option on a futures contract if, as a result their use to hedging. However, the Fund may
thereof, the aggregate premiums paid on all use derivatives for a variety of non-principal
options or options on futures contracts held purposes, including:
by the Fund do not exceed 20% of the Fund's
net assets. o As a hedge against adverse changes
in stock market prices, interest rates
Safeco Small-Cap Value Fund may enter into a or currency exchange rates
futures contract or option on futures contract o As a substitute for purchasing or
if, as a result thereof, the aggregate margin selling securities
deposits and premiums required on all such o To increase the Fund's return as a
instruments do not exceed 5% of the Fund's non-hedging strategy that may be
net assets. considered speculative
Safeco Small-Cap Value Fund may not
purchase securities on margin. However, the
Fund may (i) obtain short-term credits as
necessary to clear its purchases and sales of
securities and (ii) make margin deposits in
connection with its use of financial options and
futures, forward and spot currency contracts,
swap transactions and other financial contracts
or derivative instruments.
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Other investment policies and As described above, the Funds have substantially similar principal investment strategies and
restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Fund's other investment policies and fundamental and
non-fundamental investment restrictions, see the SAI.
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107
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Safeco Small-Cap Value Fund Pioneer Small Cap Value Fund
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Buying, Sellingand Exchanging Shares
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Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer
of Safeco Small-Cap Value Fund are subject to Small Cap Value Fund you receive in the
a 5.75% front-end sales charge. Reorganization will not be subject to any
sales charge. Moreover, if you own shares
Contingent deferred sales charge of up to 5% in your own name as of the closing of the
if you redeem Class B shares within six years Reorganization (i.e., not in the name of a
of purchase. broker or other intermediary) and maintain
your account, you may purchase Class A
Contingent deferred sales charge of 1% if shares of Pioneer Small Cap Value Fund and
you redeem Class C share within one year Class A shares of any fund in the Pioneer
of purchase. family of funds through such account in the
future without paying any sales charge.
Purchases of Investor Class shares of Safeco
Small-Cap Value Fund are not subject to a Except as described above, Class A shares of
sales load. Pioneer Small Cap Value Fund are subject to a
front-end sales charge of up to 5.75%.
Safeco Small-Cap Value Fund assesses
a mandatory redemption fee of 2%, as a
percentage of the amount redeemed or
exchanged, on Class A and Investor Class
shares held less than 30 days.
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108
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Safeco Small-Cap Value Fund Pioneer Small Cap Value Fund
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Management and other fees Safeco Small-Cap Value Fund pays an advisory Pioneer Small Cap Value Fund pays Pioneer a
fee on a monthly basis at an annual rate management fee equal to 0.85% of the Fund's
as follows: average daily net assets.
$0-$250,000,000: 0.75 of 1% During its most recent fiscal year, Pioneer
$250,000,001-$750,000,000: 0.70 of 1% Small Cap Value Fund paid an advisory fee
$750,000,001-$1,250,000,000: 0.65 of 1% at an average rate of 0.85% of average daily
Over $1,250,000,000: 0.60 of 1% net assets.
SAM serves as administrator and fund In addition, Pioneer Small Cap Value
accounting agent for Safeco Small-Cap Value Fund reimburses Pioneer for certain fund
Fund. The Fund paid SAM an administrative accounting and legal expenses incurred
services fee of 0.05% of the Fund's average on behalf of the Fund and pays a separate
daily net assets up to the first $200,000,000 shareholder servicing/transfer agency fee
and 0.01% of its net assets thereafter, and an to PIMSS, an affiliate of Pioneer.
accounting fee of 0.04% of the Fund's average
daily net assets up to the first $200,000,000 For the fiscal year ended November 30, 2003,
and 0.01% of its net assets thereafter. Pioneer Small Cap Value Fund's total annual
operating expenses for Class A shares were
During its most recent fiscal year, Safeco 1.66% of average daily net assets. The Fund
Small-Cap Value Fund paid aggregate advisory does not currently have an expense limitation
and administration fees at an average rate of for its Class A shares.
0.84% of average daily net assets.
Pioneer has agreed until the second
SAM had contractually agreed until April 30, anniversary of the closing of the
2009, to pay certain fund operating expenses Reorganization to limit the expenses
(but not all of the operating expenses of the (excluding extraordinary expenses) of the
Fund) that exceeded the rate of 0.40% per Investor Class to 1.15% of the average daily
annum of the Fund's average daily net assets. net assets attributable to the Investor Class.
This arrangement included all Fund operating
expenses except management fees, Rule 12b-1 The Investor Class shares to be issued in the
fees, brokerage commissions, interest, and Reorganization will convert to Class A shares
extraordinary expenses. after two years. Class A shares will have
higher expenses per share than Investor
For the fiscal year ended December 31, 2003, Class shares due to the Rule 12b-1 Plan. In
the Fund's annual operating expenses for Class addition, although Pioneer has agreed to limit
A shares, after giving effect to the expense the expenses attributable to Investor Class
limitation were 1.40%, and without giving shares, Pioneer is not required to limit the
effect to the expense limitation, were 1.82%. expenses attributable to Class A shares.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
B shares, after giving effect to the expense
limitation were 2.15%, and without giving
effect to the expense limitation, were 2.72%.
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109
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Safeco Small-Cap Value Fund Pioneer Small Cap Value Fund
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Management and other fees For the fiscal year ended December 31, 2003,
(continued) the Fund's annual operating expenses for Class
C shares, after giving effect to the expense
limitation were 2.15%, and without giving
effect to the expense limitation, were 39.37%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Investor Class shares, after giving effect to
the expense limitation were 1.15%, and
without giving effect to the expense limitation,
were 1.43%.
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Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class
(12b-1) fee shares will convert into Class A share after two years. Class A shares of each Fund are subject
to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
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Buying shares You may buy shares of Safeco Small-Cap You may buy shares from any investment firm
Value Fund directly through Safeco Securities, that has a sales agreement with PFD, Pioneer
the Fund's principal underwriter or through Small Cap Value Fund's distributor. Existing
brokers, registered investment advisers, shareholders of Safeco Small-Cap Value Fund
banks and other financial institutions that who own shares in their own name as of the
have entered into selling agreements with the closing date of the Reorganization and who
Fund's principal underwriter, as described in maintain their accounts may buy shares of
the Fund's prospectus. any fund in the Pioneer family of funds
through such accounts in the future without
Certain account transactions may be done paying sales charges.
by telephone.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
Small Cap Value Fund by telephone or online.
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Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer Small
acquire through dividend reinvestment or other Cap Value Fund without incurring any fee
fund distributions or for Class A shares that on the exchange with the more than 62
you have exchanged for Class A shares of other Pioneer Funds. Your exchange would
another Fund. be for Class A shares, which is subject to
Rule 12b-1 fees. An exchange generally is
Certain account transactions may be done treated as a sale and a new purchase of
by telephone. shares for federal income tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer Small Cap
Value Fund for shares of other Pioneer Funds
by telephone or online.
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110
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Safeco Small-Cap Value Fund Pioneer Small Cap Value Fund
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Selling Shares Investor Class and Class A shares will be sold at net asset value per share next calculated after
the Fund receives your request in good order.
- ------------------------------------------------------------------------------------------------------------------------------------
You may sell your shares by contacting Safeco Normally, your investment firm will send
Small-Cap Value Fund directly in writing or by your request to sell shares to PIMSS. You
contacting a financial intermediary as described can also sell your shares by contacting the
in the Fund's prospectus. fund directly if your account is registered in
your name.
If the account is established in the
shareholder's own name, shareholders may
also redeem shares of Pioneer Small Cap
Value Fund by telephone or online.
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Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks. You
could lose money on your investment in either Fund or not make as much as if you
invested elsewhere if:
o The stock market goes down (this risk may be greater in the
short-term)
o Small company or value stocks fall out of favor with investors
o The Fund's assets remain undervalued or do not have the potential
value originally expected
Each Fund also has risks associated with investing in small companies.
Compared to large companies, small companies, and the market for their equity
securities, are likely to:
o Be more sensitive to changes in the economy, earnings results and
investor expectations
o Have more limited product lines and capital resources
o Experience sharper swings in market values
o Be harder to sell at the times and prices Pioneer thinks appropriate
o Offer greater potential for gain and loss
Investments in the Funds are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money by investing in either Fund.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor Class
shares, Pioneer is not required to limit the expenses attributable to Class A
shares.
111
Past Performance
Set forth below is performance information for each Fund. The bar charts
show how each Fund's total return (not including any deduction for sales
charges) has varied from year to year for each full calendar year. The tables
show average annual total return (before and after taxes) for each Fund over
time for each class of shares (including deductions for sales charges) compared
with a broad-based securities market index. The bar charts give an indication of
the risks of investing in each Fund, including the fact that you could incur a
loss and experience volatility of returns year to year. Past performance before
and after taxes does not indicate future results.
Safeco Small-Cap Value Fund -- Investor Class
Calendar Year Total Returns*
[DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT]
'97 '98 '99 '00 '01 '02 '03
23.38 -21.57 14.07 -7.54 18.20 -3.76 43.1
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return was 27.05% for the quarter ended December 31, 1999, and
the lowest quarterly return was -33.97% for the quarter ended September 30,
1998.
Pioneer Small Cap Value Fund -- Class A Shares
Calendar Year Total Returns*
[DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT]
'98 '99 '00 '01 '02 '03
- -12.69 35.96 15.30 13.08 -12.70 37.11
* During the period shown in the bar chart, Pioneer Small Cap Value Fund's
highest quarterly return was 22.18% for the quarter ended June 30, 2003,
and the lowest quarterly return was -26.57% for the quarter ended September
30, 1998.
112
Safeco Small-Cap Value Fund
Average Annual Total Returns as of December 31, 2003
- ----------------------------------------------------------------------------------------------------------
Since
1 Year 5 Years Inception(1)
- ----------------------------------------------------------------------------------------------------------
Safeco Small-Cap Value Fund, Class A Shares
- ----------------------------------------------------------------------------------------------------------
Return Before Taxes 34.45% 9.71% 8.52%
- ----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(2) 34.39% 9.63% 8.14%
- ----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(2) 22.47% 8.41% 7.26%
- ----------------------------------------------------------------------------------------------------------
Safeco Small-Cap Value Fund, Class B Shares
- ----------------------------------------------------------------------------------------------------------
Return Before Taxes 36.67% 9.93% 8.69%
- ----------------------------------------------------------------------------------------------------------
Safeco Small-Cap Value Fund, Class C Shares
- ----------------------------------------------------------------------------------------------------------
Return Before Taxes 40.67% 10.21% 8.57%
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Safeco Small-Cap Value Fund, Investor Class Shares
- ----------------------------------------------------------------------------------------------------------
Return Before Taxes 43.10% 11.42% 9.67%
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Return After Taxes on Distributions(2) 42.97% 11.28% 9.25%
- ----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(2) 28.18% 9.90% 8.27%
- ----------------------------------------------------------------------------------------------------------
Russell 2000 Value Index(3)
(reflects no deduction for fees, expenses or taxes) 46.02% 12.28% 13.06%
- ----------------------------------------------------------------------------------------------------------
(1) The Fund commenced operations on January 31, 1996.
(2) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(3) The Russell 2000 Value Index, an unmanaged index of value stocks in the
Russell 2000 Index of small-capitalization U.S. stocks, is for reference
only and does not mirror the Fund's investments.
Pioneer Small Cap Value Fund -- Class A Shares
Average Annual Total Returns as of December 31, 2003
- ------------------------------------------------------------------------------------------------------------
Since
1 Year 5 Years Inception(1)
- ------------------------------------------------------------------------------------------------------------
Pioneer Small Cap Value Fund, Class A Shares
- ------------------------------------------------------------------------------------------------------------
Return Before Taxes 29.20% 14.87% 10.86%
- ------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(2) 29.11% 14.61% 10.28%
- ------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(2) 19.09% 12.99% 9.21%
- ------------------------------------------------------------------------------------------------------------
Russell 2000 Value Index(3)
(reflects no deduction for fees, expenses or taxes) 46.03% 12.28% 11.83%
- ------------------------------------------------------------------------------------------------------------
(1) The Fund commenced operations on February 28, 1997.
(2) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax
113
returns shown are not relevant to those who hold their shares through
tax-deferred arrangements such as 401(k) plans or IRA accounts, or to
investors that are tax-exempt.
(3) The Russell 2000 Value Index, an unmanaged index of value stocks in the
Russell 2000 Index of small-capitalization U.S. stocks, is for reference
only and does not mirror the Fund's investments.
Pioneer Small Cap Value Fund's Investor Class shares will not be
outstanding prior to the closing of the Reorganization and consequently have no
performance history. However, the performance record of the Investor Class would
be modestly higher than the performance of Class A shares due to the lower
expenses applicable to the Investor Class.
The most recent portfolio manager's discussion of each Fund's performance
is attached as Exhibit D.
The Funds' Fees and Expenses
Shareholders of both Funds pay various fees and expenses, either directly
or indirectly. The tables below show the fees and expenses that you would pay if
you were to buy and hold shares of each Fund. The expenses in the tables
appearing below are based on (i) for your Safeco Fund, the expenses of your
Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer Small
Cap Value Fund, the expenses of Pioneer Small Cap Value Fund for the period
ended November 30, 2003. Future expenses for all share classes may be greater or
less.
Safeco Safeco
Small-Cap Small-Cap
Value Fund Value Fund
Class A Class B
Shareholder transaction fees (paid directly from your investment) ------------ ------------
Maximum sales charge (load) when you buy shares as a percentage
of offering price ....................................................... 5.75%(6) None
Maximum deferred sales charge (load) as a percentage of purchase price
or the amount you receive when you sell shares, whichever is less ....... None 5.00%(7)
Redemption fees for shares held less than 30 days ........................ 2.00% None
Wire redemption fee ...................................................... $ 20(4) $ 20(4)
Annual low balance fee ................................................... $ 12(5) $ 12(5)
Annual fund operating expenses (deducted from fund assets)
(as a % of average net assets)
Management fee ........................................................... 0.75% 0.75%
Distribution and service (12b-1) fee ..................................... 0.25% 1.00%
Other expenses ........................................................... 0.82% 0.97%
Total fund operating expenses ............................................ 1.82% 2.72%
Expense reimbursement/reduction .......................................... 0.42%(2) 0.57%
Net fund operating expenses .............................................. 1.40% 2.15%
Pro Forma
Pioneer
Safeco Safeco Small Cap
Small-Cap Small-Cap Value
Value Fund Value Fund Investor
Class C Investor Class Class(9)
Shareholder transaction fees (paid directly from your investment) ------------ ---------------- -----------
Maximum sales charge (load) when you buy shares as a percentage
of offering price ....................................................... None None None(1)
Maximum deferred sales charge (load) as a percentage of purchase price
or the amount you receive when you sell shares, whichever is less ....... 1.00%(8) None None
Redemption fees for shares held less than 30 days ........................ None 2.00% N/A
Wire redemption fee ...................................................... $ 20(4) $ 20(4) $ 10
Annual low balance fee ................................................... $ 12(5) $ 12(5) N/A
Annual fund operating expenses (deducted from fund assets)
(as a % of average net assets)
Management fee ........................................................... 0.75% 0.75% 0.85%
Distribution and service (12b-1) fee ..................................... 1.00% None None
Other expenses ........................................................... 37.62% 0.68% 0.43%
Total fund operating expenses ............................................ 39.37% 1.43% 1.28%
Expense reimbursement/reduction .......................................... 37.22%(2) 0.28%(2) 0.13%(3)
Net fund operating expenses .............................................. 2.15% 1.15% 1.15%
- ----------
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer Small Cap Value Fund through the Reorganization. In addition,
shareholders of your Safeco Fund who own shares in their own name (i.e.,
not in the name of a broker or other intermediary) and maintain such
account as of the closing of the Reorganization may purchase Class A Shares
of Pioneer Small Cap Value Fund or of any fund in the Pioneer family of
funds through such account in the future without paying a sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco
Small-Cap Value Fund for certain Fund operating expenses (but not all of
the operating expenses of the Fund) that exceeded the rate of 0.40% per
annum of the Fund's average daily net assets. This arrangement included all
fund operating expenses except management fees, Rule 12b-1 fees, brokerage
commissions, interest, and extraordinary expenses.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer Small Cap
Value Fund to 1.15% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once each year in December for accounts with
balances under $1,000 in your Safeco Fund.
114
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions made in the first twelve months except with
respect to participant-directed redemptions from qualified retirement
plans.
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after six years from purchase, and the Class B shares
convert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
(9) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares.
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect for five years for
Safeco Small-Cap Value Fund and two years for Pioneer Small Cap Value Fund and
(f) and the Investor Class shares of Pioneer Small Cap Value Fund convert to
Class A shares after two years. The examples are for comparison purposes only
and are not a representation of either Fund's actual expenses or returns, either
past or future.
Example
Safeco Small-Cap Value Fund
Class A Shares
Year 1 .............. $ 709
Year 3 .............. $ 993
Year 5 .............. $1,297
Year 10 ............. $2,405
With Without
Class B Shares Redemption Redemption
Year 1 .............. $ 718 $ 218
Year 3 .............. $ 973 $ 673
Year 5 .............. $ 1,354 $ 1,154
Year 10 ............. $ 2,384 $ 2,384
With Without
Class C Shares Redemption Redemption
Year 1 .............. $ 318 $ 218
Year 3 .............. $ 673 $ 673
Year 5 .............. $ 1,154 $ 1,154
Year 10 ............. $ 2,558 $ 2,558
Investor Class Shares
Year 1 .............. $ 117
Year 3 .............. $ 365
Year 5 .............. $ 633
Year 10 ............. $1,577
Pro Forma Pioneer Small Cap Value Fund
Investor Class Shares
Year 1 .............. $ 117
Year 3 .............. $ 405
Year 5 .............. $ 754
Year 10 ............. $1,738
115
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco Small-Cap Value Fund. The Trustees considered the following
matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Safeco Fund until August 2, 2004,
was acquired by Symetra. Symetra informed the Trustees that it did not intend to
continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the long-term investment performance of Pioneer Small Cap Value
Fund is superior to your Safeco Fund's performance, although your Safeco Fund
had better performance during the most recent 12 month period. For the one and
five year periods ended June 30, 2004, Class A shares of Pioneer Small Cap Value
Fund had an average annual return of 31.83% and 13.77%, respectively, compared
to an average annual return of the Class A shares and Investor Class shares of
23.99% and 31.58% (one year) and 13.21% and 14.80% (five years), respectively,
during the same period. In addition, the Trustees considered the track record of
Pioneer in managing equity and fixed income mutual funds.
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutions and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholder account
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market fund
that will be available to your Safeco Fund's shareholders through exchanges. In
addition, Pioneer offers shareholders additional options for their accounts,
including the ability to transact and exchange shares over the telephone or
online and the ability to access account values and transaction history in all
of the shareholder's direct accounts in the Pioneer Funds over the telephone or
online.
Fourth, Pioneer's commitment until the second anniversary of the
Reorganization to limit the expenses (excluding extraordinary expenses) of the
Investor Class of Pioneer Small Cap Value Fund to 1.15% of average daily net
assets. This expense ratio is lower than both the gross expenses and expenses
net of expense reimbursement of the Class A, Class B and Class C shares of your
Safeco Fund and no higher than the gross and the same as the net expense of your
Safeco Fund's Investor Class shares. Although without the expense limitation
Pioneer Small Cap Value Fund's expenses are significantly higher than your
Safeco Fund's net expenses, the trustees believe that Pioneer Small Cap Value
Fund offers the potential for lower expenses through economies of scale.
Fifth, the substantially larger size of Pioneer Small Cap Value Fund offers
greater opportunity for diversification of the investment portfolio, which
should help to reduce risks.
Sixth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
Seventh, the Investor Class shares of Pioneer Small Cap Value Fund received
in the Reorganization will provide Safeco Small-Cap Value Fund shareholders with
exposure to substantially the same investment product as they currently have.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco Funds
and the Pioneer Funds associated with the Reorganizations, including, but not
limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses of
any proxy solicitation firm retained in connection with the Reorganizations; (3)
the legal fees and expenses incurred by the Safeco Funds in connection with the
Reorganizations; and (4) the Trustees' fees and out of pocket expenses incurred
as a result of the Reorganizations.
The Trustees also considered that Pioneer and Symetra will benefit from the
Reorganization. See "Certain Agreements between Pioneer and Symetra."
The Board of Trustees of Pioneer Small Cap Value Fund also considered that
the Reorganization presents an excellent opportunity for the Pioneer Small Cap
Value Fund to acquire investment assets without the obligation to pay
commissions or other transaction costs that a fund normally incurs when
purchasing securities. This opportunity provides an economic benefit to Pioneer
Small Cap Value Fund and its shareholders.
116
CAPITALIZATION
The following table sets forth the capitalization of each Fund as of May
31, 2004, and pro forma combined Fund as of May 31, 2004.
Pro Forma
Safeco Pioneer Pioneer
Small-Cap Small Cap Small Cap
Value Fund Value Fund Value Fund
May 31, 2004 May 31, 2004 May 31, 2004
-------------- -------------- -------------
Total Net Assets (in thousands) $69,484 $487,436 $556,920
Class A shares ................ $ 4,147 $256,248 $256,248
Class B shares ................ $ 1,380 $149,851 $149,851
Class C shares ................ $ 120 $ 79,412 $ 79,412
Investor Class shares ......... $63,837 N/A $ 69,484
Class R shares ................ N/A $ 1,925 $ 1,925
Net Asset Value Per Share
Class A shares ................ $ 19.01 $ 29.70 $ 29.70
Class B shares ................ $ 18.11 $ 28.10 $ 28.10
Class C shares ................ $ 18.17 $ 29.16 $ 29.16
Investor Class shares ......... $ 19.32 N/A $ 29.70
Class R shares ................ N/A $ 29.71 $ 29.71
Shares Outstanding
Class A shares ................ 218,133 8,629,200 8,629,200
Class B shares ................ 76,212 5,332,727 5,332,727
Class C shares ................ 6,612 2,723,047 2,723,047
Investor Class shares ......... 3,303,596 N/A 2,339,529
Class R shares ................ N/A 64,816 64,816
It is impossible to predict how many shares of Pioneer Small Cap Value Fund
will actually be received and distributed by your Safeco Fund on the
Reorganization date. The table should not be relied upon to determine the amount
of Pioneer Small Cap Value Fund's shares that will actually be received and
distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund. Similarly,
the Board of Trustees of Pioneer Small Cap Value Fund, including its Independent
Trustees, approved the Reorganization. They also determined that the
Reorganization is in the best interests of Pioneer Small Cap Value Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
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TERMS OF EACH AGREEMENT AND PLAN OF REORGANIZATION
The Reorganizations
o Each Reorganization is scheduled to occur at 4:00 p.m., Eastern time,
on December 10, 2004, unless your Safeco Fund and the corresponding
Pioneer Fund agree in writing to a later date. Your Safeco Fund will
transfer all of its assets to the corresponding Pioneer Fund. The
corresponding Pioneer Fund will assume your Safeco Fund's liabilities
that are included in the calculation of your Safeco Fund's net asset
value on the Closing Date. The net asset value of both Funds will be
computed as of 4:00 p.m., Eastern time, on the Closing Date.
o Each corresponding Pioneer Fund will issue to the corresponding Safeco
Fund Investor Class shares with an aggregate net asset value equal to
the net assets attributable to the corresponding Safeco Fund's shares.
These shares will immediately be distributed to your Safeco Fund's
shareholders in proportion to the relative net asset value of their
holdings of your Safeco Fund's shares on the Closing Date. As a
result, each Safeco Fund's shareholders will end up as Investor Class
shareholders of the corresponding Pioneer Fund.
o After the distribution of shares, your Safeco Fund will be liquidated
and dissolved.
o Each Reorganization is intended to result in no income, gain or loss
being recognized for federal income tax purposes and will not take
place unless both Funds receive a satisfactory opinion concerning the
tax consequences of the Reorganization from Wilmer Cutler Pickering
Hale and Dorr LLP, counsel to the Pioneer Funds.
Agreement and Plan of Reorganization
The shareholders of each Safeco Fund are being asked to approve an
Agreement and Plan of Reorganization substantially in the form attached as
EXHIBIT A-1 or A-2 (each, a "Plan"). The description of the Plan contained
herein is qualified in its entirety by the attached copies, as appropriate.
Conditions to Closing each Reorganization. The obligation of each Fund to
consummate each Reorganization is subject to the satisfaction of certain
conditions, including your Safeco Fund's performance of all of its obligations
under the Plan, the receipt of certain documents and financial statements from
your Safeco Fund and the receipt of all consents, orders and permits necessary
to consummate the Reorganization (see Sections 7 and 8 of the Plan).
The obligations of both Funds are subject to the approval of the Plan by
the necessary vote of the outstanding shares of your Safeco Fund, in accordance
with the provisions of your Trust's trust instrument and by-laws. The Funds'
obligations are also subject to the receipt of a favorable opinion of Wilmer
Cutler Pickering Hale and Dorr LLP as to the federal income tax consequences of
each Reorganization (see Section 8.5 of the Plan).
Termination of the Plan. The board of either the Safeco Trust or the
corresponding Pioneer Fund may terminate the Plan (even if the shareholders of
your Safeco Fund have already approved it) at any time before the Closing Date,
if that board believes in good faith that proceeding with the Reorganization
would no longer be in the best interests of shareholders.
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TAX STATUS OF EACH REORGANIZATION
Each Reorganization is intended to result in no income, gain or loss being
recognized for United States federal income tax purposes and will not take place
unless both Funds involved in the Reorganization receive a satisfactory opinion
from Wilmer Cutler Pickering Hale and Dorr LLP, counsel to the Pioneer Funds,
substantially to the effect that each Reorganization will be a "reorganization"
within the meaning of Section 368(a) of the Code.
As a result, for federal income tax purposes:
o No gain or loss will be recognized by your Safeco Fund upon (1) the
transfer of all of its assets to the Pioneer Fund as described in this
Proxy Statement/Prospectus or (2) the distribution by your Safeco Fund
of Pioneer Fund shares to your Safeco Fund's shareholders;
o No gain or loss will be recognized by the Pioneer Fund upon the
receipt of your Safeco Fund's assets solely in exchange for the
issuance of Pioneer Fund shares to your Safeco Fund and the assumption
of your Safeco Fund's liabilities by the corresponding Pioneer Fund;
o The basis of the assets of your Safeco Fund acquired by the
corresponding Pioneer Fund will be the same as the basis of those
assets in the hands of your Safeco Fund immediately before the
transfer;
o The tax holding period of the assets of your Safeco Fund in the hands
of the corresponding Pioneer Fund will include your Safeco Fund's tax
holding period for those assets;
o You will not recognize gain or loss upon the exchange of your shares
of your Safeco Fund solely for the Pioneer Fund shares as part of the
Reorganization;
o The basis of the Pioneer Fund shares received by you in the
Reorganization will be the same as the basis of your shares of your
Safeco Fund surrendered in exchange; and
o The tax holding period of the Pioneer Fund shares you receive will
include the tax holding period of the shares of your Safeco Fund
surrendered in the exchange, provided that you held the shares of your
Safeco Fund as capital assets on the date of the exchange.
In rendering such opinions, counsel shall rely upon, among other things,
reasonable assumptions as well as representations of your Safeco Fund and the
Pioneer Fund (see the annexes to the Plan).
No tax ruling has been or will be received from the Internal Revenue
Service ("IRS") in connection with the Reorganizations. An opinion of counsel is
not binding on the IRS or a court, and no assurance can be given that the IRS
would not assert, or a court would not sustain, a contrary position.
You should consult your tax adviser for the particular tax consequences to
you of the Reorganization, including the applicability of any state, local or
foreign tax laws.
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PROPOSALS 2(a)-(h)
APPROVAL OF INTERIM INVESTMENT ADVISORY AGREEMENT WITH PIONEER
Background
Having determined to recommend the Reorganizations, the Trustees appointed
Pioneer as investment adviser to each Fund commencing August 2, 2004, until the
closing of the Reorganizations given that Symetra had indicated that it did not
wish to continue to offer investment advisory services to the Safeco Funds. If
both the Reorganization and appointment of Pioneer are approved, the interim
investment advisory agreement will continue in effect until the closing of the
Reorganization. In connection with the retention of Pioneer, the sub-advisory
agreement with Bank of Ireland Asset Management (U.S.) Limited with respect to
Safeco International Stock Fund, and the sub-advisory agreement with RCM Capital
Management LLC with respect to Safeco Large-Cap Growth Fund, were terminated.
Interim Investment Advisory Agreement
Under the Investment Company Act, shareholders must approve any new
investment advisory agreement for the Funds. However, Rule 15a-4 under the
Investment Company Act permits your Trustees to appoint an adviser on an interim
basis without prior shareholder approval if the new adviser agrees to provide
such services on the same terms as the previous adviser and approves the
investment advisory agreement with that adviser. An adviser may manage on such
an interim basis for a period of 150-days. Because Pioneer will be making the
payment to Symetra discussed under "Background to the Reorganizations," any fees
that Pioneer would be entitled to under the interim investment advisory
agreement will be held in escrow by the Fund until shareholder approval of the
agreement is obtained. If shareholders of a Safeco Fund do not approve the
interim advisory agreement, Pioneer will not receive the fee under the current
investment advisory agreement with SAM but instead would be paid a fee based
upon Pioneer's cost in managing the Fund. During this period prior to the
meeting, the Fund will be managed as separate Funds and will not be combined
with a Pioneer Fund. During this period, you also will not be able to exchange
your shares in a Fund for shares of a Pioneer Fund. If the appointment of
Pioneer as interim investment adviser is not approved by December 30, 2004,
Pioneer will no longer provide advisory services to the Funds, unless an
extension of the 150 day period is permitted by a rule or independent position
of the staff of the SEC. Reasons for Approving the Interim Investment Advisory
Agreement and Board's Recommendation
Reasons for Approving the Interim Investment Advisory Agreement and Board's
Recommendation
The Trustees recommend that the shareholders of the Safeco Funds approve
the interim investment advisory agreements. In determining to appoint Pioneer as
investment advisor on an interim basis, the Trustees considered many of the same
factors on which the recommendation to approve the Reorganizations are based.
These factors include:
o SAM, the investment adviser to the Safeco Funds until August 2, 2004,
was acquired by Symetra. Symetra informed the Trustees that it was not
interested in continuing to provide investment advisory services to
the Safeco Funds. Consequently, a change in your Fund's investment
adviser was necessary.
o The resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in
assets. Pioneer is part of the global asset management group of
UniCredito Italiano S.p.A., one of the largest banking groups in
Italy, providing investment management and financial services to
mutual funds, institutions, and other clients. As of June 30, 2004,
assets under management of UniCredito Italiano S.p.A. were
approximately $151 billion worldwide.
o The track record of Pioneer in managing other investment companies
with similar strategies.
o Pioneer's willingness to proceed with the Reorganizations and to limit
expenses of the Fund as discussed above.
o Pioneer's investment process, style and philosophy with respect to
equity and fixed income investing.
o The expertise of John Carey as portfolio manager of Pioneer Fund and
the head of equity investments at Pioneer.
o Pioneer's willingness to act as investment adviser to each of the
Funds.
Safeco Advisory Agreement
The following is a summary of the material terms of the Safeco Advisory
Agreement. The Safeco Advisory Agreement terminated on August 2, 2004.
Services. Under the terms of the Safeco Advisory Agreement, SAM managed the
Funds' investments, subject to the supervision of the Board. At its expense, SAM
provided office space and all necessary office facilities, equipment and
personnel for managing the investments of the Funds.
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Compensation. As compensation under the Safeco Advisory Agreement, each
Safeco Fund paid SAM a monthly advisory fee at an annual rate as listed in the
below table of the Fund's average daily net assets calculated each business day
and paid monthly, as listed in the table below. In addition, SAM had
contractually agreed to reimburse each Fund to the extent a Fund's total annual
expenses during any of the Fund's fiscal years, exceed 0.40% of its average
daily net asset value in such year. This arrangement included all Fund operating
expenses except management fees, Rule 12b-1 fees, brokerage commissions,
interest, and extraordinary expenses.
Fund Net Assets Annual Fee
- ----------------------------------------------------------------------------------
SAFECO BALANCED FUND $0-$250,000,000 0.70 of 1%
SAFECO CORE EQUITY FUND $250,000,001-$750,000,000 0.65 of 1%
SAFECO GROWTH OPPORTUNITIES FUND $750,000,001-$1,250,000,000 0.60 of 1%
SAFECO LARGE-CAP VALUE FUND Over $1,250,000,000 0.55 of 1%
SAFECO MULTI-CAP CORE FUND
- ----------------------------------------------------------------------------------
SAFECO INTERNATIONAL STOCK FUND $0-$250,000,000 1.00 of 1%
$250,000,001-$750,000,000 0.90 of 1%
Over $750,000,000 0.80 of 1%
- ----------------------------------------------------------------------------------
SAFECO LARGE-CAP GROWTH FUND $0-$250,000,000 0.80 of 1%
$250,000,001-$750,000,000 0.75 of 1%
$750,000,001-$1,250,000,000 0.70 of 1%
Over $1,250,000,000 0.65 of 1%
- ----------------------------------------------------------------------------------
SAFECO SMALL-CAP VALUE FUND $0-$250,000,000 0.75 of 1%
$250,000,001-$750,000,000 0.70 of 1%
$750,000,001-$1,250,000,000 0.65 of 1%
Over $1,250,000,000 0.60 of 1%
- ----------------------------------------------------------------------------------
In addition to the management fee, your Safeco Fund paid SAM, in its
capacity as administrator and fund accounting agent an administrative services
fee of 0.05% of your Safeco Fund's average daily net assets up to the first
$200,000,000 and 0.01% of its net assets thereafter, and an accounting fee of
0.04% of the Fund's average daily net assets up to the first $200,000,000 and
0.01% of its net assets thereafter.
The table below shows gross advisory fees paid by each Fund and any expense
reimbursements by SAM during the fiscal year ended December 31, 2003:
FUND (In Thousands)
- ---- --------------
SAFECO BALANCED FUND
Advisory Fee ............................ $ 124
Reimbursement ........................... $ 79
SAFECO CORE EQUITY FUND
Advisory Fee ............................ $4,663
Reimbursement ........................... $ 353
SAFECO GROWTH OPPORTUNITIES FUND
Advisory Fee ............................ $3,156
Reimbursement ........................... $ 499
SAFECO INTERNATIONAL STOCK FUND
Advisory Fee ............................ $ 256
Reimbursement ........................... $ 235
SAFECO LARGE-CAP GROWTH FUND
Advisory Fee ............................ $ 40
Reimbursement ........................... $ 70
SAFECO LARGE-CAP VALUE FUND
Advisory Fee ............................ $ 965
Reimbursement ........................... $ 58
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FUND (In Thousands)
- ---- --------------
SAFECO MULTI-CAP CORE FUND
Advisory Fee ....................... $523
Reimbursement ...................... $122
SAFECO SMALL-CAP VALUE FUND
Advisory Fee ....................... $345
Reimbursement ...................... $149
Limitation of Liability. The Safeco Advisory Agreement provided that SAM
shall not be subject to liability to the Funds or to any shareholder of the
Funds for any loss suffered by a Fund or its shareholders from or as a
consequence of any act or omission of SAM, or of any of the partners, employees
or agents of SAM in connection with or pursuant to the Agreement, except by
reason of willful misfeasance, bad faith or gross negligence on the part of SAM
in the performance of its duties or by reason of reckless disregard by SAM of
its obligations and duties under the Agreement.
VOTING RIGHTS AND REQUIRED VOTE
Each share of your Safeco Fund is entitled to one vote and each fractional
share shall be entitled to a proportionate fractional vote. A quorum is required
to conduct business at the Meeting. With respect to each Safeco Fund, the
presence in person or by proxy of one-third of the outstanding shares of a
Safeco Fund entitled to cast votes at the Meeting will constitute a quorum with
respect to that Safeco Fund. A favorable vote of a "majority of the outstanding
voting securities" of the applicable Fund is required to approve each Proposal.
Under the Investment Company Act, the vote of a majority of the outstanding
voting securities means the affirmative vote of the lesser of (i) 67% or more of
the shares of the applicable Safeco Fund represented at the meeting, if at least
50% of all outstanding shares of the Safeco Fund are represented at the meeting,
or (ii) 50% or more of the outstanding shares of the Safeco Fund entitled to
vote at the meeting.
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Quorum Voting
- ---------------------------------------------------------------------------------------------------------------------------------
In General All shares "present" in person or by proxy are Shares "present" in person will be voted in
counted towards a quorum. person at the Meeting. Shares present by
proxy will be voted in accordance with
instructions.
- ---------------------------------------------------------------------------------------------------------------------------------
Broker Non-Vote (where the Considered "present" at Meeting for purposes Broker non-votes do not count as a vote "for"
underlying holder has not of quorum. and effectively result in a vote "against"
voted and the broker does not Proposals 1(a)-(h), and Proposal 2(a)-(h) if
have discretionary authority to less than 50% of the outstanding shares are
vote the shares) present at the Meeting
- ---------------------------------------------------------------------------------------------------------------------------------
Proxy with No Voting Considered "present" at Meeting for purposes Voted "for" the proposal.
Instruction (other than Broker of quorum.
Non-Vote)
- ---------------------------------------------------------------------------------------------------------------------------------
Vote to Abstain Considered "present" at Meeting for purposes Abstentions do not constitute a vote "for" and
of quorum. effectively result in a vote "against" Proposals
1(a)-(h), and Proposal 2(a)-(h) if less than
50% of the outstanding shares are present at
the Meeting.
- ---------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT THE PIONEER FUNDS
Investment Adviser
Pioneer serves as the investment adviser to each Pioneer Fund. Pioneer is
an indirect, wholly owned subsidiary of UniCredito Italiano S.p.A., one of the
largest banking groups in Italy. Pioneer is part of the global asset management
group providing investment management and financial services to mutual funds,
institutions and other clients. As of June 30, 2004, assets under management
were approximately $150 billion worldwide, including over $35 billion in assets
under management by Pioneer. Pioneer's main office is at 60 State Street,
Boston, Massachusetts 02109. Pioneer's U.S. mutual fund investment history
includes creating one of the first mutual funds in 1928.
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The Board of Trustees of the Pioneer Funds is responsible for overseeing
the performance of each of Pioneer Fund's investment adviser and subadviser, if
any, and determining whether to approve and renew the fund's investment advisory
agreement and the subadvisory agreements.
Pioneer has received an order (the "Exemptive Order") from the SEC that
permits Pioneer, subject to the approval of the Pioneer Funds' board of
trustees, to hire and terminate a subadviser or to materially modify an existing
subadvisory agreement for a Pioneer Fund without shareholder approval. Pioneer
retains the ultimate responsibility to oversee and recommend the hiring,
termination and replacement of any subadviser. To the extent that the SEC adopts
a rule that would supersede the Exemptive Order, Pioneer and the Pioneer Funds
intend to rely on such rule to permit Pioneer, subject to the approval of the
Pioneer Funds' board of trustees and any other applicable conditions of the
rule, to hire and terminate a subadviser or to materially modify an existing
subadvisory agreement for a Pioneer Fund without shareholder approval.
Buying, Exchanging and Selling Shares of the Pioneer Funds
Net Asset Value. Each Pioneer Fund's net asset value is the value of its
portfolio of securities plus any other assets minus its operating expenses and
any other liabilities. Each Pioneer Fund calculates a net asset value for each
class of shares every day the New York Stock Exchange is open when regular
trading closes (normally 4:00 p.m. Eastern time).
Each Pioneer Fund generally values its portfolio securities using closing
market prices or readily available market quotations. When closing market prices
or market quotations are not available or are considered by Pioneer to be
unreliable, a Pioneer Fund may use a security's fair value. Fair value is the
valuation of a security determined on the basis of factors other than market
value in accordance with procedures approved by the Pioneer Funds' trustees.
Each Pioneer Fund also may use the fair value of a security, including a
non-U.S. security, when Pioneer determines that the closing market price on the
primary exchange where the security is traded no longer accurately reflects the
value of the security due to factors affecting one or more relevant securities
markets or the specific issuer. The use of fair value pricing by a Pioneer Fund
may cause the net asset value of its shares to differ from the net asset value
that would be calculated using closing market prices. International securities
markets may be open on days when the U.S. markets are closed. For this reason,
the value of any international securities owned by a Pioneer Fund could change
on a day you cannot buy or sell shares of the fund. Each Pioneer Fund may use a
pricing service or a pricing matrix to value some of its assets. Debt securities
with remaining maturities of 60 days or less are valued at amortized cost, which
is a method of determining a security's fair value.
The Pioneer International Equity Fund primarily invests in securities of
non-U.S. issuers and the markets for these securities generally close prior to
the time the Fund determines its net asset value. However, the value of these
securities continues to be influenced by changes in the global markets.
Consequently, the trustees have determined to use the fair value of these
securities as of the time the fund determines its net asset value, based upon
data from a pricing service. On a daily basis, the pricing service recommends
changes, based upon a proprietary model, to the closing market prices of each
non-U.S. security held by the fund to reflect the security's fair value at the
time the fund determines its net asset value. The fund applies these
recommendations in accordance with procedures approved by the trustees. A
security's fair value determined in this manner may differ from the security's
closing market price on the date the fund determines its net asset value or the
opening price of the security on the next business day. The fund's use of this
method may significantly affect its net asset value compared to the net asset
value that would have been determined using closing market prices. The fund also
may take other factors influencing specific markets or issuers into
consideration in determining the fair value of a non-U.S. security.
You buy or sell shares at the share price. When you buy Class A shares, you
pay an initial sales charge unless you qualify for a waiver or reduced sales
charge. The Class A shares of the Pioneer Funds you receive in the
Reorganizations will not be subject to any sales charge. Moreover, if you own
shares in your own name as of the closing of the Reorganizations (i.e., not in
the name of a broker or other intermediary) and maintain your account, you may
purchase additional Class A shares of the corresponding Pioneer Fund through
such account in the future or may exchange those shares for Class A shares of
another Pioneer Fund without paying any sales charge.
Opening Your Account. If your shares are held in your investment firm's
name, the options and services available to you may be different from those
described herein or in the Pioneer Fund's prospectus. Ask your investment
professional for more information.
If you invest in a Pioneer Fund through investment professionals or other
financial intermediaries, including wrap programs and fund supermarkets,
additional conditions may apply to your investment in a Pioneer Fund, and the
investment professional or intermediary may charge you a transaction-based or
other fee for its services. These conditions and fees are in addition to those
imposed by the Pioneer Fund and its affiliates. You should ask your investment
professional or financial intermediary about its services and any applicable
fees.
Account Options. Use your account application to select options and
privileges for your account. You can change your selections at any time by
sending a completed account options form to the transfer agent. You may be
required to obtain a signature guarantee to make certain changes to an existing
account.
123
Call or write to the Pioneer Funds' transfer agent for account
applications, account options forms and other account information:
PIONEER INVESTMENT MANAGEMENT SHAREHOLDER SERVICES, INC.
P.O. Box 55014
Boston, Massachusetts 02205-5014
Telephone 1-800-225-6292
Telephone Transaction Privileges. If your account is registered in your
name, you can buy, exchange or sell shares of the Pioneer Funds by telephone. If
you do not want your account to have telephone transaction privileges, you must
indicate that choice on your account application or by writing to the transfer
agent.
When you request a telephone transaction the transfer agent will try to
confirm that the request is genuine. The transfer agent records the call,
requires the caller to provide the personal identification number for the
account and sends you a written confirmation. Each Pioneer Fund may implement
other confirmation procedures from time to time. Different procedures may apply
if you have a non-U.S. account or if your account is registered in the name of
an institution, broker-dealer or other third party.
Online Transaction Privileges. If your account is registered in your name,
you may be able to buy, exchange or sell fund shares online. Your investment
firm may also be able to buy, exchange or sell your Pioneer Fund shares online.
To establish online transaction privileges complete an account options
form, write to the transfer agent or complete the online authorization screen
on: www.pioneerfunds.com.
To use online transactions, you must read and agree to the terms of an
online transaction agreement available on the Pioneer website. When you or your
investment firm requests an online transaction the transfer agent electronically
records the transaction, requires an authorizing password and sends a written
confirmation. The Pioneer Funds may implement other procedures from time to
time. Different procedures may apply if you have a non-U.S. account or if your
account is registered in the name of an institution, broker-dealer or other
third party. You may not be able to use the online transaction privilege for
certain types of accounts, including most retirement accounts.
Share Price. If you place an order with your investment firm before the New
York Stock Exchange closes and your investment firm submits the order to PFD
prior to PFD's close of business (usually 5:30 p.m. Eastern time), your share
price will be calculated that day. Otherwise, your price per share will be
calculated at the close of the New York Stock Exchange after the distributor
receives your order. Your investment firm is responsible for submitting your
order to the distributor.
Buying Pioneer Fund Shares. You may buy shares of each Pioneer Fund from
any investment firm that has a sales agreement with PFD. If you do not have an
investment firm, please call 1-800-225-6292 for information on how to locate an
investment professional in your area.
You can buy shares of the Pioneer Funds at the offering price. The
distributor may reject any order until it has confirmed the order in writing and
received payment. The fund reserves the right to stop offering any class of
shares.
Minimum Investment Amounts. Your initial investment must be at least
$1,000. Additional investments must be at least $100 for Class A shares. You may
qualify for lower initial or subsequent investment minimums if you are opening a
retirement plan account, establishing an automatic investment plan or placing
your trade through your investment firm. The minimum investment amount does not
apply for purposes of the Reorganization.
Exchanging Pioneer Fund Shares. You may exchange your shares in a Pioneer
Fund for shares of the same class of another Pioneer mutual fund. Your exchange
request must be for at least $1,000 unless the fund you are exchanging into has
a different minimum. Each Pioneer Fund allows you to exchange your shares at net
asset value without charging you either an initial or contingent deferred sales
charge at the time of the exchange. Shares you acquire as part of an exchange
will continue to be subject to any contingent deferred sales charge that applies
to the shares you originally purchased. When you ultimately sell your shares,
the date of your original purchase will determine your contingent deferred sales
charge. Before you request an exchange, consider each Fund's investment
objective and policy as described in each fund's prospectus.
Selling Pioneer Fund Shares. Your shares will be sold at net asset value
per share next calculated after the Pioneer Fund, or authorized agent, and as a
broker-dealer, receives your request in good order. If the shares you are
selling are subject to a deferred sales charge, it will be deducted from the
sale proceeds. Each Pioneer Fund generally will send your sale proceeds by
check, bank wire or electronic funds transfer. Normally you will be paid within
seven days. If you are selling shares from a non-retirement account or certain
IRAs, you may use any of the methods described below. If you are selling shares
from a retirement account other than an IRA, you must make your request in
writing.
You may have to pay federal income taxes on a sale or an exchange.
124
Good Order means that:
o You have provided adequate instructions
o There are no outstanding claims against your account
o There are no transaction limitations on your account
o If you have any Pioneer Fund share certificates, you submit them and
they are signed by each record owner exactly as the shares are
registered
o Your request includes a signature guarantee if you:
o Are selling over $100,000 or exchanging over $500,000 worth of shares
o Changed your account registration or address within the last 30 days
o Instruct the transfer agent to mail the check to an address different
from the one on your account
o Want the check paid to someone other than the account owner(s)
o Are transferring the sale proceeds to a Pioneer mutual fund account
with a different registration
Buying, Exchanging and Selling Pioneer Fund Shares
Buying Shares
Through Normally, your investment firm will send your purchase request
your investment to the Pioneer Funds' transfer agent. Consult your investment
firm professional for more information. Your investment firm may
receive a commission from the distributor for your purchase of
fund shares. The distributor or its affiliates may pay additional
compensation, out of their own assets, to certain investment
firms or their affiliates based on objective criteria established by
the distributor.
By phone or online You can use the telephone or online privilege if you have an
existing non-retirement account or certain IRAs. You can purchase
additional fund shares by phone if:
o You established your bank account of record at least
30 days ago
o Your bank information has not changed for at least 30 days
o You are not purchasing more than $25,000 worth of shares per
account per day
o You can provide the proper account identification information
When you request a telephone or online purchase, the transfer
agent will electronically debit the amount of the purchase from
your bank account of record. The transfer agent will purchase
Pioneer Fund shares for the amount of the debit at the offering
price determined after the transfer agent receives your
telephone or online purchase instruction and good funds. It
usually takes three business days for the transfer agent to
receive notification from your bank that good funds are available
in the amount of your investment.
In writing, You can purchase Pioneer Fund shares for an existing fund
by mail or by fax account by mailing a check to the transfer agent. Make your
check payable to the Pioneer Fund. Neither initial nor subsequent
investments should be made by third party check. Your check
must be in U.S. dollars and drawn on a U.S. bank. Include in your
purchase request the fund's name, the account number and the
name or names in the account registration.
Exchanging Shares
Through Normally, your investment firm will send your exchange request to
your investment the Pioneer Fund's transfer agent. Consult your investment
firm professional for more information about exchanging your
shares.
By phone or online After you establish your Pioneer Fund account, you can exchange
Fund shares by phone or online if:
o You are exchanging into an existing account or using the
exchange to establish a new account, provided the new account
has a registration identical to the original account
o The fund into which you are exchanging offers the same class
of shares
o You are not exchanging more than $500,000 worth of shares
per account per day
o You can provide the proper account identification information
In writing, You can exchange fund shares by mailing or faxing a letter of
by mail or by fax instruction to the transfer agent. You can exchange Pioneer Fund
shares directly through the Pioneer Fund only if your account is
registered in your name. However, you may not fax an exchange
request for more than $500,000. Include in your letter:
o The name, social security number and signature of all registered
owners
o A signature guarantee for each registered owner if the amount
of the exchange is more than $500,000
o The name of the fund out of which you are exchanging and the
name of the fund into which you are exchanging
o The class of shares you are exchanging
o The dollar amount or number of shares you are exchanging
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Selling Shares
Normally, your investment firm will send your request to sell
shares to the Pioneer Funds' transfer agent. Consult your
investment professional for more information. Each Pioneer Fund
has authorized PFD to act as its agent in the repurchase of
Pioneer Fund shares from qualified investment firms. Each Pioneer
Fund reserves the right to terminate this procedure at any time.
You may sell up to $100,000 per account per day by phone or
online. You may sell Pioneer Fund shares held in a retirement
plan account by phone only if your account is an eligible IRA (tax
penalties may apply). You may not sell your shares by phone or
online if you have changed your address (for checks) or your
bank information (for wires and transfers) in the last 30 days.
You may receive your sale proceeds:
o By check, provided the check is made payable exactly as your
account is registered
o By bank wire or by electronic funds transfer, provided the sale
proceeds are being sent to your bank address of record
You can sell some or all of your Pioneer Fund shares by writing
directly to the Pioneer fund only if your account is registered in
your name. Include in your request your name, your social
security number, the fund's name and any other applicable
requirements as described below. The transfer agent will send the
sale proceeds to your address of record unless you provide other
instructions. Your request must be signed by all registered owners
and be in good order. You may not sell more than $100,000 per
account per day by fax.
How to contact Pioneer
By phone
For information or to request a telephone transaction between
8:00 a.m. and 7:00 p.m. (Eastern time) by speaking with a
shareholder services representative call 1-800-225-6292
To request a transaction using FactFoneSM call 1-800-225-4321
Telecommunications Device for the Deaf (TDD) 1-800-225-1997
By mail
Send your written instructions to:
Pioneer Investment Management Shareholder Services, Inc.
P.O. Box 55014
Boston, Massachusetts 02205-5014
By fax
Fax your exchange and sale requests to:
1-800-225-4240
Exchange Privilege
You may make up to four exchange redemptions of $25,000 or
more per account per calendar year.
Excessive Trading
The fund discourages excessive and/or trading practices, such as
market timing, that may disrupt portfolio management strategies
and harm fund request until it is received in performance. These
practices consist of:
o Selling shares purchased within the preceding 90 days;
o Two or more purchases and redemptions in any 90-day period;
or
o Any other series of transactions indicative of a timing pattern
If we identify an account that engages in such activity, the fund
and the distributor reserve the right to refuse or restrict any
purchase order (including exchanges) for that account and other
accounts under common ownership or control.
Pioneer Fund Shareholder Account Policies
Signature Guarantees and Other Requirements. You are required to obtain a
signature guarantee when you are:
o Requesting certain types of exchanges or sales of Pioneer Fund shares
o Redeeming shares for which you hold a share certificate
o Requesting certain types of changes for your existing account
You can obtain a signature guarantee from most broker-dealers, banks,
credit unions (if authorized under state law) and federal savings and loan
associations. You cannot obtain a signature guarantee from a notary public. All
Pioneer Funds will accept only medallion signature guarantees. A medallion
signature guarantee may be obtained from a domestic bank or trust company,
broker, dealer, clearing agency, savings association, or other financial
institution that is participating in a medallion program recognized by the
Securities Transfer Association. Signature guarantees from financial
institutions that are not participating in one of these programs are not
accepted. Fiduciaries and corporations are required to submit additional
documents to sell Pioneer Fund shares.
Exchange Limitation. You may only make up to four exchange redemptions of
$25,000 or more per account per calendar year out of a fund. Each fund's
exchange limitation is intended to discourage short-term trading in fund shares.
Short-term trading can increase the expenses incurred by the fund and make
portfolio management less efficient. In determining whether the exchange
redemption limit has been reached, Pioneer may aggregate a series of exchanges
(each valued at less than $25,000) and/or fund accounts that appear to be under
common ownership or control. Pioneer may view accounts for which one person
gives instructions or accounts that act on advice provided by a single source to
be under common control.
The exchange limitation does not apply to automatic exchange transactions
or to exchanges made by participants in employer-sponsored retirement plans
qualified under Section 401(a) of the IRC. While financial intermediaries that
maintain omnibus accounts that
126
invest in the fund are requested to apply the exchange limitation policy to
shareholders who hold shares through such accounts, we do not impose the
exchange limitation policy at the level of the omnibus account and are not able
to monitor compliance by the financial intermediary with this policy.
Redemption Fee. Pioneer International Equity Fund has adopted a redemption
fee on short term holdings of the fund's shares. If you sell or exchange shares
within 30 days of any purchase of fund shares, the fund will apply a 2% fee to
the entire amount of your sales proceeds. The fund's redemption fee is intended
to discourage short-term trading in fund shares. Short-term trading can increase
the expenses incurred by the fund and make portfolio management less efficient.
Excessive Trading. The fund discourages excessive and short-term trading
practices, such as market timing, that may disrupt portfolio management
strategies and harm fund performance. Although there is no generally applied
standard in the marketplace as to what level of trading activity is excessive,
we may consider trading in the fund's shares to be excessive if:
o You sell shares within a short period of time after the shares were
purchased;
o You make two or more purchases and redemptions within a short period
of time;
o You enter into a series of transactions that is indicative of a timing
pattern or strategy; or
o We reasonably believe that you have engaged in such practices in
connection with other mutual funds.
We monitor selected trades on a daily basis in an effort to detect
excessive short-term trading. If we determine that an investor or a client of a
broker has engaged in excessive short-term trading that we believe may be
harmful to the fund, we will ask the investor or broker to cease such activity
and we will refuse to process purchase orders (including purchases by exchange)
of such investor, broker or accounts that we believe are under their control. In
determining whether to take such actions, we seek to act in a manner that is
consistent with the best interests of the fund's shareholders. We also limit the
number of exchanges of $25,000 or more in any calendar year.
While we use our reasonable efforts to detect excessive trading activity,
there can be no assurance that our efforts will be successful or that market
timers will not employ tactics designed to evade detection. Frequently, fund
shares are held through omnibus accounts maintained by financial intermediaries
such as brokers and retirement plan administrators where the holdings of
multiple shareholders, such as all the clients of a particular broker, are
aggregated. Our ability to monitor trading practices by investors purchasing
shares through omnibus accounts is limited and dependent upon the cooperation of
the financial intermediary in observing the fund's policies.
Minimum Account Size. Each Pioneer Fund requires that you maintain a
minimum account value of $500. If you hold less than the minimum in your account
because you have sold or exchanged some of your shares, the Pioneer Fund will
notify you of its intent to sell your shares and close your account. You may
avoid this by increasing the value of your account to at least the minimum
within six months of the notice from the fund.
Telephone Access. You may have difficulty contacting the Pioneer Fund by
telephone during times of market volatility or disruption in telephone service.
If you are unable to reach the Pioneer Fund by telephone, you should communicate
with the fund in writing.
Share Certificates. Normally, your shares will remain on deposit with the
transfer agent and certificates will not be issued. If you are legally required
to obtain a certificate, you may request one for your Class A shares only. A fee
may be charged for this service. Any share certificates of the Safeco Funds
outstanding at the Closing of the Reorganization will be deemed to be cancelled
and will no longer represent shares of the Funds.
Other Policies. Each Pioneer Fund may suspend transactions in shares when
trading on the New York Stock Exchange is closed or restricted, when an
emergency exists that makes it impracticable, as determined by the SEC, for the
fund to sell or value its portfolio securities or with the permission of the
SEC.
Each Pioneer Fund or PFD may revise, suspend or terminate the account
options and services available to shareholders at any time.
Each Pioneer Fund reserves the right to redeem in kind by delivering
portfolio securities to a redeeming shareholder, provided that the Pioneer Fund
must pay redemptions in cash if a shareholder's aggregate redemptions in a 90
day period are less than $250,000 or 1% of the fund's net assets.
Dividends and Capital Gains
Each Pioneer Fund generally pays any distributions of net short- and
long-term capital gains and dividends from any net investment income at least
annually.
127
Each Pioneer Fund may also pay dividends and capital gain distributions at
other times if necessary for the fund to avoid U.S. federal income or excise
tax. If you invest in a Pioneer Fund close to the time that the fund makes a
distribution, generally you will pay a higher price per share and you will pay
taxes on the amount of the distribution whether you reinvest the distribution or
receive it as cash.
Taxes
For U.S. federal income tax purposes, distributions from each Pioneer
Fund's net long-term capital gains (if any) are considered long-term capital
gains and may be taxable to you at different maximum rates depending upon their
source and other factors. Short-term capital gain distributions for each Pioneer
Fund are taxable as ordinary income.
Dividends from net investment income are taxable either as ordinary income
or, if so designated by the fund and certain other conditions, including holding
period requirements, are met by the fund and the shareholder, as "qualified
dividend income" taxable to individual shareholders at the maximum 15% U.S.
federal tax rate. Dividends and distributions generally are taxable, whether you
take payment in cash or reinvest them to buy additional Pioneer Fund shares.
When you sell or exchange Pioneer Fund shares you will generally recognize
a capital gain or capital loss in an amount equal to the difference between the
net amount of sale proceeds (or, in the case of an exchange, the fair market
value of the shares) that you receive and your tax basis for the shares that you
sell or exchange. In January of each year each Pioneer Fund will mail to you
information about your dividends, distributions and any shares you sold in the
previous calendar year.
You must provide your social security number or other taxpayer
identification number to the fund along with the certifications required by the
Internal Revenue Service when you open an account. If you do not or if it is
otherwise legally required to do so, the Pioneer Fund will withhold 28% "backup
withholding" tax from your dividends and distributions, sale proceeds and any
other payments to you.
You should ask your tax adviser about any federal, state and foreign tax
considerations, including possible additional withholding taxes for non-U.S.
shareholders. You may also consult the "Tax Status" section of each Pioneer
Fund's statement of additional information for a more detailed discussion of
U.S. federal income tax considerations, including qualified dividend income
considerations that may affect the Pioneer Fund and its shareholders.
Pioneer Funds' Class A Rule 12b-1 Plans. As described above, each Pioneer
Fund has adopted a Rule 12b-1 plan for its Class A shares (the "Class A Plans"
or the "Plans"). Because the 12b-1 fees payable under each Plan are an ongoing
expense, over time they may increase the cost of your investment and your shares
may cost more than shares that are not subject to a distribution or service fee
or sales charge.
Compensation and Services. Each Class A Plan is a reimbursement plan, and
distribution expenses of PFD are expected to substantially exceed the
distribution fees paid by the fund in a given year. Pursuant to each Class A
Plan the fund reimburses PFD for its actual expenditures to finance any activity
primarily intended to result in the sale of Class A shares or to provide
services to holders of Class A shares, provided the categories of expenses for
which reimbursement is made are approved by the board of trustees. The expenses
of the fund pursuant to the Class A Plan are accrued daily at a rate which may
not exceed the annual rate of 0.25% of the fund's average daily net assets
attributable to Class A shares.
Trustee Approval and Oversight. Each Plan was last approved by the board of
trustees of each Pioneer Fund, including a majority of the independent trustees,
by votes cast in person at meetings called for the purpose of voting on the Plan
on December 6, 2003. Pursuant to the Plan, at least quarterly, PFD will provide
each fund with a written report of the amounts expended under the Plan and the
purpose for which these expenditures were made. The trustees review these
reports on a quarterly basis to determine their continued appropriateness.
Term, Termination and Amendment. Each Plan's adoption, terms, continuance
and termination are governed by Rule 12b-1 under the Investment Company Act. The
board of trustees believes that there is a reasonable likelihood that the Plans
will benefit each fund and its current and future shareholders. The Plans may
not be amended to increase materially the annual percentage limitation of
average net assets which may be spent for the services described therein without
approval of the shareholders of the fund affected thereby, and material
amendments of the Plans must also be approved by the trustees as provided in
Rule 12b-1.
128
FINANCIAL HIGHLIGHTS
The following tables show the financial performance of each Pioneer Fund
for the past five fiscal years and, if applicable, for any recent semiannual
period (or the period during which each Pioneer Fund has been in operation, if
less than five years). Certain information reflects financial results for a
single Pioneer Fund share. "Total return" shows how much an investment in a
Pioneer Fund would have increased or decreased during each period, assuming you
had reinvested all dividends and other distributions. In the case of each
Pioneer Fund, each fiscal year ended on or after the fiscal year ended June 30,
2002 has been audited by Ernst & Young LLP, each Pioneer Fund's independent
registered public accounting firm, as stated in their reports incorporated by
reference in this registration statement. For fiscal years prior to the fiscal
year ended June 30, 2002, the financial statements of each Pioneer Fund were
audited by Arthur Anderson LLP. The information for any semiannual period has
not been audited.
PIONEER BALANCED FUND
FINANCIAL HIGHLIGHTS
Six Months
Ended Year
6/30/04 Ended
CLASS A (Unaudited) 12/31/03
- ------- ----------- --------
Net asset value, beginning of period ......................... $ 9.47 $ 8.29
-------- --------
Increase (decrease) from investment operations:
Net investment income ....................................... $ 0.06 $ 0.12
Net realized and unrealized gain (loss) on investments ...... 0.09 1.20
-------- --------
Net increase (decrease) from investment operations .......... $ 0.15 $ 1.32
Distributions to shareholders:
Net investment income ....................................... (0.05) (0.14)
Net increase (decrease) in net asset value .................. $ 0.10 $ 1.18
-------- --------
Net asset value, end of period .............................. $ 9.57 $ 9.47
-------- --------
Total return* ................................................ 1.59% 15.99%
======== ========
Ratio of net expenses to average net assets+ ................. 1.31%** 1.38%
Ratio of net investment income to average net assets+ ....... 1.31%** 1.25%
Portfolio turnover rate ..................................... 34%** 44%
Net assets, end of period (in thousands) .................... $103,881 $107,265
Ratios with reductions for fees paid indirectly:
Net expenses ................................................ 1.31%** 1.38%
Net investment income ....................................... 1.31%** 1.25%
Year Year Year Year
Ended Ended Ended Ended
CLASS A 12/31/02 12/31/01 (a) 12/31/00 12/31/99
- ------- -------- ------------ -------- --------
Net asset value, beginning of period ......................... $ 9.46 $ 9.94 $ 9.73 $ 9.74
-------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income ....................................... $ 0.11 $ 0.19 $ 0.30 $ 0.31
Net realized and unrealized gain (loss) on investments ...... (1.17) (0.47) 0.22 (0.01)
-------- -------- -------- --------
Net increase (decrease) from investment operations .......... $ (1.06) $ (0.28) $ 0.52 $ 0.30
Distributions to shareholders:
Net investment income ....................................... (0.11) (0.20) (0.31) (0.31)
Net increase (decrease) in net asset value .................. $ (1.17) $ (0.48) $ 0.21 $ (0.01)
-------- -------- -------- --------
Net asset value, end of period .............................. $ 8.29 $ 9.46 $ 9.94 $ 9.73
-------- -------- -------- --------
Total return* ................................................ (11.20)% (2.87)% 5.38% 3.15%
======== ======== ======== ========
Ratio of net expenses to average net assets+ ................. 1.41% 1.31% 1.23% 1.23%
Ratio of net investment income to average net assets+ ....... 1.19% 1.97% 2.96% 3.21%
Portfolio turnover rate ..................................... 180% 133% 17% 46%
Net assets, end of period (in thousands) .................... $106,734 $141,746 $162,855 $214,866
Ratios with reductions for fees paid indirectly:
Net expenses ................................................ 1.41% 1.30% 1.20% 1.21%
Net investment income ....................................... 1.19% 1.98% 2.99% 3.23%
- ----------
* 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) At January 1, 2001, the Fund began accreting discounts and amortizing
premiums on debt securities. The effect of this change for the year ended
December 31, 2001 was to decrease net investment income by less than one
cent per share, increase net realized and unrealized gain (loss) by less
than one cent per share and decrease the ratio of net investment income to
average net assets assuming reduction for fees paid indirectly from 2.02%
to 1.98%. Per share ratios and supplemental data for periods prior to
January 1, 2002, have not been restated to reflect this change in
presentation.
129
PIONEER FUND
FINANCIAL HIGHLIGHTS
Six Months
Ended Year
6/30/04 Ended
CLASS A (Unaudited) 12/31/03
- ------- ----------- --------
Net asset value, beginning of period .......................... $ 38.00 $ 30.76
---------- ----------
Increase (decrease) from investment operations:
Net investment income ........................................ $ 0.14 $ 0.28
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ............................... 0.63 7.24
---------- ----------
Net increase (decrease) from investment operations ........... $ 0.77 $ 7.52
Distributions to shareholders:
Net investment income ........................................ $ (0.13) $ (0.28)
Net realized gain ............................................ -- --
---------- ----------
Net increase (decrease) in net asset value ................... $ 0.64 $ 7.24
---------- ----------
Net asset value, end of period ................................ $ 38.64 $ 38.00
========== ==========
Total return* ................................................. 2.03% 24.58%
Ratio of net expenses to average net assets+ .................. 1.05%** 1.09%
Ratio of net investment income to average net assets+ ........ 0.71%** 0.86%
Portfolio turnover rate ...................................... 22%** 6%
Net assets, end of period (in thousands) ..................... $5,328,526 $5,370,888
Ratios with reductions for fees paid indirectly:
Net expenses ................................................. 1.05%** 1.09%
Net investment income ........................................ 0.71%** 0.86%
Year Year Year Year
Ended Ended Ended Ended
CLASS A 12/31/02 12/31/01 12/31/00 12/31/99
- ------- -------- -------- -------- --------
Net asset value, beginning of period .......................... $ 38.87 $ 44.26 $ 47.60 $ 43.30
---------- ---------- ---------- ----------
Increase (decrease) from investment operations:
Net investment income ........................................ $ 0.27 $ 0.18 $ 0.16 $ 0.18
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ............................... (8.12) (5.11) (0.14) 6.51
---------- ---------- ---------- ----------
Net increase (decrease) from investment operations ........... $ (7.85) $ (4.93) $ 0.02 $ 6.69
Distributions to shareholders:
Net investment income ........................................ $ (0.26) $ (0.16) $ (0.12) $ (0.17)
Net realized gain ............................................ -- (0.30) (3.24) (2.22)
---------- ---------- ---------- ----------
Net increase (decrease) in net asset value ................... $ (8.11) $ (5.39) $ (3.34) $ 4.30
---------- ---------- ---------- ----------
Net asset value, end of period ................................ $ 30.76 $ 38.87 $ 44.26 $ 47.60
========== ========== ========== ==========
Total return* ................................................. (20.26%) (11.13%) 0.12% 15.54%
Ratio of net expenses to average net assets+ .................. 1.11% 1.14% 1.11% 1.10%
Ratio of net investment income to average net assets+ ........ 0.75% 0.43% 0.31% 0.39%
Portfolio turnover rate ...................................... 7% 6% 20% 10%
Net assets, end of period (in thousands) ..................... $4,584,649 $6,140,520 $6,645,954 $6,638,130
Ratios with reductions for fees paid indirectly:
Net expenses ................................................. 1.10% 1.13% 1.09% 1.09%
Net investment income ........................................ 0.76% 0.44% 0.33% 0.40%
- ----------
* 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.
130
PIONEER INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
Year Year
CLASS A Ended Ended
- ------- 3/31/04 3/31/03
Net asset value, beginning of period ................................. $ 11.64 $ 15.94
------- -------
Increase (decrease) from investment operations:
Net investment income (loss) ........................................ $ 0.10 $ 0.05
Net realized and unrealized gain (loss)on investments and foreign
currency transactions .............................................. 5.81 (4.35)
Net increase (decrease) from investment operations .................. $ 5.91 $ (4.30)
Distributions to shareholders:
Net investment income ............................................... -- --
Net realized gain ................................................... -- --
------- -------
Net increase (decrease) in net asset value .......................... $ 5.91 $ (4.30)
------- -------
Net asset value, end of period ....................................... $ 17.55 $ 11.64
======= =======
Total return* ........................................................ 50.77% (26.98)%
Ratio of net expenses to average net assets+ ......................... 1.75% 1.76%
Ratio of net investment income (loss) to average net assets+ ......... 0.67% 0.30%
Portfolio turnover rate .............................................. 169% 45%
Net assets, end of period (in thousands) ............................. $18,345 $11,578
Ratios with no waiver of management fees and assumption of expenses
by PIM and no reduction for fees paid indirectly:
Net expenses ........................................................ 2.80% 2.94%
Net investment loss ................................................. (0.38)% (0.88)%
Ratios with waiver of management fees and assumption of expenses by
PIM and reduction for fees paid indirectly:
Net expenses ........................................................ 1.75% 1.75%
Net investment income (loss) ........................................ 0.67% 0.31%
Year Year Year
CLASS A Ended Ended Ended
- ------- 3/31/02 3/31/01 3/31/00
Net asset value, beginning of period ................................. $ 16.81 $ 27.50 $ 18.55
------- ------- -------
Increase (decrease) from investment operations:
Net investment income (loss) ........................................ $ (0.06) $ (0.16) $ (0.06)
Net realized and unrealized gain (loss)on investments and foreign
currency transactions .............................................. (0.78) (9.25) 9.09
Net increase (decrease) from investment operations .................. $ (0.84) $ (9.41) $ 9.03
Distributions to shareholders:
Net investment income ............................................... -- -- (0.08)
Net realized gain ................................................... (0.03) (1.28) --
------- ------- -------
Net increase (decrease) in net asset value .......................... $ (0.87) $(10.69) $ 8.95
------- ------- -------
Net asset value, end of period ....................................... $ 15.94 $ 16.81 $ 27.50
======= ======= =======
Total return* ........................................................ (4.98)% (34.95)% 48.62%
Ratio of net expenses to average net assets+ ......................... 1.75% 1.77% 1.76%
Ratio of net investment income (loss) to average net assets+ ......... (0.35)% (0.75)% (0.23)%
Portfolio turnover rate .............................................. 77% 50% 59%
Net assets, end of period (in thousands) ............................. $16,455 $20,689 $41,276
Ratios with no waiver of management fees and assumption of expenses
by PIM and no reduction for fees paid indirectly:
Net expenses ........................................................ 2.68% 2.12% 2.10%
Net investment loss ................................................. (1.28)% (1.10) (0.57)%
Ratios with waiver of management fees and assumption of expenses by
PIM and reduction for fees paid indirectly:
Net expenses ........................................................ 1.75% 1.75% 1.75%
Net investment income (loss) ........................................ (0.35)% (0.73)% (0.22)%
- ----------
* 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.
131
PIONEER GROWTH SHARES
FINANCIAL HIGHLIGHTS
Six Months
Ended Year
6/30/04 Ended
CLASS A (Unaudited) 12/31/03
- ------- ----------- --------
Net asset value, beginning of period ..................... $ 11.42 $ 9.05
-------- --------
Increase (decrease) from investment operations:
Net investment loss ..................................... $ (0.02) $ (0.04)
Net realized and unrealized gain (loss) on investments .. (0.13) 2.41
-------- --------
Net increase (decrease) from investment operations ...... $ (0.15) $ 2.37
Distributions to shareholders:
Net realized gain ....................................... -- --
-------- --------
Net increase (decrease) in net asset value .............. $ (0.15) $ 2.37
-------- --------
Net asset value, end of period .......................... $ 11.27 $ 11.42
======== ========
Total return* ............................................ (1.31)% 26.19%
Ratio of net expenses to average net assets+ ............. 1.39%** 1.45%
Ratio of net investment loss to average net assets+ ...... (0.44)%** (0.42)%
Portfolio turnover rate .................................. 197%** 47%
Net assets, end of period (in thousands) ................. $486,992 $516,234
Ratios with reductions for fees paid indirectly:
Net expenses ............................................ 1.39%** 1.45%
Net investment loss ..................................... (0.44)%** (0.42)%
Year Year Year Year
Ended Ended Ended Ended
CLASS A 12/31/02 (a) 12/31/01 12/31/00 12/31/99
- ------- ------------ -------- -------- --------
Net asset value, beginning of period ..................... $ 13.90 $ 17.21 $ 20.16 $ 20.34
-------- -------- ---------- ----------
Increase (decrease) from investment operations:
Net investment loss ..................................... $ (0.04) $ (0.04) $ (0.09) $ (0.09)
Net realized and unrealized gain (loss) on investments .. (4.81) (3.27) (1.81) 1.59
-------- -------- ---------- ----------
Net increase (decrease) from investment operations ...... $ (4.85) $ (3.31) $ (1.90) $ 1.50
Distributions to shareholders:
Net realized gain ....................................... -- -- (1.05) (1.68)
-------- -------- ---------- ----------
Net increase (decrease) in net asset value .............. $ (4.85) $ (3.31) $ (2.95) $ (0.18)
-------- -------- ---------- ----------
Net asset value, end of period .......................... $ 9.05 $ 13.90 $ 17.21 $ 20.16
======== ======== ========== ==========
Total return* ............................................ (34.89)% (19.23)% (9.57)% 7.40%
Ratio of net expenses to average net assets+ ............. 1.39% 1.18% 1.22% 1.02%
Ratio of net investment loss to average net assets+ ...... (0.39)% (0.29)% (0.60)% (0.41)%
Portfolio turnover rate .................................. 88% 111% 58% 48%
Net assets, end of period (in thousands) ................. $452,070 $836,149 $1,197,025 $1,935,072
Ratios with reductions for fees paid indirectly:
Net expenses ............................................ 1.38% 1.16% 1.19% 1.00%
Net investment loss ..................................... (0.38)% (0.27)% (0.57)% (0.39)%
- ----------
(a) The per share data presented above is based upon the average shares
outstanding for the year presented.
* 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.
132
PIONEER VALUE FUND
FINANCIAL HIGHLIGHTS
Six Months
Ended Year
3/31/04 Ended
CLASS A (Unaudited) 9/30/03
- ------- ----------- -------
Net asset value, beginning of period .......................... $ 16.25 $ 15.29
---------- ----------
Increase (decrease) from investment operations:
Net investment income ........................................ $ 0.07 $ 0.11
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ............................... 2.52 3.20
---------- ----------
Net increase (decrease) from investment operations ........... $ 2.59 $ 3.31
Distributions to shareholders:
Net investment income ........................................ (0.08) (0.24)
Net realized gain ............................................ (0.04) (2.11)
---------- ----------
Net increase (decrease) in net asset value ................... $ 2.47 $ 0.96
---------- ----------
Net asset value, end of period ............................... $ 18.72 $ 16.25
========== ==========
Total return* ................................................. 15.98% 22.94%
Ratio of net expenses to average net assets ................... 1.06%** 1.19%
Ratio of net investment income to average net assets+ ......... 0.70%** 0.85%
Portfolio turnover rate ....................................... 35%** 40%
Net assets, end of period (in thousands) ...................... $3,843,212 $3,424,962
Ratios assuming reduction for fees paid indirectly:
Net expenses ................................................. 1.06%** 1.19%
Net investment income ........................................ 0.70%** 0.85%
Year Year Year Year
Ended Ended Ended Ended
CLASS A 9/30/02 9/30/01 9/30/00 9/30/99
- ------- ------- ------- ------- -------
Net asset value, beginning of period .......................... $ 19.12 $ 22.67 $ 20.16 $ 18.32
---------- ---------- ---------- ----------
Increase (decrease) from investment operations:
Net investment income ........................................ $ 0.15 $ 0.17 $ 0.20 $ 0.21
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ............................... (3.17) (2.05) 3.0 21.97
---------- ---------- ---------- ----------
Net increase (decrease) from investment operations ........... $ (3.02) $ (1.88) $ 3.22 $ 2.18
Distributions to shareholders:
Net investment income ........................................ (0.09) (0.14) (0.20) (0.19)
Net realized gain ............................................ (0.72) (1.53) (0.51) (0.15)
---------- ---------- ---------- ----------
Net increase (decrease) in net asset value ................... $ (3.83) $ (3.55) $ 2.51 $ 1.84
---------- ---------- ---------- ----------
Net asset value, end of period ............................... $ 15.29 $ 19.12 $ 22.67 $ 20.16
========== ========== ========== ==========
Total return* ................................................. (16.78)% (8.88)% 16.29% 11.86%
Ratio of net expenses to average net assets ................... 1.16% 1.01% 0.96% 0.96%
Ratio of net investment income to average net assets+ ......... 0.74% 0.76% 0.81% 0.93%
Portfolio turnover rate ....................................... 61% 3% 3% 12%
Net assets, end of period (in thousands) ...................... $3,016,623 $3,885,560 $4,614,739 $5,125,858
Ratios assuming reduction for fees paid indirectly:
Net expenses ................................................. 1.16% 0.99% 0.94% 0.95%
Net investment income ........................................ 0.74% 0.78% 0.83% 0.94%
- ----------
* 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 assuming no reduction for fees paid indirectly.
133
PIONEER MID CAP VALUE FUND
FINANCIAL HIGHLIGHTS
Six Months
Ended Year
4/30/04 Ended
CLASS A (Unaudited) 10/31/03
- ------- ----------- --------
Net asset value, beginning of period ............................ $ 22.25 $ 16.93
---------- ----------
Increase (decrease) from investment operations:
Net investment income (loss) ................................... $ 0.01 $ 0.04
Net realized and unrealized gain (loss) on investments ......... 2.03 5.28
---------- ----------
Net increase (decrease) from investment operations ............. $ 2.04 $ 5.32
Distributions to shareholders:
Net investment income .......................................... (0.03) --
Net realized gain .............................................. (0.49) --
---------- ----------
Net increase (decrease) in net asset value ..................... 1.52 $ 5.32
---------- ----------
Net asset value, end of period ................................. $ 23.77 $ 22.25
========== ==========
Total return* ................................................... 9.37% 31.42%
Ratio of net expenses to average net assets+ .................... 1.19%**(a) 1.37%
Ratio of net investment income (loss) to average net assets+ .... 0.08%**(a) 0.24%
Portfolio turnover rate ......................................... 46%** 58%
Net assets, end of period (in thousands) ........................ $1,363,097 $1,208,400
Ratios with reduction for fees paid indirectly:
Net expenses ................................................... 1.19%**(a) 1.37%
Net investment income (loss) ................................... 0.08%**(a) 0.24%
Year Year Year Year
Ended Ended Ended Ended
CLASS A 10/31/02 10/31/01 10/31/00 10/31/99
- ------- -------- -------- -------- --------
Net asset value, beginning of period ............................ $ 19.29 $ 20.83 $ 19.90 $ 19.02
-------- -------- -------- ----------
Increase (decrease) from investment operations:
Net investment income (loss) ................................... $ (0.02) $ (0.01) $ 0.11 $ 0.12
Net realized and unrealized gain (loss) on investments ......... (0.97) 0.34 3.46 1.70
-------- -------- -------- ----------
Net increase (decrease) from investment operations ............. $ (0.99) $ 0.33 $ 3.57 $ 1.82
Distributions to shareholders:
Net investment income .......................................... -- -- -- (0.02)
Net realized gain .............................................. (1.37) (1.87) (2.64) (0.92)
-------- -------- -------- ----------
Net increase (decrease) in net asset value ..................... $ (2.36) $ (1.54) $ 0.93 $ 0.88
-------- -------- -------- ----------
Net asset value, end of period ................................. $ 16.93 $ 19.29 $ 20.83 $ 19.90
======== ======== ======== ==========
Total return* ................................................... (5.99)% 1.85% 20.00% 10.02%
Ratio of net expenses to average net assets+ .................... 1.30% 1.24% 1.13% 1.18%
Ratio of net investment income (loss) to average net assets+ .... (0.09)% 0.01% 0.27% 0.37%
Portfolio turnover rate ......................................... 65% 95% 70% 75%
Net assets, end of period (in thousands) ........................ $890,856 $921,310 $945,583 $1,067,562
Ratios with reduction for fees paid indirectly:
Net expenses ................................................... 1.30% 1.22% 1.11% 1.16%
Net investment income (loss) ................................... (0.09)% 0.03% 0.29% 0.39%
- ----------
* 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) In the absence of the negative printing fees in the statement of
operations, which relates to a change in estimate for printing fees in the
period ended October 31, 2003, the gross expense ratio and net investment
income ratio to average net assets would have been 1.20% and 0.07%,
respectively.
134
PIONEER SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
Six Months
Ended Year
5/31/04 Ended
CLASS A (Unaudited) 11/30/03
- ------- ----------- --------
Net asset value, beginning of period ........................ $ 27.10 $ 21.51
-------- --------
Increase (decrease) from investment operations:
Net investment loss ........................................ $ (0.07) $ (0.07)
Net realized and unrealized gain (loss) on investments and
futures contracts ......................................... 2.67 5.78
-------- --------
Net increase (decrease) from investment operations ......... $ 2.60 $ 5.71
Distributions to shareholders:
Net realized gain .......................................... -- (0.12)
-------- --------
Net increase (decrease) in net asset value ................. $ 2.60 $ 5.59
-------- --------
Net asset value, end of period ............................. $ 29.70 $ 27.10
======== ========
Total return* ............................................... 9.59% 26.56%
Ratio of net expenses to average net assets+ ................ 1.51%** 1.66%
Ratio of net investment loss to average net assets+ ......... (0.50)%* (0.32)%
Portfolio turnover rate ..................................... 31%** 37%
Net assets, end of period (in thousands) .................... $256,248 $201,892
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses ............................................... 1.51%** 1.66%
Net investment loss ........................................ (0.50)%** (0.32)%
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses ............................................... 1.51%** 1.65%
Net investment loss ........................................ (0.50)%** (0.31)%
Year Year Year Year
Ended Ended Ended Ended
CLASS A 11/30/02 11/30/01 11/30/00 11/30/99
- ------- -------- -------- -------- --------
Net asset value, beginning of period ........................ $ 22.46 $ 20.10 $ 17.40 $ 13.85
-------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment loss ........................................ $ (0.24) $ (0.09) $ (0.12) $ (0.08)
Net realized and unrealized gain (loss) on investments and
futures contracts ......................................... (0.69) 3.29 3.13 3.63
-------- ------- ------- -------
Net increase (decrease) from investment operations ......... $ (0.93) $ 3.20 $ 3.01 $ 3.55
------- -------
Distributions to shareholders:
Net realized gain .......................................... (0.02) (0.84) (0.31) --
-------- ------- ------- -------
Net increase (decrease) in net asset value ................. $ (0.95) $ 2.36 $ 2.70 $ 3.55
-------- ------- ------- -------
Net asset value, end of period ............................. $ 21.51 $ 22.46 $ 20.10 $ 17.40
======== ======= ======= =======
Total return* ............................................... (4.16)% 15.92% 17.26% 25.63%
Ratio of net expenses to average net assets+ ................ 1.65% 1.79% 1.72% 2.02%
Ratio of net investment loss to average net assets+ ......... (0.49)% (0.33)% (0.27)% (0.71)%
Portfolio turnover rate ..................................... 31% 49% 61% 78%
Net assets, end of period (in thousands) .................... $139,170 $73,855 $58,323 $33,714
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses ............................................... 1.65% 1.79% 1.72% 2.02%
Net investment loss ........................................ (0.49)% (0.33)% (0.27)% (0.71)%
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses ............................................... 1.63% 1.76% 1.69% 1.98%
Net investment loss ........................................ (0.47)% (0.30)% (0.24)% (0.67)%
- ----------
* 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.
135
INFORMATION CONCERNING THE MEETING
Solicitation of Proxies
In addition to the mailing of these proxy materials, proxies may be
solicited by telephone, by fax or in person by the trustees and officers of your
Safeco Fund or its affiliates, including personnel of your Safeco Fund's
transfer agent, Pioneer Funds' investment adviser, Pioneer, Pioneer Funds'
transfer agent, PIMSS, or by broker-dealer firms. Georgeson Shareholder
Communications Corporation, 17 State Street, New York, NY 10004, has been
retained to provide proxy solicitation services to the Funds at a cost of
approximately $30,000. Pioneer and Symetra will bear the cost of such
solicitation.
Revoking Proxies
A Safeco Fund shareholder signing and returning a proxy has the power to
revoke it at any time before it is exercised:
o by filing a written notice of revocation with your Safeco Fund's
transfer agent, Safeco Services Corporation, at 4854 154th Place,
N.E., Redmond, WA 98052, or
o by returning a duly executed proxy with a later date before the time
of the Meeting, or
o if a shareholder has executed a proxy but is present at the Meeting
and wishes to vote in person, by notifying the secretary of your
Safeco Fund (without complying with any formalities) at any time
before it is voted.
Being present at the Meeting alone does NOT revoke a previously executed
and returned proxy.
Outstanding Shares and Quorum
Only shareholders of record on October 8, 2004 (the "record date") are
entitled to notice of and to vote at the Meetings. As of the record date, the
following number of shares of each Safeco Fund were outstanding.
Shares Outstanding
Safeco Fund (as of October 8, 2004)
- ----------- -----------------------
Safeco Balanced Fund ..................... 1,524,501.995
Safeco Core Equity Fund .................. 37,767,966.955
Safeco Growth Opportunities Fund ......... 19,115,534.708
Safeco International Stock Fund .......... 3,191,887.818
Safeco Large-Cap Growth Fund ............. 694,809.278
Safeco Large-Cap Value Fund .............. 7,551,928.230
Safeco Multi-Cap Core Fund ............... 3,514,922.442
Safeco Small-Cap Value Fund .............. 3,908,412.105
Other Business
Your Safeco Fund's board of trustees knows of no business to be presented
for consideration at the Meetings other than Proposals 1(a)-(h) and 2(a)-(h). If
other business is properly brought before a Meeting, proxies will be voted
according to the best judgment of the persons named as proxies.
Adjournments
If, by the time scheduled for a Meeting, a quorum of shareholders of a Fund
is not present or if a quorum is present but sufficient votes "for" the
proposals have not been received, the persons named as proxies may propose the
Meeting with respect to one or more of the Funds to another date and time, and
the Meeting may be held as adjourned within a reasonable time after the date set
for the original Meeting for that Fund without further notice. Any such
adjournment will require the affirmative vote of a majority of the votes cast on
the question in person or by proxy at the session of the Meeting to be
adjourned. The persons named as proxies will vote all proxies in favor of the
adjournment that voted in favor of the proposal or that abstained. They will
vote against such adjournment those proxies required to be voted against the
proposal. Broker non-votes will be disregarded in the vote for adjournment. If
the adjournment requires setting a new record date or the adjournment is for
more than 120 days of the original Meeting (in which case the board of trustees
of your Safeco Fund will set a new record date), your Safeco Fund will give
notice of the adjourned meeting to its shareholders.
136
Telephone Voting
In addition to soliciting proxies by mail, by fax or in person, your Safeco
Fund may also arrange to have votes recorded by telephone by officers and
employees of your Safeco Fund or by personnel of the adviser or transfer agent
or a third party solicitation firm. The telephone voting procedure is designed
to verify a shareholder's identity, to allow a shareholder to authorize the
voting of shares in accordance with the shareholder's instructions and to
confirm that the voting instructions have been properly recorded. If these
procedures were subject to a successful legal challenge, these telephone votes
would not be counted at the Meeting. Your Safeco Fund has not obtained an
opinion of counsel about telephone voting, but is currently not aware of any
challenge.
o A shareholder will be called on a recorded line at the telephone
number in the Fund's account records and will be asked to provide the
shareholder's social security number or other identifying information.
o The shareholder will then be given an opportunity to authorize proxies
to vote his or her shares at the Meeting in accordance with the
shareholder's instructions.
o To ensure that the shareholder's instructions have been recorded
correctly, the shareholder will also receive a confirmation of the
voting instructions by mail.
o A toll-free number will be available in case the voting information
contained in the confirmation is incorrect.
o If the shareholder decides after voting by telephone to attend the
Meeting, the shareholder can revoke the proxy at that time and vote
the shares at the Meeting.
Internet Voting
You will also have the opportunity to submit your voting instructions via
the Internet by utilizing a program provided through a vendor. Voting via the
Internet will not affect your right to vote in person if you decide to attend
the Meeting. Do not mail the proxy card if you are voting via the Internet. To
vote via the Internet, you will need the "control number" that appears on your
proxy card. These Internet voting procedures are designed to authenticate
shareholder identities, to allow shareholders give their voting instructions,
and to confirm that shareholders instructions have been recorded properly. If
you are voting via the Internet you should understand that there may be costs
associated with electronic access, such as usage charges from Internet access
providers and telephone companies, that must be borne by you.
o Read the proxy statement and have your proxy card at hand.
o Go to the Web site listed on your proxy card.
o Enter control number found on your proxy card.
o Follow the simple instructions on the Web site. Please call [ ]
us at [1-800 ] if you have any problems.
o To insure that your instructions have been recorded correctly you will
receive a confirmation of your voting instructions immediately after
your submission and also by e-mail if chosen.
Shareholders' Proposals
Your Safeco Fund is not required, and does not intend, to hold meetings of
shareholders each year. Instead, meetings will be held only when and if
required. Any shareholders desiring to present a proposal for consideration at
the next meeting for shareholders must submit the proposal in writing, so that
it is received by the your Safeco Fund to Safeco Mutual Funds, Attention: Legal
Department at 4854 154th Place N.E., Redmond, WA 98052 within a reasonable time
before any meeting. If the Reorganization is completed, your Safeco Fund will
not hold another shareholder meeting.
Appraisal Rights
If the Reorganization of your Safeco Fund is approved at the Meeting,
shareholders of your Safeco Fund will not have the right to dissent and obtain
payment of the fair value of their shares because the exercise of appraisal
rights is subject to the forward pricing requirements of Rule 22c-1 under the
Investment Company Act, which supersede state law. Shareholders of your Safeco
Funds, however, have the right to redeem their Fund shares until the closing
date of the Reorganizations. After the Reorganization, shareholders of your
Safeco Fund will hold shares of a Pioneer Fund which may also be redeemed at net
asset value without being subject to any deferred sales charges.
137
OWNERSHIP OF SHARES OF THE SAFECO FUNDS
To the knowledge of your Safeco Fund, as of September 30, 2004, the
following persons owned of record or beneficially 5% or more of the outstanding
shares of each of the Safeco Funds.
- ------------------------------------------------------------------------------------------------------
Safeco Fund Shareholder Name and Address Percentage Owned
- ------------------------------------------------------------------------------------------------------
Safeco Balanced Fund Symetra Asset Management Co. 35.03%
4854 154th Place NE
Redmond, WA 98052
- ------------------------------------------------------------------------------------------------------
Safeco Core Equity Fund Charles Schwab & Co. Inc. 17.66%
Exclusive Benefit of Its Customers
Attn: Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122
- ------------------------------------------------------------------------------------------------------
Safeco Growth Opportunities Fund Charles Schwab & Co. Inc. 19.44%
Exclusive Benefit of Its Customers
Attn: Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122
- ------------------------------------------------------------------------------------------------------
Wells Fargo & Company 5.66%
420 Montgomery Street
San Francisco, California 94163
- ------------------------------------------------------------------------------------------------------
National Financial Services Corp. 5.61%
for the Exclusive Benefit of Our Customers
Attn.: Mutual Funds Dept. 5th Fl.
200 Liberty St., 1 World Financial Center
New York, NY 10281-1003
- ------------------------------------------------------------------------------------------------------
Safeco International Stock Fund Wells Fargo & Company 30.77%
420 Montgomery Street
San Francisco, California 94163
- ------------------------------------------------------------------------------------------------------
Symetra Asset Management Co. 21.91%
4854 154th Place NE
Redmond, WA 98052
- ------------------------------------------------------------------------------------------------------
Charles Schwab & Co. Inc. 16.93%
Exclusive Benefit of Its Customers
Attn: Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122
- ------------------------------------------------------------------------------------------------------
Safeco Large-Cap Growth Fund Symetra Asset Management Co. 72.10%
4854 154th Place NE
Redmond, WA 98052
- ------------------------------------------------------------------------------------------------------
Safeco Large-Cap Value Fund Wells Fargo & Company 6.65%
420 Montgomery Street
San Francisco, California 94163
- ------------------------------------------------------------------------------------------------------
Charles Schwab & Co. Inc. 6.60%
Exclusive Benefit of Its Customers
Attn: Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122
- ------------------------------------------------------------------------------------------------------
138
- -------------------------------------------------------------------------------------------------
Safeco Fund Shareholder Name and Address Percentage Owned
- -------------------------------------------------------------------------------------------------
Safeco Multi-Cap Core Fund Charles Schwab & Co. Inc. 5.10%
Exclusive Benefit of Its Customers
Attn: Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122
- -------------------------------------------------------------------------------------------------
Safeco Small-Cap Value Fund Wells Fargo & Company 27.04%
420 Montgomery Street
San Francisco, California 94163
- -------------------------------------------------------------------------------------------------
National Financial Services Corp. 16.55%
for the Exclusive Benefit of Our Customers
Attn.: Mutual Funds Dept. 5th Fl.
200 Liberty St., 1 World Financial Center
New York, NY 10281-1003
- -------------------------------------------------------------------------------------------------
Charles Schwab & Co. Inc. 15.56%
Exclusive Benefit of Its Customers
Attn: Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122
- -------------------------------------------------------------------------------------------------
As of December 31, 2003, the trustees and officers of your Safeco Fund, as
a group, owned in the aggregate less than 1% of the outstanding shares of your
Safeco Fund.
Symetra or other companies controlled by Symetra own shares of certain
Safeco Funds. Those shares will be voted pro rata in accordance with the vote
cast by shareholders of the applicable Fund.
139
OWNERSHIP OF SHARES OF THE PIONEER FUNDS
To the knowledge of your Pioneer Fund, as of September 30, 2004, the
following persons owned of record or beneficially 5% or more of the outstanding
shares of each of the Pioneer Funds.
- ----------------------------------------------------------------------------------------------------
Pioneer Fund/Class Shareholder Name and Address Percentage Owned
- ----------------------------------------------------------------------------------------------------
Pioneer Balanced Fund
- ----------------------------------------------------------------------------------------------------
Class B Shares MLPFS For The Sole Benefit of its Customers 5.21%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- ----------------------------------------------------------------------------------------------------
Class C Shares MLPFS For The Sole Benefit of its Customers 6.53%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- ----------------------------------------------------------------------------------------------------
Citigroup Global Markets Inc. 7.84%
333 West 34th St., 7th Fl.
New York, NY 10001-2402
- ----------------------------------------------------------------------------------------------------
Pioneer Fund
- ----------------------------------------------------------------------------------------------------
Class B Shares MLPFS For The Sole Benefit of its Customers 15.03%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- ----------------------------------------------------------------------------------------------------
Class C Shares MLPFS For The Sole Benefit of its Customers 34.48%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- ----------------------------------------------------------------------------------------------------
Citigroup Global Markets Inc. 8.79%
333 West 34th St., 7th Fl.
New York, NY 10001-2402
- ----------------------------------------------------------------------------------------------------
Class R Shares ING National Trust, Trustee 43.47%
Agreement and Aetna 403(b)(7)
Custodial Acct 3/26/97 Trustee for Thomas J. Botticelli
DTD 4/22/96
151 Farmington Avenue -- TN41
Hartford, CT 06156-0001
- ----------------------------------------------------------------------------------------------------
Aetna Life Insurance & Annuity Co. 19.93%
151 Farmington Avenue -- TN41
Hartford, CT 06156-0001
- ----------------------------------------------------------------------------------------------------
MCB Trust Services Cust. FBO Big Boy 401(K) 5.96%
Plan & Trust
700 17th St., Ste 300
Denver, CO 80202-3531
- ----------------------------------------------------------------------------------------------------
Class Y Shares Pioneer Protected Principal Plus Fund II 12.19%
60 State St.
Boston, MA 02109-1800
- ----------------------------------------------------------------------------------------------------
NFSC FEBO #U71-000027 12.78%
First Command Bank Trust Dept.
P.O. Box 901075
Fort Worth, TX 76101-2075
- ----------------------------------------------------------------------------------------------------
140
- ---------------------------------------------------------------------------------------------------
Pioneer Fund/Class Shareholder Name and Address Percentage Owned
- ---------------------------------------------------------------------------------------------------
MLPFS For The Sole Benefit of its Customers 5.51%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- ---------------------------------------------------------------------------------------------------
State St. Bank and Trust Trustee 59.51%
FBO Pacificorp K Plus Savings Plan Trust DTD 1/9/96
805 Pennsylvania Ave.
5th Fl., Tower 2
Kansas City, MO 64105-1307
- ---------------------------------------------------------------------------------------------------
State of Florida Public Employees Optional Retirement 6.00%
Program
1801 Hermitage Blvd., Ste 100
Tallahassee, FL 32308-7743
- ---------------------------------------------------------------------------------------------------
Pioneer International Equity Fund
- ---------------------------------------------------------------------------------------------------
Class B Shares MLPFS For The Sole Benefit of its Customers 6.89%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- ---------------------------------------------------------------------------------------------------
Class Y Shares FISERV Securities, Inc. 20.10%
FAO 58861625
Attn: Mutual Funds
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
- ---------------------------------------------------------------------------------------------------
FISERV Securities, Inc. 24.75%
FAO 58861649
Attn: Mutual Funds
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
- ---------------------------------------------------------------------------------------------------
FISERV Securities, Inc. 54.32%
FAO 58861654
Attn: Mutual Funds
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
- ---------------------------------------------------------------------------------------------------
Pioneer Growth Shares
- ---------------------------------------------------------------------------------------------------
Class B Shares MLPFS For The Sole Benefit of its Customers 6.85%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- ---------------------------------------------------------------------------------------------------
Class C Shares MLPFS For The Sole Benefit of its Customers 11.53%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- ---------------------------------------------------------------------------------------------------
141
- ----------------------------------------------------------------------------------------------------
Pioneer Fund/Class Shareholder Name and Address Percentage Owned
- ----------------------------------------------------------------------------------------------------
Class R Shares MLPFS For The Sole Benefit of its Customers 51.38
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- ----------------------------------------------------------------------------------------------------
Aetna Life Insurance & Annuity Co. 13.09%
151 Farmington Avenue -- TN41
Hartford, CT 06156-0001
- ----------------------------------------------------------------------------------------------------
A T Systems Inc. 401K Plan 6.99%
Tom Donaldson ETAL
4257 Diplomacy Dr.
Columbus, OH 43228-3803
- ----------------------------------------------------------------------------------------------------
MCB Trust Services Cust. FBO 21.88%
AM-Liner Savings & Retirement
700 17th St., Ste 300
Denver, CO 80202-3531
- ----------------------------------------------------------------------------------------------------
Class Y Shares MLPFS For The Sole Benefit of its Customers 85.13%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- ----------------------------------------------------------------------------------------------------
Pioneer Mid Cap Value Fund
- ----------------------------------------------------------------------------------------------------
Class B Shares MLPFS For The Sole Benefit of its Customers 8.80%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- ----------------------------------------------------------------------------------------------------
Class C Shares MLPFS For The Sole Benefit of its Customers 18.39%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- ----------------------------------------------------------------------------------------------------
Citigroup Global Markets Inc. 9.22%
333 West 34th St., 7th Fl.
New York, NY 10001-2402
- ----------------------------------------------------------------------------------------------------
Class R Shares MCB Trust Services Cust. FBO 11.38%
United International Corp
700 17th St., Ste 300
Denver, CO 80202-3531
- ----------------------------------------------------------------------------------------------------
ING National Trust, Trustee 20.50%
Agreement and Aetna 403(b)(7)
Custodial Acct 3/26/97 Trustee for Thomas J. Botticelli
DTD 4/22/96
151 Farmington Avenue -- TN41
Hartford, CT 06156-0001
- ----------------------------------------------------------------------------------------------------
MLPFS For The Sole Benefit of its Customers 13.61%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- ----------------------------------------------------------------------------------------------------
Aetna Life Insurance & Annuity Co. 23.70%
151 Farmington Avenue -- TN41
Hartford, CT 06156-0001
- ----------------------------------------------------------------------------------------------------
142
- -----------------------------------------------------------------------------------------------------
Pioneer Fund/Class Shareholder Name and Address Percentage Owned
- -----------------------------------------------------------------------------------------------------
MCB Trust Services Cust. FBO 5.52%
Foxcor, Inc.
700 17th St., Ste 300
Denver, CO 80202-3531
- -----------------------------------------------------------------------------------------------------
Class Y Shares John F. Cogan Jr. 8.77%
C/O Hale and Dorr
60 State street
Boston, MA 02109-1800
- -----------------------------------------------------------------------------------------------------
John F. Cogan Jr. & Mary Cornille & Pamela Cogan Riddle 8.88%
& Gregory Cogan TTEESO/The Cogan Family Foundation
C/O Hale & Dorr Trust Dept.
60 State street
Boston, MA 02109-1800
- -----------------------------------------------------------------------------------------------------
MLPFS For The Sole Benefit of its Customers 55.07%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- -----------------------------------------------------------------------------------------------------
Pioneer Small Cap Value Fund
- -----------------------------------------------------------------------------------------------------
Class A Shares MLPFS For The Sole Benefit of its Customers 7.28%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- -----------------------------------------------------------------------------------------------------
Class B Shares MLPFS For The Sole Benefit of its Customers 9.53%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- -----------------------------------------------------------------------------------------------------
Class C Shares MLPFS For The Sole Benefit of its Customers 26.91%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- -----------------------------------------------------------------------------------------------------
Citigroup Global Markets Inc. 10.97%
333 West 34th St., 7th Fl.
New York, NY 10001-2402
- -----------------------------------------------------------------------------------------------------
Class R Shares MCB Trust Services Cust. FBO 13.45%
United International Corp.
700 17th St., Ste 300
Denver, CO 80202-3531
- -----------------------------------------------------------------------------------------------------
MLPFS For The Sole Benefit of its Customers 21.91%
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
- -----------------------------------------------------------------------------------------------------
MCB Trust Services Cust. FBO 20.94%
Gerken Retirement Savings Plan
700 17th St., Ste 300
Denver, CO 80202-3531
- -----------------------------------------------------------------------------------------------------
143
- -----------------------------------------------------------------------------------------------------
Pioneer Fund/Class Shareholder Name and Address Percentage Owned
- -----------------------------------------------------------------------------------------------------
MCB Trust Services Cust. FBO 5.60%
Telecommunications Asset Management
700 17th St., Ste 300
Denver, CO 80202-3531
- -----------------------------------------------------------------------------------------------------
BISYS Retirement Services FBO 9.10%
Fong & Chan Architects 401K
700 17th St. Ste 300
Denver, CO 80202-3531
- -----------------------------------------------------------------------------------------------------
Class Y Shares FISERV Securities, Inc. 5.21%
FAO 58861649
Attn: Mutual Funds
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
- -----------------------------------------------------------------------------------------------------
FISERV Securities, Inc. 7.02%
FAO 58861654
Attn: Mutual Funds
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
- -----------------------------------------------------------------------------------------------------
John F. Cogan Jr. 34.51%
C/O Hale and Dorr
60 State street
Boston, MA 02109-1800
- -----------------------------------------------------------------------------------------------------
John F. Cogan Jr. & Mary Cornille & Pamela Cogan Riddle 34.83%
& Gregory Cogan TTEESO/The Cogan Family Foundation
C/O Hale & Dorr Trust Dept.
P.O. Box 1711
Boston, MA 02109-1800
- -----------------------------------------------------------------------------------------------------
John F. Cogan and William Schmidt 13.93%
TTEESO/The John F. Cogan Jr. Family Trust
C/O Hale & Dorr Trust Dept.
P.O. Box 1711
Boston, MA 02109-1800
- -----------------------------------------------------------------------------------------------------
Pioneer Value Fund
- -----------------------------------------------------------------------------------------------------
Class A Shares Nuernberger Lebensversicherung 5.27%
AGKA-Controlling
Ostendstr. 100
D-90334 Nuernberg, Mittelfr, Germany
- -----------------------------------------------------------------------------------------------------
PFPC 20.94%
FBO Primerica Shareholder Services
211 S. Gulf Road
King of Prussia, PA 19406
- -----------------------------------------------------------------------------------------------------
Class R Shares Pioneer Funds Distributor Inc. 6.66%
Attn: Carrie Cuscia
60 State Street
Boston, MA 02109-1800
- -----------------------------------------------------------------------------------------------------
144
- -----------------------------------------------------------------------------------------------------
Pioneer Fund/Class Shareholder Name and Address Percentage Owned
- -----------------------------------------------------------------------------------------------------
Athletic Clubs International 401(k) Profit Sharing Plan 92.13%
Francis Cassidy, et al
2729 St. Marys Road
Ardmore, PA 19003-2026
- -----------------------------------------------------------------------------------------------------
Class Y Shares John F. Cogan Jr. 19.58%
C/O Hale and Dorr
60 State street
Boston, MA 02109-1800
- -----------------------------------------------------------------------------------------------------
FISERV Securities, Inc. 6.25%
FAO 58861625
Attn: Mutual Funds
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
- -----------------------------------------------------------------------------------------------------
FISERV Securities, Inc. 10.25%
FAO 58861649
Attn: Mutual Funds
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
- -----------------------------------------------------------------------------------------------------
FISERV Securities, Inc. 18.73%
FAO 58861654
Attn: Mutual Funds
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
- -----------------------------------------------------------------------------------------------------
John F. Cogan Jr. & Mary Cornille & Pamela Cogan Riddle 33.65%
& Gregory Cogan TTEESO/The Cogan Family Foundation
C/O Hale & Dorr Trust Dept.
60 State street
Boston, MA 02109-1800
- -----------------------------------------------------------------------------------------------------
John F. Cogan and William Schmidt 8.38%
TTEESO/The John F. Cogan Jr. Family Trust
C/O Hale & Dorr Trust Dept.
60 State street
Boston, MA 02109-1800
- -----------------------------------------------------------------------------------------------------
As of December 31, 2003, the trustees and officers of each Pioneer Fund
owned less than 1% of the outstanding shares of each Pioneer Fund.
145
EXPERTS
Safeco Funds
The financial statements and financial highlights of each Safeco Fund
incorporated by reference in the respective Safeco Trust's Annual Report for the
most recent fiscal year end have been audited by Ernst & Young LLP, independent
registered public accounting firm, as set forth in their reports thereon
incorporated by reference into this registration statement. Such financial
statements and financial highlights are incorporated herein by reference in
reliance on such reports given on the authority of such firm as experts in
accounting and auditing.
Pioneer Funds
The financial statements and financial highlights of each Pioneer Fund
incorporated by reference in the respective Pioneer Fund's Annual Report for the
most recent fiscal year end (except in the case of Pioneer Value Fund, in which
case the Annual Report incorporated by reference is for the fiscal year ended
September 30, 2003) have been audited by Ernst & Young LLP, independent
registered public accounting firm, as set forth in their reports thereon
incorporated by reference into this registration statement. Such financial
statements and financial highlights are incorporated herein by reference in
reliance on such reports given the authority of such firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
The Safeco Funds and the Pioneer Funds are subject to the informational
requirements of the Securities Exchange Act of 1934 and the Investment Company
Act and file reports, proxy statements and other information with the SEC. These
reports, proxy statements and other information filed by the Funds can be
inspected and copied (for a duplication fee) at the public reference facilities
of the SEC at 450 Fifth Street, N.W., Washington, D.C. Copies of these materials
can also be obtained by mail from the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition,
copies of these documents may be viewed on-screen or downloaded from the SEC's
Internet site at http://www.sec.gov.
146
Exhibit A-1 - Form of Agreement and Plan of Reorganization (C/D Reorganizations)
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made this
day of __________, 2004, by and between [Pioneer Trust], a [Delaware statutory]
[Massachusetts business] trust (the "Acquiring Trust"), on behalf of its series
[name of Pioneer Fund] (the "Acquiring Fund"), with its principal place of
business at 60 State Street, Boston, Massachusetts 02109, and [Safeco Trust], a
Delaware statutory trust (the "Safeco Trust"), on behalf of its series [name of
Safeco Fund] (the "Acquired Fund"), with its principal place of business at 5069
154th Place N.E., Redmond, Washington 98052. The Acquiring Fund and the Acquired
Fund are sometimes referred to collectively herein as the "Funds" and
individually as a "Fund."
This Agreement is intended to be and is adopted as a plan of a
"reorganization" as defined in Section 368(a)(1)(C/D) of the United States
Internal Revenue Code of 1986, as amended (the "Code") and the Treasury
Regulations thereunder. The reorganization (the "Reorganization") will consist
of (1) the transfer of all of the assets of the Acquired Fund to the Acquiring
Fund in exchange solely for (A) the issuance of Investor Class shares of
beneficial interest of the Acquiring Fund (collectively, the "Acquiring Fund
Shares" and each, an "Acquiring Fund Share") to the Acquired Fund, and (B) the
assumption by the Acquiring Fund of the liabilities of the Acquired Fund that
are included in the calculation of net asset value ("NAV") on the closing date
of the Reorganization (the "Closing Date") (collectively, the "Assumed
Liabilities"), and (2) the distribution by the Acquired Fund, on or promptly
after the Closing Date as provided herein, of the Acquiring Fund Shares to the
shareholders of the Acquired Fund in liquidation and dissolution of the Acquired
Fund, all upon the terms and conditions hereinafter set forth in this Agreement.
WHEREAS, the Acquiring Trust and the Safeco Trust are each registered
investment companies classified as management companies of the open-end type.
WHEREAS, the Acquiring Fund is authorized to issue shares of beneficial
interest.
WHEREAS, the Board of Trustees of the Safeco Trust and the Board of
Trustees of the Acquiring Trust have determined that the Reorganization is in
the best interests of the Acquired Fund shareholders and the Acquiring Fund
shareholders, respectively, and is not dilutive of the interests of those
shareholders.
NOW, THEREFORE, in consideration of the premises of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND ASSUMPTION OF THE ASSUMED LIABILITIES; LIQUIDATION AND
TERMINATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Acquired Fund will
transfer all of its assets as set forth in Paragraph 1.2 (the "Acquired
Assets") to the Acquiring Fund free and clear of all liens and encumbrances
(other than those arising under the Securities Act of 1933, as amended (the
"Securities Act"), liens for taxes not yet due and contractual restrictions on
the transfer of the Acquired Assets) and the Acquiring Fund agrees in exchange
therefor: (i) to issue to the Acquired Fund the number of Acquiring Fund
Shares, including fractional Acquiring Fund Shares, with an aggregate NAV equal
to the NAV of the Acquired Fund, as determined in the manner set forth in
Paragraphs 2.1 and 2.2; and (ii) to assume the Assumed Liabilities. Such
transactions shall take place at the Closing (as defined in Paragraph 3.1
below).
1.2(a) The Acquired Assets shall consist of all of the Acquired Fund's
property, including, without limitation, all portfolio securities and
instruments, dividends and interest receivables, cash, goodwill, contractual
rights of the Acquired Fund or the Safeco Trust in respect of the Acquired
Fund, all other intangible property owned by the Acquired Fund, originals or
copies of all books and records of the Acquired Fund, and all other assets of
the Acquired Fund on the Closing Date. The Acquiring Fund shall also be
entitled to receive (or, to the extent agreed upon between the Safeco Trust and
the Acquiring Trust, be provided access to) copies of all records that the
Safeco Trust is required to maintain under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), and the rules of the Securities and
Exchange Commission (the "Commission") thereunder to the extent such records
pertain to the Acquired Fund.
(b) The Acquired Fund has provided the Acquiring Fund with a list of all
of the Acquired Fund's securities and other assets as of the date of execution
of this Agreement, and the Acquiring Fund has provided the Acquired Fund with a
copy of the current fundamental investment policies and restrictions and fair
value procedures applicable to the Acquiring Fund. The Acquired Fund reserves
the right to sell any of such securities or other assets before the Closing
Date (except to the extent sales may be limited by representations of the
Acquired Fund contained herein and made in connection with the issuance of the
tax opinion provided for in Paragraph 8.5 hereof).
A-1
1.3 The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations that are or will become due prior to the Closing.
1.4 On or as soon after the Closing Date as is conveniently practicable
(the "Liquidation Date"), the Safeco Trust shall liquidate the Acquired Fund
and distribute pro rata to its shareholders of record, determined as of the
close of regular trading on the New York Stock Exchange on the Closing Date
(the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by the
Acquired Fund pursuant to Paragraph 1.1 hereof. Each Acquired Fund Shareholder
shall receive such number of Acquiring Fund Shares that have an aggregate NAV
equal to the aggregate NAV of the shares of beneficial interest of the Acquired
Fund (the "Acquired Fund Shares") held of record by such Acquired Fund
Shareholder on the Closing Date. Such liquidation and distribution will be
accomplished by the Safeco Trust instructing the Acquiring Trust to transfer
the Acquiring Fund Shares then credited to the account of the Acquired Fund on
the books of the Acquiring Fund to open accounts on the share records of the
Acquiring Fund established and maintained by the Acquiring Fund's transfer
agent in the names of the Acquired Fund Shareholders and representing the
respective pro rata number of the Acquiring Fund Shares due the Acquired Fund
Shareholders. The Safeco Trust shall promptly provide the Acquiring Trust with
evidence of such liquidation and distribution. All issued and outstanding
Acquired Fund Shares will simultaneously be cancelled on the books of the
Acquired Fund, and the Acquired Fund will be dissolved. The Acquiring Fund
shall not issue certificates representing the Acquiring Fund Shares in
connection with such exchange.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent for its Investor Class shares. Any certificates
representing ownership of Acquired Fund Shares that remain outstanding on the
Closing Date shall be deemed to be cancelled and shall no longer evidence
ownership of Acquired Fund Shares.
1.6 Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
name other than the registered holder of the Acquired Fund Shares on the books
of the Acquired Fund as of that time shall, as a condition of such issuance and
transfer, be paid by the person to whom such Acquiring Fund Shares are to be
issued and transferred.
1.7 Any reporting responsibility of the Safeco Trust with respect to the
Acquired Fund for taxable periods ending on or before the Closing Date,
including, but not limited to, the responsibility for filing of regulatory
reports, Tax Returns (as defined in Paragraph 4.1), or other documents with the
Commission, any state securities commissions, and any federal, state or local
tax authorities or any other relevant regulatory authority, is and shall remain
the responsibility of the Safeco Trust.
2. VALUATION
2.1 The NAV of the Acquiring Fund Shares and the NAV of the Acquired Fund
shall, in each case, be determined as of the close of business (4:00 p.m.,
Boston time) on the Closing Date (the "Valuation Time"). The NAV of each
Acquiring Fund Share shall be computed by Pioneer Investment Management, Inc.
(the "Acquiring Fund Adviser") in the manner set forth in the Acquiring Fund's
Declaration of Trust (the "Declaration"), or By-Laws, and the Acquiring Fund's
then-current prospectus and statement of additional information. The NAV of the
Acquired Fund shall be computed by Safeco Asset Management, Inc. (the "Acquired
Fund Administrator") by calculating the value of the Acquired Assets and by
subtracting therefrom the amount of the liabilities of the Acquired Fund on the
Closing Date included on the Statement of Assets and Liabilities of the
Acquired Fund delivered pursuant to Paragraph 5.7 (the "Statement of Assets and
Liabilities"), said assets and liabilities to be valued in the manner set forth
in the Acquired Fund's then current prospectus and statement of additional
information. The Acquiring Fund Adviser shall confirm to the Acquiring Fund the
NAV of the Acquired Fund.
2.2 The number of Acquiring Fund Shares to be issued (including fractional
shares, if any) in exchange for the Acquired Assets and the assumption of the
Assumed Liabilities shall be determined by the Acquiring Fund Adviser by
dividing the NAV of the Acquired Fund, as determined in accordance with
Paragraph 2.1, by the NAV of each Acquiring Fund Share, as determined in
accordance with Paragraph 2.1.
2.3 The Acquiring Fund and the Acquired Fund shall cause the Acquiring
Fund Adviser and the Acquired Fund Administrator, respectively, to deliver a
copy of its valuation report to the other party at Closing. All computations of
value shall be made by the Acquiring Fund Adviser and the Acquired Fund
Administrator in accordance with its regular practice as pricing agent for the
Acquiring Fund and the Acquired Fund, respectively.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be December 8, 2004, or such later date as the
parties may agree to in writing. All acts necessary to consummation the
Reorganization (the "Closing") shall be deemed to take place simultaneously as
of 5:00 p.m. (Eastern time) on the Closing Date unless otherwise provided. The
Closing shall be held at the offices of Wilmer Cutler Pickering Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts, or at such other place as the
parties may agree.
A-2
3.2 Portfolio securities that are held other than in book-entry form in
the name of State Street Bank and Trust Company (the "Acquired Fund Custodian")
as record holder for the Acquired Fund shall be presented by the Acquired Fund
to Brown Brothers Harriman & Co. (the "Acquiring Fund Custodian") for
examination no later than three business days preceding the Closing Date. Such
portfolio securities shall be delivered by the Acquired Fund to the Acquiring
Fund Custodian for the account of the Acquiring Fund on the Closing Date, duly
endorsed in proper form for transfer, in such condition as to constitute good
delivery thereof in accordance with the custom of brokers, and shall be
accompanied by all necessary federal and state stock transfer stamps or a check
for the appropriate purchase price thereof. Portfolio securities held of record
by the Acquired Fund Custodian in book-entry form on behalf of the Acquired
Fund shall be delivered by the Acquired Fund Custodian through the Depository
Trust Company to the Acquiring Fund Custodian and by the Acquiring Fund
Custodian recording the beneficial ownership thereof by the Acquiring Fund on
the Acquiring Fund Custodian's records. Any cash shall be delivered by the
Acquired Fund Custodian transmitting immediately available funds by wire
transfer to the Acquiring Fund Custodian the cash balances maintained by the
Acquired Fund Custodian and the Acquiring Fund Custodian crediting such amount
to the account of the Acquiring Fund.
3.3 The Acquiring Fund Custodian shall deliver within one business day
after the Closing a certificate of an authorized officer stating that: (a) the
Acquired Assets have been delivered in proper form to the Acquiring Fund on the
Closing Date, and (b) all necessary transfer taxes including all applicable
federal and state stock transfer stamps, if any, have been paid, or provision
for payment has been made in conjunction with the delivery of portfolio
securities as part of the Acquired Assets.
3.4 If on the Closing Date (a) the New York Stock Exchange is closed to
trading or trading thereon shall be restricted or (b) trading or the reporting
of trading on such exchange or elsewhere is disrupted so that accurate
appraisal of the NAV of the Acquiring Fund Shares or the Acquired Fund pursuant
to Paragraph 2.1 is impracticable, the Closing Date shall be postponed until
the first business day after the day when trading shall have been fully resumed
and reporting shall have been restored.
3.5 The Acquired Fund shall deliver at the Closing a list of the names,
addresses, federal taxpayer identification numbers and backup withholding and
nonresident alien withholding status and certificates of the Acquired Fund
Shareholders and the number and percentage ownership of outstanding Acquired
Fund Shares owned by each Acquired Fund Shareholder as of the Valuation Time,
certified by the President or a Secretary of the Safeco Trust and its
Treasurer, Secretary or other authorized officer (the "Shareholder List") as
being an accurate record of the information (a) provided by the Acquired Fund
Shareholders, (b) provided by the Acquired Fund Custodian, or (c) derived from
the Safeco Trust's records by such officers or one of the Safeco Trust's
service providers. The Acquiring Fund shall issue and deliver to the Acquired
Fund a confirmation evidencing the Acquiring Fund Shares to be credited on the
Closing Date, or provide evidence satisfactory to the Acquired Fund that such
Acquiring Fund Shares have been credited to the Acquired Fund's account on the
books of the Acquiring Fund. At the Closing, each party shall deliver to the
other such bills of sale, checks, assignments, stock certificates, receipts or
other documents as such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 Except as set forth on Schedule 4.1 hereto, the Safeco Trust, on
behalf of the Acquired Fund, represents, warrants and covenants to the
Acquiring Fund, which representations, warranties and covenants will be true
and correct on the date hereof and on the Closing Date as though made on and as
of the Closing Date, as follows:
(a) The Acquired Fund is a series of the Safeco Trust. The Safeco Trust is
a statutory trust validly existing and in good standing under the laws of
the State of Delaware and has the power to own all of its properties and
assets and, subject to approval by the Acquired Fund's shareholders, to
perform its obligations under this Agreement. The Acquired Fund is not
required to qualify to do business in any jurisdiction in which it is not
so qualified or where failure to qualify would subject it to any material
liability or disability. Each of the Safeco Trust and the Acquired Fund
has all necessary federal, state and local authorizations to own all of
its properties and assets and to carry on its business as now being
conducted;
(b) The Safeco Trust is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the Investment Company Act is in
full force and effect;
(c) The Safeco Trust is not in violation of, and the execution and
delivery of this Agreement and the performance of its obligations under
this Agreement in respect of the Acquired Fund will not result in a
violation of, any provision of the Safeco Trust's Trust Instrument or
By-Laws or any material agreement, indenture, instrument, contract, lease
or other undertaking with respect to the Acquired Fund to which the Safeco
Trust is a party or by which the Acquired Fund or any of its assets are
bound;
(d) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or to its
knowledge threatened against the Acquired Fund or any of the Acquired
Fund's properties or assets. The Acquired Fund knows of no facts which
might form the basis for the institution of such proceedings. Neither the
Safeco Trust nor the Acquired Fund is
A-3
a party to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially adversely affects the
Acquired Fund's business or its ability to consummate the transactions
contemplated herein or would be binding upon the Acquiring Fund as the
successor to the Acquired Fund;
(e) The Acquired Fund has no material contracts or other commitments
(other than this Agreement or agreements for the purchase and sale of
securities entered into in the ordinary course of business and consistent
with its obligations under this Agreement) which will not be terminated at
or prior to the Closing Date and no such termination will result in
liability to the Acquired Fund (or the Acquiring Fund);
(f) The statement of assets and liabilities of the Acquired Fund, and the
related statements of income and changes in NAV, as of and for the fiscal
year ended December 31, 2003, have been audited by Ernst & Young LLP,
independent registered public accounting firm, and are in accordance with
generally accepted accounting principles ("GAAP") consistently applied and
fairly reflect, in all material respects, the financial condition of the
Acquired Fund as of such date and the results of its operations for the
period then ended, and all known liabilities, whether actual or
contingent, of the Acquired Fund as of the date thereof are disclosed
therein. The Statement of Assets and Liabilities will be in accordance
with GAAP consistently applied and will fairly reflect, in all material
respects, the financial condition of the Acquired Fund as of such date and
the results of its operations for the period then ended. Except for the
Assumed Liabilities, the Acquired Fund will not have any known or
contingent liabilities on the Closing Date. No significant deficiency,
material weakness, fraud, significant change or other factor that could
significantly affect the internal controls of the Acquired Fund has been
disclosed or is required to be disclosed in the Acquired Fund's reports on
Form N-CSR to enable the chief executive officer and chief financial
officer or other officers of the Acquired Fund to make the certifications
required by the Sarbanes-Oxley Act, and no deficiency, weakness, fraud,
change, event or other factor exists that will be required to be disclosed
in the Acquiring Fund's Form N-CSR after the Closing Date;
(g) Since December 31, 2003, except as specifically disclosed in the
Acquired Fund's prospectus, its statement of additional information as in
effect on the date of this Agreement, or its semi-annual report for the
period ended June 30, 2004, there has not been any material adverse change
in the Acquired Fund's financial condition, assets, liabilities, business
or prospects, or any incurrence by the Acquired Fund of indebtedness,
except for normal contractual obligations incurred in the ordinary course
of business or in connection with the settlement of purchases and sales of
portfolio securities. For the purposes of this subparagraph (g) (but not
for any other purpose of this Agreement), a decline in NAV per Acquired
Fund Share arising out of its normal investment operations or a decline in
market values of securities in the Acquired Fund's portfolio or a decline
in net assets of the Acquired Fund as a result of redemptions shall not
constitute a material adverse change;
(h) (A) For each taxable year of its operation since its inception, the
Acquired Fund has met, and for the current taxable year it will meet, the
requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company. The Acquired Fund will qualify as such as
of the Closing Date and will satisfy the diversification requirements of
Section 851(b)(3) of the Code without regard to the last sentence of
Section 851(d) of the Code. The Acquired Fund has not taken any action,
caused any action to be taken or caused any action to fail to be taken
which action or failure could cause the Acquired Fund to fail to qualify as
a regulated investment company under the Code;
(B) Within the times and in the manner prescribed by law, the Acquired
Fund has properly filed on a timely basis all Tax Returns (as defined
below) that it was required to file, and all such Tax Returns were
complete and accurate in all respects. The Acquired Fund has not been
informed by any jurisdiction that the jurisdiction believes that the
Acquired Fund was required to file any Tax Return that was not filed; and
the Acquired Fund does not know of any basis upon which a jurisdiction
could assert such a position;
(C) The Acquired Fund has timely paid, in the manner prescribed by
law, all Taxes (as defined below), which were due and payable or which
were claimed to be due;
(D) All Tax Returns filed by the Acquired Fund constitute complete and
accurate reports of the respective Tax liabilities and all attributes of
the Acquired Fund or, in the case of information returns and payee
statements, the amounts required to be reported, and accurately set forth
all items required to be included or reflected in such returns;
(E) The Acquired Fund has not waived or extended any applicable
statute of limitations relating to the assessment or collection of Taxes;
(F) The Acquired Fund has not been notified that any examinations of
the Tax Returns of the Acquired Fund are currently in progress or
threatened, and no deficiencies have been asserted or assessed against the
Acquired Fund as a result of any audit
A-4
by the Internal Revenue Service or any state, local or foreign taxing
authority, and, to its knowledge, no such deficiency has been proposed or
threatened;
(G) The Acquired Fund has no actual or potential liability for any Tax
obligation of any taxpayer other than itself. The Acquired Fund is not and
has never been a member of a group of corporations with which it has filed
(or been required to file) consolidated, combined or unitary Tax Returns.
The Acquired Fund is not a party to any Tax allocation, sharing, or
indemnification agreement;
(H) The unpaid Taxes of the Acquired Fund for tax periods through the
Closing Date do not exceed the accruals and reserves for Taxes (excluding
accruals and reserves for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the Statement of
Assets and Liabilities, rather than in any notes thereto (the "Tax
Reserves"). All Taxes that the Acquired Fund is or was required by law to
withhold or collect have been duly withheld or collected and, to the
extent required, have been timely paid to the proper governmental agency;
(I) The Acquired Fund has delivered to the Acquiring Fund or made
available to the Acquiring Fund complete and accurate copies of all Tax
Returns of the Acquired Fund, together with all related examination
reports and statements of deficiency for all periods not closed under the
applicable statutes of limitations and complete and correct copies of all
private letter rulings, revenue agent reports, information document
requests, notices of proposed deficiencies, deficiency notices, protests,
petitions, closing agreements, settlement agreements, pending ruling
requests and any similar documents submitted by, received by or agreed to
by or on behalf of the Acquired Fund. The Acquired Fund has disclosed on
its federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the
meaning of Section 6662 of the Code;
(J) The Acquired Fund has not undergone, has not agreed to undergo,
and is not required to undergo (nor will it be required as a result of the
transactions contemplated in this Agreement to undergo) a change in its
method of accounting resulting in an adjustment to its taxable income
pursuant to Section 481 of the Code. The Acquired Fund will not be
required to include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of any (i) change in method of
accounting for a taxable period ending on or prior to the Closing Date
under Section 481(c) of the Code (or any corresponding or similar
provision of state, local or foreign income Tax law); (ii) "closing
agreement" as described in Section 7121 of the Code (or any corresponding
or similar provision of state, local or foreign income Tax law) executed
on or prior to the Closing Date; (iii) installment sale or open
transaction disposition made on or prior to the Closing Date; or (iv)
prepaid amount received on or prior to the Closing Date;
(K) The Acquired Fund has not taken or agreed to take any action, and
is not aware of any agreement, plan or other circumstance, that is
inconsistent with the representations set forth in Annex B;
(L) There are (and as of immediately following the Closing there will
be) no liens on the assets of the Acquired Fund relating to or
attributable to Taxes, except for Taxes not yet due and payable;
(M) The Tax bases of the assets of the Acquired Fund are accurately
reflected on the Acquired Fund's Tax books and records;
(N) The Acquired Fund has not incurred (or been allocated) an "overall
foreign loss" as defined in Section 904(f)(2) of the Code which has not
been previously recaptured in full as provided in Sections 904(f)(2)
and/or 904(f)(3) of the Code;
(O) The Acquired Fund is not a party to a gain recognition agreement
under Section 367 of the Code;
(P) The Acquired Fund does not own any interest in an entity that is
characterized as a partnership for income tax purposes;
(Q) The Acquired Fund's Tax attributes are not limited under the Code
(including but not limited to any capital loss carry forward limitations
under Sections 382 or 383 of the Code and the Treasury Regulations
thereunder) or comparable provisions of state law, except as set forth on
Schedule 4.1; and
(R) For purposes of this Agreement, "Taxes" or "Tax" shall mean all
taxes, charges, fees, levies or other similar assessments or liabilities,
including without limitation income, gross receipts, ad valorem, premium,
value-added, excise, real property, personal property, sales, use,
transfer, withholding, employment, unemployment, insurance, social
security, business license, business organization, environmental, workers
compensation, payroll, profits, license, lease, service, service use,
severance, stamp, occupation, windfall profits, customs, duties, franchise
and other taxes imposed by the United States of America or any state,
local or foreign government, or any agency thereof, or other political
subdivision of the United States or any such government,
A-5
and any interest, fines, penalties, assessments or additions to tax
resulting from, attributable to or incurred in connection with any tax or
any contest or dispute thereof; and "Tax Returns" shall mean all reports,
returns, declarations, statements or other information required to be
supplied to a governmental or regulatory authority or agency, or to any
other person, in connection with Taxes and any associated schedules or
work papers produced in connection with such items;
(i) All issued and outstanding Acquired Fund Shares are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and nonassessable by the Acquired Fund. All of the issued and outstanding
Acquired Fund Shares will, at the time of Closing, be held of record by the
persons and in the amounts set forth in the Shareholder List submitted to
the Acquiring Fund pursuant to Paragraph 3.5 hereof. The Acquired Fund does
not have outstanding any options, warrants or other rights to subscribe for
or purchase any Acquired Fund Shares, nor is there outstanding any security
convertible into any Acquired Fund Shares;
(j) At the Closing Date, the Acquired Fund will have good and marketable
title to the Acquired Assets, and full right, power and authority to sell,
assign, transfer and deliver the Acquired Assets to the Acquiring Fund, and,
upon delivery and payment for the Acquired Assets, the Acquiring Fund will
acquire good and marketable title thereto, subject to no restrictions on the
full transfer thereof, except such restrictions as might arise under the
Securities Act;
(k) The Safeco Trust has the trust power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary
action on the part of the Safeco Trust's Board of Trustees, and, subject to
the approval of the Acquired Fund's shareholders, assuming due
authorization, execution and delivery by the Acquiring Fund, this Agreement
will constitute a valid and binding obligation of the Acquired Fund,
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating
to or affecting creditors' rights and to general equity principles;
(l)The information to be furnished by the Acquired Fund to the Acquiring
Fund for use in applications for orders, registration statements, proxy
materials and other documents which may be necessary in connection with the
transactions contemplated hereby and any information necessary to compute
the total return of the Acquired Fund shall be accurate and complete and
shall comply in all material respects with federal securities and other laws
and regulations applicable thereto;
(m) The information included in the proxy statement (the "Proxy
Statement") forming part of the Acquiring Fund's Registration Statement on
Form N-14 filed in connection with this Agreement (the "Registration
Statement") that has been furnished in writing by the Acquired Fund to the
Acquiring Fund for inclusion in the Registration Statement, on the effective
date of that Registration Statement and on the Closing Date, will conform in
all material respects to the applicable requirements of the Securities Act,
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the Investment Company Act and the rules and regulations of the Commission
thereunder and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading;
(n) Upon the effectiveness of the Registration Statement, no consent,
approval, authorization or order of any court or governmental authority is
required for the consummation by the Safeco Trust or the Acquired Fund of
the transactions contemplated by this Agreement;
(o) All of the issued and outstanding Acquired Fund Shares have been
offered for sale and sold in conformity with all applicable federal and
state securities laws, except as may have been previously disclosed in
writing to the Acquiring Fund;
(p) The prospectus and statement of additional information of the Acquired
Fund and any amendments or supplements thereto, furnished to the Acquiring
Fund, did not as of their dates or the dates of their distribution to the
public contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which such statements
were made, not misleading;
(q) The Acquired Fund currently complies in all material respects with,
and since its organization has complied in all material respects with, the
requirements of, and the rules and regulations under, the Investment Company
Act, the Securities Act, the Exchange Act, state "Blue Sky" laws and all
other applicable federal and state laws or regulations. The Acquired Fund
currently complies in all material respects with, and since its organization
has complied in all material respects with, all investment objectives,
policies, guidelines and restrictions and any compliance procedures
established by the Safeco Trust with respect to the Acquired Fund. All
advertising and sales material used by the Acquired Fund complies in all
material respects with and has complied in all material respects with the
applicable requirements of the Securities Act, the Investment Company Act,
the rules and regulations of the Commission, and, to the extent applicable,
the Conduct Rules of the National Association of Securities Dealers, Inc.
(the "NASD") and any applicable state regulatory authority. All registration
statements, prospectuses, reports, proxy materials or other filings required
to be made or filed with the Commission, the NASD or any state securities
authorities by the Acquired Fund have been duly filed and have been
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approved or declared effective, if such approval or declaration of
effectiveness is required by law. Such registration statements,
prospectuses, reports, proxy materials and other filings under the
Securities Act, the Exchange Act and the Investment Company Act (i) are or
were in compliance in all material respects with the requirements of all
applicable statutes and the rules and regulations thereunder and (ii) do not
or did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not false or misleading;
(r) Neither the Acquired Fund nor, to the knowledge of the Acquired Fund,
any "affiliated person" of the Acquired Fund has been convicted of any
felony or misdemeanor, described in Section 9(a)(1) of the Investment
Company Act, nor, to the knowledge of the Acquired Fund, has any affiliated
person of the Acquired Fund been the subject, or presently is the subject,
of any proceeding or investigation with respect to any disqualification that
would be a basis for denial, suspension or revocation of registration as an
investment adviser under Section 203(e) of the Investment Advisers Act of
1940, as amended (the "Investment Advisers Act"), or Rule 206(4)-4(b)
thereunder or of a broker-dealer under Section 15 of the Exchange Act, or
for disqualification as an investment adviser, employee, officer or director
of an investment company under Section 9 of the Investment Company Act; and
(s) The tax representation certificate to be delivered by Safeco Trust on
behalf of the Acquired Fund to the Acquiring Trust and Wilmer Cutler
Pickering Hale and Dorr LLP at the Closing pursuant to Paragraph 7.4 (the
"Acquired Fund Tax Representation Certificate") will not on the Closing Date
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein not misleading.
4.2 Except as set forth on Schedule 4.2 hereto, the Acquiring Trust, on
behalf of the Acquiring Fund, represents, warrants and covenants to the
Acquired Fund, which representations, warranties and covenants will be true and
correct on the date hereof and on the Closing Date as though made on and as of
the Closing Date, as follows:
(a) The Acquiring Fund is a series of the Acquiring Trust. The Acquiring
Trust is a [statutory][business] trust duly organized, validly existing and
in good standing under the laws of the [State of Delaware][Commonwealth of
Massachusetts]. The Acquiring Trust has the power to own all of its
properties and assets and to perform the obligations under this Agreement.
The Acquiring Fund is not required to qualify to do business in any
jurisdiction in which it is not so qualified or where failure to qualify
would subject it to any material liability or disability. Each of the
Acquiring Trust and the Acquiring Fund has all necessary federal, state and
local authorizations to own all of its properties and assets and to carry on
its business as now being conducted;
(b) The Acquiring Trust is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the Investment Company Act is in
full force and effect;
(c) The Acquiring Fund's registration statement on Form N-1A that will be
in effect on the Closing Date, and the prospectus and statement of
additional information of the Acquiring Fund included therein, will conform
in all material respects with the applicable requirements of the Securities
Act and the Investment Company Act and the rules and regulations of the
Commission thereunder, and did not as of the effective date thereof and will
not as of the Closing Date contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading;
(d) The Registration Statement, the Proxy Statement and statement of
additional information with respect to the Acquiring Fund, and any
amendments or supplements thereto in effect on or prior to the Closing Date
included in the Registration Statement (other than written information
furnished by the Acquired Fund for inclusion therein, as covered by the
Acquired Fund's warranty in Paragraph 4.1(m) hereof) will conform in all
material respects to the applicable requirements of the Securities Act and
the Investment Company Act and the rules and regulations of the Commission
thereunder. Neither the Registration Statement nor the Proxy Statement
(other than written information furnished by the Acquired Fund for inclusion
therein, as covered by the Acquired Fund's warranty in Paragraph 4.1(m)
hereof) includes or will include any untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading;
(e) The Acquiring Trust is not in violation of, and the execution and
delivery of this Agreement and performance of its obligations under this
Agreement will not result in a violation of, any provisions of the
Declaration of Trust or by-laws of the Acquiring Trust or any material
agreement, indenture, instrument, contract, lease or other undertaking with
respect to the Acquiring Fund to which the Acquiring Trust is a party or by
which the Acquiring Fund or any of its assets is bound;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or threatened
against the Acquiring Fund or any of the Acquiring Fund's properties or
assets. The Acquiring Fund knows of no facts which might form the basis for
the institution of such proceedings. Neither the Acquiring Trust nor the
Acquiring Fund is a party to
A-7
or subject to the provisions of any order, decree or judgment of any court
or governmental body which materially adversely affects the Acquiring Fund's
business or its ability to consummate the transactions contemplated herein;
(g) The statement of assets and liabilities of the Acquiring Fund, and the
related statements of income and changes in NAV, as of and for the fiscal
year ended [most recent fiscal year end] have been audited by Ernst & Young
LLP, independent registered public accounting firm, and are in accordance
with GAAP consistently applied and fairly reflect, in all material respects,
the financial condition of the Acquiring Fund as of such date and the
results of its operations for the period then ended, and all known
liabilities, whether actual or contingent, of the Acquiring Fund as of the
date thereof are disclosed therein;
(h) Since [most recent fiscal year end], except as specifically disclosed
in the Acquiring Fund's prospectus, its statement of additional information
as in effect on the date of this Agreement, or its semi-annual report for
the period ended [ ], there has not been any material adverse change in
the Acquiring Fund's financial condition, assets, liabilities, business or
prospects, or any incurrence by the Acquiring Fund of indebtedness, except
for normal contractual obligations incurred in the ordinary course of
business or in connection with the settlement of purchases and sales of
portfolio securities. For the purposes of this subparagraph (h) (but not for
any other purpose of this Agreement), a decline in NAV per Acquiring Fund
Share arising out of its normal investment operations or a decline in market
values of securities in the Acquiring Fund's portfolio or a decline in net
assets of the Acquiring Fund as a result of redemptions shall not constitute
a material adverse change;
(i) (A) For each taxable year of its operation since its inception, the
Acquiring Fund has met, and for the current taxable year it will meet, the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company and will qualify as such as of the Closing Date
and will satisfy the diversification requirements of Section 851(b)(3) of the
Code without regard to the last sentence of Section 851(d) of the Code. The
Acquiring Fund has not taken any action, caused any action to be taken or
caused any action to fail to be taken which action or failure could cause the
Acquiring Fund to fail to qualify as a regulated investment company under the
Code;
(B) Within the times and in the manner prescribed by law, the Acquiring
Fund has properly filed on a timely basis all Tax Returns that it was
required to file, and all such Tax Returns were complete and accurate in
all respects. The Acquiring Fund has not been informed by any jurisdiction
that the jurisdiction believes that the Acquiring Fund was required to file
any Tax Return that was not filed; and the Acquiring Fund does not know of
any basis upon which a jurisdiction could assert such a position;
(C) The Acquiring Fund has timely paid, in the manner prescribed by
law, all Taxes that were due and payable or that were claimed to be due;
(D) All Tax Returns filed by the Acquiring Fund constitute complete and
accurate reports of the respective liabilities for Taxes and all attributes
of the Acquiring Fund or, in the case of information returns and payee
statements, the amounts required to be reported, and accurately set forth
all items required to be included or reflected in such returns;
(E) The Acquiring Fund has not waived or extended any applicable
statute of limitations relating to the assessment or collection of Taxes;
(F) The Acquiring Fund has not been notified that any examinations of
the Tax Returns of the Acquiring Fund are currently in progress or
threatened, and no deficiencies have been asserted or assessed against the
Acquiring Fund as a result of any audit by the Internal Revenue Service or
any state, local or foreign taxing authority, and, to its knowledge, no
such deficiency has been proposed or threatened;
(G) The Acquiring Fund has no actual or potential liability for any Tax
obligation of any taxpayer other than itself. The Acquiring Fund is not and
has never been a member of a group of corporations with which it has filed
(or been required to file) consolidated, combined or unitary Tax Returns.
The Acquiring Fund is not a party to any Tax allocation, sharing, or
indemnification agreement;
(H) The Acquiring Trust has delivered to Safeco Trust or made available
to Safeco Trust complete and accurate copies of all Tax Returns of the
Acquiring Fund, together with all related examination reports and
statements of deficiency for all periods not closed under the applicable
statutes of limitations and complete and correct copies of all private
letter rulings, revenue agent reports, information document requests,
notices of proposed deficiencies, deficiency notices, protests, petitions,
closing agreements, settlement agreements, pending ruling requests and any
similar documents submitted by, received by or agreed to by or on behalf of
the Acquiring Fund. The Acquiring Fund has disclosed on its federal income
Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of
Section 6662 of the Code;
(I) The Acquiring Fund has not undergone, has not agreed to undergo,
and is not required to undergo (nor will it be required as a result of the
transactions contemplated in this Agreement to undergo) a change in its
method of accounting resulting in
A-8
an adjustment to its taxable income pursuant to Section 481 of the Code.
The Acquiring Fund will not be required to include any item of income in,
or exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a result of
any (i) change in method of accounting for a taxable period ending on or
prior to the Closing Date under Section 481(c) of the Code (or any
corresponding or similar provision of state, local or foreign income Tax
law); (ii) "closing agreement" as described in Section 7121 of the Code
(or any corresponding or similar provision of state, local or foreign
income Tax law) executed on or prior to the Closing Date; (iii)
installment sale or open transaction disposition made on or prior to the
Closing Date; or (iv) prepaid amount received on or prior to the Closing
Date;
(J) The Acquiring Fund has not taken or agreed to take any action, and
is not aware of any agreement, plan or other circumstance, that is
inconsistent with the representations set forth in Annex A;
(K) The Acquiring Fund has not incurred (or been allocated) an "overall
foreign loss" as defined in Section 904(f)(2) of the Code which has not
been previously recaptured in full as provided in Sections 904(f)(2) and/or
904(f)(3) of the Code;
(L) The Acquiring Fund is not a party to a gain recognition agreement
under Section 367 of the Code;
(M) The Acquiring Fund's Tax attributes are not limited under the Code
(including but not limited to any capital loss carry forward limitations
under Sections 382 or 383 of the Code and the Treasury Regulations
thereunder) or comparable provisions of state law, except as set forth on
Schedule 4.2;
(j) The Acquiring Fund currently complies, and at all times since its
organization has complied, in all material respects with the requirements
of, and the rules and regulations under, the Investment Company Act, the
Securities Act, the Exchange Act, state "Blue Sky" laws and all other
applicable federal and state laws or regulations. The Acquiring Fund
currently complies in all material respects with, and since its organization
has complied in all material respects with, all investment objectives,
policies, guidelines and restrictions and any compliance procedures
established by the Acquiring Trust with respect to the Acquiring Fund. All
advertising and sales material used by the Acquiring Fund complies in all
material respects with and has complied in all material respects with the
applicable requirements of the Securities Act, the Investment Company Act,
the rules and regulations of the Commission, and, to the extent applicable,
the Conduct Rules of the NASD and any applicable state regulatory authority.
All registration statements, prospectuses, reports, proxy materials or other
filings required to be made or filed with the Commission, the NASD or any
state securities authorities by the Acquiring Fund have been duly filed and
have been approved or declared effective, if such approval or declaration of
effectiveness is required by law. Such registration statements,
prospectuses, reports, proxy materials and other filings under the
Securities Act, the Exchange Act and the Investment Company Act (i) are or
were in compliance in all material respects with the requirements of all
applicable statutes and the rules and regulations thereunder and (ii) do not
or did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not false or misleading;
(k) The authorized capital of the Acquiring Fund consists of an unlimited
number of shares of beneficial interest, no par value per share. As of the
Closing Date, the Acquiring Fund will be authorized to issue an unlimited
number of shares of beneficial interest, no par value per share. The
Acquiring Fund Shares to be issued and delivered to the Acquired Fund for
the account of the Acquired Fund Shareholders pursuant to the terms of this
Agreement will have been duly authorized on the Closing Date and, when so
issued and delivered, will be duly and validly issued, fully paid and
non-assessable. The Acquiring Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any Acquiring Fund
shares, nor is there outstanding any security convertible into any Acquiring
Fund shares;
(l) The Acquiring Trust has the trust power and authority to enter into
and perform its obligations under this Agreement. The execution, delivery
and performance of this Agreement have been duly authorized by all necessary
action on the part of the Acquiring Trust's Board of Trustees, and, assuming
due authorization, execution and delivery by the Acquired Fund, this
Agreement will constitute a valid and binding obligation of the Acquiring
Fund, enforceable in accordance with its terms, subject as to enforcement,
to bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights and to general equity principles;
(m) The information to be furnished in writing by the Acquiring Fund or
the Acquiring Fund Adviser for use in applications for orders, registration
statements, proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all material respects
with federal securities and other laws and regulations applicable thereto or
the requirements of any form for which its use is intended, and shall not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the information provided not misleading;
(n) No consent, approval, authorization or order of or filing with any
court or governmental authority is required for the execution of this
Agreement or the consummation of the transactions contemplated by the
Agreement by the Acquiring Fund, except for the registration of the
Acquiring Fund Shares under the Securities Act and the Investment Company
Act;
A-9
(o) All of the issued and outstanding Acquiring Fund Shares have been
offered for sale and sold in conformity with all applicable federal and
state securities laws, except as may have been previously disclosed in
writing to the Acquired Fund;
(p) The prospectus and statement of additional information of the
Acquiring Fund and any amendments or supplements thereto, furnished to the
Acquired Fund, did not as of their dates or the dates of their distribution
to the public contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which such statements
were made, not misleading;
(q) Neither the Acquiring Fund nor, to the knowledge of the Acquiring
Fund, any "affiliated person" of the Acquiring Fund has been convicted of
any felony or misdemeanor, described in Section 9(a)(1) of the Investment
Company Act, nor, to the knowledge of the Acquiring Fund, has any affiliated
person of the Acquiring Fund been the subject, or presently is the subject,
of any proceeding or investigation with respect to any disqualification that
would be a basis for denial, suspension or revocation of registration as an
investment adviser under Section 203(e) of the Investment Advisers Act or
Rule 206(4)-4(b) thereunder or of a broker-dealer under Section 15 of the
Exchange Act, or for disqualification as an investment adviser, employee,
officer or director of an investment company under Section 9 of the
Investment Company Act; and
(r) The tax representation certificate to be delivered by the Acquiring
Trust on behalf of the Acquiring Fund to the Safeco Trust and Wilmer Cutler
Pickering Hale and Dorr LLP at Closing pursuant to Section 6.3 (the
"Acquiring Fund Tax Representation Certificate") will not on the Closing
Date contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein not misleading.
5. COVENANTS OF THE FUNDS
5.1 The Acquired Fund will operate the Acquired Fund's business in the
ordinary course of business between the date hereof and the Closing Date. It is
understood that such ordinary course of business will include the declaration
and payment of customary dividends and other distributions and any other
dividends and other distributions necessary or advisable (except to the extent
dividends or other distributions that are not customary may be limited by
representations made in connection with the issuance of the tax opinion
described in Paragraph 8.5 hereof), in each case payable either in cash or in
additional shares.
5.2 The Safeco Trust will call a special meeting of the Acquired Fund's
shareholders to consider approval of this Agreement and act upon the matters
set forth in the Proxy Statement.
5.3 The Acquiring Fund will prepare the notice of meeting, form of proxy
and Proxy Statement (collectively, "Proxy Materials") to be used in connection
with such meeting, and will promptly prepare and file with the Commission the
Registration Statement. The Safeco Trust will provide the Acquiring Fund with
information reasonably requested for the preparation of the Registration
Statement in compliance with the Securities Act, the Exchange Act, and the
Investment Company Act.
5.4 The Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired by the Acquired Fund for the purpose of
making any distribution thereof other than in accordance with the terms of this
Agreement.
5.5 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requires concerning the beneficial
ownership of the Acquired Fund Shares.
5.6 Subject to the provisions of this Agreement, each Fund will take, or
cause to be taken, all actions, and do or cause to be done, all things
reasonably necessary, proper or advisable to consummate the transactions
contemplated by this Agreement.
5.7 The Acquired Fund shall furnish to the Acquiring Fund on the Closing
Date a Statement of Assets and Liabilities of the Acquired Fund as of the
Closing Date setting forth the NAV (as computed pursuant to Paragraph 2.1) of
the Acquired Fund as of the Valuation Time, which statement shall be prepared
in accordance with GAAP consistently applied and certified by the Safeco
Trust's Treasurer or Assistant Treasurer. As promptly as practicable, but in
any case within 30 days after the Closing Date, the Safeco Trust shall furnish
to the Acquiring Trust, in such form as is reasonably satisfactory to the
Acquiring Trust, a statement of the earnings and profits of the Acquired Fund
for federal income tax purposes, and of any capital loss carryovers and other
items that will be carried over to the Acquiring Fund under the Code, and which
statement will be certified by the Treasurer of the Safeco Trust.
5.8 Neither Fund shall take any action that is inconsistent with the
representations set forth in, with respect to the Acquired Fund, the Acquired
Fund Tax Representation Certificate and, with respect to the Acquiring Fund,
the Acquiring Fund Tax Representation Certificate.
5.9 From and after the date of this Agreement and until the Closing Date,
each of the Funds and the Safeco Trust and the Acquiring Trust shall use its
commercially reasonable efforts to cause the Reorganization to qualify, and
will not knowingly take any action, cause any action to be taken, fail to take
any action or cause any action to fail to be taken, which action or failure to
act could prevent the
A-10
Reorganization from qualifying, as a reorganization under the provisions of
Section 368(a) of the Code. The parties hereby adopt this Agreement as a "plan
of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the income tax regulations promulgated under the Code. Unless otherwise
required pursuant to a "determination" within the meaning of Section 1313(a) of
the Code, the parties hereto shall treat and report the transactions
contemplated hereby as a reorganization within the meaning of Section
368(a)(1)[insert (C) or (D), as applicable] of the Code and shall not take any
position inconsistent with such treatment.
5.10 From and after the date of this Agreement and through the time of the
Closing, each Fund shall use its commercially reasonable efforts to cause it to
qualify, and will not knowingly take any action, cause any action to be taken,
fail to take any action or cause any action to fail to be taken, which action
or failure to act could prevent it from qualifying as a regulated investment
company under the provisions of Subchapter M of the Code.
5.11 Each Fund shall prepare, or cause to be prepared, all of its Tax
Returns for taxable periods that end on or before the Closing Date and shall
timely file, or cause to be timely filed, all such Tax Returns. Each Fund shall
make any payments of Taxes required to be made by it with respect to any such
Tax Returns.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to complete the transactions provided
for herein shall be, at its election, subject to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions, unless waived by the Acquired Fund in writing:
6.1 All representations and warranties by the Acquiring Trust on behalf of
the Acquiring Fund contained in this Agreement shall be true and correct as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
6.2 The Acquiring Trust shall have delivered to the Safeco Trust on the
Closing Date a certificate of the Acquiring Trust on behalf of the Acquiring
Fund executed in its name by its President or Vice President and its Treasurer
or Assistant Treasurer, in form and substance satisfactory to the Safeco Trust
and dated as of the Closing Date, to the effect that the representations and
warranties of the Acquiring Trust made in this Agreement are true and correct
at and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, that each of the conditions to
Closing in this Article 6 have been met, and as to such other matters as the
Safeco Trust shall reasonably request;
6.3 The Acquiring Trust on behalf of the Acquiring Fund shall have
delivered to the Safeco Trust and Wilmer Cutler Pickering Hale and Dorr LLP an
Acquiring Fund Tax Representation Certificate, satisfactory to the Safeco Trust
and Wilmer Cutler Pickering Hale and Dorr LLP, substantially in the form
attached to this Agreement as Annex A, concerning certain tax-related matters
with respect to the Acquiring Fund;
6.4 With respect to the Acquiring Fund, the Board of Trustees of the
Acquiring Trust shall have determined that the Reorganization is in the best
interests of the Acquiring Fund and, based upon such determination, shall have
approved this Agreement and the transactions contemplated hereby; and
6.5 The Safeco Trust shall have received at the Closing a favorable
opinion as to the due authorization of this Agreement by the Acquiring Trust
and related matters of Wilmer Cutler Pickering Hale and Dorr LLP, dated as of
the Closing Date, in a form reasonably satisfactory to the Safeco Trust.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be, at its election, subject to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following further
conditions, unless waived by the Acquiring Fund in writing:
7.1 All representations and warranties of the Safeco Trust on behalf of
the Acquired Fund contained in this Agreement shall be true and correct as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
7.2 The Safeco Trust shall have delivered to the Acquiring Fund the
Statement of Assets and Liabilities of the Acquired Fund pursuant to Paragraph
5.7, together with a list of its portfolio securities showing the federal
income tax bases and holding periods of such securities, as of the Closing
Date, certified by the Safeco Trust's Treasurer or Assistant Treasurer;
A-11
7.3 The Safeco Trust shall have delivered to the Acquiring Trust on the
Closing Date a certificate of the Safeco Trust on behalf of the Acquired Fund
executed in its name by its President or Vice President and a Treasurer or
Assistant Treasurer, in form and substance reasonably satisfactory to the
Acquiring Trust and dated as of the Closing Date, to the effect that the
representations and warranties of the Safeco Trust contained in this Agreement
are true and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement, that each of the
conditions to Closing in this Article 7 have been met, and as to such other
matters as the Acquiring Trust shall reasonably request;
7.4 The Safeco Trust on behalf of the Acquired Fund shall have delivered
to the Acquiring Trust and Wilmer Cutler Pickering Hale and Dorr LLP an
Acquired Fund Tax Representation Certificate, satisfactory to the Acquiring
Trust and Wilmer Cutler Pickering Hale and Dorr LLP, substantially in the form
attached to this Agreement as Annex B, concerning certain tax-related matters
with respect to the Acquired Fund;
7.5 The Acquiring Trust shall have received at the Closing a favorable
opinion as to the due authorization of this Agreement by the Safeco Trust and
related matters of Kirkpatrick & Lockhart LLP, dated as of the Closing Date, in
a form reasonably satisfactory to Acquiring Trust; and
7.6 With respect to the Acquired Fund, the Board of Trustees of the Safeco
Trust shall have determined that the Reorganization is in the best interests of
the Acquired Fund and, based upon such determination, shall have approved this
Agreement and the transactions contemplated hereby.
8. FURTHER CONDITIONS PRECEDENT
If any of the conditions set forth below does not exist on or before the
Closing Date with respect to either party hereto, the other party to this
Agreement shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the Acquired Fund's shareholders in
accordance with the provisions of the Safeco Trust's Trust Instrument and
By-Laws, and certified copies of the resolutions evidencing such approval by
the Acquired Fund's shareholders shall have been delivered by the Acquired Fund
to the Acquiring Fund. Notwithstanding anything herein to the contrary, neither
party hereto may waive the conditions set forth in this Paragraph 8.1;
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by either party hereto to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of
either party hereto, provided that either party may waive any such conditions
for itself;
8.4 The Acquiring Trust's Registration Statement on Form N-14 shall have
become effective under the Securities Act and no stop orders suspending the
effectiveness of such Registration Statement shall have been issued and, to the
best knowledge of the parties hereto, no investigation or proceeding for that
purpose shall have been instituted or be pending, threatened or contemplated
under the Securities Act;
8.5 The parties shall have received an opinion of Wilmer Cutler Pickering
Hale and Dorr LLP, satisfactory to the Safeco Trust and the Acquiring Trust and
subject to customary assumptions and qualifications, substantially to the
effect that for federal income tax purposes the acquisition by the Acquiring
Fund of the Acquired Assets solely in exchange for the issuance of Acquiring
Fund Shares to the Acquired Fund and the assumption of the Assumed Liabilities
by the Acquiring Fund, followed by the distribution by the Acquired Fund, in
liquidation of the Acquired Fund, of Acquiring Fund Shares to the Acquired Fund
Shareholders in exchange for their Acquired Fund Shares and the termination of
the Acquired Fund, will constitute a "reorganization" within the meaning of
Section 368(a) of the Code;
8.6 The Acquired Fund shall have distributed to its shareholders, in a
distribution or distributions qualifying for the deduction for dividends paid
under Section 561 of the Code, all of its investment company taxable income (as
defined in Section 852(b)(2) of the Code determined without regard to Section
852(b)(2)(D) of the Code) for its taxable year ending on the Closing Date, all
of the excess of (i) its interest income excludable from gross income under
Section 103(a) of the Code over (ii) its deductions disallowed under Sections
265 and 171(a)(2) of the Code for its taxable year ending on the Closing Date,
and all of its net capital gain (as such term is used in Sections 852(b)(3)(A)
and (C) of the Code), after reduction by any available capital loss
carryforward, for its taxable year ending on the Closing Date; and
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8.7 The Acquiring Trust shall have made a distribution of capital gains to
its shareholders in November 2004 in accordance with its normal practices and,
unless the Acquiring Fund distributes income monthly, the dividend distribution
that the Acquiring Fund normally would make in December of 2004 shall have been
made to shareholders of record prior to the Closing.
9. BROKERAGE FEES AND EXPENSES
9.1 Each party hereto represents and warrants to the other party hereto
that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
9.2 The parties have been informed by Symetra Financial Corporation and
the Acquiring Fund Adviser -- and the parties have entered into this Agreement
in reliance on such information -- that such non-parties will pay all expenses
of the Funds associated with the Reorganization, including, the expenses
associated with the preparation, printing and mailing of any and all
shareholder notices, communications, proxy statements, and necessary filings
with the SEC or any other governmental authority in connection with the
transactions contemplated by this Agreement and the legal and Trustees' fees
and expenses incurred in connection with the Reorganization. Except for the
foregoing, the Acquiring Fund and the Acquired Fund shall each bear its own
expenses in connection with the transactions contemplated by this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Trust and the Safeco Trust each agrees that neither
party has made any representation, warranty or covenant not set forth herein or
referred to in Paragraphs 4.1 or 4.2 hereof and that this Agreement constitutes
the entire agreement between the parties.
10.2 The representations and warranties contained in this Agreement or in
any document delivered pursuant hereto or in connection herewith shall not
survive the consummation of the transactions contemplated hereunder.
11. TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Trust and Safeco Trust. In addition, either party may at its option
terminate this Agreement at or prior to the Closing Date:
(a) because of a material breach by the other of any representation,
warranty, covenant or agreement contained herein to be performed at or prior
to the Closing Date;
(b) because of a condition herein expressed to be precedent to the
obligations of the terminating party which has not been met and which
reasonably appears will not or cannot be met;
(c) by resolution of the Acquiring Trust's Board of Trustees if
circumstances should develop that, in the good faith opinion of such Board,
make proceeding with the Agreement not in the best interests of the
Acquiring Fund's shareholders;
(d) by resolution of the Safeco Trust's Board of Trustees if circumstances
should develop that, in the good faith opinion of such Board, make
proceeding with the Agreement not in the best interests of the Acquired
Fund's shareholders; or
(e) if the transactions contemplated by this Agreement shall not have
occurred on or prior to December 31, 2004 or such other date as the parties
may mutually agree upon in writing.
11.2 In the event of any such termination, there shall be no liability for
damages on the part of the Acquiring Fund, the Acquiring Trust, the Safeco
Trust or the Acquired Fund, or the trustees or officers of the Safeco Trust, or
the Acquiring Trust, but, subject to Paragraph 9.2, each party shall bear the
expenses incurred by it incidental to the preparation and carrying out of this
Agreement.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the Safeco
Trust and the Acquiring Trust; provided, however, that following the meeting of
the Acquired Fund's shareholders called by the Safeco Trust pursuant to
Paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions regarding the method for determining the number of
Acquiring Fund Shares to be received by the Acquired Fund Shareholders under
this Agreement to their detriment without their further approval; provided that
nothing contained in this Section 12 shall be construed to prohibit the parties
from amending this Agreement to change the Closing Date.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the Acquired Fund, c/o
Symetra Financial Corporation, 5069 154th Place,
A-13
N.E., Seattle, Washington 98052, Attention: Roger F. Harbin, with copies to R.
Darrell Mounts, Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W.,
Second Floor, Washington, DC 20036-1221, and to the Acquiring Fund, c/o Pioneer
Investment Management, Inc., 60 State Street, Boston, Massachusetts 02109,
Attention: Dorothy E. Bourassa, Esq., with copies to Wilmer Cutler Pickering
Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, Attention:
David C. Phelan.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
14.1 The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware, without giving effect to conflict
of laws principles (other than Delaware Code Title 6 [sec] 2708); provided
that, in the case of any conflict between those laws and the federal securities
laws, the latter shall govern.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by
either party without the prior written consent of the other party hereto.
Nothing herein expressed or implied is intended or shall be construed to confer
upon or give any person, firm or corporation, or other entity, other than the
parties hereto and their respective successors and assigns, any rights or
remedies under or by reason of this Agreement.
14.5 It is expressly agreed that the obligations of the Acquiring Trust
and the Safeco Trust shall not be binding upon any of their respective
trustees, shareholders, nominees, officers, agents or employees personally, but
bind only to the property of the Acquiring Fund or the Acquired Fund, as the
case may be, as provided in the trust instruments of the Acquiring Trust and
the Instrument of Trust of the Safeco Trust, respectively. The execution and
delivery of this Agreement have been authorized by the trustees of the
Acquiring Trust and of the Safeco Trust and this Agreement has been executed by
authorized officers of the Acquiring Trust and the Safeco Trust, acting as
such, and neither such authorization by such trustees nor such execution and
delivery by such officers shall be deemed to have been made by any of them
individually or to imposed any liability on any of them personally, but shall
bind only the property of the Acquiring Fund and the Acquired Fund, as the case
may be, as provided in the trust instruments of the Acquiring Trust and the
Instrument of Trust of the Safeco Trust, respectively.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed as of the date first set forth above by its President or Vice
President and attested by its Secretary or Assistant Secretary.
Attest: [SAFECO TRUST] on behalf of
[SAFECO FUND]
By: __________________________________ By: __________________________________
Name: Name:
Title: Secretary Title: President
Attest: [PIONEER TRUST] on behalf of
[PIONEER FUND]
By: __________________________________ By: __________________________________
Name: Name:
Title: Secretary Title:
A-14
Annex A
TAX REPRESENTATION CERTIFICATE OF
[PIONEER TRUST] ON BEHALF OF [PIONEER FUND]
This certificate is being delivered in connection with the transactions to
be effected pursuant to the Agreement and Plan of Reorganization made as of
_____________ , 2004 between [Pioneer Trust], a [Delaware statutory]
[Massachusetts business] trust ("Acquiring Trust"), on behalf of its series
[Pioneer Fund] ("Acquiring Fund"), and [Safeco Trust], a Delaware statutory
trust, on behalf of its series [Safeco Fund] ("Acquired Fund") (the
"Agreement"). Pursuant to the Agreement, Acquiring Fund will acquire all of the
assets of Acquired Fund in exchange solely for (i) the assumption by Acquiring
Fund of the Assumed Liabilities of Acquired Fund and (ii) the issuance of
Investor Class shares of beneficial interest of Acquiring Fund (the "Acquiring
Fund Shares") to Acquired Fund, followed by the distribution by Acquired Fund,
in liquidation of Acquired Fund, of the Acquiring Fund Shares to the
shareholders of Acquired Fund and the termination of Acquired Fund (the
foregoing together constituting the "transaction").
The undersigned officer of Acquiring Trust, after consulting with its
counsel, auditors and tax advisers regarding the meaning of and factual support
for the following representations on behalf of Acquiring Fund, hereby certifies
and represents that the following statements are true, complete and correct and
will be true, complete and correct on the date of the transaction and
thereafter as relevant. Unless otherwise indicated, all capitalized terms used
but not defined herein shall have the meanings ascribed to them in the
Agreement.
1. Acquiring Fund is a series of Acquiring Trust, [a statutory] [business]
trust organized under the laws of the [State of Delaware] [Commonwealth of
Massachusetts], and Acquiring Fund is, and has been at all times, treated as a
separate corporation for federal tax purposes.
2. Neither Acquiring Fund nor any person "related" to Acquiring Fund (as
defined in Treasury Regulation Section 1.368-1(e)(3)), nor any partnership of
which Acquiring Fund or any such related person is a partner, has any plan or
intention to redeem or otherwise acquire any of the Acquiring Fund Shares
received by shareholders of Acquired Fund in the transaction except in the
ordinary course of Acquiring Fund's business in connection with its legal
obligation under Section 22(e) of the Investment Company Act of 1940, as
amended (the "1940 Act"), as a series of a registered open-end investment
company to redeem its own shares.
3. After the transaction, Acquiring Fund will continue the historic
business (as defined in Treasury Regulation Section 1.368-1(d)(2)) of Acquired
Fund or will use a significant portion of the historic business assets (as
defined in Treasury Regulation Section 1.368-1(d)(3)) acquired from Acquired
Fund in a business.
4. Acquiring Fund has no plan or intention to sell or otherwise dispose of
any assets of Acquired Fund acquired in the transaction, except for
dispositions made in the ordinary course of its business or to maintain its
qualification as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code").
5. Any expenses of Acquired Fund incurred in connection with the
transaction which are paid or assumed by Acquiring Fund will be expenses of
Acquired Fund solely and directly related to the transaction in accordance with
Rev. Rul. 73-54, 1973-1 C.B. 187. Acquiring Fund will not pay or assume the
expenses, if any, incurred by any Acquired Fund Shareholders in connection with
the transaction.
6. There is no, and never has been any, indebtedness between Acquiring Fund
and Acquired Fund.
7. Acquiring Fund has properly elected to be a regulated investment company
under Subchapter M of the Code, has qualified for the special tax treatment
afforded regulated investment companies under the Code for each taxable year
since inception and qualifies for such treatment as of the time of the Closing.
8. Acquiring Fund meets the requirements of an "investment company" in
Section 368(a)(2)(F) of the Code.
9. Acquiring Fund is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
10. Acquiring Fund does not now own and has never owned, directly or
indirectly, any shares of Acquired Fund.
11. As of the date of the transaction, the fair market value of the
Acquiring Fund Shares issued to Acquired Fund will be approximately equal to the
fair market value of the Acquired Assets minus the Assumed Liabilities.
Acquiring Fund will not furnish any consideration in connection with the
acquisition of the Acquired Assets other than the assumption of the Assumed
Liabilities and the issuance of such Acquiring Fund Shares.
A-15
12. Acquired Fund Shareholders [will/will not] be in control (within the
meaning of Sections 368(a)(2)(H)(i) and 304(c)(1) of the Code) of Acquiring
Fund after the transaction.
13. The transaction is being undertaken for valid and substantial business
purposes, including facilitating Acquired Fund's becoming a member of the
Pioneer family of mutual funds, which, in the long term, is intended to result
in lower expenses and increased assets.
14. No Acquired Fund shareholder is acting as agent for Acquiring Fund in
connection with the transaction or approval thereof. Acquiring Fund will not
reimburse any Acquired Fund shareholder for Acquired Fund Shares such
shareholder may have purchased or for other obligations such shareholder may
have incurred.
15. Acquiring Fund has no outstanding warrants, options, convertible
securities or any other type of right pursuant to which any person could
acquire stock in Acquiring Fund.
* * * * *
A-16
The undersigned officer of Acquiring Trust is authorized to make all of
the representations set forth herein, and the undersigned is authorized to
execute this certificate on behalf of Acquiring Fund. The undersigned
recognizes that Wilmer Cutler Pickering Hale and Dorr LLP will rely upon the
foregoing representations in evaluating the United States federal income tax
consequences of the transaction and rendering its opinion pursuant to Section
8.5 of the Agreement. If, prior to the date of the transaction, any of the
representations set forth herein ceases to be accurate, the undersigned agrees
to deliver immediately to Wilmer Cutler Pickering Hale and Dorr LLP a written
notice to that effect.
[PIONEER TRUST] on behalf of [Pioneer Fund]
By: __________________________________
Name: _____________________________
Title: ____________________________
Dated: ______________, 2004
A-17
Annex B
TAX REPRESENTATION CERTIFICATE OF
[SAFECO TRUST]
ON BEHALF OF [SAFECO FUND]
This certificate is being delivered in connection with the transactions to
be effected pursuant to the Agreement and Plan of Reorganization made as of ,
2004 between [Pioneer Trust], a [Delaware statutory] [Massachusetts business]
trust, on behalf of its series [Pioneer Fund] ("Acquiring Fund"), and [Safeco
Trust], a Delaware statutory trust ("Safeco Trust"), on behalf of its series
[Safeco Fund] ("Acquired Fund") (the "Agreement"). Pursuant to the Agreement,
Acquiring Fund will acquire all of the assets of Acquired Fund in exchange
solely for (i) the assumption by Acquiring Fund of the Assumed Liabilities of
Acquired Fund and (ii) the issuance of Investor Class shares of beneficial
interest of Acquiring Fund (the "Acquiring Fund Shares") to Acquired Fund,
followed by the distribution by Acquired Fund, in liquidation of Acquired Fund,
of the Acquiring Fund Shares to the shareholders of Acquired Fund and the
termination of Acquired Fund (the foregoing together constituting the
"transaction").
The undersigned officer of Safeco Trust, after consulting with its
counsel, auditors and tax advisers regarding the meaning of and factual support
for the following representations, on behalf of Acquired Fund, hereby certifies
and represents that the following statements are true, complete and correct and
will be true, complete and correct on the date of the transaction and
thereafter as relevant. Unless otherwise indicated, all capitalized terms used
but not defined herein shall have the meanings ascribed to them in the
Agreement.
1. Acquired Fund is a series of Safeco Trust, a statutory trust organized
under the laws of the State of Delaware, and Acquired Fund is, and has been at
all times, treated as a separate corporation for federal tax purposes.
2. As of the date of the transaction, the fair market value of the
Acquiring Fund Shares received by each shareholder that holds shares of
Acquired Fund (the "Acquired Fund Shares") will be approximately equal to the
fair market value of the Acquired Fund Shares with respect to which such
Acquiring Fund Shares are received, and the aggregate consideration received by
Acquired Fund shareholders in exchange for their Acquired Fund Shares will be
approximately equal to the fair market value of all of the outstanding Acquired
Fund Shares immediately prior to the transaction. No property other than
Acquiring Fund Shares will be distributed to shareholders of Acquired Fund in
exchange for their Acquired Fund Shares, nor will any such shareholder receive
cash or other property as part of the transaction.
3. Neither Acquired Fund nor any person "related" to Acquired Fund (as
defined in Treasury Regulation Section 1.368-1(e)(3)), nor any partnership in
which Acquired Fund or any such related person is a partner, has redeemed,
acquired or otherwise made any distributions with respect to any shares of
Acquired Fund as part of the transaction, or otherwise pursuant to a plan of
which the transaction is a part, other than redemptions and distributions made
in the ordinary course of Acquired Fund's business as a series of an open-end
investment company. To the best knowledge of management of Acquired Fund, there
is no plan or intention on the part of the shareholders of Acquired Fund to
engage in any transaction with Acquired Fund, Acquiring Fund, or any person
treated as related to Acquired Fund or Acquiring Fund under Treasury Regulation
Section 1.368-1(e)(3) or any partnership in which Acquired Fund, Acquiring
Fund, or any person treated as related to Acquired Fund or Acquiring Fund under
Treasury Regulation Section 1.368-1(e)(3) is a partner involving the sale,
redemption or exchange of any of the Acquired Fund Shares or any of the
Acquiring Fund Shares to be received in the transaction, as the case may be,
other than in the ordinary course of Acquired Fund's business as a series of an
open-end investment company.
4. Pursuant to the transaction, Acquired Fund will transfer to Acquiring
Fund, and Acquiring Fund will acquire, at least 90% of the fair market value of
the net assets, and at least 70% of the fair market value of the gross assets,
Acquired Fund held immediately before the transaction. For the purposes of the
foregoing, any amounts Acquired Fund uses to pay its transaction expenses and
to make redemptions and distributions immediately before the transaction
(except (a) redemptions in the ordinary course of its business required by
section 22(e) of the Investment Company Act and (b) regular, normal dividend
distributions made to conform to its policy of distributing all or
substantially all of its income and gains to avoid the obligation to pay
federal income tax and/or the excise tax under Section 4982 of the Code) will
be included as assets it held immediately before the transaction.
5. As of the date of the transaction, the fair market value of the
Acquiring Fund Shares issued to Acquired Fund will be approximately equal to
the fair market value of the Acquired Assets minus the Assumed Liabilities.
Acquired Fund will not receive any consideration from Acquiring Fund in
connection with the acquisition of the Acquired Assets other than the
assumption of the Assumed Liabilities and the issuance of such Acquiring Fund
Shares.
6. The Assumed Liabilities assumed by Acquiring Fund plus the Assumed
Liabilities, if any, to which the transferred assets are subject were incurred
by Acquired Fund in the ordinary course of its business. Acquired Fund is not
aware of any liabilities of any kind other than the Assumed Liabilities.
A-18
7. As of the Closing Date, the adjusted basis and fair market value of the
Acquired Assets will equal or exceed the Assumed Liabilities for purposes of
Section 357(d) of the Code.
8. Acquired Fund currently conducts its historic business within the
meaning of Treasury Regulation Section 1.368-1(d)(2), which provides that, in
general, a corporation's historic business is the business it has conducted
most recently, but does not include a business that the corporation enters into
as part of a plan of reorganization. All of the assets held by Acquired Fund as
of the opening of business on August 2, 2004 (the date the Acquiring Fund
Adviser became investment adviser to Acquired Fund) were Acquired Fund's
historic business assets within the meaning of Treasury Regulation Section
1.368-1(d)(3) (which provides that a corporation's historic business assets are
the assets used in its historic business).
9. Acquired Fund will distribute to its shareholders the Acquiring Fund
Shares it receives pursuant to the transaction, and its other properties, if
any, and will be liquidated promptly thereafter.
10. The expenses of Acquired Fund incurred by it in connection with the
transaction will be only such expenses that are solely and directly related to
the transaction in accordance with Rev. Rul. 73-54, 1973-1 C.B. 187. Acquired
Fund will not pay any expenses incurred by its shareholders in connection with
the transaction.
11. There is no, and never has been any, indebtedness between Acquiring
Fund and Acquired Fund.
12. Acquired Fund has properly elected to be a regulated investment
company under Subchapter M of the Code, has qualified for the special tax
treatment afforded regulated investment companies under Subchapter M of the
Code for each taxable year since inception, and qualifies for such treatment as
of the time of the Closing.
13. Acquired Fund meets the requirements of an "investment company" in
Section 368(a)(2)(F) of the Code.
14. Acquired Fund is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
15. Acquired Fund does not pay compensation to any shareholder-employee.
16. Acquired Fund shareholders will not have dissenters' or appraisal
rights in the transaction.
17. The transaction is being undertaken for valid and substantial business
purposes, including facilitating Acquired Fund's becoming a member of the
Pioneer family of material funds, which, in the long term, is intended to result
in lower expenses and increased assets.
18. Acquired Fund has no outstanding warrants, options, convertible
securities or any other type of right pursuant to which any person could acquire
stock in Acquired Fund.
* * * * *
A-19
The undersigned officer of Safeco Trust is authorized to make all of the
representations set forth herein, and the undersigned is authorized to execute
this certificate on behalf of Acquired Fund. The undersigned recognizes that
Wilmer Cutler Pickering Hale and Dorr LLP will rely upon the foregoing
representations in evaluating the United States federal income tax consequences
of the transaction and rendering its opinion pursuant to Section 8.5 of the
Agreement. If, prior to the date of the transaction, any of the representations
set forth herein ceases to be accurate, the undersigned agrees to deliver
immediately to Wilmer Cutler Pickering Hale and Dorr LLP a written notice to
that effect.
SAFECO TRUST, on behalf of SAFECO FUND
By: ____________________________________
Name: ______________________________
Title: _____________________________
A-20
Exhibit A-2 -- Form of Agreement and Plan of Reorganization (F Reorganization)
- ------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made this
day of ______________, 2004, by and between [Pioneer Trust], a [Delaware
statutory][Massachusetts business] trust (the "Acquiring Trust"), on behalf of
its series [name of Pioneer Fund] (the "Acquiring Fund"), with its principal
place of business at 60 State Street, Boston, Massachusetts 02109, and [Safeco
Trust], a Delaware statutory trust (the "Safeco Trust"), on behalf of its
series [name of Safeco Fund] (the "Acquired Fund"), with its principal place of
business at 5069 154th Place N.E., Redmond, Washington 98052. The Acquiring
Fund and the Acquired Fund are sometimes referred to collectively herein as the
"Funds" and individually as a "Fund."
This Agreement is intended to be and is adopted as a plan of a
"reorganization" as defined in Section 368(a)(1)(F) of the United States
Internal Revenue Code of 1986, as amended (the "Code") and the Treasury
Regulations thereunder. The reorganization (the "Reorganization") will consist
of (1) the transfer of all of the assets of the Acquired Fund to the Acquiring
Fund in exchange solely for (A) the issuance of Investor Class shares of
beneficial interest of the Acquiring Fund (collectively, the "Acquiring Fund
Shares" and each, an "Acquiring Fund Share") to the Acquired Fund, and (B) the
assumption by the Acquiring Fund of the liabilities of the Acquired Fund
(collectively, the "Assumed Liabilities"), and (2) the distribution by the
Acquired Fund, on or promptly after the closing date of the Reorganization (the
"Closing Date") as provided herein, of the Acquiring Fund Shares to the
shareholders of the Acquired Fund in liquidation and dissolution of the
Acquired Fund, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, the Acquiring Trust and the Safeco Trust are each registered
investment companies classified as management companies of the open-end type.
WHEREAS, the Acquiring Fund is authorized to issue shares of beneficial
interest.
WHEREAS, the Board of Trustees of the Safeco Trust has determined that the
Reorganization is in the best interests of the Acquired Fund shareholders and
is not dilutive of the interests of those shareholders.
NOW, THEREFORE, in consideration of the premises of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND ASSUMPTION OF THE ASSUMED LIABILITIES; LIQUIDATION AND
TERMINATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Acquired Fund will
transfer all of its assets as set forth in Paragraph 1.2 (the "Acquired
Assets") to the Acquiring Fund free and clear of all liens and encumbrances
(other than those arising under the Securities Act of 1933, as amended (the
"Securities Act"), liens for taxes not yet due and contractual restrictions on
the transfer of the Acquired Assets) and the Acquiring Fund agrees in exchange
therefor: (i) to issue to the Acquired Fund the number of Acquiring Fund
Shares, including fractional Acquiring Fund Shares, with an aggregate net asset
value ("NAV") equal to the NAV of the Acquired Fund, as determined in the
manner set forth in Paragraphs 2.1 and 2.2; and (ii) to assume the Assumed
Liabilities. Such transactions shall take place at the Closing (as defined in
Paragraph 3.1 below).
1.2 (a) The Acquired Assets shall consist of all of the Acquired Fund's
property, including, without limitation, all portfolio securities and
instruments, dividends and interest receivables, cash, goodwill, contractual
rights of the Acquired Fund or the Safeco Trust in respect of the Acquired
Fund, all other intangible property owned by the Acquired Fund, originals or
copies of all books and records of the Acquired Fund, and all other assets of
the Acquired Fund on the Closing Date. The Acquiring Fund shall also be
entitled to receive (or, to the extent agreed upon between the Safeco Trust and
the Acquiring Trust, be provided access to) copies of all records that the
Safeco Trust is required to maintain under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), and the rules of the Securities and
Exchange Commission (the "Commission") thereunder to the extent such records
pertain to the Acquired Fund.
(b) The Acquired Fund has provided the Acquiring Fund with a list of all
of the Acquired Fund's securities and other assets as of the date of execution
of this Agreement, and the Acquiring Fund has provided the Acquired Fund with a
copy of the current fundamental investment policies and restrictions and fair
value procedures applicable to the Acquiring Fund. The Acquired Fund reserves
the right to sell any of such securities or other assets before the Closing
Date (except to the extent sales may be limited by representations of the
Acquired Fund contained herein and made in connection with the issuance of the
tax opinion provided for in Paragraph 8.5 hereof).
1.3 The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations that are or will become due prior to the Closing.
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1.4 On or as soon after the Closing Date as is conveniently practicable
(the "Liquidation Date"), the Safeco Trust shall liquidate the Acquired Fund
and distribute pro rata to its shareholders of record, determined as of the
close of regular trading on the New York Stock Exchange on the Closing Date
(the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by the
Acquired Fund pursuant to Paragraph 1.1 hereof. Each Acquired Fund Shareholder
shall receive the number of Acquiring Fund Shares that have an aggregate NAV
equal to the aggregate NAV of the shares of beneficial interest of the Acquired
Fund ("Acquired Fund Shares") held of record by such Acquired Fund Shareholder
on the Closing Date. Such liquidation and distribution will be accomplished by
the Safeco Trust instructing the Acquiring Trust to transfer the Acquiring Fund
Shares then credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share records of the Acquiring Fund
established and maintained by the Acquiring Fund's transfer agent in the names
of the Acquired Fund Shareholders and representing the respective pro rata
number of the Acquiring Fund Shares due the Acquired Fund Shareholders. The
Safeco Trust shall promptly provide the Acquiring Trust with evidence of such
liquidation and distribution. All issued and outstanding Acquired Fund Shares
will simultaneously be cancelled on the books of the Acquired Fund, and the
Acquired Fund will be dissolved. The Acquiring Fund shall not issue
certificates representing the Acquiring Fund Shares in connection with such
exchange.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent for its Investor Class shares. Any certificates
representing ownership of Acquired Fund Shares that remain outstanding on the
Closing Date shall be deemed to be cancelled and shall no longer evidence
ownership of Acquired Fund Shares.
1.6 Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
name other than the registered holder of the Acquired Fund Shares on the books
of the Acquired Fund as of that time shall, as a condition of such issuance and
transfer, be paid by the person to whom such Acquiring Fund Shares are to be
issued and transferred.
1.7 Any reporting responsibility of the Safeco Trust with respect to the
Acquired Fund for taxable periods ending on or before the Closing Date,
including, but not limited to, the responsibility for filing of regulatory
reports, Tax Returns (as defined in Paragraph 4.1), or other documents with the
Commission, any state securities commissions, and any federal, state or local
tax authorities or any other relevant regulatory authority, is and shall remain
the responsibility of the Safeco Trust.
2. VALUATION
2.1 The NAV of the Acquiring Fund Shares and the NAV of the Acquired Fund
shall, in each case, be determined as of the close of business (4:00 p.m.,
Boston time) on the Closing Date (the "Valuation Time"). The NAV of each
Acquiring Fund Share shall be computed by Pioneer Investment Management, Inc.
(the "Acquiring Fund Adviser") in the manner set forth in the Acquiring Fund's
Declaration of Trust (the "Declaration"), or By-Laws, and the Acquiring Fund's
then-current prospectus and statement of additional information. The NAV of the
Acquired Fund and of each Institutional Class shares thereof shall be computed
by Safeco Asset Management, Inc. (the "Acquired Fund Administrator") by
calculating the value of the Acquired Assets and by subtracting therefrom the
amount of the liabilities of the Acquired Fund on the Closing Date included on
the Statement of Assets and Liabilities of the Acquired Fund delivered pursuant
to Paragraph 5.7 (the "Statement of Assets and Liabilities"), said assets and
liabilities to be valued in the manner set forth in the Acquired Fund's then
current prospectus and statement of additional information. Pioneer Investment
Management, Inc. (the "Acquiring Fund Adviser") shall confirm to the Acquiring
Fund the NAV of the Acquired Fund.
2.2 The number of Acquiring Fund Shares to be issued (including fractional
shares, if any) in exchange for the Acquired Assets and the assumption of the
Assumed Liabilities shall be determined by Pioneer Investment Management, Inc.
(the "Acquiring Fund Adviser") by dividing the NAV of the Acquired Fund, as
determined in accordance with Paragraph 2.1, by the NAV of each Acquiring Fund
Share, as determined in accordance with Paragraph 2.1.
2.3 The Acquired Fund shall cause the Acquired Fund Administrator to
deliver a copy of its valuation report to the Acquiring Fund at Closing. All
computations of value shall be made by the Acquired Fund Administrator in
accordance with its regular practice as pricing agent for the Acquired Fund.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be December 8, 2004, or such later date as the
parties may agree to in writing. All acts necessary to consummation the
Reorganization (the "Closing") shall be deemed to take place simultaneously as
of 5:00 p.m. (Eastern time) on the Closing Date unless otherwise provided. The
Closing shall be held at the offices of Wilmer Cutler Pickering Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts, or at such other place as the
parties may agree.
3.2 Portfolio securities that are held other than in book-entry form in
the name of State Street Bank and Trust Company (the "Acquired Fund Custodian")
as record holder for the Acquired Fund shall be presented by the Acquired Fund
to Brown Brothers Harriman & Co.
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(the "Acquiring Fund Custodian") for examination no later than three business
days preceding the Closing Date. Such portfolio securities shall be delivered
by the Acquired Fund to the Acquiring Fund Custodian for the account of the
Acquiring Fund on the Closing Date, duly endorsed in proper form for transfer,
in such condition as to constitute good delivery thereof in accordance with the
custom of brokers, and shall be accompanied by all necessary federal and state
stock transfer stamps or a check for the appropriate purchase price thereof.
Portfolio securities held of record by the Acquired Fund Custodian in
book-entry form on behalf of the Acquired Fund shall be delivered by the
Acquired Fund Custodian through the Depository Trust Company to the Acquiring
Fund Custodian and by the Acquiring Fund Custodian recording the beneficial
ownership thereof by the Acquiring Fund on the Acquiring Fund Custodian's
records. Any cash shall be delivered by the Acquired Fund Custodian
transmitting immediately available funds by wire transfer to the Acquiring Fund
Custodian the cash balances maintained by the Acquired Fund Custodian and the
Acquiring Fund Custodian crediting such amount to the account of the Acquiring
Fund.
3.3 The Acquiring Fund Custodian shall deliver within one business day
after the Closing a certificate of an authorized officer stating that: (a) the
Acquired Assets have been delivered in proper form to the Acquiring Fund on the
Closing Date, and (b) all necessary transfer taxes including all applicable
federal and state stock transfer stamps, if any, have been paid, or provision
for payment has been made in conjunction with the delivery of portfolio
securities as part of the Acquired Assets.
3.4 If on the Closing Date (a) the New York Stock Exchange is closed to
trading or trading thereon shall be restricted or (b) trading or the reporting
of trading on such exchange or elsewhere is disrupted so that accurate
appraisal of the NAV of the Acquired Fund pursuant to Paragraph 2.1 is
impracticable, the Closing Date shall be postponed until the first business day
after the day when trading shall have been fully resumed and reporting shall
have been restored.
3.5 The Acquired Fund shall deliver at the Closing a list of the names,
addresses, federal taxpayer identification numbers and backup withholding and
nonresident alien withholding status and certificates of the Acquired Fund
Shareholders and the number and percentage ownership of outstanding Acquired
Fund Shares owned by each Acquired Fund Shareholder as of the Valuation Time,
certified by the President or a Secretary of the Safeco Trust and its
Treasurer, Secretary or other authorized officer (the "Shareholder List") as
being an accurate record of the information (a) provided by the Acquired Fund
Shareholders, (b) provided by the Acquired Fund Custodian, or (c) derived from
the Safeco Trust's records by such officers or one of the Safeco Trust's
service providers. The Acquiring Fund shall issue and deliver to the Acquired
Fund a confirmation evidencing the Acquiring Fund Shares to be credited on the
Closing Date, or provide evidence satisfactory to the Acquired Fund that such
Acquiring Fund Shares have been credited to the Acquired Fund's account on the
books of the Acquiring Fund. At the Closing, each party shall deliver to the
other such bills of sale, checks, assignments, stock certificates, receipts or
other documents as such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 Except as set forth on Schedule 4.1 hereto, the Safeco Trust, on
behalf of the Acquired Fund, represents, warrants and covenants to the
Acquiring Fund, which representations, warranties and covenants will be true
and correct on the date hereof and on the Closing Date as though made on and as
of the Closing Date, as follows:
(a) The Acquired Fund is a series of the Safeco Trust. The Safeco
Trust is a statutory trust validly existing and in good standing under the
laws of the State of Delaware and has the power to own all of its
properties and assets and, subject to approval by the Acquired Fund's
shareholders, to perform its obligations under this Agreement. The Acquired
Fund is not required to qualify to do business in any jurisdiction in which
it is not so qualified or where failure to qualify would subject it to any
material liability or disability. Each of the Safeco Trust and the Acquired
Fund has all necessary federal, state and local authorizations to own all
of its properties and assets and to carry on its business as now being
conducted;
(b) The Safeco Trust is a registered investment company classified as
a management company of the open-end type, and its registration with the
Commission as an investment company under the Investment Company Act is in
full force and effect;
(c) The Safeco Trust is not in violation of, and the execution and
delivery of this Agreement and the performance of its obligations under
this Agreement in respect of the Acquired Fund will not result in a
violation of, any provision of the Safeco Trust's Trust Instrument or
By-Laws or any material agreement, indenture, instrument, contract, lease
or other undertaking with respect to the Acquired Fund to which the Safeco
Trust is a party or by which the Acquired Fund or any of its assets are
bound;
(d) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or to its
knowledge threatened against the Acquired Fund or any of the Acquired
Fund's properties or assets. The Acquired Fund knows of no facts which
might form the basis for the institution of such proceedings. Neither the
Safeco Trust nor the Acquired Fund is a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which materially adversely affects the Acquired Fund's business or its
ability to consummate the transactions contemplated herein or would be
binding upon the Acquiring Fund as the successor to the Acquired Fund;
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(e) The Acquired Fund has no material contracts or other commitments
(other than this Agreement or agreements for the purchase and sale of
securities entered into in the ordinary course of business and consistent
with its obligations under this Agreement) which will not be terminated at
or prior to the Closing Date and no such termination will result in
liability to the Acquired Fund (or the Acquiring Fund);
(f) The statement of assets and liabilities of the Acquired Fund, and
the related statements of income and changes in NAV, as of and for the
fiscal year ended December 31, 2003 have been audited by Ernst & Young LLP,
independent registered public accounting firm, and are in accordance with
generally accepted accounting principles ("GAAP") consistently applied and
fairly reflect, in all material respects, the financial condition of the
Acquired Fund as of such date and the results of its operations for the
period then ended, and all known liabilities, whether actual or contingent,
of the Acquired Fund as of the date thereof are disclosed therein. The
Statement of Assets and Liabilities will be in accordance with GAAP
consistently applied and will fairly reflect, in all material respects, the
financial condition of the Acquired Fund as of such date and the results of
its operations for the period then ended. Except for the Assumed
Liabilities, the Acquired Fund will not have any known or contingent
liabilities on the Closing Date. No significant deficiency, material
weakness, fraud, significant change or other factor that could
significantly affect the internal controls of the Acquired Fund has been
disclosed or is required to be disclosed in the Acquired Fund's reports on
Form N-CSR to enable the chief executive officer and chief financial
officer or other officers of the Acquired Fund to make the certifications
required by the Sarbanes-Oxley Act, and no deficiency, weakness, fraud,
change, event or other factor exists that will be required to be disclosed
in the Acquiring Fund's Form N-CSR after the Closing Date;
(g) Since December 31, 2003, except as specifically disclosed in the
Acquired Fund's prospectus, its statement of additional information as in
effect on the date of this Agreement, or its semi-annual report for the
period ended June 30, 2004, there has not been any material adverse change
in the Acquired Fund's financial condition, assets, liabilities, business
or prospects, or any incurrence by the Acquired Fund of indebtedness,
except for normal contractual obligations incurred in the ordinary course
of business or in connection with the settlement of purchases and sales of
portfolio securities. For the purposes of this subparagraph (g) (but not
for any other purpose of this Agreement), a decline in NAV per Acquired
Fund Share arising out of its normal investment operations or a decline in
market values of securities in the Acquired Fund's portfolio or a decline
in net assets of the Acquired Fund as a result of redemptions shall not
constitute a material adverse change;
(h) (A) For each taxable year of its operation since its inception,
the Acquired Fund has met, and for the current taxable year it will meet,
the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and will qualify as such as of
the Closing Date and will satisfy the diversification requirements of
Section 851(b)(3) of the Code without regard to the last sentence of
Section 851(d) of the Code. The Acquired Fund has not taken any action,
caused any action to be taken or caused any action to fail to be taken
which action or failure could cause the Acquired Fund to fail to qualify as
a regulated investment company under the Code;
(B) Within the times and in the manner prescribed by law, the
Acquired Fund has properly filed on a timely basis all Tax Returns (as
defined below) that it was required to file, and all such Tax Returns
were complete and accurate in all respects. The Acquired Fund has not
been informed by any jurisdiction that the jurisdiction believes that
the Acquired Fund was required to file any Tax Return that was not
filed; and the Acquired Fund does not know of any basis upon which a
jurisdiction could assert such a position;
(C) The Acquired Fund has timely paid, in the manner prescribed
by law, all Taxes (as defined below), which were due and payable or
which were claimed to be due;
(D) All Tax Returns filed by the Acquired Fund constitute
complete and accurate reports of the respective Tax liabilities and
all attributes of the Acquired Fund or, in the case of information
returns and payee statements, the amounts required to be reported, and
accurately set forth all items required to be included or reflected in
such returns;
(E) The Acquired Fund has not waived or extended any applicable
statute of limitations relating to the assessment or collection of
Taxes;
(F) The Acquired Fund has not been notified that any examinations
of the Tax Returns of the Acquired Fund are currently in progress or
threatened, and no deficiencies have been asserted or assessed against
the Acquired Fund as a result of any audit by the Internal Revenue
Service or any state, local or foreign taxing authority, and, to its
knowledge, no such deficiency has been proposed or threatened;
(G) The Acquired Fund has no actual or potential liability for
any Tax obligation of any taxpayer other than itself. The Acquired
Fund is not and has never been a member of a group of corporations
with which it has filed (or been required to file) consolidated,
combined or unitary Tax Returns. The Acquired Fund is not a party to
any Tax allocation, sharing, or indemnification agreement;
A-24
(H) The unpaid Taxes of the Acquired Fund for tax periods through
the Closing Date do not exceed the accruals and reserves for Taxes
(excluding accruals and reserves for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on
the Statement of Assets and Liabilities, rather than in any notes
thereto (the "Tax Reserves"). All Taxes that the Acquired Fund is or
was required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been timely paid to the
proper governmental agency;
(I) The Acquired Fund has delivered to the Acquiring Fund or made
available to the Acquiring Fund complete and accurate copies of all
Tax Returns of the Acquired Fund, together with all related
examination reports and statements of deficiency for all periods not
closed under the applicable statutes of limitations and complete and
correct copies of all private letter rulings, revenue agent reports,
information document requests, notices of proposed deficiencies,
deficiency notices, protests, petitions, closing agreements,
settlement agreements, pending ruling requests and any similar
documents submitted by, received by or agreed to by or on behalf of
the Acquired Fund. The Acquired Fund has disclosed on its federal
income Tax Returns all positions taken therein that could give rise to
a substantial understatement of federal income Tax within the meaning
of Section 6662 of the Code;
(J) The Acquired Fund has not undergone, has not agreed to
undergo, and is not required to undergo (nor will it be required as a
result of the transactions contemplated in this Agreement to undergo)
a change in its method of accounting resulting in an adjustment to its
taxable income pursuant to Section 481 of the Code. The Acquired Fund
will not be required to include any item of income in, or exclude any
item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any (i)
change in method of accounting for a taxable period ending on or prior
to the Closing Date under Section 481(c) of the Code (or any
corresponding or similar provision of state, local or foreign income
Tax law); (ii) "closing agreement" as described in Section 7121 of the
Code (or any corresponding or similar provision of state, local or
foreign income Tax law) executed on or prior to the Closing Date;
(iii) installment sale or open transaction disposition made on or
prior to the Closing Date; or (iv) prepaid amount received on or prior
to the Closing Date;
(K) The Acquired Fund has not taken or agreed to take any action,
and is not aware of any agreement, plan or other circumstance, that is
inconsistent with the representations set forth in Annex B;
(L) There are (and as of immediately following the Closing there
will be) no liens on the assets of the Acquired Fund relating to or
attributable to Taxes, except for Taxes not yet due and payable;
(M) The Tax bases of the assets of the Acquired Fund are
accurately reflected on the Acquired Fund's Tax books and records;
(N) The Acquired Fund has not incurred (or been allocated) an
"overall foreign loss" as defined in Section 904(f)(2) of the Code
which has not been previously recaptured in full as provided in
Sections 904(f)(2) and/or 904(f)(3) of the Code;
(O) The Acquired Fund is not a party to a gain recognition
agreement under Section 367 of the Code;
(P) The Acquired Fund does not own any interest in an entity that
is characterized as a partnership for income tax purposes;
(Q) The Acquired Fund's Tax attributes are not limited under the
Code (including but not limited to any capital loss carry forward
limitations under Sections 382 or 383 of the Code and the Treasury
Regulations thereunder) or comparable provisions of state law, except
as set forth on Schedule 4.1; and
(R) For purposes of this Agreement, "Taxes" or "Tax" shall mean
all taxes, charges, fees, levies or other similar assessments or
liabilities, including without limitation income, gross receipts, ad
valorem, premium, value-added, excise, real property, personal
property, sales, use, transfer, withholding, employment, unemployment,
insurance, social security, business license, business organization,
environmental, workers compensation, payroll, profits, license, lease,
service, service use, severance, stamp, occupation, windfall profits,
customs, duties, franchise and other taxes imposed by the United
States of America or any state, local or foreign government, or any
agency thereof, or other political subdivision of the United States or
any such government, and any interest, fines, penalties, assessments
or additions to tax resulting from, attributable to or incurred in
connection with any tax or any contest or dispute thereof; and "Tax
Returns" shall mean all reports, returns, declarations, statements or
other information required to be supplied to a governmental or
regulatory authority or agency, or to any other person, in connection
with Taxes and any associated schedules or work papers produced in
connection with such items;
(i) All issued and outstanding Acquired Fund Shares are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and nonassessable by the Acquired Fund. All of the issued and outstanding
Acquired Fund Shares will, at the time of Closing, be held of record by the
persons and in the amounts set forth in the Shareholder List submitted to
the Acquiring Fund pursuant to
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Paragraph 3.5 hereof. The Acquired Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any Acquired
Fund Shares, nor is there outstanding any security convertible into any
Acquired Fund Shares;
(j) At the Closing Date, the Acquired Fund will have good and
marketable title to the Acquired Assets, and full right, power and
authority to sell, assign, transfer and deliver the Acquired Assets to the
Acquiring Fund, and, upon delivery and payment for the Acquired Assets, the
Acquiring Fund will acquire good and marketable title thereto, subject to
no restrictions on the full transfer thereof, except such restrictions as
might arise under the Securities Act;
(k) The Safeco Trust has the trust power and authority to enter into
and perform its obligations under this Agreement. The execution, delivery
and performance of this Agreement have been duly authorized by all
necessary action on the part of the Safeco Trust's Board of Trustees, and,
subject to the approval of the Acquired Fund's shareholders, assuming due
authorization, execution and delivery by the Acquiring Fund, this Agreement
will constitute a valid and binding obligation of the Acquired Fund,
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating
to or affecting creditors' rights and to general equity principles;
(l) The information to be furnished by the Acquired Fund to the
Acquiring Fund for use in applications for orders, registration statements,
proxy materials and other documents which may be necessary in connection
with the transactions contemplated hereby and any information necessary to
compute the total return of the Acquired Fund shall be accurate and
complete and shall comply in all material respects with federal securities
and other laws and regulations applicable thereto;
(m) The information included in the proxy statement (the "Proxy
Statement") forming part of the Acquiring Fund's Registration Statement on
Form N-14 filed in connection with this Agreement (the "Registration
Statement") that has been furnished in writing by the Acquired Fund to the
Acquiring Fund for inclusion in the Registration Statement, on the
effective date of that Registration Statement and on the Closing Date, will
conform in all material respects to the applicable requirements of the
Securities Act, the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the Investment Company Act and the rules and
regulations of the Commission thereunder and will not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading;
(n) Upon the effectiveness of the Registration Statement, no consent,
approval, authorization or order of any court or governmental authority is
required for the consummation by the Safeco Trust or the Acquired Fund of
the transactions contemplated by this Agreement;
(o) All of the issued and outstanding Acquired Fund Shares have been
offered for sale and sold in conformity with all applicable federal and
state securities laws, except as may have been previously disclosed in
writing to the Acquiring Fund;
(p) The prospectus and statement of additional information of the
Acquired Fund, and any amendments or supplements thereto, furnished to the
Acquiring Fund, did not as of their dates or the dates of their
distribution to the public contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances in which such
statements were made, not misleading;
(q) The Acquired Fund currently complies in all material respects
with, and since its organization has complied in all material respects
with, the requirements of, and the rules and regulations under, the
Investment Company Act, the Securities Act, the Exchange Act, state "Blue
Sky" laws and all other applicable federal and state laws or regulations.
The Acquired Fund currently complies in all material respects with, and
since its organization has complied in all material respects with, all
investment objectives, policies, guidelines and restrictions and any
compliance procedures established by the Safeco Trust with respect to the
Acquired Fund. All advertising and sales material used by the Acquired Fund
complies in all material respects with and has complied in all material
respects with the applicable requirements of the Securities Act, the
Investment Company Act, the rules and regulations of the Commission, and,
to the extent applicable, the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD") and any applicable state regulatory
authority. All registration statements, prospectuses, reports, proxy
materials or other filings required to be made or filed with the
Commission, the NASD or any state securities authorities by the Acquired
Fund have been duly filed and have been approved or declared effective, if
such approval or declaration of effectiveness is required by law. Such
registration statements, prospectuses, reports, proxy materials and other
filings under the Securities Act, the Exchange Act and the Investment
Company Act (i) are or were in compliance in all material respects with the
requirements of all applicable statutes and the rules and regulations
thereunder and (ii) do not or did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not false or misleading;
(r) The Acquired Fund has previously provided to the Acquiring Fund
(and at the Closing will provide an update through the Closing Date of such
information) data which supports a calculation of the Acquired Fund's total
return for all periods since the
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organization of the Acquired Fund. Such data has been prepared in
accordance in all material respects with the requirements of the Investment
Company Act and the regulations thereunder and the rules of the NASD;
(s) Neither the Acquired Fund nor, to the knowledge of the Acquired
Fund, any "affiliated person" of the Acquired Fund has been convicted of
any felony or misdemeanor, described in Section 9(a)(1) of the Investment
Company Act, nor, to the knowledge of the Acquired Fund, has any affiliated
person of the Acquired Fund been the subject, or presently is the subject,
of any proceeding or investigation with respect to any disqualification
that would be a basis for denial, suspension or revocation of registration
as an investment adviser under Section 203(e) of the Investment Advisers
Act of 1940, as amended (the "Investment Advisers Act"), or Rule
206(4)-4(b) thereunder or of a broker-dealer under Section 15 of the
Exchange Act, or for disqualification as an investment adviser, employee,
officer or director of an investment company under Section 9 of the
Investment Company Act; and
(t) The tax representation certificate to be delivered by Safeco Trust
on behalf of the Acquired Fund to the Acquiring Trust and Wilmer Cutler
Pickering Hale and Dorr LLP at the Closing pursuant to Paragraph 7.4 (the
"Acquired Fund Tax Representation Certificate") will not on the Closing
Date contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein not misleading.
4.2 Except as set forth on Schedule 4.2 hereto, the Acquiring Trust, on
behalf of the Acquiring Fund, represents, warrants and covenants to the
Acquired Fund, which representations, warranties and covenants will be true and
correct on the date hereof and on the Closing Date as though made on and as of
the Closing Date, as follows:
(a) The Acquiring Fund is a series of the Acquiring Trust. The
Acquiring Fund has not commenced operations and will not do so until the
Closing. The Acquiring Trust is a [statutory][business] trust duly
organized, validly existing and in good standing under the laws of the
[State of Delaware][Commonwealth of Massachusetts]. The Acquiring Trust has
the power to own all of its properties and assets and to perform the
obligations under this Agreement. The Acquiring Fund is not required to
qualify to do business in any jurisdiction in which it is not so qualified
or where failure to qualify would subject it to any material liability or
disability. Each of the Acquiring Trust and the Acquiring Fund has all
necessary federal, state and local authorizations to own all of its
properties and assets and to carry on its business as now being conducted;
(b) The Acquiring Trust is a registered investment company classified
as a management company of the open-end type, and its registration with the
Commission as an investment company under the Investment Company Act is in
full force and effect;
(c) The Acquiring Fund's registration statement on Form N-1A that will
be in effect on the Closing Date, and the prospectus and statement of
additional information of the Acquiring Fund included therein, will conform
in all material respects with the applicable requirements of the Securities
Act and the Investment Company Act and the rules and regulations of the
Commission thereunder, and did not as of the effective date thereof and
will not as of the Closing Date contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading;
(d) The Registration Statement, the Proxy Statement and statement of
additional information with respect to the Acquiring Fund, each dated [ ],
2004, and any amendments or supplements thereto in effect on or prior to
the Closing Date included in the Registration Statement (other than written
information furnished by the Acquired Fund for inclusion therein, as
covered by the Acquired Fund's warranty in Paragraph 4.1(m) hereof) will
conform in all material respects to the applicable requirements of the
Securities Act and the Investment Company Act and the rules and regulations
of the Commission thereunder. Neither the Registration Statement nor the
Proxy Statement (other than written information furnished by the Acquired
Fund for inclusion therein, as covered by the Acquired Fund's warranty in
Paragraph 4.1(m) hereof) includes or will include any untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(e) The Acquiring Trust is not in violation of, and the execution and
delivery of this Agreement and performance of its obligations under this
Agreement will not result in a violation of, any provisions of the
Declaration of Trust or by-laws of the Acquiring Trust or any material
agreement, indenture, instrument, contract, lease or other undertaking with
respect to the Acquiring Fund to which the Acquiring Trust is a party or by
which the Acquiring Fund or any of its assets is bound;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or threatened
against the Acquiring Fund or any of the Acquiring Fund's properties or
assets. The Acquiring Fund knows of no facts which might form the basis for
the institution of such proceedings. Neither the Acquiring Trust nor the
Acquiring Fund is a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body which materially
adversely affects the Acquiring Fund's business or its ability to
consummate the transactions contemplated herein;
A-27
(g) The Acquiring Fund has no actual or potential liability for any
Tax obligation of any taxpayer other than itself. Acquiring Fund is not and
has never been a member of a group of corporations with which it has filed
(or been required to file) consolidated, combined or unitary Tax Returns.
The Acquiring Fund is not a party to any Tax allocation, sharing, or
indemnification agreement;
(h) The Acquiring Fund has not taken or agreed to take any action, and
is not aware of any agreement, plan or other circumstance, that is
inconsistent with the representations set forth in Annex A;
(i) The Acquiring Fund currently complies, and at all times since its
organization has complied, in all material respects with the requirements
of, and the rules and regulations under, the Investment Company Act, the
Securities Act, the Exchange Act, state "Blue Sky" laws and all other
applicable federal and state laws or regulations. The Acquiring Fund
currently complies in all material respects with, and since its
organization has complied in all material respects with, all investment
objectives, policies, guidelines and restrictions and any compliance
procedures established by the Acquiring Trust with respect to the Acquiring
Fund. All advertising and sales material used by the Acquiring Fund
complies in all material respects with and has complied in all material
respects with the applicable requirements of the Securities Act, the
Investment Company Act, the rules and regulations of the Commission, and,
to the extent applicable, the Conduct Rules of the NASD and any applicable
state regulatory authority. All registration statements, prospectuses,
reports, proxy materials or other filings required to be made or filed with
the Commission, the NASD or any state securities authorities by the
Acquiring Fund have been duly filed and have been approved or declared
effective, if such approval or declaration of effectiveness is required by
law. Such registration statements, prospectuses, reports, proxy materials
and other filings under the Securities Act, the Exchange Act and the
Investment Company Act (i) are or were in compliance in all material
respects with the requirements of all applicable statutes and the rules and
regulations thereunder and (ii) do not or did not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not false or misleading;
(j) The authorized capital of the Acquiring Fund consists of an
unlimited number of shares of beneficial interest, no par value per share.
As of the Closing Date, the Acquiring Fund will be authorized to issue an
unlimited number of shares of beneficial interest, no par value per share.
The Acquiring Fund Shares to be issued and delivered to the Acquired Fund
for the account of the Acquired Fund Shareholders pursuant to the terms of
this Agreement will have been duly authorized on the Closing Date and, when
so issued and delivered, will be duly and validly issued, fully paid and
non-assessable. The Acquiring Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any Acquiring Fund
shares, nor is there outstanding any security convertible into any
Acquiring Fund shares, nor will the Acquiring Fund have any issued or
outstanding shares on or before the Closing Date other than those issued to
Acquiring Fund Adviser or one of its affiliates, which shares shall be
redeemed, for an amount equal to the price paid therefor, at or before the
Closing;
(k) The Acquiring Trust has the trust power and authority to enter
into and perform its obligations under this Agreement. The execution,
delivery and performance of this Agreement have been duly authorized by all
necessary action on the part of the Acquiring Trust's Board of Trustees,
and, assuming due authorization, execution and delivery by the Acquired
Fund, this Agreement will constitute a valid and binding obligation of the
Acquiring Fund, enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights and to general equity
principles;
(l) The information to be furnished in writing by the Acquiring Fund
or the Acquiring Fund Adviser for use in applications for orders,
registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all
material respects with federal securities and other laws and regulations
applicable thereto or the requirements of any form for which its use is
intended, and shall not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the information provided
not misleading;
(m) No consent, approval, authorization or order of or filing with any
court or governmental authority is required for the execution of this
Agreement or the consummation of the transactions contemplated by the
Agreement by the Acquiring Fund, except for the registration of the
Acquiring Fund Shares under the Securities Act and the Investment Company
Act;
(n) The prospectus and statement of additional information of the
Acquiring Fund, and any amendments or supplements thereto, furnished to the
Acquired Fund, did not as of their dates or the dates of their distribution
to the public contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which such
statements were made, not misleading;
(o) Neither the Acquiring Fund nor, to the knowledge of the Acquiring
Fund, any "affiliated person" of the Acquiring Fund has been convicted of
any felony or misdemeanor, described in Section 9(a)(1) of the Investment
Company Act, nor, to the knowledge
A-28
of the Acquiring Fund, has any affiliated person of the Acquiring Fund been
the subject, or presently is the subject, of any proceeding or
investigation with respect to any disqualification that would be a basis
for denial, suspension or revocation of registration as an investment
adviser under Section 203(e) of the Investment Advisers Act or Rule
206(4)-4(b) thereunder or of a broker-dealer under Section 15 of the
Exchange Act, or for disqualification as an investment adviser, employee,
officer or director of an investment company under Section 9 of the
Investment Company Act; and
(p) The tax representation certificate to be delivered by the
Acquiring Trust on behalf of the Acquiring Fund to the Safeco Trust and
Wilmer Cutler Pickering Hale and Dorr LLP at Closing pursuant to Section
6.3 (the "Acquiring Fund Tax Representation Certificate") will not on the
Closing Date contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not
misleading.
5. COVENANTS OF THE FUNDS
5.1 The Acquired Fund will operate the Acquired Fund's business in the
ordinary course of business between the date hereof and the Closing Date. It is
understood that such ordinary course of business will include the declaration
and payment of customary dividends and other distributions and any other
dividends and other distributions necessary or advisable (except to the extent
dividends or other distributions that are not customary may be limited by
representations made in connection with the issuance of the tax opinion
described in Paragraph 8.5 hereof), in each case payable either in cash or in
additional shares.
5.2 The Safeco Trust will call a special meeting of the Acquired Fund's
shareholders to consider approval of this Agreement and act upon the matters
set forth in the Proxy Statement.
5.3 The Acquiring Fund will prepare the notice of meeting, form of proxy
and Proxy Statement (collectively, "Proxy Materials") to be used in connection
with such meeting, and will promptly prepare and file with the Commission the
Registration Statement. The Safeco Trust will provide the Acquiring Fund with
information reasonably requested for the preparation of the Registration
Statement in compliance with the Securities Act, the Exchange Act, and the
Investment Company Act.
5.4 The Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired by the Acquired Fund for the purpose of
making any distribution thereof other than in accordance with the terms of this
Agreement.
5.5 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requires concerning the beneficial
ownership of the Acquired Fund Shares.
5.6 Subject to the provisions of this Agreement, each Fund will take, or
cause to be taken, all actions, and do or cause to be done, all things
reasonably necessary, proper or advisable to consummate the transactions
contemplated by this Agreement.
5.7 The Acquired Fund shall furnish to the Acquiring Fund on the Closing
Date a Statement of Assets and Liabilities of the Acquired Fund as of the
Closing Date setting forth the NAV of the Acquired Fund as of the Valuation
Time, which statement shall be prepared in accordance with GAAP consistently
applied and certified by the Safeco Trust's Treasurer or Assistant Treasurer.
As promptly as practicable, but in any case within 30 days after the Closing
Date, the Safeco Trust shall furnish to the Acquiring Trust, in such form as is
reasonably satisfactory to the Acquiring Trust, a statement of the earnings and
profits of the Acquired Fund for federal income tax purposes, and of any
capital loss carryovers and other items that will be carried over to the
Acquiring Fund under the Code, and which statement will be certified by the
Treasurer of the Safeco Trust.
5.8 Neither Fund shall take any action that is inconsistent with the
representations set forth in, with respect to the Acquired Fund, the Acquired
Fund Tax Representation Certificate and, with respect to the Acquiring Fund,
the Acquiring Fund Tax Representation Certificate.
5.9 From and after the date of this Agreement and until the Closing Date,
each of the Funds and the Safeco Trust and the Acquiring Trust shall use its
commercially reasonable efforts to cause the Reorganization to qualify, and
will not knowingly take any action, cause any action to be taken, fail to take
any action or cause any action to fail to be taken, which action or failure to
act could prevent the Reorganization from qualifying, as a reorganization under
the provisions of Section 368(a) of the Code. The parties hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the income tax regulations promulgated under the
Code. Unless otherwise required pursuant to a "determination" within the
meaning of Section 1313(a) of the Code, the parties hereto shall treat and
report the transactions contemplated hereby as a reorganization within the
meaning of Section 368(a)(1)(F) of the Code and shall not take any position
inconsistent with such treatment.
5.10 From and after the date of this Agreement and through the time of the
Closing, each Fund shall use its commercially reasonable efforts to cause it to
qualify, and will not knowingly take any action, cause any action to be taken,
fail to take any action or cause any action
A-29
to fail to be taken, which action or failure to act could prevent it from
qualifying, as a regulated investment company under the provisions of
Subchapter M of the Code.
5.11 The Acquired Fund shall prepare, or cause to be prepared, all Tax
Returns of the Acquired Fund for taxable periods that end on or before the
Closing Date and shall timely file, or cause to be timely filed, all such Tax
Returns. The Acquired Fund shall make any payments of Taxes required to be made
by such Fund with respect to any such Tax Returns.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to complete the transactions provided
for herein shall be, at its election, subject to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions, unless waived by the Acquired Fund in writing:
6.1 All representations and warranties by the Acquiring Trust on behalf of
the Acquiring Fund contained in this Agreement shall be true and correct as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
6.2 The Acquiring Trust shall have delivered to the Safeco Trust on the
Closing Date a certificate of the Acquiring Trust on behalf of the Acquiring
Fund executed in its name by its President or Vice President and its Treasurer
or Assistant Treasurer, in form and substance satisfactory to the Safeco Trust
and dated as of the Closing Date, to the effect that the representations and
warranties of the Acquiring Trust made in this Agreement are true and correct
at and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, that each of the conditions to
Closing in this Article 6 have been met, and as to such other matters as the
Safeco Trust shall reasonably request;
6.3 The Acquiring Trust on behalf of the Acquiring Fund shall have
delivered to the Safeco Trust and Wilmer Cutler Pickering Hale and Dorr LLP an
Acquiring Fund Tax Representation Certificate, satisfactory to the Safeco Trust
and Wilmer Cutler Pickering Hale and Dorr LLP, substantially in the form
attached to this Agreement as Annex A, concerning certain tax-related matters
with respect to the Acquiring Fund;
6.4 With respect to the Acquiring Fund, the Board of Trustees of the
Acquiring Trust shall have determined that the Reorganization is in the best
interests of the Acquiring Fund and, based upon such determination, shall have
approved this Agreement and the transactions contemplated hereby; and
6.5 The Safeco Trust shall have received at the Closing a favorable
opinion as to the due authorization of this Agreement by the Acquiring Trust
and related matters of Wilmer Cutler Pickering Hale and Dorr LLP, dated as of
the Closing Date, in a form reasonably satisfactory to the Safeco Trust.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be, at its election, subject to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following further
conditions, unless waived by the Acquiring Fund in writing:
7.1 All representations and warranties of the Safeco Trust on behalf of
the Acquired Fund contained in this Agreement shall be true and correct as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
7.2 The Safeco Trust shall have delivered to the Acquiring Fund the
Statement of Assets and Liabilities of the Acquired Fund pursuant to Paragraph
5.7, together with a list of its portfolio securities showing the federal
income tax bases and holding periods of such securities, as of the Closing
Date, certified by the Safeco Trust's Treasurer or Assistant Treasurer;
7.3 The Safeco Trust shall have delivered to the Acquiring Trust on the
Closing Date a certificate of the Safeco Trust on behalf of the Acquired Fund
executed in its name by its President or Vice President and a Treasurer or
Assistant Treasurer, in form and substance reasonably satisfactory to the
Acquiring Trust and dated as of the Closing Date, to the effect that the
representations and warranties of the Safeco Trust contained in this Agreement
are true and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement, that each of the
conditions to closing in this Article 7 have been met, and as to such other
matters as the Acquiring Trust shall reasonably request;
7.4 The Safeco Trust on behalf of the Acquired Fund shall have delivered
to the Acquiring Trust and Wilmer Cutler Pickering Hale and Dorr LLP an
Acquired Fund Tax Representation Certificate, satisfactory to the Acquiring
Trust and Wilmer Cutler Pickering Hale and
A-30
Dorr LLP, substantially in the form attached to this Agreement as Annex B,
concerning certain tax-related matters with respect to the Acquired Fund;
7.5 The Acquiring Trust shall have received at the Closing a favorable
opinion as to the due authorization of this Agreement by the Safeco Trust and
related matters of Kirkpatrick & Lockhart LLP, dated as of the Closing Date, in
a form reasonably satisfactory to the Acquiring Trust; and
7.6 With respect to the Acquired Fund, the Board of Trustees of the Safeco
Trust shall have determined that the Reorganization is in the best interests of
the Acquired Fund and, based upon such determination, shall have approved this
Agreement and the transactions contemplated hereby.
8. FURTHER CONDITIONS PRECEDENT
If any of the conditions set forth below does not exist on or before the
Closing Date with respect to either party hereto, the other party to this
Agreement shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the Acquired Fund's shareholders in
accordance with the provisions of the Safeco Trust's Trust Instrument and
By-Laws, and certified copies of the resolutions evidencing such approval by
the Acquired Fund's shareholders shall have been delivered by the Acquired Fund
to the Acquiring Fund. Notwithstanding anything herein to the contrary, neither
party hereto may waive the conditions set forth in this Paragraph 8.1;
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by either party hereto to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of
either party hereto, provided that either party may waive any such conditions
for itself;
8.4 The Acquiring Trust's Registration Statement on Form N-14 shall have
become effective under the Securities Act and no stop orders suspending the
effectiveness of such Registration Statement shall have been issued and, to the
best knowledge of the parties hereto, no investigation or proceeding for that
purpose shall have been instituted or be pending, threatened or contemplated
under the Securities Act; and
8.5 The parties shall have received an opinion of Wilmer Cutler Pickering
Hale and Dorr LLP, satisfactory to the Safeco Trust and the Acquiring Trust and
subject to customary assumptions and qualifications, substantially to the
effect that for federal income tax purposes the acquisition by the Acquiring
Fund of the Acquired Assets solely in exchange for the issuance of Acquiring
Fund Shares to the Acquired Fund and the assumption of the Assumed Liabilities
by the Acquiring Fund, followed by the distribution by the Acquired Fund, in
liquidation of the Acquired Fund, of Acquiring Fund Shares to the Acquired Fund
Shareholders in exchange for their Acquired Fund Shares and the termination of
the Acquired Fund, will constitute a "reorganization" within the meaning of
Section 368(a) of the Code
9. BROKERAGE FEES AND EXPENSES
9.1 Each party hereto represents and warrants to the other party hereto
that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
9.2 The parties have been informed by Symetra Financial Corporation and
the Acquiring Fund Adviser -- and the parties have entered into this Agreement
in reliance on such information -- that such non-parties will pay all expenses
of the Funds associated with the Reorganization, including the expenses
associated with the preparation, printing and mailing of any and all
shareholder notices, communications, proxy statements, and necessary filings
with the SEC or any other governmental authority in connection with the
transactions contemplated by this Agreement and the legal and Trustees' fees
and expenses incurred in connection with the Reorganization. Except for the
foregoing, the Acquiring Fund and the Acquired Fund shall each bear its own
expenses in connection with the transactions contemplated by this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Trust and the Safeco Trust each agree that neither
party has made any representation, warranty or covenant not set forth herein or
referred to in Paragraphs 4.1 or 4.2 hereof and that this Agreement constitutes
the entire agreement between the parties.
A-31
10.2 The representations and warranties contained in this Agreement or in
any document delivered pursuant hereto or in connection herewith shall not
survive the consummation of the transactions contemplated hereunder.
11. TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Trust and the Safeco Trust. In addition, either party may at its
option terminate this Agreement at or prior to the Closing Date:
(a) because of a material breach by the other of any representation,
warranty, covenant or agreement contained herein to be performed at or
prior to the Closing Date;
(b) because of a condition herein expressed to be precedent to the
obligations of the terminating party which has not been met and which
reasonably appears will not or cannot be met;
(c) by resolution of the Acquiring Trust's Board of Trustees if
circumstances should develop that, in the good faith opinion of such
Board, make proceeding with the Agreement not in the best interests of
the Acquiring Fund's shareholders;
(d) by resolution of the Safeco Trust's Board of Trustees if circumstances
should develop that, in the good faith opinion of such Board, make
proceeding with the Agreement not in the best interests of the
Acquired Fund's shareholders; or
(e) if the transactions contemplated by this Agreement shall not have
occurred on or prior to December 31, 2004 or such other date as the
parties may mutually agree upon in writing.
11.2 In the event of any such termination, there shall be no liability for
damages on the part of the Acquiring Fund, the Acquiring Trust, the Safeco
Trust or the Acquired Fund, or the trustees or officers of the Safeco Trust, or
the Acquiring Trust, but, subject to Paragraph 9.2, each party shall bear the
expenses incurred by it incidental to the preparation and carrying out of this
Agreement.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the Safeco
Trust and the Acquiring Trust; provided, however, that following the meeting of
the Acquired Fund's shareholders called by the Safeco Trust pursuant to
Paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions regarding the method for determining the number of
Acquiring Fund Shares to be received by the Acquired Fund Shareholders under
this Agreement to their detriment without their further approval; provided that
nothing contained in this Section 12 shall be construed to prohibit the parties
from amending this Agreement to change the Closing Date.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the Acquired Fund, c/o
Symetra Financial Corporation, 5069 154th Place, N.E., Seattle, Washington
98052, Attention: Roger F. Harbin, with copies to R. Darrell Mounts,
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second Floor,
Washington, DC 20036-1221, and to the Acquiring Fund, c/o Pioneer Investment
Management, Inc., 60 State Street, Boston, Massachusetts 02109, Attention:
Dorothy E. Bourassa, Esq., with copies to Wilmer Cutler Pickering Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, Attention: David C. Phelan.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
14.1 The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware, without giving effect to conflict
of laws principles (other than Delaware Code Title 6 [sec] 2708); provided
that, in the case of any conflict between those laws and the federal securities
laws, the latter shall govern.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by
either party without the prior written consent of the other party hereto.
Nothing herein expressed or implied is intended or shall be construed to confer
upon or give any person, firm or corporation, or other entity, other than the
parties hereto and their respective successors and assigns, any rights or
remedies under or by reason of this Agreement.
A-32
14.5 It is expressly agreed that the obligations of the Acquiring Trust
and the Safeco Trust shall not be binding upon any of their respective
trustees, shareholders, nominees, officers, agents or employees personally, but
bind only to the property of the Acquiring Fund or the Acquired Fund, as the
case may be, as provided in the trust instruments of the Acquiring Trust and
the Instrument of Trust of the Safeco Trust, respectively. The execution and
delivery of this Agreement have been authorized by the trustees of the
Acquiring Trust and of the Safeco Trust and this Agreement has been executed by
authorized officers of the Acquiring Trust and the Safeco Trust, acting as
such, and neither such authorization by such trustees nor such execution and
delivery by such officers shall be deemed to have been made by any of them
individually or to imposed any liability on any of them personally, but shall
bind only the property of the Acquiring Fund and the Acquired Fund, as the case
may be, as provided in the trust instruments of the Acquiring Trust and the
Instrument of Trust of the Safeco Trust, respectively.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed as of the date first set forth above by its President or Vice
President and attested by its Secretary or Assistant Secretary.
Attest: [SAFECO TRUST]
on behalf of
[SAFECO FUND]
By: ___________________________________ By: ___________________________________
Name: Name:
Title: Secretary Title: President
Attest: [PIONEER TRUST]
on behalf of
[PIONEER FUND]
By: ___________________________________ By: ___________________________________
Name: Name:
Title: Title:
A-33
Annex A
TAX REPRESENTATION CERTIFICATE OF
[PIONEER TRUST ON BEHALF OF PIONEER FUND]
This certificate is being delivered in connection with the transactions to
be effected pursuant to the Agreement and Plan of Reorganization made as of
__________ , 2004 between [Pioneer Trust], a [Delaware statutory][Massachusetts
business] trust (the "Acquiring Trust"), on behalf of its series [Pioneer Fund]
("Acquiring Fund"), and [Safeco Trust], a Delaware statutory trust, on behalf
of its series [Safeco Fund] ("Acquired Fund") (the "Agreement"). Pursuant to
the Agreement, Acquiring Fund will acquire all of the assets of Acquired Fund
in exchange solely for (i) the assumption by Acquiring Fund of the Assumed
Liabilities of Acquired Fund, and (ii) the issuance of Investor Class shares of
beneficial interest of Acquiring Fund (the "Acquiring Fund Shares") to Acquired
Fund, followed by the distribution by Acquired Fund, in liquidation of Acquired
Fund, of the Acquiring Fund Shares to the shareholders of Acquired Fund and the
termination of Acquired Fund (the foregoing together constituting the
"transaction").
The undersigned officer of Acquiring Trust, after consulting with its
counsel, auditors and tax advisers regarding the meaning of and factual support
for the following representations, on behalf of Acquiring Fund, hereby
certifies and represents that the following statements are true, complete and
correct and will be true, complete and correct on the date of the transaction
and thereafter as relevant. Unless otherwise indicated, all capitalized terms
used but not defined herein shall have the meanings ascribed to them in the
Agreement.
1. Acquiring Fund is a series of Acquiring Trust, a [statutory][business]
trust established under the laws of the [State of Delaware][Commonwealth of
Massachusetts], and Acquiring Fund will be treated after the Closing as a
separate corporation for federal tax purposes. Acquiring Fund was newly
organized solely for the purpose of effecting the transaction and continuing
thereafter to operate as a regulated investment company. Prior to the
transaction, Acquiring Fund did not and will not engage in any business
activities. There shall be no shares of Acquiring Fund issued and outstanding
prior to the Closing Date other than those issued to Pioneer Investment
Management, Inc. or one of its affiliates in connection with the creation of
Acquiring Fund, which shares shall be redeemed, for an amount equal to the
price paid therefor, at or before the Closing.
2. Neither Acquiring Fund nor any person "related" to Acquiring Fund (as
defined in Treasury Regulation Section 1.368-1(e)(3)), nor any partnership of
which Acquiring Fund or any such related person is a partner, has any plan or
intention to redeem or otherwise acquire any of the Acquiring Fund Shares
received by shareholders of Acquired Fund in the transaction except in the
ordinary course of Acquiring Fund's business in connection with its legal
obligation under Section 22(e) of the Investment Company Act of 1940, as
amended (the "1940 Act"), as a series of a registered open-end investment
company to redeem its own shares.
3. After the transaction, Acquiring Fund will continue the historic
business (as defined in Treasury Regulation Section 1.368-1(d)(2)) of Acquired
Fund or will use a significant portion of the historic business assets (as
defined in Treasury Regulation Section 1.368-1(d)(3)) of Acquired Fund in a
business.
4. Acquiring Fund has no plan or intention to sell or otherwise dispose of
any assets of Acquired Fund acquired in the transaction, except for
dispositions made in the ordinary course of its business or to maintain its
qualification as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code").
5. Any expenses of Acquired Fund incurred in connection with the
transaction which are paid or assumed by Acquiring Fund will be expenses of
Acquired Fund solely and directly related to the transaction in accordance with
Rev. Rul. 73 54, 1973 1 C.B. 187. Acquiring Fund will not pay or assume the
expenses, if any, incurred by any Acquired Fund Shareholders in connection with
the transaction.
6. There is no, and never has been any, indebtedness between Acquiring Fund
and Acquired Fund.
7. Acquiring Fund will qualify for the special tax treatment afforded
regulated investment companies under Subchapter M of the Code for all taxable
years ending after the date of the transaction.
8. Acquiring Fund meets the requirements of an "investment company" in
Section 368(a)(2)(F) of the Code.
9. Acquiring Fund is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
10. Acquiring Fund does not now own and has never owned, directly or
indirectly, any shares of Acquired Fund.
11. As of the date of the transaction, the fair market value of the
Acquiring Fund Shares issued to Acquired Fund will be approximately equal to
the fair market value of the Acquired Assets minus the Assumed Liabilities.
Acquiring Fund will not furnish any consideration
A-34
in connection with the acquisition of the Acquired Assets other than the
assumption of the Assumed Liabilities and the issuance of such Acquiring Fund
Shares.
12. Immediately following the transaction, the Acquired Fund Shareholders
will own all of the outstanding Acquiring Fund Shares and will own such shares
solely by reason of their ownership of the Acquired Fund Shares immediately
prior to the transaction. Acquiring Fund has no plan or intention to issue as
part of the transaction any shares of Acquiring Fund other than the Acquiring
Fund Shares issued in exchange for the Acquired Assets.
13. The transaction is being undertaken for valid and substantial business
purposes, including facilitating Acquired Fund's becoming a member of the
Pioneer family of mutual funds, which, in the long term, is intended to result
in lower expenses and increased assets.
14. No Acquired Fund shareholder is acting as agent for Acquiring Fund in
connection with the transaction or approval thereof. Acquiring Fund will not
reimburse any Acquired Fund shareholder for Acquired Fund Shares such
shareholder may have purchased or for other obligations such shareholder may
have incurred.
15. Acquiring Fund has no outstanding warrants, options, convertible
securities or any other type of right pursuant to which any person could
acquire stock in Acquiring Fund.
* * * * *
The undersigned officer of Acquiring Trust is authorized to make all of
the representations set forth herein, and the undersigned is authorized to
execute this certificate on behalf of Acquiring Fund. The undersigned
recognizes that Wilmer Cutler Pickering Hale and Dorr LLP will rely upon the
foregoing representations in evaluating the United States federal income tax
consequences of the transaction and rendering its opinion pursuant to Section
8.5 of the Agreement. If, prior to the date of the transaction, any of the
representations set forth herein ceases to be accurate, the undersigned agrees
to deliver immediately to Wilmer Cutler Pickering Hale and Dorr LLP a written
notice to that effect.
[PIONEER TRUST], on
behalf of [Pioneer Fund]
By: ___________________________________
Name: _____________________________
Title: ____________________________
Dated: ______________, 2004
A-35
Annex B
TAX REPRESENTATION CERTIFICATE OF
[SAFECO TRUST]
ON BEHALF OF [SAFECO FUND]
This certificate is being delivered in connection with the transactions to
be effected pursuant to the Agreement and Plan of Reorganization made as of
______________, 2004 between [Pioneer Trust], a [Delaware statutory]
[Massachusetts business] trust, on behalf of its series [Pioneer Fund]
("Acquiring Fund"), and [Safeco Trust], a Delaware statutory trust ("Safeco
Trust"), on behalf of its series [Safeco Fund] ("Acquired Fund") (the
"Agreement"). Pursuant to the Agreement, Acquiring Fund will acquire all of the
assets of Acquired Fund in exchange solely for (i) the assumption by Acquiring
Fund of the Assumed Liabilities of Acquired Fund and (ii) the issuance of
Investor Class shares of beneficial interest of Acquiring Fund (the "Acquiring
Fund Shares") to Acquired Fund, followed by the distribution by Acquired Fund,
in liquidation of Acquired Fund, of the Acquiring Fund Shares to the
shareholders of Acquired Fund and the termination of Acquired Fund (the
foregoing together constituting the "transaction").
The undersigned officer of Safeco Trust, after consulting with its
counsel, auditors and tax advisers regarding the meaning of and factual support
for the following representations, on behalf of Acquired Fund, hereby certifies
and represents that the following statements are true, complete and correct and
will be true, complete and correct on the date of the transaction and
thereafter as relevant. Unless otherwise indicated, all capitalized terms used
but not defined herein shall have the meanings ascribed to them in the
Agreement.
1. Acquired Fund is a series of Safeco Trust, a statutory trust organized
under the laws of the State of Delaware, and Acquired Fund is, and has been at
all times, treated as a separate corporation for federal tax purposes.
2. As of the date of the transaction, the fair market value of the
Acquiring Fund Shares received by each shareholder that holds shares of
Acquired Fund (the "Acquired Fund Shares") will be approximately equal to the
fair market value of the Acquired Fund Shares with respect to which such
Acquiring Fund Shares are received, and the aggregate consideration received by
Acquired Fund shareholders in exchange for their Acquired Fund Shares will be
approximately equal to the fair market value of all of the outstanding Acquired
Fund Shares immediately prior to the transaction. No property other than
Acquiring Fund Shares will be distributed to shareholders of Acquired Fund in
exchange for their Acquired Fund Shares, nor will any such shareholder receive
cash or other property as part of the transaction.
3. Neither Acquired Fund nor any person "related" to Acquired Fund (as
defined in Treasury Regulation Section 1.368-1(e)(3)), nor any partnership in
which Acquired Fund or any such related person is a partner, has redeemed,
acquired or otherwise made any distributions with respect to any shares of
Acquired Fund as part of the transaction, or otherwise pursuant to a plan of
which the transaction is a part, other than redemptions and distributions made
in the ordinary course of Acquired Fund's business as a series of an open-end
investment company. To the best knowledge of management of Acquired Fund, there
is no plan or intention on the part of the shareholders of Acquired Fund to
engage in any transaction with Acquired Fund, Acquiring Fund, or any person
treated as related to Acquired Fund or Acquiring Fund under Treasury Regulation
Section 1.368-1(e)(3) or any partnership in which Acquired Fund, Acquiring
Fund, or any person treated as related to Acquired Fund or Acquiring Fund under
Treasury Regulation Section 1.368-1(e)(3) is a partner involving the sale,
redemption or exchange of any of the Acquired Fund Shares or any of the
Acquiring Fund Shares to be received in the transaction, as the case may be,
other than in the ordinary course of Acquired Fund's business as a series of an
open-end investment company.
4. In the transaction, Acquired Fund will transfer its assets to Acquiring
Fund, which will assume the Assumed Liabilities, such that immediately
following the transfer, Acquiring Fund will possess all of the same assets and
liabilities as were possessed by Acquired Fund immediately prior to the
transaction, except for assets used to pay expenses incurred in connection with
the transaction and assets distributed to shareholders in redemption of their
shares immediately preceding, or in contemplation of, the transaction (other
than redemptions and distributions made in the ordinary course of Acquired
Fund's business as an open-end investment company) which assets constitute less
than 1% of the net assets of Acquired Fund.
5. As of the date of the transaction, the fair market value of the
Acquiring Fund Shares issued to Acquired Fund will be approximately equal to
the fair market value of the Acquired Assets minus the Assumed Liabilities.
Acquired Fund will not receive any consideration from Acquiring Fund in
connection with the acquisition of the Acquired Assets other than the
assumption of the Assumed Liabilities and the issuance of such Acquiring Fund
Shares.
A-36
6. The Assumed Liabilities assumed by Acquiring Fund plus the Assumed
Liabilities, if any, to which the transferred assets are subject were incurred
by Acquired Fund in the ordinary course of its business. Acquired Fund is not
aware of any liabilities of any kind other than the Assumed Liabilities.
7. As of the Closing Date, the adjusted basis and the fair market value of
the Acquired Assets will equal or exceed the Assumed Liabilities for purposes
of Section 357(d) of the Code.
8. Acquired Fund currently conducts its historic business within the
meaning of Treasury Regulation Section 1.368-1(d)(2), which provides that, in
general, a corporation's historic business is the business it has conducted
most recently, but does not include a business that the corporation enters into
as part of a plan of reorganization. All of the assets of the Acquired Fund
held by Acquiring Fund as of the opening of business on August 2, 2004 (the
date the Acquiring Fund Adviser became the investment adviser to Acquired Fund)
were Acquired Fund's historic business assets within the meaning of Treasury
Regulation Section 1.368-1(d)(3) (which provides that a corporation's historic
business assets are the assets used in its historic business).
9. Acquired Fund will distribute to its shareholders the Acquiring Fund
Shares it receives pursuant to the transaction, and its other properties, if
any, and will be liquidated promptly thereafter.
10. The expenses of Acquired Fund incurred by it in connection with the
transaction, if any, will be only such expenses that are solely and directly
related to the transaction in accordance with Rev. Rul. 73-54, 1973-1 C.B. 187.
Acquired Fund will not pay any expenses incurred by its shareholders in
connection with the transaction.
11. There is no, and never has been any, indebtedness between Acquiring
Fund and Acquired Fund.
12. Acquired Fund has properly elected to be a regulated investment
company under Subchapter M of the Code, has qualified for the special tax
treatment afforded regulated investment companies under Subchapter M of the
Code for each taxable year since inception, and qualifies for such treatment as
of the time of the Closing.
13. Acquired Fund meets the requirements of an "investment company" in
Section 368(a)(2)(F) of the Code.
14. Acquired Fund is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
15. Acquired Fund does not pay compensation to any shareholder-employee.
16. Immediately following the transaction, the Acquired Fund Shareholders
will own all of the outstanding Acquiring Fund Shares and will own such shares
solely by reason of their ownership of the Acquired Fund Shares immediately
prior to the transaction.
17. Acquired Fund shareholders will not have dissenters' or appraisal
rights in the transaction.
18. The transaction is being undertaken for valid and substantial business
purposes, including facilitating Acquired Fund's becoming a member of the
Pioneer family of mutual funds, which, in the long term, is intended to result
in lower expenses and increased assets.
19. Acquired Fund has no outstanding warrants, options, convertible
securities or any other type of right pursuant to which any person could
acquire stock in Acquired Fund.
* * * * *
A-37
The undersigned officer of the Safeco Trust is authorized to make all of
the representations set forth herein, and the undersigned is authorized to
execute this certificate on behalf of Acquired Fund. The undersigned recognizes
that Wilmer Cutler Pickering Hale and Dorr LLP will rely upon the foregoing
representations in evaluating the United States federal income tax consequences
of the transaction and rendering its opinion pursuant to Section 8.5 of the
Agreement. If, prior to the date of the transaction, any of the representations
set forth herein ceases to be accurate, the undersigned agrees to deliver
immediately to Wilmer Cutler Pickering Hale and Dorr LLP a written notice to
that effect.
[SAFECO TRUST], on
behalf of [SAFECO FUND]
By: _____________________________________
Name: _______________________________
Title: ______________________________
A-38
Exhibit B -- Form of Interim Advisory Agreement
AGREEMENT dated as of August 2, 2004, between Pioneer Investment
Management, Inc. ("Pioneer"), a Delaware corporation and a member of the
UniCreditio Italiano Banking Group, Register of Banking Groups, and [SAFECO
TRUST], a Delaware statutory trust (the "Trust"), on behalf of its series
[SAFECO FUNDS] (the "Fund").
Whereas, Safeco Asset Management Company has acted as investment adviser to
the Fund pursuant to an Investment Advisory Agreement dated (the "Prior
Agreement").
Whereas, the Prior Agreement has been approved by the Board of Trustees of
the Trust and the shareholders of the Fund.
Whereas, the Prior Agreement is being terminated as a result of assignment.
Whereas, the Board of Trustees has determined to appoint Pioneer as
investment adviser to the Fund.
Whereas, this Agreement is being entered into in reliance upon Rule 15a-4
under the Investment Company Act of 1940, as amended (the "Investment Company
Act").
Now therefore the Trust and Pioneer agree as follow:
Section 1. The Trust appoints Pioneer as investment adviser of the Funds
for the period and on the terms set forth herein. Pioneer accepts such
appointment.
Section 2. Pioneer and the Trust, on behalf of the Fund, hereby agree that
the provisions of the Prior Agreement (other than as to the term of the Prior
Agreement, the identity of the Adviser and the use of the "Safeco" name) are
incorporated herein by reference and made a part hereof as if references to the
Adviser were to Pioneer. Without limiting the forgoing, Pioneer shall be
entitled to the fee for its services provided for in the Prior Agreement from
(but exclusive of) the date hereof until the termination of this Agreement,
except as provided in Section 3 below.
Section 3. In the event that this Agreement is not approved by a majority
of the Trust's outstanding voting securities (as such term is used in the
Investment Company Act), Pioneer shall be entitled to a fee equal to the cost to
Pioneer of performing its services under this Agreement in lieu of the fee
provided for in Section 2. For purposes of this Agreement, Pioneer's costs in
providing the services under this Agreement shall be equal to the pro rata
portion of Pioneer's expenses for the term of this Agreement attributable to its
investment company advisory business, calculated as follows: Pioneer cost in
providing investment advisory services to its investment companies of the same
type (i.e., domestic equity, international, fixed income, money market)
multiplied by a fraction the numerator of which shall be the average daily net
assets of the Fund during the term of this Agreement and the denominator of
which shall be the average month end net assets under Pioneer's management of
all of its investment company clients.
Section 4. The compensation earned by Pioneer under Section 2 of this
Agreement shall be held in an interest bearing escrow account with the Fund's
custodian. If a majority of the outstanding voting securities approves this
Agreement prior to the end of its term, the amount in the escrow account
(including any interest earned) shall be paid to Pioneer. If a majority of the
outstanding voting securities do not approve this Agreement prior to the end of
its term, Pioneer shall be entitled to be paid, out of the escrow account the
lesser of (i) the amount in the escrow account (including any interest earned on
that amount while in escrow) and (ii) the fee provided for in Section 3 (plus
any interest on that amount while in escrow), with any remaining amount in the
escrow account being returned to the Fund.
Section 5. This Agreement shall become effective on August 2, 2004. Unless
terminated as provided below, this Agreement shall remain in full force and
effect until the earliest of (i) the closing of the reorganization of the Fund
into [name of Pioneer Fund], (ii) approval of a Management Contract between the
Fund and Pioneer and (iii) a date that is the later of 150 days after the date
of the termination of the Prior Agreement or such later date as may be
consistent with a rule or interpretive position (formal or informal) of the
staff of the Securities and Exchange Commission. This Agreement may be
terminated at any time without payment of penalty by vote of the Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the Fund.
Pioneer may terminate this Agreement at any time without payment of any penalty
on not less than 60 days written notice to the Fund. This Agreement shall
automatically terminate upon its assignment as defined in the Investment Company
Act.
B-1
In witness whereof, the parties hereto have executed this Agreement as the
2nd day of August 2004.
[SAFECO TRUST]
By: ____________________________________
Its: ___________________________________
PIONEER INVESTMENT MANAGEMENT, INC.
By: ____________________________________
Its: ___________________________________
B-2
Exhibit C -- Additional Information Pertaining to Pioneer
PORTFOLIO TRANSACTION POLICIES
All orders for the purchase or sale of portfolio securities are placed on
behalf of each fund by Pioneer pursuant to authority contained in the fund's
management contract. Pioneer seeks to obtain the best execution on portfolio
trades. The price of securities and any commission rate paid are always factors,
but frequently not the only factors, in judging best execution. In selecting
brokers or dealers, Pioneer considers various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and character
of the markets for the security to be purchased or sold; the execution
efficiency, settlement capability and financial condition of the dealer; the
dealer's execution services rendered on a continuing basis; and the
reasonableness of any dealer spreads. Transactions in non-U.S. equity securities
are executed by broker-dealers in non-U.S. countries in which commission rates
may not be negotiable (as such rates are in the U.S.).
Pioneer may select broker-dealers that provide brokerage and/or research
services to a fund and/or other investment companies or other accounts managed
by Pioneer. In addition, consistent with Section 28(e) of the Exchange Act, if
Pioneer determines in good faith that the amount of commissions charged by a
broker-dealer is reasonable in relation to the value of the brokerage and
research services provided by such broker, the fund may pay commissions to such
broker-dealer in an amount greater than the amount another firm may charge. Such
services may include advice concerning the value of securities; the advisability
of investing in, purchasing or selling securities; the availability of
securities or the purchasers or sellers of securities; providing stock quotation
services, credit rating service information and comparative fund statistics;
furnishing analyses, electronic information services, manuals and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and performance of accounts and particular investment
decisions; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). Pioneer maintains a
listing of broker-dealers who provide such services on a regular basis. However,
because many transactions on behalf of a fund and other investment companies or
accounts managed by Pioneer are placed with broker-dealers (including
broker-dealers on the listing) without regard to the furnishing of such
services, it is not possible to estimate the proportion of such transactions
directed to such dealers solely because such services were provided. Pioneer
believes that no exact dollar value can be calculated for such services.
The research received from broker-dealers may be useful to Pioneer in
rendering investment management services to any of the funds as well as other
investment companies or other accounts managed by Pioneer, although not all such
research may be useful to any of the funds. Conversely, such information
provided by brokers or dealers who have executed transaction orders on behalf of
such other accounts may be useful to Pioneer in carrying out its obligations to
any of the funds. The receipt of such research has not reduced Pioneer's normal
independent research activities; however, it enables Pioneer to avoid the
additional expenses which might otherwise be incurred if it were to attempt to
develop comparable information through its own staff.
In circumstances where two or more broker-dealers offer comparable prices
and executions, preference may be given to a broker-dealer which has sold shares
of a fund as well as shares of other investment companies managed by Pioneer.
This policy does not imply a commitment to execute all portfolio transactions
through all broker-dealers that sell shares of the fund.
None of the funds used any brokers affiliated with Pioneer during its most
recently completed fiscal year in connection with its portfolio transactions.
SIMILAR FUNDS
Pioneer serves as the investment adviser to each fund in the Pioneer Family
of Funds. The following table identifies other funds in the Pioneer Family of
Funds that have similar investment objectives to the Funds described in this
Proxy Statement/Prospectus and provides other information regarding the similar
funds.
- -----------------------------------------------------------------------------------------------------------------
Net assets of Fund Management fee rate
Fund (as of September 30, 2004) (as a percentage of average daily net assets)
- -----------------------------------------------------------------------------------------------------------------
Pioneer Balanced Fund $ 44,418,013 0.65% of the Funds average net assets up to $1
billion, 0.60% of the next $4 billion; and 0.55% of
the excess over $5 billion.
- -----------------------------------------------------------------------------------------------------------------
Pioneer Emerging Markets Fund $268,254,326 1.15%
- -----------------------------------------------------------------------------------------------------------------
Pioneer Equity Income Fund $874,304,393 0.60 of the funds average net assets up to $10
billion and 0.575% on the assets over $10 billion.
- -----------------------------------------------------------------------------------------------------------------
C-1
- ----------------------------------------------------------------------------------------------------------------------
Net assets of Fund Management fee rate
Fund (as of September 30, 2004) (as a percentage of average daily net assets)
- ----------------------------------------------------------------------------------------------------------------------
Pioneer Europe Fund $ 171,301,516 1.00% of the Funds average net assets up to $300
million, 0.85% of the next $200 million and 0.75%
of the excess over $500 million.
- ----------------------------------------------------------------------------------------------------------------------
Pioneer Europe Select Fund $ 6,725,644 1.00% of the Funds average net assets up to $300
million, 0.85% of the next $200 million and 0.75%
of the excess over $500 million.
- ----------------------------------------------------------------------------------------------------------------------
Pioneer Fund $6,131,707,342 0.60% +/- 10% depending on performance vs. S&P
500 Index.
- ----------------------------------------------------------------------------------------------------------------------
Pioneer Growth Shares $ 663,767,737 0.70% of the Funds average net assets up to $500
million, 0.65% of the next $500 million and 0.625%
of the excess over $1 billion.
+/- 10% depending on performance vs. Russell 1000
Index.
- ----------------------------------------------------------------------------------------------------------------------
Pioneer International Equity Fund $ 36,478,202 1.00% of the Funds average net assets up to $300
million, 0.85% of the next $200 million and 0.75%
of the excess over $500 million.
- ----------------------------------------------------------------------------------------------------------------------
Pioneer International Value Fund $ 130,773,125 1.00% of the Funds average net assets up to $300
million, 0.85% of the next $200 million and 0.75%
of the excess over $500 million.
- ----------------------------------------------------------------------------------------------------------------------
Pioneer Large Cap Growth Fund $ 1,694,987 0.75%
- ----------------------------------------------------------------------------------------------------------------------
Pioneer Mid Cap Growth Fund $ 559,334,106 0.625% +/- .20% depending on performance vs. S&P
Mid Cap 400 Index.
- ----------------------------------------------------------------------------------------------------------------------
Pioneer Mid Cap Value Fund $1,842,494,003 0.70% of the Funds average net assets up to $500
million, 0.65% of the next $500 million and 0.625%
of the excess over $1 billion.
+/- .10% depending on performance vs. Russell Mid
Cap Value Index.
- ----------------------------------------------------------------------------------------------------------------------
Pioneer Oak Ridge Large Cap $ 39,073,966 0.75% of the next $1 billion and 0.70% of the
Growth Fund excess over $1 billion.
- ----------------------------------------------------------------------------------------------------------------------
Pioneer Oak Ridge Small Cap $ 47,438,259 0.85% of the next $1 billion and 0.80% of the
Growth Fund excess over $1 billion.
- ----------------------------------------------------------------------------------------------------------------------
Pioneer Papp America-Pacific $ 20,219,066 0.75% of the next $1 billion and 0.70% of the
Rim Fund excess over $1 billion.
- ----------------------------------------------------------------------------------------------------------------------
Pioneer Papp Small and Mid Cap $ 40,835,919 0.85% of the next $1 billion and 0.80% of the
Growth Fund excess over $1 billion.
- ----------------------------------------------------------------------------------------------------------------------
Pioneer Papp Stock Fund $ 43,972,353 0.75% of the next $1 billion and 0.70% of the
excess over $1 billion.
- ----------------------------------------------------------------------------------------------------------------------
Pioneer Papp Strategic Growth Fund $ 43,117,493 0.75% of the next $1 billion and 0.70% of the
excess over $1 billion.
- ----------------------------------------------------------------------------------------------------------------------
Pioneer Research Fund $ 18,315,138 0.75% of the next $1 billion and 0.70% of the
excess over $1 billion.
- ----------------------------------------------------------------------------------------------------------------------
Pioneer Select Equity Fund $ 496,845 0.75%
- ----------------------------------------------------------------------------------------------------------------------
Pioneer Small Cap Value Fund $ 517,033,022 0.85%
- ----------------------------------------------------------------------------------------------------------------------
C-2
- --------------------------------------------------------------------------------------------------------------------
Net assets of Fund Management fee rate
Fund (as of September 30, 2004) (as a percentage of average daily net assets)
- --------------------------------------------------------------------------------------------------------------------
Pioneer Small Company Fund $ 186,036,475 0.85%
- --------------------------------------------------------------------------------------------------------------------
Pioneer Value Fund $3,788,405,005 0.60% +/- .10% depending on performance vs.
Lipper Growth and Income Fund Index.
- --------------------------------------------------------------------------------------------------------------------
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------------------------------------------
Pioneer Balanced VCT Portfolio $ 44,699,291 0.65%
- --------------------------------------------------------------------------------------------------------------------
Pioneer Equity Income VCT Portfolio $ 874,304,393 0.65%
- --------------------------------------------------------------------------------------------------------------------
Pioneer Emerging Markets VCT $ 33,358,556 1.15%
Portfolio
- --------------------------------------------------------------------------------------------------------------------
Pioneer Europe VCT Portfolio $ 14,946,105 1.00%
- --------------------------------------------------------------------------------------------------------------------
Pioneer Fund VCT Portfolio $ 265,027,924 0.65%
- --------------------------------------------------------------------------------------------------------------------
Pioneer Growth Shares VCT Portfolio $ 36,316,518 0.70%
- --------------------------------------------------------------------------------------------------------------------
Pioneer International Value VCT $ 23,107,772 1.00%
Portfolio
- --------------------------------------------------------------------------------------------------------------------
Pioneer Mid Cap Value VCT Portfolio $ 660,212,326 0.65%
- --------------------------------------------------------------------------------------------------------------------
Pioneer Oak Ridge Large Cap $ 2,528,521 0.75% of the next $1 billion and 0.70% of the
Growth VCT Portfolio excess over $1 billion.
- --------------------------------------------------------------------------------------------------------------------
Pioneer Papp America-Pacific Rim $ 909,585 0.75% of the next $1 billion and 0.70% of the
VCT Portfolio excess over $1 billion.
- --------------------------------------------------------------------------------------------------------------------
Pioneer Papp Small and Mid Cap $ 1,525,336 0.75% of the next $1 billion and 0.70% of the
Growth VCT Portfolio excess over $1 billion.
- --------------------------------------------------------------------------------------------------------------------
Pioneer Small Cap Value VCT $ 22,800,093 0.75%
Portfolio
- --------------------------------------------------------------------------------------------------------------------
Pioneer Small Company VCT $ 12,241,934 0.75%
Portfolio
- --------------------------------------------------------------------------------------------------------------------
Pioneer Value VCT Portfolio $ 7,738,878 0.75%
- --------------------------------------------------------------------------------------------------------------------
C-3
Exhibit D -- Portfolio Manager's Discussion of Performance
Report From the Fund Managers
Safeco Balanced Fund
As of June 30, 2004
How did the Fund perform?
The Safeco Balanced Fund underperformed its benchmark -- a 60/40 mix of the
Russell 1000 Value and Lehman Aggregate Bond indices, for the six-month period
ending June 30, 2004.
What factors impacted the Fund's performance?
The two dominant factors effecting performance over the past six months
were the rise in interest rates in the second quarter, and the dramatic
outperformance of smaller, lower-quality stocks in the first quarter. Higher
interest rates caused a decline in fixed-income assets over the past three
months, resulting in an essentially flat bond market over the six-month period.
Rising interest rates also had a negative impact on financial stocks, our
largest equity sector. Asset allocation had a favorable impact, as 64.9% of the
assets were invested in equities, which had a somewhat higher return than fixed
income assets year-to-date. This allocation is toward the upper end of our
allowable range of 50% to 70% equity exposure. Year-to-date both stocks and
bonds lagged their respective indices. Most of the underperformance in equities
occurred early in the year, when lower quality stocks performed exceptionally
well.
For the year-to-date, the Fund's best-performing sector was energy, which
returned around 10%. Performance here was led by Conoco-Philips, up nearly 20%,
and British Petroleum, up around 10%. This sector was up primarily due to the
rise in oil prices, and the resulting improved outlook for earnings. Consumer
discretionary stocks were our next best group, returning around 8%. Materials
and consumer staples were our third and fourth best-performing sectors.
On the negative side, our worst sectors were technology and health care,
both of which declined by around 2%. Technology was hurt primarily by a large
decline in both Nokia and Texas Instruments. Nokia has been losing market share
in the cell phone market, and Texas Instruments is one of their suppliers.
Finance stocks, the largest sector in both our index and the Fund, were held
back by the negative impact that rising interest rates are expected to have on
earnings. This essentially led to flat performance for the six-month period.
The bond portion of the Fund benefited from a relatively short duration of
4.48 compared to the 4.7 duration of the Lehman Aggregate Index. This is because
longer duration bonds declined more than shorter ones after rates began rising.
The Fund also benefited from being underweight in Treasury securities, as
Treasuries were the worst-performing sector of the bond market for the six-month
period.
We were hurt in the fixed-income portion of the portfolio by being
underweight in mortgages, which were the bond market's best-performing sector.
Being overweight in corporate debt also negatively impacted performance, even
though we were mostly overweight in A-rated bonds, which performed better than
lower-quality bonds.
What changes did you make to the Fund and why?
During the past six months, we made several changes to the equity portion
of the Fund. As always, the changes were designed to own the stocks we find most
attractive and to adjust sector weightings to what we believe are appropriate
levels.
Stocks added to the portfolio included PMI Group, Weyerhaeuser, and Polaris
Industries. PMI Group, a mortgage insurer, was added because it's a rarity among
financial stocks in that rising rates should actually help earnings as the pace
of refinancing slows. Weyerhaeuser, a stock we have wanted to own for some time
in order to gain exposure to forest products, finally reached what we believe to
be an attractive valuation. Polaris Industries is a maker of all-terrain
vehicles, a market we expect will continue to experience good growth, especially
as the economy improves and the outlook for jobs gets better. We also initiated
positions in Allstate Insurance, Coca Cola and Illinois Tool Works, all of which
we believe were selling at attractive valuations.
We eliminated holdings of Disney, which rose after receiving an unsolicited
takeover offer. We also sold Eli Lilly, Anheuser-Busch and Hubbell based on
valuation, as they had appreciated to levels that were very near our target
prices.
We reduced our position in the finance sector, mainly to reduce our
exposure during what we expect to be a period of rising interest rates. We are
currently marginally underweight in finance relative to the Russell 1000 value
Index. We also reduced our exposure to producer durables due to these stocks
having performed very well. We do however remain overweighted in this sector by
just over 2% as we expect these stocks to continue to perform well as the
economy improves. We are overweight in the materials sector for the same reason,
and
D-1
have added to our position in this sector, primarily by buying Weyerhaeuser as
discussed earlier. We also added to our exposure to what Russell calls "other"
(primarily includes multi-industry companies, such as GE), as this sector went
from 1.6% to 6.6% of the index at the June re-configuration.
In the fixed income portion of the Fund, over the past six months we
increased our holdings in corporate debt, where we are overweight. We also added
to our holdings in government debt, while decreasing the portion of the assets
invested in mortgages. We also reduced the duration of the bonds, and currently
have a lower duration than the index.
Rex Bentley, CFA -- Portfolio Manager/Equity Analyst
Lynette Sagvold, CFA -- Portfolio Manager/Equity Analyst
Lesley Fox -- Portfolio Manager
Gregory Card, CFA -- Portfolio Manager
Tim Hokari -- Portfolio Manager
Nancy McFadden, CFA -- Portfolio Manager
D-2
Performance Overview & Highlights
Safeco Balanced Fund
(Unaudited)
INVESTOR CLASS
- --------------------------------------------------------------------------------------------------
Average Annual Total Return Since
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year Inception**
- --------------------------------------------------------------------------------------------------
Safeco Balanced Fund 1.05% 9.97% 1.78% 6.28%
60% Russell 1000 Value/40%
Lehman Brothers Aggregate Bond Index 2.42% 12.81% 3.90% 8.90%
S&P 500 Index 3.46% 19.13% (2.20)% 8.90%
Lipper, Inc. (Balanced Funds) 1.79% 11.65% 1.67% N/A
* Not annualized.
** Graph and average annual return comparison begins January 31, 1996,
inception date of the Fund. Performance does not reflect the deduction for
taxes that a shareholder would pay on Fund distributions or the redemption
of Fund shares.
- --------------------------------------------------------------------------------------------------
<Plot Points To Come for Line Chart>
The performance graph compares a hypothetical $10,000 investment in the Investor
Class to a hypothetical investment in a relevant market index. The index is
unmanaged and includes no operating expenses or transaction costs. Past
performance is not predictive of future results. Principal value may fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost.
Percent of
TOP FIVE INDUSTRIES (Common Stocks) Net Assets
- ------------------------------------------------------
Diversified Banks 7.6%
Integrated Oil & Gas 6.7
Integrated Telecommunications Services 3.9
Multi-Line Insurance 3.8
Electric Utilities 2.3
Percent of
TOP TEN COMMON STOCK HOLDINGS Net Assets
- ------------------------------------------------------------------------------
ChevronTexaco Corp. (Integrated Oil & Gas) 2.3%
Exxon Mobil Corp. (Integrated Oil & Gas) 2.3
Citigroup, Inc. (Other Diversified Financial Services) 2.2
U.S. Bancorp (Diversified Banks) 1.8
Hartford Financial Services Group, Inc. (Multi-Line Insurance) 1.7
General Electric Co. (Industrial Conglomerates) 1.6
Wells Fargo & Co. (Diversified Banks) 1.5
Bank of America Corp. (Diversified Banks) 1.4
Kimberly-Clark Corp. (Household Products) 1.3
American International Group, Inc. (Multi-Line Insurance) 1.3
TOP FIVE PURCHASES (Common Stocks)
For the Period Ended June 30, 2004 Cost (000's)
- ----------------------------------------------------
MBNA Corp. $210
Mellon Financial Corp. 172
Air Products and Chemicals, Inc. 168
Allstate Corp. 157
General Electric Co. 144
TOP FIVE SALES (Common Stocks) Proceeds
For the Period Ended June 30, 2004 (000's)
- ---------------------------------------------------------
Travelers Property Casualty Corp. (Class B) $172
Kroger Co. 133
American Express Co. 131
United Parcel Service, Inc. (Class B) 129
Costco Wholesale Corp. 117
WEIGHTINGS AS A PERCENT OF NET ASSETS
- --------------------------------------------------------------------------------
[DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
Large - Common Stocks: 62.3%
($4 Bil. and above)
Medium - Common Stocks: 2.1%
($1.5 Bil. - $4 Bil.)
Small - Common Stocks: 0.7%
(Less than $1.5 Bil.)
Corporate Bonds: 10.2%
Asset Backed Securities: 0.5%
Collateralized Mortgage Obligations: 1.4%
U.S. Government Agency -
Mortgage Backed Securities: 7.6%
U.S. Government & Agency Obligations: 12.0%
Municipal Bonds: 0.4%
Cash & Other: 2.8%
D-3
Report From the Fund Managers
Safeco Core Equity Fund
As of June 30, 2004
How did the Fund perform?
The Safeco Core Equity Fund underperformed its benchmark Index, the S&P
500, for the six-month period ending June 30, 2004.
What factors impacted the Fund's performance?
Trends that hurt the Fund in the fourth quarter of 2003 continued. Cyclical
stocks, companies without earnings, and lower-quality companies continued to
perform better than the stocks in the Fund's benchmark.
During the first half of this year, virtually every sector had stocks that
performed well. Some of these stocks, such as Ball Corp., Illinois Tool Works
and Leggett & Platt performed well as the economy strengthened. Others like
Hartford Financial and Schlumberger performed well because trends in the
insurance and energy industries remained positive. Finally, others like Estee
Lauder, Harley Davidson and PepsiCo are simply solid companies that continue to
do well.
The Fund had several poor performing stocks in the first half, including
some in the health care sector. In this sector, patent expirations (Abbott),
legal issues (Wyeth) and concerns regarding future growth rates (Amgen) weighed
on the stocks. The technology sector had several losers. Nokia is suffering from
newer entrants and its own product cycle. Texas Instruments and Applied
Materials remain volatile due to concerns regarding the strength and length of
the cycle in their end markets.
What changes did you make to the Fund and why?
Diversification is increasing -- we added two utilities stocks. The largest
position sizes are decreasing: positions over 3% at year-end 2003 are down to
zero at mid-year. The percentage of the funds in its top-10 holdings is
decreasing (28.2% at year-end 2003 versus 24% now) and the average market
capitalization is decreasing, achieved by reducing positions in Citigroup and
Pfizer. The intent of these moves is to improve the relative performance of the
Fund.
At the same time we were undertaking the activities outlined above, we
continued to look for the correct buy and hold stocks for the Fund. This
included such moves as adding to existing positions in Illinois Tool Works and
Cardinal Health and initiating new positions, such as in SunGard Data Systems
and Best Buy.
We eliminated our position in Altria when it reached our price objective,
as well as our position in PeopleSoft, because we found a better alternative.
Rich Meagley, CFA -- Portfolio Manager/Equity Analyst
Darcy MacLaren, CFA -- Portfolio Manager
D-4
Performance Overview & Highlights
Safeco Core Equity Fund
(Unaudited)
INVESTOR CLASS
- ---------------------------------------------------------------------------------------------------
Average Annual Total Return Since
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year Inception**
- ---------------------------------------------------------------------------------------------------
Safeco Core Equity Fund 1.76% 14.16% (5.70)% 7.99%
S&P 500 Index 3.46% 19.13% (2.20)% 11.82%
Lipper, Inc. (Large-Cap Core Funds) 2.03% 16.13% (3.17)% 9.79%
* Not annualized.
Performance does not reflect the deduction for taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
- ---------------------------------------------------------------------------------------------------
<Plot Points To Come for Line Chart>
The performance graph compares a hypothetical $10,000 investment in the
Investor Class to a hypothetical investment in a relevant market index. The
index is unmanaged and includes no operating expenses or transaction costs.
Past performance is not predictive of future results. Principal value may
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost.
TOP FIVE INDUSTRIES Percent of
(Common Stocks) Net Assets
- ------------------------------------
Pharmaceuticals 8.7%
Diversified Banks 4.9
Integrated Oil & Gas 4.3
Industrial Machinery 4.2
Multi-Line Insurance 3.3
Percent of
TOP TEN COMMON STOCK HOLDINGS Net Assets
- ---------------------------------------------------------
General Electric Co. 2.8%
(Industrial Conglomerates)
Microsoft Corp. 2.7
(Systems Software)
Citigroup, Inc. 2.5
(Other Diversified Financial Services)
Pfizer, Inc. 2.5
(Pharmaceuticals)
Wells Fargo & Co. 2.4
(Diversified Banks)
Exxon Mobil Corp. 2.4
(Integrated Oil & Gas)
United Technologies Corp. 2.3
(Aerospace & Defense)
American International Group, Inc. 2.2
(Multi-Line Insurance)
Cisco Systems, Inc. 2.1
(Communication Equipment)
Procter & Gamble Co. 2.1
(Household Products)
TOP FIVE PURCHASES Cost
For the Period Ended June 30, 2004 (000's)
- -----------------------------------------------
SunGard Data Systems, Inc. $7,637
Apache Corp. 7,522
Ball Corp. 7,448
FirstEnergy Corp. 7,125
Exelon Corp. 6,711
TOP FIVE SALES Proceeds
For the Period Ended June 30, 2004 (000's)
- ------------------------------------------------
American International Group, Inc. $8,284
Pfizer, Inc. 8,091
PepsiCo, Inc. 7,374
Citigroup, Inc. 6,750
Oracle Corp. 6,412
WEIGHTINGS AS A PERCENT OF NET ASSETS
- --------------------------------------------------------------------------------
[DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
Large - Common Stocks: 97.8%
($4 Bil. and above)
Medium - Common Stocks: 0.8%
($1.5 Bil. - $4 Bil.)
Cash & Other: 1.4%
D-5
Report From the Fund Managers
Safeco Growth Opportunities Fund
As of June 30, 2004
How did the Fund perform?
The Safeco Growth Opportunities Fund outperformed its benchmark index, the
Russell 2000 Index[RegTM], for the six-month period ending June 30, 2004.
What factors impacted the Fund's performance?
The biggest factor affecting the Fund's strong performance has been from
stock selection. We have many stable, liquid and less volatile small-cap
holdings. Our view continues to be that earnings growth comparisons for many
companies will moderate as the economy continues to recover, thus we have
positioned the portfolio toward companies with sustainable growth in earnings.
Some of the Fund's outperformance was a result of 46% of the Fund having a
market capitalization of greater than $1 billion currently. This is the segment
of the market-cap spectrum that we added to during late 2003. Year-to date, the
Russell 2000 Index[RegTM] sectors that contributed the most were producer
durables, consumer discretionary and healthcare -- all overweighted sectors in
the Fund. Our underweight in technology helped as well.
What changes did you make to the Fund and why?
The turnover in the Fund remains quite low for a small-cap fund, as
compared to the turnover of other funds of its type. What this symbolizes is a
management team with a long-term view of the investments made in the portfolio.
We continue to upgrade the quality of the portfolio to more stable, more
liquid and thereby less volatile stocks. We seek high quality companies that
have consistent growth in profits, strong return on investor capital (or
increasing), an ability to fund growth internally, and a seasoned management
team.
Jeffrey Schwartz, CFA -- Portfolio Manager/Equity Analyst
Bill Whitlow, CFA -- Portfolio Manager/Equity Analyst
D-6
Performance Overview & Highlights
Safeco Growth Opportunities Fund
(Unaudited)
INVESTOR CLASS
- ---------------------------------------------------------------------------------------------
Average Annual Total Return
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year
- ---------------------------------------------------------------------------------------------
Safeco Growth Opportunities Fund 8.40% 32.82% 4.75% 11.92%
Russell 2000 Index 6.76% 33.37% 6.63% 10.93%
Lipper, Inc. (Small-Cap Core Funds) 7.14% 33.47% 10.61% 12.54%
* Not annualized.
Performance does not reflect the deduction for taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
- ---------------------------------------------------------------------------------------------
<Plot Points To Come for Line Chart>
The performance graph compares a hypothetical $10,000 investment in the Investor
Class to a hypothetical investment in a relevant market index. The index is
unmanaged and includes no operating expenses or transaction costs. Past
performance is not predictive of future results. Principal value may fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost.
Percent of
TOP FIVE INDUSTRIES Net Assets
- ------------------------------------------
Specialty Stores 5.6%
Thrifts & Mortgage Finance 5.2
Homebuilding 4.1
Casinos & Gaming 4.0
Health Care Services 3.9
Percent of
TOP TEN COMMON STOCK HOLDINGS Net Assets
- --------------------------------------------------------
MICROS Systems, Inc. 2.9%
(Application Software)
Nu Skin Enterprises, Inc. (Class A) 2.6
(Personal Products)
PolyMedica Corp. 2.6
(Health Care Supplies)
Rent-A-Center, Inc. 2.6
(Specialty Stores)
Iron Mountain, Inc. 2.5
(Data Processing & Outsourced Services)
Websense, Inc. 2.5
(Internet Software & Services)
American Healthways, Inc. 2.4
(Health Care Services)
Station Casinos, Inc. 2.3
(Casinos & Gaming)
Textronix, Inc. 2.1
(Electronic Equipment Manufacturers)
W Holding Co., Inc. 2.1
(Thrifts & Mortgage Finance)
TOP FIVE PURCHASES Cost
For the Period Ended June 30, 2004 (000's)
- -----------------------------------------------
Florida Rock Industries, Inc. $9,506
Scientific Games Corp. 8,266
Timberland Co. (Class A) 8,074
W Holding Co., Inc. 7,938
Scotts Co. (Class A) 5,966
TOP FIVE SALES Cost
For the Period Ended June 30, 2004 (000's)
- -------------------------------------------------
Conceptus, Inc. $9,279
NCO Group, Inc. 9,264
Nastech Pharmaceutical Co., Inc. 7,681
Matria Healthcare, Inc. 6,791
iShare Russell 2000 Value Index Fund 6,615
WEIGHTINGS AS A PERCENT OF NET ASSETS
- --------------------------------------------------------------------------------
[DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
Small - Common Stocks: 52.5%
(Less than $1.5 Bil.)
Indexed Securities: 6.4%
Warrants: 0.4%
Cash & Other: 2.4%
Large - Common Stocks: 3.1%
($4 Bil. and above)
Medium - Common Stocks: 35.2%
($1.5 Bil. - $4 Bil.)
D-7
Report From the Fund Manager
Safeco International Stock Fund
As of June 30, 2004
How did the Fund perform?
The Safeco International Fund underperformed its benchmark index, the MSCI
EAFE Net Index, for the six-month period ending June 30, 2004.
What factors impacted the Fund's performance?
Against a backdrop of improved economic conditions, global equity markets
posted moderate gains in most instances for the first six months of 2004.
However, concern about the future sustainability of the economic improvement,
peaking of the corporate profit cycle, rising interest rates, persistent
geopolitical strains and the ascent in the crude oil price counteracted some of
the gains in stocks.
The American and Japanese economies -- the world's largest and second
largest -- and China, produced much of the economic vigor. These economies also
provided the tonic for the rest of the world that buoyed corporate earnings'
prospects and underpinned the equity markets' advance.
Performance of the Fund was mixed over the first half of the year. Some of
the factors that weighed on performance during 2003 persisted while others
dissipated. Smaller companies continued to outperform their larger peers during
the first half of 2004. This continues to negatively impact the Fund as our
focus is large-cap companies.
However, encouragingly, we have begun to see a broadening out of
performance in the markets. Many of the low quality, "recovery play" stocks
which led the markets last year have begun to lag and high quality companies
which generate consistent earnings growth have begun to come back into favor.
Lastly, the Fund was held back somewhat by its underexposure to the
strongly performing Japanese market, however, as evidenced by the Fund's
increased weighting in Japan and greater Asia, we are encouraged by developments
in the region.
What changes did you make to the Fund and why?
There was considerable activity in the Fund during the first half of the
year, with much of the activity occurring in the Asia region. The Fund's
exposure to a particular country or sector is strictly a residual of the stock
selection process; however we have identified a number of attractive investment
opportunities in Japan and Asia in general.
Several Japanese financial services companies were added to the Fund
including, Sumitomo Mitsui Financial Group NPV, Millea Holdings Incorporated NPV
and Mitsui Sumitomo Insurance Company. The recovery in the Japanese economy
continues to gain momentum and, more importantly the underlying causes appear to
be more structural rather than cyclical and therefore more sustainable.
Financial services companies should be among the beneficiaries of this recovery.
Similarly Hong Kong banking group Hang Seng Bank was added to the fund.
Hang Seng Bank is one of the largest financial services companies in Hong Kong
and is well placed to benefit from the recovery in the Hong Kong economy as well
as the strong growth in mainland China where it is the largest foreign investor
in any Chinese bank.
During the second quarter, Japan Tobacco and Taiwan Semiconductor (TSMC)
were added to the Fund. Japan Tobacco is the dominate tobacco company in Japan
and owns the international rights to three of the top six global cigarette
brands. There is potential for re-rating of the stock as management pursues a
number of restructuring initiatives. TSMC is a global leader in the design and
manufacture of integrated circuit chips. The company is well positioned to
benefit from the growth in outsourcing of chip manufacturing yet trades on an
attractive multiple relative to its peers and historical growth record.
Positions disposed of during the period include Lloyds TSB, Shell T&T and
China Life. Shell's announcement that it has overstated proven reserves by 20%
raised a credibility issue about the management and we felt better opportunities
were available elsewhere. We participated in the IPO of China Life in December
of 2003. Shares in the company soared shortly thereafter making the stock look
expensive in our view.
Although Lloyds TSB is the highest yielding of the U.K. banks, we had
concerns regarding the sustainability of the dividend given the potential need
for capital support for its insurance subsidiary, Scottish Widows. Further, we
believe that other financial companies, in particular Royal Bank of Scotland and
BNP Paribas (also purchased during the period) are more attractive at this time.
Bank of Ireland
Asset Management (U.S.) Limited
D-8
Performance Overview & Highlights
Safeco International Stock Fund
(Unaudited)
INVESTOR CLASS
- ------------------------------------------------------------------------------------------
Average Annual Total Return Since
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year Inception**
- ------------------------------------------------------------------------------------------
Safeco International Stock Fund 2.35% 23.29% (2.72)% 2.74%
MCSI EAFE Index 4.56% 32.37% 0.06% 3.59%
Lipper, Inc. (International Funds) 2.49% 25.48% (1.31)% N/A
* Not annualized.
** Graph and average annual return comparison begins January 31, 1996, inception date
of the Fund. Performance does not reflect the deduction for taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
- ------------------------------------------------------------------------------------------
<Plot Points To Come for Line Chart>
The performance graph compares a hypothetical $10,000 investment in the Investor
Class to a hypothetical investment in a relevant market index. The index is
unmanaged and includes no operating expenses or transaction costs. Past
performance is not predictive of future results. Principal value may fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost.
TOP FIVE COUNTRIES Percent of
(Common Stocks) Net Assets
- ----------------------------------
United Kingdom 23.5%
Japan 17.4
Switzerland 12.2
France 9.7
Netherlands 8.3
TOP TEN COMMON STOCK HOLDINGS Percent of
(Common Stocks) Net Assets
- -----------------------------------------------------------
Nestle SA 3.6%
(Food Retail)
Total SA 3.4
(Integrated Oil & Gas)
Canon, Inc. 3.1
(Office Electronics)
UBS AG 2.9
(Investment Banking & Brokerage)
E.On AG 2.4
(Electric Utilities)
ING Groep NV 2.4
(Other Diversified Financial Services)
Nippon Telegraph & Telephone Corp. 2.2
(Integrated Telecommunications Services)
Samsung Electronics Co., Ltd. 2.2
(Electronic Equipment Manufacturers)
HSBC Holdings, plc 2.2
(Diversified Banks)
Novartis AG 2.2
(Pharmaceuticals)
TOP FIVE PURCHASES
For the Period Ended June 30, 2004 Cost (000's)
- -------------------------------------------------------
Royal Bank of Scotland Group, plc $539
BNP Paribas SA 528
Sumitomo Mitsui Financial Group, Inc. 341
HSBC Holdings, plc 325
Japan Tobacco, Inc. 299
TOP FIVE SALES Proceeds
For the Period Ended June 30, 2004 (000's)
- ------------------------------------------------
Lloyds TSB Group, plc $585
Shell Transport & Trading Co., plc 548
Aventis SA 169
Barclays, plc 160
Acom Co., Ltd. 149
D-9
Report From the Fund Managers
Safeco Large-Cap Growth Fund
As of June 30, 2004
How did the Fund perform?
For the six-month period ending June 30, 2004, the Safeco Large-Cap Growth
Fund underperformed its benchmark, the Russell 1000 Growth Index.
The Fund's performance since inception in late 2001 also trails its
benchmark, although the majority of the Fund's underperformance since inception
occurred in calendar year 2003, when smaller stocks with no earnings and
speculative characteristics significantly outperformed the overall market.
Conversely, stocks with better fundamentals such as high levels of profitability
and balance sheet strength underperformed in 2003. This provided a major
headwind to our quality investment style. While volatile conditions may persist
near term, we believe that we are in the midst of a transitional phase, into an
environment in which investors again return to high quality large cap stocks
with sustainable growth characteristics.
What factors impacted the Fund's performance?
Many companies have been demonstrating very strong fundamentals and
exceptional earnings growth. Returns have been muted, however, due in part to
investor anxieties regarding inflation, rising interest rates, slowing growth in
China, the Iraqi Government transition, terrorism, near record oil prices and
the upcoming presidential election.
Returns were helped most by internet software and services holdings, while
the largest detractors from returns came from software. Individual stocks that
had a major impact on performance included:
o Yahoo! Inc. appreciated by 62% over the half-year, helped by increases
in paid search activity and online advertising, along with a growing
user base.
o Avon Products was also a top performer, benefiting from growth in
developing markets such as central/eastern Europe, Latin America, and
China.
o Software storage firm Veritas lost 25% over the period, and recently
announced that revenues and earnings would come in below investor
expectations. We trimmed our holding in the stock and are monitoring
developments closely.
What changes did you make to the Fund and why?
The relatively flat first half returns masked an erratic period in which
market leadership shifted frequently between cyclical and defensive areas of the
market. Since the beginning of the year, we reduced our holdings of technology
stocks, and the Fund is now slightly underweight in technology. We also took
profits in some areas of health care, notably in health care equipment and
supplies. Some proceeds were re-deployed into biotechnology. The Fund's largest
position remained with the global, research-based pharmaceutical firm, Pfizer
Inc.
Energy was one of the best performing segments in the Fund, appreciating by
over 25%. We continue to like the operating environment for several energy and
oil services companies, which are indirectly benefiting from high oil and gas
prices, limited supply growth and increasing demand associated with the global
economic recovery. Accordingly, we added to this sector over the period, and
hold an overweight position here.
RCM Capital Management LLC, formerly Dresdner RCM Global Investors LLC acts
as an investment sub-advisor to the Safeco Large-Cap Growth Fund.
Peter Goetz, MBA, CFA -- Portfolio Manager
Seth A. Reicher, CFA -- Portfolio Manager
D-10
Performance Overview & Highlights
Safeco Large-Cap Growth Fund
(Unaudited)
INVESTOR CLASS
- ------------------------------------------------------------------------------------------
Average Annual Total Return Since
for the periods ended June 30, 2004 Six Month* 1 Year Inception**
- ------------------------------------------------------------------------------------------
Safeco Large-Cap Growth Fund 0.65% 10.77% (2.30)%
Russell 1000 Growth Index 2.74% 17.88% 1.91%
Lipper, Inc. (Large-Cap Growth Funds) 2.35% 15.56% N/A
* Not annualized.
** Total return comparison begins October 31, 2001, inception date of the Fund.
Performance does not reflect the deduction for taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
- ------------------------------------------------------------------------------------------
<Plot Points To Come for Line Chart>
The performance graph compares a hypothetical $10,000 investment in the
Investor Class to a hypothetical investment in a relevant market index. The
index is unmanaged and includes no operating expenses or transaction costs.
Past performance is not predictive of future results. Principal value may
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost.
Percent of
TOP FIVE INDUSTRIES Net Assets
- --------------------------------------------
Pharmaceuticals 12.4%
Industrial Conglomerates 6.3
Systems Software 6.3
Communication Equipment 5.1
Internet Software & Services 4.5
Percent of
TOP TEN COMMON STOCK HOLDINGS Net Assets
- ----------------------------------------------------
Pfizer, Inc. 5.4%
(Pharmaceuticals)
Intel Corp. 3.4
(Semiconductors)
Cisco Systems, Inc. 3.3
(Communications Equipment)
Minnesota Mining & Manufacturing Co. 3.3
(Industrial Conglomerates)
Yahoo, Inc. 3.3
(Internet Software and Services)
General Electric Co. 3.0
(Industrial Conglomerates)
Wal-Mart Stores 2.6
(General Merchandise Stores)
Dell, Inc. 2.6
(Computer Hardware)
Procter & Gamble 2.4
(Household Products)
Microsoft Corp. 2.2
(Systems Software)
TOP FIVE PURCHASES Cost
For the Period Ended June 30, 2004 (000's)
- ------------------------------------------------
Paychex, Inc. $123
Guidant Corp. 122
International Game Technology, Inc. 115
Coca-Cola Co. 114
Agilent Technologies, Inc. 104
TOP FIVE SALES Proceeds
For the Period Ended June 30, 2004 (000's)
- ------------------------------------------------
St. Jude Medical, Inc. $117
Lowe's Companies, Inc. 113
General Electric Co. 93
Agilent Technologies, Inc. 76
Microsoft Corp. 75
WEIGHTINGS AS A PERCENT OF NET ASSETS
- --------------------------------------------------------------------------------
[DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
Large - Common Stocks: 97.0%
($4 Bil. and above)
Mid-Cap - Common Stocks: 0.4%
($1.5 Bil. - $4 Bil.)
Cash & Other: 2.6%
D-11
Report From the Fund Managers
Safeco Large-Cap Value Fund
As of June 30, 2004
How did the Fund perform?
The Safeco Large-Cap Value Fund underperformed its benchmark, the Russell
1000 Value[RegTM] Index, for the six-month period ending June 30, 2004.
What factors impacted the Fund's performance?
The Fund's performance was primarily due to stock selection and aided by a
one-time settlement of a class action lawsuit regarding a former holding.
As usual, there were multiple factors affecting performance. One factor
that has helped so far this year, after hurting last year, was the relative
outperformance of large companies over smaller ones. This helped the Fund's
relative performance as we own mostly larger companies. It also helped that
higher quality companies tended to perform better than lower quality ones. This
too is a change from recent periods.
For the year-to-date, the Fund's best performing sector was energy, which
returned around 10%. Performance here was led by Conoco-Philips, up nearly 20%,
and British Petroleum, up around 10%. This sector was up primarily due to the
rise in oil prices, and the resulting improved outlook for earnings. Consumer
discretionary stocks were our next best group, returning around 8%. Materials
and consumer staples were our third and fourth best performing sectors.
On the negative side, our worst sectors were technology and health care,
both of which declined by around 2%. Technology was hurt primarily by a large
decline in both Nokia and Texas Instruments. Nokia has been losing market share
in the cell phone market, and Texas Instruments is one of their suppliers.
Finance stocks, the largest sector in both our Index and the Fund, were held
back by rising interest rates and the negative impact this is expected to have
on earnings. Finance stocks were essentially flat for the past six months.
What changes did you make to the Fund and why?
During the past six months, we made several changes to the Fund. As always,
the changes were designed to own the stocks we find most attractive and to
adjust sector weightings to what we believe are appropriate levels. Some recent
sector weighting adjustments were due to the annual Russell Value Index
re-configuration which occurred at the end of June.
Stocks added to the portfolio included PMI Group, Weyerhaeuser, and Polaris
Industries. PMI Group, a mortgage insurer, was added because it's a rarity among
financial stocks in that rising rates should actually help earnings as the pace
of refinancing slows. Weyerhaeuser, a stock we have wanted to own for some time
in order to gain exposure to forest products, finally reached what we believe to
be an attractive valuation. Polaris Industries is a maker of all-terrain
vehicles, a market we expect will continue to experience good growth, especially
as the economy improves and the outlook for jobs gets better. We also initiated
positions in Allstate Insurance, Coca Cola and Illinois Tool Works, all of which
we believe were selling at attractive valuations.
We eliminated holdings of Disney, which rose after receiving an unsolicited
takeover offer. We also sold Eli Lilly, Anheuser-Busch and Hubbell based on
valuation, as they had appreciated to levels that were very near our target
prices.
We reduced our position in the finance sector by 2.1%, mainly to lessen our
exposure during what we expect to be a period of rising interest rates. We are
currently 1.7% underweight in finance relative to the Russell 1000 Value Index.
We reduced our exposure to stocks in the producer durables sector, which
performed very well. We do, however, remain overweighted in this sector by 2.0%
as we expect these stocks to continue to perform well as the economy improves.
We are overweighted in the materials sector for the same reason, and have added
to our position, primarily by buying Weyerhaeuser as discussed earlier. We also
added to our exposure to what Russell calls "other" (primarily includes
multi-industry companies, such as GE), as this sector went from 1.6% to 6.6% of
the Index at the June re-configuration.
Rex Bentley, CFA -- Portfolio Manager/Equity Analyst
Lynette Sagvold, CFA -- Portfolio Manager/Equity Analyst
D-12
Performance Overview & Highlights
Safeco Large-Cap Value Fund
(Unaudited)
INVESTOR CLASS
- -----------------------------------------------------------------------------------------------
Average Annual Total Return
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year
- -----------------------------------------------------------------------------------------------
Safeco Large-Cap Value Fund 3.37% 18.91% (1.71)% 7.52%
Russell 1000 Value Index 3.94% 21.13% 1.87% 12.64%
Lipper, Inc. (Equity-Income Funds) 3.24% 19.19% 0.67% 10.41%
* Not annualized.
Performance does not reflect the deduction for taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
- -----------------------------------------------------------------------------------------------
<Plot Points To Come for Line Chart>
The performance graph compares a hypothetical $10,000 investment in the Investor
Class to a hypothetical investment in a relevant market index. The index is
unmanaged and includes no operating expenses or transaction costs. Past
performance is not predictive of future results. Principal value may fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost.
Percent of
TOP FIVE INDUSTRIES Net Assets
- ------------------------------------------------------
Diversified Banks 11.2%
Integrated Oil & Gas 10.2
Multi-Line Insurance 5.8
Integrated Telecommunications Services 5.7
Pharmaceuticals 3.5
Percent of
TOP TEN COMMON STOCK HOLDINGS Net Assets
- -------------------------------------------------------
Chevron Texaco Corp. 3.7%
(Integrated Oil & Gas)
Citigroup, Inc. 3.3
(Other Diversified Financial Services)
Exxon Mobil Corp. 2.9
(Integrated Oil & Gas)
Hartford Financial Services Group, Inc. 2.7
(Multi-Line Insurance)
U.S. Bancorp 2.6
(Diversified Banks)
General Electric Co. 2.6
(Industrial Conglomerates)
Wells Fargo & Co. 2.3
(Diversified Banks)
Bank of America Corp. 2.1
(Diversified Banks)
Kimberly-Clark Corp. 2.0
(Household Products)
American International Group, Inc. 1.9
(Multi-Line Insurance)
TOP FIVE PURCHASES Cost
For the Period Ended June 30, 2004 (000's)
- -----------------------------------------------
MBNA Corp. $2,441
Mellon Financial Corp. 2,013
General Electric Co. 1,958
Allstate Corp. 1,828
Praxair, Inc. 1,755
TOP FIVE SALES Proceeds
For the Period Ended June 30, 2004 (000's)
- ------------------------------------------------
Travelers Property Casualty Corp. $2,048
(Class B)
American Express Co. 1,619
Northrop Grumman Corp. 1,585
Nokia Oyj (ADR) 1,579
Kroger Co. 1,512
WEIGHTINGS AS A PERCENT OF NET ASSETS
- --------------------------------------------------------------------------------
[DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
Large - Common Stocks: 94.0%
($4 Bil. and above)
Medium - Common Stocks: 3.1%
($1.5 Bil. - $4 Bil.)
Small - Common Stocks: 0.8%
(Less than $1.5 Bil.)
Cash & Other 2.1%
D-13
Report From the Fund Managers
Safeco Multi-Cap Core Fund
As of June 30, 2004
How did the Fund perform?
The Safeco Multi-Cap Core Fund outperformed its benchmark Index, the
Russell 3000[RegTM] Index, for the six-month period ending June 30, 2004.
What factors impacted the Fund's performance?
The market posted a modest gain during the first half of the year as the
improving economy and strong corporate earnings outweighed investors' concerns
about rising rates, the conflict in Iraq and higher oil prices.
During the period, small- and mid-cap stocks outperformed large-cap stocks.
In the first half of this year, the Russell 2000[RegTM] Index of small-cap
stocks advanced 6.76% and the Russell Mid-Cap Index advanced 6.67% versus a 3.3%
rise in the Russell 1000[RegTM] Index of large-cap issues.
We attribute our better performance in the period to the Fund's high
exposure to mid- and small-cap stocks relative to the benchmark.
What changes did you make to the Fund and why?
During the first half we continued our strategy of increasing
diversification to improve the risk/reward trade-off in the Fund. We added 17
new positions, and deleted six, bringing our total number of names to 73. The
additions were mostly economically sensitive companies in the mid-cap size
range. The deletions were all small-cap companies which had not been performing
well. We continue to seek a better balance among market capitalizations as we
modestly reduce our exposure to small-caps relative to our benchmark.
Four of the five top performers for the period -- Coldwater Creek,
Starbucks, Expeditors International and Nordstrom -- are cyclical companies. Our
poor performers were either companies that had company-specific problems, like
Performance Food Group, Intuit and Penwest Pharmaceutical, or stocks that
retreated after a good run, like Primus Knowledge.
Bill Whitlow, CFA -- Portfolio Manager/Equity Analyst
Brian Clancy, CFA -- Portfolio Manager/Equity Analyst
D-14
Performance Overview & Highlights
Safeco Multi-Cap Core Fund
(Unaudited)
INVESTOR CLASS
- -----------------------------------------------------------------------------------------------
Average Annual Total Return
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year
- -----------------------------------------------------------------------------------------------
Safeco Multi-Cap Core Fund 4.86% 25.78% 2.32% 9.53%
Russell 3000 Index 3.59% 20.46% (1.07)% 11.66%
S&P 500 Index 3.46% 19.13% (2.20)% 11.82%
Lipper, Inc. (Multi-Cap Core Funds) 3.34% 19.72% 1.66% 11.38%
* Not annualized.
Performance does not reflect the deduction for taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
- -----------------------------------------------------------------------------------------------
<Plot Points To Come for Line Chart>
The performance graph compares a hypothetical $10,000 investment in the Investor
Class to a hypothetical investment in a relevant market indexes. The indexes are
unmanaged and include no operating expenses or transaction costs. Past
performance is not predictive of future results. Principal value may fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost.
Percent of
TOP FIVE INDUSTRIES Net Assets
- --------------------------------------------------
Diversified Banks 5.6%
Pharmaceuticals 5.2
Semiconductors 4.0
Oil & Gas Exploration & Production 3.7
Electronic Equipment Manufacturers 3.6
Percent of
TOP TEN COMMON STOCK HOLDINGS Net Assets
- ------------------------------------------------------------
StanCorp Financial Group, Inc. 2.5%
(Life & Health Insurance)
Tektronix, Inc. 2.5
(Electronic Equipment Manufacturers)
Starbucks Corp. 2.4
(Restaurants)
Expeditors International of Washington, Inc. 2.3
(Air Freight & Logistics)
Nordstrom, Inc. 2.3
(Department Stores)
Kroger Co. 2.2
(Food Retail)
Costco Wholesale Corp. 2.2
(Hypermarkets & Super Centers)
Pfizer, Inc. 2.1
(Pharmaceuticals)
Microsoft Corp. 2.1
(Systems Software)
U.S. Bancorp 2.0
(Diversified Banks)
TOP FIVE PURCHASES Cost
For the Period Ended June 30, 2004 (000's)
- -----------------------------------------------
Performance Food Group Co. $1,388
A.G. Edwards, Inc. 1,354
Investors Financial Services Corp. 1,274
Accredo Health, Inc. 1,098
American Healthways, Inc. 1,043
TOP FIVE SALES Proceeds
For the Period Ended June 30, 2004 (000's)
- ------------------------------------------------
Coldwater Creek, Inc. $2,028
Monaco Coach Corp. 1,267
Starbucks Corp. 1,169
Penford Corp. 1,020
Tektronix, Inc. 978
WEIGHTINGS AS A PERCENT OF NET ASSETS
- --------------------------------------------------------------------------------
[DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
Large - Common Stocks: 58.2%
($4 Bil. and above)
Medium - Common Stocks: 17.6%
($1.5 Bil. - $4 Bil.)
Small - Common Stocks: 23.0%
(Less than $1.5 Bil.)
Cash & Other: 1.2%
D-15
Report From the Fund Manager
Safeco Small-Cap Value Fund
As of June 30, 2004
How did the Fund perform?
Overall the Fund essentially matched the performance of our benchmark
Russell 2000 Value index for the six-month period ending June 30, 2004. All the
positive contributions took place in the first quarter, and then the small-cap
market seesawed down and up from April through June. In retrospect, the first
few months were a continuation of the "take off" phase of the market cycle that
began last March. The April/May timeframe saw the first significant correction
since that rally began.
What factors impacted the Fund's performance?
Market leadership by higher quality stocks has continued, following a trend
that began in the fourth quarter of last year. I define high quality as
companies with stock prices above $5 per share, with positive earnings, low P/E
ratios versus the universe, and market capitalization above $250 million.
This trend helped the Fund, since it owns stocks all across the
small-cap-size spectrum and the weighted average tends towards the middle of the
small-cap-size range. Also, the Fund has less of its assets invested in
companies that are not currently more profitable than the index, and we didn't
have much exposure to under-$5 price stocks.
In early April, one single government report of job growth was all it took
to crystallize the market's worry that the Federal Reserve would start raising
short-term interest rates. This precipitated a fast and steep correction in the
Fund's most interest-rate-sensitive stocks. Those stocks have made a partial
recovery since then.
What changes did you make to the Fund and why?
I added new stocks, which I believed were not discounting their full
potential or had not participated in the "lift off" phase of the early market
cycle. From the March 2003 bottom, the entire market experienced a "rising tide"
effect. That effect has run its course, and so I've tried to find stocks that
represent value opportunities in the traditional sense of the word.
For example, Pacer International was bought on price weakness after I had
multiple meetings with management to cement an understanding of their business.
Pacer arranges for the transportation of ocean freight containers by reselling
space on the railroads in a service called the Stack Train. They produce
significant free cash flow, but their service offering is aligned with the Union
Pacific and CSX railroads, and those companies are experiencing a period of poor
service quality that has temporarily hurt Pacer. In time this will change.
However, Pacer's stock was down based on the current view of conditions, not
what they'll be in the future. The future is where I see the stock's
opportunity.
I also exited positions that I believe have run their course, or have taken
a turn for the worse. Examples of the former include the last of the utility
preferred stocks in the Fund. An example of the latter would be the company
Osteotech, which abandoned one of its product lines in January, calling into
doubt its growth prospects and valuation. I was fortunate to exit the stock
before the worst of the damage was done.
I continue to believe stocks with traditional "value" characteristics, in
terms of their overall valuation and free cash flow generation, are a successful
strategy to own for the long term. I am a believer in owning stocks that are
priced cheaper than the overall market, and that have sustainable businesses and
cash flows. I think the Fund is currently positioned this way.
Greg Eisen, CFA -- Portfolio Manager/Equity Analyst
D-16
Performance Overview & Highlights
Safeco Small-Cap Value Fund
(Unaudited)
INVESTOR CLASS
- --------------------------------------------------------------------------------------------------
Average Annual Total Return Since
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year Inception**
- --------------------------------------------------------------------------------------------------
Safeco Small-Cap Value Fund 7.82% 31.58% 14.80% 10.05%
Russell 2000 Value Index 7.83% 35.17% 12.82% 13.26%
Lipper, Inc. (Small-Cap Value Funds) 8.15% 34.14% 13.08% N/A
* Not annualized.
** Graph and average annual return comparison begins January 31, 1996, inception date of
the Fund.
Performance does not reflect the deduction for taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
- --------------------------------------------------------------------------------------------------
<Plot Points To Come for Line Chart>
The performance graph compares a hypothetical $10,000 investment in the Investor
Class to a hypothetical investment in a relevant market index. The index is
unmanaged and includes no operating expenses or transaction costs. Past
performance is not predictive of future results. Principal value may fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost.
Percent of
TOP FIVE INDUSTRIES Net Assets
- --------------------------------------------
Real Estate Investment Trust 6.7%
Specialty Stores 6.4
Regional Banks 5.9
Trucking 5.3
Consumer Finance 4.8
Percent of
TOP TEN COMMON STOCK HOLDINGS Net Assets
- ---------------------------------------------------
World Fuel Services Corp. 3.3%
(Integrated Oil & Gas)
Lone Star Technologies, Inc. 2.9
(Oil & Gas Equipment & Services)
Cash America International, Inc. 2.5
(Consumer Finance)
Imation Corp. 2.5
(Computer Storage & Peripherals)
Foot Locker, Inc. 2.4
(Specialty Stores)
Champion Enterprises, Inc. 2.4
(Homebuilding)
AmeriCredit Corp. 2.3
(Consumer Finance)
Precision Castparts Corp. 2.3
(Diversified Metals & Mining)
Hollywood Entertainment Corp. 2.3
(Specialty Stores)
Insight Enterprises, Inc. 2.2
(Catalog Retail)
TOP FIVE PURCHASES Cost
For the Period Ended June 30, 2004 (000's)
- -----------------------------------------------
Champion Enterprises, Inc. $1,534
Pacer International, Inc. 1,371
Apollo Investment Corp. 1,188
Hanger Orthopedic Group, Inc. 1,149
Impac Mortgage Holdings, Inc. 1,134
TOP FIVE SALES Proceeds
For the Period Ended June 30, 2004 (000's)
- ---------------------------------------------------
Pacific Crest Capital, Inc. $1,310
Nordic American Tanker Shipping, Ltd. 1,003
Isle of Capri Casinos, Inc. 731
Furniture Branks International, Inc. 721
SonoSite, Inc. 680
WEIGHTINGS AS A PERCENT OF NET ASSETS
- --------------------------------------------------------------------------------
[DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
Indexed Securities: 3.6%
Cash & Other: 3.0%
Mid-Cap - Common Stocks: 22.8%
($1.5 Bil. - $4 Bil.)
Small Cap - Common Stocks Under ($1.5 Bil.)
a) Large (Over $750 Mil.): 40.2%
b) Medium ($250 Mil. - $750 Mil.): 25.8%
c) Small (Under $250 Mil.): 4.6%
D-17
PIONEER BALANCED FUND
Performance Update 6/30/04 Class A Shares
Share Prices and Distributions
6/30/04 12/31/03
Net Asset Value per Share $9.57 $9.47
Distributions per Share Net Short-Term Long-Term
(1/1/04 - 6/30/04) Investment Capital Gains Capital Gains
Income
$0.0500 $ $
Investment Returns
The mountain chart shows the change in value of a $10,000 investment made in
Pioneer Balanced Fund at public offering price, compared to that of the Standard
& Poor's 500 Index and the Lehman Brothers Aggregate Bond Index.
[DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Value of $10,000 Investment
Lehman
Pioneer Brothers Standard &
Balanaced Aggregate Poor's 500
Fund* Bond Index Index
6/94 9550 10000 10000
9573 10099 10486
11679 11965 14420
12/96 12834 12398 17725
14621 13597 23635
12/98 14788 14776 30394
15253 14652 36787
12/00 16074 16356 33444
15612 17737 29480
12/02 13863 19557 22966
16080 20360 29550
6/04 16335 20391 30567
Average Annual Total Returns
(As of June 30, 2004)
Period Net Asset Value Public Offering Price *
- ---------------------------------------------------------
10 Years 5.51% 5.03%
5 Years 1.34 0.40
1 Year 8.51 3.64
* Reflects deduction of the maximum 4.5% sales charge at the beginning of the
period and assumes reinvestment of distributions at net asset value.
Performance data shown represents past performance. Past performance does not
guarantee future results. Assumes reinvestment of all distributions at net asset
value. Investment return and principal value fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance shown. For performance
data that is current to the most recent month-end, please call 1-800-225-6292 or
visit our web site www.pioneerfunds.com. The performance table and graph do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
The Fund adopted its current name and investment objective on February 3, 1997.
Prior to that date, the Fund's name was Pioneer Income Fund and its objective
was income from a portfolio of income-producing bonds and stocks.
The Standard & Poor's (S&P) 500 Index is an unmanaged measure of 500 widely held
common stocks listed on the New York Stock Exchange, American Stock Exchange and
the over-the-counter market. The Lehman Brothers Aggregate Bond Index is a
widely recognized market value-weighted index composed of the Lehman Brothers
Government/Credit, Mortgage-backed, Asset-Backed and Commercial Mortgage-Based
Securities indices. Index returns assume reinvestment of dividends and, unlike
Fund returns, do not reflect any fees, expenses or sales charges. You cannot
invest directly in any Index.
D-18
Portfolio Manager's Discussion 6/30/04
While the economy grew and corporate profits rose during the first half of
2004, stock market returns were muted by worries about rising interest rates as
well as geopolitical issues around the world. In the fixed income markets, the
jump in interest rates midway through the six months sent many bond prices
lower, resulting in weak returns in most sectors. In the following interview,
Timothy Mulrenan, who is responsible for the equity portfolio of Pioneer
Balanced Fund, and Richard Schlanger, who is responsible for the Fund's fixed
income portfolio, discuss the markets and their investment strategies during the
six months ended June 30, 2004.
Q: How did the Fund perform during the first six months of 2004?
A: Pioneer Balanced Fund's Class A shares had a total return of 1.59% during
the six months ended June 30, 2004, while Class B and Class C shares
returned, respectively, 1.18% and 1.06%, all at net asset value. During the
same six months, the average return of the funds in Lipper's Balanced Fund
category was 1.79%.
Q: What were the factors that affected performance?
A: The domestic equity market produced generally positive returns for the six
months, but those returns masked the underlying volatility and tensions
between conflicting influences. Supporting equity valuations were an
expanding economy and robust corporate profits. Reported earnings tended to
be 25% higher than in the comparable period of 2003. The competing negative
factors included the spike in market interest rates midway through the six
months, as well as uncertainty brought on by concerns over issues such as
energy prices, stability in Iraq and presidential election-year politics.
In the fixed income markets, interest rates tended to rise, with
shorter-maturity rates rising farther than longer-term rates. The price
losses brought on by the higher rates as well as the flattening of the
yield curve -- or difference between short-term and long-term yields --
resulted in volatility in the bond market. The key factor was the widely
anticipated announcement by the Federal Reserve Board on the final day of
the period to begin tightening monetary policy by starting to raise the
influential overnight lending rate -- the Fed Funds rate. The initial hike
was from 1.00% to 1.25%, but the expectation was that the Fed would raise
rates further in the months to come in an effort to guard against
inflationary pressures.
Q: What were the principal strategies during the period?
A: We kept the allocation between equities and bonds consistent during the six
months. On June 30, about 64% of assets were invested in stocks -- about
the same percentage as at the start of the period. The remaining assets
were invested in fixed income assets, including corporate bonds, government
securities, and mortgage-backed securities, with a small allocation in
foreign bonds and less than 2% in cash. There also were no major changes in
the equity portfolio, although we did trim our energy position to take
profits and to reduce our vulnerability to the area during a time when we
expected increased price volatility. We remained over weighted in energy
stocks, however, and remain positive about the sector's longer-term
fundamentals. We modestly increased the Fund's health care holdings, adding
medical device company Guidant and pharmaceutical company Eli Lilly. We
thought Guidant's stock price had become compellingly attractive after it
fell because of an announcement about a delay in a new product
introduction. We like Lilly because it has well-developed research and
development activities that should produce a flow of new products. In
addition, we initiated a position in Liz Claiborne, the apparel company. We
think it is attractive because of its strong distribution during a time
when the industry is beginning to gain greater control over pricing. We
substantially reduced our holdings in two stocks that had performed very
well -- software company Symantec and auto insurance company Progressive.
We also eliminated our position in Devon Energy, an exploration and
production company, because of our concerns about its internal cost
structure. In the fixed income portfolio, we raised overall quality of the
portfolio, with average credit quality moving from A+ to AA-. Interestrate
sensitivity -- as measured by duration -- was about even with that of the
benchmark Lehman Brothers Aggregate Bond Index, although it declined
slightly during the six months from 4.52 years to 4.34 years. We increased
our exposure to mortgage-backed securities -- the best-performing part of
the investment-grade sector -- from 43.6% of fixed income assets to 47.7%.
Mortgages tend to be less vulnerable to declining prices than Treasuries
and other government securities in a rising interest-rate environment. We
reduced our exposure to corporates, taking profits when their yield
advantage over Treasuries began to narrow. At the end of the period, 25.9%
of the fixed income portfolio was invested in industrial and utility bonds,
compared to 31.4% at the start of the period. At the same time, we also
reduced our banking and financial services bond holdings from 10.7% to 9.0%
of fixed income assets. When we invest in corporates, we tend to favor new
issues, which have a greater yield advantage over Treasuries than existing
issues available on the secondary market. When invested in Treasury bonds,
we tended to hold TIPS, or inflation-protected Treasuries, although we sold
them near the end of the period when the Federal Reserve made it clear it
intended to control inflationary pressures.
D-19
Q: What types of investments had the greatest influence on performance?
A: In our equity portfolio, our emphasis on consumer staples companies helped
considerably as stock investors began to recognize the value of
higher-quality, stable growth companies that had been overlooked in the
rally of 2003. Holdings such as Gillette, PepsiCo and Wrigley performed
very well. Our technology positions also did well, led by Symantec, whose
share price went up 27% during the six months. Detracting from performance,
however, was security selection in the consumer discretionary sector.
Family Dollar Stores had disappointing earnings, which may have been caused
by higher gasoline prices, but we still favor the company and continue to
hold it at the end of the period. Newmont Mining, which had been a strong
contributor to Fund performance prior to the period, fell 20% during the
period in response to slumping gold prices. However, we still believe the
company is attractive and continue to hold a position in it on June 30.
In the fixed income portfolio, our overweight position in mortgages helped
substantially, as did our exposure to corporate bonds -- both high yield
and investment-grade. Performance was held back, however, by our
concentration in intermediate-term securities, as short- and
intermediate-term interest rates rose more than the rates on long-term
bonds during the six months.
Q: What is your investment outlook?
A: We believe the June 30 announcement by the U.S. Federal Reserve that it was
starting to raise short-term rates is the start of a long process of
interest-rate hikes that is likely to continue at least through the end of
2005. We anticipate moving to a barbelled strategy over time with respect
to maturity allocations, concentrating on both short-term securities and
long-term bonds while de-emphasizing intermediate-term bonds that we think
are most vulnerable in the present environment. We believe the equity
market will continue to be choppy, with no major trends either up or down
in stock price averages. The outlooks for gross domestic product (GDP) and
for corporate earnings both are favorable, although the rate of corporate
profit growth may slow somewhat. The big question hanging over investors'
minds will be what happens to interest rates. In addition, uncertainty
about geopolitical events and the outcome of the presidential election will
influence investor psychology. We think the most likely scenario is that
the major stock averages will show moderate growth over the next several
months.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
D-20
PIONEER FUND
Performance Update 6/30/04 Class A Shares
Share Prices and Distributions
6/30/04 12/31/03
$38.64 $38.00
Distributions per Share Net Short-Term Long-Term
(1/1/04 - 6/30/04) Investment Capital Gains Capital Gains
Income
$0.1300 $ $
Investment Returns
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Fund at public offering price, compared to that of
the Standard & Poor's (S&P) 500 Index.
[DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Value of $10,000 Investment
Pioneer S&P 500
Fund* Index
6/94 9425 10000
9618 10486
12180 14420
12/96 14580 17725
20189 23635
12/98 26044 30394
30112 36787
12/00 30147 33444
26793 29480
12/02 21364 22966
26615 29550
6/04 27155 30567
Average Annual Total Returns
(As of June 30, 2004)
Period Net Asset Value Public Offering Price *
- ---------------------------------------------------------
10 Years 11.16% 10.51%
5 Years -1.14 -2.31
1 Year 18.13 1.34
* Reflects deduction of the maximum 5.75% sales charge at the beginning of
the period and assumes reinvestment of distributions at net asset value.
Performance data shown represents past performance. Past performance does not
guarantee future results. Assumes reinvestment of all distributions at net asset
value. Investment return and principal value fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance shown. For performance
data that is current to the most recent month-end, please call 1-800-225-6292 or
visit our web site www.pioneerfunds.com. The performance table and graph do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
The S&P 500 Index is an unmanaged measure of 500 widely held common stocks
listed on the New York Stock Exchange, American Stock Exchange and the
over-the-counter market. Index returns assume reinvestment of dividends and,
unlike Fund returns, do not reflect any fees, expenses or sales charges. You
cannot invest directly in any Index.
D-21
Portfolio Manager's Discussion 6/30/04
In the following discussion, portfolio manager John Carey, reviews the
investment environment and the performance of Pioneer Fund over the six months
ended June 30, 2004.
Q: How did the portfolio perform over the first six months of 2004?
A: Pioneer Fund recorded a positive total return of 2.03% at net asset value
on Class A shares in the six months ended June 30, 2004. Class B, C, R and
Y shares returned 1.59%, 1.63%, 2.03% and 2.27% at net asset value. That
exactly matched the return of the average fund in the Lipper Large-Cap Core
group, which was also up 2.03%. Both Pioneer Fund and the Lipper average
lagged the Standard & Poor's 500 Index, which showed a total return of
3.44% over the same period. While the mild returns might suggest a calm
market, the reality was a market of sharp contrasts. With reference to
performance of the respective sectors in the S&P 500, information
technology, the darling of investors in 2003, barely moved, with a gain of
0.44% for the period, while energy, industrials and consumer staples
advanced, respectively, 12.97%, 7.42%, and 6.12%. Investors appeared to be
"rotating" out of more highly priced stocks and into shares more moderately
priced, with dividends and steadier earnings outlooks.
Q: Please discuss the Fund's performance versus the S&P 500 Index.
A: Our underperformance versus the S&P 500 was attributable mainly to our
stock holdings in four sectors: information technology, materials,
industrials and telecommunications services. Our strongest positive
contributors were our investments in consumer discretionary, consumer
staples and health care. Taking first the negative contributors, our
technology holdings showed an overall decline of 1.59% versus the S&P 500
sector gain of 0.44%. The main culprits were our positions in Texas
Instruments, Novellus Systems, Synopsys and Nokia. After analyzing the
different situations, we retained shares in Texas Instruments and Nokia,
but liquidated our positions in Novellus and Synopsys. With regard to
materials, where again we showed a negative return (3.80%) versus a slight
positive return (0.71%) for the S&P 500 sector, the largest factor was our
position in Rio Tinto. In the case of materials, we believe that the
fundamentals are strong for the group looking out at least over the next
couple of years and that it was mainly "profit taking" behind the weak
share prices. Perhaps, too, there was some concern about a potential
slow-down in the Chinese economy, which has been a prime user of many raw
materials as that country rapidly industrializes. Following our evaluation
of the pros and cons, we retained Rio Tinto, a prominent worldwide mining
company, as well as our shares of other companies in the sector.
Industrials presented a mixed picture, with our investments rising 5.13%
versus an increase for the sector of 7.42%. We had very good performance
from our railroad holding Norfolk Southern, but our capital-goods stocks
were more sluggish. Finally, in telecommunication services, we did not own
AT&T Wireless, which received a premium take-over bid, but instead owned
BellSouth and SBC Communications, the companies in the joint venture
Cingular, that made the bid. BellSouth and SBC both declined as investors
worried that they "overpaid." On the bright side, we had some nice gains
from stocks in consumer discretionary, consumer staples and health care.
They were, respectively, John Wiley & Sons, publisher of scientific and
technical books and journals and also owner of the "For Dummies" imprint;
Colgate-Palmolive, major brand in toothpaste; and Becton Dickinson,
provider of medical supplies including disposable syringes.
Q: What changes have you made to the portfolio so far this year?
A: We were fairly active during the six months, adding 18 positions and
eliminating 18. The combined effect of securities transactions and market
fluctuations produced overall increases for our weightings in the energy,
consumer discretionary, consumer staples, health care and financials
sectors; overall decreases for our weightings in industrials and
information technology; and no meaningful change for our weightings in
materials, telecommunications services and utilities. In energy, we
initiated positions in Apache, British Petroleum, Pioneer Natural Resources
and Occidental Petroleum and sold positions in Transocean, Royal Dutch
Petroleum, and Shell Transport & Trading. We believed that Transocean was
fairly valued, and in the cases of Royal Dutch and the allied Shell
Transport we had developed reservations about management in the wake of
significant downward revisions in oil and gas reserves estimates. On the
other hand, we thought that prospects were positive for the companies we
added and that the larger number of holdings would provide the portfolio
with more diversification. In consumer discretionary we invested in three
companies we thought were poised to do better with the stronger economy,
Ford Motor, Liz Claiborne, and Walt Disney, and sold two stocks that had
been longer-term disappointments, Dow Jones and Eastman Kodak. We also
added Clorox, formulator of bleaches and other household cleansers, and
Estee Lauder, cosmetics manufacturer, in consumer staples. Our health care
additions were among our most significant and included equipment makers
Guidant and St. Jude Medical, distributor Cardinal Health, and generic-drug
companies Barr Pharmaceuticals and Mylan Laboratories. One of our purchases
in financials proved to be particularly well timed, as South Trust, a
regional bank headquartered in Birmingham, Alabama, received a generous
acquisition offer from another bank, Wachovia, not long after we had bought
it. Another entry we made to the portfolio was U.S. Bancorp, based in
Minneapolis, Minnesota. In other sectors, we bought, in materials, Ecolab,
supplier of industrial and institutional cleaning chemicals, and, in
information technology, Apple Computer, survivor, against all odds, in the
personal-
D-22
computer business as well as innovative producer of the very hot iPod
digital-music player. Along with the seven names already mentioned in
energy and consumer discretionary and (above) in information technology, we
deleted the following: Boeing, Lockheed Martin, Robert Half, Union Pacific,
Medco Health Solutions, Bank of America, Electronics Data Systems, BMC
Software, Cisco Systems, QUALCOMM and Altera. As always, we had a variety
of reasons, in some instances recognizing difficulties for the companies
that appeared beyond a reasonable time horizon in their resolution, in
other instances seeing a fully valued stock relative to identifiable
earnings power, and in still other cases just thinking we had more
attractive alternatives.
Q: What is your outlook on the stock market and economy for the remainder of
2004?
A: At the midpoint of 2004, the market appears in disarray. Truth be told,
interest rates have not really moved very much at all, but there appears
great anxiety about greater moves to come. Inflation is not a current
problem, yet the high oil and raw-materials prices, as well as the prospect
of rising wages with growth in employment, provide the worriers a reason to
focus on the risk of inflation. Corporate earnings are generally very
strong and also strongly up from last year, but the expressed concern is
with respect to slowing of the impressive comparisons. And so it is as well
when it comes to discussion of international events and
corporate-governance issues and much else: every glass on the counter seems
to be half empty, none are thought to be half full, as the common
expression goes. From our point of view, a half glass of water is just
that, and the market to us remains attractive, even if more moderately
attractive than it was in early 2003 then prices were much lower and the
economy was still just poised for its rebound rather than underway with the
rebound as it is currently. We see especially good values, however, among
the good companies with good long-term records in which we like to invest
on your behalf and which were relatively neglected by investors up until
recently.
Betting which way the market might go on a short-term basis has never
seemed to us like a particularly fruitful endeavor. For one thing, what is
to be gained from that activity unless one is just speculating, for
example, in market-index futures, an activity we would not recommend to any
but the real gamblers. For in the actual day-to-day world, one makes or
loses money on individual stocks bought and sold, embraced or avoided. One
never makes a dime guessing which way the market will go; it is the actual
investments one does or does not make that determine your results. So our
intention is, as always, to stay invested over the coming months, and
years, and to stay invested in the solid kinds of companies we always aim
to own in your portfolio. Thank you for your support.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
D-23
PIONEER INTERNATIONAL EQUITY FUND
Performance Update 3/31/04 Class A Shares
Share Prices and Distributions
3/31/04 3/31/03
$17.55 $11.64
Distributions per Share Net Short-Term Long-Term
(4/1/03 - 3/31/04) Investment Capital Gains Capital Gains
Income
$ $ $
Investment Returns
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer International Equity Fund at public offering price,
compared to that of the Morgan Stanley Capital International (MSCI) EAFE Index.
[DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Value of $10,000 Investment
Pioneer MSCI
International EAFE
Equity Fund Index
10/96 9425 10000
3/97 10488 10103
12728 11982
3/99 11797 12705
17542 15895
3/01 11410 11785
10841 10833
3/03 7917 8279
11936 13040
9/04 12413 13036
Average Annual Total Returns
(As of March 31, 2004)
Period Net Asset Value Public Offering Price*
- --------------------------------------------------------------
Life-of-Class
(10/31/96) 3.24% 2.41%
5 Years 0.22 -0.95
1 Year 50.77 42.11
* Reflects deduction of the maximum 5.75% sales charge at the beginning of
the period and assumes reinvestment of distributions at net asset value.
The Fund's investment advisor, Pioneer Investment Management, Inc., reduced its
management fee and subsidized other Fund expenses; otherwise, returns would have
been lower. The MSCI EAFE (Europe, Australasia, Far East) Index is an unmanaged,
capitalization weighted measure of 21 international stock markets. Index returns
are calculated monthly, assume reinvestment of dividends and, unlike Fund
returns, do not reflect any fees, expenses or sales charges. You cannot invest
directly in the Index.
Performance data shown represents past performance. Past performance does not
guarantee future results. Assumes reinvestment of all distributions at net asset
value. Investment return and principal value fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance shown. For performance
data that is current to the most recent month-end, please call 1-800-225-6292 or
visit our website www.pioneerfunds.com. The performance table and graph do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
D-24
Portfolio Manager's Discussion 3/31/04
Investor optimism lifted international markets during the 12 months ended
March 31, 2004. The upbeat mood was supported by a resurging Japanese economy
and stronger-than-expected job growth in the United States, both of which are
expected to be positive for the European economy. As Stefano Pregnolato, the
Fund's lead portfolio manager, mentions in the following interview, the rally
was broad based -- led by cyclical stocks and lesser quality companies that had
underperformed in the multi-year correction in equity markets.
Q: How did the Fund perform during the rally?
A: The positive trends that we witnessed in the first half of Pioneer
International Equity Fund's fiscal year continued into the second half.
However, the momentum for global economic growth shifted to Asia in the
first quarter of 2004. Investors are looking more favorably upon Japan and
its economy, which is showing signs of resurgence. For the 12 months ended
March 31, 2004, the Fund's Class A, B and C shares posted gains of 50.77%,
49.32% and 48.85% at net asset value, respectively. In comparison, the
Morgan Stanley Capital International (MSCI) EAFE Index grew 57.54% for the
same period. We believe the Fund's relative underperformance to this
benchmark is the result of two factors. First, Japanese stocks appreciated
strongly during the first quarter of 2004. The Fund's investments in
Japanese stocks, although significant at 21.5% of total assets on March 31,
remained below that of the benchmark throughout the fiscal year -- thereby
limiting the degree of its relative performance. While we think the
economic recovery in Japan is a welcome development, we believe it's too
early to know if Japan has turned the corner. We may consider increasing
the Fund's exposure there, once we're convinced that Japan is solidly on
the road to recovery.
Secondly, the rally in international markets has benefited cyclical stocks,
that is, companies whose fate is closely linked with the strength of
economic growth, as well as lower-quality investments. Your Fund has a
considerable exposure to cyclical stocks, which was very beneficial during
the fiscal year. However, we refuse to be tempted by short-term trends or
invest in lower-quality companies just because they are selling at steep
discounts today. Rather, we invest for the long term, selecting the
highest-quality, financially sound companies that meet our strict
investment criteria.
Q: What is contributing to the rise of Japanese stocks?
A: After a multi-year recession, the outlook for Japan is improving. Japanese
consumers are increasing their spending, businesses are buying more
equipment, and trade with other Asian countries experiencing good growth is
strong. All these factors are attracting foreign investors and driving
Japanese stock prices higher. Midway through the fiscal year, Japanese
investments represented 9.4% of total assets. By the close of the fiscal
year on March 31, Japanese holdings had climbed to 21.5% of assets through
price appreciation and addition to existing holdings, while we trimmed the
overall number of Japanese holdings in the portfolio.
Q: Were you adding domestic or export-oriented stocks in Japan?
A: We've been adding to positions in both domestic and export oriented stocks.
Domestic-demand stocks are benefiting from increased consumer spending,
which is partially supported by the secular trend of a declining savings
rate. One of the Fund's best performing stocks, Fast Retailing, which sells
high-end apparel and accessories, was a major contributor to performance
for the second half of the fiscal year. The stock's dramatic price
appreciation left the stock overvalued in our estimation, and we sold the
entire position in January. Food retailer Ajinomoto is a high-quality
consumer staple holding with defensive qualities that did well leading up
to the recovery. It has also done well in the rally, but not nearly to the
degree of Fast Retailing. Generally speaking, prices of consumer
discretionary stocks, such as Fast Retailing, posted some of the greatest
gains during the rally -- bolstered by rising consumer confidence and
spending.
Q: Are the Fund's Pacific Rim investments outside Japan also doing well?
A: Yes. Strong fundamentals, robust intra-regional growth and exports combined
with strong global demand for cyclical investments are supporting our
decision to overweight investments in the Pacific Rim outside Japan. In
many sectors, we believe stocks offer better value than in Europe --
including semiconductor manufacturer Samsung Electronics (South Korea) and
telecommunications services provider SK Telecom (South Korea).
Q: Europe still represents the majority of the Fund's holdings. How are these
investments faring?
A: All of the global markets rose sharply during the fiscal year, and European
stocks -- including those held by your Fund -- were no exception. This
performance is illustrated by the fact that the MSCI Europe Index, a
commonly used benchmark for the region, rose 53.96% for the 12 months ended
March 31, 2004. With nearly 70% of the Fund's assets invested in the
developed markets of Europe, we are maintaining a slightly overweight
position in European equities relative to the benchmark. We think stock
price valuations are
D-25
fair and are supported by strong dividend yields. Growth across Europe is
more moderate than outside the region, and this fact is discounted in stock
prices. The appreciation of the euro continues to be a risk for European
exporters, and we will be closely following the monetary policy of the Bank
of England and the European Central Bank (ECB) on that front. (Just
following the close of the fiscal year, the ECB decided to leave rates
unchanged.)
Q: Could you name some of the companies that exemplify your strategy?
A: Much like other world markets, European cyclical stocks posted some of the
most dramatic gains, including those in the materials, industrial,
automobile and consumer discretionary sectors. Porsche (Germany) exceeded
our expectations, as did software producer Indira Systems (Spain). On the
other hand, capital goods producer Sandvik (Sweden) performed well, but not
as strongly as the sector in general. Pharmaceutical Schering is another
stock that underperformed its sector for the year, when news of a product
patent expiration last summer left the stock trailing many of its peers.
Q: What is your outlook for the upcoming fiscal year?
A: During fiscal 2004, we saw a change in market psychology, with investors
demonstrating a greater appetite for risk. Not only did investors move
assets from relatively more stable fixed-income investments into equities,
but within the equity markets from higher-quality companies to more
leveraged, lower-quality companies.
Companies that were considered to be in severe financial distress were
reclassified as recovery stocks. This paradigm shift benefited many stocks,
particularly in the technology sector, but left other sectors, such as
consumer staples and health care underperforming. As history has proven,
this is to be expected in the early stages of a recovery, when economic
fundamentals improve and the relatively low stock prices begin to look very
attractive.
Our outlook for 2004 is quite optimistic. The recovery appears to be well
on its way, business confidence is high and the cash flow of companies has
been substantially improved, thanks to successful restructuring and
de-leveraging enacted over the last two years. We'll endeavor to position
the Fund in response to this improving economic picture.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
D-26
PIONEER GROWTH SHARES
Performance Update 6/30/04 Class A Shares
Share Prices and Distributions
6/30/04 12/31/03
$11.27 $11.42
Distributions per Share Net Short-Term Long-Term
(1/1/04 - 6/30/04) Investment Capital Gains Capital Gains
Income
$ $ $
Investment Returns
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Growth Shares at public offering price, compared to
that of the Russell 1000 Growth Index.
[DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Value of $10,000 Investment
Pioneer Russell
Growth 1000 Growth
Shares* Index
6/94 9425 10000
11247 10849
14600 14884
12/96 18536 18324
26651 23909
12/98 35591 33163
38225 44158
12/00 34569 34255
27920 27261
12/02 18178 19658
22939 25508
6/04 22637 26205
Average Annual Total Returns
(As of June 30, 2004)
Period Net Asset Value Public Offering Price*
- --------------------------------------------------------
10 Years 9.16% 8.51%
5 Years -10.46 -11.52
1 Year 9.31 3.02
* Reflects deduction of the maximum 5.75% sales charge at the beginning of
the period and assumes reinvestment of distributions at net asset value.
Performance data shown represents past performance. Past performance does not
guarantee future results. Assumes reinvestment of all distributions at net asset
value. Investment return and principal value fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance shown. For performance
data that is current to the most recent month-end, please call 1-800-225-6292 or
visit our web site www.pioneerfunds.com.
The performance table and graph do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
The Fund adopted its current name and investment adviser (Pioneer Investment
Management, Inc.) on December 1, 1993. Prior to that date, the Fund's name was
Mutual of Omaha Growth Fund, Inc., and its investment adviser was Mutual of
Omaha Fund Management Company. The Russell 1000 Growth Index contains those
Russell 1000 securities with greater-than-average growth orientation. 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. Index returns assume reinvestment of dividends and, unlike Fund
returns, do not reflect any fees, expenses or sales charges. You cannot invest
directly in the Index.
D-27
Portfolio Manager's Discussion 6/30/04
The economy continued to grow during the first half of 2004, but the
general investment environment for equities began turning slightly negative as
rising corporate profit trends began to weaken, consumer spending was not as
strong as expected, and markets started anticipating a tighter monetary policy
from the Federal Reserve. In the following interview, Christopher Galizio
discusses the factors that affected the performance of Pioneer Growth Shares
during the six month period ended June 30, 2004. Mr. Galizio is a member of the
Fund's management team.
Q: How did the Fund perform during the first half of 2004?
A: For the six-month period ended June 30, 2004, the Fund's Class A shares
returned -1.31%, while Class B and Class C shares had returns of -1.80% and
-1.78%, respectively, all at net asset value. For the same period, the
Russell 1000 Growth Index returned 2.74%, while the average return was
2.35% for the 639 funds in the Large-Cap Growth Funds category tracked by
Lipper Inc. (Lipper is an independent firm that measures mutual fund
performance.)
The Fund lagged the benchmark Russell 1000 Growth Index as well as the
Lipper peer group, principally because of the comparatively larger position
in technology, especially semiconductor companies, early in the six-month
period.
Q: What was the general investment environment like during the period?
A: The overall market sentiment appeared to be turning negative late in the
six-month period. The stock market surge that had begun in March 2003
appeared to lose some energy. Several major corporations, including ones in
the retail and semiconductor industries, began to report earnings
disappointments, and we saw some weakening in profit trends, notably in the
consumer and technology sectors. Consumer spending trends, in particular,
appeared weak as over-extended consumers finally began to retrench from
their high-spending patterns. As stock market investors anticipated the
June 30 announcement by the Federal Reserve Board that it would begin to
tighten monetary policy by raising short-term interest rates, the share
prices of some consumer-oriented financial institutions began to fade.
Industrial stocks, however, tended to outperform the overall market.
Q: What were your principal strategies during the period?
A: We restructured the portfolio during the period, focusing on large cap
companies that we believed offered long-term value, above average revenue
growth, strong returns on capital and reasonable valuations in relation to
their earnings potential. This strategy led to a reduced emphasis on the
semiconductor industry and increased weightings in the software, consumer
discretionary and financial services areas. We reduced our semi-conductor
holdings, eliminating positions in Applied Materials, Cypress
Semiconductor, Texas Instruments and Maxim Technology. We did add Taiwan
Semiconductor, a major manufacturer with an attractive stock valuation.
Overall, however, semiconductor stocks went from an overweight to an
underweight position, relative to the benchmark S&P 500. The reduced
weightings in technology tended to support performance. Conversely, we
increased the portfolio's emphasis on software companies, adding companies
such as Macrovision, which has developed a technology to protect DVDs, CDs
and other disc based products from piracy, as well as Take-Two Interactive,
the developer of video games, including Grand Theft Auto -- the most
successful game in history, with a new version soon to be introduced. We
also added Fair Isaac, which has developed software to help credit card
companies analyze the credit-worthiness of applicants. Fair Isaac tended to
detract from performance late in the six-month period as it reported
disappointing earnings, but we continued to hold it because of its
attractive valuation. We moved from an underweight to an overweight in the
consumer discretionary sector, taking advantage of attractive valuations of
Disney, whose media and theme park properties have improved earnings
outlooks, and Viacom, the owner of the CBS and MTV television networks
among other properties. Among retailers, we sold our Wal-Mart position
before the stock fell hard, investing in Target, Kohl's and Ross Stores. In
addition, we increased the emphasis on financial services stocks, focusing
on insurance companies with excellent valuations that were not as
vulnerable to interest-rate increases as banks and other lenders. We
continued to de-emphasize consumer staples, although we added Altria (the
former Philip Morris), which offered a high dividend yield and an
attractive stock price that we believed was the result of overly
pessimistic market evaluations of the company's tobacco liability. In
addition, we invested in First Data, the leader in processing of credit
card transactions and owner of the Western Union system, and Accenture, an
information-technology services consulting firm.
Q: What were some of the investments that influenced performance?
A: Among newer holdings, Macrovision rose significantly during the period as
its revenue grew faster than had been expected. Sepracor, a pharmaceutical
company and a new holding, also advanced on positive news of a drug under
development. Zimmer Holdings, a world leader in orthopedic products,
including hip and knee replacements, was another health-care position that
did very well. The timely sale of Wal-Mart Stores also supported
performance. The overweight position in the semiconductor industry early in
the six-month
D-28
period held back performance, as valuations in that group fell hard.
Corinthian Colleges, operator of adult vocational educational colleges and
programs, was another detractor, as the SEC began an investigation of its
financial records. However, we took advantage of the price decline to add
to the position in Corinthian because of its good long-term fundamentals.
Lexar and Sandisk, two manufacturers of flash memories for cameras and cell
phones, also fell on disappointing sales. Freeport-McMoRan, a leader in the
copper mining industry and a strong support for performance in 2003, also
declined both because of problems at one of its mines and because of fears
of an economic slowdown in China, an important importer of copper. We
increased our investment in the company because of its attractive price. We
also believed it experienced some short-term production problems that would
be resolved.
Q: What is your investment outlook?
A: We are cautious about the near-term opportunities in the domestic stock
market, as stock valuations appear relatively expensive and the Federal
Reserve Board has moved to a less accommodating monetary policy. The home
refinancing boom of the past two years may hurt the future earnings of
banks, while the technology industry faces a number of challenges, from
pricing pressure on its products to calls to change the way many companies
have treated stock options in their accounting. Health care stocks,
however, appear to be more reasonably valued. Given this outlook, we are
paying very strict attention to our analysis and selection of individual
companies. We also have somewhat reduced our exposure to the domestic stock
market with investments in Europe and the emerging markets. We have, for
example, increased our position in Vodafone, the world's largest wireless
communications service company, and we have added small holdings from
Korea, Taiwan and Israel.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
D-29
PIONEER VALUE FUND
Performance Update 3/31/04 Class A Shares
Share Prices and Distributions
3/31/04 9/30/03
$18.72 $16.25
Distributions per Share Net Short-Term Long-Term
(10/1/03 - 3/31/04) Investment Capital Gains Capital Gains
Income
$0.0783 $ - $0.0404
Investment Returns
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Value Fund at public offering price, compared to
that of the Russell 1000 Value Index.
[DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Value of $10,000 Investment
Pioneer Russell
Value 1000 Value
Fund* Index
3/94 9425 10000
9/94 10095 10321
12105 13181
9/96 13580 15546
19820 22124
9/98 15069 22921
16857 27213
9/00 19604 29369
17864 26998
9/02 14867 22422
18277 27884
3/04 21198 32805
Average Annual Total Returns
(As of March 31, 2004)
Period Net Asset Value Public Offering Price*
- --------------------------------------------------------
10 Years 8.44% 7.80%
5 Years 4.80 3.56
1 Year 37.69 29.75
All returns reflect investment of distributions at net asset value.
* Reflects deduction of the maximum 5.75% sales charge at the beginning of
the period.
The Russell 1000 Value Index is a measure of the performance of the
value-oriented stocks in the Russell 1000 Index. Index returns assume
reinvestment of dividends and, unlike Fund returns, do not reflect any fees,
expenses or sales charges. You cannot invest directly in any index.
Data shown represents past performance. Past performance does not guarantee
future results. Assumes reinvestment of all distributions at net asset value.
Investment return and principal value fluctuate, and shares, when redeemed, may
be worth more or less than their original cost. Current performance may be lower
or higher than the performance shown. For performance data that is current to
the most recent month-end, please call 1-800-225-6292 or visit our web site
www.pioneerfunds.com.
D-30
Portfolio Management's Discussion 3/31/04
The stock market continued to rise through the final quarter of 2003 and
into this year, then took a modest breather late in this year's first quarter.
The period favored the Fund's value discipline, as value stocks in general
outperformed their growth counterparts. In the following discussion, portfolio
manager Rod Wright describes those events and the decisions that affected
Pioneer Value Fund's performance over the last six months.
Q: Please describe the investment background over the last six months.
A: As the economic recovery gathered strength, investors were encouraged by
the increase being reported in corporate profits. Fueling the recovery in
large measure were the lowest short-term interest rates in over 40 years
and broad federal income tax cuts that put added cash into the hands of
individuals and businesses. However, the markets stalled in March, as
unemployment remained stubbornly high despite the continued economic
expansion. Renewed geopolitical concerns and a dip in consumer confidence
added to market uncertainty. Consumers account for more than half of US
economic activity, and any pullback in their spending is taken as a
negative sign.
Q: How did Pioneer Value Fund perform against that background?
A: For the six months ended March 31, 2004, Pioneer Value Fund's Class A, B, C
and R shares had total returns at net asset value of 15.98%, 15.30%, 15.27%
and 15.82%, respectively. In comparison, the Russell 1000 Value Index, the
Fund's benchmark, returned 17.65% for the same period. The Fund's Lipper
Large-Cap Value peers returned 15.94% for the six months ended March 31,
2004.
Q: Which of your decisions or strategies had the most impact on performance?
A: Stock selection was generally favorable over this period, but sector
emphasis hurt results, accounting for the Fund's relative underperformance
versus the benchmark. In particular, we were underweight compared to our
benchmark in financial stocks, a decision based on our expectation that
interest rates would begin to rise and put pressure on the earnings of
financial companies. But rates stayed low, and financials were one of the
market's better-performing sectors over this period. A number of mergers
within the industry also pushed up prices. In addition, the stronger
economy had a positive impact on credit quality, favoring lending
institutions. Countrywide Financial, a mortgage lender, was the Fund's
biggest gainer among financial issues. Countrywide rose on news of
surprisingly strong earnings as mortgage rates remained low and home
refinancings continued. Citigroup, the Fund's largest holding, also rose
during the period.
Q: What other decisions or strategies had an impact on performance?
A: Our overweight commitment to energy stocks aided results, as rising oil
prices boosted their profit outlook. Successful stock selection added to
the Fund's strong performance in this sector. Suncor Energy, which extracts
oil from oil-bearing sands by means of a costly process, benefited when oil
prices reached levels that allowed for profitable operations. Transocean
Inc., a leading offshore drilling company, also saw increased activity as
oil prices moved higher. Utilities companies generally added to Fund
results, but Dominion Resources underperformed. Results benefited from good
stock selection in the telecommunications sector, an area in which we
maintained a neutral weighting compared to the benchmark. AT&T Wireless was
a standout performer, rising sharply when news broke of its pending
acquisition by Cingular. In technology, Motorola rose when operating
results improved for the first time in three years. Strategic steps by
Motorola's new management, including sale of the company's semiconductor
unit, also benefited results. Tyco International, a diversified industrial
company, rose as disciplined new management distanced the company from
earlier problems, eliminated some non-essential business units and
strengthened the firm's balance sheet by cutting outstanding debt. Another
industrial company, Waste Management, rose on the basis of a successful
turnaround. Management cut costs and upgraded systems while successfully
integrating a number of acquisitions. The growing economy also boosted
results, as waste volumes are tied to the level of business activity.
In healthcare, Wellpoint Health Networks, a leading managed-care company,
rose on the basis of earnings increases, increased market share and the
imposition of higher premiums. Wellpoint has also agreed to merge with
Anthem, another major health benefits company. In a related area, our
overweight position in Merck hurt results; large pharmaceutical companies
were laggards over the period.
Q: Which of the Fund's other holdings held back results?
A: Shares of Freddie Mac (The Federal Home Loan Mortgage Corporation), an
issuer of mortgage-backed securities, declined. Shares weakened when
questions arose about its method of calculating earnings, raising the
possibility of more stringent regulation and greater government involvement
with its operations. Among industrial issues, the rising price of oil
pulled down the Fund's transportation stocks.
D-31
In addition, Southwest Airlines was hurt by an unresolved contract dispute
with flight attendants. Donaldson Co., which manufactures filtration
systems, declined following a disappointing earnings report.
Q: What is your outlook for the economy and for value stocks?
A: We believe the economy will continue expanding in the months ahead.
However, some of the good economic news we anticipate may already be
reflected in stock prices. In addition, if the expansion begins to generate
inflationary forces in the economy, the Federal Reserve Board is likely to
raise interest rates, a move that would dampen investor enthusiasm.
Nevertheless, we are still finding good values, and with corporate
fundamentals strong and improving, we expect good returns on equities for
the balance of this year.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
D-32
PIONEER MID CAP VALUE FUND
Performance Update 4/30/04 Class A Shares
Share Prices and Distributions
4/30/04 10/31/03
$23.77 $22.25
Distributions per Share Net Short-Term Long-Term
(11/1/03 - 4/30/04) Investment Capital Gains Capital Gains
Income
$0.0306 $0.1778 $0.3145
Investment Returns
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Mid Cap Value Fund at public offering price, compared
to that of the Russell Midcap Value Index.
[DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Value of $10,000 Investment
Pioneer Russell
Mid Cap Midcap
Value Value
Fund* Index
4/94 9425 10000
10544 10260
10/95 12581 12563
14231 15222
10/97 17457 20163
15932 21323
10/99 17529 22538
21036 25211
10/01 21425 24866
20141 24126
26470 32199
4/04 28950 34870
Average Annual Total Returns
(As of April 30, 2004)
Period Net Asset Value Public Offering Price*
- --------------------------------------------------------
10 Years 11.87% 11.22%
5 Years 9.65 8.37
1 Year 36.78 28.89
All returns reflect reinvestment of distributions at net asset value.
* Reflects deduction of the maximum 5.75% sales charge at the beginning of
the period.
Data shown represents past performance. Past performance does not guarantee
future results. Assumes reinvestment of all distributions at net asset value.
Investment return and principal value fluctuate, and shares, when redeemed, may
be worth more or less than their original cost. Current performance may be lower
or higher than the performance shown. For performance data that is current to
the most recent month-end, please call 1-800-225-6292 or visit our web site
www.pioneerfunds.com. The performance table and graph do not reflect the
deduction of taxes that a shareholder would pay on Fund distributions or the
redemption of Fund shares.
The Russell Midcap Value Index measures the performance of those Russell Midcap
companies with lower price-to-book and lower forecasted growth values. Index
returns assume reinvestment of dividends and, unlike Fund returns, do not
reflect any fees, expenses or sales charges. You cannot invest directly in the
Index.
D-33
Portfolio Management Discussion 4/30/04
Stock prices continued to climb during the six months ended April 30, 2004,
although new worries about the direction of interest rate moves, and concerns
about instability in Iraq, added to the volatility of the market. In the
following discussion, Rod Wright, leader of the team that manages Pioneer Mid
Cap Value Fund, provides an update on the Fund, its investment strategies and
the economic environment during the six-month period.
Q: How did the Fund perform?
A: The Fund did very well during a period of changing sentiment in the market.
The Fund's Class A shares had a total return of 9.37% for the six months
ended April 30, 2004, while Class B and Class C shares returned 8.89% and
8.85%, respectively, all at net asset value. During the same period, the
Standard & Poor's 500 Index, a benchmark for large-cap stocks, rose by
6.27%, while the Russell Midcap Value Index gained 8.30%.
Q: How would you characterize the market during the six months?
A: It was a period of volatility and shifting trends. During the first two
months of the period -- the final two months of 2003 -- we saw a
continuation of the pattern that had characterized much of the year. As
optimism grew that the economy was finally emerging from its slump and that
corporate profits would continue to increase, stock prices rose, led by
lower quality companies with weaker balance sheets. Technology stocks
typically were among the performance leaders. That pattern began to change
and the market became more volatile in the early weeks of 2004, amid
worries that interest rates were beginning to rise and that the situation
in Iraq was more troublesome than earlier believed. Interest rates did rise
substantially from the middle of March through the end of April, which
undermined the valuations of many technology companies, as well as the
stocks in sectors particularly sensitive to changes in interest rates, such
as financial services and utilities. Fortunately, the Fund was well
positioned for this change in the direction of interest rates. Our
underweight positions among financial and utility companies helped
performance, as did our de-emphasis of technology companies.
Q: What types of investments tended to help performance?
A: Our strategy emphasizes fundamental analysis of companies and individual
stock-picking, rather than major sector decisions based on macroeconomic
trends. We seek good companies at attractive valuations, irrespective of
their industry. The biggest single contributor to performance was sports
retailer Foot Locker, a major holding, which posted strong earnings gains
during the period. But we also enjoyed excellent results from our
selections in the healthcare and energy sectors. In the health-care sector,
top performers included medical-supply company Becton, Dickinson, and
dental-supply company Apogent Technologies, which received a takeover offer
during the period.
Our investment in Wellpoint Health Networks, an HMO, also appreciated
sharply as it merged with Anthem. In the energy sector, top performers
included Transocean, a deepwater drilling company, and Occidental
Petroleum, a fully integrated energy corporation. While the stock prices of
many technology companies discouraged us from investing, we did have some
excellent results in the sector, including NCR, a hardware and systems
company, and Autodesk, a software firm. We also enjoyed excellent results
from ConAgra, an agricultural products and food-processing firm, and
Republic Services, a waste-disposal corporation.
Q: What types of investments were disappointing during the period?
A: Basic materials companies, which had supported the Fund's performance
during 2003, tended to detract from results as interest rates began to
rise. A good example was mining company Freeport-McMoRan, which we have
eliminated from the portfolio. Securities transaction processor Investment
Technology Group declined when its trading volumes declined, while toy
maker Mattel fell when analysts began doubting the continued strength of
the Barbie line.
Q: What is your investment outlook?
A: We continue to be encouraged by the strong economy and the inexpensive
dollar, which helps domestic companies compete globally. While interest
rates have started to increase and the Federal Reserve is expected to raise
short-term rates this year, rates are likely to remain relatively low when
compared to historical standards. However, the stock market has enjoyed an
extraordinary rally since March 2003, and many companies already are
selling at high valuations based on anticipations of strong future earnings
growth. As a result, while we are optimistic about the economy, we are more
guarded about opportunities in the overall market, and we will continue to
emphasize strong companies with attractive stock valuations.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
D-34
PIONEER SMALL CAP VALUE FUND
Performance Update 5/31/04 Class A Shares
Share Prices and Distributions
5/31/04 11/30/03
$29.70 $27.10
Distributions per Share Net Short-Term Long-Term
(12/1/03 - 5/31/04) Investment Capital Gains Capital Gains
Income
$ - $ - $ -
Investment Returns
The mountain chart on the right shows the change in value of a $10,000
investment in Pioneer Small Cap Value Fund, at public offering price, compared
to that of the Russell 2000 Value Index.
[DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Value of $10,000 Investment
Russell Pioneer
2000 Small Cap
Value Value
Index Fund*
2/97 10000 9425
12436 11206
11/98 11665 9282
11499 11661
11/00 13142 13674
15637 15851
11/02 15355 15192
20714 19227
5/04 22024 21071
Average Annual Total Returns
(As of May 31, 2004)
Period Net Asset Value Public Offering Price*
- --------------------------------------------------------------
Life-of-Class
(2/28/97) 11.72% 10.81%
5 Years 14.37 13.02
1 Year 29.55 22.08
All returns reflect reinvestment of distributions at net asset value.
* Reflects the deduction of the maximum 5.75% sales charge at the beginning
of the period.
Performance data shown represents past performance. Past performance does not
guarantee future results. Assumes reinvestment of all distributions at net asset
value. Investment return and principal value fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance shown. For performance
data that is current to the most recent month-end, please call 1-800-225-6292 or
visit our web site www.pioneerfunds.com. The performance table and graph do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
The Russell 2000 Value Index is a measure of the performance of the
value-oriented stocks in the Russell 2000 Index. You cannot invest directly in
any index. Small-cap stocks may be subject to greater short-term price
fluctuations than securities of larger companies.
D-35
Portfolio Management's Discussion 5/31/04
A shift by investors away from speculative issues into higher quality,
small-capitalization stocks helped Pioneer Small Cap Value Fund outperform its
benchmark index over the past six months. In the following discussion, portfolio
manager David Adams and assistant portfolio manager Jack McPherson review their
investment strategies and the factors that led to these favorable results.
Q: What were market conditions like over this period and how did you respond?
A. Strong growth in the last quarter of 2003 extended into this year as a
broad-based economic recovery continued to take shape. At the same time,
increased global demand pushed up prices for most commodities, triggering
inflation concerns and increasing the possibility that the Federal Reserve
Board will raise interest rates over the summer.
We were rewarded over this period for staying with our long established
investment discipline. Late in 2003, the Fund's results, although positive,
nevertheless lagged the benchmark because we do not invest in the kinds of
high-risk issues that were market leaders at the time. More recently,
better quality issues that fit our criteria for valuation, financial
strength and earnings potential have attracted the market's attention. By
the end of the period, Fund performance had swung from trailing the
benchmark because of stocks we did not own, to outperforming our benchmark
thanks to successful stock selection.
Q: Given that background, how did the Fund perform?
A. For the six-month period ended May 31, 2004, Pioneer Small Cap Value Fund's
Class A, B, C and R shares returned 9.59%, 9.13% 9.09% and 9.59%
respectively, all at net asset value. These results outdistanced the 6.32%
return of the Russell 2000 Value Index, the Fund's benchmark, for the same
period.
Q: Which of your decisions aided Fund performance?
A. In our bottom-up process, our stock choices produce the portfolio's sector
weightings. A shortage of attractive values and the possibility of higher
interest rates left the portfolio underweighted in financial services
companies compared to the benchmark. That stance helped performance, as
many financial issues were poor performers. Also beneficial was our
decision to downplay companies that are most vulnerable to higher rates --
thrifts that rely heavily on mortgage financing, and real estate investment
trusts. Instead, we emphasized commercial banks that can gain earning power
as economic activity pushes rates higher just when businesses are
increasing their borrowing. We took profits in Irwin
Financial, which has a large mortgage lending subsidiary. Texas Capital
Bancshares and Virginia-based Cardinal Financial both are expected to
benefit from the fallout of the merger activity taking place among the
larger national banking companies, as well as the improving business
environment for their small- and mid-size business customers.
Overweighting and successful selection of energy stocks aided results as
investors took notice of attractive valuations. Coal producer Massey Energy
was the Fund's most successful holding over this period. Global energy
demand drove up the price of Appalachian coal. In addition, as the US
dollar weakened, the price of US coal fell in terms of foreign currencies,
making the price of our coal competitive in world markets for the first
time in years. Southwestern Energy, Penn Virginia and Swift Energy also
moved higher.
Q: What other sectors or stocks had an impact, for better or worse?
A. Our slightly overweight position in transportation stocks led to positive
results that ran contrary to the industrials sector's trend. Stelmar
Shipping, based in Greece, continues to benefit as available tanker
capacity lags behind the demands of a growing world economy and not enough
new ships are being built. In addition, a high percentage of Stelmar's
fleet already meets the mandate for double-hulled ships, allowing it to
charge premium rates. Genesee & Wyoming, which acquires and operates short
line railroads in North America and Australia, saw a pickup in demand for
hauling iron ore and coal as well as large harvests of grain in Australia.
Genesee also has lower labor costs than some large railroads. We bought
Wabtec, which makes components parts for railcars, at a low point in its
business cycle. Shares moved higher when industrial growth began to absorb
the oversupply of railcars and orders for new cars came in. Pediatrix
Medical Group, which runs specialized neonatology practices in hospitals,
continued to deliver good results, as did Pacificare Health Systems, a
leading Medicare HMO. Chattem, marketer of Gold Bond, Icy Hot and other
consumer healthcare brands, rebounded sharply after resolving pending
litigation. In commercial services, our patience with Central Parking was
rewarded as the better economic environment and the return of the company
founder in the role of CEO has begun to have a positive impact on their
business. But PRG Schultz, which provides specialized auditing services,
continued to wrestle with merger related problems. Technology, where our
relatively small exposure hurt results, was also a disappointment. Remec, a
maker of microwave and other wireless transmission equipment, ran afoul of
internal problems and is undergoing a management shakeup. We believe
Remec's core business is solid and that a new management team enhances its
outlook. Shares of software maker SPSS fell back, while Borland Software
continued to
D-36
tread water. Insight Enterprises, a distributor of computers and
peripherals to mid-sized businesses, slipped back slightly following a very
strong run late last year and into the beginning of this year. We think
Insight remains an attractive way to capitalize on possible increases in
corporate technology spending. Insituform's sewer maintenance business
continued to feel the constraints of tight municipal budgets. Our
performance among insurance stocks trailed the benchmark.
Q: What is your outlook for the next several months?
A. The economic recovery has by now benefited most sectors of the market. But
it is not yet clear whether the expansion is merely satisfying pent-up
demand or we are at the beginning of a sustained period of growth. High
prices for industrial and other commodities give pause, as inflation
remains a threat to the recovery. The upcoming presidential election and
geopolitical tensions may also have unforeseeable market impacts.
Nevertheless, we continue to find good companies that seem mispriced in the
marketplace, given their potential for earnings expansion over the next two
or three years.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
D-37
PIONEER MID CAP VALUE FUND
STATEMENT OF ADDITIONAL INFORMATION
October 25, 2004
This Statement of Additional Information is not a Prospectus. It should be
read in conjunction with the related Proxy Statement and Prospectus (also dated
October 25, 2004) which covers Investor Class shares of Pioneer Mid Cap Value
Fund to be issued in exchange for shares of Safeco Multi-Cap Core Fund, a series
of Safeco Common Stock Trust. Please retain this Statement of Additional
Information for further reference.
The Prospectus is available to you free of charge (please call
1-800-407-7298).
INTRODUCTION......................................................................................2
EXHIBITS..........................................................................................2
ADDITIONAL INFORMATION ABOUT PIONEER MID CAP VALUE FUND...........................................2
FUND HISTORY.................................................................................2
DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS.............................................2
MANAGEMENT OF THE FUND.......................................................................3
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..........................................3
INVESTMENT ADVISORY AND OTHER SERVICES.......................................................3
BROKERAGE ALLOCATION AND OTHER PRACTICES.....................................................3
CAPITAL STOCK AND OTHER SECURITIES...........................................................3
PURCHASE, REDEMPTION AND PRICING OF SHARES...................................................3
TAXATION OF THE FUND.........................................................................3
UNDERWRITERS.................................................................................3
CALCULATION OF PERFORMANCE DATA..............................................................3
FINANCIAL STATEMENTS.........................................................................3
INTRODUCTION
This Statement of Additional Information is intended to supplement the
information provided in a Proxy Statement and Prospectus dated October 25, 2004
(the "Proxy Statement and Prospectus") relating to the proposed reorganization
of Safeco Multi-Cap Core Fund, a series of Safeco Common Stock Trust, into
Pioneer Mid Cap Value Fund and in connection with the solicitation by the
management of Safeco Common Stock Trust of proxies to be voted at the Meeting of
Shareholders of Safeco Multi-Cap Core Fund to be held on December 8, 2004.
EXHIBITS AND DOCUMENTS INCORPORATED BY REFERENCE
The following documents incorporated herein by reference, unless otherwise
indicated. Shareholders will receive a copy of each document that is
incorporated by reference upon any request to receive a copy of this Statement
of Additional Information.
1. Pioneer Mid Cap Value Fund's statement of additional information for Class
A, B, C, R and Y shares, dated March 1, 2004 (the "SAI") (File No.
33-34801), as filed with the Securities and Exchange Commission on February
23, 2004 (Accession No. 0001016964-04-000053) is incorporated herein by
reference.
2. Pioneer Mid Cap Value Fund's Annual Report for the fiscal year ended
October 31, 2003 (File No. 811-06106), as filed with the Securities and
Exchange Commission on December 31, 2003 (Accession No.
0001173601-03-000015) is incorporated herein by reference.
3. Pioneer Mid Cap Value Fund's Semi-Annual Report for the period ended April
30, 2004 (File No. 811-06106), as filed with the Securities and Exchange
Commission on July 1, 2004 (Accession No. 0001016964-04-000274) is
incorporated herein by reference.
4. Safeco Common Stock Trust's statement of additional information, dated
April 30, 2004 (File No. 33-36700), as filed with the Securities and
Exchange Commission on April 29, 2004 (Accession No. 0001193125-04-072454)
is incorporated herein by reference.
5. Safeco Multi-Cap Core Fund's Annual Report for the fiscal year ended
December 31, 2003 (File No. 811-06167), as filed with the Securities and
Exchange Commission on February 26, 2004 (Accession No.
0001193125-04-030270) is incorporated herein by reference.
6. Safeco Multi-Cap Core Fund's Semi-Annual Report for the period ended June
30, 2004 (File No. 811-06167), as filed with the Securities and Exchange
Commission on August 26, 2004 (Accession No. 0001193125-04-147286) is
incorporated herein by reference.
ADDITIONAL INFORMATION ABOUT
PIONEER MID CAP VALUE FUND
FUND HISTORY
For additional information about Pioneer Mid Cap Value Fund generally and
its history, see "Fund History" in the SAI.
-2-
DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS
For additional information about Pioneer Mid Cap Value Fund's investment
objective, policies, risks and restrictions, see "Investment Policies, Risks and
Restrictions" in the SAI.
MANAGEMENT OF THE FUND
For additional information about Pioneer Mid Cap Value Fund's Board of
Trustees and officers, see "Trustees and Officers" in the SAI.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
For additional information, see "Annual Fee, Expense and Other Information
- - Share ownership."
INVESTMENT ADVISORY AND OTHER SERVICES
For additional information, see "Investment Adviser," "Shareholder
Servicing/Transfer Agent," "Custodian" and "Independent Auditors" in Pioneer Mid
Cap Value Fund's SAI.
BROKERAGE ALLOCATION AND OTHER PRACTICES
For additional information about the Pioneer Mid Cap Value Fund's brokerage
allocation practices, see "Portfolio Transactions" in the SAI.
CAPITAL STOCK AND OTHER SECURITIES
For additional information about the voting rights and other
characteristics of shares of beneficial interest of Pioneer Mid Cap Value Fund,
see "Description of Shares" in the SAI.
PURCHASE, REDEMPTION AND PRICING OF SHARES
For additional information about purchase, redemption and pricing of shares
of Pioneer Mid Cap Value Fund, see "Sales Charges," "Redeeming Shares,"
"Telephone and Online Transactions" and "Pricing of Shares" in the SAI.
TAXATION OF THE FUND
For additional information about tax matters related to an investment in
Pioneer Mid Cap Value Fund, see "Tax Status" in the SAI.
UNDERWRITERS
For additional information about the Pioneer Mid Cap Value Fund's principal
underwriter and distribution plans, see "Principal Underwriter and Distribution
Plans" and "Sales Charges" in the SAI.
CALCULATION OF PERFORMANCE DATA
For additional information about the investment performance of Pioneer Mid
Cap Value Fund, see "Investment Results" in the SAI.
FINANCIAL STATEMENTS
For additional information, see "Financial Statements" in Pioneer Mid Cap
Value Fund's SAI.
-3-
PART C
OTHER INFORMATION
PIONEER MID CAP VALUE FUND
ITEM 15. INDEMNIFICATION
No change from the information set forth in Item 25 of the most recently filed
Registration Statement of Pioneer Mid Cap Value Fund (the "Registrant") on Form
N-1A under the Securities Act of 1933 and the Investment Company Act of 1940
(File Nos. 33-34801 and 811-06106) as filed with the Securities and Exchange
Commission on February 23, 2004 (Accession No. 0001016964-04-000053), which
information is incorporated herein by reference.
(1)(a) Agreement and Declaration of Trust (1)
(1)(b) Certificates of Amendments to Agreement and Declaration of
Trust (2) (4)
(1)(c) Amendment to Agreement and Declaration of Trust to establish (7)
Investor Class Shares
(2) Restated By-Laws (3)
(3) Not applicable
(4) Form of Agreement and Plan of Reorganization (6)
(5) Reference is made to Exhibits (1) and (2) hereof
(6)(a) Management Contract (5)
(6)(b) Expense Limitation Agreement (7)
(7) Underwriting Agreement with Pioneer Funds Distributor, Inc. (4)
(8) Not applicable
(9) Custodian Agreement with Brown Brothers Harriman & Co. (4)
(10) Multiple Class Plan Pursuant to Rule 18f-3 (7)
(11) Opinion of Counsel (legality of securities being offered) (*)
(12) Form of opinion as to tax matters and consent (7)
(13)(a) Investment Company Service Agreement with Pioneering
Services Corporation (5)
(13)(b) Administration Agreement with Pioneer Investment Management, Inc. (5)
(14) Consents of Independent Registered Public Accounting Firm (*)
(15) Not applicable
(16) Powers of Attorney (5)
(17)(a) Code of Ethics (5)
(17)(b) Form of Proxy Card (*)
(1) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 11 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-34801; 811-06106), as filed with the Securities and
Exchange Commission on June 30, 1998 (Accession no. 0001016964-98-000074).
(2) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 15 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-34801; 811-06106), as filed with the Securities and
Exchange Commission on February 28, 2000 (Accession no. 0001016964-00-000032).
(3) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 16 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-34801; 811-06106), as filed with the Securities and
Exchange Commission on March 1, 2001 (Accession no. 0001016964-01-000040).
(4) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 18 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-34801; 811-06106), as filed with the Securities and
Exchange Commission on March 1, 2002 (Accession no. 0001016964-02-000042).
(5) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 21 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-34801; 811-06106), as filed with the Securities and
Exchange Commission on February 23, 2004 (Accession no. 0001016964-04-000053).
(6) Filed herewith as Exhibit A to the Proxy Statement and Prospectus included
as Part A of this Registration Statement.
(7) Previously filed. Incorporated herein by reference from the exhibits filed
with Registrant's Initial Registration Statement on Form N-14 (File No.
333-118456), as filed with the Securities and Exchange Commission on August 23,
2004 (Accession no. 0001145443-04-001288).
(*) Filed herewith.
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant agrees that prior to any public reoffering of the
securities registered through the use of a prospectus which is part of this
Registration Statement by any person or party which is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the
reoffering prospectus will contain the information called for by the applicable
registration form for the reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as part of an amendment to the Registration
Statement and will not be used until the amendment is effective, and that, in
determining any liability under the Securities Act of 1933, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form N-14 has been signed on behalf of the
Registrant, in the City of Boston and the Commonwealth of Massachusetts, on the
25th day of October, 2004.
Pioneer Mid Cap Value Fund
By: /s/ Osbert M. Hood
------------------------------------------
Osbert M. Hood
Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
* Chairman of the Board, Trustee, October 25, 2004
- ------------------------------ and President
John F. Cogan, Jr.
* Chief Financial Officer and October 25, 2004
- ------------------------------ Treasurer
Vincent Nave
*
- ------------------------------
Mary K. Bush Trustee
*
- ------------------------------
Richard H. Egdahl Trustee
*
- ------------------------------
Margaret B.W. Graham Trustee
/s/ Osbert M. Hood
Osbert M. Hood Trustee
*
- ------------------------------
Marguerite A. Piret Trustee
*
- ------------------------------
Steven K. West Trustee
*
- ------------------------------
John Winthrop Trustee
* By: /s/ Osbert M. Hood October 25, 2004
--------------------------------
Osbert M. Hood, Attorney-in-Fact
EXHIBIT INDEX
The following exhibits are filed as part of this Registration Statement:
Exhibit No. Description
(11) Opinion of Counsel (legality of securities being offered)
(14) Consents of Independent Registered Public Accounting Firm
(17)(b) Form of Proxy Card