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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement
under
Section 14(d)(4) of the Securities Exchange Act of 1934
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PIONEER MUNICIPAL AND EQUITY INCOME TRUST
(Name of Subject Company)
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PIONEER MUNICIPAL AND EQUITY INCOME TRUST
(Name of Person Filing Statement)
COMMON SHARES OF BENEFICIAL INTEREST, NO PAR VALUE
(Title of Class of Securities)
723761102
(CUSIP Number of Class of Securities)
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Dorothy E. Bourassa
Pioneer Investment Management, Inc.
60 State Street
Boston, Massachusetts 02109
(617) 742-7825
(Name, Address and Telephone Number of Person Authorized to Receive
Notice and Communications On Behalf of the Person Filing Statement)
with a copy to:
Roger P. Joseph, Esq.
Bingham McCutchen LLP
150 Federal Street
Boston, Massachusetts 02110
(617) 951-8000
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_____ Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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Page 1 of 8
Item 1. Subject Company Information.
The name of the subject company is Pioneer Municipal and Equity Income
Trust (formerly known as Pioneer Tax Advantaged Balanced Trust), a Delaware
statutory trust (the "Fund"). The address of its principal executive offices is
60 State Street, Boston, Massachusetts 02109. The telephone number at its
principal executive offices is (617) 742-7845.
The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (together with the
Exhibits hereto, this "Statement") relates is the common shares of beneficial
interest, no par value of the Fund (the "Common Shares"). As of October 25,
2007, there were 28,706,981 Common Shares outstanding.
Item 2. Identity and Background of Filing Person.
The filing person is the subject company. The Fund's name, business address
and business telephone number are set forth in Item 1 above.
This Statement relates to an offer by Bulldog Investors General Partnership
("BIGP") to purchase certain Common Shares, as described in the Schedule TO
filed by BIGP on October 31, 2007, as amended on November 13, 2007 (the "Offeror
Schedule TO"). According to the Offeror Schedule TO, BIGP is a New York general
partnership, and it is offering to purchase up to 1,500,000 of the issued and
outstanding Common Shares at a price per share equal to 95% of the net asset
value per share determined as of the close of the regular trading session of the
New York Stock Exchange on the Expiration Date, as defined in the Offeror
Schedule TO, net to the seller in cash (subject to a $50 processing fee that
BIGP will charge for processing each Letter of Transmittal, applicable
withholding taxes and any brokerage fees that may apply), without interest, upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated October 30, 2007 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which, together with the Offer to Purchase, constitutes the
"Offer").
The Offeror Schedule TO and Offer to Purchase refer to "shares of common
stock, no par value." For purposes of this Statement only, the Fund assumes that
the Offer relates to the Common Shares. The Fund has no outstanding securities
with the title "common stock."
According to the Offeror Schedule TO, the business address of BIGP is Park
80 West, Plaza Two, Suite 750, Saddle Brook, New Jersey 07663, and the business
telephone number of BIGP is (201) 556-0092.
Item 3. Past Contracts, Transactions, Negotiations and Agreements.
Except as described in this Statement or in the excerpts from the Fund's
proxy statement dated April 24, 2007 (the "2007 Proxy Statement") filed as
Exhibit (e)(1) to this Statement, there are no material agreements,
arrangements, understandings, or any actual or potential conflicts of interest
between the Fund or its affiliates and (a) the Fund, its executive officers,
trustees or affiliates or (b) BIGP or its executive officers, directors or
affiliates.
The excerpts from the 2007 Proxy Statement filed as Exhibit (e)(1) to this
Statement are incorporated herein by this reference and include the information
beginning on the following pages and with the following headings:
Page 2 of 8
o Page 8: Share Ownership.
o Pages 10-11: Trustee Compensation Table.
o Page 11 and Appendix A: Trust Information. Investment Adviser and
Administrator.
David R. Bock and Stephen K. West no longer are Trustees of the Fund as of
June 8, 2007.
On June 8, 2007, Arthur D. Lipson and Robert S. Ferguson were elected
as Trustees of the Fund. Messrs. Lipson and Ferguson receive the same
compensation as the other Independent Trustees. Amounts paid to the
Trustees by the Fund differ because of (a) membership on or chairing certain
committees of the Board and (b) attendance at meetings. Neither Mr. Lipson nor
Mr. Ferguson is on the Board of any other Pioneer fund.
Based on the definitive proxy statement filed by Western Investment LLC on
March 19, 2007, as of March 15, 2007, the dollar range of Common Shares
beneficially owned by Mr. Lipson and Mr. Ferguson is as follows:
Arthur D Lipson more than $100,000
Robert S. Ferguson more than $100,000
Description of Relevant Agreements.
o Advisory Agreement dated January 30, 2004 (the "Advisory Agreement")
between the Fund and Pioneer Investment Management, Inc. ("Pioneer")
generally provides that Pioneer will provide the Fund with investment
research, advice and supervision and will furnish continuously an
investment program for the Fund, consistent with the investment
objective and policies of the Fund. Under the Advisory Agreement,
Pioneer will determine from time to time what securities shall be
purchased for, and held and sold by the Fund. To carry out such
determinations, the Advisory Agreement provides that Pioneer will
exercise full discretion and act for the Fund in the same manner and
with the same force and effect as the Fund itself might or could do
with respect to purchases, sales or other transactions, as well as
with respect to all other things necessary or incidental to the
furtherance or conduct of such purchases, sales or other transactions.
For performing those services, the Advisory Agreement provides that
Pioneer will receive a fee based on the Fund's average daily managed
assets, which will be computed daily and paid monthly in arrears. The
Advisory Agreement also provides that it shall continue from year to
year so long as its continuance is approved in accordance with the
requirements of the Investment Company Act of 1940, as amended (the
"1940 Act"), or an exemption therefrom, subject to the right of either
party to terminate it on 60 days' prior written notice. This summary
description of the Advisory Agreement does not purport to be complete,
and it is qualified in its entirety by reference to the Advisory
Agreement. The Advisory Agreement is filed as Exhibit (e)(2) hereto
and incorporated by reference herein.
o Amended and Restated Administration Agreement dated October 1, 2006
with effect from January 1, 2006 (the "Administration Agreement")
between the Pioneer Funds listed on Exhibit 1 thereto (which includes
the Fund), and Pioneer generally provides that Pioneer will perform
certain accounting, legal and compliance services for the Fund. The
Administration Agreement further provides that for performing those
services, Pioneer will receive a fee based on the Fund's average daily
net assets, which will be computed daily and paid monthly. The
Administration Agreement also provides that it shall continue from
year to year so long as its continuance is approved by the Trustees,
including a majority of the Trustees who are not interested persons of
the Fund, subject to the right of either party to terminate it on 60
days' prior written notice. This summary description of the
Administration Agreement does not purport to be complete, and it is
qualified in its entirety by reference to the Administration
Agreement. The Administration Agreement is filed as Exhibit (e)(3)
hereto and incorporated by reference herein.
o Administration Agreement dated January 30, 2004 (the "Tri-Party
Administration Agreement") among the Fund, Pioneer and Princeton
Administrators, L.P. ("Princeton") generally provides that Princeton,
among other things, will calculate or arrange for the
Page 3 of 8
calculation and publication of the Fund's net asset value in
accordance with the Fund's policy as adopted from time to time by the
Fund's Board of Trustees (the "Board"), and maintain, or arrange for
the maintenance of, certain books and records of the Fund as required
under the 1940 Act. The Tri-Party Administration Agreement also
provides that Pioneer will provide officers for the Fund and oversee
the activities of Princeton. Under the Tri-Party Administration
Agreement, Princeton will receive a fee for its services. Pioneer will
not receive a fee, but the Tri-Party Administration Agreement provides
that Pioneer is entitled to receive reimbursement for out of pocket
expenses incurred in connection with its services. The Tri-Party
Administration Agreement further provides that any party may terminate
it on 60 days' prior written notice. This summary description of the
Tri-Party Administration Agreement does not purport to be complete,
and it is qualified in its entirety by reference to the Tri-Party
Administration Agreement. The Tri-Party Administration Agreement is
filed as Exhibit (e)(4) hereto and incorporated by reference herein.
o Investment Company Service Agreement dated January 30, 2004 (the
"Services Agreement") between the Fund and Pioneer Investment
Management Shareholder Services, Inc. ("PIMSS") generally provides
that PIMSS will provide certain account services for Fund
shareholders, as well as certain services relating to the issuance of
Fund shares, which PIMSS may delegate to another party. The Services
Agreement provides that PIMSS is entitled to receive a fee for
providing those services, which generally is based on transactions for
the Fund or its shareholders. The Services Agreement also provides
that it may be terminated by either party on 90 days' prior written
notice. This summary description of the Services Agreement does not
purport to be complete, and it is qualified in its entirety by
reference to the Services Agreement. The Services Agreement is filed
as Exhibit (e)(5) hereto and incorporated by reference herein.
Item 4. The Solicitation or Recommendation.
(a) Solicitation/ Recommendation.
On November 5, 2007, the Board, including each of the Trustees who is not
an "interested person" of the Fund, as that term is defined in Section 2(a)(19)
of the 1940 Act (collectively, the "Independent Trustees"), met to evaluate and
assess the terms of the Offer. At that meeting were, among others, "independent
legal counsel," as that term is defined in Rule 0-1(a)(6) under the 1940 Act, to
the Independent Trustees.
At the meeting, a majority of the Board, including a majority of the
Independent Trustees in consultation with independent legal counsel, after
careful consideration determined to recommend that the Fund's shareholders
reject the Offer and not tender their Common Shares to BIGP. One of the
Independent Trustees of the Fund has disclosed to the Board that he has an
interest as an investor in Full Value Partners L.P., a Delaware limited
partnership that is a general partner of BIGP.
A press release issued by the Fund on November 14, 2007 communicating the
recommendation of the Board is filed as Exhibit (a)(1) hereto and is
incorporated herein by this reference.
Page 4 of 8
(b) Reasons
In making the recommendation described above, the Board consulted with its
legal advisors and considered a number of factors, including the following:
o For shareholders seeking the tax-advantaged income that the Fund
provides, any economic benefit of the tender offer should be weighed
against the economic benefits of remaining invested in the Fund. The
amount over current market price that the Offer represents is
significantly less than the Fund's annualized distribution rate of
nearly 9.90%, or 13.82% on a tax-equivalent basis, based on the Fund's
market price at November 13, 2007. The Trustees recognize that certain
investors may seek to take advantage of the Offer as part of an
arbitrage or other investment strategy.
o BIGP states that the purpose of the Offer is for BIGP to gain
influence over the management of the Fund with the objective of
enhancing the value of the Common Shares. Although BIGP has not
specified any particular plan it would pursue, several changes it may
pursue would alter substantially the Fund's current investment and/or
operational structure. For example, conversion to an open-end
structure (as a means to allow investors to receive net asset value
for their shares) would eliminate the significant benefits of the
closed-end structure in implementing the Fund's investment strategies.
In particular, the restrictions on leverage applicable to open-end
funds would hinder substantially the Fund's ability to provide
enhanced tax-advantaged income and return pursuant to its investment
strategies. Conversion to an open-end structure also would mean that
the Fund would need to maintain part of its assets in cash. This would
limit the Fund's ability to be fully invested in income-producing
securities, which may reduce the Fund's yield. To the extent that a
substantial number of investors sell their shares in connection with
conversion to an open-end structure, the expense ratio of the
resulting smaller fund is likely to increase.
o The $50 processing fee charged to each shareholder who tenders, along
with any applicable brokerage commission, will be deducted from the
proceeds of shareholders who tender their shares, and will reduce the
return realized by those shareholders, significantly in the case of
shareholders who tender smaller share amounts.
o The Offer is subject to a number of conditions. There is no assurance
that BIGP will be able to complete the transactions it proposes.
o The sale of shares by a shareholder pursuant to the Offer is a taxable
event. Shareholders evaluating the Offer should consider consulting a
tax professional.
o The Board has taken a number of actions over the past few months that
have reduced the Fund's discount to NAV, including:
o Increasing the monthly distribution rate by 72.9% since June 2007
o Instituting a level distribution policy, whereby the Fund pays an
increased, fixed monthly distribution consisting of net
investment income and a return of capital
o Applying for exemptive relief from the Securities and Exchange
Commission (SEC) to allow the Fund to distribute long-term
capital gains on a monthly basis instead of on an annual basis
o Approving a share repurchase program, which is intended to
increase the Fund's net asset value and increase liquidity in the
Fund's shares
o Changing the name of the Fund to more clearly reflect its unique
investment strategy and tax benefits
Since some of these actions were taken by the Board fairly recently,
the Fund's discount to NAV may be reduced further as the market responds to
the enhancements.
Shareholders should understand that a return of capital is not a
distribution of income or capital gains from the Fund. There can be no assurance
as to whether or when the SEC would grant the exemptive order, or as to the
conditions to which any order would be subject.
The Fund's tax-equivalent distribution rate is based on the blended
effective tax rate applicable to the Fund's income distributions as of
September 30, 2007 assuming the recipient is taxed at the maximum 35% federal
personal income tax rate. A portion of the Fund's distributions may be subject
to the alternative minimum tax, which would reduce the tax-oriented benefits of
the fund to an investor who is subject to that tax.
The discussion above of the information and factors considered by the Board
is not meant to be exhaustive, but includes material information, factors and
analyses considered by the Board in reaching its determination. Each of the
Trustees evaluated the various factors listed above in light of his or her
knowledge of the business, financial condition, and prospects of the Fund and
based upon the advice of independent legal counsel. In light of the number and
variety of factors that the Board considered, the Trustees did not find it
practicable to assign relative weights to the foregoing factors. The Board's
determination was made after considering the totality of the information and
factors involved. In addition, individual Trustees may have given different
weight to different factors.
(c) Intent to Tender
As far as the Fund currrently is aware, except as disclosed below, none of
its Trustees, executive officers, affiliates, or subsidiaries currently intends
to tender Common Shares held of record or beneficially by such person for
purchase pursuant to the Offer. The foregoing does not include any Common Shares
over which, or with respect to which, any such Trustee, executive officer,
affiliate or subsidiary acts in a fiduciary or representative capacity or is
subject to the instruction of a third party.
Arthur D. Lipson has stated that he intends to tender all Common Shares
held of record or beneficially by him pursuant to the Offer, except for the 1000
shares held in certificate by Western Investment LLC and the 48 Common Shares
that have accumulated through the Fund's Dividend Reinvestment Program. Robert
S. Ferguson has stated that he plans to tender all Common Shares held of record
or beneficially by him pursuant to the Offer.
Item 5. Person/Assets Retained, Employed, Compensated or Used.
Trustees and employees of Pioneer may make recommendations to the
shareholders of the Fund with respect to the Offer.
Item 6. Interest in Securities of the Subject Company.
During the past 60 days, no transaction with respect to the Common Shares
has been effected by the Fund or, to the Fund's knowledge, by any of its
executive officers, Trustees, affiliates or subsidiaries, except the following:
Page 5 of 8
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Name Date of Transaction Amount of Price Per Share Where and How the
Securities Involved Transaction was
Effected
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John F. Cogan, Jr. October 10, 2007 34,340 common Varies between Acquisition on open market
shares, no par value $14.49 and $14.53
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Arthur D. Lipson September 28, 2007 6.826 common $14.429 Dividend reinvestment
shares, no par value
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Arthur D. Lipson October 12, 2007 10,000 common $14.38 Equity swap (obligation to
shares, no par value purchase) by Western
Investments, LLC, in which Mr.
Lipson has an interest
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Arthur D. Lipson October 15, 2007 1,800 common $14.37 Equity swap (obligation to
shares, no par value purchase) by Western Investments,
LLC, in which Mr. Lipson has an
interest
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Arthur D. Lipson October 31, 2007 8.099 common $14.357 Dividend reinvestment
shares, no par value
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Marguerite A. Piret September 4, 2007 0.4819 common $14.07 Dividend reinvestment
shares, no par value
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The foregoing does not include any Common Shares over which, or with
respect to which, any such executive officer, Trustee, affiliate or subsidiary
acts in a fiduciary or representative capacity or is the subject to the
instruction of a third party.
Item 7. Purposes of the Transaction and Plans or Proposals.
(a) The Fund has not undertaken, and is not engaged, in any negotiation in
response to the Offer that relates to: (i) a tender offer or other acquisition
of the Fund's securities by the Fund, any of its subsidiaries or any other
person; (ii) an extraordinary transaction, such as a merger, reorganization or
liquidation involving the Fund or any of its subsidiaries; (iii) a purchase,
sale or transfer of a material amount of assets of the Fund or any of its
subsidiaries; or (iv) any material change in the present dividend rate or
policy, or indebtedness or capitalization of the Fund. The Fund, however,
reserves the right to develop and evaluate alternatives to the Offer.
Accordingly, the Fund may undertake or engage in negotiations and actions which
relate to the foregoing. There can be no assurance that the foregoing will
result in a transaction being recommended, or if recommended, will be authorized
or consummated. Disclosure of the parties to, or terms of, any proposed
transactions might jeopardize the initiation or continuation of such
negotiations, if any. Accordingly, the Fund will not disclose the possible terms
of any such proposal or transactions unless and until an agreement relating
thereto has been reached.
(b) There is no transaction, Board resolution, agreement in principle or
signed contract in response to the Offer that relates to, or would result in,
one or more of the matters referred to in Item 7(a) immediately above.
Page 6 of 8
Item 8. Additional Information.
This Statement is not an offer to sell, or a solicitation of an offer to
buy, shares of any fund, including the Fund.
On November 14, 2007, the Fund issued a press release (the "Press Release")
relating to the Offer, which contains important information. The materials have
also been filed with the SEC. For more information regarding the Fund, or to
receive a free copy of the materials filed with the SEC, including the Press
Release, please visit www.pioneerinvestments.com. Free copies of such materials
can also be found on the SEC's website (http://www.sec.gov). Please note that
the information contained at www.pioneerinvestments.com does not constitute part
of this Statement.
Item 9. Material to be Filed as Exhibits.
Exhibit No. Description
(a)(1) Press Release issued by the Fund on November 14, 2007. Filed
herewith.
(e)(1) Excerpts from the Proxy Statement of the Fund, dated April 24,
2007, filed with the Securities and Exchange Commission on
Schedule 14A on April 24, 2007. Filed herewith.
(e)(2) Advisory Agreement, dated January 30, 2004 between the Fund and
Pioneer Investment Management, Inc. Filed herewith.
(e)(3) Amended and Restated Administration Agreement, dated October 1,
2006 between the Pioneer Funds listed on Exhibit 1 thereto
(which includes the Fund), and Pioneer Investment Management,
Inc. Filed herewith.
(e)(4) Administration Agreement, dated January 30, 2004 among the
Fund, Pioneer Investment Management, Inc. and Princeton
Administrators, L.P. Filed herewith.
(e)(5) Investment Company Service Agreement, dated January 30, 2004
between the Fund and Pioneer Investment Management Shareholder
Services, Inc. Filed herewith.
[Rest of page intentionally left blank]
Page 7 of 8
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
PIONEER MUNICIPAL AND EQUITY INCOME TRUST
By: /s/ Dorothy E. Bourassa
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Name: Dorothy E. Bourassa
Title: Secretary
Dated: November 14, 2007
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