As filed with the Securities and Exchange Commission on June 18, 2008
File No. 333-_____
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. ___
Post-Effective Amendment No. ___
(Check appropriate box or boxes)
PIONEER TAX FREE INCOME 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: Roger P. Joseph, Esq.
Bingham McCutchen LLP
One Federal Street
Boston, Massachusetts 02110
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.
It is proposed that this registration statement will become effective on July
18, 2008, pursuant to Rule 488 under the Securities Act of 1933, as amended.
COMBINED PROXY STATEMENT
OF
PIONEER MUNICIPAL AND EQUITY INCOME TRUST
AND
PROSPECTUS FOR
CLASS A SHARES OF
PIONEER TAX FREE INCOME FUND
(each, a "Pioneer Fund" and together, the "Pioneer Funds")
The address and telephone number of each Pioneer Fund is:
60 State Street
Boston, Massachusetts 02109
1-800-225-6292
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
SCHEDULED FOR SEPTEMBER 11, 2008
To the Shareholders of Pioneer Municipal and Equity Income Trust:
This is the formal agenda for your fund's shareholder meeting. It tells you
what matters will be voted on and the time and place of the meeting, in case you
want to attend in person.
A special shareholder meeting for your fund will be held at the offices of
Bingham McCutchen LLP, One Federal Street, Boston, Massachusetts on September
11, 2008, at 2:00 p.m., Eastern Time (the "Meeting"), to consider the following:
1. A proposal to approve an Agreement and Plan of Merger between your
fund and Pioneer Tax Free Income Fund. Under this Agreement and Plan
of Merger, your fund (a closed-end fund) will merge with and into an
open-end fund, Pioneer Tax Free Income Fund.
2. Any other business that may properly come before the Meeting.
YOUR TRUSTEES RECOMMEND THAT YOU VOTE IN FAVOR OF THE PROPOSAL.
Shareholders of record as of the close of business on July 7, 2008 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. If shareholders do not return their proxies in sufficient
numbers, your fund may be required to make additional solicitations.
By Order of the Board of Trustees,
/s/Dorothy E. Bourassa
Dorothy E. Bourassa
Secretary
Boston, Massachusetts
_______________, 2008
COMBINED PROXY STATEMENT
OF
PIONEER MUNICIPAL AND EQUITY INCOME TRUST
AND
PROSPECTUS FOR
CLASS A SHARES OF
PIONEER TAX FREE INCOME FUND
(each, a "Pioneer Fund" and together, the "Pioneer Funds")
The address and telephone number of each Pioneer Fund is:
60 State Street
Boston, Massachusetts 02109
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 on upon
the adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
An investment in either Pioneer Fund (each sometimes referred to herein as
a "fund") is not a bank deposit and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
1
INTRODUCTION
This combined proxy statement/prospectus, dated __________, 2008 (the
"Proxy Statement/Prospectus"), is being furnished to shareholders of Pioneer
Municipal and Equity Income Trust (NYSE symbol: PBF) in connection with the
solicitation by the Board of Trustees (the "Board" or the "Trustees") of proxies
to be used at a special meeting of the shareholders of Pioneer Municipal and
Equity Income Trust to be held at the offices of Bingham McCutchen LLP, One
Federal Street, Boston, Massachusetts on September 11, 2008, at 2:00 p.m.,
Eastern Time (the "Meeting"). The Proxy Statement/Prospectus is being mailed to
shareholders of Pioneer Municipal and Equity Income Trust on or about
__________, 2008.
The purpose of this Proxy Statement/Prospectus is to obtain shareholder
approval to merge Pioneer Municipal and Equity Income Trust with and into
Pioneer Tax Free Income Fund, an open-end fund (commonly referred to as a
"mutual fund"). Pioneer Tax Free Income Fund and your fund have the same
investment adviser, Pioneer Investment Management, Inc. ("Pioneer").
Reorganizing your fund into Pioneer Tax Free Income Fund will enable you to
share in certain potential benefits, including (i) the opportunity to invest in
an established open-end fund that, like your fund, pursues a tax-oriented
investment approach and also offers lower expenses and a comparable tax-
equivalent yield; (ii) elimination of the discount to net asset value at which
shares of your fund have traded historically; (iii) the ability to redeem your
shares at their net asset value on a daily basis; and (iv) allowing you to
choose the timing of any recognition of taxable gain or loss occasioned by the
redemption of shares. These potential benefits are described in greater detail
below. It should be noted that past performance is no assurance of future
results.
The Trustees recommend that you vote FOR this proposal.
The Proxy Statement/Prospectus contains information you should know before
voting on the proposed Agreement and Plan of Merger that provides for the merger
of your fund into Pioneer Tax Free Income Fund (the "Merger"). Please read the
Proxy Statement/Prospectus carefully, including Exhibit A and Exhibit B, because
they are a part of this Proxy Statement/Prospectus and contain details that are
not in the summary.
The date of this Proxy Statement/Prospectus is __________, 2008.
Additional information about each Pioneer Fund has been filed with the SEC
(http://www.sec.gov) and is available upon oral or written request and without
charge. See "Where to Get More Information" below.
----------------------------------------------------------------------------------------------------------------
Where to Get More Information
----------------------------------------------------------------------------------------------------------------
Pioneer Tax Free Income Fund's current Class A shares On file with the SEC (http://www.sec.gov) and
prospectus, multi-class statement of additional available at no charge by calling our toll-free
information, and any applicable supplements. number: 1-800-225-6292
Each Pioneer Fund's most recent annual and
semi-annual reports to shareholders. On file with the SEC (http://www.sec.gov) and
available at no charge by calling our toll-free
number: 1-800-225-6292. See "Available
Information."
----------------------------------------------------------------------------------------------------------------
A statement of additional information for this Proxy On file with the SEC (http://www.sec.gov) and
Statement/Prospectus (the "SAI"), dated [ ], 2008. It available at no charge by calling our toll-free
contains additional information about the Pioneer Funds. number: 1-800-225-6292. This SAI is incorporated
by reference into this Proxy Statement/Prospectus.
----------------------------------------------------------------------------------------------------------------
To ask questions about this Proxy Statement/Prospectus. Call our toll-free telephone number: 1-800-225-6292.
----------------------------------------------------------------------------------------------------------------
How the Merger Will Work
o The Merger is scheduled to occur as of the close of business on [ ],
2008 but may occur on such later date as the parties may agree in
writing (the "Closing Date").
o Your fund will merge with and into an open-end fund, Pioneer Tax Free
Income Fund. All of the assets and liabilities of your fund will
become the assets and liabilities of Pioneer Tax Free Income Fund, and
your fund will cease to exist. The outstanding common shares of your
fund will be converted into a number of whole or fractional Class A
shares of Pioneer Tax Free Income Fund with an aggregate net asset
value equal to the aggregate net asset value of the common shares of
your fund immediately prior to the Merger. Your fund's net asset value
can be expected to vary from the market value attributable to your
fund's common shares. The net asset value of both Pioneer Funds will
be computed as of the close of regular trading on the New York Stock
Exchange ("NYSE") on the Closing Date.
2
o Holders of each of your fund's common shares and Auction Market
Preferred Shares ("AMPS") are entitled to vote on the Agreement and
Plan of Merger. An affirmative vote of a majority of the outstanding
common shares and an affirmative vote of a majority of the outstanding
AMPS, voting separately, will be required to approve the Agreement and
Plan of Merger. However, after the Meeting but prior to the Closing
Date, your fund will call for redemption and redeem all of its
outstanding AMPS. Only common shares will be converted into Class A
shares of Pioneer Tax Free Income Fund in the Merger.
o No sales load, contingent deferred sales charge, commission,
redemption fee or other transaction fee will be charged as a result of
the Merger. After the Merger, holders of common shares of your fund
will be able to exchange your Class A shares of Pioneer Tax Free
Income Fund into Class A shares of other Pioneer Funds without a sales
charge. Class A shares are subject to a Rule 12b-1 fee of 0.25%. Class
A shares do not currently charge a redemption fee.
o The Merger generally will not result in income, gain or loss being
recognized for federal income tax purposes by either Pioneer Fund or
its common shareholders. However, prior to the Closing Date, your fund
is expected to sell certain securities in its portfolio, including all
of its non-municipal securities. The disposition of these securities
could result in significant brokerage expense to your fund and also
will cause your fund to realize gains or losses in its current tax
year, which will end on the Closing Date. Your fund will be able to
offset any net gain from such securities dispositions with its
available net capital loss carryovers, and any gain not so offset will
result in a distribution that will be taxable to you. The Trustees
anticipate, however, that there will be sufficient loss carryovers to
offset any net gain recognized by your fund as a result of securities
dispositions. In addition, as noted above, after the Meeting but prior
to the Closing Date, your fund will call for redemption and redeem all
of its outstanding AMPS. Holders of AMPS will recognize gain or loss
equal to the difference between the amount realized on the redemption
and the shareholder's tax basis in the shares redeemed.
o Any net capital loss carryovers of your fund not used in the taxable
year ending on the Closing Date may be utilized in the future by
Pioneer Tax Free Income Fund, as the surviving single entity, subject
to tax law limitations resulting from the Merger. Subject to
applicable limitations, Pioneer Tax Free Income Fund, as the surviving
single entity, will be able to utilize its separate tax loss
carryforwards against capital gains recognized by Pioneer Tax Free
Income Fund following the Merger.
o In recommending the Merger, the Board of Trustees of each Pioneer
Fund, including all of the Trustees who are not "interested" persons
(as defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) of the Pioneer Funds, Pioneer Investment Management,
Inc., the Pioneer Funds' investment adviser ("Pioneer"), or Pioneer
Funds Distributor, Inc., Pioneer Tax Free Income Fund's principal
underwriter and distributor ("PFD") (the "Independent Trustees"), have
determined that the Merger is in the best interest of the Pioneer Fund
and will not dilute the interests of shareholders of the Pioneer Fund.
The Trustees of each Pioneer Fund have made this determination based
on factors that are discussed below and in greater detail under the
proposal.
Why Your Fund's Trustees Recommend the Merger
The Trustees believe that merging your fund with and into Pioneer Tax Free
Income Fund offers you a number of potential benefits, which are highlighted by
the following discussion of key differences between the two funds. These
potential benefits and considerations include:
o Liquidity at net asset value. Pioneer Tax Free Income Fund is an
open-end fund that permits redeeming or purchasing shares at net asset
value. The Trustees noted that, because common shares of closed-end
funds, such as your fund, are not redeemable and instead are bought
and sold on the open market, the market price of these shares is
influenced by a number of factors and, at times, may trade at a
discount (or premium) to net asset value. Your fund's net asset value
per share can be expected to vary from the market price of its shares,
and your fund's common shares generally have traded at a discount to
net asset value, ranging from (3.02)% (high) to (17.25)% (low) over
the past two years ended February 29, 2008 and currently have traded
at a discount of (6.14)% as of April 30, 2008. The Trustees noted that
the merger of your fund into Pioneer Tax Free Income Fund effectively
would provide your fund's shareholders with liquidity for their common
shares at net asset value, thereby eliminating the discount at which
your fund's common shares historically have traded. The Trustees also
noted requests for enhanced liquidity from shareholders and changes in
your fund's shareholder base related to investors seeking liquidity.
o Tax-oriented investment approach. Pioneer Tax Free Income Fund is an
established open-end fund that, like your fund, invests in municipal
securities that provide income that is exempt from regular federal
income tax. The portion of your fund's portfolio invested in municipal
securities is similar in many respects to Pioneer Tax Free Income
Fund, including overall credit quality, maturity distribution and
sector weights. However, unlike Pioneer Tax Free Income Fund, your
fund invests at least 25%, and may invest up to 50%, of its total
assets in equity securities. As noted above, prior to the Closing
Date, your fund will sell the non-municipal securities in its
portfolio.
3
o Comparable Performance. Pioneer Tax Free Income Fund's performance was
comparable to your fund's performance. As of February 29, 2008, your
fund's average annual returns for the past one and three year periods
were (14.69)% and 0.72%, respectively. In comparison, Pioneer Tax Free
Income Fund's Class A shares' average annual returns as of March 31,
2008 for the past one and three year periods were (5.14)% and 1.29%,
respectively. As of February 29, 2008, the average annual return of
your fund since its inception on January 30, 2004 is 3.18%. As of
March 31, 2008, the average annual return of Class A shares of Pioneer
Tax Free Income Fund since its inception on January 18, 1977 is 5.82%.
o Yield. The combined fund is expected to have a yield that is
comparable to the yield of your fund. Your fund currently offers a
slightly higher yield than Pioneer Tax Free Income Fund, mostly as a
result of its somewhat higher exposure to below investment-grade
bonds. Your fund's portfolio of municipal bonds has a yield calculated
using its book value ("book yield") of approximately 6%. Pioneer Tax
Free Income Fund's portfolio has a book yield of approximately 5.4%.
As of March 31, 2008 the 30-day SEC yields for your Fund's common
shares and the Class A shares of Pioneer Tax Free Income Fund were
8.03% and 4.43%, respectively.
o Lower operating expenses. The pro forma gross expense ratio for the
combined fund's Class A shares is anticipated to be 0.87%. In
addition, if shareholders of your fund approve the Merger, Pioneer
will contractually agree to limit ordinary operating expense to the
extent required to reduce the combined fund's expenses to 0.89% of the
average daily net assets attributable to Class A shares of the
combined fund. The historical expense ratio for common shares of your
fund is 1.26% (the expense ratio does not reflect the effect of
dividend payments to preferred shareowners). Therefore, the expense
ratio will be lower for the Class A shares of the combined fund as
compared to the common shares of your fund. The expense limitation
discussed above would be in effect for three years from the date of
the Merger. There can be no assurance that Pioneer will extend the
expense limitation beyond such time.
o Lower management fees. Pioneer Tax Free Income Fund pays a lower
management fee rate. Pioneer Tax Free Income Fund's current management
fee rate of 0.48% of average daily net assets and the combined fund's
anticipated pro forma management fee rate of 0.45% of average daily
net assets are each lower than your fund's management fee, which is
0.60% of your fund's average daily managed assets (which is equivalent
to 0.83% of your fund's average daily net assets attributable to
common shareowners).
o Tax Consequences. The transaction is expected to be treated as a
reorganization under Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"), and therefore you will not recognize
gain or loss for federal income tax purposes on the conversion of your
fund shares into Class A shares of Pioneer Tax Free Income Fund.
However, in considering the Merger, the Board noted that prior to the
Closing Date, your fund is expected to sell certain securities in its
portfolio, including all of its non-municipal securities. The Board
recognized that the sale of these securities could result in
significant brokerage expense to your fund and also will cause your
fund to realize gains or losses in the current tax year, which would
then be distributed to shareholders in one or more taxable
distributions. The Board also considered that your fund will be able
to offset any net gain from the disposition of such securities with
its available net capital loss carryovers. The Board anticipates that
there will be sufficient loss carryovers to offset any net gain
recognized by your fund as a result of securities dispositions. The
Board also noted that after the Meeting but prior to the Closing Date,
your fund will call for redemption and redeem all of its outstanding
AMPS. The Board considered that holders of AMPS will recognize gain or
loss equal to the difference between the amount realized on the
redemption and the shareholder's tax basis in the shares redeemed.
o Alternatives. If the Merger is not approved, the Board will meet to
consider all available options, including liquidating your fund to
provide all shareholders the opportunity to receive their net asset
value and make their own choices as to how to invest their assets.
o Other differences. Your fund has used investment leverage through the
issuance of AMPS. Your fund has currently issued AMPS with an
aggregate liquidation preference of approximately 32% of the fund's
total assets. In contrast, Pioneer Tax Free Income Fund may not use
leverage through AMPS. As noted above, after the Meeting but prior to
the Closing Date, your fund will call for redemption and redeem all of
its outstanding AMPS. Holders of AMPS will receive $25,000 per share,
plus an amount equal to accumulated but unpaid dividends thereon
through the date fixed for redemption.
There are differences in shareholder voting between your fund and
Pioneer Tax Free Income Fund. Generally, shareholders of listed
closed-end funds like your fund have greater voting rights, including
rights to vote at annual meetings for the election of trustees in
accordance with NYSE rules. Your voting rights and the voting rights
of shareholders of Pioneer Tax Free Income Fund are described in more
detail below.
Therefore, your fund's Trustees recommend that you vote FOR the Merger.
4
What are the Federal Income Tax Consequences of the Merger
As a condition to the closing of the Merger, the funds must receive an
opinion of Bingham McCutchen LLP to the effect that the Merger will constitute a
"reorganization" within the meaning of Section 368 of the Code. Accordingly,
subject to the limited exceptions described below under the heading "Tax Status
of the Merger," it is expected that neither your fund nor common shareholders of
your fund will recognize gain or loss as a direct result of the Merger, and that
the aggregate tax basis of the Pioneer Tax Free Income Fund Class A shares that
holders of common shares of your fund receive in the Merger will be the same as
the aggregate tax basis of the common shares of your fund that you held prior to
the Merger. However, in accordance with the Pioneer Funds' policy that each
Pioneer Fund distributes its investment company taxable income, net tax-exempt
income and net capital gains for each taxable year (in order to qualify for tax
treatment as a regulated investment company and avoid federal income tax thereon
at the fund level), your fund will declare and pay a distribution of such income
and gains to its shareholders shortly before the Merger. Such distribution may
affect the amount, timing or character of taxable income that you realize in
respect of your fund shares. Such distribution is currently estimated to total
$0.1120 in ordinary income per share. Pioneer Tax Free Income Fund may make a
comparable distribution to its shareholders shortly before the Merger.
Additionally, following the Merger, Pioneer Tax Free Income Fund will declare
and pay to its shareholders before the end of 2008 a distribution of any
remaining 2008 income and gains. Distributions that Pioneer Tax Free Income Fund
declares and pays on your shares after the Closing Date will be reportable to
you for tax purposes, even though those distributions may include a portion of
Pioneer Tax Free Income Fund's income and gains that were accrued and/or
realized before the Closing Date.
In addition, as noted above, prior to the Closing Date, your fund is
expected to sell certain securities in its portfolio, including all of its
non-municipal securities. The disposition of these securities will cause your
fund to realize gains or losses in the current tax year. Your fund will be able
to offset any net gain from such securities dispositions with its available net
capital loss carryovers, and any gain not so offset will result in a
distribution that will be taxable to you. The Trustees anticipate, however, that
there will be sufficient loss carryovers to offset any net gain recognized by
your fund as a result of securities dispositions.
Further, as noted above, after the Meeting but prior to the Closing Date,
your fund will call for redemption and redeem all of its outstanding AMPS.
Holders of AMPS will recognize gain or loss equal to the difference between the
amount realized on the redemption and the shareholder's tax basis in the shares
redeemed.
Who Bears the Expenses Associated with the Merger
Your fund will bear the costs of preparing and printing the Proxy
Statement/Prospectus and the solicitation costs incurred in connection with the
Merger. Your fund also will bear its own costs in connection with the Merger,
including the costs associated with redeeming AMPS and the costs of liquidating
portfolio securities as described herein, and other redemptions anticipated in
connection with the Merger. The Board estimates that these expenses in the
aggregate will be approximately $200,000.
What Happens if the Merger is Not Approved
If the required approval of shareholders of your fund is not obtained, the
meeting may be adjourned as more fully described in this Proxy
Statement/Prospectus, your fund will continue to engage in the business as a
closed-end fund and the Board will consider what further action may be
appropriate.
Who is Eligible to Vote?
Shareholders of record on July 7, 2008 are entitled to attend and vote at
the meeting or any adjourned meeting. Each share is entitled to one vote.
Holders of common shares and AMPS will vote as separate classes on the proposal.
Approval by a majority of holders of common shares and majority of holders of
AMPS, voting separately, is required to approve the Agreement and Plan of
Merger. 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 Merger. If any other business comes before the meeting,
your shares will be voted at the discretion of the persons named as proxies.
5
TABLE OF CONTENTS
Page
----
SUMMARY ................................................................................ 7
COMPARISON OF PIONEER MUNICIPAL AND EQUITY INCOME TRUST TO PIONEER TAX FREE INCOME FUND 7
OTHER IMPORTANT INFORMATION CONCERNING THE PROPOSED MERGER ............................. 27
TERMS OF THE AGREEMENT AND PLAN OF MERGER .............................................. 29
TAX STATUS OF THE MERGER ............................................................... 30
BOARDS' EVALUATION AND RECOMMENDATION .................................................. 31
ADDITIONAL INFORMATION ABOUT THE PIONEER FUNDS ......................................... 32
FINANCIAL HIGHLIGHTS ................................................................... 44
INFORMATION CONCERNING THE MEETING ..................................................... 47
VOTING RIGHTS AND REQUIRED VOTE ........................................................ 48
OWNERSHIP OF SHARES OF THE PIONEER FUNDS ............................................... 49
EXPERTS ................................................................................ 49
AVAILABLE INFORMATION .................................................................. 50
EXHIBIT A -- FORM OF AGREEMENT AND PLAN OF MERGER ...................................... A-1
EXHIBIT B -- PORTFOLIO MANAGEMENT DISCUSSION OF EACH PIONEER FUND'S PERFORMANCE ........ B-1
6
PIONEER MUNICIPAL AND EQUITY INCOME TRUST
AND
PIONEER TAX FREE INCOME FUND
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 Merger attached as Exhibit A, because they contain details that are
not in the summary.
If Proposal 1 is approved, your fund will be merged with and into Pioneer
Tax Free Income Fund, as described in this Proxy Statement/ Prospectus.
Both your fund and Pioneer Tax Free Income Fund invest in municipal
securities that provide income that is exempt from regular federal income tax.
The portion of your fund's portfolio invested in municipal securities is similar
in many respects to Pioneer Tax Free Income Fund, including overall credit
quality, maturity distribution and sector weights. However, unlike Pioneer Tax
Free Income Fund, your fund invests at least 25%, and may invest up to 50%, of
its total assets in equity securities. Prior to the Closing Date, your fund will
sell the non-municipal securities in its portfolio.
Your fund, unlike Pioneer Tax Free Income Fund, uses investment leverage
through the issuance of AMPS. Your fund has currently issued AMPS with an
aggregate liquidation preference of approximately 32% of the fund's total
assets. In contrast, Pioneer Tax Free Income Fund does not use leverage in its
investment strategy and as an open-end fund is not permitted to issue AMPS.
After the Meeting but prior to the Closing Date, your fund will call for
redemption and redeem all of its outstanding AMPS.
Your fund is subject to additional risks (and the potential higher or lower
returns) associated with its equity investments and use of leverage.
Your fund, unlike Pioneer Tax Free Income Fund, is a closed-end management
investment company, which means that shareholders do not have the right to
redeem or exchange their shares. Instead, shareholders of your fund must sell
their common shares on the NYSE at the prevailing market price. Market prices
can be expected to deviate from the net asset value per share of your fund. Your
fund's common shares generally have traded at a discount to net asset value over
the past two years ended February 29, 2008, ranging from (3.02)% (high) to
(17.25)% (low). Pioneer Tax Free Income Fund is an open-end management
investment company, which means that it issues redeemable securities on an
ongoing basis and pays its shareholders the net asset value of such shares upon
redemption. A more complete discussion of these differences is provided under
the heading, "Comparison of a Closed-End Fund and an Open-End Fund."
Comparison of Pioneer Municipal and Equity Income Trust
to Pioneer Tax Free Income Fund
The table below provides a more detailed comparison of the two funds. In
the table below, if a row extends across the entire table, the policy disclosed
applies to both your fund and Pioneer Tax Free Income Fund.
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Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund
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Business A diversified closed-end management A diversified open-end management
investment company organized as a Delaware investment company organized as a Delaware
statutory trust. statutory trust.
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Net assets (as of March 31, $548 million $505.5 million
2008)
- $372 million of which is attributable to
common assets, $176 million of which is
attributable to preferred assets
- $301 million of which is attributable to
municipal securities, $241 million of which
is attributable to equity securities
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Investment adviser and Investment Adviser:
portfolio manager Pioneer Investment Management, Inc. ("Pioneer")
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7
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Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund
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Portfolio Managers: Portfolio Manager:
Day-to-day management of the fund's portfolio Day-to-day management of the fund's portfolio
of municipal securities is the responsibility is the responsibility of David Eurkus, lead
of a team of fixed income portfolio managers portfolio manager. Mr. Eurkus is supported by
led by Kenneth J. Taubes. The team, which Timothy Pynchon, portfolio manager, and the
also includes David Eurkus and Timothy fixed income team. Members of this team
Pynchon, manages other Pioneer funds manage other Pioneer funds investing
investing primarily in fixed income primarily in fixed income securities. The
securities. portfolio managers and the team also may draw
upon the research and investment management
Mr. Taubes is responsible for overseeing expertise of Pioneer's affiliate, Pioneer
Pioneer's fixed income team. Mr. Taubes Investment Management Limited.
joined Pioneer as a senior vice president in
September 1998 and has been an investment Mr. Eurkus joined Pioneer as a senior vice
professional since 1982. Prior to joining president in 2001 and has been an investment
Pioneer, Mr. Taubes had served since 1991 as professional since 1969. Mr. Pynchon joined
a senior vice president and senior portfolio Pioneer as a vice president in 2000 and has
manager for several institutional accounts been an investment professional since 1982.
and mutual funds at another investment
adviser. Mr. Eurkus joined Pioneer as a The fund's statement of additional
senior vice president in 2001 and has been an information provides additional information
investment professional since 1969. Mr. about the portfolio manager's compensation,
Pynchon joined Pioneer as a vice president in other accounts managed by the portfolio
2000 and has been an investment professional manager, and the portfolio manager's
since 1982. ownership of shares of the fund.
Day-to-day management of the fund's portfolio
of equity securities is the responsibility of
a team of domestic equity portfolio managers
led by John A. Carey. The team manages other
Pioneer funds investing primarily in U.S.
equity securities.
John A. Carey is the director of portfolio
management and an executive vice president of
Pioneer. Mr. Carey joined Pioneer as an
analyst and has been an investment
professional since 1979.
The equity team also includes Walter
Hunnewell, Jr., a vice president of Pioneer.
Mr. Hunnewell joined Pioneer in August 2001
and has been an investment professional since
1985. Prior to joining Pioneer, Mr. Hunnewell
was an independent investment manager and a
fiduciary of private asset portfolios from
2000 to 2001. He was a global equity analyst
with Putnam Investment from 1994 to 1999.
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Investment objective The fund's investment objective is to provide The fund's investment objective is to provide
a high level of total after-tax return, as high a level of current income exempt from
including attractive tax-advantaged income. federal income taxes as possible consistent
with the preservation of capital.
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8
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Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund
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Primary investments Under normal market conditions, the fund Normally, the fund invests at least 80% of
invests in a portfolio consisting primarily its total assets in investment grade
of (i) municipal securities and (ii) common securities that provide income that is exempt
stocks and preferred securities that pay from regular federal income tax and is not
tax-qualified dividends. subject to the alternative minimum tax (AMT).
These investments include bonds, notes and
Municipal Securities other debt instruments issued by or on behalf
of states, counties, municipalities,
The fund invests at least 50%, and may invest territories and possessions of the United
up to 75%, of its total assets in municipal States and the District of Columbia and their
securities. The fund is not limited in the authorities, political subdivisions, agencies
portion of its municipal securities portfolio or instrumentalities.
that may be invested in municipal securities
the interest income on which is a preference The fund may invest in securities of any
item for purposes of the alternative minimum maturity. The fund may invest 25% or more of
tax (AMT). its assets in issuers in any one or more
states or securities the payments on which
The fund may invest in municipal securities are derived from gas, electric, telephone,
with a broad range of maturities and credit sewer and water segments of the municipal
ratings, including both investment grade and bond market. The fund may also invest up to
below-investment grade municipal securities. 20% of its assets in industrial development
bonds.
Duration. The average duration of the fund's
portfolio of municipal securities ranges from The fund's investments may have fixed or
five years to 12 years; however, Pioneer is variable principal payments and all types of
not restricted as to such range if Pioneer interest rate payment and reset terms,
determines a shorter or longer average including fixed rate, inverse floating rate,
duration is in the best interests of the fund floating rate, zero coupon, contingent,
in light of market conditions at such times. deferred and payment in kind and auction rate
features. The fund's investments may include
Credit Management. The fund may invest in instruments that allow for balloon payments
municipal securities with a broad range of or negative amortization payments. Such
credit ratings, including both investment investments permit the borrower to avoid
grade and below-investment grade municipal paying currently a portion of the interest
securities. The fund may invest in high yield accruing on the instrument. While these
municipal securities of any rating, including features make the debt instrument more
securities that are in default at the time of affordable to the borrower in the near term,
purchase. they increase the risk that the borrower will
be unable to make the resulting higher
The fund's investments in revenue obligations payment or payments that become due at the
emphasizes municipal securities backed by maturity of the loan.
revenue from essential services, such as
hospitals and healthcare, power generation,
transportation, education and housing. The
fund will not invest 25% or more of its
assets in municipal securities backed by
revenues in the same industry.
-------------------------------------------------------------------------------------------------------------------------------
9
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Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund
-------------------------------------------------------------------------------------------------------------------------------
Equity Investments
The fund invests at least 25%, and may invest
up to 50%, of its total assets in equity
securities. A substantial portion of the
equity allocation is invested in securities
that Pioneer believes qualify to pay
tax-qualified dividends. Investments in
equity securities that do not qualify to pay
tax-qualified dividends and non-municipal
debt securities are not a principal
investment strategy.
Pioneer retains broad discretion to allocate
this portion of the fund's investments
between common and preferred stocks. The fund
is not limited either in the types of equity
securities or the market capitalization of
issuers in which it may invest. Although the
fund ordinarily focuses its equity
investments in securities of U.S. issuers,
subject to the limitation of the fund's
investments in equity securities and its
focus on equity securities that pay
tax-qualified dividends, the fund may invest
in American Depositary Receipts ("ADRs") and
in other securities of foreign issuers
located in any geographic region, including
securities of issuers based in developing or
"emerging market" countries. The fund does
not concentrate its investments in a
particular industry but is not precluded from
focusing investments in issuers in a group of
industries in related sectors (such as
different types of utilities industries).
Tax-qualified dividends generally include
dividends from domestic corporations and
dividends from foreign corporations that meet
certain specified criteria. The fund
generally can pass through the tax treatment
of tax- qualified dividends it receives from
such corporations to its shareholders. For
the fund to receive tax-qualified dividends
generally, the fund must hold the otherwise
qualified stock for more than 60 days during
the 120-day period beginning 60 days before
the ex- dividend date (or, in the case of
preferred stock, more than 90 days during the
180-day period beginning 90 days before the
ex- dividend date).
10
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Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund
-------------------------------------------------------------------------------------------------------------------------------
Investment strategies Pioneer Investment Management, Inc., the fund's investment adviser, considers
both broad economic factors and issuer specific factors in selecting a portfolio
designed to achieve the fund's investment objective. In assessing the
appropriate maturity and rating weighting of the fund's portfolio, Pioneer
considers a variety of factors that are expected to influence economic activity
and interest rates. These factors include fundamental economic indicators, such
as the rates of economic growth and inflation, Federal Reserve monetary policy
and the relative value of the U.S. dollar compared to other currencies. Once
Pioneer determines the preferable portfolio characteristics, Pioneer selects
individual securities based upon the terms of the securities (such as yields
compared to U.S. Treasuries or comparable issues), liquidity and rating and
issuer diversification. Pioneer also employs fundamental research, an evaluation
of the issuer based on its financial statements and operations, to assess an
issuer's credit quality, taking into account financial condition, future capital
needs and potential for change in rating.
In making these portfolio decisions, Pioneer relies on the knowledge, experience
and judgment of its staff and the staff of its affiliates who have access to a
wide variety of research.
-------------------------------------------------------------------------------------------------------------------------------
Pioneer uses a value approach in selecting
the fund's equity investments. Using this
investment style, Pioneer seeks securities
selling at substantial discounts to their
underlying values and then holds these
securities until the market values reflect
their intrinsic values. Pioneer evaluates a
security's potential value, including the
attractiveness of its market valuation, based
on the company's assets and prospectus for
earnings growth. Pioneer also considers a
security's potential to provide a reasonable
amount of income. In making these
assessments, Pioneer employs due diligence
and fundamental research, an evaluation of
the issuer based on its financial statements
and operations, employing a bottom-up
analytic style. Pioneer relies on the
knowledge, experience and judgment of its
staff who have access to a wide variety of
research. Pioneer focuses on the quality and
price of individual issuers, not on economic
sector or market- timing strategies. In
selecting investments, Pioneer considers
various factors, including:
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; and
o dividend growth prospects.
-------------------------------------------------------------------------------------------------------------------------------
11
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Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund
-------------------------------------------------------------------------------------------------------------------------------
Other Tax Management The fund also seeks to achieve favorable
Strategies after-tax returns in part by reducing the
capital gains taxes incurred by shareholders
in connection with the fund's portfolio
investments. Pioneer attempts to minimize
distributions of long-term capital gains
taxable to shareholders by avoiding, to the
extent consistent with its investment
objective, the sale of securities with large
accumulated capital gains.
Pioneer may sell securities to realize
capital losses that can be used to offset
realized gains. To protect against price
declines in securities holdings with large
accumulated gains, the fund may use various
hedging techniques (such as the purchase and
sale of futures contracts on securities and
securities indices and options thereon, the
purchase of put options and the sale of call
options on securities held, equity swaps,
covered short sales, forward sales of
securities and the purchase and sale of
forward currency exchange contracts and
currency futures). By using these techniques
rather than selling appreciated securities,
the Fund may, subject to certain limitations,
attempt to reduce its exposure to price
declines in the securities without realizing
substantial capital gains under current tax
law. There is no assurance that the fund will
use these strategies or that they will be
successful if used.
-------------------------------------------------------------------------------------------------------------------------------
Other investments -- In addition to investing in municipal The fund may invest up to 20% of its net
Taxable investments securities and equity securities that pay assets in taxable securities of other
tax-qualified dividends, the fund may invest investment companies, investment grade
in other securities, including debt commercial paper, U.S. government securities,
instruments, real estate investment trusts U.S. or foreign bank instruments and
("REITs") and equity securities, that repurchase agreements.
generate income taxable at ordinary income,
rather than long-term capital gain, rates.
Although the fund invests primarily in
municipal securities and equity securities
that pay tax-qualified dividends and to
satisfy the holding period requirements, a
portion of the fund's income distributions
may be taxable as ordinary income.
-------------------------------------------------------------------------------------------------------------------------------
12
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Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund
Derivatives The fund may, but is not required to, use futures and options on securities,
indices and other derivatives. A derivative is a security or instrument whose
value is determined by reference to the value or the change in value of one or
more securities, indices or other financial instruments. Although there is no
specific limitation on investing in derivatives, the fund does not use
derivatives as a primary investment technique and generally limits their use to
hedging. However, the fund may use derivatives for a variety of non-principal
purposes, including:
o As a hedge against adverse changes in the market prices of securities or
interest 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
Derivatives may be subject to market risk, interest rate risk and credit risk.
The fund's use of certain derivatives may, in some cases, involve forms of
financial leverage, which involves risk and may increase the volatility of the
fund's net asset value. Even a small investment in derivatives can have a
significant impact on the fund's investment exposure to the market prices of
securities or interest rates. Therefore, using derivatives can
disproportionately increase losses and reduce opportunities for gain. If changes
in a derivative's value do not correspond to changes in the value of the fund's
other investments or do not correlate well with the underlying asset, rate or
index, the fund may not fully benefit from or could lose money on the derivative
position. In addition, some derivatives involve risk of loss if the issuer of
the derivative defaults on its obligation. Certain derivatives may be less
liquid. Some derivatives may involve the risk of improper valuation, which may
reduce the returns of the fund if it cannot sell or terminate the derivative at
an advantageous time or price. The fund will only invest in derivatives to the
extent Pioneer believes these investments do not prevent the fund from seeking
its investment objective, but derivatives may not perform as intended. Suitable
derivatives may not be available in all circumstances or at reasonable prices
and may not be used by the fund for a variety of reasons.
-------------------------------------------------------------------------------------------------------------------------------
Illiquid Investments The fund may invest up to 20% of its total The fund may invest up to 15% of its net
assets in illiquid securities. assets in illiquid and other securities that
are not readily marketable.
-------------------------------------------------------------------------------------------------------------------------------
Below investment grade The fund will not invest more than 15% of its The fund may invest up to 10% of its net
securities total assets in fixed income securities, assets in debt securities rated below
including municipal securities, rated below investment grade or, if unrated, of
investment grade at the time of acquisition equivalent quality as determined by Pioneer.
(that is, rated Ba or lower by Moody's or BB The fund may invest in debt securities rated
or lower by S&P or, if unrated, determined by "D" or better, or comparable unrated
Pioneer to be of comparable credit quality). securities.
-------------------------------------------------------------------------------------------------------------------------------
13
-------------------------------------------------------------------------------------------------------------------------------
Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund
-------------------------------------------------------------------------------------------------------------------------------
Collateralized debt The fund may invest in asset-backed
obligations securities issued by special entities, such
as trusts, that are backed by a pool of
financial assets. The fund may invest in
collateralized debt obligations (CDOs), which
include collateralized bond obligations
(CBOs), collateralized loan obligations
(CLOs) and other similarly structured
securities. A CDO is a trust backed by a pool
of fixed income securities. The trust
typically is split into two or more portions,
called tranches, which vary in credit quality
and yield. Lower tranches pay higher interest
rates but represent lower degrees of credit
quality and are more sensitive to the rate of
defaults in the pool of obligations. The
risks of an investment in a CDO depend
largely on the type of the underlying
obligations (e.g., an underlying obligation
may decline in quality or default) and the
tranche of the CDO in which the fund invests
(e.g., the fund may invest in a tranche of
CDO that is subordinate to other tranches).
Investments in CDOs may be characterized by
the fund as illiquid securities, which may be
difficult to sell at an advantageous time or
price.
-------------------------------------------------------------------------------------------------------------------------------
Inverse floating rate The fund may invest up to 10% of its net
obligations assets in inverse floating rate obligations
(a type of derivative instrument). Inverse
floating rate obligations represent interests
in tax- exempt bonds. The interest rate on
inverse floating rate obligations will
generally decrease as short-term interest
rates increase, and increase as short-term
rates decrease. Due to their leveraged
structure, the sensitivity of the market
value of an inverse floating rate obligation
to changes in interest rates is generally
greater than a comparable long-term bond
issued by the same municipality and with
similar credit quality, redemption and
maturity provisions. Inverse floating rate
obligations may be volatile and involve
leverage risk.
-------------------------------------------------------------------------------------------------------------------------------
14
-------------------------------------------------------------------------------------------------------------------------------
Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund
-------------------------------------------------------------------------------------------------------------------------------
Cash management and Normally, the fund invests substantially all
temporary investments of its assets to meet its investment
objective. The fund may invest the remainder
of its assets in securities with remaining
maturities of less than one year or cash
equivalents, or may hold cash. For temporary
defensive purposes, including during periods
of unusual cash flows, the fund may depart
from its principal investment strategies and
invest part or all of its assets in these
securities or may hold cash. During such
periods, the fund may not be able to achieve
its investment objective. The fund may adopt
a defensive strategy when Pioneer believes
securities in which the fund normally invests
have extraordinary risks due to political or
economic factors and in other extraordinary
circumstances.
-------------------------------------------------------------------------------------------------------------------------------
Short-term trading The fund usually does not trade for
short-term profits. The fund will sell an
investment, however, even if it has only been
held for a short time, if it no longer meets
the fund's investment criteria. If the fund
does a lot of trading, it may incur
additional operating expenses, which would
reduce performance, and could cause
shareowners to incur a higher level of
taxable income or capital gains.
-------------------------------------------------------------------------------------------------------------------------------
Fees and Expenses
-------------------------------------------------------------------------------------------------------------------------------
Sales charges and fees Shares purchased on the secondary market are o Class A shares are generally offered
not subject to sales charges but may be with an initial sales charge up to 4.50%
subject to brokerage commissions or other of the offering price, which is reduced
charges. or waived for large purchases and
certain types of investors. At the time
of your purchase, your investment firm
may receive a commission from PFD, the
fund's distributor, of up to 4%,
declining as the size of your investment
increases. The Class A shares that the
holders of common shares of Pioneer
Municipal and Equity Income Trust will
receive in connection with the Merger
will not be subject to an initial sales
charge.
-------------------------------------------------------------------------------------------------------------------------------
15
-------------------------------------------------------------------------------------------------------------------------------
Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund
-------------------------------------------------------------------------------------------------------------------------------
Fees and Expenses
-------------------------------------------------------------------------------------------------------------------------------
o There are no contingent deferred sales
charges, except in certain circumstances
when the initial sales charge is waived.
A contingent deferred sales charge may
be payable to PFD, the fund's
distributor, in the event of a share
redemption within 18 months following
the share purchase at the rate of 1% of
the lesser of the value of the shares
redeemed or the total cost of such
shares, subject to certain waivers.
o Class A shares are subject to
distribution and service (12b-1) fees of
0.25% of average daily net assets. These
fees are paid out of the fund's assets
on an ongoing basis. Over time these
fees will increase the cost of
investments and may cost more than other
types of sales charges.
-------------------------------------------------------------------------------------------------------------------------------
Management fees The fund pays Pioneer a fee for managing the The fund pays Pioneer a fee for managing the
fund and to cover the cost of providing fund and to cover the cost of providing
certain services to the fund. Pioneer's certain services to the fund. Pioneer's
annual fee is equal to 0.60% of the fund's annual fee is equal to 0.50% of the fund's
average daily managed assets. "Managed average daily net assets up to $250 million,
assets" is the average daily value of the 0.45% of the next $500 million and 0.40% on
fund's total assets minus the sum of the assets over $750 million. The fee is accrued
fund's liabilities, which liabilities exclude daily and paid monthly.
debt related to leverage, short-term debt and
the aggregate liquidation preference of any Prior to January 1, 2008, the fund paid
outstanding AMPS. Pioneer an annual fee equal to 0.50% of the
fund's average daily net assets up to $250
For the year ended November 30, 2007, the net million, 0.48% of the next $50 million and
management fee was 0.60% of the fund's 0.45% on assets over $300 million.
average daily managed assets, which was
equivalent to 0.83% of the fund's average For the fiscal year ended December 31, 2007,
daily net assets attributable to common the fund paid management fees equivalent to
shareholders. 0.47% of the fund's average daily net assets.
A discussion regarding the basis for the A discussion regarding the basis for the
Board of Trustees' most recent approval of Board of Trustees' most recent approval of
the management contract is available in the the management contract is available in the
fund's annual report to shareholders for the fund's annual report to shareholders for the
fiscal year ended November 30, 2007. fiscal year ended December 31, 2007.
-------------------------------------------------------------------------------------------------------------------------------
Fees and Expenses For a comparison of the gross and net expenses of both Pioneer Funds, please see
the fee tables in the "The Pioneer Funds' Fees and Expenses" section starting on
page 20.
-------------------------------------------------------------------------------------------------------------------------------
16
-------------------------------------------------------------------------------------------------------------------------------
Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund
-------------------------------------------------------------------------------------------------------------------------------
Buying, Selling and Exchanging Shares
-------------------------------------------------------------------------------------------------------------------------------
Buying shares Shares of your fund are listed on the NYSE You may buy shares from any investment firm
and may be purchased in the secondary market that has a sales agreement with PFD, the
through an authorized broker and subject to fund's distributor. You can buy shares at the
brokerage commission or other fees charged by offering price. You may use securities you
such broker. own to purchase shares of the fund provided
that Pioneer, in its sole discretion,
Your fund does not issue new shares except in determines that the securities are consistent
connection with its dividend reinvestment with the fund's objective and policies and
plan. its acquisition is in the best interests of
the fund.
If you have an existing non-retirement
account, you may purchase shares of the fund
by telephone or online. Certain IRAs also may
use the telephone purchase privilege.
-------------------------------------------------------------------------------------------------------------------------------
Minimum initial investment Not applicable. See "Buying Shares" above. Your initial investment must be at least
$1,000 for Class A shares. 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.
-------------------------------------------------------------------------------------------------------------------------------
Exchanging shares Not applicable. See "Buying Shares" above. You may exchange your Class A shares for
shares of the same class of another Pioneer
mutual fund. Your exchange request must be
for at least $1,000. Each Pioneer Fund allows
you to exchange your shares at net asset
value without charging you either an initial
or contingent deferred shares 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. An exchange generally
is treated as a sale and a new purchase of
shares for federal income tax purposes. Class
A shares received by shareholders of Pioneer
Municipal and Equity Income Trust in
connection with the Merger will not be
subject to a contingent deferred sales
charge.
After you establish an eligible fund account,
you can exchange shares of a Pioneer Fund by
telephone or online.
-------------------------------------------------------------------------------------------------------------------------------
17
-------------------------------------------------------------------------------------------------------------------------------
Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund
-------------------------------------------------------------------------------------------------------------------------------
Selling shares Shares of your fund are listed on the NYSE Your shares will be sold at net asset value
and may be sold in the secondary market per share next calculated after the fund
through an authorized broker at the market receives your request in good order. If the
value. shares you are selling are subject to a
deferred sales charge, it will be deducted
from the sale proceeds.
If you have an eligible non-retirement
account, you may sell up to $100,000 per
account per day by telephone or online. You
may sell shares of the fund held in a
retirement plan account by telephone only if
your account is an eligible IRA (tax
penalties may apply).
-------------------------------------------------------------------------------------------------------------------------------
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).
-------------------------------------------------------------------------------------------------------------------------------
You buy or sell shares at the share price.
When you buy Class A shares, you pay an
initial sales charge unless you qualify for a
waiver or reduced sales charge. When you sell
Class A shares, you may pay a contingent
deferred sales charge depending on how long
you have owned your shares. The Class A
shares that the holders of common shares of
Pioneer Municipal and Equity Income Trust
will receive in connection with the Merger
will not be subject to an initial sales
charge or a contingent deferred sales charge.
-------------------------------------------------------------------------------------------------------------------------------
Comparison of Principal Risks of Investing in the Pioneer Funds
Each Pioneer Fund is subject to similar principal risks. You could lose
money on your investment in each Pioneer Fund or not make as much as if you
invested elsewhere if:
o Interest rates go up, causing the value of the fund's investments to
decline. This is known as interest rate risk (this risk may be greater
for securities with longer maturities)
o The issuer of a security owned by the fund fails to pay principal
and/or interest, otherwise defaults or is perceived to be less
creditworthy, the security's credit rating is downgraded, or the
credit quality of any underlying assets declines. This is known as
credit risk. This risk is greater for high yield securities than for
securities of higher credit quality
o New federal or state legislation or other developments adversely
affects the tax-exempt status of securities held by the fund or the
financial ability of municipalities to repay these obligations
o The issuer of a security owned by the fund may not be able to make
timely payments because of a general economic downturn or increased
governmental costs
o To the extent the fund concentrates its investments in a single state
or securities the payments on which are dependent upon a single
industry, the fund will be more susceptible to risks associated with
that state or industry
o Pioneer is incorrect in its expectation of changes in interest rates
or the credit quality of an issuer
18
Although distributions of interest income from each Pioneer Fund's
tax-exempt securities are generally exempt from federal income tax,
distributions from other sources, including capital gain distributions, and any
gains on the sale of your shares, are not. You should consult a tax adviser
about whether the alternative minimum tax applies to you and about state and
local taxes on your fund distributions.
To the extent that a Pioneer Fund emphasizes, from time to time,
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.
Additional Principal Risks of Investing in Pioneer Municipal and Equity Income
Trust
Shareholders of your fund are subject to the following additional risks as
a result of the fund's equity investments:
o Common Stock Risk. The common stocks and other equity securities in
which your fund invests may experience substantial volatility in their
market value. Although common stocks typically provide higher returns
than debt securities, they are also more susceptible to adverse
changes in market value due to issuer-specific events, such as
unfavorable earnings reports, negative press releases and market
related news. The market values of common stocks are also sensitive to
changes in investor perceptions as well as general movements in the
equities markets. Common stock holders are also subordinate to debt
holders and other senior security holders in an issuer's capital
structure, and a common stock may not have any value in the event the
issuer declares bankruptcy or is subject to the claims of creditors if
the value of the issuer's assets does not exceed the issuer's
liabilities. Common stock prices may be sensitive to rising interest
rates, as the costs of capital or borrowing increase. Common stocks
are also subject to the general risks of the issuer's industry,
sector, geographic region and market capitalization.
o Value Investing Risk. Your fund focuses its equity investments on
dividend-paying common and preferred stocks that Pioneer believes are
undervalued or inexpensive relative to other investments. Such
securities are subject to the risk of mis-estimation of certain
fundamental factors. In addition, during certain time periods market
dynamics may favor "growth" stocks of issuers that do not display
strong fundamentals relative to market price based upon positive price
momentum and other factors.
Because your fund is a closed-end fund that uses leverage, shareholders of
the fund are subject to the following additional risks:
o Market Discount Risk. Because your fund is a closed-end fund, it is
subject to the risk that its shares may trade at prices lower than net
asset value. This is a risk that is not applicable to open-end funds,
such as Pioneer Tax Free Income Fund, because shares of open-end funds
are not traded on a secondary market and are redeemable at their net
asset value on any day the NYSE is open. A more complete discussion on
these differences is provided under the heading, "Comparison of a
Closed-End Fund and an Open-End Fund."
o Leveraging Risk. Your fund uses investment leverage through the
issuance of AMPS. Your fund has currently issued AMPS with an
aggregate liquidation preference of approximately 32% of the fund's
total assets. Your fund is also authorized to borrow or issue debt
securities for leveraging purposes up to such limitation and in excess
of such limitation for temporary purposes, such as the settlement of
transactions. In contrast, Pioneer Tax Free Income Fund does not use
leverage in its investment strategy and, as an open-end fund, is not
permitted to issue AMPS.
Leverage creates risks which may adversely affect the return for the
holders of common shares of your fund, including:
o the likelihood of greater volatility of net asset value and market
price of and dividends on the fund's common shares;
o fluctuations in the dividend rates on any AMPS or in interest rates on
borrowings and short-term debt;
o increased operating costs, which are borne entirely by the fund's
common shares and which may reduce the total return on the Fund's
common shares; and
o the potential for a decline in the value of an investment acquired
with leverage, while the fund's obligations as a result of such
leverage remain fixed.
To the extent the income or capital appreciation derived from securities
purchased with funds received from leverage exceeds the cost of leverage,
the fund's return will be greater than if leverage had not been used.
Conversely, if the income or capital appreciation from the securities
purchased with such funds is not sufficient to cover the cost of leverage
or if the fund's assets decline in value, the return of the fund will be
less than if leverage had not been used, and therefore the amount available
for distribution to shareholders as dividends and other distributions will
be reduced or potentially eliminated.
19
The dividend rates for your fund's AMPS are reset in auctions conducted
every seven or 28 days. Recently, the credit markets have experienced
increased volatility and significantly reduced availability of capital,
which have led many of the auctions of auction rate securities, including
the auctions of your fund's AMPS, to fail. Upon auction failure, the
dividend rate for the next succeeding dividend period is set according to a
pre-determined formula, and the resulting rate is higher than the rate
which the fund otherwise would pay as a result of a successful auction.
Higher dividend rates on the AMPS, which may be indefinite in duration, may
reduce the amount of the distributions the fund pays to the holders of its
common shares. Alternative forms of leverage have different features and
costs.
Investment in AMPS of your fund are subject to certain special risk
considerations, including:
Liquidity Risk. Liquidity risk is the possibility that holders of AMPS
might be unable to redeem their shares at an auction. Historically, the auctions
have provided a means of liquidity to investors wishing to sell their AMPS. An
auction is deemed to "fail" if some portion of the preferred shares that were
offered for sale at a particular auction were not matched with buyers. Recently,
auctions of AMPS have failed as a result of developments in the credit markets.
o When an auction fails, holders of AMPS will not be able to sell some
or all of their shares. This situation may continue for a prolonged
period of time.
o Because of the nature of the market for AMPS, holders of AMPS may
receive less than the price they paid for their AMPS if the AMPS are
sold outside of the auction, especially when market interest rates are
rising. A market outside the auction may not be available.
o A rating agency could, at any time, downgrade or withdraw its rating
assigned to the AMPS without prior notice to the fund or shareholders.
Any downgrading or withdrawal of rating could affect the liquidity of
the AMPS in an auction.
Credit Risk. If interest rates rise, the value of the fund's investment
portfolio will decline, reducing the asset coverage for the AMPS. Consequently,
holders of AMPS could get back less than the par value of their shares.
Redemption. The fund may be forced to redeem AMPS to meet regulatory or
rating agency requirements or may voluntarily redeem AMPS in certain
circumstances.
Dividends. In certain circumstances, the fund may not earn sufficient
income from its investments to pay dividends on the AMPS.
The Pioneer Funds' Fees and Expenses
Shareholders of both Pioneer 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 Pioneer Fund. The expenses
in the tables appearing below are based on (i) for your fund, the expenses of
common shares your fund for the twelve-month period ended November 30, 2007, and
(ii) for Pioneer Tax Free Income Fund, the expenses of Class A shares of Pioneer
Tax Free Income Fund for the twelve-month period ended December 31, 2007. Future
expenses for all share classes may be greater or less. The tables also show the
pro forma expenses of the combined fund assuming the Merger occurred on December
31, 2007.
20
Combined
Pioneer
Pioneer Pioneer Tax Free
Municipal and Tax Free Income Fund
Equity Income Trust Income Fund (Pro Forma
(12 months ended (12 months ended 12 months ended
November 30, 2007) December 31, 2007) December 31, 2007)
--------------------- ------------------- ------------------
Shareholder transaction fees
(paid directly from your investment) Common Shares Class A Class A
Maximum sales charge (load) when you buy shares as a
percentage of offering price ......................... None(1) 4.50% 4.50%
Maximum deferred sales charge (load) as a percentage of
offering price or the amount you receive when you sell
shares, whichever is less ............................ None(2) None(4) None(4)
Dividend reinvestment plan fees ....................... None(2) None None
Redemption fee as a percentage of amount redeemed,
if applicable ........................................ None(3) None None
Annual Fund operating expenses (deducted from
fund assets) as a % of average daily net assets
Management Fee ........................................ 0.83%(5) 0.48%(7) 0.45%(7)
Distribution and Service (12b-1) Fee .................. None(1) 0.25% 0.25%
Other Expenses ........................................ 0.43% 0.16%(7) 0.17%(7)
Total Annual Fund Operating Expenses(6) ............... 1.26% 0.89%(7) 0.87%(7)
-----------------------------------------------------------------------------------------------------------------------------
Less: Fee Waiver and Expense Limitations .............. 0.00% 0.00% 0.00%(8)
Net Expenses .......................................... 1.26% 0.89%(7) 0.87%(8)
The hypothetical examples below help you compare the cost of investing in
each Pioneer Fund. It assumes that: (a) you invest $10,000 in each Pioneer Fund
for the time periods shown, (b) you reinvest all dividends and distributions,
(c) your investment has a 5% return each year, (d) each Pioneer Fund's total
operating expenses remain the same and (e) Pioneer's contractual expense
limitation for the combined Pioneer Tax Free Income Fund's Class A shares is in
effect through year three. Pro forma expenses are included assuming a Merger
with your fund and Pioneer Tax Free Income Fund. The examples are for comparison
purposes only and are not a representation of either fund's actual expenses or
returns, either past or future.
Combined
Pioneer Pioneer
Number of years Municipal and Pioneer Tax Free Income Fund
you own your shares Equity Income Trust Tax Free Income Fund (Pro Forma)
------------------------------------- ------------------- -------------------- --------------------
Class A -- assuming redemption at end
of period
Year 1 ............................. $ 128 $ 537 $ 535
Year 3 ............................. $ 400 $ 721 $ 715
Year 5 ............................. $ 692 $ 921 $ 911
Year 10 ............................ $1,523 $1,497 $1,474
Class A -- assuming no redemption
Year 1 ............................. $ 128 $ 537 $ 535
Year 3 ............................. $ 400 $ 721 $ 715
Year 5 ............................. $ 692 $ 921 $ 911
Year 10 ............................ $1,523 $1,497 $1,474
----------
(1) Shares of your fund purchased on the secondary market are not subject to
sales charges, deferred sales charges (or 12b-1 fees) but may be subject to
brokerage commissions or other charges. The table does not reflect the
underwriting commission paid by your fund's shareholders in connection with
the initial offering of common shares.
(2) A shareholder that directs the dividend reinvestment plan agent to sell
shares held in a dividend reinvestment account will pay brokerage charges.
(3) Shares of your fund are not redeemable, and any sales of shares must be
effected in the secondary market.
21
(4) Class A purchases of $1 million or more and purchases by participants in
certain group plans are not subject to an initial sales charge but may be
subject to a contingent deferred sales charge of 1%.
(5) Pioneer's annual fee is equal to 0.60% of your fund's average daily managed
assets. "Managed assets" is the average daily value of your fund's total
assets minus the sum of the your fund's liabilities, which liabilities
exclude debt related to leverage, short-term debt and the aggregate
liquidation preference of any outstanding AMPS. For the year ended,
November 30, 2007, the net management fee was 0.60% of your fund's average
daily managed assets, which was equivalent to 0.83% of the Trust's average
daily net assets attributable to common shareowners.
(6) Each Pioneer Fund's total annual operating expenses in the table have not
been reduced by any expense offset arrangements.
(7) Fees and expenses of Pioneer Tax Free Income Fund have been restated to
reflect current fees.
(8) If shareholders of your fund approve the Merger, Pioneer will contractually
agree to limit the combined fund's ordinary operating expense to the extent
required to reduce the combined fund's expenses to 0.89% of the average
daily net assets attributable to Class A shares of the combined fund. This
expense limitation would be in effect for three years from the date of the
Merger. There can be no assurance that Pioneer will extend the expense
limitations beyond such time.
Comparison of each Pioneer Fund's Performance
The following table shows your fund's highest and lowest NYSE market price
per share for each quarter over the past two fiscal years and the quarters ended
February 29, 2008 and May 31, 2008. Also included in the table is the net asset
value per share of your fund on that date and the percentage discount or premium
to net asset value (expressed as a percentage) that the sales price represents.
-----------------------------------------------------------------------------------
(Discount)/Premium
NYSE Market Price* Net Asset Value Percentage
-----------------------------------------------------------------------------------
Quarter Ended High Low High Low High Low
-----------------------------------------------------------------------------------
February 28, 2006 $12.87 $12.05 $15.24 $14.53 (14.91)% (18.35)%
-----------------------------------------------------------------------------------
May 31, 2006 $12.91 $12.21 $15.28 $14.64 (14.86)% (16.68)%
-----------------------------------------------------------------------------------
August 31, 2006 $13.05 $12.25 $15.45 $14.66 (15.08)% (17.25)%
-----------------------------------------------------------------------------------
November 30, 2006 $14.00 $13.00 $16.17 $15.39 (13.42)% (15.67)%
-----------------------------------------------------------------------------------
February 28, 2007 $14.55 $13.87 $16.43 $16.08 (10.46)% (14.54)%
-----------------------------------------------------------------------------------
May 31, 2007 $15.25 $14.32 $16.64 $16.15 (7.70)% (11.75)%
-----------------------------------------------------------------------------------
August 31, 2007 $15.26 $12.97 $16.50 $14.76 (6.11)% (12.13)%
-----------------------------------------------------------------------------------
November 30, 2007 $14.58 $13.22 $15.64 $14.46 (5.57)% (10.13)%
-----------------------------------------------------------------------------------
February 29, 2008 $14.03 $12.56 $14.82 $12.97 (3.02)% (9.61)%
-----------------------------------------------------------------------------------
May 31, 2008 $12.99 $11.60 $13.44 $12.76 (2.11)% (9.18)%
-----------------------------------------------------------------------------------
----------
As of June 30, 2008, your fund had a market value per share of $[ ] and a
net asset value per share of $[ ], resulting in a [ ]% discount to net
asset value.
* Market price refers to the inter-dealer price, without retail mark-up,
mark-down or commission, and may not necessarily represent actual
transactions.
The following charts provide some indication of the risk of investing in
your fund or Pioneer Tax Free Income Fund by showing changes in each fund's
performance from year to year and by showing how each fund's average annual
returns for 1, 5 and 10 years compare with those of a broad measure of market
performance.
The bar charts show the year-by-year performance of common shares of
Pioneer Municipal and Equity Income Trust and Class A shares of Pioneer Tax Free
Income Fund for the past 10 calendar years or since inception if less than 10
years. The chart does not reflect any sales charge you may pay when you buy or
sell Pioneer Fund shares. Any sales charge will reduce your return.
22
The table below shows the average annual total returns for Pioneer
Municipal and Equity Income Trust (at net asset value and at market price) and
average annual total returns (before and after taxes) for Pioneer Tax Free
Income Fund's Class A shares over time, each compared with a broad-based
securities market index.
Past performance (before and after taxes) does not indicate future results.
Pioneer Municipal and Equity Income Trust's Annual Returns -- Common Shares*
(Years ended December 31)
[THE FOLLOWING DATA IS A REPRESENTATION OF A BAR CHART IN THE PRINTED MATERIAL]
'05 5.39
'06 14.36
'07 -5.14
----------
* During the period shown in the bar chart, Pioneer Municipal and Equity
Income Trust's highest quarterly return was 6.70% for the quarter ended
September 30, 2006, and the lowest quarterly return was (4.75)% for the
quarter ended December 31, 2007. For the period from January 1, 2008 to
June 30, 2008, Pioneer Municipal and Equity Income Trust's return was [ ]%.
Pioneer Tax Free Income Fund's Annual Returns -- Class A Shares*
(Years ended December 31)
[THE FOLLOWING DATA IS A REPRESENTATION OF A BAR CHART IN THE PRINTED MATERIAL]
'98 6.20
'99 -4.29
'00 11.63
'01 4.13
'02 7.06
'03 5.80
'04 4.76
'05 4.05
'06 5.31
'07 -1.23
----------
* During the period shown in the bar chart, Pioneer Tax Free Income Fund's
highest quarterly return was 4.84% for the quarter ended December 31, 2000,
and the lowest quarterly return was (3.38)% for the quarter ended June 30,
2004. For the period from January 1, 2008 to June 30, 2008, Pioneer Tax
Free Income Fund's return was [ ]%
23
Average Annual Total Returns
(for periods ended December 31, 2007)
---------------------------------------------------------------------------------------------------------------------------
Since
Inception
1 Year (1/30/04)
---------------------------------------------------------------------------------------------------------------------------
Pioneer Municipal and Equity Income Trust
---------------------------------------------------------------------------------------------------------------------------
Common Shares -- (at net asset value before taxes)(1) (5.14)% 5.71%
---------------------------------------------------------------------------------------------------------------------------
Common Shares -- (at market value before taxes)(1) 2.76% 2.94%
---------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index (reflects no deduction for taxes)(2) 3.36% 3.98%
---------------------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Stock Index (reflects no deduction for taxes)(2) 5.49% 8.87%
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Since
Inception
1 Year 5 Years 10 Years (1/18/77)
---------------------------------------------------------------------------------------------------------------------------
Pioneer Tax Free Income Fund
---------------------------------------------------------------------------------------------------------------------------
Class A -- Before Taxes (5.65)% 2.75% 3.78% 5.84%
---------------------------------------------------------------------------------------------------------------------------
Class A -- After Taxes on Distribution(3) (5.68)% 2.73% 3.66% 5.67%
---------------------------------------------------------------------------------------------------------------------------
Class A -- After Taxes on Distributions and Sale of Fund Shares(3) (2.31)% 2.98% 3.82% 5.72%
---------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index 3.36% 4.30% 5.18% 7.49%(5)
(reflects no deduction for taxes)(4)
---------------------------------------------------------------------------------------------------------------------------
----------
(1) The average annual total returns reflect reinvestment of all dividends and
distributions. Distributions are assumed, for this calculation, to be
reinvested at prices obtained under the dividend reinvestment plan. The
performance does not reflect any brokerage commissions associated with the
purchase or sale of the common shares on the NYSE, any underwriting spread
or sales charges paid in Pioneer Municipal and Equity Income Trust's
initial public offering of its common shares or the deduction of taxes a
shareholder would pay on distributions or the sale of common shares.
(2) The Lehman Brothers Municipal Bond Index is a broad measure of the
municipal bond market. The Standard & Poor's 500 Stock Index (the S&P 500)
is a commonly used measure of the broad U.S. stock market. Unlike the fund,
the indexes are not managed and do not incur fees, expenses or taxes. You
cannot invest directly in an index.
(3) 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 the investor's tax
situation and may differ from those shown. Furthermore, the after-tax
returns shown are not relevant to shareholders who hold a Pioneer Fund's
shares through tax-deferred arrangements such as 401(k) plans or individual
retirement accounts.
(4) The Lehman Brothers Municipal Bond Index is a broad measure of the
municipal bond market. Unlike the fund, the index is not managed and does
not incur fees, expenses or taxes. You cannot invest directly in an index.
The table reflects sales charges applicable to the class, assumes that you
sell your shares at the end of the period and assumes that you reinvest all
of your dividends and distributions.
(5) Since December 31, 1979. Index return information is not available for
prior periods.
The most recent portfolio management discussion of each Pioneer Fund's
performance is attached as Exhibit B.
24
Other Investment Policies
In addition to the principal investment policies described above, each
Pioneer Fund is subject to the following fundamental investment restrictions.
These restrictions may not be changed without the approval of the holders of a
majority of the fund's outstanding voting securities (as defined in the 1940
Act) (a "1940 Act Majority"). A 1940 Act Majority means the lesser of (i) 67% of
the shares represented at a meeting, if the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (ii) more than 50% of
the outstanding shares of the fund. With respect to your fund, the investment
restrictions cannot be changed without the approval of a 1940 Act Majority of
the outstanding common shares and AMPS, voting together as a class, and the
approval of a 1940 Act Majority of the outstanding AMPS, voting separately.
------------------------------------------------------------------------------------------------------------------
Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund
------------------------------------------------------------------------------------------------------------------
Borrowing The fund may not borrow money, except as The fund may not borrow money except as
permitted by applicable law, as amended and permitted by (i) the 1940 Act, or
interpreted or modified from time to time by interpretations or modifications by the
any regulatory authority having jurisdiction. Securities and Exchange Commission (the
"SEC"), SEC staff or other authority of
competent jurisdiction, or (ii) exemptive or
other relief or permission from the SEC, SEC
staff or other authority of competent
jurisdiction.
------------------------------------------------------------------------------------------------------------------
Underwriting The fund may not act as an underwriter, The fund may not engage in the business of
except insofar as the fund technically may be underwriting the securities of other issuers
deemed to be an underwriter in connection except as permitted by (i) the 1940 Act, or
with the purchase or sale of its portfolio interpretations or modifications by the SEC,
securities. SEC staff or other authority of competent
jurisdiction, or (ii) exemptive or other
relief or permission from the SEC, SEC staff
or other authority of competent jurisdiction.
------------------------------------------------------------------------------------------------------------------
Lending The fund may not make loans, except that the The fund may lend money or other assets to
fund may (i) lend portfolio securities in the extent permitted by (i) the 1940 Act, or
accordance with the fund's investment interpretations or modifications by the SEC,
policies, (ii) enter into repurchase SEC staff or other authority of competent
agreements, (iii) purchase all or a portion jurisdiction, or (ii) exemptive or other
of an issue of publicly distributed debt relief or permission from the SEC, SEC staff
securities, bank loan participation or other authority of competent jurisdiction.
interests, bank certificates of deposit,
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 1940 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.
------------------------------------------------------------------------------------------------------------------
Issuing Senior The fund may not issue senior securities, The fund may not issue senior securities
Securities except as permitted by applicable law, as except as permitted by (i) the 1940 Act, or
amended and interpreted or modified from time interpretations or modifications by the SEC,
to time by any regulatory authority having SEC staff or other authority of competent
jurisdiction. Senior securities that the fund jurisdiction, or (ii) exemptive or other
may issue in accordance with the 1940 Act relief or permission from the SEC, SEC staff
include AMPS, borrowing, futures, when-issued or other authority of competent jurisdiction.
and delayed delivery securities and forward
foreign currency exchange transactions.
------------------------------------------------------------------------------------------------------------------
25
-------------------------------------------------------------------------------------------------------------------
Pioneer Municipal and Equity Income Trust Pioneer Tax Free Income Fund
-------------------------------------------------------------------------------------------------------------------
Real Estate The fund may not invest in real estate, The fund may not purchase or sell real estate
except the fund may invest in securities of except as permitted by (i) the 1940 Act, or
issuers that invest in real estate or interpretations or modifications by the SEC,
interests therein, securities that are SEC staff or other authority of competent
secured by real estate or interests therein, jurisdiction, or (ii) exemptive or other
securities of real estate investment trusts, relief or permission from the SEC, SEC staff
mortgage-backed securities and other or other authority of competent jurisdiction.
securities that represent a similar indirect
interest in real estate, and the fund may
acquire real estate or interests therein
through exercising rights or remedies with
regard to an instrument.
-------------------------------------------------------------------------------------------------------------------
Commodities The fund may not invest in commodities or The fund may purchase or sell commodities or
commodity contracts, except that the fund may contracts related to commodities to the
invest in currency instruments and contracts extent permitted by (i) the 1940 Act, or
and financial instruments and contracts that interpretations or modifications by the SEC,
might be deemed to be commodities and SEC staff or other authority of competent
commodity contracts. A futures contract, for jurisdiction, or (ii) exemptive or other
example, may be deemed to be a commodity relief or permission from the SEC, SEC staff
contract. or other authority of competent jurisdiction.
-------------------------------------------------------------------------------------------------------------------
Concentration The fund may not invest 25% or more of the Except as permitted by exemptive or other
value of its total assets in any one relief or permission from the SEC, SEC staff
industry, provided that this limitation does or other authority of competent jurisdiction,
not apply to municipal securities other than the fund may not make any investment if, as a
those municipal securities backed by assets result, the Fund's investments will be
and revenues of similar projects. concentrated in any one industry.
-------------------------------------------------------------------------------------------------------------------
Diversification The fund may not make any investment The fund does not have a fundamental policy
inconsistent with its classification as a regarding diversification. However, the fund
diversified closed-end investment company (or is a diversified open-end investment company
series thereof) under the 1940 Act. This under the 1940 Act. This means that with
means that with respect to 75% of the its respect to 75% of the its total assets, the
total assets, the fund may not purchase fund may not purchase securities of an issuer
securities of an issuer (other than the U.S. (other than the U.S. government, its agencies
government, its agencies or or instrumentalities), if such purchase would
instrumentalities), if such purchase would cause more than 5% of the fund's total
cause more than 5% of the fund's total assets, taken at market value, to be invested
assets, taken at market value, to be invested in the securities of a single issuer, or if
in the securities of a single issuer, or if such purchase would at the same time result
such purchase would at the same time result in more than 10% of the outstanding voting
in more than 10% of the outstanding voting securities of such issuer being held by the
securities of such issuer being held by the fund. The fund may not change its
fund. classification from diversified to
non-diversified without shareholder approval.
-------------------------------------------------------------------------------------------------------------------
In addition to the above, Pioneer Tax Free Income Fund's policy that the
fund will invest at least 80% of its assets in investments the income from which
will be exempt from regular federal income tax is fundamental.
Each Pioneer Fund's investment objective is fundamental.
26
OTHER IMPORTANT INFORMATION
CONCERNING THE MERGER
Portfolio Securities
The Merger is scheduled to occur as of the close of business on [ ], 2008
but may occur on such later date as the parties may agree in writing (the
"Closing Date"). After the Meeting but prior to the Closing Date, your fund will
sell certain securities in its portfolio, including all of its non-municipal
securities. The disposition of certain of your fund's securities prior to the
Closing Date could result in significant brokerage expense to your fund and also
will cause your fund to realize gains or losses in the current tax year. Your
fund will be able to offset any net gain from such securities dispositions with
its available net capital loss carryovers, and any gain not so offset will
result in a distribution that will be taxable to you. The Trustees anticipate,
however, that there will be sufficient loss carryovers to offset any net gain
recognized by your fund as a result of securities dispositions.
If the Merger is consummated, Pioneer will analyze and evaluate the
portfolio securities of your fund invested in municipal securities. Consistent
with Pioneer Tax Free Income Fund's investment objective and policies, any
restrictions imposed by the Code and in the best interests of Pioneer Tax Free
Income Fund's shareholders (including former shareholders of your fund),
management will influence the extent and duration for which the portfolio
securities of your fund will be held by Pioneer Tax Free Income Fund. It is
possible that there may be additional sales of some of the portfolio securities
of your fund following the Merger. Subject to market conditions at the time of
any such sale, the sale of the portfolio securities by the combined fund may
result in a capital gain or loss. The actual tax consequences of any sale of
portfolio securities will vary depending upon the specific security(ies) being
sold and the combined fund's ability to use any available tax loss
carryforwards. As noted above, the sale of portfolio securities may also result
in significant brokerage expense to the combined fund.
Comparison of a Closed-End Fund and an Open-End Fund
It is proposed that your fund be merged with and into Pioneer Tax Free
Income Fund. Although each fund is a Delaware statutory trust, your fund is a
closed-end fund whose shares are traded on the NYSE whereas Pioneer Tax Free
Income Fund is an open-end fund whose shares can be redeemed on request. The
differences between the rights of shareholders of your fund and those of Pioneer
Tax Free Income Fund relate primarily to the different characteristics of a
closed-end fund and an open-end fund. Below is a summary of the principal
differences between a closed-end fund and an open-end fund.
Closed-end investment companies neither redeem their outstanding shares nor
engage in the ongoing sale of new shares, and thus operate with a relatively
fixed capitalization. Shares of closed-end investment companies typically are
bought and sold on national securities exchanges. The shares of your fund
currently are traded on the NYSE and during the last few years have traded at a
discount from net asset value.
Pioneer Tax Free Income Fund is registered as an open-end investment
company under the 1940 Act. Open-end investment companies are commonly referred
to as "mutual funds" and generally issue redeemable securities on an ongoing
basis. Open-end fund shares are redeemable each day the NYSE is open at their
net asset value. Pioneer Tax Free Income Fund engages in a continuous offering
of its shares of beneficial interest. Class A shares of Pioneer Tax Free Income
Fund are offered with an initial sales charge up to 4.50% of the offering price,
which is reduced or waived for large purchases and certain types of investors.
You will be able to exchange your Class A shares received as a result of the
Merger into Class A shares of other Pioneer Funds. Class A shares are subject to
distribution and service (12b-1) fees of 0.25% of average daily net assets.
Other classes of shares of Pioneer Tax Free Income Fund have different features.
Shareholders of Pioneer Tax Free Income Fund may, on any day the NYSE is open,
redeem their shares and receive the net asset value of the shares next computed
after the receipt of the redemption request in good order, less any applicable
sales charges.
In addition to the methods of acquiring and disposing of shares and their
potential impact on portfolio management, there are a number of other
differences between the funds that you should consider:
o Effect of redemption rights on value of shares. As stated above, the
shareholders of open-end funds redeem their shares at the "public
offering price," meaning net asset value plus any applicable sales
charge. The right to transact at the public offering price is
established by Section 22(d) of the 1940 Act. This provision
effectively eliminates any discount that may occur when shares of a
closed-end fund trade on the secondary market. Conversely, this
provision precludes the possibility of ever receiving a premium over
net asset value at which shares of a closed-end fund may trade on the
secondary market.
o Shareholder services. Shareholders of Pioneer Tax Free Income Fund may
participate in an exchange privilege allowing them to exchange their
shares for Class A shares of other Pioneer open-end funds. These
exchange privileges are not available to shareholders
27
of closed-end funds, such as your fund. In addition, shareholders of
Pioneer Tax Free Income Fund receive other shareholder services and
privileges that are not provided to shareholders of your fund, as
discussed under "Additional Information About The Pioneer Funds".
o Dividend Reinvestment Plan. For the period prior to the proposed
Merger, shareholders of your fund participating in the Dividend
Reinvestment Plan will continue to have their dividends reinvested in
shares of the fund in accordance with the Dividend Reinvestment Plan
unless they elect otherwise. The Dividend Reinvestment Plan is
expected to be suspended, however, with respect to any dividend
payable on the business day immediately preceding and up through the
Closing Date. Any such dividend will be paid to Dividend Reinvestment
Plan participants in cash. Following the Merger, former shareholders
of your fund who participated in the Dividend Reinvestment Plan may
have their dividends reinvested in Class A shares of Pioneer Tax Free
Income Fund at net asset value.
o Shareholder meetings. The NYSE listing regulations require that your
fund hold an annual meeting of shareholders. Pioneer Tax Free Income
Fund is not required to and generally does not hold such annual
meetings.
Capitalization
The following table sets forth the capitalization of each Pioneer Fund as
of December 31, 2007 and the pro forma combined capitalization of the combined
fund as if the Merger had occurred on that date. If the Merger is consummated,
the actual exchange ratios on the Closing Date may vary from the exchange ratios
indicated. This is due to changes in the market value of the portfolio
securities of both Pioneer Funds between December 31, 2007 and the Closing Date,
changes in the amount of undistributed net investment income and net realized
capital gains of both Pioneer Funds during that period resulting from income and
distributions, and changes in the accrued liabilities of both Pioneer Funds
during the same period.
Pioneer
Tax Free Pro Forma
Pioneer Pioneer Income Fund Pioneer
Municipal and Tax Free Pro Forma Tax Free
Equity Income Trust Income Fund Adjustments Income Fund
(December 31, 2007) (December 31, 2007) (December 31, 2007)(1) (December 31, 2007)(1)
------------------- ------------------- ---------------------- ----------------------
Net Assets
Class A .................. -- $313,705,643 $413,426,136 $727,131,779
Class B .................. -- $ 14,622,470 -- $ 14,622,470
Class C .................. -- $ 13,580,501 -- $ 13,580,501
Class Y .................. -- $219,814,431 -- $219,814,431
Common Shares ............ $413,631,136 -- -- --
AMPS ..................... $176,250,000 -- $(176,250,000) --
Total Net Assets ......... -- $561,723,045 -- $975,149,181
Net Asset Value Per Share
Class A .................. -- $ 11.13 -- $ 11.13
Class B .................. -- $ 11.04 -- $ 11.04
Class C .................. -- $ 10.96 -- $ 10.96
Class Y .................. -- $ 11.07 -- $ 11.07
Common Shares ............ $ 14.41 -- -- --
AMPS ..................... $ 25,000 -- -- --
Shares Outstanding
Class A .................. -- 28,179,852 37,145,655 65,325,507
Class B .................. -- 1,324,866 -- 1,324,866
Class C .................. -- 1,239,065 -- 1,239,065
Class Y .................. -- 19,858,193 -- 19,858,193
Common Shares ............ 28,706,981 -- (28,706,981) --
AMPS ..................... 7,050 -- (7,050) --
----------
(1) The pro forma data reflects the liquidation of Pioneer Municipal and Equity
Income Trust's non-municipal securities for cash, with the proceeds of such
redemption used to redeem AMPS. The pro forma data also reflects
adjustments to account for the costs of the Merger to be borne by Pioneer
Municipal and Equity Income Trust, which are estimated to be $200,000, and
Class A shares of Pioneer Tax Free Income Fund, which are estimated to be
$5,000.
28
It is impossible to predict how many Class A shares of Pioneer Tax Free
Income Fund actually will be received by common shareholders of your fund on the
Closing Date. The table should not be relied upon to determine the amount of
Pioneer Tax Free Income Fund shares that will actually be received and
distributed.
TERMS OF THE AGREEMENT AND PLAN OF MERGER
The Merger
o The Merger is scheduled to occur on the Closing Date.
o Your fund will merge with and into Pioneer Tax Free Income Fund. All
of the assets and liabilities of your fund will become the assets and
liabilities of Pioneer Tax Free Income Fund, and your fund will cease
to exist. The outstanding common shares of your fund will be converted
into a number of whole or fractional Class A shares of Pioneer Tax
Free Income Fund with an aggregate net asset value equal to the
aggregate net asset value of the common shares of your fund
immediately prior to the Merger. The net asset value of both Pioneer
Funds will be computed as of the close of regular trading on the New
York Stock Exchange on the Closing Date.
o Holders of each of your fund's common shares and AMPS are entitled to
vote on the Agreement and Plan of Merger. An affirmative vote of a
1940 Act Majority of the outstanding common shares and the affirmative
vote of a 1940 Act Majority of the outstanding AMPS, voting
separately, will be required to approve the Agreement and Plan of
Merger. After the Meeting but prior to the Closing Date, your fund
will call for redemption and redeem all of its outstanding AMPS. Only
common shares will be converted into Class A shares of Pioneer Tax
Free Income Fund in the Merger.
o No sales load, contingent deferred sales charge, commission,
redemption fee or other transaction fee will be charged as a result of
the Merger. After the Merger, you will be permitted to exchange your
Class A shares of Pioneer Tax Free Income Fund into Class A shares of
other Pioneer Funds without a sales charge. Class A shares are subject
to a Rule 12b-1 fee of 0.25%. Class A shares do not currently charge a
redemption fee.
o The Merger generally will not result in income, gain or loss being
recognized for federal income tax purposes by either Pioneer Fund or
its shareholders, except as set forth below under the heading "Tax
Status of the Merger," and will not take place unless the Pioneer
Funds receive an opinion concerning the tax consequences of the Merger
from Bingham McCutchen LLP, counsel to the Pioneer Funds, as further
described below under the heading "Tax Status of the Merger."
Agreement and Plan of Merger
The shareholders of your fund are being asked to approve an Agreement and
Plan of Merger, the form of which is attached as Exhibit A to this Proxy
Statement/Prospectus and incorporated herein by this reference. The description
of the Agreement and Plan of Merger contained herein, which includes the
material provisions of the Agreement and Plan of Merger, is qualified in its
entirety by the attached copy.
Cancellation of Share Certificates. If your shares are represented by one
or more share certificates before the Closing Date, on the Closing Date all
certificates will be canceled, will no longer evidence ownership of your fund's
shares and will evidence ownership of Pioneer Tax Free Income Fund shares.
Pioneer Tax Free Income Fund will not issue share certificates in the Merger.
Conditions to Closing the Merger. The obligation of your fund to consummate
the Merger is subject to the satisfaction of certain conditions, including the
performance by Pioneer Tax Free Income Fund of all its obligations under the
Agreement and Plan of Merger and the receipt of all consents, orders and permits
necessary to consummate the Merger (see Agreement and Plan of Merger, Section
6).
The obligation of Pioneer Tax Free Income Fund to consummate the Merger is
subject to the satisfaction of certain conditions, including your fund's
performance of all of its obligations under the Agreement and Plan of Merger,
the receipt of certain documents and financial statements from your fund and the
receipt of all consents, orders and permits necessary to consummate the Merger
(see Agreement and Plan of Merger, Section 7).
The obligations of your fund and Pioneer Tax Free Income Fund are subject
to approval of the Agreement and Plan of Merger by the necessary vote of the
outstanding shares of your fund in accordance with the provisions of your fund's
Declaration of Trust and By-Laws and the Statement of Preferences with respect
to the AMPS. The Pioneer Funds' obligations are also subject to the receipt of a
favorable opinion of Bingham McCutchen LLP as to the federal income tax
consequences of the Merger (see Agreement and Plan of Merger, Section 8.5).
29
Termination of Agreement and Plan of Merger. The Board of Trustees of
either Pioneer Fund may terminate the Agreement and Plan of Merger (even if the
shareholders of your fund have already approved it) at any time before the
Closing Date if the Board believes that proceeding with the Merger would no
longer be in the best interests of shareholders of the Fund.
Expenses of the Merger. Your fund will bear the costs of preparing and
printing the Proxy Statement/Prospectus and the solicitation costs incurred in
connection with the Merger. Your fund also will bear its own costs in connection
with the Merger, including the costs associated with redeeming AMPS and the
costs of liquidating portfolio securities as described herein, and other
redemptions anticipated in connection with the Merger.
TAX STATUS OF THE MERGER
The Merger is conditioned upon the receipt by each Pioneer Fund of an
opinion from Bingham McCutchen LLP, counsel to the Pioneer Funds, substantially
to the effect that, for federal income tax purposes:
o The Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and each of your fund and Pioneer Tax Free
Income Fund will be a "party to a reorganization" within the meaning
of Section 368(b) of the Code;
o No gain or loss will be recognized by your fund upon the vesting of
the assets and liabilities of your fund as assets and liabilities of
Pioneer Tax Free Income Fund or upon the conversion of shares of your
fund into a number of shares of Pioneer Tax Free Income Fund,
including fractional shares, except for (A) gain or loss that may be
recognized on the transfer of "section 1256 contracts" as defined in
Section 1256(b) of the Code, (B) gain that may be recognized on the
transfer of stock in a "passive foreign investment company" as defined
in Section 1297(a) of the Code, or (C) any other gain that may be
required to be recognized as a result of the closing of your fund's
taxable year;
o The tax basis of the assets of your fund acquired by Pioneer Tax Free
Income Fund will be the same as the tax basis of those assets in the
hands of your fund immediately prior to the Merger, increased by the
amount of gain (or decreased by the amount of loss), if any,
recognized by your fund on the Merger;
o The holding periods of the assets of your fund in the hands of Pioneer
Tax Free Income Fund, other than assets with respect to which gain or
loss is required to be recognized, will include your fund's holding
period for those assets;
o No gain or loss will be recognized by Pioneer Tax Free Income Fund
upon the vesting of the assets and liabilities of your fund as assets
and liabilities of Pioneer Tax Free Income Fund;
o You will not recognize gain or loss on the conversion of your shares
into shares of Pioneer Tax Free Income Fund as part of the Merger;
o The aggregate basis of Pioneer Tax Free Income Fund shares received by
you in the Merger will be the same as the aggregate basis of the
shares of your fund you held immediately prior to the Merger;
o The holding period of Pioneer Tax Free Income Fund shares received by
you in the Merger will include the holding period of the shares of
your fund that were converted into such Pioneer Tax Free Income Fund
shares, provided that you held the shares of your fund as capital
assets on the Closing Date.
In rendering such opinion, counsel shall rely upon, among other things,
certain facts, assumptions and representations of Pioneer Tax Free Income Fund
and your fund.
No tax ruling has been or will be received from the Internal Revenue
Service ("IRS") in connection with the Merger. 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.
Immediately prior to the Merger, your fund will declare and pay a dividend,
which, together with all previous dividends, is intended to have the effect of
distributing to your fund's shareholders all of your fund's investment company
taxable income for taxable years ending on or prior to the Closing Date
(computed without regard to any deduction for dividends paid), all of its net
tax-exempt income and all of its net capital gain, if any, realized in taxable
years ending on or prior to the Closing Date (after reduction for any available
capital loss carryover). Such distributions may result in taxable income to you.
The foregoing discussion is very general, and does not take into account
any considerations that may apply to certain classes of taxpayers who are
subject to special circumstances, such as shareholders who are not citizens of
or residents of the United States, insurance companies, tax-exempt
organizations, financial institutions, dealers in securities or foreign
currencies, or persons who hold their shares
30
as part of a straddle or conversion transaction. You should consult your tax
adviser for the particular tax consequences to you of the transaction, including
the applicability of any state, local or foreign tax laws.
BOARDS' EVALUATION AND RECOMMENDATION
The Trustees of your fund believe that the proposed Merger will be
advantageous to the shareholders of your fund for several reasons. The Trustees
considered the following matters, among others, in approving the proposal:
The Board considered the benefit to shareholders of an open-end fund that
permits redeeming or purchasing shares at net asset value. The Trustees noted
that, because common shares of closed-end funds, such as your fund, are not
redeemable and instead are bought and sold on the open market, the market price
of these shares is influenced by a number of factors and, at times, may trade at
a discount (or premium) to net asset value. Your fund's net asset value per
share can be expected to vary from the market price of its shares, and your
fund's common shares generally have traded at a discount to net asset value,
ranging from (3.02)% (high) to (17.25)% (low) over the past two years ended
February 29, 2008 and currently have traded at a discount of (6.14)% as of April
30, 2008. The Trustees noted that the merger of your fund into Pioneer Tax Free
Income Fund effectively would provide your fund's shareholders with liquidity
for their common shares at net asset value, thereby eliminating the discount at
which your fund's common shares historically have traded. The Trustees also
noted requests for enhanced liquidity from shareholders and changes in your
fund's shareholder base related to investors seeking liquidity.
The Board considered that Pioneer Tax Free Income Fund is an established
open-end fund that, like your fund, pursues a tax-oriented investment approach.
Pioneer Tax Free Income Fund invests at least 80% of its total assets in
investment grade securities that provide income that is exempt from regular
federal income tax and is not subject to the alternative minimum tax (AMT). Your
fund invests in a portfolio consisting primarily of (i) municipal securities and
(ii) common stocks and preferred securities that pay tax-qualified dividends.
Your fund invests at least 50%, and may invest up to 75%, of its total assets in
municipal securities. The portion of your fund's portfolio invested in municipal
securities is similar in many respects to Pioneer Tax Free Income Fund,
including overall credit quality, maturity distribution and sector weights.
However, unlike Pioneer Tax Free Income Fund, your fund invests at least 25%,
and may invest up to 50%, of its total assets in equity securities. The Board
noted that prior to the Closing Date, your fund will sell the non-municipal
securities in its portfolio.
The Board considered that Pioneer Tax Free Income Fund's performance was
comparable to your fund's performance. As of February 29, 2008, your fund's
average annual returns for the past one and three year periods were (14.69)% and
0.72%, respectively. In comparison, Pioneer Tax Free Income Fund's Class A
shares' average annual returns as of March 31, 2008 for the past one and three
year periods were (5.14)% and 1.29%, respectively. As of February 29, 2008, the
average annual return of your fund since its inception on January 30, 2004 is
3.18%. As of March 31, 2008, the average annual return of Class A shares of
Pioneer Tax Free Income Fund since its inception on January 18, 1977 is 5.82%.
The Board considered that the combined fund is expected to have a yield
that is comparable to the yield of your fund. Your fund's portfolio of municipal
bonds has a book yield of approximately 6%. Pioneer Tax Free Income Fund's
portfolio has a book yield of approximately 5.4%. As of March 31, 2008 the
30-day SEC yields for your Fund shares and Class A shares of Pioneer Tax Free
Income Fund were 8.03% and 4.43%, respectively.
The Board considered that the pro forma gross expense ratio for the
combined fund's Class A shares is anticipated to be 0.87%, and in addition, that
if shareholders of your fund approve the Merger, Pioneer will contractually
agree to limit ordinary operating expense to the extent required to reduce the
combined fund's expenses to 0.89% of the average daily net assets attributable
to Class A shares of the combined fund. The Board noted that the historical
expense ratio for common shares of your fund is 1.26% (the expense ratio does
not reflect the effect of dividend payments to preferred shareowners).
Therefore, the expense ratio will be lower for the Class A shares of the
combined fund as compared to the common shares of your fund. The expense
limitation described above would be in effect for three years from the date of
the Merger. There can be no assurance that Pioneer will extend the expense
limitation beyond such time.
The Board considered that Pioneer Tax Free Income Fund's current management
fee rate of 0.48% of average daily net assets and the combined fund's
anticipated pro forma management fee rate of 0.45% of average daily net assets
are each lower than your fund's management fee, which is 0.60% of your fund's
average daily managed assets (which is equivalent to 0.83% of your fund's
average daily net assets attributable to common shareholders).
The Board considered that the transaction is expected to be treated as a
reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and therefore will not result in a taxable sale of your
fund shares. However, in considering the Merger, the Board noted that prior to
the Closing Date, your fund is expected to sell certain securities in its
portfolio, including all of its non-municipal securities. The Board recognized
that the disposition of these securities could result in significant brokerage
expense to your fund and also will cause your fund to realize gains or losses in
the current tax year, which would then be distributed to shareholders in one or
more taxable
31
distributions. However, the Board also considered that your fund will be able to
offset any net gain from the disposition of these securities with its available
net capital loss carryovers. The Board anticipates that there will be sufficient
loss carryovers to offset any net gain recognized by your fund as a result of
securities dispositions. The Board also noted that after the Meeting but prior
to the Closing Date, your fund will call for redemption and redeem all of its
outstanding AMPS. The Board considered that holders of AMPS will recognize gain
or loss equal to the difference between the amount realized on the redemption
and the shareholder's tax basis in the shares redeemed.
The Board considered that your fund would bear the costs of preparing and
printing the Proxy Statement/Prospectus and the solicitation costs incurred in
connection with the Merger. The Board considered that your fund also would bear
its own costs in connection with the Merger, including the costs associated with
redeeming AMPS and the costs of liquidating portfolio securities, and other
redemptions anticipated in connection with the Merger. The Board estimated that
these expenses in the aggregate would be approximately $200,000.
The Board considered that the funds' investment adviser and the principal
distributor of Pioneer Tax Free Income Fund would benefit from the Merger. For
example, Pioneer might achieve cost savings from managing one larger fund
compared to managing more than one fund with similar investment strategies.
Pioneer also will avoid the potential cost, burden and adverse consequences
associated with potential future proxy contests, including the possible
termination of Pioneer as investment adviser to your fund and the consequent
loss of investment advisory fees by Pioneer. The Board also considered the fact
that Pioneer Tax Free Income Fund shareholders pay Pioneer and its affiliates
fees for administrative services, including transfer agency fees. The Boards
believe, however, that these savings and revenues will not amount to a
significant economic benefit to Pioneer or PFD. Further, the Board considered
that Pioneer's advisory fee rate is lower for Pioneer Tax Free Income Fund than
for your fund.
The Board also considered that the Merger presents an excellent opportunity
for the shareholders of Pioneer Municipal and Equity Income Trust to become
investors in a combined fund that has (i) lower advisory fees, (ii) lower
operating expenses (historically), and (iii) a larger asset size than either
Pioneer Fund alone without the obligation to pay commissions or other
transaction costs that a fund normally incurs when purchasing securities. This
opportunity provides an immediate economic benefit to Pioneer Municipal and
Equity Income Trust and its shareholders and the potential for benefit for
Pioneer. While the Board of Trustees considered alternatives to the Merger, it
concluded that the Merger offered a method to eliminate the discount to net
asset value, while offering continuity of portfolio management.
For all of the reasons described above, all of the Trustees of your fund,
including all of the Independent Trustees, approved the Merger. In particular,
the Trustees determined that the Merger is in the best interest of your fund and
that your interests, and the interests of your fund's other shareholders would
not be diluted as a result of the Merger. Similarly, the Board of Trustees of
Pioneer Tax Free Income Fund, including the Independent Trustees, approved the
Merger. They also determined that the Merger is in the best interests of Pioneer
Tax Free Income Fund and that the interests of Pioneer Tax Free Income Fund's
shareholders would not be diluted as a result of the Merger.
The Trustees of your fund recommend that you vote FOR the proposal to
approve the Agreement and Plan of Merger.
ADDITIONAL INFORMATION ABOUT THE PIONEER FUNDS
Investment Adviser
Pioneer serves as the investment adviser to each Pioneer Fund. Pioneer
oversees each Pioneer Fund's operations and is responsible for the day-to-day
management of the fund's portfolio. 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, institutional and other
clients. As of April 30, 2008, assets under management were approximately $328
billion worldwide, including over $73 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.
The Board of Trustees of each Pioneer Fund is responsible for overseeing
the performance of Pioneer and determining whether to approve and renew each
Pioneer Fund's investment management agreement.
Administrator, Custodian, Distributor and Transfer Agent
Because your fund is a closed-end fund traded on the NYSE, your fund does
not have an underwriting agreement with a distributor to distribute shares. PFD
is the distributor of Pioneer Tax Free Income Fund's shares.
Pioneer Investment Management Shareholder Services, Inc. ("PIMSS") is the
transfer agent for Pioneer Tax Free Income Fund and common shares of Pioneer
Municipal and Equity Income Trust. The principal business address of PIMSS is
P.O. Box 55150 Boston, MA 02205-5150. Mellon Investor Services ("Mellon") serves
as the sub-transfer agent for common shares of Pioneer Municipal and Equity
Income Trust.
32
Deutsche Bank Trust Company Americas ("Deutsche Bank") serves as the
auction agent, transfer agent, dividend paying agent and registrar for AMPS.
Brown Brothers Harriman & Co. ("BBH") is each fund's custodian. The
principal business address of Brown Brothers Harriman & Co. is 40 Water Street,
Boston, MA 02109.
Pioneer is each Pioneer Fund's administrator. Pioneer provides certain
accounting, administration and legal services to Pioneer Tax Free Income Fund
for a fee at the annual rate of 0.0225% of average daily net assets, and to
Pioneer Municipal and Equity Income Trust for a fee at the annual rate of
0.0175% of average daily net assets.
Princeton Administrators, LLC ("Princeton"), an affiliate of Merrill Lynch,
Pierce, Fenner & Smith Incorporated, serves as the sub-administrator of Pioneer
Municipal and Equity Income Trust. For its services, Princeton receives a
monthly fee at an annual rate of 0.07% of the average daily value of the fund's
managed assets up to $500 million and 0.03% for average daily managed assets in
excess of $500 million, subject to a minimum monthly fee of $10,000.
Pioneer Tax Free Income Fund compensates Pioneer, PFD, PIMSS and BBH for
their services. Pioneer Municipal and Equity Income Trust compensates PIMSS,
Deutsche, BBH and Princeton for their services. PIMSS is responsible for paying
the fees of Mellon. PFD and PIMSS are affiliates of Pioneer.
Capital Stock (Pioneer Municipal and Equity Income Trust)
Your fund's Agreement and Declaration of Trust ("Declaration of Trust")
authorizes issuance of an unlimited number of common shares. Common shareholders
are entitled to share pro rata in the net assets of the fund available for
distribution to common shareholders upon liquidation of the fund. Common
shareholders are entitled to one vote for each share held (or, in the case of
fractional shares, a proportionate fractional vote). So long as any shares of
the fund's preferred shares, including the AMPS, are outstanding, holders of
common shares will not be entitled to receive any net income of or other
distributions from the fund unless all accumulated dividends on preferred shares
have been paid, and unless asset coverage (as defined in the 1940 Act) with
respect to preferred shares would be at least 200% after giving effect to such
distributions. There are no preemptive rights, conversion rights, redemption
provisions or sinking fund provisions with respect to common shares.
Your fund's Declaration of Trust also authorizes issuance of an unlimited
number of AMPS. AMPS are preferred shares of beneficial interest that entitle
their holders to receive dividends when, as and if declared by the Board of
Trustees out of funds legally available therefor. AMPS are non-assessable and
have no preemptive, conversion or cumulative voting rights. AMPS are not
convertible into common shares or other shares of beneficial interest of the
fund, and the holders thereof have no preemptive rights. AMPS are not be subject
to any sinking fund but are subject to redemption at the option of the fund on
any dividend payment date for the AMPS at a redemption price generally equal to
$25,000 per share plus accumulated and unpaid dividends. In certain
circumstances, the AMPS may be subject to mandatory redemption by the fund at a
redemption price of $25,000 per share plus accumulated and unpaid dividends.
Pioneer Municipal and Equity Income Trust Outstanding Securities
(As of July 7, 2008)
-------------------------------------------------------------------------------------------------------
(3) Amount Held by Pioneer (4) Amount Outstanding
Municipal and Equity Income Exclusive of Amount shown
(1) Title of Class (2) Amount Authorized Trust for its Account under (3)
-------------------------------------------------------------------------------------------------------
Common Shares
-------------------------------------------------------------------------------------------------------
AMPS
-------------------------------------------------------------------------------------------------------
Set forth below is information about the closed-end fund's AMPS as of the
end of each of the fund's fiscal years ended November 30 since the fund
commenced operations on January 30, 2004.
----------------------------------------------------------------------------------------------------------
Total Number of Asset Coverage Ratio Involuntary Liquidation Average Market Value
Year AMPS Outstanding Per Preferred Share Preference Per Preferred Share Per Preferred Share
----------------------------------------------------------------------------------------------------------
2004 7,050 339% -0- $25,000
----------------------------------------------------------------------------------------------------------
2005 7,050 339% -0- $25,000
----------------------------------------------------------------------------------------------------------
2006 7,050 361% -0- $25,000
----------------------------------------------------------------------------------------------------------
2007 7,050 341% -0- $25,000
----------------------------------------------------------------------------------------------------------
33
Certain Provisions of Pioneer Municipal and Equity Income Trust's Agreement and
Declaration of Trust
Your fund's Declaration of Trust includes provisions that could have the
effect of limiting the ability of other entities or persons to acquire control
of your fund or to change the composition of its Board of Trustees and could
have the effect of depriving shareholders of an opportunity to sell their shares
at a premium over prevailing market prices by discouraging a third party from
seeking to obtain control of the fund.
The Board of Trustees of your fund is divided into three classes of
approximately equal size. The terms of the Trustees of the different classes are
staggered so that approximately one-third of the Board of Trustees is elected by
shareholders each year.
A Trustee may be removed from office with or without cause by a vote of at
least a majority of the Trustees if such removal is approved by a vote of the
holders of at least 75% of the shares entitled to be voted on the matter.
The Declaration requires the favorable vote of the holders of at least 75%
of the fund's shares to approve, adopt or authorize the following:
o a merger or consolidation or statutory share exchange of the fund with
any other corporations;
o a sale of all or substantially all of the fund's assets (other than in
the regular course of the Fund's investment activities); or
o a liquidation or dissolution of the fund;
unless such action has been approved, adopted or authorized by the affirmative
vote of at least 75% of the total number of Trustees fixed in accordance with
your fund's By-Laws, in which case the affirmative vote of a majority of the
fund's shares is required. The approval, adoption or authorization of the
foregoing also would require the favorable vote of a majority of the fund's AMPS
then entitled to be voted, voting as a separate class.
Conversion of your fund to an open-end investment company would require an
amendment to the fund's Declaration. The amendment would have to be declared
advisable by the Board of Trustees prior to its submission to shareholders. Such
an amendment would require the favorable vote of the holders of at least 75% of
the fund's outstanding common shares entitled to vote on the matter, (or a
majority of such shares if the amendment was previously approved, adopted or
authorized by 75% of the total number of Trustees fixed in accordance with the
By-Laws), and the affirmative vote of a majority of outstanding AMPS, voting as
a separate class.
Automatic Dividend Reinvestment Plan (Pioneer Municipal and Equity Income Trust)
All common shareowners of your fund automatically participate in the
Automatic Dividend Reinvestment Plan (the "Plan"), under which participants
receive all dividends and capital gain distributions (collectively, "dividends")
in full and fractional common shares of your fund in lieu of cash. Shareowners
may elect not to participate in the Plan. Shareowners not participating in the
Plan receive all dividends and capital gain distributions in cash. Participation
in the Plan is completely voluntary and may be terminated or resumed at any time
without penalty by notifying American Stock Transfer & Trust Company, the agent
for shareowners in administering the Plan (the "Plan Agent"), in writing prior
to any dividend record date; otherwise such termination or resumption will be
effective with respect to any subsequently declared dividend or other
distribution.
Whenever your fund declares a dividend on common shares payable in cash,
participants in the Plan will receive the equivalent in common shares acquired
by the Plan Agent either (i) through receipt of additional unissued but
authorized common shares from your fund or (ii) by purchase of outstanding
common shares on the New York Stock Exchange or elsewhere. If, on the payment
date for any dividend, the net asset value per common share is equal to or less
than the market price per share plus estimated brokerage trading fees ("market
premium"), the Plan Agent will invest the dividend amount in newly issued common
shares. The number of newly issued common shares to be credited to each account
will be determined by dividing the dollar amount of the dividend by the net
asset value per common share on the date the shares are issued, provided that
the maximum discount from the then current market price per share on the date of
issuance does not exceed 5%. If, on the payment date for any dividend, the net
asset value per common share is greater than the market value ("market
discount"), the Plan Agent will invest the dividend amount in common shares
acquired in open-market purchases. There are no brokerage charges with respect
to newly issued common shares. However, each participant will pay a pro rata
share of brokerage trading fees incurred with respect to the Plan Agent's
open-market purchases. Participating in the Plan does not relieve shareowners
from any federal, state or local taxes which may be due on dividends paid in any
taxable year. Shareowners holding Plan shares in a brokerage account may not be
able to transfer the shares to another broker and continue to participate in the
Plan.
34
Description of Shares (Pioneer Tax Free Income Fund)
Pioneer Tax Free Income Fund's Declaration of Trust authorizes the Trustees
to classify or reclassify any series of the shares into one or more classes. The
Trustees have authorized the issuance of the following classes of shares of the
fund, designated as Class A shares, Class B shares, Class C shares and Class Y
shares. The shares of each class represent an interest in the same portfolio of
investments of Pioneer Tax Free Income Fund. Each class has equal rights as to
voting, redemption, dividends and liquidation, except that each class bears
different distribution and transfer agent fees and may bear other expenses
properly attributable to the particular class. Class A, Class B and Class C
shareholders have exclusive voting rights with respect to the rule 12b-1 plan
adopted by holders of those shares in connection with the distribution of those
shares.
Shareholders are entitled to one vote for each share held (or, in the case
of fractional shares, a proportionate fractional vote) and may vote in the
election of the Trustees and on other matters submitted to a meeting of
shareholders. Although Trustees are not elected annually by the shareholders,
shareholders have, under certain circumstances, the right to remove one or more
Trustees. Pioneer Tax Free Income Fund is not required, and does not intend, to
hold annual shareholder meetings although special meetings may be called for
such purposes as electing or removing Trustees, changing fundamental investment
restrictions or approving a management contract. The shares of each series of
the fund are entitled to vote separately to approve investment advisory
agreements or changes in investment restrictions, but shareholders of all series
vote together in the election and selection of Trustees and accountants. Shares
of all series of the fund vote together as a class on matters that affect all
series of Pioneer Tax Free Income Fund in substantially the same manner. As to
matters affecting a single series or class, shares of such series or class will
vote separately. No amendment adversely affecting the rights of shareholders may
be made to the Declaration of Trust without the affirmative vote of a majority
of Pioneer Tax Free Income Fund's shares.
Disclosure of Portfolio Holdings (Pioneer Tax Free Income Fund)
Pioneer Tax Free Income Fund's policies and procedures with respect to the
disclosure of its portfolio securities are described in the statement of
additional information and on Pioneer's website at www.pioneerinvestments.com.
Buying, Exchanging and Selling Shares of the Pioneer Funds
Net Asset Value. Each Pioneer Fund's net asset value is the value of its
securities plus any other assets minus its accrued operating expenses and 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 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, the fund uses fair value methods to value its securities pursuant to
procedures adopted by the Board of Trustees. Valuing securities using fair value
methods may cause the net asset value of the fund's shares to differ from the
net asset value that would be calculated only using market prices. For market
prices and quotations, as well as for some fair value methods, the fund relies
upon securities prices provided by pricing services.
Each Pioneer Fund uses fair value pricing methods for 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 at the time the fund calculates its net asset value.
This may occur for a variety of reasons that affect either the relevant
securities markets generally or the specific issuer. For example, with respect
to non-U.S. securities held by the fund, developments relating to specific
events in the securities markets or the specific issuer may occur between the
time the primary market closes and the time the fund determines its net asset
value. International securities markets may be open on days when the U.S.
markets are closed. For this reason, the values of any international securities
owned by the fund could change on a day you cannot buy or sell shares of the
fund.
Certain types of securities, including those discussed in this paragraph,
are priced using fair value pricing methods rather than market prices. Each
Pioneer Fund uses a pricing matrix to determine the value of fixed income
securities that may not trade daily. A pricing matrix is a means of valuing a
debt security on the basis of current market prices for other debt securities
and historical trading patterns in the market for fixed income securities. Each
Pioneer Fund values cash equivalent securities with remaining maturities of 60
days or less at amortized cost. To the extent that the fund invests in the
shares of other registered open-end investment companies that are not traded on
an exchange (mutual funds), such shares are valued at their published net asset
values per share as reported by the funds. The prospectuses of these funds
explain the circumstances under which the funds will use fair value pricing
methods to value their securities and the effects of using the fair value
methodology.
You buy or sell shares at the share price. When you buy Class A shares of
Pioneer Tax Free Income Fund, you pay an initial sales charge unless you qualify
for a waiver or reduced sales charge.
35
Distribution and Service Plan (Pioneer Tax Free Income Fund). Pioneer Tax
Free Income Fund has adopted a distribution plan for its Class A shares in
accordance with Rule 12b-1 under the 1940 Act. Under the plan, a Pioneer Fund
pays distribution and service fees to PFD. Because these fees are an ongoing
expense of a Pioneer Fund, over time they increase the cost of your investment
and your shares may cost more than shares that are subject to other types of
sales charges.
Additional Payments to Financial Intermediaries (Pioneer Tax Free Income
Fund). There are two principal ways you compensate the financial intermediary
through which you buy shares of Pioneer Tax Free Income Fund -- directly, by the
payment of sales commissions, if any; and indirectly, as a result of the fund
paying Rule 12b-1 fees. The fund also may pay intermediaries for administrative
services and transaction processing.
Pioneer and its affiliates may make additional payments to your financial
intermediary. These payments by Pioneer may provide your financial intermediary
with an incentive to favor the Pioneer funds over other mutual funds or assist
the distributor in its efforts to promote the sale of the fund's shares.
Financial intermediaries include broker-dealers, banks (including bank trust
departments), registered investment advisers, financial planners, retirement
plan administrators and other types of intermediaries.
Pioneer makes these additional payments (sometimes referred to as "revenue
sharing") to financial intermediaries out of its own assets. Revenue sharing is
not an expense of the Pioneer funds. Pioneer may base these payments on a
variety of criteria, including the amount of sales or assets of the Pioneer
funds attributable to the financial intermediary or as a per transaction fee.
Not all financial intermediaries receive additional compensation and the
amount of compensation paid varies for each financial intermediary. In certain
cases, these payments may be significant. Pioneer determines which firms to
support and the extent of the payments it is willing to make, generally choosing
firms that have a strong capability to effectively distribute shares of the
Pioneer funds and that are willing to cooperate with Pioneer's promotional
efforts. Pioneer also may compensate financial intermediaries (in addition to
amounts that may be paid by the fund) for providing certain administrative
services and transaction processing services.
Pioneer may benefit from revenue sharing if the intermediary features the
Pioneer funds in its sales system (such as by placing certain Pioneer funds on
its preferred fund list or giving access on a preferential basis to members of
the financial intermediary's sales force or management). In addition, the
financial intermediary may agree to participate in the distributor's marketing
efforts (such as by helping to facilitate or provide financial assistance for
conferences, seminars or other programs at which Pioneer personnel may make
presentations on the Pioneer funds to the intermediary's sales force). To the
extent intermediaries sell more shares of the Pioneer funds or retain shares of
the Pioneer funds in their clients' accounts, Pioneer receives greater
management and other fees due to the increase in the Pioneer funds' assets. The
intermediary may earn a profit on these payments to the intermediary if the
amount of the payment exceeds the intermediary's costs.
The compensation that Pioneer pays to financial intermediaries is discussed
in more detail in the fund's statement of additional information. Your
intermediary may charge you additional fees or commissions other than those
disclosed in this prospectus. Intermediaries may categorize and disclose these
arrangements differently than the discussion above and in the statement of
additional information. You can ask your financial intermediary about any
payments it receives from Pioneer or the Pioneer funds, as well as about fees
and/or commissions it charges.
Pioneer and its affiliates may have other relationships with your financial
intermediary relating to the provision of services to the Pioneer funds, such as
providing omnibus account services or effecting portfolio transactions for the
Pioneer funds. If your intermediary provides these services, Pioneer or the
Pioneer funds may compensate the intermediary for these services. In addition,
your intermediary may have other relationships with Pioneer or its affiliates
that are not related to the Pioneer funds.
Opening Your Account (Pioneer Tax Free Income Fund). If shares of Pioneer
Tax Free Income Fund are held in an investment firm's name, the options and
services available to you may be different from those described herein or in the
fund's prospectus. Ask your investment professional for more information.
If you invest in Pioneer Tax Free Income 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 a Pioneer Fund and its affiliates. You should
ask your investment professional or financial intermediary about its services
and any applicable fees.
Account Options (Pioneer Tax Free Income Fund). 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.
36
Call or write to the 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 (Pioneer Tax Free Income Fund). 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 validating information 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 (Pioneer Tax Free Income Fund). If your
account is registered in your name, you may be able to buy, exchange or sell
shares of Pioneer Tax Free Income Fund online. Your investment firm may also be
able to buy, exchange or sell your 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.pioneerinvestments.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. Pioneer Tax Free Income Fund 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 (Pioneer Tax Free Income Fund). If you place an order to
purchase, exchange, or sell shares of Pioneer Tax Free Income Fund with the
transfer agent or a broker-dealer, your investment firm or plan administrator by
the close of regular trading on the New York Stock Exchange (currently 4:00 p.m.
Eastern time), your transaction will be completed at the share price determined
as of the close of trading on the New York Stock Exchange on that day. If your
order is placed with the transfer agent or a broker-dealer, your investment firm
or plan administrator after 4:00 p.m., or your order is not in good order, your
transaction will be completed at the share price next determined after your
order is received in good order by the fund. Your investment firm or plan
administrator is responsible for transmitting your order to the fund in a timely
manner.
Transaction Limitations (Pioneer Tax Free Income Fund). Your transactions
are subject to certain limitations, including the limitation on the purchase of
Pioneer Tax Free Income Fund's shares within 30 calendar days of a redemption.
See "Excessive Trading" below.
Buying Pioneer Fund Shares (Pioneer Tax Free Income Fund). You may buy
shares of Pioneer Tax Free Income Fund from any investment firm that has a sales
agreement with PFD. Participants in retirement plans generally must contact the
plan's administrator to purchase shares.
You can buy shares of Pioneer Tax Free Income Fund at the offering price.
PFD may reject any order until it has confirmed the order in writing and
received payment. Pioneer Tax Free Income Fund reserves the right to stop
offering any class of shares.
Minimum Investment Amounts (Pioneer Tax Free Income Fund). Your initial
investment for Class A shares 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 Merger.
Maximum Purchase Amounts (Pioneer Tax Free Income Fund). Class A shares are
not subject to a maximum purchase amount.
Exchanging Pioneer Fund Shares (Pioneer Tax Free Income Fund). You may
exchange your shares in Pioneer Tax Free Income Fund for shares of the same
class of another Pioneer mutual fund. Your exchange request must be for at least
$1,000.
The 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. An exchange generally is treated as a sale and a new purchase
of shares for federal income tax purposes.
37
Shares you acquire as part of an exchange and shares your acquire as a result of
this Merger 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 Pioneer Fund's investment
objective and policies as described in the relevant Pioneer Fund's prospectus.
Selling Pioneer Fund Shares (Pioneer Tax Free Income Fund). Shares of
Pioneer Tax Free Income Fund will be sold at net asset value per share next
calculated after Pioneer Tax Free Income Fund or its authorized agent 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. Pioneer Tax
Free Income Fund generally will send your sale proceeds by check, bank wire or
electronic funds transfer. If you recently sent a check to purchase the shares
being sold, the fund may delay payment of the sale proceeds until your check has
cleared. This may take up to 10 calendar days from the purchase date. 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 or any
distributions received in cash or additional shares.
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:
-- Are selling over $100,000 or exchanging over $500,000 worth of
shares
-- Changed your account registration or address within the last 30
days
-- Instruct the transfer agent to mail the check to an address
different from the one on your account
-- Want the check paid to someone other than the account owner(s)
-- Are transferring the sale proceeds to a Pioneer mutual fund
account with a different registration
---------------------------------------------------------------------------------------------------------------------
Buying Shares Exchanging Shares
---------------------------------------------------------------------------------------------------------------------
THROUGH YOUR Normally, your investment firm will send your Normally, your investment firm will send your
INVESTMENT FIRM purchase request to PFD and/or the Pioneer exchange request to the Pioneer Funds'
Funds' transfer agent. transfer agent.
CONSULT YOUR INVESTMENT PROFESSIONAL FOR MORE CONSULT YOUR INVESTMENT PROFESSIONAL FOR MORE
INFORMATION. INFORMATION ABOUT EXCHANGING YOUR SHARES.
Your investment firm may receive a commission
from PFD for your purchase of fund shares,
and may receive additional compensation from
Pioneer for your purchase of fund shares.
---------------------------------------------------------------------------------------------------------------------
38
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Buying Shares Exchanging Shares
-------------------------------------------------------------------------------------------------------------------------
BY PHONE OR ONLINE You can use the telephone or online privilege After you establish your eligible fund
if you have an existing non-retirement account, you can exchange fund shares by
account. Certain IRAs can use the telephone phone or online if:
purchase privilege. If your account is
eligible, you can purchase additional fund o You are exchanging into an existing
shares by phone or online if: account or using the exchange to
establish a new account, provided the
o You established your bank account of new account has a registration identical
record at least 30 days ago to the original account
o Your bank information has not changed o The fund into which you are exchanging
for at least 30 days offers the same class of shares
o You are not purchasing more than $25,000 o You are not exchanging more than
worth of shares per account per day $500,000 worth of shares per account per
day
o You can provide the proper account
identification information 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 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, BY MAIL You can purchase fund shares for an existing You can exchange fund shares by mailing or
OR BY FAX fund account by mailing a check to the faxing a letter of instruction to the
transfer agent. Make your check payable to transfer agent. You can exchange Pioneer Fund
the fund. Neither initial nor subsequent shares directly through a Pioneer Fund only
investments should be made by third party if your account is registered in your name.
check. Your check must be in U.S. dollars and However, you may not fax an exchange request
drawn on a U.S. bank. Include in your for more than $500,000. Include in your
purchase request the fund's name, the account letter:
number and the name or names in the account
registration. 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
your are exchanging
-------------------------------------------------------------------------------------------------------------------------
39
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Selling Shares How to Contact Pioneer
------------------------------------------------------------------------------------------------------------
Normally, your investment firm will send your BY PHONE
request to sell shares to the Pioneer Funds' For information or to request a telephone
transfer agent. transaction between 8:00 a.m. and 7:00 p.m.
(Eastern time) by speaking with a shareholder
CONSULT YOUR INVESTMENT PROFESSIONAL FOR MORE services representative call 1-800-225-6292
INFORMATION.
To request a transaction using FactFone(SM) call
Each Pioneer Fund has authorized PFD to act as its 1-800-225-4321
agent in the repurchase of fund shares from
qualified investment firms. Each Pioneer Fund Telecommunications Device for the Deaf (TDD)
reserves the right to terminate this procedure at 1-800-225-1997
any time.
------------------------------------------------------------------------------------------------------------
IF YOU HAVE AN ELIGIBLE NON-RETIREMENT ACCOUNT, BY MAIL
YOU MAY SELL UP TO $100,000 PER ACCOUNT PER DAY BY Send your written instructions to: PIONEER INVESTMENT
PHONE OR ONLINE. You may sell fund shares held in MANAGEMENT SHAREHOLDER SERVICES, INC. P.O. Box
a retirement plan account by phone only if your 55014 Boston, Massachusetts 02205-5014
account is an eligible IRA (tax penalties may
apply). You may not sell your shares by phone or PIONEER WEBSITE
online if you have changed your address (for www.pioneerinvestments.com
checks) or your bank information (for wires and
transfers) in the last 30 days. BY FAX
Fax your exchange and sale requests to:
You may receive your sale proceeds: 1-800-225-4240
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 fund shares by
WRITING DIRECTLY TO A 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, your fund account number,
the class of shares to be sold, the dollar amount
or number of shares to be sold, 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.
The transfer agent will not process your request
until it is received in good order.
You may sell up to $100,000 per account per day by
fax.
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Pioneer Fund Shareholder Account Policies (Pioneer Tax Free Income Fund)
Signature Guarantees and Other Requirements (Pioneer Tax Free Income Fund).
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 understate law) and federal savings and loan
associations. You cannot obtain a signature guarantee from a notary public.
40
The Pioneer Funds generally 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 as medallion signature guarantees. The Pioneer Funds may accept other
forms of guarantee from financial intermediaries in limited circumstances.
Fiduciaries and corporations are required to submit additional documents to
sell Pioneer Fund shares.
Distribution Options (Pioneer Tax Free Income Fund). Pioneer Tax Free
Income Fund offers three distribution options. Any fund shares you buy by
reinvesting distributions will be priced at the applicable net asset value per
share.
1. Unless you indicate another option on your account application, any
dividends and capital gain distributions paid to you by the fund will
automatically be invested in additional fund shares.
2. You may elect to have the amount of any dividends paid to you in cash
and any capital gain distributions reinvested in additional shares.
3. You may elect to have the full amount of any dividends and/or capital
gain distributions paid to you in cash.
Options (2) or (3) are not available to retirement plan accounts or
accounts with a current value of less than $500.
If your distribution check is returned to the transfer agent or you do not
cash the check for six months or more, the transfer agent may reinvest the
amount of the check in your account and automatically change the distribution on
your account to option (1) until you request a different option in writing.
These additional shares will be purchased at the then current net asset value.
Directed Dividends (Pioneer Tax Free Income Fund). You can invest the
dividends paid by one of your Pioneer mutual fund accounts in a second Pioneer
mutual fund account. The value of your second account must be at least $1,000.
You may direct the investment of any amount of dividends. There are no fees or
charges for directed dividends. If you have a retirement plan account, you may
only direct dividends to accounts with identical registrations.
Excessive Trading (Pioneer Tax Free Income Fund). Frequent trading into and
out of the fund can disrupt portfolio management strategies, harm fund
performance by forcing the fund to hold excess cash or to liquidate certain
portfolio securities prematurely and increase expenses for all investors,
including long-term investors who do not generate these costs. An investor may
use short-term trading as a strategy, for example, if the investor believes that
the valuation of the fund's portfolio securities for purposes of calculating its
net asset value does not fully reflect the then current fair market value of
those holdings. The fund discourages, and does not take any intentional action
to accommodate, excessive and short-term trading practices, such as market
timing. 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 for a variety of reasons, such as 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 indicate a timing pattern
or strategy; or
o We reasonably believe that you have engaged in such practices in
connection with other mutual funds.
The fund's Board of Trustees has adopted policies and procedures with
respect to frequent purchases and redemptions of fund shares by fund investors.
Pursuant to these policies and procedures, 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 or other intermediary has engaged in
excessive short-term trading that we believe may be harmful to the fund, we will
ask the investor, broker or other intermediary to cease such activity and we
will refuse to process purchase orders (including purchases by exchange) of such
investor, broker, other intermediary 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.
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. If we are not
successful, your return from an investment in the fund may be adversely
affected. 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 or other intermediary, are aggregated. Our ability to monitor
trading practices by investors purchasing shares through omnibus accounts may be
limited and dependent upon the cooperation of the broker or other intermediary
in taking steps to limit this type of activity.
41
The fund may reject a purchase or exchange order before its acceptance or
the issuance of shares. The fund may also restrict additional purchases or
exchanges in an account. Each of these steps may be taken for any transaction,
for any reason, without prior notice, including transactions that the fund
believes are requested on behalf of market timers. The fund reserves the right
to reject any purchase or exchange request by any investor or financial
institution if the fund believes that any combination of trading activity in the
account or related accounts is potentially disruptive to the fund. A prospective
investor whose purchase or exchange order is rejected will not achieve the
investment results, whether gain or loss, that would have been realized if the
order were accepted and an investment made in the fund. The fund and its
shareholders do not incur any gain or loss as a result of a rejected order. The
fund may impose further restrictions on trading activities by market timers in
the future.
To limit the negative effects of excessive trading on the fund, the fund
has adopted the following restriction on investor transactions. If an investor
redeems $5,000 or more (including redemptions that are a part of an exchange
transaction) from the fund, that investor shall be prevented (or "blocked") from
purchasing shares of the fund (including purchases that are a part of an
exchange transaction) for 30 calendar days after the redemption. This policy
does not apply to systematic purchase or withdrawal plan transactions,
transactions made through employer-sponsored retirement plans described under
Section 401(a), 403(b) or 457 of the Internal Revenue Code or employee benefit
plans, scheduled (Internal Revenue Code Section 72(t) election) or mandatory
(required minimum distribution) withdrawals from IRAs, rebalancing transactions
made through certain asset allocation or "wrap" programs, transactions by
insurance company separate accounts or transactions by other funds that invest
in the fund. This policy does not apply to purchase or redemption transactions
of less than $5,000 or to the Pioneer money market funds. Purchases pursuant to
the reinstatement privilege for Class A and Class B shares are subject to this
policy.
We rely on financial intermediaries that maintain omnibus accounts to apply
to their customers either the fund's policy described above or their own
policies or restrictions designed to limit excessive trading of fund shares.
However, we do not impose this policy at the omnibus account level.
Minimum Account Size (Pioneer Tax Free Income Fund). Pioneer Tax Free
Income Fund requires that you maintain a minimum account value of $500. If you
hold less than $500 in your account, Pioneer Tax Free Income Fund reserves the
right to notify you that it intends to sell your shares and close your account.
You will be given 60 days from the date of the notice to make additional
investments to avoid having your shares sold. This policy does not apply to
certain qualified retirement plan accounts.
Telephone and Website Access (Pioneer Tax Free Income Fund). You may have
difficulty contacting Pioneer Tax Free Income Fund by telephone or accessing
www.pioneerinvestments.com during times of market volatility or disruption in
telephone or internet service. On New York Stock Exchange holidays or on days
when the exchange closes early, Pioneer will adjust the hours for the telephone
center and for online transaction processing accordingly. If you are unable to
reach Pioneer Tax Free Income Fund by telephone, you should communicate with the
fund in writing.
Share Certificates (Pioneer Tax Free Income Fund). The Pioneer Funds do not
offer share certificates. Shares are electronically recorded. Any existing
certificated shares can only be sold by returning your certificate to the
transfer agent, along with a letter of instruction or a stock power (a separate
written authority transferring ownership) and a signature guarantee.
Other Policies (Pioneer Tax Free Income Fund).
Pioneer Tax Free Income Fund and PFD reserve the right to:
o reject any purchase or exchange order for any reason, without prior
notice
o charge a fee for exchanges or to modify, limit or suspend the exchange
privilege at any time without notice. Each Pioneer Fund will provide
60 days' notice of material amendments to or termination of the
exchange privilege
o revise, suspend, limit or terminate the account options or services
available to shareowners at any time, except as required by the rules
of the SEC
Pioneer Tax Free Income Fund reserves the right to:
o suspend transactions in shares when trading on the New York Stock
Exchange is closed or restricted, when the SEC determines an emergency
or other circumstances exist that make it impracticable for Pioneer
Tax Free Income Fund to sell or value its portfolio securities
o redeem in kind by delivering to you portfolio securities owned by
Pioneer Tax Free Income Fund rather than cash. Securities you receive
this way may increase or decrease in value while you hold them and you
may incur brokerage and transaction charges and tax liability when you
convert the securities to cash
42
o charge transfer, shareholder servicing or similar agent fees, such as
an account maintenance fee for small balance accounts, directly to
accounts upon at least 30 days' notice. The fund may do this by
deducting the fee from your distribution of dividends and/or by
redeeming shares to the extent necessary to cover the fee.
Dividends and Capital Gains.
Pioneer Municipal and Equity Income Trust's policy is to distribute each
quarter substantially all of its net investment income and annually
substantially all of its net realized capital gains, if any. It is Pioneer
Municipal and Equity Income Trust's policy to offset capital gains with any
capital loss-carryforward before making additional capital gains distributions.
Pioneer Tax Free Income Fund declares a dividend daily. Dividends are normally
paid on the last business day of each month.
Each Pioneer Fund generally pays any distributions of net short- and
long-term capital gains in November, and generally pays dividends from any net
investment income in December. 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 such Pioneer 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 tax-exempt interest income, called "exempt-interest dividends,"
are exempt from regular federal income tax, but may be subject to state or local
income taxes. A portion of these dividends may be tax preference items for
purposes of the alternative minimum tax. Distributions from each fund's net
capital gains (if any) are considered long-term capital gains and may be taxable
to you at reduced rates depending upon their source and other factors.
Distributions from each fund's net short-term capital gains are taxable as
ordinary income. Other dividends are generally taxable as ordinary income or,
for taxable years beginning on or before December 31, 2010, if so designated by
the fund and certain other conditions, including holding period requirements,
are met by the applicable fund and shareholder, as "qualified dividend income"
taxable to individual shareholders at a maximum 15% U.S. federal income tax
rate. "Qualified dividend income" generally is income derived from dividends
from U.S. corporations or certain foreign corporations that are either
incorporated in a U.S. possession or eligible for tax benefits under certain
U.S. income tax treaties. Since Pioneer Tax Free Income Fund's income is derived
from sources that do not pay dividends, it is not expected that any dividends
paid by that fund will qualify for either the dividends-received deduction for
corporations or the reduced rate available to individuals on "qualified dividend
income." Any taxable dividends and distributions are taxable whether you take
payment in cash or reinvest them to buy additional fund shares. If a fund
declares a taxable dividend in October, November or December, payable to
shareholders of record in such a month, but pays it in January of the following
year, you will be taxed on the dividend as if you received it in the year in
which it was declared.
When you sell or exchange 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.
You must provide your social security number or other taxpayer
identification number to the fund in which you hold shares 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 fund
will apply "backup withholding" at the rate of 28% to your dividends (other than
exempt-interest dividends) and distributions, sale proceeds and any other
payments to you that are subject to backup withholding. If you are neither a
citizen nor a resident of the United States, the fund will withhold U.S. federal
income tax at the rate of 30% (or any lower applicable treaty rate) on certain
taxable dividends and other payments (but not on distributions of net capital
gains).
You should ask your tax adviser about any federal and state tax
considerations relating to an investment in a fund, including the potential
application of the alternative minimum tax to you on the fund's exempt interest
dividends and possible state and local income taxation of the fund's
exempt-interest dividends and other distributions. You may also consult each
fund's statement of additional information for a more detailed discussion of
U.S. federal income tax considerations that may affect the fund and its
shareowners.
Share Classes. Pioneer Tax Free Income Fund offers four share classes
(designated Class A, B, C and Y, respectively) that have different sales loads,
12b-1 fees and/or other class-specific expenses. As the investors in the other
share classes have loads, 12b-1 fees and/or different class-specific expenses,
the NAV and performance of each class varies. Class A has one of the highest
class-specific expense ratios. Shareholders are only offered Class A shares by
means of this prospectus. Pioneer Municipal and Equity Income Trust offers
common shares and AMPS. AMPS will be redeemed by the fund after the Meeting but
prior to the Closing Date. Only common shares will be converted to Class A
shares of Pioneer Tax Free Income Fund in connection with the Merger.
43
FINANCIAL HIGHLIGHTS
PIONEER MUNICIPAL AND EQUITY INCOME TRUST
The following table shows the financial performance of your fund since its
inception. The total returns in the tables represent the rate that your
investment would have increased or decreased during each period (assuming
reinvestment of all dividends and distributions at net asset value).
The information below has been audited by Ernst & Young LLP, your fund's
independent registered public accounting firm, whose report is included in your
fund's annual report along with your fund's financial statements. The annual
report is available upon request.
Year Year Year 1/30/04(b)
Ended Ended Ended to
11/30/07 11/30/06 11/30/05 11/30/04
-------- -------- -------- ----------
Per Common Share Operating Performance
Net asset value, beginning of period $ 16.17 $ 14.65 $ 14.55 $ 14.33(c)
-------- -------- -------- --------
Increase (decrease) from investment operations:(a)
Net investment income $ 0.97 $ 0.98 $ 0.95 $ 0.66
Net realized and unrealized gain (loss) on investments and interest
rate swaps (1.07) 1.57 0.13 0.27
Dividends and distributions to preferred shareowners from:
Net Investment income (0.27) (0.26) (0.19) (0.06)
Net realized gain (0.03) (0.02) --(d) --
-------- -------- -------- --------
Net increase (decrease) from investment operations $ (0.40) $ 2.27 $ 0.89 $ 0.87
Dividends and distributions to common shareowners from:
Net investment income (0.85) (0.67) (0.79) (0.55)
Net realized gain (0.10) (0.08) -- --
Capital charge with respect to issuance of:
Common shares -- -- -- (0.03)
Preferred shares -- -- -- (0.07)
-------- -------- -------- --------
Net increase (decrease) in net asset value $ (1.35) $ 1.52 $ 0.10 $ 0.22
-------- -------- -------- --------
Net asset value, end of period(e) $ 14.82 $ 16.17 $ 14.65 $ 14.55
======== ======== ======== ========
Market value, end of period(e) $ 13.41 $ 14.00 $ 12.18 $ 12.74
======== ======== ======== ========
Total return(f) 2.30% 21.79% 1.51% (11.26)%
Ratios to average net assets of common shareowners
Net expenses(g) 1.26% 1.12% 1.12% 1.04%(h)
Net investment income before preferred share dividends 6.12% 6.43% 6.32% 5.69%(h)
Preferred share dividends 1.70% 1.69% 1.28% 0.55%(h)
Net investment income available to common shareowners 4.42% 4.74% 5.04% 5.14%(h)
Portfolio turnover 23% 16% 27% 63%
Net assets of common shareowners, end of period (in thousands) $425,358 $464,291 $420,476 $417,789
Preferred shares outstanding (in thousands) $176,250 $176,250 $176,250 $176,250
Asset coverage per preferred share, end of period $ 85,354 $ 90,870 $ 84,651 $ 84,264
Average market value per preferred share $ 25,000 $ 25,000 $ 25,000 $ 25,000
Liquidation value, including dividends payable, per preferred share $ 25,019 $ 25,015 $ 25,009 $ 25,003
Ratios to average net assets of common shareowners before reimbursement of
waivers and reimbursement of expenses
Net expenses(g) 1.26% 1.12% 1.12% 1.05%(h)
Net investment income before preferred share dividends 6.12% 6.43% 6.32% 5.68%(h)
Preferred share dividends 1.70% 1.69% 1.28% 0.55%(h)
Net investment income available to common shareowners 4.42% 4.74% 5.04% 5.13%(h)
(a) The per common share data presented above is based upon the average common
shares outstanding for the periods presented.
(b) Trust shares were first publicly offered on January 28, 2004.
(c) Net asset value immediately after the closing of the first public offering
was $14.30.
(d) Amount is less than $0.01 per common share.
44
(e) Net asset value and market value are published in Barron's on Saturday, The
Wall Street Journal on Monday and The New York Times on Monday and
Saturday.
(f) Total investment return is calculated assuming a purchase of common shares
at the current market value on the first day and a sale at the current
market value on the last day of the periods reported. Dividends and
distributions, if any, are assumed for purposes of this calculation to be
reinvested at prices obtained under the Trust's dividend reinvestment plan.
Total investment return does not reflect brokerage commissions. Total
investment return less than a full period is not annualized. Past
performance is not a guarantee of future results.
(g) Expense ratios do not reflect the effect of dividend payments to preferred
shareowners.
(h) Annualized.
The information above represents the audited operating performance data for a
common share outstanding, total investment return, ratios to average net assets
of common shareowners and other supplemental data for the periods indicated.
This information has been determined based upon financial information provided
in the financial statements and market value data for the Trust's common shares.
45
FINANCIAL HIGHLIGHTS
PIONEER TAX FREE INCOME FUND
The following tables show the financial performance of Class A shares of
Pioneer Tax Free Income Fund for the past five fiscal years. Certain information
reflects financial results for a single share. The total returns in the tables
represent the rate that your investment in Pioneer Tax Free Income Fund would
have increased or decreased during each period (assuming reinvestment of all
dividends and distributions).
The information below has been audited by Ernst & Young LLP, Pioneer Tax
Free Income Fund's independent registered public accounting firm, whose report
is included in the fund's annual report along with the fund's financial
statements. The annual report is available upon request.
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/07 12/31/06 12/31/05 12/31/04 12/31/03
Class A shares ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period $ 11.75 $ 11.62 $ 11.67 $ 11.70 $ 11.61
-------- -------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income $ 0.46 $ 0.47 $ 0.51 $ 0.56 $ 0.56
Net realized and unrealized gain (loss) on investments (0.60) 0.13 (0.04) (0.02) 0.09
-------- -------- -------- -------- --------
Net increase (decrease) from investment operations $ (0.14) $ 0.60 $ 0.47 $ 0.54 $ 0.65
Distributions to shareowners:
Net investment income (0.48) (0.47) (0.52) (0.57) (0.56)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value $ (0.62) $ 0.13 $ (0.05) $ (0.03) $ 0.09
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.13 $ 11.75 $ 11.62 $ 11.67 $ 11.70
======== ======== ======== ======== ========
Total return* (1.23)% 5.31% 4.05% 4.75% 5.80%
Ratio of net expenses to average net assets+ 0.84% 0.86% 0.91% 0.91% 0.93%
Ratio of net investment income to average net assets+ 4.05% 4.08% 4.36% 4.88% 4.88%
Portfolio turnover rate 68% 66% 26% 39% 80%
Net assets, end of period (in thousands) $313,706 $349,683 $315,855 $307,463 $326,173
Ratios with reductions for fees paid indirectly:
Net expenses 0.84% 0.86% 0.91% 0.91% 0.93%
Net investment income 4.05% 4.08% 4.36% 4.88% 4.88%
* 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.
+ Ratio with no reduction for fees paid indirectly.
46
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, officers and
employees of your fund; by personnel of Pioneer or PIMSS, or by broker-dealer
firms. Pioneer and its affiliates, together with a third party solicitation
firm, have agreed to provide proxy solicitation services to your fund at a cost
of approximately $[ ]. Your fund will bear the costs of preparing and printing
the Proxy Statement/Prospectus and the solicitation costs incurred in connection
with the Merger.
Revoking Proxies
If you sign and return a proxy, you can revoke it at any time before it is
exercised:
o By filing a written notice of revocation with your fund's transfer
agent, Pioneer Investment Management Shareholder Services, Inc., 60
State Street, Boston, Massachusetts 02109,
o By returning a duly executed proxy with a later date before the time
of the meeting, or
o If you have executed a proxy but are present at the meeting and wish
to vote in person, by notifying the secretary of your 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
Only shareholders of record on July 7, 2008 (the "record date") are
entitled to notice of and to vote at the meeting. As of the record date, the
following shares of your fund were outstanding:
Pioneer Municipal and Equity Income Trust Shares Outstanding (as of July 7, 2008)
----------------------------------------- ---------------------------------------
Common Shares ...................... [ ]
AMPS ............................... [ ]
As described above, AMPS and common shares will each be entitled to vote to
approve the Agreement and Plan of Merger. However, AMPS will be redeemed prior
to the Closing Date.
Other Business
Your fund's Board of Trustees knows of no business to be presented for
consideration at the meeting other than Proposal 1. If other business is
properly brought before the meeting, proxies will be voted according to the best
judgment of the persons named as proxies.
Adjournments
If, by the time scheduled for the meeting, a quorum of shareholders of your
fund is not present or if a quorum is present but sufficient votes "for" the
proposal have not been received, the persons named as proxies may propose an
adjournment of the meeting 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 without further notice. Any such adjournment will require the
affirmative vote of a majority of the votes cast 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. Broker non-votes will be disregarded in the vote for
adjournment.
Telephone and Internet Voting
In addition to soliciting proxies by mail, by fax or in person, your fund
may also arrange to have votes recorded by telephone, the Internet or other
electronic means. The voting procedures used in connection with such voting
methods are designed to authenticate shareholders' identities, to allow
shareholders to authorize the voting of their shares in accordance with their
instructions and to confirm that their instructions have been properly recorded.
In the case of telephone voting, shareholders would be called at the phone
number PIMSS has in its records for their accounts and would be asked for their
Social Security number or other identifying information. The shareholders would
then be given an opportunity to authorize proxies to vote their shares at the
meeting in accordance with their instructions. In the case of automated
telephone and Internet voting, shareholders would be required to provide their
identifying information and will receive a confirmation of their instructions.
47
Shareholders' Proposals
Your fund holds an annual meeting of shareholders each year. In accordance
with your fund's by-laws, any shareholder desiring to present a proposal for
consideration at the next annual meeting of shareholders must submit a proposal
in writing, so that it is received by your fund at 60 State Street, Boston,
Massachusetts 02109 no later than the close of business on the 90th day (and no
earlier than the close of business on the 120th day) prior to the one year
anniversary of the date on which notice of the preceding year's annual meeting
was mailed. Last year's mailing of notice for the annual shareholders meeting
occurred on April 30, 2007, so proposals for this year's annual shareholder
meeting should have been received by your fund no later than the close of
business on January 31, 2008 and no earlier than the close of business on
January 1, 2008.
Pioneer Tax Free Income 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 shareholder desiring to present a proposal for consideration at
the next annual meeting of shareholders must submit a proposal in writing, so
that it is received by your fund at 60 State Street, Boston, Massachusetts 02109
within a reasonable time before the meeting.
VOTING RIGHTS AND REQUIRED VOTE
Holders of common shares and AMPS of your fund are each entitled to vote to
approve the Agreement and Plan of Merger. Each share is entitled to one vote.
Common shares and AMPS will vote as separate classes on the proposal. A quorum
is required to conduct business at the meeting. With respect to your fund,
one-third of the outstanding shares of each class of your fund entitled to cast
votes at the meeting constitutes a quorum for the transaction of business with
respect to such class; however, since the proposal must be approved by a 1940
Act Majority of each class, at least 50% of the outstanding shares of each class
must have submitted votes to approve the proposal with respect to your fund. For
this purpose, a "majority of the outstanding shares of each class of your fund"
means the affirmative vote of the lesser of:
1. 67% or more of the shares of each class of your fund present at the
meeting, if the holders of more than 50% of the outstanding shares of
each class of your fund entitled to vote are present or represented by
proxy, or
2. more than 50% of the outstanding shares of each class of your fund.
The table below shows how shares will be treated for the purposes of quorum
and voting requirements.
------------------------------------------------------------------------------------------------------------------------------------
Shares Quorum Voting
------------------------------------------------------------------------------------------------------------------------------------
In General All shares "present" in person or by proxy Shares "present" in person will be voted in
are counted toward a quorum. person at the meeting. Shares present by
proxy will be voted in accordance
with instructions.
------------------------------------------------------------------------------------------------------------------------------------
Signed Proxy with no Voting Considered "present" at meeting for purposes Voted "for" the proposal.
Instruction (other than Broker of quorum.
Non-Vote)
------------------------------------------------------------------------------------------------------------------------------------
Broker Non-Vote (where the Considered "present" at meeting for purposes Broker non-votes do not count as a vote "for"
underlying holder had not of quorum. the proposal and effectively result in a vote
voted and the broker does not "against" the proposal.
have discretionary authority to
vote the shares)
------------------------------------------------------------------------------------------------------------------------------------
Vote to Abstain Considered "present" at meeting for purposes Abstentions do not constitute a vote "for" the
of quorum. proposal and effectively result in a vote
"against" the proposal.
------------------------------------------------------------------------------------------------------------------------------------
If the required approval of shareholders is not obtained, the meeting may
be adjourned as more fully described in this Proxy Statement/
Prospectus, and your fund will continue to engage in business as a separate
fund and the Board of Trustees will consider what further action may be
appropriate.
48
OWNERSHIP OF SHARES OF THE PIONEER FUNDS
As of July 7, 2008, the Trustees and officers of each Pioneer Fund owned in
the aggregate less than 1% of the outstanding shares of a Pioneer Fund. The
following is a list of the holders of 5% or more of the outstanding shares of
any class of a Pioneer Fund as of July 7, 2008.(1)(2)
Pioneer Municipal and Equity Income Trust
Record Holder Share Class Number of Shares Percent of Class
Common Shares
AMPS
Pioneer Tax Free Income Fund
Record Holder Share Class Number of Shares Percent of Class(1)
Class A
Class B
Class C
Class Y
----------
(1) To the knowledge of each Pioneer Fund, the amount of each class owned of
record, unless otherwise noted.
(2) Calculated on the basis of each record holder's present holdings and
commitments as of the record date, and assuming the Merger took place on
that same day.
Bulldog Investors General Partnership ("BIGP") and one of its partners,
Full Value Partners, L.P. ("Full Value"), investors holding in the aggregate
approximately 18.6% of the common shares of Pioneer Municipal and Equity Income
Trust, have reached an agreement with Pioneer to vote their shares in favor of
the Merger. BIGP and Full Value also have agreed to vote their shares in
accordance with the recommendation of the Trustees of Pioneer Municipal and
Equity Income Trust with respect to each proposal submitted to shareholders at
Pioneer Municipal and Equity Income Trust's 2008 annual meeting of shareholders,
if held, or at any other meeting of Pioneer Municipal and Equity Income Trust's
shareholders held prior to the completion of the Merger. In addition, BIGP and
Full Value have agreed not to nominate any person for election as trustee at, or
to make or submit any proposal for, these shareholder meetings. If the Merger is
approved, the 2008 annual shareholder meeting would not be held.
EXPERTS
The financial highlights for the past four years for Pioneer Municipal and
Equity Income Trust and the financial highlights for the past five fiscal years
for Pioneer Tax Free Income and the financial statements for each Pioneer Fund
for the past two years are incorporated by reference into this Proxy
Statement/Prospectus. The financial highlights and financial statements of each
Pioneer Fund for its 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 by reference
herein in reliance upon such reports given on the authority of such firm as
experts in accounting and auditing.
49
AVAILABLE INFORMATION
You can obtain more free information about each Pioneer Fund from your
investment firm or by writing to Pioneer Investment Management Shareholder
Services, Inc., 60 State Street, Boston, Massachusetts 02109. You may also call
1-800-225-6292.
Pioneer Tax Free Income Fund's statement of additional information and each
Pioneer Fund's shareholder reports are available free of charge on the Pioneer
Funds' website at www.pioneerinvestments.com
Shareholder reports. Annual and semiannual reports to shareholders, and
quarterly reports filed with the SEC, provide information about each Pioneer
Fund's investments. The annual report discusses market conditions and investment
strategies that significantly affected each Pioneer Fund's performance during
its last fiscal year.
Visit our website www.pioneerinvestments.com
Each Pioneer Fund is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended and the 1940 Act and files reports,
proxy statements and other information with the SEC. These reports, proxy
statements and other information filed by the Pioneer Funds and their
predecessors can be inspected and copied (for a duplication fee) at the public
reference facilities of the SEC at 100 F Street, N.E., Washington, D.C. Copies
of these materials can also be obtained by mail from the Public Reference
Branch, Office of Consumer Affairs and Information Services, Securities and
Exchange Commission, 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.
50
EXHIBIT A -- FORM OF AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of the [ ]
day of [ ], 2008, by and between Pioneer Tax Free Income Fund, a Delaware
statutory trust, in its individual capacity (the "Surviving Trust"), and on
behalf of its sole series, Pioneer Tax Free Income Fund (the "Surviving Fund"),
with its principal place of business at 60 State Street, Boston, Massachusetts
02109, and Pioneer Municipal and Equity Income Trust, a Delaware statutory
trust, in its individual capacity (the "Merging Trust"), and on behalf of its
sole series, Pioneer Municipal and Equity Income Trust (the "Merging Fund"),
with its principal place of business at 60 State Street, Boston, Massachusetts
02109. The Surviving Fund and the Merging Fund are sometimes referred to
collectively herein as the "Funds" and individually as a "Fund."
WHEREAS, the Surviving Trust is a registered investment company classified
as a management company of the open-end type.
WHEREAS, the Merging Trust is a registered investment company classified as
a management company of the closed-end type.
WHEREAS, this Agreement is intended to constitute a plan of a
"reorganization" as defined in Section 368(a) of the United States Internal
Revenue Code of 1986, as amended (the "Code") and the Treasury Regulations
thereunder, and the parties hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Treasury Regulations Sections 1.368-2(g)
and 1.368-3(a).
WHEREAS, the reorganization will consist of the merger of the Merging Trust
into the Surviving Trust pursuant to the provisions of the Delaware Statutory
Trust Act (the "Merger") and will have the consequences described in Section 1.2
below.
WHEREAS, the Surviving Fund is authorized to issue shares of beneficial
interest.
WHEREAS, the Board of Trustees of each of the Surviving Trust and the
Merging Trust have determined that the Merger is in the best interests of the
Surviving Fund shareholders and the Merging 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. THE MERGER
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, a certificate of merger
of the Merging Trust with and into the Surviving Trust (the "Certificate of
Merger") shall be executed and acknowledged on behalf of the Surviving Trust and
thereafter delivered to the Secretary of State of the State of Delaware by the
Surviving Trust for filing, as provided in Section 3815 of the Delaware
Statutory Trust Act 12 Del.C. Section 3801, et. seq. (the "DSTA"). The Merger
shall become effective at 5:00 p.m. (Eastern time) (the "Effective Time") on the
closing date of the Merger (the "Closing Date"), unless otherwise mutually
agreed by the parties hereto. At the Effective Time, the separate existence of
the Merging Trust and the Merging Fund shall cease and the Merging Trust and the
Merging Fund shall be merged with and into the Surviving Trust and the Surviving
Fund, respectively.
1.2 At the Effective Time, by virtue of the Merger and without any further
action on the part of Surviving Fund, Merging Fund, or the holders of common
shares of the Merging Fund or the Class A shares of the Surviving Fund, (i) all
of the assets of the Merging Fund as set forth in Paragraph 1.3 ("Merging Fund
Assets") and all of the liabilities and obligations of the Merging Fund, whether
accrued or contingent, known or unknown, existing at the Closing Date
(collectively, the "Merging Fund Liabilities") are hereby assigned to, and will
become the assets and liabilities of, the Surviving Fund, and the Surviving Fund
hereby agrees to accept and assume all such assets and liabilities, and (ii) the
common shares of the Merging Fund issued and outstanding immediately prior to
the Merger shall be exchanged for a number of Class A shares of the Surviving
Fund, including fractional Class A shares of the Surviving Fund ("Surviving Fund
Shares"), with an aggregate net asset value ("NAV") equal to the NAV of the
common shares of the Merging Fund, as determined in the manner set forth in
Paragraphs 2.1 and 2.2. Such transactions shall take place at the Closing (as
defined in Paragraph 3.1 below).
1.3 (a) The Merging Fund Assets shall consist of all of the Merging Fund's
property, including, without limitation, all portfolio securities and
instruments, dividends and interest receivables, cash, goodwill, contractual
rights and choses in action of the Merging Fund or the Merging Trust in respect
of the Merging Fund, all other intangible property owned by the Merging Fund,
originals or copies of all books and records of the Merging Fund, and all other
assets of the Merging Fund as of the Effective Time. The Surviving Fund shall
also be entitled to receive copies of all records that the Merging Fund 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 Merging Fund.
A-1
(b) The Merging Fund has provided the Surviving Fund with a list of
all of the Merging Fund's securities and other assets as of the date of
execution of this Agreement, and the Surviving Fund has provided the
Merging Fund with a copy of the current fundamental investment policies and
restrictions and fair value procedures applicable to the Surviving Fund.
The Merging Fund reserves the right to sell any of such securities or other
assets before the Effective Time and agrees not to acquire any portfolio
security that is not an eligible investment for, or that would violate an
investment policy or restriction of, the Surviving Fund.
1.4 The Merging Fund will endeavor to discharge all of its known
liabilities and obligations that are or will become due prior to the Closing.
1.5 On or as soon after the Closing Date as is conveniently practicable,
accounts on the share records of the Surviving Fund will be established in the
names of each shareholder of record of the Merging Fund, determined as of the
Effective Time (the "Merging Fund Shareholders"), representing the number of
Surviving Fund Shares due to the shareholder pursuant to Paragraph 1.2 hereof.
Each Merging Fund Shareholder shall receive the number of Surviving Fund Shares
corresponding to common shares of the Merging Fund (the "Merging Fund Shares")
held by such Merging Fund Shareholder that have an aggregate NAV equal to the
aggregate NAV of the Merging Fund Shares held of record by such Merging Fund
Shareholder as of the Effective Time. The Surviving Fund shall not issue
certificates representing the Surviving Fund Shares in connection with the
Merger.
1.6 Ownership of Surviving Fund Shares will be shown on the books of the
Surviving Fund's transfer agent. Any certificates representing ownership of
Merging Fund Shares that remain outstanding at the Effective Time shall be
deemed to be cancelled and shall no longer evidence ownership of Merging Fund
Shares.
1.7 Any transfer taxes payable upon issuance of Surviving Fund Shares in a
name other than the registered holder of the Merging Fund Shares on the books of
the Merging Fund as of that time shall, as a condition of such issuance and
transfer, be paid by the person to whom such Surviving Fund Shares are to be
issued and transferred.
2. VALUATION
2.1 The NAV of the Surviving Fund Shares and the NAV of the Merging Fund
shall, in each case, be determined as of the close of regular trading on the New
York Stock Exchange (generally, 4:00 p.m., Boston time) on the Closing Date, but
immediately prior to giving effect to the assignment and assumption of assets
and liabilities between the Merging Fund and the Surviving Fund as set forth
herein (the "Valuation Time"). Pioneer Investment Management, Inc. (the
"Surviving Fund Adviser") shall compute the NAV per Surviving Fund Share in the
manner set forth in the Surviving Trust's Agreement and Declaration of Trust
(the "Declaration"), or By-Laws, and the Surviving Fund's then-current
prospectus and statement of additional information. The Surviving Fund Adviser
shall compute the NAV per share of the Merging Fund in the manner set forth in
the Merging Trust's Agreement and Declaration of Trust, or By-laws, and the
Merging Fund's then-current prospectus and statement of additional information.
The Surviving Fund Adviser shall confirm to the Surviving Fund the NAV of the
Merging Fund.
2.2 The number of Surviving Fund Shares to be issued (including fractional
shares, if any) in the exchange of the Merging Fund Shares for Surviving Fund
Shares shall be determined by the Surviving Fund Adviser by dividing the NAV
with respect to common shares of the Merging Fund, as determined in accordance
with Paragraph 2.1, by the NAV of the Surviving Fund Shares, as determined in
accordance with Paragraph 2.1.
2.3 The Surviving Fund and the Merging Fund shall cause the Surviving Fund
Adviser to deliver a copy of its valuation report to the other party at Closing
(as defined in Paragraph 3.1). All computations of value shall be made by the
Surviving Fund Adviser in accordance with its regular practice as pricing agent
for the Surviving Fund and the Merging Fund.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be [ ], 2008, or such later date as the parties
may agree to in writing. All acts necessary to consummate the Merger (the
"Closing") shall be deemed to take place simultaneously as of the Effective Time
unless otherwise provided. The Closing shall be held at the offices of Bingham
McCutchen LLP, One Federal 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 Brown Brothers Harriman & Co. (the "Merging Fund Custodian") as record
holder for the Merging Fund shall be presented by the Merging Fund to Brown
Brothers Harriman & Co. (the "Surviving Fund Custodian") for examination no
later than three business days preceding the Closing Date. Such portfolio
securities shall be transferred to the Surviving Fund Custodian for the account
of the Surviving 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
A-2
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
Merging Fund Custodian in book-entry form on behalf of the Merging Fund shall be
transferred by the Merging Fund Custodian through the Depository Trust Company
to the Surviving Fund Custodian and by the Surviving Fund Custodian recording
the beneficial ownership thereof by the Surviving Fund on the Surviving Fund
Custodian's records, in each case on the Closing Date. Any cash shall be
transferred by the Merging Fund Custodian transmitting immediately available
funds by wire transfer to the Surviving Fund Custodian the cash balances
maintained by the Merging Fund Custodian and the Surviving Fund Custodian
crediting such amount to the account of the Surviving Fund, in each case on the
Closing Date.
3.3 The Surviving Fund Custodian shall deliver within one business day
after the Closing a certificate of an authorized officer stating that: (a) the
Merging Fund Assets have been transferred in proper form to the Surviving 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 transfer of
portfolio securities as part of the Merging Fund 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 Surviving Fund Shares or the Merging Fund pursuant to
Paragraph 2.1 is impracticable (in the judgment of the Surviving Trust Board
with respect to the Surviving Fund and the Merging Trust Board with respect to
the Merging Fund), 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 Merging 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 Merging Fund
Shareholders and the number and percentage ownership of outstanding Merging Fund
Shares owned by each Merging Fund Shareholder as of the Valuation Time,
certified by the President or a Secretary of the Merging Trust and its
Treasurer, Secretary or other authorized officer (the "Shareholder List") as
being an accurate record of the information (a) provided by the Merging Fund
Shareholders, (b) provided by the Merging Fund Custodian, or (c) derived from
the Merging Fund's records by such officers or one of the Merging Fund's service
providers. The Surviving Fund shall issue and deliver to the Merging Fund a
confirmation evidencing the Surviving Fund Shares to be credited on the Closing
Date, or provide evidence satisfactory to the Merging Fund that such Surviving
Fund Shares have been credited on the Closing Date to the shareholders of record
of the Merging 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 of this Agreement, the Merging
Trust, on behalf of itself and the Merging Fund, as applicable, represents,
warrants and covenants to the Surviving 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 Merging Fund is a statutory series of the Merging Trust
pursuant to Section 3804 and 3806(b)(2) of the DSTA. The Merging Fund is
the only series of the Merging Trust. The Merging 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 Merging Fund's shareholders, to perform its
obligations under this Agreement. The Merging 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 Merging Trust and the Merging 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 Merging Trust is a registered investment company classified as
a management company of the closed-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 Merging Trust is not in violation of, and the Merging Trust's
execution and delivery of this Agreement and the performance of its
obligations under this Agreement in respect and on behalf of the Merging
Fund will not result in a material violation of, any provision of the
Merging Trust's Declaration or By-Laws or any material agreement,
indenture, instrument, contract, lease or other undertaking to which the
Merging Fund, or the Merging Trust on behalf of the Merging Fund, is a
party or by which the Merging 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 Merging Fund or any of the Merging Fund's
properties or assets that, if adversely determined, would materially and
adversely affect its financial condition or the conduct of the Merging
Fund's business. The Merging Fund is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which materially adversely
A-3
affects the Merging Fund's business or its ability to consummate the
transactions contemplated herein or would be binding upon the Surviving
Fund as the successor to the Merging Fund;
(e) The statement of assets and liabilities of the Merging Fund, and
the related statements of operations and changes in net assets, as of and
for the fiscal year ended November 30, 2007, 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 Merging 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 Merging Fund as of the date thereof
are disclosed therein. The statement of assets and liabilities of the
Merging Fund, and the related statements of operations and changes in net
assets, as of and for the six-month period ended May 31, 2008 will be in
accordance with GAAP consistently applied and will fairly reflect, in all
material respects the financial condition of the Merging 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 Merging 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
Merging Fund as of such date and the results of its operations for the
period then ended. Except for the Merging Fund Liabilities, the Merging
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
Merging Fund has been disclosed or is required to be disclosed in the
Merging Fund's reports on Form N-CSR to enable the chief executive officer
and chief financial officer or other officers of the Merging Trust to make
the certifications required by the Sarbanes-Oxley Act, and no deficiency,
weakness, fraud, change, event or other factor exists with respect to the
Merging Fund will be required to be disclosed in the Surviving Fund's Form
N-CSR after the Closing Date;
(f) Since its most recent fiscal year end, except as specifically
disclosed in the Merging Fund's semi-annual report for the six-month period
ended May 31, 2008, there has not been any material adverse change in the
Merging Fund's financial condition, assets, liabilities, business or
prospects, or any incurrence by the Merging 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 (f) (but not
for any other purpose of this Agreement), a decline in NAV per Merging Fund
Share arising out of its normal investment operations or a decline in
market values of securities in the Merging Fund's portfolio, a decline in
net assets of the Merging Fund as a result of redemptions or the discharge
of Merging Fund liabilities shall not constitute a material adverse change;
(g) On the Closing Date, all federal and other tax returns, dividend
reporting forms and other tax-related reports of the Merging Fund and/or
the Merging Trust required by law to have been filed by such date
(including any extensions) shall have been filed and are or will be correct
in all material respects, and all federal and other taxes shown as due or
required to be shown as due on said returns and reports shall have been
paid or provision shall have been made for the payment thereof and, to the
best of the Merging Trust's knowledge, no such return is currently under
audit and no assessment has been asserted with respect to such returns;
(h) For each taxable year of its existence, including the taxable year
ending on the Closing Date, the Merging Trust has had in effect an election
to be treated as a "regulated investment company" under Subchapter M of the
Code, has satisfied or will satisfy all of the requirements of Subchapter M
of the Code for treatment as a regulated investment company, and has been
or will be eligible to compute, and has computed or will compute, its
federal income tax under Section 852 of the Code, and on or before the
Closing Date, shall have distributed to its shareholders, substantially 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), 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 ("net tax-exempt income"), 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, through the Closing Date such that for all tax periods ending
on or before the Closing Date, the Merging Trust will not have any tax
liability under Section 852 or Section 4982;
(i) All issued and outstanding Merging Fund Shares are, and at the
Closing Date will be, legally issued and outstanding, fully paid and
nonassessable by the Merging Fund. All of the issued and outstanding
Merging 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 Surviving Fund pursuant to Paragraph 3.5 hereof. The Merging Fund does
not have outstanding any options, warrants or other rights to subscribe for
or purchase any Merging Fund Shares, nor is there outstanding any security
convertible into any Merging Fund Shares;
(j) At the Effective Time and the Valuation Time, the Merging Fund
will have good and marketable title to the Merging Fund Assets, and full
right, power and authority to merge with and assign all of its assets and
liabilities to the Surviving Fund pursuant to this Agreement. At the
Effective Time, the Merging Fund Assets and Merging Fund Liabilities will
be assigned to and vest in the
A-4
Surviving Fund and the Surviving Fund will have 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 Merging Trust has the trust power and authority, on behalf of
the Merging Fund, 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 Merging
Trust's Board of Trustees, and, subject to the approval of the Merging
Fund's shareholders, assuming due authorization, execution and delivery by
the Surviving Trust in its individual capacity and on behalf of the
Surviving Fund, this Agreement will constitute a valid and binding
obligation of the Merging Trust, on behalf of the Merging 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 Merging Fund to the
Surviving 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 Merging Fund 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;
(m) The information included in the proxy statement (the "Proxy
Statement") forming part of the Surviving 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 Merging Fund to the
Surviving 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 Merging Trust or the Merging Fund of
the transactions contemplated by this Agreement;
(o) All of the issued and outstanding Merging Fund Shares have been
offered for sale and sold in compliance in all material respects with all
applicable federal and state securities laws, except as may have been
previously disclosed in writing to the Surviving Fund;
(p) The prospectus and statement of additional information of the
Merging Fund and any amendments or supplements thereto, furnished to the
Surviving 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 materially misleading;
(q) The Merging Fund currently complies 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 Merging
Fund currently complies in all material respects with all of its investment
objectives, policies, guidelines and restrictions and any compliance
procedures established by the Merging Trust with respect to the Merging
Fund. All advertising and sales material currently used by the Merging Fund
complies 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
Financial Industry Regulatory Authority ("FINRA") 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, FINRA or any state securities authorities used by the Merging
Fund during the three (3) years prior to the date of this Agreement 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) Neither the Merging Fund nor, to the knowledge of the Merging
Trust, any "affiliated person" of the Merging 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 Merging Trust, has any affiliated
person of the Merging 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
A-5
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 the Merging
Trust to Bingham McCutchen LLP at the Closing pursuant to Paragraph 7.4
(the "Merging Trust 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 a disclosure schedule previously provided by the
Surviving Fund to the Merging Fund, the Surviving Trust, on behalf of the
Surviving Fund, represents, warrants and covenants to the Merging 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 Surviving Fund is a statutory series of the Surviving Trust
pursuant to Sections 3804 and 3806(b)(2) of the DSTA. The Surviving Fund is
the only series of the Surviving Trust. The Surviving Trust is a statutory
trust duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Surviving Trust has the power to own all of
its properties and assets and to perform the obligations under this
Agreement. The Surviving 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 Surviving Trust and the Surviving 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 Surviving 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 current prospectus and statement of additional information of
the Surviving Fund and each prospectus and statement of additional
information for the Surviving Fund used during the three years previous to
the date of this Agreement, and any amendment or supplement to any of the
foregoing, conform or conformed at the time their distribution to the
public 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 and do not or did not at the time of their
distribution to the public include 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
under which they were made, not materially misleading;
(d) The Surviving 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 Surviving 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;
(e) The Registration Statement, the Proxy Statement and statement of
additional information with respect to the Surviving 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 Merging Fund for inclusion therein, as covered by the
Merging Fund's warranty in Paragraph 4.1(n) 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 Merging Fund for inclusion
therein, as covered by the Merging Fund's warranty in Paragraph 4.1(n)
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;
(f) The Surviving Trust is not in violation of, and the Surviving
Trust's execution and delivery of this Agreement and performance of its
obligations under this Agreement in respect and on behalf of the Surviving
Fund will not result in a material violation of, any provisions of the
Declaration of Trust or by-laws of the Surviving Trust or any material
agreement, indenture, instrument, contract, lease or other undertaking to
which the Surviving Fund or the Surviving Trust on behalf of the Surviving
Fund is a party or by which the Surviving Fund or any of its assets is
bound;
(g) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or threatened
against the Surviving Fund or any of the Surviving Fund's properties or
assets that, if adversely determined, would materially and adversely affect
its financial condition or the conduct of the Surviving Fund's business.
Neither the Surviving Trust nor the Surviving 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 Surviving Fund's
business or its ability to consummate the transactions contemplated herein;
A-6
(h) The statement of assets and liabilities of the Surviving Fund, and
the related statements of operations and changes in net assets, as of and
for the fiscal year ended December 31, 2007 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 Surviving 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 Surviving Fund as
of the date thereof are disclosed therein;
(i) Since the most recent fiscal year end, except as specifically
disclosed in the Surviving 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, 2008, there has not been any material
adverse change in the Surviving Fund's financial condition, assets,
liabilities, business or prospects, or any incurrence by the Surviving 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 (i) (but not for any other purpose of this Agreement), a
decline in NAV per Surviving Fund Share arising out of its normal
investment operations or a decline in market values of securities in the
Surviving Fund's portfolio, a decline in net assets of the Surviving Fund
as a result of redemptions or the discharge of Surviving Fund liabilities
shall not constitute a material adverse change;
(j) On the Closing Date, all federal and other tax returns, dividend
reporting forms and other tax-related reports of the Surviving Fund and/or
the Surviving Trust required by law to have been filed by such date
(including any extensions) shall have been filed and are or will be correct
in all material respects, and all federal and other taxes shown as due or
required to be shown as due on said returns and reports shall have been
paid or provision shall have been made for the payment thereof and, to the
best of the Surviving Trust's knowledge, no such return is currently under
audit and no assessment has been asserted with respect to such returns;
(k) For each taxable year of its existence, the Surviving Trust has
had in effect an election to be treated as a "regulated investment company"
under Subchapter M of the Code, has satisfied all of the requirements of
Subchapter M of the Code for treatment as a regulated investment company,
and has been eligible to compute its federal income tax under Section 852
of the Code.
(l) The authorized capital of the Surviving Fund consists of an
unlimited number of shares of beneficial interest in the assets of the
Surviving Fund, no par value per share. As of the Closing Date, the
Surviving Fund will be authorized to issue an unlimited number of shares of
beneficial interest in the assets of the Surviving Fund, no par value per
share. The Surviving Fund Shares to be issued and delivered to the Merging
Fund for the account of the Merging 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 legally issued and outstanding, fully
paid and non-assessable. The Surviving Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any
Surviving Fund Shares, nor is there outstanding any security convertible
into any Surviving Fund shares;
(m) All issued and outstanding Surviving Fund Shares are, and on the
Closing Date will be, legally issued, fully paid and non-assessable and
have been offered and sold in every state and the District of Columbia in
compliance in all material respects with all applicable federal and state
securities laws;
(n) The Surviving Trust has the full right, power and authority, on
behalf of the Surviving Fund, 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 Surviving Trust's Board of Trustees, and, assuming due authorization,
execution and delivery by the Merging Trust, in its individual capacity and
on behalf of the Merging Fund, this Agreement will constitute a valid and
binding obligation of the Surviving Trust, on behalf of the Surviving 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;
(o) The information to be furnished in writing by the Surviving Trust,
on behalf of the Surviving Fund, or the Surviving 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;
A-7
(p) 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 Surviving Fund, except for the registration of the
Surviving Fund Shares under the Securities Act and the Investment Company
Act;
(q) The Surviving Trust currently complies 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 Surviving Trust currently complies in all material respects with all of
its investment objectives, policies, guidelines and restrictions and any
compliance procedures established by the Surviving Trust with respect to
the Surviving Fund. All advertising and sales material currently used by
the Surviving Trust complies 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 FINRA 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, FINRA or any
state securities authorities used by the Surviving Trust during the three
(3) years prior to the date of this Agreement 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) Neither the Surviving Fund nor, to the knowledge of the Surviving
Trust, any "affiliated person" of the Surviving 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 Surviving Trust, has any
affiliated person of the Surviving 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
(s) The tax representation certificate to be delivered by the
Surviving Trust to Bingham McCutchen LLP at Closing pursuant to Section 6.3
(the "Surviving Trust 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
The Merging Fund and the Surviving Fund, respectively, hereby further
covenant as follows:
5.1 The Merging Trust will call a special meeting of the Merging Fund's
shareholders to consider approval of this Agreement and act upon the matters set
forth in the Proxy Statement.
5.2 The Surviving 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 Merging Fund will provide the Surviving 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.
5.3 The Merging Fund will assist the Surviving Fund in obtaining such
information as the Surviving Fund reasonably requires concerning the beneficial
ownership of the Merging Fund Shares.
5.4 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.
5.5 The Merging Fund shall furnish to the Surviving Fund on the Closing
Date a statement of assets and liabilities of the Merging Fund ("Statement of
Assets and Liabilities") as of the Closing Date setting forth the NAV (as
computed pursuant to Paragraph 2.1) of the Merging Fund as of the Valuation
Time, which statement shall be prepared in accordance with GAAP consistently
applied and certified by the Merging Fund's Treasurer or Assistant Treasurer. As
promptly as practicable, but in any case within 30 days after the Closing Date,
the Merging Fund shall furnish to the Surviving Fund, in such form as is
reasonably satisfactory to the Surviving Fund, a statement of the earnings and
profits of the Merging Fund for federal income tax purposes, and of any capital
loss carryovers and other items that will be carried over to the Surviving Fund
under the Code, and which statement will be certified by the Treasurer of the
Merging Fund.
A-8
5.6 Neither Fund shall take any action that is inconsistent with (i) the
representations set forth herein, (ii) with respect to the Merging Fund, the
Merging Trust Tax Representation Certificate and, (iii) with respect to the
Surviving Fund, the Surviving Trust Tax Representation Certificate. 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) of
the Code on their federal income tax returns for their respective taxable years
in which the Merger occurs, including filing any and all statements required by
Treasury Regulations Section 1.368-3, and shall not take any position
inconsistent with such treatment.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE MERGING FUND
The obligations of the Merging Fund to complete the transactions provided
for herein shall be, at its election, subject to the performance by the
Surviving 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 Merging Fund in writing:
6.1 All representations and warranties by the Surviving Trust, on behalf of
the Surviving Fund, contained in this Agreement shall be true and correct in all
material respects 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 Surviving Trust shall have delivered to the Merging Trust on the
Closing Date a certificate of the Surviving Trust, on behalf of the Surviving
Fund, executed in its name by its President or Vice President and its Treasurer
or Assistant Treasurer, in form and substance satisfactory to the Merging Trust
and dated as of the Closing Date, to the effect that the representations and
warranties of the Surviving Trust made in this Agreement on behalf of itself and
the Surviving Fund are true and correct in all material respects 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 Merging Trust shall
reasonably request;
6.3 The Surviving Trust, on its own behalf and on behalf of the Surviving
Fund, shall have delivered to Bingham McCutchen LLP a Surviving Trust Tax
Representation Certificate, satisfactory to Bingham McCutchen LLP, in a form
mutually acceptable to the Surviving Trust and the Merging Trust, concerning
certain tax-related matters;
6.4 The Board of Trustees of the Surviving Trust shall have determined that
the Merger is in the best interests of the Surviving Fund and, based upon such
determination, shall have approved this Agreement and the transactions
contemplated hereby; and
6.5 The Merging Trust, on behalf of the Merging Fund, shall have received
at the Closing a favorable opinion of Bingham McCutchen LLP as to the due
authorization of this Agreement by the Surviving Trust, on behalf of the
Surviving Fund, and related matters, dated as of the Closing Date, in a form
reasonably satisfactory to the Merging Trust.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SURVIVING FUND
The obligations of the Surviving Fund to complete the transactions provided
for herein shall be, at its election, subject to the performance by the Merging
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 Surviving Fund in writing:
7.1 All representations and warranties of the Merging Trust, on behalf of
the Merging Fund, contained in this Agreement shall be true and correct in all
material respects 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 Merging Trust shall have delivered to the Surviving Fund the
Statement of Assets and Liabilities of the Merging Fund pursuant to Paragraph
5.6, 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 Merging Trust's Treasurer or Assistant Treasurer;
7.3 The Merging Trust shall have delivered to the Surviving Trust on the
Closing Date a certificate of the Merging Trust, on behalf of the Merging 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
Surviving Trust and dated as of the Closing Date, to the effect that the
representations and warranties of the Merging Trust contained in this Agreement
on behalf of itself and the Merging Fund are true and correct in all material
respects 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
Surviving Trust shall reasonably request;
7.4 The Merging Trust, on its own behalf and on behalf of the Merging Fund,
shall have delivered to Bingham McCutchen LLP a Merging Trust Tax Representation
Certificate, satisfactory to Bingham McCutchen LLP , in a form mutually
acceptable to the Surviving Trust and the Merging Trust, concerning certain
tax-related matters; and
A-9
7.5 The Board of Trustees of the Merging Trust shall have determined that
the Merger is in the best interests of the Merging 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 (including,
without limitation, the Merger) shall have been approved by the requisite vote
of the Merging Fund's shareholders in accordance with the provisions of the
Merging Trust's Declaration and By-Laws, and certified copies of the resolutions
evidencing such approval by the Merging Fund's shareholders shall have been
delivered by the Merging Fund to the Surviving 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 Surviving Fund'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 under the Securities Act;
8.5 The parties shall have received an opinion of Bingham McCutchen LLP,
satisfactory to the Merging Trust and the Surviving Trust, substantially to the
effect that, based upon certain facts, assumptions and representations, and upon
certifications contained in the Merging Trust Tax Representation Certificate and
the Surviving Trust Tax Representation Certificate, for federal income tax
purposes (i) the Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and each of the Merging Trust and the Surviving
Trust will be a "party to a reorganization" within the meaning of Section 368(b)
of the Code; (ii) no gain or loss will be recognized by the Merging Trust upon
the vesting of the Merging Fund Assets and Merging Fund Liabilities as assets
and liabilities of the Surviving Fund or upon the exchange of shares of the
Merging Fund for a number of Surviving Fund Shares, including fractional
Surviving Fund Shares, except for (A) gain or loss that may be recognized on the
transfer of "section 1256 contracts" as defined in Section 1256(b) of the Code,
(B) gain that may be recognized on the transfer of stock in a "passive foreign
investment company" as defined in Section 1297(a) of the Code, or (C) any other
gain that may be required to be recognized as a result of the closing of the
Merging Trust's taxable year; (iii) the tax basis in the hands of the Surviving
Trust of the Merging Fund Assets will be the same as the tax basis of such
assets in the hands of the Merging Trust immediately prior to the Merger,
increased by the amount of gain (or decreased by the amount of loss), if any,
recognized by the Merging Trust on the Merger; (iv) the holding periods of the
Merging Fund Assets in the hands of the Surviving Trust, other than assets with
respect to which gain or loss is required to be recognized, will include in each
instance the period during which those assets were held by the Merging Trust;
(v) no gain or loss will be recognized by the Surviving Trust upon the vesting
of the Merging Fund Assets and Merging Fund Liabilities as assets and
liabilities of the Surviving Fund; (vi) no gain or loss will be recognized by
the shareholders of the Merging Fund on the exchange of all of their Merging
Fund Shares for a number of Surviving Fund Shares, including fractional
Surviving Fund Shares, as part of the Merger; (vii) the aggregate basis of the
Surviving Fund Shares that each Merging Fund Shareholder receives in the Merger
will be the same as the aggregate basis of the Merging Fund Shares held
immediately prior to the Merger; and (viii) each Merging Fund Shareholder's
holding period for the Surviving Fund Shares received in the Merger will include
the period for which such shareholder held the Merging Fund Shares that were
exchanged for such Surviving Fund Shares, provided that the Merging Fund
Shareholder held such Merging Fund Shares as capital assets on the Closing Date.
Notwithstanding anything in this Agreement to the contrary, neither the Merging
Fund nor the Surviving Fund may waive the condition set forth in this paragraph
8.5.
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.
A-10
9.2 The Merging Fund agrees to bear the costs of preparing and printing the
proxy statement and the solicitation costs incurred in connection with the
Merger. Each of the Merging Fund and the Surviving Fund agrees to bear its own
costs in connection with the Merger.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Surviving Trust, on behalf of itself and the Surviving Fund, and
the Merging Trust, on behalf of itself and the Merging Fund, 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 covenants to be performed after the Closing by both the Surviving
Trust and the Merging Trust shall survive the Closing. 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
Surviving Trust and the Merging Trust. In addition, either party may at its
option terminate this Agreement at or prior to the Closing Date:
(a) by resolution of the Surviving 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
Surviving Fund's shareholders; or
(b) by resolution of the Merging 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 Merging
Fund's shareholders.
11.2 In the event of any such termination, there shall be no liability for
damages on the part of the Surviving Trust, the Surviving Fund, the Merging
Trust or the Merging Fund, or the trustees or officers of the Merging Trust or
the Surviving 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 Merging
Trust and the Surviving Trust.
12.1 Specifically, this Agreement may be amended, modified or supplemented
to the extent necessary for the Agreement to constitute a "plan of
reorganization" within the meaning of Treasury Regulations Sections 1.369-2(g)
and 1.368-3(a), however nothing contained in this Section 12 shall be construed
to require that the Agreement constitute such a "plan of reorganization".
12.2 Following the meeting of the Merging Fund's shareholders called by the
Merging Trust pursuant to Paragraph 5.1 of this Agreement, no amendment to this
Agreement in accordance with this Section 12 may have the effect of changing the
provisions regarding the method for determining the number of Surviving Fund
Shares to be received by the Merging Fund Shareholders under this Agreement to
their detriment without their further approval.
12.3 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
provision of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the Merging Fund and the
Surviving Fund at 60 State Street, Boston, Massachusetts 02109.
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.
A-11
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 Surviving Trust and
the Merging 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 Surviving Fund or the Merging Fund, as the case may be,
as provided in the Surviving Trust's Declaration and the Merging Fund's
Declaration of Trust, respectively. The execution and delivery of this Agreement
have been authorized by the trustees of the Surviving Trust and of the Merging
Trust and this Agreement has been executed by authorized officers of the
Surviving Trust and the Merging 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
Surviving Fund and the Merging Fund, as the case may be, as provided in the
Surviving Trust's Declaration and the Merging Trust's Declaration of Trust,
respectively.
* * * * *
A-12
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf as of the date first set forth above by its President
or Vice President and attested by its Secretary or Assistant Secretary.
Attest: PIONEER MUNICIPAL AND EQUITY INCOME TRUST,
in its individual capacity on its own
behalf and on behalf of its series,
PIONEER MUNICIPAL AND EQUITY INCOME TRUST
By: ------------------------------ By: ------------------------------
Name: Name:
Title: Title:
Attest: PIONEER TAX FREE INCOME FUND,
in its individual capacity on its own
behalf and on behalf of its series,
PIONEER TAX FREE INCOME FUND
By: ------------------------------ By: ------------------------------
Name: Name:
Title: Title:
A-13
SCHEDULE 4.1
------------
A-14
EXHIBIT B -- PORTFOLIO MANAGEMENT DISCUSSION OF EACH PIONEER FUND'S PERFORMANCE
-------------------------------------------------------------------------------
PIONEER TAX FREE INCOME FUND
--------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/07 CLASS A SHARES
--------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Tax Free Income Fund at public offering price,
compared to that of the Lehman Brothers Municipal Bond Index.
Average Annual Total Returns
(As of December 31, 2007)
Net Asset Public Offering
Period Value (NAV) Price (POP)
10 Years 4.26% 3.78%
5 Years 3.71 2.75
1 Year -1.23 -5.65
Expense Ratio
(Per prospectus dated May 1, 2007)
Gross Net
0.86% 0.86%
[THE FOLLOWING DATA IS A REPRESENTATION OF A MOUNTAIN CHART IN THE PRINTED
MATERIAL]
Value of $10,000 Investment
Pioneer Tax Free Lehman Brothers
Income Fund Municipal Bond Index
12/97 $ 9,550 $10,000
12/99 $ 9,709 $10,429
12/01 $11,286 $12,245
12/03 $12,784 $14,134
12/05 $13,935 $15,286
12/07 $14,494 $16,564
Call 1-800-225-6292 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
NAV results represent the percent change in net asset value per share. Returns
would have been lower had sales charges been reflected. POP returns reflect
deduction of maximum 4.5% sales charge. All results are historical and assume
the reinvestment of dividends and capital gains. Other share classes are
available for which performance and expenses will differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
The Lehman Brothers Municipal Bond Index is a broad measure of the municipal
bond market. You cannot invest directly in an Index.
B-1
PORTFOLIO MANAGEMENT DISCUSSION
PIONEER TAX FREE INCOME FUND 12/31/07
In the following interview, David Eurkus, the Fund's portfolio manager,
discusses some of the factors that had an impact for the past year on the
municipal bond market and the Fund.
Q: How did the Fund perform in 2007?
A: For the 12-month period ended December 31, 2007, the total return on
Pioneer Tax Free Income Fund's Class A shares was -1.23% at net asset
value. The Fund's benchmark index, the Lehman Brothers Municipal Bond
Index, generated a return of 3.36% for the same period, and the average
return of the 237 funds in the Lipper General Municipal Debt Funds category
was 1.15%. Lipper is an independent monitor of mutual fund performance. The
Fund's Class A shares generated a 30-day SEC tax-free yield of 3.84% on
December 31, 2007. That translates into a taxable equivalent yield of
5.91%, based on the maximum federal income tax rate of 35%. At the end of
the period, the Fund had 205 issues in 42 states, and the average credit
quality of the portfolio was AA-. At a time when only the highest quality
investments outperformed, the portfolio's below investment-grade and
lower-rated investment-grade securities held back returns.
Call 1-800-225-6292 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher
than the performance data quoted.
The performance data quoted represents past performance, which is no
guarantee of future results. Investment return and principal value will
fluctuate, and shares, when redeemed, may be worth more or less than their
original cost.
Q: What was the investment environment like during 2007?
A: The major event of 2007 was the mid-summer turmoil in the subprime mortgage
sector that led to a loss of confidence in the fixed-income markets. As
some large financial institutions were forced to take write-downs on their
subprime mortgage debt, bond credit agencies became concerned that bond
insurers, which insure both taxable and tax-free bonds, would suffer the
same fate; that is, they would not have enough capital to cover the
defaults on taxable bonds backed by subprime mortgages. In this
environment, credit agencies issued warnings to insurers that their AAA
credit quality ratings could be downgraded. The actions of the credit
agencies led to a "flight to quality" to the Treasury market and to a
significant decline in virtually every other type of fixed-income asset
class, including municipal bonds.
Q: How did you manage the Fund in this environment?
A: As we closed out the fiscal year, 10% of the portfolio was invested in
high-yield bonds, which until the latter part of 2007 had been the
best-performing area of the municipal bond market. The rest of the
portfolio was invested in investment-grade bonds.
Throughout the fiscal year, the Fund maintained an emphasis on market
sectors that underpin the U.S. economy. Health care (26.9% of net assets),
education (10.1% of net assets) and special revenue, or tobacco bonds
(10.4% of net assets) were among the largest positions in the portfolio.
Nearly all of the Fund's assets were invested in revenue bonds, on which
the payment of interest and principal depends on the revenues derived from
the particular asset the bond was issued to finance. Only 3.7% of Fund
holdings were in general obligation bonds, whose principal and interest are
guaranteed by the financial resources and taxing power of the issuing
municipality.
Q: What affected performance?
A: The portfolio's lower-quality investment-grade bonds were instrumental in
the underperformance relative to the Lehman Brothers Municipal Bond Index.
These included hospital and tobacco bonds, which accounted for about 37% of
the Fund's total net assets and which were rated Baa and BBB. On a more
positive note, we were able to provide shareholders with a relatively high
level of tax-free income by remaining fully invested throughout the
12-month period.
Q: What is your outlook for 2008?
A: We expect economic growth to weaken over the next several months, with the
problems in the housing sector having the biggest negative impact. Because
of rising oil prices and an upturn in unemployment, consumer spending is
also likely to decline. Given this backdrop, the Federal Reserve seems
poised to continue to add more liquidity to the economy through further
interest rate cuts. At the close of 2007, the municipal bond market was at
parity with the taxable bond market, which means that high quality
municipal bonds were cheap. We are taking advantage of these more
attractive valuations of municipal bonds and the opportunity to add value
to the portfolio.
B-2
When interest rates rise, the prices of fixed-income securities in the Fund
will generally fall. Conversely, when interest rates fall, the prices of
fixed-income securities in the Fund will generally rise. Investments in the
Fund are subject to possible loss due to the financial failure of issuers
of underlying securities and their inability to meet their debt
obligations. A portion of income may be subject to local, state, federal,
and/or alternative minimum tax. Capital gains, if any, are subject to a
capital gains tax. At times, the Fund's investments may represent
industries or industry sectors that are interrelated or have common risks,
making it more susceptible to any economic, political, or regulatory
developments or other risks affecting those industries and sectors.
Any information in this shareholder report regarding market or economic
trends or the factors influencing the Fund's historical or future
performance are statements of the opinion of Fund management as of the date
of this report. These opinions should not be relied upon for any other
purposes. Past performance is no guarantee of future results, and there is
no guarantee that market forecasts discussed will be realized.
B-3
PIONEER MUNICIPAL AND EQUITY INCOME TRUST
--------------------------------------------------------------------------------
PERFORMANCE UPDATE 11/30/07
--------------------------------------------------------------------------------
The mountain chart on the right shows the change in market value, including
reinvestment of dividends and distributions, of a $10,000 investment made in
common shares of Pioneer Municipal and Equity Income Trust, compared to that of
the Lehman Brothers Municipal Bond Index and the S&P 500 Index.
Cumulative Total Returns
(As of November 30, 2007)
Net Asset Value
Period (NAV) Market Price
Life-of-Trust
(1/30/04) 29.83% 12.23%
1 Year -2.12 2.30
[THE FOLLOWING DATA IS A REPRESENTATION OF A MOUNTAIN CHART IN THE PRINTED
MATERIAL]
Value of $10,000 Investment
Pioneer Municipal and Lehman Brothers Standard & Poor's
Equity Income Fund Municipal Bond Index 500 Index
1/04 $10,000 $10,000 $10,000
11/04 $ 8,374 $10,263 $10,529
11/05 $ 9,008 $10,662 $11,418
11/06 $10,970 $11,314 $13,041
11/07 $11,223 $11,621 $14,048
Call 1-800-225-6292 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
Performance data shown represents past performance. Past performance is no
guarantee of future results. Investment return and market price will fluctuate,
and your shares may trade below net asset value ("NAV"), due to such factors as
interest rate changes, and the perceived credit quality of borrowers.
Total investment return does not reflect broker sales charges or commissions.
All performance is for common shares of the Trust.
Closed-end funds, unlike open-end funds, are not continuously offered. There is
a one-time public offering and once issued, shares of closed-end funds are sold
in the open market through a stock exchange and frequently trade at prices lower
than their NAV. NAV is total assets less total liabilities, which includes
preferred shares, divided by the number of common shares outstanding.
When NAV is lower than market price, dividends are assumed to be reinvested at
the greater of NAV or 95% of the market price. When NAV is higher, dividends are
assumed to be reinvested at prices obtained under the Trust's dividend
reinvestment plan.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Trust distributions or the redemption of Trust
shares.
Index comparisons begin January 31, 2004. The Lehman Brothers Municipal Bond
Index is a broad measure of the municipal bond market. The Standard & Poor's 500
Stock Index (the S&P 500) is a commonly used measure of the broad U.S. stock
market. Index returns are calculated monthly, assume reinvestment of dividends
and, unlike Trust returns, do not reflect any fees, expenses or charges. You
cannot invest directly in an index.
B-4
PORTFOLIO MANAGEMENT DISCUSSION
PIONEER MUNICIPAL AND EQUITY INCOME TRUST 11/30/07
During the fiscal year ended November 30, 2007, the Trustees voted to change the
name of Pioneer Tax Advantaged Balance Trust to Pioneer Municipal and Equity
Income Trust, a name that the Trustees believe better reflects the composition
of the Trust's underlying portfolio, which combines municipal bonds and
qualified dividend-producing equity securities. In June 2007, the Trustees
adopted a level-distribution policy, which may include a return of capital
component. In the following interview, David Eurkus, who is responsible for the
Trust's fixed-income investments, and Walter Hunnewell, Jr., who is responsible
for the Trust's equity investments, discuss the Trust's investment strategy and
outlook.
Q: How did the Trust perform over the 12 months ended November 30, 2007?
A: For the 12-month period ended November 30, 2007, Pioneer Municipal and
Equity Income Trust returned -2.12% at net asset value and 2.30% at market
price. As of November 30, 2007, the Trust was selling at a discount of
market price to net asset value of 9.5%. For the same 12-month period, the
Lehman Brothers Municipal Bond Index returned 2.71%, and the S&P 500 Index
returned 7.72%.
Call 1-800-225-6292 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher
than the performance data quoted.
The performance data quoted represents past performance, which is no
guarantee of future results. Investment return and principal value will
fluctuate, and shares, when redeemed, may be worth more or less than their
original cost.
Q: What was the investment environment like for fixed-income and equity
securities during the 12-month period ended November 30, 2007?
A: The major event of the year was the mid-summer turmoil in the fixed-income
markets, which was triggered by concerns that weakness in the financial
sector, which resulted from write-downs of subprime mortgage debt, would
spread to the wider economy. In that environment, market participants
generally gravitated toward the safest investments and both bonds and
stocks declined. When it appeared that the loss of confidence in debt
collateral could result in a credit crunch, the Federal Reserve ("Fed")
stepped in and lowered short-term interest rates on two occasions during
the fiscal year for a total of three-quarters of a percentage point. (The
Fed also trimmed interest rates by one-quarter percentage point on December
11.) The central bank's actions had a calming effect on the financial
markets, and fixed-income and equity prices stabilized. While the financial
markets were volatile for the remainder of the fiscal year, both bonds and
stocks ended the period with positive returns.
Q: What were the principal strategies used in managing the Trust during the
12-month period ended November 30, 2007?
A: We continued to focus on providing tax-favored income from a mix of about
55% municipal bonds and 45% qualified dividend income (QDI) dividend-paying
equity securities during the period. The emphasis of the fixed-income
portion of the Trust remained on sectors that underpin the economy, with
the largest positions being in bonds related to the health care sector and
other various revenue bonds on which the payment of interest and principal
depends on revenues generated from the particular asset that the bond was
issued to finance. About 22% of the Trust's fixed-income investments were
insured as of November 30, 2007, which means that the interest and
principal of those AAA-rated securities are guaranteed by private insurance
companies. Below investment-grade bonds accounted for almost 19% of the
Trust's fixed-income assets as of November 30, 2007. On November 30, 2007,
the Trust had 124 fixed-income issues in 38 states, territories and the
District of Columbia. The average credit quality of the fixed-income
holdings was A as of November 30, 2007, compared with A- on May 31, 2007.
In the equity portion of the Trust, the focus continued to be on higher QDI
dividend-paying common and preferred equities. At period-end, the split
between preferred and common stocks was 40%/60%. Financial companies, which
typically pay healthy dividends, accounted for 36% of the equity portion of
the Trust. Moreover, approximately three-quarters of the Trust's preferred
equities were in the financials sector and, while diversified across many
different securities, these holdings, which trade like fixed-income
securities, reacted to the late summer tumult in the credit markets. Where
appropriate, we made some changes to the preferred holdings to strengthen
the Trust's portfolio; but our view is that the credit markets dislocation
will eventually pass, and the value of the Trust's high-quality, preferred
holdings will be recognized. The Trust's common equity holdings in the
financial sector have always de-emphasized large, diversified financial
institutions. Nonetheless, the nation-wide weakness in real estate values
had an adverse effect on many of the Trust's bank holdings, such as
KeyCorp, National City, and most notably Washington Mutual. We sold
National City late in the period and Washington Mutual shortly after fiscal
year end. The utilities sector, at 16% of equities on November 30, 2007,
was the next-largest weighting after financials. Telecommunications
services (15%), consumer staples (13%) and health care (8%)
B-5
rounded out the top-five equity sector concentrations at period-end. Among
the changes in common equities during the period, we sold Great Plains
Energy out of concern for risks related to that company's future capital
expenditures. We purchased Diamond Offshore Drilling, a mid- and deep-water
oil drilling company with a good historical record of returning cash to
shareholders. Another addition was B&G Foods, which manufactures an
offering of food products, all with strong regional brand identification.
Near period-end we added a convertible preferred of Avery Dennison, a
leading manufacturer of pressure-sensitive and office product materials.
On November 30, 2007, 28.9% of the Trust was leveraged, which means that
the Trust borrowed and invested those funds in high-yielding securities.
Short-term rates declined over the fiscal period. However, a rise in
short-term rates in the future would add to the Trust's borrowing costs,
and the ability to sustain present dividend levels could be affected.
Should short-term rates continue to decline, the cost of borrowing would go
down, providing the Trust with a modest amount of additional income.
Q: What affected the Trust's performance during the 12-month period ended
November 30, 2007?
A: Remaining fully invested in municipal securities contributed to the Trust's
tax-free income and principal appreciation during the period. However, the
performance of below investment-grade bonds during the period held back
results, as investors sought high quality securities above everything else
in response to the market volatility created by the subprime mortgage
debacle. A reduction in investor demand for municipal securities was also a
factor in the Trust's underperformance during the period.
In the equity portion of the Trust, some of the strongest contributions to
absolute performance during the period came from more defensive names in
consumer staples, health care and telecommunications. As tobacco litigation
risks receded, Carolina Group, the tobacco tracking stock of Lowes, and
Altria Group posted total returns of 46% and 27%, respectively, for the
period. In health care, Merck added substantially to performance because of
good results in the vaccine area, and Bristol-Myers Squibb did well after
weathering a patent challenge. In telecommunications, AT&T and Verizon
helped boost return.
Detractors from returns during the period centered on the Trust's financial
holdings. Washington Mutual (-53%) did poorly due to market fears of its
subprime mortgage exposure. As noted, the stock was sold shortly after
period-end. Preferred holdings Scottish Re Group (-45%) and SLM Holdings
(-17%) also held back results, due to concerns with subprime exposure in
the companies' investment portfolios and private equity deals in an
unfavorable debt market. Both stocks remained in the portfolio at November
30, 2007 because we believe they have the potential to do well in the
future and continue to pay their dividends. In the utility sector, Atmos
Energy (-17%) lost ground compared to other utility stocks during the
period because of its lack of exposure to unregulated power generation. The
Trust continued to hold the stock at November 30, 2007 for its dividend and
because we believe the company has attractive opportunities in its natural
gas pipeline businesses.
Q: What is your outlook?
A: We expect to see further weakness in the economy and believe that the Fed
is likely to continue lowering short-term interest rates well into 2008. A
decline in rates would likely enhance the value of the fixed-income
securities in the portfolio and would make equities more attractive to
investors. In the equity markets, we plan to maintain our focus on
preferred and common stocks that emphasize dividend yield. As has always
been the case, we will seek diversification and the potential for long-term
capital return. Our view is that when the economy moderates, the credit
market concerns that have depressed the Trust's preferred holdings should
ease, and we should see some price appreciation. When investing in common
equities, we will continue to seek opportunities that strengthen the
portfolio and that have the potential to benefit from improving economic
growth over the long term.
Information regarding the Trust's principal investment risks is contained
in the Trust's prospectus. Please refer to those documents when considering
the Trust's risks.
There can be no assurance as to the portion of the Trust's dividends that
will be tax-exempt or tax-qualified.
A portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to a capital gains tax.
When interest rates rise, the prices of fixed-income securities in the
Trust will generally fall. Conversely, when interest rates fall the prices
of fixed-income securities in the Trust will generally rise. By
concentrating in municipal securities, the portfolio is more susceptible to
adverse economic, political or regulatory developments than is a portfolio
that invests more broadly. Investments in the Trust are subject to possible
loss due to the financial failure of underlying securities and their
inability to meet their debt obligations.
The Trust may invest in derivative securities, which may include futures
and options. These types of instruments can increase price fluctuation.
B-6
The Trust currently uses leverage through the issuance of preferred shares.
The Trust is also authorized to borrow from banks and to issue debt
securities, which are other forms of leverage. Leverage creates significant
risks, including the risk that the Trust's income or capital appreciation
will not be sufficient to cover the cost of leverage, which may adversely
affect the return of the holders of common shares.
Any information in this shareowner report regarding market or economic
trends or the factors influencing the Trust's historical or future
performance are statements of the opinion of Trust 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 the market forecasts discussed will be realized.
B-7
PIONEER TAX FREE INCOME FUND
60 State Street
Boston, Massachusetts 02109
STATEMENT OF ADDITIONAL INFORMATION
[ ], 2008
This Statement of Additional Information is not a Prospectus. It should be
read in conjunction with the related Proxy Statement and Prospectus (also dated
[ ], 2008) which covers Class A shares of Pioneer Tax Free Income Fund to be
issued in exchange for shares of Pioneer Municipal and Equity Income Trust.
Please retain this Statement of Additional Information for further reference.
The Prospectus is available to you free of charge (please call
1-800-225-6292).
Page
----
INTRODUCTION .......................................................... 2
EXHIBITS AND DOCUMENTS INCORPORATED BY REFERENCE ...................... 2
ADDITIONAL INFORMATION ABOUT PIONEER TAX FREE INCOME FUND ............. 3
FUND HISTORY ......................................................... 3
DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS ..................... 3
MANAGEMENT OF THE FUND ............................................... 6
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES .................. 9
INVESTMENT ADVISORY AND OTHER SERVICES ............................... 9
PORTFOLIO MANAGERS ................................................... 11
BROKERAGE ALLOCATION AND OTHER PRACTICES ............................. 11
CAPITAL STOCK AND OTHER SECURITIES ................................... 11
PURCHASE, REDEMPTION AND PRICING OF SHARES ........................... 13
TAXATION OF THE FUND ................................................. 13
UNDERWRITERS ......................................................... 13
FINANCIAL STATEMENTS ................................................. 13
ADDITIONAL INFORMATION ABOUT PIONEER MUNICIPAL AND EQUITY INCOME TRUST 13
FINANCIAL STATEMENTS ................................................. 13
PRO FORMA COMBINED FINANCIAL STATEMENTS ............................... 14
INTRODUCTION
This Statement of Additional Information is intended to supplement the
information provided in a Proxy Statement and Prospectus dated [ ] 2008 (the
"Proxy Statement and Prospectus") relating to the proposed merger of Pioneer
Municipal and Equity Income Trust with and into Pioneer Tax Free Income Fund,
and in connection with the solicitation by the management of Pioneer Municipal
and Equity Income Trust of proxies to be voted at the special meeting of
shareholders of Pioneer Municipal and Equity Income Trust to be held on
September 11, 2008.
EXHIBITS AND DOCUMENTS INCORPORATED BY REFERENCE
The following documents are 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 Tax Free Income Fund's Statement of Additional Information,
dated May 1, 2008 (File Nos. 2-57653; 811-02704), as filed with the
Securities and Exchange Commission on April 29, 2008 (Accession No.
0000202679-08-000012) is incorporated herein by reference.
2. Pioneer Tax Free Income Fund's Annual Report for the fiscal year ended
December 31, 2007 (File No. 811-02704), as filed with the Securities
and Exchange Commission on February 28, 2008 (Accession No.
0000276776-08-000025) is incorporated herein by reference.
3. Pioneer Municipal and Equity Income Trust's Annual Report for the
fiscal year ended November 30, 2007 (File No. 811-21448), as filed
with the Securities and Exchange Commission on January 29, 2008
(Accession No. 0000921023-08-000005) is incorporated herein by
reference.
2
ADDITIONAL INFORMATION ABOUT
PIONEER TAX FREE INCOME FUND
FUND HISTORY
For additional information about Pioneer Tax Free Income Fund generally and
its history, see "Fund History" in Pioneer Tax Free Income Fund's SAI.
DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS
For additional information about Pioneer Tax Free Income Fund's investment
objective, policies, risks and restrictions, see "Investment Policies, Risks and
Restrictions" in Pioneer Tax Free Income Fund's SAI.
Following is additional information about the Fundamental Investment
Policies of Pioneer Tax Free Income Fund:
Fundamental Investment Policies. The fund has adopted certain fundamental
investment policies which, along with the fund's investment objective, may not
be changed without the affirmative vote of the holders of a "majority of the
outstanding voting securities" (as defined in the 1940 Act) of the fund. For
this purpose, a majority of the outstanding shares of the fund means the vote of
the lesser of:
1. 67% or more of the shares represented at a meeting, if the holders of
more than 50% of the outstanding shares are present in person or by
proxy, or
2. more than 50% of the outstanding shares of the fund.
The fund's fundamental policies are as follows:
(1) The fund may not borrow money except as permitted by (i) the 1940
Act, or interpretations or modifications by the SEC, SEC staff or
other authority of competent jurisdiction, or (ii) exemptive or other
relief or permission from the SEC, SEC staff or other authority of
competent jurisdiction.
(2) The fund may not engage in the business of underwriting the
securities of other issuers except as permitted by (i) the 1940 Act,
or interpretations or modifications by the SEC, SEC staff or other
authority of competent jurisdiction, or (ii) exemptive or other relief
or permission from the SEC, SEC staff or other authority of competent
jurisdiction.
(3) The fund may lend money or other assets to the extent permitted by
(i) the 1940 Act, or interpretations or modifications by the SEC, SEC
staff or other authority of competent jurisdiction or (ii) exemptive
or other relief or permission from the SEC, SEC staff or other
authority of competent jurisdiction.
(4) The fund may not issue senior securities except as permitted by
(i) the 1940 Act, or interpretations or modifications by the SEC, SEC
staff or other authority of competent jurisdiction, or (ii) exemptive
or other relief or permission from the SEC, SEC staff or other
authority of competent jurisdiction.
(5) The fund may not purchase or sell real estate except as permitted
by (i) the 1940 Act, or interpretations or modifications by the SEC,
SEC staff or other authority of competent jurisdiction, or (ii)
exemptive or other relief or permission from the SEC, SEC staff or
other authority of competent jurisdiction.
(6) The fund may purchase or sell commodities or contracts related to
commodities to the extent permitted by (i) the 1940 Act, or
interpretations or modifications by the SEC, SEC staff or other
authority of competent jurisdiction, or (ii) exemptive or other relief
or permission from the SEC, SEC staff or other authority of competent
jurisdiction.
(7) Except as permitted by exemptive or other relief or permission
from the SEC, SEC staff or other authority of competent jurisdiction,
each fund may not make any investment if, as a result, the fund's
investments will be concentrated in any one industry.
With respect to the fundamental policy relating to borrowing money set
forth in (1) above, the 1940 Act permits a fund to borrow money in amounts of up
to one-third of the fund's total assets from banks for any purpose, and to
borrow up to 5% of the fund's total assets from banks or other lenders for
temporary purposes. To limit the risks attendant to borrowing, the 1940 Act
requires the fund to maintain at all times an "asset coverage" of at least 300%
of the amount of its borrowings. Asset coverage means the ratio that the value
of the fund's total assets, minus liabilities other than borrowings, bears to
the aggregate amount of all borrowings. Certain trading practices and
investments, such as reverse repurchase agreements, may be considered to be
borrowing and thus subject to the 1940 Act restrictions. Borrowing money to
increase a fund's investment portfolio is known as "leveraging." Borrowing,
especially when used for leverage, may cause the value of a fund's shares to be
more volatile than if the fund did not borrow. This is because borrowing tends
to magnify the
3
effect of any increase or decrease in the value of the fund's portfolio
holdings. Borrowed money thus creates an opportunity for greater gains, but also
greater losses. To repay borrowings, the fund may have to sell securities at a
time and at a price that is unfavorable to the fund. There also are costs
associated with borrowing money, and these costs would offset and could
eliminate a fund's net investment income in any given period. Currently, the
fund does not contemplate borrowing money for leverage, but if the fund does so,
it will not likely do so to a substantial degree. The policy in (1) above will
be interpreted to permit the fund to engage in trading practices and investments
that may be considered to be borrowing to the extent permitted by the 1940 Act.
Short-term credits necessary for the settlement of securities transactions and
arrangements with respect to securities lending will not be considered to be
borrowings under the policy. Practices and investments that may involve leverage
but are not considered to be borrowings are not subject to the policy.
With respect to the fundamental policy relating to underwriting set forth
in (2) above, the 1940 Act does not prohibit a fund from engaging in the
underwriting business or from underwriting the securities of other issuers; in
fact, the 1940 Act permits a fund to have underwriting commitments of up to 25%
of its assets under certain circumstances. Those circumstances currently are
that the amount of the fund's underwriting commitments, when added to the value
of the fund's investments in issuers where the fund owns more than 10% of the
outstanding voting securities of those issuers, cannot exceed the 25% cap. A
fund engaging in transactions involving the acquisition or disposition of
portfolio securities may be considered to be an underwriter under the Securities
Act of 1933, as amended (the "1933 Act"). Under the 1933 Act, an underwriter may
be liable for material omissions or misstatements in an issuer's registration
statement or prospectus. Securities purchased from an issuer and not registered
for sale under the 1933 Act are considered restricted securities. There may be a
limited market for these securities. If these securities are registered under
the 1933 Act, they may then be eligible for sale but participating in the sale
may subject the seller to underwriter liability. These risks could apply to a
fund investing in restricted securities. Although it is not believed that the
application of the 1933 Act provisions described above would cause a fund to be
engaged in the business of underwriting, the policy in (2) above will be
interpreted not to prevent the fund from engaging in transactions involving the
acquisition or disposition of portfolio securities, regardless of whether the
fund may be considered to be an underwriter under the 1933 Act.
With respect to the fundamental policy relating to lending set forth in (3)
above, the 1940 Act does not prohibit a fund from making loans; however, SEC
staff interpretations currently prohibit funds from lending more than one-third
of their total assets, except through the purchase of debt obligations or the
use of repurchase agreements. (A repurchase agreement is an agreement to
purchase a security, coupled with an agreement to sell that security back to the
original seller on an agreed-upon date at a price that reflects current interest
rates. The SEC frequently treats repurchase agreements as loans.) While lending
securities may be a source of income to a fund, as with other extensions of
credit, there are risks of delay in recovery or even loss of rights in the
underlying securities should the borrower fail financially. However, loans would
be made only when the fund's manager or a subadviser believes the income
justifies the attendant risks. The fund also will be permitted by this policy to
make loans of money, including to other funds. The fund has obtained exemptive
relief from the SEC to make loans to other Pioneer funds through a credit
facility. The policy in (3) above will be interpreted not to prevent the fund
from purchasing or investing in debt obligations and loans. In addition,
collateral arrangements with respect to options, forward currency and futures
transactions and other derivative instruments, as well as delays in the
settlement of securities transactions, will not be considered loans.
With respect to the fundamental policy relating to issuing senior
securities set forth in (4) above, "senior securities" are defined as fund
obligations that have a priority over the fund's shares with respect to the
payment of dividends or the distribution of fund assets. The 1940 Act prohibits
a fund from issuing senior securities except that the fund may borrow money in
amounts of up to one-third of the fund's total assets from banks for any
purpose. A fund also may borrow up to 5% of the fund's total assets from banks
or other lenders for temporary purposes, and these borrowings are not considered
senior securities. The issuance of senior securities by a fund can increase the
speculative character of the fund's outstanding shares through leveraging.
Leveraging of a fund's portfolio through the issuance of senior securities
magnifies the potential for gain or loss on monies, because even though the
fund's net assets remain the same, the total risk to investors is increased to
the extent of the fund's gross assets. The policy in (4) above will be
interpreted not to prevent collateral arrangements with respect to swaps,
options, forward or futures contracts or other derivatives, or the posting of
initial or variation margin.
With respect to the fundamental policy relating to real estate set forth in
(5) above, the 1940 Act does not prohibit a fund from owning real estate;
however, a fund is limited in the amount of illiquid assets it may purchase.
Investing in real estate may involve risks, including that real estate is
generally considered illiquid and may be difficult to value and sell. Owners of
real estate may be subject to various liabilities, including environmental
liabilities. To the extent that investments in real estate are considered
illiquid, the current SEC staff position generally limits a fund's purchases of
illiquid securities to 15% of net assets. The policy in (5) above will be
interpreted not to prevent the fund from investing in real estate-related
companies, companies whose businesses consist in whole or in part of investing
in real estate, instruments (like mortgages) that are secured by real estate or
interests therein, or real estate investment trust securities.
4
With respect to the fundamental policy relating to commodities set forth in
(6) above, the 1940 Act does not prohibit a fund from owning commodities,
whether physical commodities and contracts related to physical commodities (such
as oil or grains and related futures contracts), or financial commodities and
contracts related to financial commodities (such as currencies and, possibly,
currency futures). However, a fund is limited in the amount of illiquid assets
it may purchase. To the extent that investments in commodities are considered
illiquid, the current SEC staff position generally limits a fund's purchases of
illiquid securities to 15% of net assets. If a fund were to invest in a physical
commodity or a physical commodity-related instrument, the fund would be subject
to the additional risks of the particular physical commodity and its related
market. The value of commodities and commodity-related instruments may be
extremely volatile and may be affected either directly or indirectly by a
variety of factors. There also may be storage charges and risks of loss
associated with physical commodities. The policy in (6) above will be
interpreted to permit investments in exchange traded funds that invest in
physical and/or financial commodities.
With respect to the fundamental policy relating to concentration set forth
in (7) above, the 1940 Act does not define what constitutes "concentration" in
an industry. The SEC staff has taken the position that investment of 25% or more
of a fund's total assets in one or more issuers conducting their principal
activities in the same industry or group of industries constitutes
concentration. It is possible that interpretations of concentration could change
in the future. A fund that invests a significant percentage of its total assets
in a single industry may be particularly susceptible to adverse events affecting
that industry and may be more risky than a fund that does not concentrate in an
industry. The policy in (7) above will be interpreted to refer to concentration
as that term may be interpreted from time to time. The policy also will be
interpreted to permit investment without limit in the following: securities of
the U.S. government and its agencies or instrumentalities; securities of state,
territory, possession or municipal governments and their authorities, agencies,
instrumentalities or political subdivisions; securities of foreign governments;
and repurchase agreements collateralized by any such obligations. Accordingly,
issuers of the foregoing securities will not be considered to be members of any
industry. There also will be no limit on investment in issuers domiciled in a
single jurisdiction or country. The policy also will be interpreted to give
broad authority to the fund as to how to classify issuers within or among
industries.
The fund's fundamental policies are written and will be interpreted
broadly. For example, the policies will be interpreted to refer to the 1940 Act
and the related rules as they are in effect from time to time, and to
interpretations and modifications of or relating to the 1940 Act by the SEC and
others as they are given from time to time. When a policy provides that an
investment practice may be conducted as permitted by the 1940 Act, the policy
will be interpreted to mean either that the 1940 Act expressly permits the
practice or that the 1940 Act does not prohibit the practice.
5
MANAGEMENT OF THE FUND
Following is additional information about Pioneer Tax Free Income Fund's
recently elected Board of Trustees:
The Board of Trustees provides broad supervision over the fund's affairs.
The officers of the fund are responsible for the fund's operations. The Trustees
and officers are listed below, together with their principal occupations during
the past five years. Trustees who are interested persons of the fund within the
meaning of the 1940 Act are referred to as Interested Trustees. Trustees who are
not interested persons of the fund are referred to as Independent Trustees. Each
of the Trustees serves as a Trustee of each of the 77 U.S. registered investment
portfolios for which Pioneer serves as investment adviser (the "Pioneer Funds").
The address for all Trustees and all officers of the fund is 60 State Street,
Boston, Massachusetts 02109.
------------------------------------------------------------------------------------------------------------------------------------
Name, Age Position Held Term of Office and Principal Occupation Other Directorships
and Address With the Fund Length of Service During Past Five Years Held by this Trustee
------------------------------------------------------------------------------------------------------------------------------------
Interested Trustees:
------------------------------------------------------------------------------------------------------------------------------------
John F. Cogan Jr. Chairman of the Board, Trustee since 1996. Deputy Chairman and a Director None
(82)* Trustee and President Serves until a successor of Pioneer Global Asset
trustee is elected or Management S.p.A. ("PGAM");
earlier retirement or Non-Executive Chairman and a
removal. Director of Pioneer Investment
Management USA Inc. ("PIM-
USA"); Chairman and a Director
of Pioneer; Chairman and
Director of Pioneer Institutional
Asset Management, Inc. (since
2006); Director of Pioneer
Alternative Investment
Management Limited (Dublin);
President and a Director of
Pioneer Alternative Investment
Management (Bermuda) Limited
and affiliated funds; Director of
PIOGLOBAL Real Estate
Investment Fund (Russia)
(until June 2006); Director of
Nano-C, Inc. (since 2003);
Director of Cole Management
Inc. (since 2004); Director of
Fiduciary Counseling, Inc.;
President and Director of
Pioneer Funds Distributor, Inc.
("PFD") (until May 2006);
President of all of the Pioneer
Funds; and Of Counsel,
Wilmer Cutler Pickering Hale
and Dorr LLP
------------------------------------------------------------------------------------------------------------------------------------
6
------------------------------------------------------------------------------------------------------------------------------------
Name, Age Position Held Term of Office and Principal Occupation Other Directorships
and Address With the Fund Length of Service During Past Five Years Held by this Trustee
------------------------------------------------------------------------------------------------------------------------------------
Daniel K. Kingsbury Trustee and Executive Trustee since Director, CEO and President None
(49)* Vice President March 2007. Serves of Pioneer Investment
until a successor trustee Management USA Inc. (since
is elected or earlier February 2007); Director and
retirement or removal. President of Pioneer Investment
Management, Inc. and Pioneer
Institutional Asset Management,
Inc. (since February 2007);
Executive Vice President of all
of the Pioneer Funds (since
March 2007); Director of
Pioneer Global Asset
Management S.p.A. (since
April 2007); Head of New
Markets Division, Pioneer
Global Asset Management
S.p.A. (2000-2007)
------------------------------------------------------------------------------------------------------------------------------------
Independent Trustees:
David R. Bock (64) Trustee Trustee since 2005. Executive Vice President and Director of Enterprise
Serves until a successor Chief Financial Officer, I-trax, Community
trustee is elected Inc. (publicly traded health care Investment, Inc.
or earlier retirement services company) (privately-held
or removal. (2004-2007); Partner, Federal affordable housing
City Capital Advisors (boutique finance company); and
merchant bank) (1997 to 2004 Director of New York
and 2008-present); and Mortgage Trust
Executive Vice President and (publicly traded
Chief Financial Officer, Pedestal mortgage REIT)
Inc. (internet-based mortgage
trading company) (2000-2002)
------------------------------------------------------------------------------------------------------------------------------------
7
---------------------------------------------------------------------------------------------------------------------------------
Name, Age Position Held Term of Office and Principal Occupation Other Directorships
and Address With the Fund Length of Service During Past Five Years Held by this Trustee
---------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (60) Trustee Trustee since 1997. President, Bush International, Director of Brady
Serves until a successor LLC (international financial Corporation (industrial
trustee is elected or advisory firm) identification and
earlier retirement or specialty coated material
removal. products manufacturer);
Director of Briggs &
Stratton Co. (engine
manufacturer); Director
of UAL Corporation
(airline holding
company); Director of
Mantech International
Corporation (national
security, defense, and
intelligence technology
firm); and Member,
Board of Governors,
Investment
Company Institute
---------------------------------------------------------------------------------------------------------------------------------
Benjamin M. Trustee Trustee since May, 2008 Professor, Harvard University Trustee, Mellon
Friedman (63) Institutional Funds
Investment Trust and
Mellon Institutional
Funds Master Portfolio
(oversees 17 portfolios
in fund complex)
---------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Trustee Trustee since 1996. Founding Director, Vice- None
Graham (61) Serves until a successor President and Corporate
trustee is elected or Secretary, The Winthrop Group,
earlier retirement or Inc. (consulting firm); and
removal. Desautels Faculty of
Management, McGill University
---------------------------------------------------------------------------------------------------------------------------------
Thomas J. Perna Trustee Trustee since 2006. Private investor (2004-present); Director of Quadriserv
(57) Serves until a successor and Senior Executive Vice Inc. (technology
trustee is elected or President, The Bank of New products for securities
earlier retirement or York (financial and securities lending industry)
removal. services) (1986-2004)
---------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret Trustee Trustee since 1996. President and Chief Executive Director of New
(60) Serves until a successor Officer, Newbury, Piret & America High Income
trustee is elected or Company, Inc. (investment Fund, Inc. (closed-end
earlier retirement or banking firm) investment company)
removal.
---------------------------------------------------------------------------------------------------------------------------------
John Winthrop (71) Trustee Trustee since 1996. President, John Winthrop None
Serves until a successor & Co., Inc. (private
trustee is elected or investment firm)
earlier retirement or
removal.
---------------------------------------------------------------------------------------------------------------------------------
* Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are
officers or directors of the fund's investment adviser and certain of its
affiliates.
8
For additional information about Pioneer Tax Free Income Fund's Board of
Trustees and officers, see "Trustees and Officers" in Pioneer Tax Free Income
Fund's SAI.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
For additional information, see "Annual Fee, Expense and Other
Information--Share Ownership" in Pioneer Tax Free Income Fund's SAI.
INVESTMENT ADVISORY AND OTHER SERVICES
Following is additional information about Pioneer Investment Management,
Inc. ("Pioneer"), the investment adviser and administrator of Pioneer Tax Free
Income Fund:
INVESTMENT ADVISER
The fund has contracted with Pioneer to act as its investment adviser
pursuant to an amended and restated management agreement (the "management
contract"). Pioneer is an indirect, wholly owned subsidiary of UniCredito
Italiano. Certain Trustees or officers of the fund are also directors and/or
officers of certain of UniCredito Italiano's subsidiaries (see management
biographies in Pioneer Tax Free Income Fund's SAI.). Pioneer has entered into an
agreement with its affiliate, Pioneer Investment Management Limited ("PIML"),
pursuant to which PIML provides certain services and personnel to Pioneer.
As the fund's investment adviser, Pioneer provides the fund with investment
research, advice and supervision and furnishes an investment program for the
fund consistent with the fund's investment objective and policies, subject to
the supervision of the fund's Trustees. Pioneer determines what portfolio
securities will be purchased or sold, arranges for the placing of orders for the
purchase or sale of portfolio securities, selects brokers or dealers to place
those orders, maintains books and records with respect to the fund's securities
transactions, and reports to the Trustees on the fund's investments and
performance.
The Trustees' approval of and the terms, continuance and termination of the
management contract are governed by the 1940 Act and the Investment Advisers Act
of 1940, as applicable. Pursuant to the management contract, Pioneer assumes no
responsibility other than to render the services called for under the management
contract, in good faith, and Pioneer will not be liable for any error of
judgment or mistake of law or for any loss arising out of any investment or for
any act or omission in the execution of securities or other transactions for the
fund. Pioneer, however, is not protected against liability by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under the
management contract. The management contract requires Pioneer to furnish all
necessary services, facilities and personnel in connection with the performance
of its services under the management contract, and except as specifically stated
therein, Pioneer is not responsible for any of the fund's ordinary and
extraordinary expenses.
Pioneer has received an order from the Securities and Exchange Commission
that permits Pioneer, subject to the approval of the fund's Board of Trustees,
to hire and terminate a subadviser or to materially modify an existing
subadvisory contract for the 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 Securities and Exchange
Commission adopts a rule that would supersede the order, or would provide
greater flexibility than the order, Pioneer and the fund intend to rely on such
rule to permit Pioneer, subject to the approval of the fund's Board of Trustees
and any other applicable conditions of the rule, to hire and terminate a
subadviser or to materially modify an existing subadvisory contract for the fund
without shareholder approval.
Advisory Fee. As compensation for its management services and expenses
incurred, the fund pays Pioneer a fee at the annual rate of 0.50% of the fund's
average daily net assets up to $250 million, 0.45% of the next $500 million and
0.40% on assets over $750 million. This fee is computed and accrued daily and
paid monthly.
See the table in Annual Fee, Expense and Other Information for management
fees paid to Pioneer during recently completed fiscal years in Pioneer Tax Free
Income Fund's SAI..
Administration Agreement. The fund has entered into an amended and restated
administration agreement with Pioneer pursuant to which certain accounting,
administration and legal services are performed by Pioneer and pursuant to which
Pioneer receives a fee at the annual rate of 0.0225% of the fund's average daily
net assets. See "Annual Fee, Expense and Other Information" for fees the fund
paid to Pioneer for administration and related services.
Under the terms of the amended and restated administration agreement with
the fund, Pioneer pays or reimburses the fund for expenses relating to its
services for the fund, with the exception of the following, which are to be paid
by the fund: (a) charges and expenses
9
for fund accounting, pricing and appraisal services and related overhead,
including, to the extent such services are performed by personnel of Pioneer, or
its affiliates, office space and facilities and personnel compensation, training
and benefits; (b) the charges and expenses of auditors; (c) the charges and
expenses of any custodian, transfer agent, plan agent, dividend disbursing agent
and registrar appointed by the fund; (d) issue and transfer taxes, chargeable to
the fund in connection with securities transactions to which the fund is a
party; (e) insurance premiums, interest charges, dues and fees for membership in
trade associations and all taxes and corporate fees payable by the fund to
federal, state or other governmental agencies; (f) fees and expenses involved in
registering and maintaining registrations of the fund and/or its shares with
federal regulatory agencies, state or blue sky securities agencies and foreign
jurisdictions, including the preparation of prospectuses and statements of
additional information for filing with such regulatory authorities; (g) all
expenses of shareholders' and Trustees' meetings and of preparing, printing and
distributing prospectuses, notices, proxy statements and all reports to
shareholders and to governmental agencies; (h) charges and expenses of legal
counsel to the fund and the Trustees; (i) any distribution fees paid by the fund
in accordance with Rule 12b-1 promulgated by the SEC pursuant to the 1940 Act;
(j) compensation of those Trustees of the fund who are not affiliated with or
interested persons of Pioneer, the fund (other than as Trustees), PIM-USA or
PFD; (k) the cost of preparing and printing share certificates; (l) interest on
borrowed money, if any; (m) fees payable by the fund under management agreements
and the administration agreement; and (n) extraordinary expenses. The fund shall
also assume and pay any other expense that the fund, the manager or any other
agent of the fund may incur not listed above that is approved by the Board of
Trustees (including a majority of the Independent Trustees) as being an
appropriate expense of the fund. In addition, the fund shall pay all brokers'
and underwriting commissions chargeable to the fund in connection with
securities transactions to which the fund is a party.
Potential Conflicts of Interest. The fund is managed by Pioneer which also
serves as investment adviser to other Pioneer mutual funds and other accounts
(including separate accounts and unregistered products) with investment
objectives identical or similar to those of the fund. Securities frequently meet
the investment objectives of the fund, the other Pioneer mutual funds and such
other accounts. In such cases, the decision to recommend a purchase to one fund
or account rather than another is based on a number of factors. The determining
factors in most cases are the amount of securities of the issuer then
outstanding, the value of those securities and the market for them. Other
factors considered in the investment recommendations include other investments
which each fund or account presently has in a particular industry and the
availability of investment funds in each fund or account.
It is possible that at times identical securities will be held by more than
one fund and/or account. However, positions in the same issue may vary and the
length of time that any fund or account may choose to hold its investment in the
same issue may likewise vary. To the extent that more than one of the Pioneer
mutual funds or a private account managed by Pioneer seeks to acquire the same
security at about the same time, the fund may not be able to acquire as large a
position in such security as it desires or it may have to pay a higher price for
the security. Similarly, the fund may not be able to obtain as large an
execution of an order to sell or as high a price for any particular portfolio
security if Pioneer decides to sell on behalf of another account the same
portfolio security at the same time. On the other hand, if the same securities
are bought or sold at the same time by more than one fund or account, the
resulting participation in volume transactions could produce better executions
for the fund. In the event more than one account purchases or sells the same
security on a given date, the purchases and sales will normally be made as
nearly as practicable on a pro rata basis in proportion to the amounts desired
to be purchased or sold by each account. Although the other Pioneer mutual funds
may have the same or similar investment objectives and policies as the fund,
their portfolios do not generally consist of the same investments as the fund or
each other, and their performance results are likely to differ from those of the
fund.
Personal Securities Transactions. The fund, Pioneer, and PFD have adopted a
code of ethics under Rule 17j-1 under the 1940 Act which is applicable to
officers, trustees/directors and designated employees of Pioneer and certain of
Pioneer's affiliates. The code permits such persons to engage in personal
securities transactions for their own accounts, including securities that may be
purchased or held by the fund, and is designed to prescribe means reasonably
necessary to prevent conflicts of interest from arising in connection with
personal securities transactions. The code is on public file with and available
from the SEC.
For additional information, see "Shareholder Servicing/Transfer Agent,"
"Custodian" and "Independent Registered Public Accounting Firm" in Pioneer Tax
Free Income Fund's SAI.
PORTFOLIO MANAGERS
For addition information, see "Portfolio Management" in Pioneer Tax Free
Income Fund's SAI.
BROKERAGE ALLOCATION AND OTHER PRACTICES
For additional information about the Pioneer Tax Free Income Fund's
brokerage allocation practices, see "Portfolio Transactions" in Pioneer Tax Free
Income Fund's SAI.
10
CAPITAL STOCK AND OTHER SECURITIES
Pioneer Tax Free Income Fund issues Class A, B, C and Y shares. As an
open-end management investment company, the fund continuously offers its shares
to the public and under normal conditions must redeem its shares upon the demand
of any shareholder at the next determined net asset value per share less any
applicable CDSC. See "Sales Charges" in Pioneer Tax Free Income Fund's SAI. When
issued and paid for in accordance with the terms of the prospectus and statement
of additional information, shares of the fund are fully paid and non-assessable.
Shares will remain on deposit with the fund's transfer agent and certificates
will not normally be issued.
The shares of each class represent an interest in the same portfolio of
investments of the fund. Each class has equal rights as to voting, redemption,
dividends and liquidation, except that each class bears different distribution
and transfer agent fees and may bear other expenses properly attributable to the
particular class. Class A, Class B and Class C shareholders have exclusive
voting rights with respect to the Rule 12b-1 Plan adopted by holders of those
shares in connection with the distribution of shares.
The Trust
The Trust's operations are governed by the Amended and Restated Agreement
and Declaration of Trust, dated as of July 1, 2008 (referred to in this section
as the declaration). A copy of the Trust's Certificate of Trust dated July 26,
1996, as amended, is on file with the office of the Secretary of State of
Delaware.
The fund is a series of the trust, a Delaware statutory trust. Delaware law
provides a statutory framework for the powers, duties, rights and obligations of
the board (referred to in this section as the trustees) and shareholders of the
Delaware statutory trust, while the more specific powers, duties, rights and
obligations of the trustees and the shareholders are determined by the trustees
as set forth declaration. Some of the more significant provisions of the
declaration are described below.
Shareholder Voting
The declaration provides for shareholder voting as required by the 1940 Act
or other applicable laws but otherwise permits, consistent with Delaware law,
actions by the trustees without seeking the consent of shareholders. The
trustees may, without shareholder approval, amend the declaration or authorize
the merger or consolidation of the trust into another trust or entity,
reorganize the trust or any series or class into another trust or entity or a
series or class of another entity, sell all or substantially all of the assets
of the trust or any series or class to another entity, or a series or class of
another entity, or terminate the trust or any series or class.
The fund is not required to hold an annual meeting of shareholders, but the
fund will call special meetings of shareholders whenever required by the 1940
Act or by the terms of the declaration. The declaration gives the Board the
flexibility to specify either per share voting or dollar-weighted voting. Under
per share voting, each share of the fund is entitled to one vote. Under
dollar-weighted voting, a shareholder's voting power is determined, not by the
number of shares the shareholder owns, but by the dollar value of those shares
determined on the record date. All shareholders of all series and classes of the
trust vote together, except where required by the 1940 Act to vote separately by
series or by class, or when the trustees have determined that a matter affects
only the interests of one or more series or classes of shares.
Election and Removal of Trustees
The declaration provides that the trustees may establish the number of
trustees and that vacancies on the board may be filled by the remaining
trustees, except when election of trustees by the shareholders is required under
the 1940 Act. Trustees are then elected by a plurality of votes cast by
shareholders at a meeting at which a quorum is present. The declaration also
provides that a mandatory retirement age may be set by action of two thirds of
the trustees and that trustees may be removed at any time or for any reason by a
majority of the Board or by a majority of the outstanding shareholders of the
trust.
Amendments to the Declaration
The trustees are authorized to amend the declaration without the vote of
shareholders, but no amendment may be made that impairs the exemption from
personal liability granted in the declaration to persons who are or have been
shareholders, trustees, officers or, employees of the trust or that limit the
rights to indemnification or insurance provided in the declaration with respect
to actions or omissions of persons entitled to indemnification under the
declaration prior to the amendment.
11
Issuance and Redemption of Shares
The fund may issue an unlimited number of shares for such consideration and
on such terms as the trustees may determine. Shareholders are not entitled to
any appraisal, preemptive, conversion, exchange or similar rights, except as the
trustees may determine. The fund may involuntarily redeem a shareholder's shares
upon certain conditions as may be determined by the trustees, including, for
example, if the shareholder fails to provide the fund with identification
required by law, or if the fund is unable to verify the information received
from the shareholder. Additionally, as discussed below, shares may be redeemed
in connection with the closing of small accounts.
Disclosure of Shareholder Holdings
The declaration specifically requires shareholders, upon demand, to
disclose to the fund information with respect to the direct and indirect
ownership of shares in order to comply with various laws or regulations, and the
fund may disclose such ownership if required by law or regulation.
Small Accounts
The declaration provides that the fund may close out a shareholder's
account by redeeming all of the shares in the account if the account falls below
a minimum account size (which may vary by class) that may be set by the trustees
from time to time. Alternately, the declaration permits the fund to assess a fee
for small accounts (which may vary by class) and redeem shares in the account to
cover such fees, or convert the shares into another share class that is geared
to smaller accounts.
Series and Classes
The declaration provides that the trustees may establish series and classes
in addition to those currently established and to determine the rights and
preferences, limitations and restrictions, including qualifications for
ownership, conversion and exchange features, minimum purchase and account size,
expenses and charges, and other features of the series and classes. The trustees
may change any of those features, terminate any series or class, combine series
with other series in the trust, combine one or more classes of a series with
another class in that series or convert the shares of one class into another
class.
Each share of the fund, as a series of the trust, represents an interest in
the fund only and not in the assets of any other series of the trust.
Shareholder, Trustee and Officer Liability
The declaration provides that shareholders are not personally liable for
the obligations of the fund and requires a fund to indemnify a shareholder
against liability arising solely from the shareholder's ownership of shares in
the fund. In addition, the fund will assume the defense of any claim against a
shareholder for personal liability at the request of the shareholder. The
declaration further provides that no trustee, officer or employee of the fund
shall be liable to the fund or any shareholder for any action, failure to act,
error or mistake except in cases of bad faith, willful misfeasance, gross
negligence or reckless disregard of duty. The declaration requires the fund to
indemnify each trustee, director, officer, employee and authorized agent to the
fullest extent permitted by law against liability and against all expenses
reasonably incurred or paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise by virtue of his
being or having been such a trustee, director, officer, employee, or agent and
against amounts paid or incurred by him in settlement thereof. The 1940 Act
currently provides that no officer or director shall be protected from liability
to the fund or shareholders for misfeasance, bad faith, gross negligence, or
reckless disregard of the duties of office. The declaration extends to trustees,
officers and employees of the fund the full protection from liability that the
law allows.
The declaration provides that the appointment or designation of a trustee
as chairperson, a member of a committee, an expert, lead independent trustee, or
any other special appointment shall not impose any heightened standard of care
or liability on such trustee.
Derivative Actions
The declaration provides a detailed process for the bringing of derivative
actions by shareholders in order to permit legitimate inquiries and claims while
avoiding the time, expense, distraction, and other harm that can be caused to
the fund or its shareholders as a result of spurious shareholder demands and
derivative actions. Prior to bringing a derivative action, a demand by three
unrelated shareholders must first be made on the fund's trustees. The
declaration details various information, certifications, undertakings and
acknowledgements that must be included in the demand. Following receipt of the
demand, the trustees have a period of 90 days, which may be extended by an
additional 60 days, to consider the demand. If a majority of the trustees who
are considered independent for the purposes of
12
considering the demand determine that maintaining the suit would not be in the
best interests of the fund, the trustees are required to reject the demand and
the complaining shareholders may not proceed with the derivative action unless
the shareholders are able to sustain the burden of proof to a court that the
decision of the trustees not to pursue the requested action was not a good faith
exercise of their business judgment on behalf of the fund. The declaration
further provides that shareholders owning shares representing at least 10% of
the voting power of the affected fund must join in bringing the derivative
action. If a demand is rejected, the complaining shareholders will be
responsible for the costs and expenses (including attorneys' fees) incurred by
the fund in connection with the consideration of the demand, if in the judgment
of the independent trustees, the demand was made without reasonable cause or for
an improper purpose. If a derivative action is brought in violation of the
declaration, the shareholders bringing the action may be responsible for the
fund's costs, including attorneys' fees.
The declaration further provides that the fund shall be responsible for
payment of attorneys' fees and legal expenses incurred by a complaining
shareholder only if required by law, and any attorneys' fees that the fund is
obligated to pay shall be calculated using reasonable hourly rates. The
declaration also requires that actions by shareholders against the fund be
brought only in federal court in Boston, Massachusetts, or if not permitted to
be brought in federal court, then in state court in Boston, Massachusetts, and
that shareholders have no right to jury trial for such actions.
PURCHASE, REDEMPTION AND PRICING OF SHARES
For additional information about purchase, redemption and pricing of shares
of Pioneer Tax Free Income Fund, see "Sales Charges," "Redeeming Shares,"
"Telephone and Online Transactions" and "Pricing of Shares" in Pioneer Tax Free
Income Fund's SAI.
TAXATION OF THE FUND
For additional information about tax matters related to an investment in
Pioneer Tax Free Income Fund, see "Tax Status" in Pioneer Tax Free Income Fund's
SAI.
UNDERWRITERS
For additional information about the Pioneer Tax Free Income Fund's
principal underwriter and distribution plans, see "Principal Underwriter and
Distribution Plan" and "Sales Charges" in Pioneer Tax Free Income Fund's SAI.
FINANCIAL STATEMENTS
For additional information, see "Financial Statements" in Pioneer Tax Free
Income Fund's SAI.
13
ADDITIONAL INFORMATION ABOUT
PIONEER MUNICIPAL AND EQUITY INCOME TRUST
FINANCIAL STATEMENTS
For additional information, see "Financial Statements" in Pioneer Municipal
and Equity Income Trust's 2007 Annual Report.
14
PRO FORMA COMBINED FINANCIAL STATEMENTS
Pro Forma Schedule of Investments (a)
12/31/07
(Unaudited)
Pioneer
Pioneer Tax Free
Municipal Pioneer Income Fund
and Equity Tax Free Pro Forma % of
Income Trust Income Fund Combined Pro Forma
Principal Principal Pro Forma Principal Combined
Amount ($) Amount ($) Adjustment Amount ($) Net Assets
------------ ----------- ---------- ----------- -----------
TAX EXEMPT OBLIGATIONS 90.0%
No State 0.5%
5,000,000 5,000,000 Northern Mariana Islands, 5.0%, 6/1/17
Alabama 2.0%
7,500,000 7,500,000 DCH Health Care Authority, 5.125%, 6/1/36
405,000 405,000 Florence Alabama Water General, 4.4%, 12/1/08
550,000 550,000 Huntsville Alabama Electric System, 4.6%, 12/1/09
1,445,000 1,445,000 Huntsville Alabama General, 4.75%, 11/1/18
1,895,000 1,895,000 Huntsville Alabama, 5.125%, 5/1/20
5,000,000 5,000,000 Huntsville-Redstone Village Special Care Facilities Financing
Authority, 5.5%, 1/1/43
725,000 725,000 Madison Alabama Water & Waste Water Board, 4.6%, 12/1/11
645,000 645,000 Mobile Alabama Regulation General, 0.0%, 2/15/09
500,000 500,000 Southeast, Alabama Gas District, 5.3%, 6/1/12
1,500,000 1,500,000 Sylacauga Health Care Authority Revenue, 6.0%, 8/1/35
Arizona 2.4%
1,000,000 1,000,000 Maricopa County Hospital Revenue, 5.0%, 4/1/35
1,000,000 1,000,000 Maricopa County School District, 7.0%, 7/1/08
4,000,000 4,000,000 Phoenix Arizona Civic Corp., District Revenue, 0.0%, 7/1/25
8,005,000 8,005,000 Phoenix Arizona Civic Corp., District Revenue, 0.0%, 7/1/26
10,000,000 10,000,000 Phoenix Arizona Civic Corp., Floating Rate Note, 7/1/43
470,000 470,000 Pima County Industrial Development Authority, 6.375%, 7/1/31
530,000 530,000 Pima County Industrial Development Authority, 6.375%, 7/1/31
989,000 989,000 Pima County Industrial Development Authority, 6.75%, 7/1/31
1,000,000 1,000,000 Pima County Industrial Development Authority, 7.5%, 7/1/34
California 9.1%
5,000,000 5,000,000 Alhambra California CTFS Part, 6.75%, 9/1/23
1,000,000 1,000,000 California Health Facilities Authority Revenue, 5.25%, 7/1/23
10,000,000 10,000,000 California State Department of Veteran Affairs, 4.6%, 12/1/28
1,000,000 1,000,000 California State, 4.25%, 8/1/33
4,875,000 4,875,000 California Statewide Communities Development Authority,
5.0%, 5/15/30
5,125,000 5,125,000 California Statewide Communities Development Authority,
5.0%, 5/15/38
20,000,000 20,000,000 Foothill Eastern Transportation Corridor Agency Toll Road
Revenue, 0.0%, 1/1/28
1,000,000 1,000,000 Franklin-McKinley California School District, 6.0%, 7/1/16
9,000,000 9,000,000 Golden State Tobacco Securitization Corp., 5.125%, 6/1/47
9,655,000 9,655,000 Golden State Tobacco Securitization Corp., 5.817%, 6/1/45
(144A) RIB
4,000,000 4,000,000 Golden State Tobacco Securitization Corp., 6.75%, 6/1/39
4,525,000 4,525,000 Golden State Tobacco Securitization, 7.8%, 6/1/42
1,000,000 1,000,000 Golden State Tobacco Securitization, 7.875%, 6/1/42
3,000,000 3,000,000 Golden State Tobacco Securitization, 7.9%, 6/1/42
12,000,000 12,000,000 Golden State Tobacco Security Corp. California, 5.125%, 6/1/47
Pioneer
Pioneer Pioneer Tax Free
Municipal Municipal Pioneer Income Fund
and Equity and Equity Tax Free Pro Forma
Income Trust Income Trust Income Fund Combined
Principal Market Market Pro Forma Market
Amount ($) Value Value Adjustment (a) Value
------------ ------------ ----------- -------------- -----------
$ -- $ 4,937,050 $ $ 4,937,050
---------- ----------- -------------- -----------
$ -- $ 4,937,050 $ $ 4,937,050
---------- ----------- -------------- -----------
$ -- $ 7,318,800 $ $ 7,318,800
-- 410,229 410,229
-- 561,655 561,655
-- 1,472,845 1,472,845
-- 2,037,599 2,037,599
5,000,000
4,349,550 -- 4,349,550
-- 752,217 752,217
-- 647,522 647,522
-- 534,450 534,450
1,500,000 1,415,250 -- 1,415,250
---------- ----------- -------------- -----------
$5,764,800 $13,735,317 $ $19,500,117
---------- ----------- -------------- -----------
1,000,000 $ 923,110 $ -- $ $ 923,110
-- 1,019,600 1,019,600
-- 3,328,160 3,328,160
-- 6,648,953 6,648,953
-- 8,346,600 8,346,600
470,000 537,577 -- 537,577
530,000 541,803 -- 541,803
989,000 1,016,178 -- 1,016,178
1,000,000 1,197,860 -- 1,197,860
---------- ----------- ------------ -----------
$4,216,528 $19,343,313 $ $23,559,841
---------- ----------- ------------ -----------
$ -- $ 5,769,900 $ $ 5,769,900
1,000,000 1,023,190 -- 1,023,190
-- 9,922,600 9,922,600
-- 926,380 926,380
-- 4,551,251 4,551,251
-- 4,636,741 4,636,741
-- 7,882,600 7,882,600
-- 1,178,010 1,178,010
9,000,000 7,579,620 -- 7,579,620
9,655,000
8,013,264 -- 8,013,264
4,000,000 4,623,840 -- 4,623,840
-- 5,449,548 5,449,548
-- 1,207,650 1,207,650
-- 3,626,280 3,626,280
-- 10,106,160 10,106,160
15
Pioneer
Pioneer Tax Free
Municipal Pioneer Income Fund
and Equity Tax Free Pro Forma % of
Income Trust Income Fund Combined Pro Forma
Principal Principal Pro Forma Principal Combined
Amount ($) Amount ($) Adjustment Amount ($) Net Assets
------------ ----------- ---------- ----------- ----------
California (continued)
10,000,000 10,000,000 Inland Empire Tobacco Securitization Authority California
Tobacco, 0.0%, 6/1/36
1,175,000 1,175,000 Lucia Mar University School District, 0.0%, 8/1/20
165,000 165,000 Sacramento California Municipal Utility District, 5.5%, 2/1/11
3,600,000 3,600,000 Saugus California University School District, 0.0%, 8/1/23
1,210,000 1,210,000 Saugus California University School District, 0.0%, 8/1/24
5,000,000 5,000,000 Tobacco Securitization Authority Southern California Tobacco
Settlement, 5.125%, 6/1/46
3,000,000 3,000,000 West VY Mission Community College California, 5.0%, 8/1/30
Colorado 1.2%
3,000,000 3,000,000 Colorado Educational & Cultural Facilities Authority Revenue,
5.5%, 6/1/37 (144A)
2,500,000 2,500,000 Colorado Health Facilities Revenue, 5.25%, 6/1/36
10,000 10,000 Colorado Housing Finance Authority, Series A-3, 7.0%, 11/1/16
15,000 15,000 Colorado Housing Finance Authority, Series B-2, 7.45%, 11/1/27
70,000 70,000 Colorado Housing Finance Authority, Series B-3, 6.55%, 5/1/25
3,575,000 3,575,000 Douglas County School District Regiona1, 7.0%, 12/15/13
10,000,000 10,000,000 E-470 Public Highway Authority Colorado, 0.0%, 9/1/37
Connecticut 1.3%
10,000,000 10,000,000 Connecticut State Health & Education, 5.0%, 7/1/42
1,000,000 1,000,000 Connecticut State Health & Education, 5.5%, 7/1/17
1,500,000 1,500,000 Mohegan Tribe Indians Gaming Authority, 5.25%,
1/1/33 (144A)
District of Columbia 1.3%
4,000,000 8,825,000 12,825,000 District of Columbia Tobacco Settlement Financing Corp.,
6.75%, 5/15/40
Florida 2.8%
1,000,000 1,000,000 Dade County Florida General, 7.7%, 10/1/12
500,000 500,000 Halifax Hospital Medical Center Florida, 5.375%, 6/1/46
1,105,000 1,105,000 Highlands County Health Facilities Authority Revenue,
5.0%, 11/15/24
5,000,000 5,000,000 Highlands County Health Facilities Authority Revenue,
6.0%, 11/15/25
5,435,000 5,435,000 Lee County Industrial Development Authority Revenue,
4.75%, 6/15/14
2,000,000 2,000,000 Lee County Industrial Development Authority Revenue,
5.375%, 6/15/37
585,000 585,000 Madison County First Mortgage Revenue, 6.0%, 7/1/25
1,535,000 1,535,000 Marion County Florida Hospital District Development,
5.0%, 10/1/16
2,025,000 2,025,000 Miami Beach Health Facilities Authority Revenue,
5.375%, 11/15/28
500,000 500,000 Miami Beach Health Facilities Authority Revenue, 6.7%, 11/15/19
1,400,000 1,400,000 Orange County Health Facilities Authority Revenue,
5.5%, 7/1/38
2,000,000 2,000,000 Sarasota County Florida Health, 5.75%, 7/1/45
3,970,000 3,970,000 Tampa-Hillsborough County Expressway Authority Revenue,
RIB, 6.379%, 7/1/23 (144A)
Pioneer
Pioneer Pioneer Tax Free
Municipal Municipal Pioneer Income Fund
and Equity and Equity Tax Free Pro Forma
Income Trust Income Trust Income Fund Combined
Principal Market Market Pro Forma Market
Amount ($) Value Value Adjustment (a) Value
------------ ------------ ----------- -------------- ------------
$ -- $ 1,435,000 $ $ 1,435,000
-- 651,667 651,667
-- 170,108 170,108
-- 1,682,568 1,682,568
-- 533,985 533,985
4,215,850
-- 4,215,850 3,136,140
-- 3,136,140 --------- -----------
----------- ----------- $ $88,322,352
$21,239,914 $67,082,438 --------- -----------
----------- -----------
3,000,000
$ 2,755,140 $ -- $ $ 2,755,140
-- 2,449,275 2,449,275
-- 10,314 10,314
-- 15,250 15,250
-- 71,720 71,720
-- 4,259,470 4,259,470
-- 2,052,300 2,052,300
----------- ----------- --------- -----------
$ 2,755,140 $ 8,858,329 $ $11,613,469
----------- ----------- --------- -----------
$ -- $10,400,100 $ $10,400,100
-- 1,044,780 1,044,780
1,500,000
1,323,555 -- 1,323,555
----------- ----------- --------- -----------
$ 1,323,555 $11,444,880 $ $12,768,435
----------- ----------- --------- -----------
4,000,000
$ 4,085,800 $ 9,014,296 $ $13,100,096
----------- ----------- --------- -----------
$ 4,085,800 $ 9,014,296 $ $13,100,096
----------- ----------- --------- -----------
$ -- $ 1,178,660 $ $ 1,178,660
-- 476,175 476,175
1,105,000
1,107,784 -- 1,107,784
5,000,000
5,578,950 -- 5,578,950
-- 5,255,917 5,255,917
2,000,000
1,704,080 -- 1,704,080
585,000 566,795 -- 566,795
-- 1,595,540 1,595,540
2,025,000
1,814,380 -- 1,814,380
500,000 515,825 -- 515,825
1,400,000
1,230,264 -- 1,230,264
-- 1,806,900 1,806,900
3,970,000
4,645,734 -- 4,645,734
----------- ----------- --------- -----------
$17,163,812 $10,313,192 $ $27,477,004
----------- ----------- --------- -----------
16
Pioneer
Pioneer Tax Free
Municipal Pioneer Income Fund
and Equity Tax Free Pro Forma % of
Income Trust Income Fund Combined Pro Forma
Principal Principal Pro Forma Principal Combined
Amount ($) Amount ($) Adjustment Amount ($) Net Assets
------------ ----------- ---------- ----------- ----------
Georgia 2.5%
9,580,000 9,580,000 Georgia Municipal Electric Authority Power Revenue, RIB,
6.97%, 1/1/20 (144A)
10,000,000 10,000,000 Houston County Georgia Hospital Authority Revenue,
5.0%, 10/1/42
2,500,000 2,500,000 Milledgeville-Baldwin County Development Authority Revenue,
5.625%, 9/1/30
Illinois 5.0%
3,000,000 3,000,000 Chicago Illinois General Obligation, 5.0%, 1/1/28
4,000,000 4,000,000 Chicago Illinois O'Hare International Airport, 5.5%, 12/1/30
170,000 170,000 Chicago Illinois Single Family Mortgage, 6.45%, 9/1/29
495,000 495,000 Chicago Illinois Tax Increment, 5.0%, 11/15/10
10,775,000 10,775,000 Illinois Finance Authority, 5.0%, 5/1/25
4,580,000 4,580,000 Illinois Development Finance Authority Revenue, 5.25%, 10/1/24
5,000,000 5,000,000 Illinois Educational Facilities Authority Revenue, 5.0%, 12/1/38
2,000,000 2,000,000 Illinois Finance Authority Revenue, 5.5%, 8/15/43
2,055,000 2,055,000 Illinois Finance Authority Revenue, 8.245%, 8/15/43 (144A) RIB
5,000,000 5,000,000 Illinois Finance Authority, 5.0%, 4/1/31
5,000,000 5,000,000 Illinois Finance Authority, 5.0%, 4/1/36
1,145,000 1,145,000 Illinois Housing Development Authority Revenue Multi-Family
Housing, 7.0%, 7/1/23
20,000,000 20,000,000 Metropolitan Pier & Exposition Authority Illinois Dedicated
State Tax, Floating Rate Note, 6/15/39
3,000,000 3,000,000 Will County Illinois Forest Preservation District, 0.0%, 12/1/18
Indiana 4.8%
15,000,000 15,000,000 Hobart Indiana Building Corp., 6.5%, 1/15/29
5,000,000 5,000,000 Indiana Health & Educational Facilities Finance Authority,
5.0%, 2/15/36
5,000,000 5,000,000 10,000,000 Indiana Health & Educational Facilities Finance Authority,
5.0%, 2/15/39
4,135,000 1,250,000 5,385,000 Indiana State Development Finance Authority Revenue,
5.75%, 10/1/11
3,400,000 3,400,000 Indianapolis Local Public Improvement Board Revenue,
6.0%, 1/10/20
1,400,000 1,400,000 Indianapolis Local Public Improvement Board Revenue,
6.75%, 2/1/14
1,000,000 1,000,000 Lawrence Township Metropolitan School District Revenue,
6.75%, 7/5/13
2,570,000 2,570,000 Vigo County Hospital Authority Revenue, 5.8%, 9/1/47 (144A)
Iowa 0.4%
4,000,000 4,000,000 Iowa Financing Authority Senior Housing Revenue,
5.625%, 12/1/45
Kansas 0.2%
750,000 750,000 Manhattan Health Care Facilities Revenue, 5.125%, 5/15/37
2,000,000 2,000,000 Manhattan Health Care Facilities Revenue, 5.125%, 5/15/42
Kentucky 0.3%
165,000 165,000 Kentucky Economic Development Finance, 6.25%, 10/1/12
335,000 335,000 Kentucky Economic Development Finance, 6.25%, 10/1/12
2,000,000 2,000,000 Louisville & Jefferson County Kentucky Metro Government
Health Systems Revenue, 5.25%, 10/1/36
Pioneer
Pioneer Pioneer Tax Free
Municipal Municipal Pioneer Income Fund
and Equity and Equity Tax Free Pro Forma
Income Trust Income Trust Income Fund Combined
Principal Market Market Pro Forma Market
Amount ($) Value Value Adjustment (a) Value
------------ ------------ ----------- -------------- -----------
9,580,000
$11,714,711 $ -- $ $11,714,711
-- 9,431,400 9,431,400
2,500,000
2,842,750 -- 2,842,750
----------- ----------- --------- -----------
$14,557,461 $ 9,431,400 $ $23,988,861
----------- ----------- --------- -----------
3,000,000 $ 3,095,610 $ -- $ $ 3,095,610
-- 3,424,920 3,424,920
-- 172,424 172,424
-- 487,060 487,060
-- 9,995,213 9,995,213
4,580,000 4,621,037 -- 4,621,037
5,000,000 5,125,800 -- 5,125,800
2,000,000 2,242,060 -- 2,242,060
2,055,000 2,900,632 -- 2,900,632
-- 4,692,450 4,692,450
-- 4,609,600 4,609,600
-- 1,470,695 1,470,695
-- 4,295,800 4,295,800
-- 1,855,500 1,855,500
----------- ----------- --------- -----------
$17,985,139 $31,003,662 $ $48,988,801
----------- ----------- --------- -----------
$ -- $18,151,050 $ $18,151,050
-- 4,719,000 4,719,000
5,000,000
4,678,450 4,678,450 9,356,900
4,135,000
4,165,020 1,259,075 5,424,095
-- 3,927,272 3,927,272
-- 1,569,498 1,569,498
-- 1,153,490 1,153,490
2,570,000 2,366,482 -- 2,366,482
----------- ----------- --------- -----------
$11,209,952 $35,457,835 $ $46,667,787
----------- ----------- --------- -----------
4,000,000
$ 3,472,520 $ -- $ $ 3,472,520
----------- ----------- --------- -----------
$ 3,472,520 $ -- $ $ 3,472,520
----------- ----------- --------- -----------
750,000 $ 630,060 $ -- $ $ 630,060
2,000,000 1,647,120 -- 1,647,120
----------- ----------- --------- -----------
$ 2,277,180 $ -- $ $ 2,277,180
----------- ----------- --------- -----------
$ -- $ 179,695 $ $ 179,695
-- 353,475 353,475
-- 1,939,240 1,939,240
----------- ----------- --------- -----------
$ -- $ 2,472,410 $ $ 2,472,410
----------- ----------- --------- -----------
17
Pioneer
Pioneer Tax Free
Municipal Pioneer Income Fund
and Equity Tax Free Pro Forma % of
Income Trust Income Fund Combined Pro Forma
Principal Principal Pro Forma Principal Combined
Amount ($) Amount ($) Adjustment Amount ($) Net Assets
------------ ----------- ---------- ----------- -----------
Louisiana 3.5%
5,000,000 15,000,000 20,000,000 Louisiana Public Facilities Authority Revenue, 5.5%, 5/15/47
425,000 425,000 Louisiana Public Facilities Authority Revenue, 6.25%, 10/1/11
1,085,000 1,085,000 Louisiana Local Government Environment Community,
5.25%, 12/1/18
5,000,000 5,000,000 St. John Baptist Parish Louisiana Revenue, 5.125%, 6/1/37
8,335,000 8,335,000 Tobacco Settlement Financing Corp., 5.875%, 5/15/39
Maine 0.0%
300,000 300,000 Maine Municipal Bond Bank, 5.0%, 11/1/09
Maryland 1.2%
3,000,000 3,000,000 Frederick County Educational Facilities Revenue, 5.625%, 9/1/38
4,600,000 4,600,000 Maryland Health Department, 4.75% 1/1/13
1,000,000 1,000,000 Maryland State Economic Development Revenue, 5.0%, 12/1/31
1,000,000 1,000,000 Maryland State Economic Development Revenue, Series A,
5.0%, 12/1/16
660,000 660,000 Maryland State Economic Development Revenue, Series B,
5.0%, 12/1/16
2,000,000 2,000,000 Maryland State Health & Higher Educational Facilities Authority
Revenue, 5.125%, 7/1/34
Massachusetts 9.5%
16,070,000 16,070,000 Massachusetts Bay Transportation Authority, 4.0%, 7/1/33
4,990,000 4,990,000 Massachusetts Bay Transportation Authority, 5.0%, 7/1/31
4,500,000 4,500,000 Massachusetts Health & Educational Facilities Authority
Revenue, 4.625%, 8/15/28
2,000,000 2,000,000 Massachusetts Health & Educational Facilities Authority
Revenue, 5.0%, 7/1/33
1,550,000 1,550,000 Massachusetts Health & Educational Facilities Authority
Revenue, 5.25%, 7/15/18
6,215,000 6,215,000 Massachusetts Health & Educational Facilities Authority
Revenue, 5.25%, 7/1/33
1,600,000 1,600,000 Massachusetts Health & Educational Facilities Authority
Revenue, 5.45%, 11/15/23
2,500,000 2,500,000 Massachusetts Health & Educational Facilities Authority
Revenue, 5.5%, 7/1/40
2,120,000 2,120,000 Massachusetts Health & Educational Facilities Authority
Revenue, 5.625%, 7/1/20
5,290,000 5,290,000 Massachusetts Health & Educational Facilities Authority
Revenue, 5.75%, 7/1/32
40,000 40,000 Massachusetts Health & Educational Facilities Authority
Revenue, 6.0%, 7/1/18
900,000 1,250,000 2,150,000 Massachusetts Health & Educational Facilities Authority
Revenue, 6.25%, 7/1/22
1,145,000 1,145,000 Massachusetts Health & Educational Facilities Authority
Revenue, 6.25%, 10/1/31
2,000,000 2,000,000 Massachusetts Health & Educational Facilities Authority
Revenue, 6.5%, 7/1/21
2,000,000 2,000,000 Massachusetts Health & Educational Facilities Authority
Revenue, 6.625%, 7/1/31
2,750,000 2,750,000 Massachusetts Health & Educational Facilities Authority
Revenue, 6.625%, 7/1/32
1,000,000 1,000,000 Massachusetts Health & Educational Facilities Authority
Revenue, 6.75%, 7/1/16
8,170,000 8,170,000 Massachusetts State Dedicated Tax, 5.5%, 1/1/29
Pioneer
Pioneer Pioneer Tax Free
Municipal Municipal Pioneer Income Fund
and Equity and Equity Tax Free Pro Forma
Income Trust Income Trust Income Fund Combined
Principal Market Market Pro Forma Market
Amount ($) Value Value Adjustment (a) Value
------------ ------------ ----------- -------------- -----------
5,000,000 $ 4,899,500 $14,698,500
-- 421,906 $ $19,598,000
421,906
-- 1,188,878 1,188,878
-- 4,787,600 4,787,600
8,335,000 8,006,184 -- 8,006,184
----------- ----------- --------- -----------
$12,905,684 $21,096,884 $ $34,002,568
----------- ----------- --------- -----------
$ -- $ 307,866 $ $ 307,866
----------- ----------- --------- -----------
$ -- $ 307,866 $ $ 307,866
----------- ----------- --------- -----------
3,000,000 $ 3,003,810 $ -- $ $ 3,003,810
-- 4,399,670 4,399,670
1,000,000 870,960 -- 870,960
1,000,000
980,250 -- 980,250
660,000
646,965 -- 646,965
2,000,000
1,984,240 -- 1,984,240
----------- ----------- --------- -----------
$ 7,486,225 $ 4,399,670 $ $11,885,895
----------- ----------- --------- -----------
$ -- $14,528,244 $ $14,528,244
-- 5,425,777 5,425,777
4,500,000
4,012,560 -- 4,012,560
2,000,000
2,049,540 -- 2,049,540
1,550,000
1,550,697 -- 1,550,697
-- 7,082,117 7,082,117
1,600,000
1,606,464 -- 1,606,464
-- 2,322,175 2,322,175
2,120,000
2,115,294 -- 2,115,294
-- 5,781,163 5,781,163
-- 42,856 42,856
900,000
923,949 1,283,263 2,207,212
-- 1,187,296 1,187,296
-- 2,086,440 2,086,440
-- 2,070,440 2,070,440
2,750,000
2,846,855 -- 2,846,855
-- 1,062,810 1,062,810
-- 9,296,480 9,296,480
18
Pioneer
Pioneer Tax Free
Municipal Pioneer Income Fund
and Equity Tax Free Pro Forma % of
Income Trust Income Fund Combined Pro Forma
Principal Principal Pro Forma Principal Combined
Amount ($) Amount ($) Adjustment Amount ($) Net Assets
------------ ----------- ---------- ----------- -----------
Massachusetts (continued)
750,000 750,000 Massachusetts State Development Finance Agency, 4.5%, 9/1/36
1,680,000 1,680,000 Massachusetts State Development Finance Agency,
5.25%, 10/1/29
3,320,000 3,320,000 Massachusetts State Development Finance Agency,
5.25%, 10/1/37
500,000 500,000 Massachusetts State Development Finance Agency, 5.5%, 1/1/35
1,100,000 1,100,000 Massachusetts State Development Finance Agency,
5.625%, 10/1/24
1,000,000 1,000,000 Massachusetts State Development Finance Agency, 5.7%, 10/1/34
5,500,000 5,500,000 Massachusetts State Development Finance Agency, 5.75%, 1/1/42
2,635,000 2,635,000 Massachusetts State Development Finance Agency,
6.25%, 10/15/17
1,500,000 1,500,000 Massachusetts State Development Finance Agency,
6.375%, 7/1/23
16,070,000 16,070,000 Noblesville Independent Revenue, 5.25%, 2/1/30
Michigan 2.0%
1,500,000 1,500,000 John Tolfree Health System, 6.0%, 9/15/23
5,000,000 5,000,000 Macomb County Hospital Finance Authority Revenue, 5.875%,
11/15/34
1,595,000 1,595,000 Meridian Economic Development Corporate Ltd. Obligation
Revenue, 5.25%, 7/1/26
3,340,000 3,340,000 Michigan Public Educational Facilities Authority Revenue,
5.875%, 6/1/37
2,000,000 2,000,000 Michigan State Hospital Finance Authority Revenue,
5.25%, 11/15/25
1,000,000 1,000,000 Michigan State Hospital Finance Authority Revenue,
5.5%, 11/15/35
4,000,000 4,000,000 Michigan State Hospital Finance Authority Revenue,
6.0%, 2/1/24
400,000 400,000 Michigan State Trunk Line, 5.5%, 11/1/10
1,500,000 1,500,000 Southfield Michigan Public Schools, 4.5%, 5/1/27
Minnesota 1.3%
5,000,000 5,000,000 Becker Minnesota Pollution Control Revenue Northern States
Power "A" Conversions, 8.5%, 4/1/30
2,000,000 2,000,000 Duluth Economic Development Authority Health Care Facilities
Revenue, 5.25%, 2/15/28
1,500,000 1,500,000 Duluth Economic Development Authority Health Care Facilities
Revenue, 5.25%, 2/15/33
1,000,000 1,000,000 Laurentian Energy Authority Minnesota Cogeneration,
5.0%, 12/1/15
1,000,000 1,000,000 North Oaks Senior Housing Revenue, 6.0%, 10/1/33
1,000,000 1,000,000 North Oaks Senior Housing Revenue, 6.5%, 10/1/47
Mississippi 0.9%
1,800,000 1,800,000 Columbus Mississippi Industrial Development Revenue,
5.9%, 12/1/11
6,000,000 6,000,000 Lowndes County Mississippi Solid Waste Disposal & Pollution
Control Revenue, 6.8%, 4/1/22
Pioneer
Pioneer Pioneer Tax Free
Municipal Municipal Pioneer Income Fund
and Equity and Equity Tax Free Pro Forma
Income Trust Income Trust Income Fund Combined
Principal Market Market Pro Forma Market
Amount ($) Value Value Adjustment (a) Value
------------ ------------ ----------- -------------- -----------
$ -- $ 687,720 $ $ 687,720
-- 1,604,400 1,604,400
-- 3,102,341 3,102,341
500,000 469,950 -- 469,950
1,100,000
1,118,095 -- 1,118,095
1,000,000 1,001,340 -- 1,001,340
-- 6,609,130 6,609,130
-- 2,545,041 2,545,041
-- 1,742,805 1,742,805
-- 6,837,868 6,837,868
----------- ----------- --------- -----------
$17,694,744 $75,298,366 $ $92,993,110
----------- ----------- --------- -----------
$ -- $ 1,520,355 $ $ 1,520,355
5,000,000
4,904,900 -- 4,904,900
1,595,000
1,405,626 -- 1,405,626
3,340,000
3,126,307 -- 3,126,307
2,000,000
1,793,320 -- 1,793,320
1,000,000
888,310 -- 888,310
-- 4,001,280 4,001,280
-- 425,572 425,572
-- 1,494,165 1,494,165
----------- ----------- --------- -----------
$12,118,463 $ 7,441,372 $ $19,559,835
----------- ----------- --------- -----------
$ -- $ 5,876,400 $ $ 5,876,400
2,000,000
2,009,120 -- 2,009,120
1,500,000
1,493,685 -- 1,493,685
-- 1,013,660 1,013,660
1,000,000 970,570 -- 970,570
1,000,000 1,015,010 -- 1,015,010
----------- ----------- --------- -----------
$ 5,488,385 $ 6,890,060 $ $12,378,445
----------- ----------- --------- -----------
$ -- $ 1,831,302 $ $ 1,831,302
-- 6,603,360 6,603,360
----------- ----------- --------- -----------
$ -- $ 8,434,662 $ $ 8,434,662
----------- ----------- --------- -----------
19
Pioneer
Pioneer Tax Free
Municipal Pioneer Income Fund
and Equity Tax Free Pro Forma % of
Income Trust Income Fund Combined Pro Forma
Principal Principal Pro Forma Principal Combined
Amount ($) Amount ($) Adjustment Amount ($) Net Assets
------------ ----------- ---------- ----------- -----------
Missouri 0.2%
295,000 295,000 Missouri State Housing Development Common Mortgage
Revenue, Single Family, Series B-2, 6.4%, 3/1/29
1,720,000 1,720,000 Missouri State Health & Educational Authority Health Facilities
Revenue, 5.25%, 8/15/28
Montana 0.2%
500,000 500,000 Forsyth Pollution Control Revenue, 5.2%, 5/1/33
1,000,000 1,000,000 Montana Finance Authority Hospital Facilities Revenue,
5.0%, 6/1/24
Nebraska 1.1%
1,648,869 1,648,869 Energy America Nebraska Natural Gas Revenue, 5.45%, 4/15/08
1,325,000 1,325,000 Municipal Energy Agency, 6.0%, 4/1/08
2,050,000 2,050,000 Nebraska Investment Finance Authority Single Family, Floating
Rate Note, 3/1/26
4,980,000 4,980,000 Nebraska Public Power District Revenue, 6.375%, 1/1/41
(144A) RIB
Nevada 1.1%
10,000,000 10,000,000 Reno Nevada Hospital Revenue, 5.25%, 6/1/41
1,500,000 1,500,000 Henderson Nevada Health Care Facilities Revenue,
5.625%, 7/1/24
New Hampshire 1.6%
1,700,000 1,700,000 New Hampshire Business Finance Authority Revenue, 6.05%,
9/1/29
5,000,000 5,000,000 New Hampshire Health & Education Facilities Authority
Revenue, 5.0%, 10/1/17
5,000,000 5,000,000 New Hampshire Health & Education Facilities Authority
Revenue, 5.0%, 10/1/32
1,000,000 1,250,000 2,250,000 New Hampshire Health & Education Facilities Authority
Revenue, 5.75%, 10/1/31
2,000,000 2,000,000 New Hampshire Health & Education Facilities Authority
Revenue, 5.75%, 7/1/22
140,000 140,000 New Hampshire State Housing Finance Authority, 6.125%, 1/1/20
New Jersey 5.2%
1,250,000 1,250,000 Camden County Improvement Authority Revenue,
5.75%, 2/15/34
5,920,000 5,920,000 Garden State Preservation Trust, 10.112%, 11/1/22 (144A) RIB
500,000 500,000 New Jersey Economic Development Authority Revenue,
5.3%, 11/1/26
450,000 450,000 New Jersey Economic Development Authority Revenue,
5.375%, 11/1/36
710,000 710,000 New Jersey Economic Development Authority Revenue,
5.75%, 1/1/25
1,000,000 1,000,000 New Jersey Economic Development Authority Revenue,
5.875%, 1/1/37
5,060,000 5,060,000 New Jersey Economic Development Authority Special Facility
Revenue, 7.0%, 11/15/30
2,000,000 2,000,000 New Jersey Health Care Facilities Financing Authority Revenue,
5.0%, 7/1/24
1,000,000 1,000,000 New Jersey Health Care Facilities Financing Authority Revenue,
5.125%, 7/1/14
Pioneer
Pioneer Pioneer Tax Free
Municipal Municipal Pioneer Income Fund
and Equity and Equity Tax Free Pro Forma
Income Trust Income Trust Income Fund Combined
Principal Market Market Pro Forma Market
Amount ($) Value Value Adjustment (a) Value
------------ ------------ ----------- -------------- -----------
$ -- $ 303,349 $ $ 303,349
1,720,000
1,694,338 -- 1,694,338
----------- ----------- --------- -----------
$ 1,694,338 $ 303,349 $ $ 1,997,687
----------- ----------- --------- -----------
$ -- $ 505,890 $ $ 505,890
1,000,000
1,009,240 -- 1,009,240
----------- ----------- --------- -----------
$ 1,009,240 $ 505,890 $ $ 1,515,130
----------- ----------- --------- -----------
$ -- $ 1,642,043 $ $ 1,642,043
-- 1,334,514 1,334,514
-- 2,092,558 2,092,558
4,980,000
5,250,812 -- 5,250,812
----------- ----------- --------- -----------
$ 5,250,812 $ 5,069,115 $ $10,319,927
----------- ----------- --------- -----------
$ -- $ 9,619,100 $ $ 9,619,100
1,500,000
1,560,765 -- 1,560,765
----------- ----------- --------- -----------
$ 1,560,765 $ 9,619,100 $ $11,179,865
----------- ----------- --------- -----------
1,700,000
$ 1,777,078 $ -- $ $ 1,777,078
-- 4,601,300 4,601,300
-- 4,663,700 4,663,700
1,000,000
1,025,940 1,282,425 2,308,365
-- 2,059,500 2,059,500
-- 143,333 143,333
----------- ----------- --------- -----------
$ 2,803,018 $12,750,258 $ $15,553,276
----------- ----------- --------- -----------
1,250,000
$ 1,216,975 $ -- $ $ 1,216,975
5,920,000 8,568,371 -- 8,568,371
-- 448,720 448,720
-- 392,792 392,792
710,000
684,660 -- 684,660
1,000,000
935,150 -- 935,150
-- 5,091,170 5,091,170
-- 2,019,580 2,019,580
1,000,000
955,540 -- 955,540
20
Pioneer
Pioneer Tax Free
Municipal Pioneer Income Fund
and Equity Tax Free Pro Forma % of
Income Trust Income Fund Combined Pro Forma
Principal Principal Pro Forma Principal Combined
Amount ($) Amount ($) Adjustment Amount ($) Net Assets
------------ ----------- ---------- ----------- -----------
New Jersey (continued)
4,140,000 4,140,000 New Jersey Health Care Facilities Financing Authority Revenue,
5.25%, 7/1/30
5,000,000 5,000,000 New Jersey Health Care Facilities Financing Authority Revenue,
5.375%, 7/1/33
3,500,000 3,500,000 New Jersey Health Care Facilities Financing Authority Revenue,
7.25%, 7/1/27
9,500,000 9,500,000 Tobacco Settlement Financing Corp., 5.0%, 6/1/41
3,000,000 3,000,000 Tobacco Settlement Financing Corp., 6.25%, 6/1/43
1,000,000 1,000,000 Tobacco Settlement Financing Corp., New Jersey, 6.25%, 6/1/43
5,215,000 5,215,000 Tobacco Settlement Financing Corp., New Jersey, 6.75%, 6/1/39
New Mexico 0.3%
1,000,000 1,000,000 Dona Ana County PILT Revenue, 5.25%, 12/1/25
1,500,000 1,500,000 Farmington New Mexico Hospital Revenue, 5.0%, 6/1/23
New York 4.3%
1,000,000 1,000,000 Albany Individual Development, 6.0%, 7/1/19
2,000,000 2,000,000 Dutchess County Industrial Development Agency Revenue,
7.5%, 3/1/29
400,000 400,000 Metropolitan Transportation Authority New York, 5.5%, 7/1/14
1,700,000 1,700,000 Nassau County Industrial Development Agency, 6.7%, 1/1/43
1,000,000 1,000,000 New York City Industrial Development Agency, 5.0%, 7/1/27
1,000,000 1,000,000 New York City Industrial Development Agency, 5.25%, 7/1/24
2,000,000 2,000,000 New York City Transportation Finance Authority Revenue,
Floating Rate Note, 11/1/26
4,400,000 4,400,000 New York State Dorm Authority, 0.0%, 7/1/39
8,465,000 8,465,000 New York State Dorm Authority, 5.0%, 7/1/25
5,515,000 5,515,000 New York State Dorm Authority, 5.24%, 7/1/24
5,000,000 5,000,000 Port Authority of New York & New Jersey Revenue,
5.0%, 9/1/38
1,000,000 1,000,000 Suffolk County Industrial Development Agency Civic Facilities
Revenue, 5.5%, 1/1/37 (144A)
4,900,000 4,900,000 Triborough Bridge & Tunnel Authority, 5.25%, 11/15/30
3,000,000 3,000,000 Ulster County Industrial Development Agency Civic Facility
Revenue, 6.0%, 9/15/27
North Carolina 0.7%
1,000,000 1,000,000 North Carolina Capital Facilities Finance Agency Student
Revenue, 5.0%, 6/1/27
1,000,000 1,000,000 North Carolina Capital Facilities Finance Agency Student
Revenue, 5.0%, 6/1/32
2,250,000 2,250,000 North Carolina Capital Facilities Finance, 4.5%, 10/1/26
1,000,000 1,000,000 North Carolina Medical Care Commission Health Care Facilities
Revenue, 5.0%, 11/1/23
2,250,000 2,250,000 University North Carolina Revenue, 5.0%, 12/1/36
North Dakota 0.1%
280,000 280,000 North Dakota State Housing Finance Agency Revenue,
5.8%, 7/1/18
575,000 575,000 North Dakota State Housing Finance Agency Revenue,
6.0%, 7/1/20
Pioneer
Pioneer Pioneer Tax Free
Municipal Municipal Pioneer Income Fund
and Equity and Equity Tax Free Pro Forma
Income Trust Income Trust Income Fund Combined
Principal Market Market Pro Forma Market
Amount ($) Value Value Adjustment (a) Value
------------ ------------ ----------- -------------- -----------
$ -- $ 3,811,988 $ $ 3,811,988
5,000,000
4,848,250 -- 4,848,250
3,500,000
3,534,650 -- 3,534,650
-- 7,922,905 7,922,905
3,000,000 3,413,580 -- 3,413,580
-- 1,137,860 1,137,860
-- 6,061,812 6,061,812
----------- ----------- --------- -----------
$24,157,176 $26,886,827 $ $51,044,003
----------- ----------- --------- -----------
1,000,000 $ 1,002,830 $ -- $ $ 1,002,830
1,500,000 1,500,750 -- 1,500,750
----------- ----------- --------- -----------
$ 2,503,580 $ -- $ $ 2,503,580
----------- ----------- --------- -----------
$ -- $ 1,016,820 $ $ 1,016,820
2,000,000
2,121,120 -- 2,121,120
-- 440,532 440,532
1,700,000 1,700,000 -- 1,700,000
1,000,000 1,035,890 -- 1,035,890
1,000,000 1,059,770 -- 1,059,770
-- 2,154,140 2,154,140
-- 3,627,668 3,627,668
-- 9,038,842 9,038,842
-- 6,122,643 6,122,643
5,000,000
5,111,450 -- 5,111,450
1,000,000
867,900 -- 867,900
4,900,000 5,133,877 -- 5,133,877
3,000,000
2,876,040 -- 2,876,040
----------- ----------- --------- -----------
$19,906,047 $22,400,645 $ $42,306,692
----------- ----------- --------- -----------
1,000,000
$ 975,690 $ -- $ $ 975,690
1,000,000
946,050 -- 946,050
-- 1,976,670 1,976,670
1,000,000
985,950 -- 985,950
-- 2,357,460 2,357,460
----------- ----------- --------- -----------
$ 2,907,690 $ 4,334,130 $ $ 7,241,820
----------- ----------- --------- -----------
$ -- $ 285,519 $ $ 285,519
-- 582,055 582,055
----------- ----------- --------- -----------
$ -- $ 867,574 $ $ 867,574
----------- ----------- --------- -----------
21
Pioneer
Pioneer Tax Free
Municipal Pioneer Income Fund
and Equity Tax Free Pro Forma % of
Income Trust Income Fund Combined Pro Forma
Principal Principal Pro Forma Principal Combined
Amount ($) Amount ($) Adjustment Amount ($) Net Assets
------------ ----------- ---------- ----------- -----------
Ohio 0.8%
3,000,000 3,000,000 Columbus City School District, 5.0%, 12/1/32
1,500,000 1,500,000 Cuyahoga County Health Care & Independent Living Facilities
Revenue, 6.0%, 5/15/37
1,500,000 1,500,000 Cuyahoga County Health Care & Independent Living Facilities
Revenue, 6.0%, 5/15/42
1,000,000 1,000,000 Hamilton County Hospital Facilities Revenue, 5.125%, 5/15/28
400,000 400,000 Ohio State Building Authority Revenue, 5.5%, 10/1/11
500,000 500,000 Ohio State Building Authority Revenue, 6.0%, 10/1/08
Oklahoma 0.2%
1,530,000 1,530,000 Moore Oklahoma General Obligation, 5.75%, 4/1/12
Oregon 0.8%
1,165,000 1,165,000 Jackson County School District No. 4, 5.5%, 6/15/17
500,000 500,000 Klamath Falls Inter-Community Hospital Authority Revenue,
6.125%, 9/1/22
2,935,000 2,935,000 Oregon State Housing & Community Services Department
Multi-Family Revenue, 6.0%, 7/1/31
1,000,000 1,000,000 Portland Urban Development, 5.75%, 6/15/08
1,650,000 1,650,000 Wasco County School District, 5.5%, 6/15/19
Pennsylvania 3.7%
4,000,000 4,000,000 Allentown Pennsylvania Area Hospital Authority, 6.0%, 11/15/16
1,165,000 1,165,000 Chester County Pennsylvania Health & Education Facility,
5.0%, 11/1/19
1,220,000 1,220,000 Chester County Pennsylvania Health & Education Facility,
5.0%, 11/1/20
1,650,000 1,650,000 Chester County Pennsylvania Health & Education Facility,
5.0%, 11/1/31
1,000,000 1,000,000 Columbia County Pennsylvania Hospital Authority, 5.8%, 6/1/19
1,000,000 1,000,000 Montgomery County Pennsylvania Industrial, 5.0%, 12/1/24
1,000,000 1,000,000 Montgomery County Pennsylvania Industrial, 5.0%, 12/1/30
5,000,000 5,000,000 Pennsylvania State Turnpike Commission Oil Franchise Tax
Revenue, 5.0%, 12/1/31
15,000,000 15,000,000 Philadelphia Pennsylvania Hospital, 5.0%, 7/1/34
500,000 500,000 Philadelphia Pennsylvania Parking, 4.875%, 9/1/09
1,315,000 1,315,000 Sayre Health Care Facilities Authority Revenue, 5.875%, 12/1/31
685,000 685,000 Sayre Health Care Facilities Authority Revenue, 5.875%, 12/1/31
250,000 250,000 Sayre Pennsylvania Health Care Facilities Authority,
5.75%, 12/1/21
280,000 280,000 Scranton-Lackawanna Health and Welfare Authority Hospital
Revenue, 5.9%, 7/1/08
700,000 700,000 Scranton-Lackawanna Health and Welfare Authority Hospital
Revenue, 6.0%, 7/1/09
460,000 460,000 Scranton-Lackawanna Health and Welfare Authority Hospital
Revenue, 6.05%, 7/1/10
2,165,000 2,165,000 Swarthmore Borough Authority College Revenue, 5.0%, 9/15/31
Puerto Rico 1.1%
8,305,000 8,305,000 Puerto Rico Electric Power, 0.0%, 7/1/17*
5,000,000 5,000,000 Puerto Rico Public Buildings Authority Revenue, 5.25%, 7/1/33
Pioneer
Pioneer Pioneer Tax Free
Municipal Municipal Pioneer Income Fund
and Equity and Equity Tax Free Pro Forma
Income Trust Income Trust Income Fund Combined
Principal Market Market Pro Forma Market
Amount ($) Value Value Adjustment (a) Value
------------ ------------ ----------- -------------- -----------
3,000,000 $ 3,289,680 $ -- $ $ 3,289,680
1,500,000
1,469,460 -- 1,469,460
1,500,000
1,453,275 -- 1,453,275
1,000,000 1,017,600 -- 1,017,600
-- 430,340 430,340
-- 511,130 511,130
----------- ----------- --------- -----------
$ 7,230,015 $ 941,470 $ $ 8,171,485
----------- ----------- --------- -----------
$ -- $ 1,637,222 $ $ 1,637,222
----------- ----------- --------- -----------
$ -- $ 1,637,222 $ $ 1,637,222
----------- ----------- --------- -----------
$ -- $ 1,254,752 $ $ 1,254,752
-- 548,539 548,539
2,935,000
2,960,476 -- 2,960,476
-- 1,062,640 1,062,640
-- 1,896,939 1,896,939
----------- ----------- --------- -----------
$ 2,960,476 $ 4,762,870 $ $ 7,723,346
----------- ----------- --------- -----------
$ -- $ 3,994,240 $ $ 3,994,240
-- 1,184,898 1,184,898
-- 1,235,567 1,235,567
-- 1,576,889 1,576,889
-- 918,590 918,590
-- 943,250 943,250
-- 899,230 899,230
5,000,000
5,442,150 -- 5,442,150
-- 13,275,000 13,275,000
-- 513,220 513,220
1,315,000 1,454,587 -- 1,454,587
685,000 707,043 -- 707,043
-- 271,699 271,699
280,000
280,451 -- 280,451
700,000
703,773 -- 703,773
460,000
462,479 -- 462,479
2,165,000 2,216,462 -- 2,216,462
----------- ----------- --------- -----------
$11,266,945 $24,812,583 $ $36,079,528
----------- ----------- --------- -----------
$ -- $ 5,518,091 $ $ 5,518,091
5,000,000 5,000,000 -- 5,000,000
----------- ----------- --------- -----------
$ 5,000,000 $ 5,518,091 $ $10,518,091
----------- ----------- --------- -----------
22
Pioneer
Pioneer Tax Free
Municipal Pioneer Income Fund
and Equity Tax Free Pro Forma % of
Income Trust Income Fund Combined Pro Forma
Principal Principal Pro Forma Principal Combined
Amount ($) Amount ($) Adjustment Amount ($) Net Assets
------------ ----------- ---------- ----------- ----------
Rhode Island 0.8%
250,000 250,000 Rhode Island State Health & Education Facilities Authorities,
6.5%, 8/15/32
480,000 480,000 Rhode Island State Health & Educational Building Corp.,
6.375%, 8/15/21
1,640,000 1,640,000 Tobacco Settlement Financing Corp., 6.125%, 6/1/32
3,100,000 2,100,000 5,200,000 Tobacco Settlement Financing Corp., 6.25%, 6/1/42
South Carolina 2.2%
6,000,000 6,000,000 Berkeley County School District Installment Lease, 5.0%, 12/1/28
5,000,000 5,000,000 Florence County Hospital Revenue, 5.25%, 11/1/34
3,500,000 3,500,000 Lexington County Health Services District, Inc., Hospital
Revenue, 5.5%, 11/1/32
95,000 95,000 South Carolina Housing Finance & Development Authority
Mortgage Revenue, Series A-1, 6.2%, 7/1/09
2,500,000 2,500,000 South Carolina Jobs Economic Development Authority
Revenue, 5.5%, 11/15/23
500,000 500,000 South Carolina Jobs Economic Development Authority
Revenue, 6.0%, 8/1/13
440,000 440,000 South Carolina Jobs Economic Development Authority
Revenue, 6.875%, 8/1/27
2,500,000 2,500,000 Tobacco Settlement Revenue Management, 6.375%, 5/15/30
South Dakota 0.0%
65,000 65,000 South Dakota Conservancy District Revenue, 5.625%, 8/1/17
Tennessee 2.3%
1,570,000 1,570,000 Clarksville Tennessee Water and Gas, 5.15%, 2/1/14
1,000,000 1,000,000 Johnson City Tennessee Health & Education, 5.5%, 7/1/36
2,500,000 1,500,000 4,000,000 Knox County Health Educational & Housing Facilities Board
Hospital Revenue, 6.5%, 4/15/31
1,000,000 1,000,000 Knox County Health Facility, 6.375%, 4/15/22
750,000 750,000 Knoxville County Tennessee Health Education & Housing,
7.25%, 1/1/08
750,000 750,000 Knoxville County Tennessee Series A, 5.0%, 5/1/13
1,000,000 1,000,000 Metro Government Nashville/Davidson County Tennessee,
5.5%, 5/15/12
1,000,000 1,000,000 Metro Government Nashville/Davidson County Tennessee,
5.5%, 5/15/14
1,500,000 1,500,000 Metro Government Nashville/Davidson County Tennessee,
6.0%, 12/1/09
1,000,000 1,000,000 Metro Government Nashville/Davidson County Tennessee,
7.5%, 11/15/12
5,960,000 5,960,000 Sumner Court Tennessee Health Educational, 5.5%, 11/1/46
1,000,000 1,000,000 Tennessee County Tennessee General, 5.5%, 4/1/19
550,000 550,000 Williamson County Tennessee General, 5.1%, 3/1/14
500,000 500,000 Williamson County Tennessee General, 6.0%, 3/1/08
Texas 6.9%
3,000,000 3,000,000 Brazos River Authority Pollution Control Revenue, 7.7%, 4/1/33
750,000 750,000 Carroll Independent School District, 6.75%, 8/15/21
850,000 850,000 Carroll Independent School District, 6.75%, 8/15/22
13,885,000 13,885,000 Dallas-Fort Worth Texas International Airport, 6.0%, 11/1/14
1,000,000 1,000,000 Harris County Health Facilities Development Authority,
6.375%, 6/1/29
1,552,000 1,552,000 Houston Housing Financing Corp., 6.25%, 9/20/31
2,885,000 2,885,000 Houston Utility System Revenue, 7.126%, 5/15/24 (144A) RIB
Pioneer
Pioneer Pioneer Tax Free
Municipal Municipal Pioneer Income Fund
and Equity and Equity Tax Free Pro Forma
Income Trust Income Trust Income Fund Combined
Principal Market Market Pro Forma Market
Amount ($) Value Value Adjustment (a) Value
------------ ------------ ------------ -------------- -----------
$ -- $ 284,025 $ $ 284,025
-- 538,992 538,992
1,640,000 1,666,519 -- 1,666,519
3,100,000 3,108,060 2,105,460 5,213,520
----------- ----------- --------- -----------
$ 4,774,579 $ 2,928,477 $ $ 7,703,056
----------- ----------- --------- -----------
6,000,000 $ 5,923,140 $ -- $ $ 5,923,140
5,000,000 5,117,750 -- 5,117,750
3,500,000
3,870,160 -- 3,870,160
-- 95,168 95,168
2,500,000
2,560,900 -- 2,560,900
-- 530,315 530,315
-- 515,068 515,068
-- 2,504,200 2,504,200
----------- ----------- --------- -----------
$17,471,950 $ 3,644,751 $ $21,116,701
----------- ----------- --------- -----------
$ -- $ 65,129 $ $ 65,129
----------- ----------- --------- -----------
$ -- $ 65,129 $ $ 65,129
----------- ----------- --------- -----------
$ -- $ 1,716,811 $ $ 1,716,811
-- 978,880 978,880
2,500,000
2,554,500 1,532,700 4,087,200
-- 1,020,750 1,020,750
-- 750,000 750,000
-- 753,000 753,000
-- 1,088,550 1,088,550
-- 1,115,420 1,115,420
-- 1,583,160 1,583,160
-- 1,170,090 1,170,090
-- 5,577,070 5,577,070
-- 1,051,270 1,051,270
-- 572,622 572,622
-- 502,480 502,480
----------- ----------- --------- -----------
$ 2,554,500 $19,412,803 $ $21,967,303
----------- ----------- --------- -----------
$ -- $ 3,102,810 $ $ 3,102,810
-- 951,308 951,308
-- 1,086,062 1,086,062
-- 13,233,377 13,233,377
-- 1,107,150 1,107,150
1,552,000 1,632,704 -- 1,632,704
2,885,000 3,477,839 -- 3,477,839
23
Pioneer
Pioneer Tax Free
Municipal Pioneer Income Fund
and Equity Tax Free Pro Forma % of
Income Trust Income Fund Combined Pro Forma
Principal Principal Pro Forma Principal Combined
Amount ($) Amount ($) Adjustment Amount ($) Net Assets
------------ ----------- ---------- ----------- ----------
Texas (continued)
2,750,000 2,750,000 Lower Colorado River Authority, 5.0%, 5/15/31
1,711,000 1,711,000 Panhandle Regional Housing Finance Corp., 6.6%, 7/20/31
3,000,000 3,000,000 Richardson Hospital Authority, 6.0%, 12/1/34
515,000 515,000 San Antonio Texas General, 4.75%, 2/1/19
300,000 300,000 San Felipe Del Rio Texas Conservation, 5.0%, 8/15/12
1,000,000 1,000,000 Seguin Higher Education Facilities Corp. Revenue, 5.0%, 9/1/23
2,310,000 2,310,000 Texas Clear Creek Independent School District General
Obligation, 0.0%, 2/1/10
2,050,000 2,050,000 Texas Keller Independent School District General Obligation,
0.0%, 8/15/10
5,500,000 5,500,000 Texas Public Finance Authority Building Revenue, 0.0%, 2/1/08
2,750,000 2,750,000 Texas Public Finance Authority Building Revenue, 0.0%, 2/1/10
1,500,000 1,500,000 Texas State Student Housing Revenue, 6.5%, 9/1/34
3,500,000 3,500,000 Texas State, Floating Rate Note, 9/30/11
1,335,000 1,335,000 Texas Water Development Board, 5.0%, 7/15/26
1,000,000 1,000,000 Texas Water Development Board, 5.0%, 7/15/27
500,000 500,000 Tomball Texas Independent Schools, 5.0%, 2/15/11
3,500,000 3,500,000 Weslaco Health Facilities, 6.25%, 6/1/25
2,000,000 2,000,000 Weslaco Health Facilities, 6.25%, 6/1/32
1,000,000 1,000,000 Whitehouse Texas Independent School District, 4.8%, 2/15/12
3,000,000 3,000,000 Willacy County Local Government Corp. Revenue, 6.0%, 9/1/10
3,000,000 3,000,000 Willacy County Local Government Corp. Revenue,
6.875%, 9/1/28
Utah 0.1%
500,000 500,000 Utah County Utah Charter School Revenue, 5.35%, 7/15/17
Vermont 0.1%
1,295,000 1,295,000 Vermont Educational & Health Buildings Financing Agency
Revenue, 5.0%, 7/1/24
Virginia 0.9%
2,500,000 2,500,000 Henrico County Virginia, Floating Rate Note, 8/23/27
1,500,000 1,500,000 Prince William County Industrial Development Hospital
Revenue, 5.2%, 10/1/26
3,925,000 3,925,000 Prince William County Industrial Development Hospital
Revenue, 5.35%, 10/1/36
Washington 2.6%
1,000,000 1,000,000 Cuyahoga County Ohio Health, 5.75%, 12/1/32
1,095,000 1,095,000 King County Washington Public Hospital District, 5.25%, 12/1/13
300,000 300,000 King County Washington School District No. 415, 5.5%, 6/1/13
3,000,000 3,000,000 King County Washington Sewer Revenue, 5.0%, 1/1/35
1,000,000 1,000,000 Pierce County Washington School District, 4.0%, 12/1/09
500,000 500,000 Renton Washington Water & Sewer, 4.4%, 12/1/15
2,250,000 2,250,000 Snohomish County Public Utility District Revenue,
5.7%, 12/1/11+
2,500,000 2,500,000 Snohomish County Public Utility District Revenue, 6.8%, 1/1/20
7,000,000 7,000,000 Tobacco Settlement Authority Revenue, 6.625%, 6/1/32
3,500,000 3,500,000 Tobacco Settlement Authority Washington, 6.625%, 6/1/32
2,500,000 2,500,000 Washington State Housing, 5.25%, 1/1/17
Pioneer
Pioneer Pioneer Tax Free
Municipal Municipal Pioneer Income Fund
and Equity and Equity Tax Free Pro Forma
Income Trust Income Trust Income Fund Combined
Principal Market Market Pro Forma Market
Amount ($) Value Value Adjustment (a) Value
------------ ------------ ----------- -------------- -----------
2,750,000 $ 2,813,745 $ -- $ $ 2,813,745
1,711,000 1,834,089 -- 1,834,089
3,000,000 3,019,080 -- 3,019,080
-- 521,177 521,177
-- 314,163 314,163
1,000,000 974,490 -- 974,490
-- 2,156,408 2,156,408
-- 1,879,461 1,879,461
-- 5,485,700 5,485,700
-- 2,566,108 2,566,108
1,500,000 1,552,200 -- 1,552,200
-- 4,187,820 4,187,820
-- 1,404,260 1,404,260
-- 1,049,490 1,049,490
-- 526,600 526,600
-- 3,645,985 3,645,985
-- 2,065,900 2,065,900
-- 1,002,145 1,002,145
3,000,000 3,019,710 -- 3,019,710
3,000,000
3,086,220 -- $ 3,086,220
----------- ----------- --------- -----------
$21,410,077 $46,285,924 $ $67,696,001
----------- ----------- --------- -----------
$ -- $ 494,115 $ $ 494,115
----------- ----------- --------- -----------
$ -- $ 494,115 $ $ 494,115
----------- ----------- --------- -----------
1,295,000
$ 1,273,581 $ -- $ $ 1,273,581
----------- ----------- --------- -----------
$ 1,273,581 $ -- $ $ 1,273,581
----------- ----------- --------- -----------
-- 3,296,600 3,296,600
1,500,000
1,514,160 -- 1,514,160
3,925,000
3,944,429 -- 3,944,429
----------- ----------- --------- -----------
$ 5,458,589 $ 3,296,600 $ $ 8,755,189
----------- ----------- --------- -----------
$ -- $ 979,210 $ $ 979,210
-- 1,126,427 1,126,427
-- 331,575 331,575
3,000,000 3,060,660 -- 3,060,660
-- 1,017,350 1,017,350
-- 525,830 525,830
-- 2,455,802 2,455,802
-- 3,051,975 3,051,975
7,000,000 7,141,050 -- 7,141,050
-- 3,570,525 3,570,525
-- 2,449,150 2,449,150
----------- ----------- --------- -----------
$10,201,710 $15,507,844 $ $25,709,554
----------- ----------- --------- -----------
24
Pioneer
Pioneer Tax Free
Municipal Pioneer Income Fund
and Equity Tax Free Pro Forma % of
Income Trust Income Fund Combined Pro Forma
Principal Principal Pro Forma Principal Combined
Amount ($) Amount ($) Adjustment Amount ($) Net Assets
------------ ----------- ---------- ----------- ----------
Wisconsin 0.5%
1,430,000 1,430,000 Adams-Friendship School District, 6.5%, 4/1/16
3,500,000 3,500,000 Wisconsin State Health & Educational Facilities Authority
Revenue, 5.6%, 2/15/29
TOTAL TAX-EXEMPT OBLIGATIONS
Shares
---------
COMMON STOCKS 0.2%
Energy 0.0%
Oil & Gas Drilling 0.0%
19,566 (19,566) -- Diamond Offshore Drilling, Inc.
Oil & Gas Storage & Transportation 0.0%
142,876 (142,876) -- Spectra Energy Corp.
Total Energy
Materials 0.0%
Diversified Chemicals 0.0%
94,000 (94,000) -- Olin Corp.
Diversified Metals & Mining 0.0%
56,012 (56,012) -- Compass Minerals International, Inc.
Total Materials
Commercial Services & Supplies 0.0%
Commercial Printing 0.0%
79,034 (79,034) -- R.R. Donnelley & Sons Co.
Total Commercial Services & Supplies
Transportation 0.2%
Airlines 0.2%
153,656 153,656 Northwest Airlines*
Total Transportation
Consumer Durables & Apparel 0.0%
Home Furnishings 0.0%
50,000 (50,000) -- Bassett Furniture Industries, Inc.
31,486 (31,486) -- Kimball International, Inc.
Total Consumer Durables & Apparel
Media 0.0%
Movies & Entertainment 0.0%
206,487 (206,487) -- Regal Entertainment Group
Publishing 0.0%
229,566 (229,566) -- Idearc, Inc.
Total Media
Food, Beverage & Tobacco 0.0%
Packaged Foods & Meats 0.0%
527,431 (527,431) -- B&G Foods, Inc.
92,828 (92,828) -- Kraft Foods, Inc.
Tobacco 0.0%
134,140 (134,140) -- Altria Group, Inc.
172,872 (172,872) -- Loews Corp.--Carolina Group
29,704 (29,704) -- Reynolds American, Inc.
Total Food, Beverage & Tobacco
Pioneer
Pioneer Pioneer Tax Free
Municipal Municipal Pioneer Income Fund
and Equity and Equity Tax Free Pro Forma
Income Trust Income Trust Income Fund Combined
Principal Market Market Pro Forma Market
Amount ($) Value Value Adjustment (a) Value
------------ ------------ ----------- -------------- -----------
$ -- $ 1,724,194 $ $ 1,724,194
3,500,000
3,443,580 -- 3,443,580
------------ ------------ ------------ ------------
$ 3,443,580 $ 1,724,194 $ $ 5,167,774
------------ ------------ ------------ ------------
$316,583,970 $560,731,963 $ -- $877,315,933
------------ ------------ ------------ ------------
Shares
---------
19,566 $ 2,778,372 $ -- $ (2,778,372) $ --
------------ ------------ ------------ ------------
142,876 $ 3,689,058 $ -- $ (3,689,058) $ --
------------ ------------ ------------ ------------
$ 6,467,430 $ -- $ (6,467,430) $ --
------------ ------------ ------------ ------------
94,000 $ 1,817,020 $ -- $ (1,817,020) $ --
------------ ------------ ------------ ------------
56,012 $ 2,296,492 $ -- $ (2,296,492) $ --
------------ ------------ ------------ ------------
$ 4,113,512 $ -- $ (4,113,512) $ --
------------ ------------ ------------ ------------
79,034 $ 2,982,743 $ -- $ (2,982,743) $ --
------------ ------------ ------------ ------------
$ 2,982,743 $ -- $ (2,982,743) $ --
------------ ------------ ------------ ------------
$ -- $ 2,229,548 $ -- $ 2,229,548
------------ ------------ ------------ ------------
$ -- $ 2,229,548 $ -- $ 2,229,548
------------ ------------ ------------ ------------
50,000 $ 467,000 $ -- $ (467,000) $ --
31,486 431,358 -- (431,358) --
------------ ------------ ------------ ------------
$ 898,358 $ -- $ (898,358) $ --
------------ ------------ ------------ ------------
206,487 $ 3,731,220 $ -- $ (3,731,220) $ --
------------ ------------ ------------ ------------
229,566 $ 4,031,179 $ -- $ (4,031,179) $ --
------------ ------------ ------------ ------------
$ 7,762,399 $ -- $ (7,762,399) $ --
------------ ------------ ------------ ------------
527,431 $ 5,385,070 $ -- $ (5,385,070) $ --
92,828 3,028,978 -- (3,028,978) --
------------ ------------ ------------ ------------
$ 8,414,048 $ -- $ (8,414,048) $ --
------------ ------------ ------------ ------------
134,140 $ 10,138,301 $ -- $(10,138,301) $ --
172,872 14,745,982 -- (14,745,982) --
29,704 1,959,276 -- (1,959,276) --
------------ ------------ ------------ ------------
$ 26,843,559 $ -- $(26,843,559) $ --
------------ ------------ ------------ ------------
$ 35,257,607 $ -- $(35,257,607) $ --
------------ ------------ ------------ ------------
25
Pioneer
Tax Free
Pioneer Pioneer Income Fund
Municipal Tax Free Pro Forma % of
and Equity Income Fund Combined Pro Forma
Income Trust Principal Pro Forma Principal Combined
Shares Amount ($) Adjustment Amount ($) Net Assets
------------ ----------- ---------- ----------- -----------
Pharmaceuticals, Biotechnology & Life 0.0%
Sciences
Pharmaceuticals 0.0%
329,758 (329,758) -- Bristol-Myers Squibb Co.
216,536 (216,536) -- Merck & Co., Inc.
Total Pharmaceuticals, Biotechnology & Life
Sciences
Banks 0.0%
Diversified Banks 0.0%
28,642 (28,642) -- Wachovia Corp.
Regional Banks 0.0%
81,550 (81,550) -- KeyCorp
67,800 (67,800) -- Regions Financial Corp.
Thrifts & Mortgage Finance 0.0%
222,700 (222,700) -- TrustCo Bank Corp., NY
Total Banks
Diversified Financials 0.0%
Other Diversified Financial Services 0.0%
42,500 (42,500) -- Bank of America Corp.
Total Diversified Financials
Telecommunication Services 0.0%
Integrated Telecommunication Services 0.0%
204,553 (204,553) -- AT&T, Inc.
529,946 (529,946) -- Citizens Communications Co.
406,745 (406,745) -- Verizon Communications, Inc.
790,184 (790,184) -- Windstream Corp.
Total Telecommunication Services
Utilities 0.0%
Electric Utilities 0.0%
138,400 (138,400) -- Empire District Electric Co.
Gas Utilities 0.0%
81,249 (81,249) -- AGL Resources, Inc.
395,466 (395,466) -- Atmos Energy Corp.
Multi-Utilities 0.0%
100,000 (100,000) -- Consolidated Edison, Inc.
285,753 (285,753) -- Duke Energy Corp.
134,112 (134,112) -- NSTAR
Total Utilities
TOTAL COMMON STOCKS
NON-CONVERTIBLE PREFERRED STOCKS 0.0%
Energy 0.0%
Oil & Gas Exploration & Production- 1.0% 0.0%
49,300 (49,300) -- Apache Corp., Series B, 5.68%
Total Energy
Automobiles & Components 0.0%
Automobile Manufacturers 0.0%
126,542 (126,542) -- Ford Motor Co. Capital Trust II, 6.5%
Total Automobiles & Components
Pioneer
Pioneer Tax Free
Pioneer Municipal Pioneer Income Fund
Municipal and Equity Tax Free Pro Forma
and Equity Income Trust Income Fund Combined
Income Trust Market Market Pro Forma Market
Shares Value Value Adjustment (a) Value
------------ ------------ ----------- -------------- -----------
329,758 $ 8,745,182 $ -- $ (8,745,182) $ --
216,536 12,582,907 -- (12,582,907) --
------------ ---------- ------------- ----------
$ 21,328,089 $ -- $ (21,328,089) $ --
------------ ---------- ------------- ----------
28,642 $ 1,089,255 $ -- $ (1,089,255) $ --
------------ ---------- ------------- ----------
81,550 $ 1,912,347 $ -- $ (1,912,347) $ --
67,800 1,603,470 -- (1,603,470) --
------------ ---------- ------------- ----------
$ 3,515,817 $ -- $ (3,515,817) $ --
------------ ---------- ------------- ----------
222,700 $ 2,209,184 $ -- $ (2,209,184) $ --
------------ ---------- ------------- ----------
$ 6,814,256 $ -- $ (6,814,256) $ --
------------ ---------- ------------- ----------
42,500 $ 1,753,550 $ -- $ (1,753,550) $ --
------------ ---------- ------------- ----------
$ 1,753,550 $ -- $ (1,753,550) $ --
------------ ---------- ------------- ----------
204,553 $ 8,501,223 $ -- $ (8,501,223) $ --
529,946 6,746,213 -- (6,746,213) --
406,745 17,770,689 -- (17,770,689) --
790,184 10,288,196 -- (10,288,196) --
------------ ---------- ------------- ----------
$ 43,306,321 $ -- $ (43,306,321) $ --
------------ ---------- ------------- ----------
138,400 $ 3,152,752 $ -- $ (3,152,752) $ --
------------ ---------- ------------- ----------
81,249 $ 3,058,212 $ -- $ (3,058,212) $ --
395,466 11,088,867 -- (11,088,867) --
------------ ---------- ------------- ----------
$ 14,147,079 $ -- $ (14,147,079) $ --
------------ ---------- ------------- ----------
100,000 $ 4,885,000 $ -- $ (4,885,000) $ --
285,753 5,763,638 -- (5,763,638) --
134,112 4,857,537 -- (4,857,537) --
------------ ---------- ------------- ----------
$ 15,506,175 $ -- $ (15,506,175) $ --
------------ ---------- ------------- ----------
$ 32,806,006 $ -- $ (32,806,006) $ --
------------ ---------- ------------- ----------
$163,490,271 $2,229,548 $(163,490,271) $2,229,548
------------ ---------- ------------- ----------
49,300 $ 4,236,719 $ -- $ (4,236,719) $ --
------------ ---------- ------------- ----------
$ 4,236,719 $ -- $ (4,236,719) $ --
------------ ---------- ------------- ----------
126,542 $ 4,144,079 $ -- $ (4,144,079) $ --
------------ ---------- ------------- ----------
$ 4,144,079 $ -- $ (4,144,079) $ --
------------ ---------- ------------- ----------
26
Pioneer
Tax Free
Pioneer Pioneer Income Fund
Municipal Tax Free Pro Forma % of
and Equity Income Fund Combined Pro Forma
Income Trust Principal Pro Forma Principal Combined
Shares Amount ($) Adjustment Amount ($) Net Assets
------------ ----------- ---------- ----------- ----------
Banks 0.0%
Diversified Banks 0.0%
105,000 (105,000) -- Bank One Capital VI, 7.2%
120,000 (120,000) -- Barclays Bank Plc, Series 2, 6.625%
120,000 (120,000) -- HSBC Holdings Plc, Series A, 6.2%,
170,579 (170,579) -- Royal Bank of Scotland Group Plc, Series Q,
6.75%
71,000 (71,000) -- Wachovia Preferred Funding Corp., Series A,
7.25%
Thrifts & Mortgage Finance 0.0%
56,980 (56,980) -- Countrywide Capital V, 7.0%
171,677 (171,677) -- Fannie Mae, Series N, 6.75%
57,000 (57,000) -- Freddie Mac, 5.81%
39,000 (39,000) -- Freddie Mac, Series F, 5.0%
58,000 (58,000) -- Freddie Mac, Series K, 5.79%
Total Banks
Diversified Financials 0.0%
Other Diversified Financial Services 0.0%
49,000 (49,000) -- ABN Amro Capital Fund Trust VII, 6.08%
120,000 (120,000) -- Bank of America Corp., Series D, 6.204%
120,000 (120,000) -- Deustche Bank Capital Funding Trust VIII,
6.375%
150,000 (150,000) -- JPMorgan Chase Capital Trust XVI, 6.35%
Consumer Finance 0.0%
18,000 (18,000) -- MBNA Capital, Series D, 8.125%
71,300 (71,300) -- SLM Holdings Corp., Series A, 6.97%
Investment Banking & Brokerage 0.0%
57,000 (57,000) -- Bear Stearns Companies, Inc., Series F, 5.72%
40,000 (40,000) -- Bear Stearns Companies, Inc., Series G,
5.49%
100,000 (100,000) -- Lehman Brothers Holdings, Inc., 6.5%
19,000 (19,000) -- Lehman Brothers Holdings, Inc., Series C,
5.94%
50,800 (50,800) -- Lehman Brothers Holdings, Inc., Series D,
5.67%
65,000 (65,000) -- Merrill Lynch Preferred Capital Trust IV, 7.12%
87,000 (87,000) -- Merrill Lynch Preferred Capital Trust V, 7.28%
Total Diversified Financials
Insurance 0.0%
Life & Health Insurance 0.0%
159,000 (159,000) -- Scottish Re Group, Ltd., 7.25%
Property & Casualty Insurance 0.0%
160,000 (160,000) -- ACE, Ltd., Series C, 7.8%
161,000 (161,000) -- Berkley W.R. Capital Trust II, 6.75%
Reinsurance 0.0%
158,000 (158,000) -- Renaissance Holdings, Ltd., Series D, 6.6%
Total Insurance
Pioneer
Pioneer Tax Free
Pioneer Municipal Pioneer Income Fund
Municipal and Equity Tax Free Pro Forma
and Equity Income Trust Income Fund Combined
Income Trust Market Market Pro Forma Market
Shares Value Value Adjustment (a) Value
------------ ------------ ----------- -------------- -----------
105,000 $ 2,406,440 $-- $ (2,406,440) $--
120,000 2,606,400 -- (2,606,400) --
120,000 2,444,400 -- (2,444,400) --
170,579
3,551,455 -- (3,551,455) --
71,000
1,610,990 -- (1,610,990) --
------------ --- -------------- ---
$ 12,619,685 $-- $ (12,619,685) $--
------------ --- -------------- ---
56,980 $ 635,892 $-- $ (635,892) $--
171,677 4,077,329 -- (4,077,329) --
57,000 2,351,250 -- (2,351,250) --
39,000 1,341,600 -- (1,341,600) --
58,000 2,328,700 -- (2,328,700) --
------------ --- -------------- ---
$ 10,734,771 $-- $ (10,734,771) $--
------------ --- -------------- ---
$ 23,354,456 $-- $ (23,354,456) $--
------------ --- -------------- ---
49,000 $ 910,420 $-- $ (910,420) $--
120,000 2,604,000 -- (2,604,000) --
120,000
2,520,000 -- (2,520,000) --
150,000 3,102,000 -- (3,102,000) --
------------ --- -------------- ---
$ 9,136,420 $-- $ (9,136,420) $--
------------ --- -------------- ---
18,000 $ 445,500 $-- $ (445,500) $--
71,300 2,879,807 -- (2,879,807) --
------------ --- -------------- ---
$ 3,325,307 $-- $ (3,325,307) $--
------------ --- -------------- ---
57,000 $ 2,069,100 $-- $ (2,069,100) $--
40,000
1,432,000 -- (1,432,000) --
100,000 2,163,000 -- (2,163,000) --
19,000
793,250 -- (793,250) --
50,800
1,831,848 -- (1,831,848) --
65,000 1,422,864 -- (1,422,864) --
87,000 1,913,130 -- (1,913,130) --
------------ --- -------------- ---
$ 11,625,192 $-- $ (11,625,192) $--
------------ --- -------------- ---
$ 24,086,919 $-- $ (24,086,919) $--
------------ --- -------------- ---
159,000 $ 1,160,700 $-- $ (1,160,700) $--
------------ --- -------------- ---
160,000 $ 3,824,000 $-- $ (3,824,000) $--
161,000 3,330,396 -- (3,330,396) --
------------ --- -------------- ---
$ 7,154,396 $-- $ (7,154,396) $--
------------ --- -------------- ---
158,000 $ 2,929,320 $-- $ (2,929,320) $--
------------ --- -------------- ---
$ 11,244,416 $-- $ (11,244,416) $--
------------ --- -------------- ---
27
Pioneer
Tax Free
Pioneer Pioneer Income Fund
Municipal Tax Free Pro Forma % of
and Equity Income Fund Combined Pro Forma
Income Trust Principal Pro Forma Principal Combined
Shares Amount ($) Adjustment Amount ($) Net Assets
------------ ----------- ---------- ----------- ----------
Real Estate 0.0%
Diversification Real Estate Investment Trust 0.0%
32,440 (32,440) -- PS Business Parks, Inc., Series I, 6.875%
13,000 (13,000) -- PS Business Parks, Inc., Series L, 7.6%
119,200 (119,200) -- PS Business Parks, Inc., Series P, 6.7%
Industrial Real Estate Investment Trust 0.0%
40,000 (40,000) -- Prologis Trust, Series G, 6.75%
Office Real Estate Investment Trust 0.0%
15,000 (15,000) -- Brandywine Realty Trust, Series C, 7.5%
34,500 (34,500) -- Brandywine Realty Trust, Series D, 7.375%
Retail Real Estate Investment Trust 0.0%
94,000 (94,000) -- Regency Centers Corp., Series C, 7.45%
53,500 (53,500) -- Regency Centers Corp., Series E, 6.7%
Specialized Real Estate Investment Trust 0.0%
118,000 (118,000) -- Public Storage, Inc., Series L, 6.75%
Total Real Estate
Utilities 0.0%
Electric Utilities 0.0%
98,000 (98,000) -- Alabama Power Co., 5.3%
113,000 (113,000) -- Alabama Power Co., 5.83%
78,000 (78,000) -- Interstate Power and Light Co., Series B,
8.375%
40,000 (40,000) -- Mississippi Power Co., 5.25%
7,700 (7,700) -- PPL Electric Utilities Corp., 4.5%
73,000 (73,000) -- Southern California Edison Co., 4.32%
94,000 (94,000) -- Virginia Power Capital Trust II, 7.375%
Gas Utilities 0.0%
62,000 (62,000) -- Southern Union Co., Series C, 7.55%
Total Utilities
TOTAL NON-CONVERTIBLE PREFERRED
STOCKS
CONVERTIBLE PREFERRED STOCKS 0.0%
Capital Goods 0.0%
Aerospace & Defense
15,000 (15,000) -- Northrop Grumman Corp., 7.0%
Total Capital Goods
Commercial Services & Supplies 0.0%
Office Services & Supplies
60,000 (60,000) -- Avery Dennison Corp., 7.875%
Total Commercial Services & Supplies
Diversified Financials 0.0%
Other Diversified Financial Services
161,000 (161,000) -- Lazard, Ltd., 6.625%
Total Diversified Financials
Insurance 0.0%
Property & Casualty Insurance
47,919 (47,919) -- XL Capital, Ltd., Class A, 7.0%
Total Insurance
Pioneer
Pioneer Tax Free
Pioneer Municipal Pioneer Income Fund
Municipal and Equity Tax Free Pro Forma
and Equity Income Trust Income Fund Combined
Income Trust Market Market Pro Forma Market
Shares Value Value Adjustment (a) Value
------------ ------------ ----------- -------------- -----------
32,440 $ 622,848 $-- $ (622,848) $--
13,000 273,520 -- (273,520) --
119,200 2,260,032 -- (2,260,032) --
------------ --- ------------ ---
$ 3,156,400 $-- $ (3,156,400) $--
------------ --- ------------ ---
40,000 $ 840,800 $-- $ (840,800) $--
------------ --- ------------ ---
15,000 $ 306,600 $-- $ (306,600) $--
34,500 683,100 -- (683,100) --
------------ --- ------------ ---
$ 989,700 $-- $ (989,700) $--
------------ --- ------------ ---
94,000 $ 2,072,700 $-- $ (2,072,700) $--
53,500 1,051,810 -- (1,051,810) --
------------ --- ------------ ---
$ 3,124,510 $-- $ (3,124,510) $--
------------ --- ------------ ---
118,000 $ 2,318,700 $-- $ (2,318,700) $--
------------ --- ------------ ---
$ 10,430,110 $-- $(10,430,110) $--
------------ --- ------------ ---
98,000 $ 2,067,800 $-- $ (2,067,800) $--
113,000 2,502,950 -- (2,502,950) --
78,000
2,320,500 -- (2,320,500) --
40,000 926,000 -- (926,000) --
7,700 645,645 -- (645,645) --
73,000 1,423,500 -- (1,423,500) --
94,000 2,262,990 -- (2,262,990) --
------------ --- ------------ ---
$ 12,149,385 $-- $(12,149,385) $--
------------ --- ------------ ---
62,000 $ 1,528,300 $-- $ (1,528,300) $--
------------ --- ------------ ---
$ 13,677,685 $-- $(13,677,685) $--
------------ --- ------------ ---
$ 91,174,384 $-- $(91,174,384) $--
------------ --- ------------ ---
15,000 $ 2,184,750 $-- $ (2,184,750) $--
------------ --- ------------ ---
$ 2,184,750 $-- $ (2,184,750) $--
------------ --- ------------ ---
60,000 $ 3,120,000 $-- $ (3,120,000) $--
------------ --- ------------ ---
$ 3,120,000 $-- $ (3,120,000) $--
------------ --- ------------ ---
161,000 $ 5,615,680 $-- $ (5,615,680) $--
------------ --- ------------ ---
$ 5,615,680 $-- $ (5,615,680) $--
------------ --- ------------ ---
47,919 $ 911,419 $-- $ (911,419) $--
------------ --- ------------ ---
$ 911,419 $-- $ (911,419) $--
------------ --- ------------ ---
28
Pioneer
Tax Free Pioneer
Pioneer Pioneer Income Fund Municipal
Municipal Tax Free Pro Forma % of and Equity
and Equity Income Fund Combined Pro Forma Income Trust
Income Trust Principal Pro Forma Principal Combined Market
Shares Amount ($) Adjustment Amount ($) Net Assets Value
----- ----------- ---------- ----------- ---------- ---------------
TOTAL CONVERTIBLE PREFERRED STOCKS $ 11,831,849
---------------
TOTAL INVESTMENTS IN SECURITIES 90.2% $ 583,080,474
---------------
OTHER ASSETS AND LIABILITIES 9.8% $ 6,920,317
---------------
PREFERRED SHARES AT REDEMPTION
VALUE, INCLUDING DIVIDENDS PAYABLE 0.0% (176,369,655)
---------------
TOTAL NET ASSETS 100.0% $ 413,631,136
---------------
TOTAL INVESTMENT AT COST $ 571,436,247
---------------
* Non-income producing security
RIB Residual Interest Bonds
(a) All of Pioneer Municipal
and Equity Income Trust's
non-municipal securities
are assumed to be
liquidated for cash, with
proceeds largely being
used to redeem out the
preferred shareowners.
(b) Reflects costs of the Merger.
Pioneer
Tax Free
Pioneer Pioneer Income Fund
Municipal Tax Free Pro Forma
and Equity Income Fund Combined
Income Trust Market Pro Forma Market
Shares Value Adjustment (a) Value
----- ------------- -------------- ---------------
$ -- $ (11,831,849) $ --
------------ -------------- --------------
$562,961,511 $ (266,496,504) $ 879,545,481
------------ -------------- --------------
$ (1,238,466) $ 90,126,849 $ 95,603,700(b)
------------ -------------- --------------
-- 176,369,655 --
------------ -------------- --------------
$561,723,045 $ $ 975,149,181
------------ -------------- --------------
$562,031,318 $ $1,133,467,565
----------- -------------- --------------
29
Pro Forma Combined Statement of Assets and Liabilities
December 31, 2007
(unaudited)
Pioneer Pioneer Tax Free Pioneer Tax Free
Municipal and Pioneer Income Fund Income Fund
Equity Income Tax Free Pro Forma Pro Forma
Trust Income Fund Adjustments Combined
------------- ------------ --------------- ----------------
ASSETS:
Investment in securities, at value (Cost $571,436,247 and
$562,031,318, respectively) $583,080,474 $562,961,511 $(266,496,504)(c) $879,545,481
Cash 2,590,966 89,899,891(c) 92,490,857
Receivables -
Investment securities sold -- 46,132 46,132
Fund shares sold -- 1,380,533 1,380,533
Dividends and interest 6,076,851 7,194,031 13,270,882
Due from Pioneer Investment Management, Inc. -- -- --
Prepaid expenses 21,525 21,525
Other 9,793 51,920 -- 61,713
------------ ------------ ------------- ------------
Total assets $591,779,609 $571,634,127 $(176,596,613) $986,817,123
------------ ------------ ------------- ------------
LIABILITIES:
Payables -
Investment securities purchased $ 1,137,003 $ 2,442,445 $ $ 3,579,448
Fund shares repurchased -- 1,529,115 1,529,115
Upon return of securities loaned -- -- --
Dividends 1,185,830 1,185,830
Unrealized depreciation on interest rate swaps 226,958 -- (226,958)(c) --
Administration fee payable 32,045 -- 32,045
Due to bank -- 4,640,780 4,640,780
Due to PIMSS and PFD 310,913 62,048 372,961
Accrued expenses 71,899 50,864 205,000(b) 327,763
------------ ------------ ------------- ------------
Total liabilities $ 1,778,818 $ 9,911,082 $ (21,958) $ 11,667,942
------------ ------------ ------------- ------------
PREFERRED SHARES AT REDEMPTION VALUE:
$25,000 Liquidation value per share applicable to 7,050 shares,
including dividends payable of $119,655 $176,369,655 $ -- $(176,369,655) $ --
------------ ------------ ------------- ------------
NET ASSETS:
Paid-in capital $406,036,048 $570,120,050 $ -- $976,156,098
Undistributed/distributions in excess of, net investment income (1,165,172) 284,485 (205,000)(b) (1,085,687)
Accumulated net realized gain (loss) on investments and
interest rate swaps (2,657,009) (9,611,683) 8,749,550(c) (3,519,142)
Net unrealized gain on investments 11,644,227 930,193 (8,976,508)(c) 3,597,912
Net unrealized loss on interest rate swaps (226,958) -- 226,958(c) --
------------ ------------ ------------- ------------
Total net assets $413,631,136 $561,723,045 $ (205,000) $975,149,181
------------ ------------ ------------- ------------
NET ASSETS BY CLASS: $413,631,136 $ -- (413,631,136)(a)(b) $ --
============ ============ ============
Class A $ -- $313,705,643 413,426,136(a)(b) $727,131,779
============ ============ ============
Class B $ -- $ 14,622,470 $ 14,622,470
============ ============ ============
Class C $ -- $ 13,580,501 -- $ 13,580,501
============ ============ ============
Class Y $ -- $219,814,431 -- $219,814,431
============ ============ ============
OUTSTANDING SHARES:
(No par value, unlimited number of shares authorized) 28,706,981 (28,706,981)(a)
============ ============ 37,145,655(a) 65,325,507
Class A -- 28,179,852 ============
============ ============ -- 1,324,866
Class B -- 1,324,866 ============
============ ============ -- 1,239,065
Class C -- 1,239,065 ============
============ ============ -- 19,858,193
Class Y -- 19,858,193 ============
============ ============ $ --
NET ASSET VALUE PER SHARE: $ 14.41 $ -- ============
============ ============ $ 11.13
Class A $ -- $ 11.13 ============
============ ============ $ 11.04
Class B $ -- $ 11.04 ============
============ ============ $ 10.96
Class C $ -- $ 10.96 ============
============ ============ $ 11.07
Class Y $ -- $ 11.07 ============
============ ============
MAXIMUM OFFERING PRICE:
Class A $ -- $ 11.65 $ 11.65
============ ============ ============
(a) Shares of Pioneer Municipal and Equity Income Trust are exchanged for Class
A shares of Pioneer Tax Free Income Fund.
(b) Reflects one-time cost related to the Merger.
(c) All of Pioneer Municipal and Equity Income Trust's non-municipal securities
are assumed to be liquidated for cash, with proceeds largely being used to
redeem out the preferred shareowners. Remaining proceeds are held as cash.
See accompanying notes to pro forma financial statements.
30
Pro Forma Combined Statement of Operations
For the Year ended December 31, 2007
(unaudited)
Pioneer Tax Free Tax Free
Municipal Pioneer Income Fund Income Fund
and Equity Tax Free Pro Forma Pro Forma
Income Trust Income Fund Adjustments Combined
------------- ------------- ------------ -------------
INVESTMENT INCOME:
Dividends $ 14,353,391 $ -- $ 14,353,391
Interest 19,419,376 30,943,440 50,362,816
------------- ------------- -------------
Total investment income $ 33,772,767 $ 30,943,440 $ 64,716,207
------------- ------------- -------------
EXPENSES:
Management fees $ 3,774,201 $ 2,985,435 $ (1,718,491)(a) $ 5,041,145
Transfer agent fees 433,901 -- (433,901)(a) --
Class A -- 233,111 397,600(a) 630,711
Class B -- 19,721 -- 19,721
Class C -- 10,786 -- 10,786
Class Y -- 3,597 -- 3,597
Distribution fees
Class A -- 833,565 1,152,346(a) 1,985,911
Class B -- 161,084 -- 161,084
Class C -- 136,632 -- 136,632
Administrative fees 498,745 142,272 (395,960)(a) 245,057
Custodian fees 39,602 21,196 60,798
Registration fees 25,447 70,573 96,020
Professional fees 363,119 66,468 (357,832)(b) 71,755
Printing expense 56,967 21,590 (43,557)(b) 35,000
Interest expense -- 4,392 4,392
Auction agent fees 467,965 -- (467,965)(c) --
Pricing fees 19,679 -- (19,679)(c) --
Insurance fees 12,589 -- (12,589)(b) --
Fees and expenses of nonaffiliated trustees 24,684 11,476 (11,160)(b) 25,000
Miscellaneous 19,170 37,032 196,065(b)(d) 252,267
------------- ------------- ------------ -------------
Total expenses $ 5,736,069 $ 4,758,930 (1,715,123) $ 8,779,876
Less fees paid indirectly (523) (12,492) (13,015)
------------- ------------- ------------ -------------
Net expenses $ 5,735,546 $ 4,746,438 $ (1,715,123) $ 8,766,861
------------- ------------- ------------ -------------
Net investment income (loss) $ 28,037,221 $ 26,197,002 $ 1,715,123 $ 55,949,346
------------- ------------- ------------ -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND INTEREST RATE SWAPS:
Net realized gain from:
Investments $ (2,091,500) $ 1,855,800 $ 8,976,508(e) $ 8,740,808
Interest rate swaps 844,165 (226,958)(e) 617,207
------------- ------------- ------------ -------------
$ (1,247,335) $ 1,855,800 $ 8,749,550 $ 9,358,015
------------- ------------- ------------ -------------
Change in net unrealized gain or loss from:
Investments $ (38,659,075) $ (35,099,680) $ (8,976,508)(e) $ (82,735,263)
Interest rate swaps (1,843,939) $ 226,958(e) (1,616,981)
------------- ------------- ------------ -------------
$ (40,503,014) $ (35,099,680) $ (8,749,550) $ (84,352,244)
------------- ------------- ------------ -------------
Net gain on investments and interest rate swaps $ (41,750,349) $ (33,243,880) $ -- $ (74,994,229)
------------- ------------- ------------ -------------
DIVIDENDS AND DISTRIBUTIONS TO PREFERRED
SHAREOWNERS FROM:
Net Investment Income $ (7,899,822) $ -- $ 7,899,822(f) $
Net Realized Gains (908,387) -- 908,387(f) --
------------- ------------- ------------ -------------
Total distributions $ (8,808,209) $ -- 8,808,209 $ --
------------- ------------- ------------ -------------
Net increase in net assets resulting from operations $ (22,521,337) $ (7,046,878) $ 10,523,332 $ (19,044,883)
============= ============= ============ =============
(a) Expenses and expense limitations conformed to the Pioneer Tax Free Income
Fund's contracts with affiliated parties.
(b) Reflects reduction in expenses due to elimination of duplicate services.
(c) Reflects the elimination of expenses related to preferred shares.
(d) Includes costs of the Merger.
(e) Represents realized gains triggered from the sale of Pioneer Municipal and
Equity Income Trust's non-municipal holdings.
(f) Represents the redemption of Pioneer Municipal and Equity Income Trust's
Preferred shareowners.
See accompanying notes to pro forma financial statements.
31
Notes to Pro Forma Combined Financial Statements
December 31, 2007
(unaudited)
1. Description of the Fund
Pioneer Tax Free Income Fund (the Fund) is a Delaware statutory trust
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The investment objective of the Fund is to seek
as high a level of current income exempt from federal income taxes, as possible
consistent with the preservation of capital.
The Fund offers four classes of shares designated as Class A, Class B,
Class C, and Class Y shares. Each class of shares represents an interest in the
same portfolio of investments of the Fund and have equal rights to voting,
redemptions, dividends and liquidations, except that each class of shares can
bear different transfer agent and distribution fees and has exclusive voting
rights with respect to the distribution plan that has been adopted by Class A,
Class B and Class C shareowners, respectively. There is no distribution plan for
Class Y shares.
2. Basis of Combination
The accompanying pro forma combining financial statements, and related
notes, are presented to show the effect of the proposed merger of Pioneer
Municipal and Equity Income Trust with and in to the Fund (the "Merger"), as if
such Merger had taken place as of January 1, 2007.
Under the terms of an Agreement and Plan of Merger between these two funds,
the combination of the Fund and Pioneer Municipal and Equity Income Trust will
be treated as a tax-free business combination and accordingly will be accounted
for by a method of accounting for tax-free mergers of investment companies. The
Merger will be accomplished by an acquisition of the net assets of Pioneer
Municipal and Equity Income Trust in exchange for Class A Shares of the Fund at
its net asset value. The accompanying schedules of investments, statements of
assets and liabilities and the related statements of operations of the Fund and
Pioneer Municipal and Equity Income Trust have been combined as of and for the
most recent twelve months ended December 31, 2007. Following the Merger, the
Fund will be the accounting survivor. Pioneer Municipal and Equity Income Trust
will bear the costs of preparing and printing all documents related to the
Merger, as well as its own costs incurred in connection with the merger,
including costs associated with redeeming out the preferred shareowners. The
Fund will bear its own costs occurred in connection with the Merger. These costs
are reflected in the pro forma financial statements.
These pro forma financial statements and related notes should be read in
conjunction with the financial statements of the Fund and Pioneer Municipal and
Equity Income Trust included in their respective annual reports to shareowners
dated December 31 and November 30, 2007, respectively. The schedules of
investments and the statements of assets and liabilities have been shown to
reflect the liquidation of Pioneer Municipal and Equity Income Trust's
non-municipal holdings for cash, with proceeds largely being used to fund the
redemption of the Preferred Shareowners. The statements of operations reflect
the realized gain from the sale of Pioneer Municipal and Equity Income Trust's
non-municipal holdings and other adjustments made to expenses for Pioneer
affiliate contractual rates and for duplicate services that would not have been
incurred if the Merger took place on January 1, 2007.
3. Security Valuation
Security transactions are recorded as of trade date. The net asset value of
the Fund is computed once daily on each day the New York Stock Exchange (NYSE)
is open, as of the close of regular trading on the NYSE. Securities are valued
at prices supplied by independent pricing services, which consider such factors
as Treasury spreads, yields, maturities and ratings. Valuations may be
supplemented by dealers and other sources, as required. Securities for which
there are no other readily available valuation methods are valued at their fair
values as determined by, or under the direction of the Board of Trustees. The
Fund also may use the fair value of a security including a non-U.S. security,
when the closing market price on the principal exchange where the security is
traded no longer reflects the value of the security. At December 31, 2007, there
were no securities fair valued. Discount and premium on debt securities are
accreted or amortized, respectively, daily into interest income on a
yield-to-maturity basis with a corresponding increase or decrease in the cost
basis of the security. Interest income is recorded on the accrual basis.
Temporary cash investments are valued at cost which approximates market value.
Dividend income is recorded on the ex-dividend, date except that certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund becomes aware of the ex-dividend data in the
exercise of reasonable diligence. Dividend and interest income is recorded on
the accrual basis.
32
4. Capital Shares
The pro forma net asset value per share assumes the issuance of shares of
the Fund that would have been issued at December 31, 2007, in connection with
the proposed Merger. The number of shares assumed to be issued is equal to the
net assets of Pioneer Municipal and Equity Income Trust, as of December 31,
2007, divided by the net asset value the Fund's Class A Shares as of December
31, 2007. The pro forma number of shares outstanding, by class, for the combined
Fund consists of the following at December 31, 2007:
-----------------------------------------------------------------------------------
Shares of Additional Shares
The Fund Assumed Issued Total Outstanding Shares
Class of Shares Pre-Combination In Merger Post-Combination
-----------------------------------------------------------------------------------
Class A 28,179,852 37,145,655 65,325,507
-----------------------------------------------------------------------------------
Class B 1,324,866 -- 1,324,866
-----------------------------------------------------------------------------------
Class C 1,239,065 -- 1,239,065
-----------------------------------------------------------------------------------
Class Y 19,858,193 -- 19,858,193
-----------------------------------------------------------------------------------
5. Management Agreement
Pioneer Investment Management, Inc., (PIM), a wholly owned indirect
subsidiary of UniCredito Italiano, the Fund's investment adviser manages the
Fund's portfolio. Management fees are calculated daily at the annual rate of
0.50% of the Fund's average daily net assets up to $250 million; 0.45% of the
next $500 million; and 0.40% on assets over $750 million. Prior to January 1,
2008, management fees were calculated daily at the annual rate of 0.50% of the
Fund's average daily net assets up to $250 million; 0.48% of the next $50
million; and 0.45% of the excess over $300 million. For the year ended December
31, 2007, the net management fee was equivalent to 0.47% of average net assets.
Through September 30, 2011, PIM has agreed not to impose its management fee
and to assume operating expenses of the Fund to the extent necessary to limit
Class A expenses to 0.89% of the average daily net assets attributable to Class
A shares.
6. Federal Income Taxes
Each fund has elected to be taxed as a "regulated investment company" under
the Internal Revenue Code. After the acquisition, it will continue to be the
Fund's policy to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
taxable income and net realized capital gains, if any, to its shareowners.
Therefore, no federal income tax provision is required.
The identified cost of investments for these funds is substantially the
same for both financial and federal income tax purposes. The cost of investments
will remain unchanged for the combined Fund.
33
PART C
OTHER INFORMATION
PIONEER TAX FREE INCOME FUND
ITEM 15. INDEMNIFICATION
No change from the information set forth in Item 25 of the most recently filed
Registration Statement of Pioneer Tax Free Income Fund (the "Registrant") on
Form N-1A under the Securities Act of 1933 and the Investment Company Act of
1940 (File Nos. 2-57653 and 811-02704), as filed with the Securities and
Exchange Commission on April 29, 2008 (Accession No. 0000202679-08-000012),
which information is incorporated herein by reference.
ITEM 16. EXHIBITS
(1)(a) Amended and Restated Agreement and Declaration of Trust (**)
(1)(b) Establishment and Designation of Class B Shares (1)
(1)(c) Establishment and Designation of Class C Shares (2)
(1)(d) Establishment and Designation of Class Y Shares (6)
(2) Amended and Restated By-Laws (**)
(3) Not applicable
(4) Form of Agreement and Plan of Merger (*)
(5) Reference is made to Exhibits (1) and (2) hereof
(6)(a) Amended and Restated Management Contract between the Registrant and Pioneer Investment (**)
Management, Inc.
(6)(b) Form of Expense Limit Agreement (**)
(7)(a) Underwriting Agreement between the Registrant and Pioneer Funds Distributor, (3)
Inc.
(7)(b) Dealer Sales Agreement (6)
(8) Not applicable
(9)(a) Custodian Agreement between the Registrant and Brown Brothers Harriman & (5)
Co.
(9)(b) Amended Appendix A to Custodian Agreement (6)
(10)(a) Pioneer Funds Distribution Plan (7)
(10)(b) Multi-class Plan Pursuant to Rule 18f-3 (4)
(11) Opinion of Counsel (legality of securities being offered) (**)
(12) Form of opinion as to tax matters and consent (**)
(13)(a) Investment Company Service Agreement between the Registrant and Pioneer Investment (5)
Management Shareholder Services, Inc.
(13)(b) Amended Exhibit A to Investment Company Service Agreement (5)
(13)(c) Amended and Restated Administration Agreement between the Registrant and Pioneer (**)
Investment Management, Inc.
(14) Consent of Independent Registered Public Accounting Firm (**)
(15) Not applicable
(16) Power of Attorney (**)
(17)(a) Code of Ethics - Pioneer Investment Management, Inc. (4)
(17)(b) Code of Ethics - Pioneer Funds (4)
(17)(c) Code of Ethics - Pioneer Funds Distributor, Inc. (4)
(17)(d) Form of Proxy Card (**)
(17)(e) Prospectus for Class A Shares, Class B Shares and Class C Shares of Pioneer Tax (**)
Free Income Fund dated May 1, 2008 (as revised May 9, 2008) and Statement of
Additional Information for Class A Shares, Class B Shares, Class C Shares and
Class Y Shares of Pioneer Tax Free Income Fund dated May 1, 2008
(17)(f) Annual Report of Pioneer Tax Free Income Fund for the fiscal year ended December 31, 2007 (**)
(17)(g) Annual Report of Pioneer Municipal and Equity Income Trust for the fiscal year ended (**)
November 30, 2007
(1) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 34 to the Registrant's Registration Statement
on Form N-1A (the "Registration Statement") (File Nos. 2-57653; 811-02704) as
filed with the Securities and Exchange Commission (the "SEC") on April 26, 1995
(Accession No. 0000202679-95-000010).
(2) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 35 to the Registration Statement (File Nos.
2-57653; 811-02704) as filed with the SEC on April 26, 1996 (Accession No.
0000202679-96-000011).
(3) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 46 to the Registration Statement (File Nos.
2-57653; 811-02704) as filed with the SEC on May 1, 2002 (Accession No.
0000202679-02-000012).
(4) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 51 to the Registration Statement (File Nos.
2-57653; 811-02704) as filed with the SEC on April 29, 2005 (Accession No.
0001016964-05-000189).
(5) Previously filed. Incorporated herein by reference from the exhibit filed
with Post-Effective Amendment No. 52 to the Registration Statement (File Nos.
2-57653; 811-02704) as filed with the SEC on April 28, 2006 (Accession No.
0000831120-06-000024).
(6) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 53 to the Registration Statement (File Nos.
2-57653; 811-02704) as filed with the SEC on April 30, 2007 (Accession No.
0000908996-07-000010)
(7) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 54 to the Registration Statement (File Nos.
2-57653; 811-02704) as filed with the SEC on April 29, 2008 (Accession No.
0000202679-08-000012)
(*) Attached as Exhibit A to the combined Proxy Statement/Prospectus.
(**) 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.
(3) The undersigned Registrant agrees that it shall file a final executed
version of the legal and consent opinion as to tax matters as an exhibit to the
subsequent post-effective amendment to its registration statement on Form N-14
filed with the SEC upon the closing of the reorganizations contemplated by this
Registration Statement on Form N-14.
(4) Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
As required by the Securities Act of 1933, 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 18th day of June, 2008.
PIONEER TAX FREE INCOME FUND
By: /s/ Daniel K. Kingsbury
----------------------------------
Name: Daniel K. Kingsbury
Title: Trustee and 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
--------- ----- ----
/s/ John F. Cogan, Jr.* Chairman of the Board, Trustee and President June 18, 2008
-----------------------
John F. Cogan, Jr
/s/ Mark E. Bradley Chief Financial Officer and Treasurer June 18, 2008
------------------- (Principal Financial and Accounting Officer)
Mark E. Bradley
/s/ Daniel K. Kingsbury Trustee and Executive Vice President June 18, 2008
-----------------------
Daniel K. Kingsbury
/s/ David R. Bock* Trustee June 18, 2008
------------------
David R. Bock
/s/ Mary K. Bush* Trustee June 18, 2008
-----------------
Mary K. Bush
/s/ Benjamin M. Friedman* Trustee June 18, 2008
-------------------------
Benjamin M. Friedman
/s/ Margaret B.W. Graham* Trustee June 18, 2008
-------------------------
Margaret B.W. Graham
/s/ Thomas J. Perna* Trustee June 18, 2008
--------------------
Thomas J. Perna
/s/ Marguerite A. Piret* Trustee June 18, 2008
------------------------
Marguerite A. Piret
/s/ John Winthrop* Trustee June 18, 2008
------------------
John Winthrop
* By: /s/ Daniel K. Kingsbury
-----------------------
Daniel K. Kingsbury, Attorney-in-Fact
EXHIBIT INDEX
The following exhibits are filed as part of this Registration Statement:
Exhibit No. Description
----------- -----------
(1)(a) Amended and Restated Agreement and Declaration of Trust
(2) Amended and Restated By-Laws
(6)(a) Amended and Restated Management Contract between the Registrant and Pioneer
Investment Management, Inc.
(6)(b) Form of Expense Limit Agreement
(11) Opinion of Counsel (legality of securities being offered)
(12) Form of opinion as to tax matters and consent
(13)(c) Amended and Restated Administration Agreement between the Registrant and
Pioneer Investment Management, Inc.
(14) Consent of Independent Registered Public Accounting Firm
(16) Power of Attorney
(17)(d) Form of Proxy Card
(17)(e) Prospectus for Class A Shares, Class B Shares and Class C Shares of Pioneer Tax
Free Income Fund dated May 1, 2008 (as revised May 9, 2008) and Statement of
Additional Information for Class A Shares, Class B Shares, Class C Shares and
Class Y Shares of Pioneer Tax Free Income Fund dated May 1, 2008
(17)(f) Annual Report of Pioneer Tax Free Income Fund for the fiscal year ended
December 31, 2007
(17)(g) Annual Report of Pioneer Municipal and Equity Income Trust for the fiscal year
ended November 30, 2007